<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 20, 1998.
REGISTRATION NO. 333-46125
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
RSL COMMUNICATIONS, LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
BERMUDA 4813 N/A
(STATE OR OTHER (PRIMARY STANDARD (I.R.S.EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE NUMBER)
ORGANIZATION)
----------------------
CLARENDON HOUSE
CHURCH STREET
HAMILTON HM CX BERMUDA
(441) 295-2832
(ADDRESS AND TELEPHONE
NUMBER OF
REGISTRANT'S PRINCIPAL
EXECUTIVE OFFICES)
</TABLE>
----------------------
ITZHAK FISHER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
RSL COMMUNICATIONS, N. AMERICA, INC.
767 FIFTH AVENUE, SUITE 4300
NEW YORK, NY 10153
(212) 317-1800
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
----------------------
Copy to:
ROBERT L. KOHL, ESQ.
MARK D. FISCHER, ESQ.
ROSENMAN & COLIN LLP
575 MADISON AVENUE
NEW YORK, NY 10022
----------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /x/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CROSS REFERENCE SHEET TO FORM S-1
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION CAPTION OR LOCATION IN PROSPECTUS
-------------------------------------- -------------------------------------
<S> <C> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of
Prospectus.......................... Forepart of the Registration
Statement and Outside Front Cover
Page
2. Inside Front and Outside Back Cover
Pages of Prospectus................. Inside Front and Outside Back Cover
Pages
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed
Charges............................. Prospectus Summary; Risk Factors;
Selected Consolidated Financial Data
4. Use of Proceeds....................... Use of Proceeds
5. Determination of Offering Price....... Determination of Offering Price
6. Dilution.............................. (1)
7. Selling Security Holders.............. Prospectus Summary; Principal
Shareholders and Selling Shareholder
8. Plan of Distribution.................. Plan of Distribution
9. Description of Securities to be
Registered.......................... Outside Front Cover; Description of
Capital Stock; Plan of Distribution
10. Interests of Named Experts and
Counsel............................. Experts; Legal Matters
11. Information with Respect to the
Registrant.......................... Outside Front Cover; Prospectus
Summary; Dividend Policy;
Capitalization; Selected Financial
Data; Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Business;
Management; Certain Relationships
and Related Transactions; Principal
Shareholders and Selling
Shareholder; Shares Eligible for
Future Sale; Description of Capital
Stock; Consolidated Financial
Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities (1)
</TABLE>
- ------------------------
(1) Omitted from Prospectus because the item is inapplicable or the answer is in
the negative.
<PAGE>
1,452,715 SHARES
RSL COMMUNICATIONS, LTD.
CLASS A COMMON SHARES
(PAR VALUE $.00457 PER SHARE)
----------------------
Of the 1,452,715 Class A common shares, par value $.00457 per share (the
'Class A Common Stock') of RSL Communications, Ltd. (the 'Company') offered
hereby (the 'Offering'), (a) up to 1,152,715 shares of the Class A Common Stock
are to be issued and sold by the Company upon the exercise of the remaining
warrants (each a 'Warrant') issued as part of 300,000 units (the 'Units'), each
Unit consisting of (i) $1,000 principal amount of 12 1/4% Senior Notes due 2006
of RSL Communications PLC (the 'Note Issuer'), a wholly owned subsidiary of the
Company, and (ii) one Warrant; and (b) up to 300,000 shares may be sold by
Bukfenc, Inc., a shareholder of the Company that is wholly owned by Andrew
Gaspar, Vice Chairman of the Company, and members of his family (the 'Selling
Shareholder'). Mr. Gaspar is not involved in the day-to-day management of the
Company and his sale would represent approximately 8.6% of his deemed beneficial
ownership in the Company.
Reoffers and resales of shares of Class A Common Stock received hereunder
by 'affiliates' of the Company upon the exercise of Warrants may be made only
pursuant to a separate prospectus contained in a post-effective amendment hereto
or in a separate registration statement under the Securities Act of 1933, as
amended (the 'Securities Act') or pursuant to an exemption from registration
under the Securities Act.
The Class A Common Stock is listed on The Nasdaq Stock Market's National
Market (the 'Nasdaq National Market') under the symbol 'RSLCF.' Application will
be made to the Nasdaq National Market to list the shares of Class A Common Stock
offered herein (the 'Shares') upon notice of issuance. The last reported sale
price of a share of Class A Common Stock on the Nasdaq National Market on March
19, 1998 was $23.50.
The Company will pay all expenses in connection with the Offering and no
underwriter has been engaged for the Offering.
As of the date of this Prospectus, the Company has two classes of
authorized common shares, the Class A Common Stock and its Class B common
shares, par value $.00457 per share (the 'Class B Common Stock' and, together
with the Class A Common Stock, the 'Common Stock'). The holders of both classes
of Common Stock have identical rights, except that (i) holders of Class A Common
Stock are entitled to one vote per share and holders of Class B Common Stock are
entitled to 10 votes per share, (ii) shares of Class B Common Stock are
convertible at any time at the option of the holders into shares of Class A
Common Stock on a share-for-share basis and (iii) shares of Class B Common Stock
may only be transferred to other original holders of Class B Common Stock and
certain related parties. See 'Description of Capital Stock.'
----------------------
SEE 'RISK FACTORS' BEGINNING ON PAGE 12 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE CLASS A COMMON STOCK.
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
----------------------
The date of this Prospectus is March 20, 1998.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the 'Exchange Act'), and, in accordance
therewith, files reports, proxy and information statements and other information
with the Securities and Exchange Commission (the 'Commission'). Such reports,
proxy and information statements and other information can be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices at 7 World Trade Center, New York, New York 10048
and the Northwestern Atrium Center, 500 West Madison Street, Room 1400, Chicago,
Illinois 60661. Copies of such material can be obtained at prescribed rates from
the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. The Commission maintains a Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding issuers that file electronically with the
Commission.
The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the Shares. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement, certain items of which are
contained in exhibits and schedules to the Registration Statement, as permitted
by the rules and regulations of the Commission. For further information with
respect to the Company and the Class A Common Stock offered hereby, reference is
made to the Registration Statement, including the schedules and exhibits
thereto, and the financial statements and notes filed as a part thereof.
Statements made in this Prospectus concerning the contents of any contract,
agreement or other document filed with the Commission as an exhibit are not
necessarily complete. With respect to each such contract, agreement or other
document filed with the Commission as an exhibit, reference is made to the
exhibit for a more complete description of the matter involved, and each such
statement shall be deemed qualified in its entirety by such reference. The
Registration Statement and the schedules and exhibits may be inspected and
copied at the public reference facilities maintained by the Commission at the
addresses and in the manner set forth in the preceding paragraph.
The Class A Common Stock is listed on the Nasdaq National Market under the
symbol 'RSLCF'. Reports, proxy and information statements and other information
concerning the Company can also be inspected at the National Association of
Securities Dealers, Inc. at 1735 17th Street, N.W., Washington, D.C. 20006.
----------------------
The consolidated financial statements of the Company (the 'Consolidated
Financial Statements') and the notes thereto appearing elsewhere in this
Prospectus are presented in accordance with United States generally accepted
accounting principles ('U.S. GAAP'), and amounts originally measured in foreign
currencies for all periods presented have been translated into U.S. dollars in
accordance with the methodology set forth in Note 3 to the Consolidated
Financial Statements of the Company.
----------------------
In this Prospectus, references to 'dollars' and '$' are to United States
dollars. For purposes of the balance sheet data included in this Prospectus,
conversions of foreign currencies to U.S. dollars have been calculated on the
basis of exchange rates in effect on the balance sheet dates. Conversions of
foreign currencies to U.S. dollars in the pro forma and historical financial
information included herein have been calculated, for purposes of the statements
of operations, on the basis of average exchange rates over the periods
presented. Exchange rates per United States dollar as of certain dates for
certain currencies are set forth below.
<TABLE>
<CAPTION>
RATE AS OF RATE AS OF RATE AS OF RATE AS OF
CURRENCY DECEMBER 31, 1995 DECEMBER 31, 1996 DECEMBER 31, 1997 MARCH 18, 1998
- --------------------- ----------------- ----------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Australian Dollar.... (1) 1.26 1.54 1.51
Belgian Franc........ (1) (1) (1) 37.65
British Pound........ 0.65 0.58 0.61 0.60
Danish Krone......... (1) (1) 6.85 6.96
Dutch Guilder........ (1) 1.74 2.03 2.06
Finnish Markka....... 4.37 4.60 5.45 5.55
French Franc......... 4.95 5.19 6.01 6.11
German Mark.......... 1.44 1.54 1.80 1.83
Italian Lira......... (1) (1) 1,769.91 1,798.00
Swedish Krona........ 6.64 6.89 7.94 7.96
Venezuelan Bolivar... (1) (1) 504.29 522.00
</TABLE>
- ------------------
(1) The Company had no business activity in these countries during the periods
indicated.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and the Consolidated Financial Statements and the notes
thereto, appearing elsewhere in this Prospectus. Unless the context otherwise
requires, the term 'Company' means RSL Communications, Ltd., a Bermuda
corporation, its predecessors and all of its subsidiaries. Unless otherwise
indicated in this Prospectus, all information in this Prospectus, including all
adjusted and pro forma financial information, has been adjusted to give
retroactive effect to the changes to the Company's capital structure described
under the heading 'Description of Capital Stock' and all share information has
been rounded down to eliminate fractional shares created as a result of such
changes. The Company is in the process of purchasing all fractional shares.
Industry data used throughout this Prospectus was obtained from industry
publications and has not been independently verified by the Company. Certain of
the information contained in this Prospectus, including information with respect
to the Company's plans and strategy for its business and related financing, are
forward-looking statements. For a discussion of important factors that could
cause actual results to differ materially from the forward-looking statements,
see 'Risk Factors.'
THE COMPANY
OVERVIEW
The Company is a rapidly growing multinational telecommunications company
which provides a broad array of international and domestic telephone services to
both carrier and commercial accounts. These services include international long
distance calling to over 200 countries and calling card, private line and
value-added telecommunications services. The Company focuses on providing
international long distance voice services to small and medium-sized businesses
in key markets. The Company currently has revenue generating operations in the
United States, the United Kingdom, France, Germany, Sweden, Finland, The
Netherlands, Denmark, Australia, Italy, Switzerland, Venezuela and Belgium. The
Company is in the process of commencing operations through its investments in
majority-owned entities in Austria, Spain, Luxembourg and Japan, and through its
39% investment in a Portuguese telecommunications company. In 1996,
approximately 66% of all international long distance telecommunications minutes
originated in these markets. The Company plans to expand its operations and
network into additional key markets which account for a significant portion of
the world's remaining international traffic. The Company's consolidated revenues
for the years ended December 31, 1997 and 1996 were $300.8 million and $113.3
million, respectively.
The Company was formed by Ronald S. Lauder and Itzhak Fisher in 1994 to
capitalize on the opportunities created by the growth, deregulation and
profitability of the international long distance market. The Company has grown
rapidly through acquisitions, strategic investments and joint ventures, as well
as through the start-up of its own operations in key markets. The Company began
its operations in the United States in order to establish a presence in the
largest and one of the most deregulated telecommunications markets in the world,
and has since expanded its presence to key European countries in anticipation of
continued telecommunication deregulation in the European Union (the 'EU'). In
order to pursue opportunities in Latin America, the Company formed in mid-1997 a
joint venture with entities controlled by the Cisneros Group of Companies (the
'Cisneros Group'), a privately held conglomerate with significant interests in,
among other things, the Latin American media and communications industry. The
Company has also established a presence in Asia and the Pacific Rim through its
operations in Australia and the start-up of its operations in Japan. The Company
intends to continue to expand rapidly by establishing or acquiring operations in
additional countries as they deregulate.
The Company's strategic objective is to create a low-cost facilities-based
global network that provides high quality international telecommunications
services to small and medium-sized businesses in key markets. The Company
employs a 'first to market' entry strategy to establish a presence in targeted
markets ahead of full deregulation by (i) investing in new or existing
facilities-based networks (which are then integrated into the Company's existing
network) while (ii) developing multiple marketing and distribution channels for
telecommunications services.
3
<PAGE>
ADVANCED AND LOW COST NETWORK INFRASTRUCTURE
The core of the Company's operations is 'RSL-NET,' its integrated digital
telecommunications network, which is being developed to minimize the overall
transmission costs of carrying telecommunications traffic while maintaining high
('toll') quality. RSL-NET is comprised of (i) the Company's owned facilities,
which consist of international and domestic switches and ownership interests in
international fiber optic cables, (ii) operating agreements to exchange traffic
directly with telecommunications carriers in other countries and (iii)
transmission capacity leased from other carriers and satellite providers. The
connection of the Company's switching facilities is a critical element of
RSL-NET. This connection allows the Company to bypass the costs associated with
transporting the international portion of a call through a third party carrier,
which provides the Company with an advantage in applying least cost routing for
calls which are originated and terminated utilizing the Company's switches. All
of the Company's switches are directly or indirectly linked. The Company's
existing international gateway switches conform to international signaling and
transmission standards provided for in International Telegraph and Telephone
Consultative Committee ('CCITT') recommendations and allow the Company to
interconnect its network to existing government-owned post, telegraph and
telephone monopolies ('PTT') and carrier networks around the world while
maintaining quality and dependable services. The Company presently has 11
international gateway switches, located in New York, Los Angeles, London,
Stockholm, Paris, Frankfurt, Helsinki, Vienna, Copenhagen, Lisbon and Sydney,
and seven domestic switches, located in Rotterdam, Amsterdam, New York, London,
Melbourne, Brisbane and Caracas. The Company generally utilizes state-of-the-art
Ericsson AXE-10 switches for its international gateway switches. The Company
believes that a single switch platform allows the Company to develop new
services and upgrade network software on a more efficient basis when compared to
other global carriers which may employ multiple switch technologies. The Company
is also utilizing alternative transmission technologies such as the Internet in
order to minimize its operating costs. See 'Certain Recent
Developments--Internet Telephony/Acquisition of Delta Three' and
'Business--Internet Telephony Operation.'
DEVELOPMENT OF MARKETING AND DISTRIBUTION CHANNELS
The Company is developing a wide range of marketing and distribution
channels in order to expand its customer base, particularly in its target market
of small to medium-sized businesses. The Company markets its products and
services through (i) its direct sales forces; (ii) networks of independent
agents and distributors; and (iii) telemarketing organizations. The Company's
services are currently marketed independently by the Company's local operations
in each country ('Local Operators'). The Company is in the process of developing
a universal brand name to provide uniformity of image and to create worldwide
name recognition for the Company.
MARKET OPPORTUNITY
The international long distance public switched telecommunications market,
consisting of telephone calls between countries, generated an estimated $61.3
billion in revenue and 70.0 billion minutes of use in 1996 and is currently
recognized as one of the fastest growing and most profitable segments of the
long distance telecommunications industry. The Company currently has
significantly less than a 1% share of this market. International long distance
minutes are projected to grow between approximately 11% and 17% per annum
through the year 2000, with growth spurred by (i) the continued deregulation of
telecommunications markets throughout the world, (ii) increased capacity,
improved quality and lower operating costs attributable to technological
improvements, (iii) the expansion of telecommunications infrastructure and (iv)
the globalization of the world's economies and free trade. International
settlement rates (the rates paid to other carriers to terminate an international
call) have declined over the past five years and, in connection with a recent
U.S. Federal Communications Commission (the 'FCC') initiative to balance the
U.S. settlement deficit, are expected to continue to decline. The costs for
leased transmission capacity have also declined and are expected to continue to
decline. Furthermore, the trend towards deregulation is expected to further
reduce carriers' costs of originating and terminating calls by allowing carriers
in some jurisdictions to interconnect with the domestic public switched
telephone network ('PSTN') in a deregulated market. However, these are
forward-looking statements and there can be no assurances in this regard.
4
<PAGE>
COMPANY OPERATIONS
Each of the Company's operations is at a different stage of development.
The following table shows the Company's principal operations by country, the
principal subsidiary conducting such operations, the percentage of each such
subsidiary owned by the Company, the date of acquisition or start-up of such
operations and the date each such operation began (or is anticipated to begin)
generating revenues (which may, in certain circumstances, have been prior to the
Company's acquisition of such operation):
<TABLE>
<CAPTION>
COMPANY'S DATE OF
PERCENTAGE ACQUISITION OR COMMENCEMENT OF
COUNTRY OPERATING ENTITY OWNERSHIP START-UP DATE(1) OPERATIONS(2)
- --------------- ----------------------------------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
United States RSL COM U.S.A., Inc................ 97% (3)(4) March 1995 May 1990
United Kingdom RSL COM Europe Ltd................. 100% August 1995 May 1996
Sweden RSL COM Sweden AB.................. 100% November 1995 May 1996
Finland RSL COM Finland OY................. 100% November 1995 May 1996
France RSL COM France S.A................. 100% May 1996 January 1994
Germany RSL COM Deutschland GmbH........... 100% May 1996 November 1993
The Netherlands RSL COM Nederland B.V.(5).......... 100% October 1996 October 1995
Australia RSL COM Australia Pty. Ltd.(6)..... 91.5% (4) October 1996 April 1997
Denmark RSL COM Danmark A/S................ 100% November 1996 May 1997
Japan RSL COM Japan K.K.................. 100% March 1997 June 1998(7)
Portugal Maxitel Servicos e Gestao de
Telecomunicacoes, SA............. 39% April 1997 November 1997
Italy RSL COM Italia S.r.l.(8)........... 85% (4) August 1997 December 1997
Venezuela RSL COM Venezuela C.A.(9).......... 51% (10) August 1997 January 1998
Austria Newtelco Telekom AG(11)............ 90% (4) August 1997 June 1998(7)
Spain RSL Communications Spain,
S.A.............................. 90% (4) December 1997 June 1998(7)
Switzerland Callcom AG fur TeleKommu-
nikation(12)..................... 78.5% (4) December 1997 August 1996
Belgium European Telecom S.A./N.V.......... 90% (4) December 1997 April 1995
Luxembourg European Telecom SARL.............. 90% (13) December 1997 June 1998(7)
</TABLE>
- ------------------
(1) Acquisition date refers to the Company's initial purchase of an interest in
the operating entity.
(2) Such date refers to the date upon which the operating entity began or is
currently expected to begin generating revenues from the sale of its
facilities-based international telecommunications services, although
certain of the operating entities may have been generating revenues from
other activities prior to the date of the Company's investment therein.
(3) The Company owns 100% of International Telecommunications Group, Ltd.
('ITG'), which in turn owns 97% of RSL COM U.S.A., Inc. (formerly known as
International Telecommunications Corporation) ('RSL USA'). In September
1995, the Company gained majority control of ITG and began consolidating
its U.S. operations into RSL USA. The Company acquired a 100% interest in
ITG over a 30-month period commencing March 1995. As of October 1997, RSL
USA acquired 100% of LDM Systems, Inc. ('LDM') and, in connection
therewith, certain shareholders of LDM received approximately 3% of the
outstanding stock of RSL USA.
(4) Upon the occurrence of certain events, the minority shareholders of these
entities have the right, but not the obligation, to exchange their
ownership interests in the applicable entity for shares of Class A Common
Stock or, under certain circumstances, cash, at the Company's option. Any
such exchange would result in an increase in the Company's ownership
interest in the relevant subsidiary to up to 100%. The rights held by the
minority shareholders of RSL COM Italia S.r.l. ('RSL Italy'), European
Telecom S.A./N.V. ('RSL Belgium'), RSL USA, RSL Communications Spain S.A.
('RSL Spain'), RSL COM Australia Holdings Pty. Limited, Newtelco Telekom AG
('RSL Austria') and Callcom AG fur TeleKommunikation ('RSL Switzerland')
are not currently exercisable.
(5) A subsidiary of RSL COM Holdings B.V. (formerly known as Belnet Nederland
B.V.).
(6) As of October 1997, RSL COM Australia Holdings Pty. Limited, the parent
holding company of RSL COM Australia Pty. Limited (together, 'RSL
Australia'), acquired 100% of the issued capital of, and the copyrights in
the billing software used by, each of Call Australia Pty. Ltd., Associated
Service Providers Pty. Limited, Digiplus Pty. Limited, Power Serve
Communications Consultants Pty. Limited, Talk 2000 Networks Pty. Limited
and Telephone Bill Pty. Limited (collectively the 'Call Australia Group').
In connection with such acquisition, the Company issued approximately 8.5%
of the outstanding stock of RSL Australia to certain shareholders of the
Call Australia Group.
(7) Such date refers to the anticipated date of commencement of operations. The
projected dates are forward-looking statements and, in the event the
Company does not timely receive regulatory approvals, switches cannot be
installed or become operational on a timely basis or the Company is unable
to hire necessary personnel, among other reasons, there can be no assurance
that such operations will commence generating revenues on such dates, if at
all.
(8) Formerly known as DECADE Communications S.r.l.
(9) Formerly known as Sprintel de Venezuela C.A.
(10) The Company owns 51% of RSL Communications Latin America, Ltd. ('RSL Latin
America'), which owns 100% of Sundanco S.A., which in turn owns 100% of RSL
COM Venezuela C.A. ('RSL Venezuela'). The minority shareholder of RSL Latin
America has the right to exchange its 49% ownership interest in RSL Latin
America for either shares of Class A Common Stock or cash, at the Company's
option.
(11) The Company intends to change the name of RSL Austria to RSL COM Austria
AG.
(12) The Company intends to change the name of Callcom AG fur TeleKommunikation
to RSL COM Switzerland AG.
(13) The Company owns 90% of RSL Belgium which in turn owns 100% of European
Telecom SARL ('RSL Luxembourg').
5
<PAGE>
COMPANY STRATEGY
The Company's strategic objective is to create a low-cost facilities-based
global network that provides high quality international telecommunications
services to small and medium-sized businesses in key markets. The key elements
of the Company's strategy to achieve this objective are as follows:
FOCUS ON PROVIDING INTERNATIONAL LONG DISTANCE SERVICES
The international long distance public switched telecommunications market
is currently recognized as one of the fastest growing and most profitable
segments of the long distance industry. The Company provides a broad array of
international and domestic services, but focuses on providing services to end-
users which generate significant calling traffic between countries to capitalize
on (i) the continued growth of international traffic and (ii) the margin
opportunity created by the high end-user rates currently maintained by PTTs and
other dominant carriers.
ESTABLISH OPERATIONS IN KEY MARKETS
The Company establishes operations in markets that (i) originate or
terminate significant levels of international traffic and (ii) are, or are in
the process of being, deregulated. The Company has structured its Local
Operators to be managed independently and expects its Local Operators to be
separately profitable, while benefiting from the centralized strategic,
financial and network support provided by the Company.
ENTER MARKETS EARLY
The Company seeks to enter new markets ahead of full deregulation in an
attempt to gain competitive advantages over carriers which attempt to enter a
market after deregulation is complete. These advantages include (i) the
development of multiple sales channels and the establishment of a customer base
prior to widespread competition, (ii) the early acquisition of scarce
experienced technical and marketing personnel and distribution channels and
(iii) the achievement of name recognition as one of the early competitors to the
incumbent PTTs. The Company employs multiple marketing and distribution
channels, including direct sales forces, telemarketing organizations, agents and
resellers, while also forming marketing alliances with other service providers,
such as Internet service providers and mobile service providers.
TARGET SMALL AND MEDIUM-SIZED BUSINESSES
The Company focuses on offering high quality products and services to small
and medium-sized businesses that originate in excess of $500 in international
telephone calls per month. The Company believes that this segment offers
significant market opportunities because it has traditionally been underserved
by the major global telecommunications carriers and the PTTs. The Company
believes that in most markets, small and medium-sized businesses account for a
significant percentage of international calling traffic and will continue to do
so in the future.
DEVELOP A COST COMPETITIVE GLOBAL NETWORK
Most of the Local Operators have network switching facilities, known as
points of presence ('POPs'), to provide international voice and other
telecommunications services in their markets. By integrating its current and
future POPs into RSL-NET, the Company believes that it will be able to
originate, transport and terminate traffic utilizing its own network, thereby
bypassing the high costs associated with the transport of the international
portion of a call through a third party carrier. This is expected to enable the
Company to reduce significantly its operating costs for calls that originate and
terminate in markets in which the Company has Local Operators, as well as its
overall operating costs.
PURSUE STRATEGIC ACQUISITIONS AND ALLIANCES
The Company intends to enter additional markets and expand its operations
through acquisitions, joint ventures, strategic alliances and the establishment
of new operations. The Company is continuously reviewing acquisition
opportunities, and seeks to acquire control of businesses with an established
customer base, compatible operations, licenses to operate as an international
carrier,
6
<PAGE>
experience with additional or emerging telecommunications products and
technologies and/or experienced management. In addition, the Company seeks to
enter into strategic alliances which the Company believes will enhance its
ability to expand and grow its business. For example, the Company has entered
into a joint venture with the Cisneros Group and a strategic alliance with L.M.
Ericsson A.B. ('Ericsson'), a leading global provider of telecommunications
equipment, and has acquired Delta Three, Inc. ('Delta Three'), a
telecommunications provider utilizing the Internet and networks based on
Internet Protocols to provide telecommunications services. See '--Certain Recent
Developments.'
LEVERAGE EXPERTISE OF MANAGEMENT TEAM
The Company has retained a number of experienced management personnel in
the telecommunications industry, many of whom have had significant experience
with incumbent providers, as well as early competitors in deregulating markets.
As a result, the Company believes that it is well positioned to manage the rapid
growth of its customer base and network infrastructure.
MANAGE NETWORK INVESTMENTS
The Company seeks to manage the investment of capital within its network on
an incremental basis in order to maximize the efficiency of its capital
expenditures program. In general, the Company transmits traffic by leasing
capacity on a variable cost per minute basis until it believes that a direct
investment in facilities or a fixed cost lease arrangement between countries or
on a particular route is warranted. When the cost of owning facilities is
justified relative to leasing facilities and the Company invests in such
facilities, the Company generally experiences higher gross margins and lower
overall transmission costs.
CERTAIN RECENT DEVELOPMENTS
NEW OPERATIONS
In the fourth quarter of 1997, the Company entered the Swiss
telecommunications market with the acquisition of 78.5% of Callcom AG fur
TeleKommunikation, a long distance telephone company based in Zurich, and also
established operations in Spain. As of October 1997, the Company acquired 100%
of LDM, a telecommunications provider to small and medium-sized businesses in
the United States, acquired 100% of the issued capital of the members of the
Call Australia Group, leading Australian resellers, and also acquired the
copyright in the billing system of the Call Australia Group. In November 1997,
RSL Australia purchased 85% of EZI Phonecard Holdings Pty. Limited, an
international reseller and prepaid calling card services provider. In December
1997, the Company announced the commencement of operations in Belgium and
Luxembourg through the acquisition of a 90% interest in European Telecom, one of
Belgium's largest telephone carriers. As of January 1998, the Company acquired a
90% interest in Telecenter Oy, an independent sales agent in Finland. In January
1998, the Company was granted a telecommunications license from the Austrian
Telecom Control GmbH to operate as a full service telecommunications provider of
local, long distance and international services in Austria. In February 1998,
Japan's Ministry of Posts and Telecommunications (the 'MPT') awarded to the
Company a Type II license to provide international simple resale services. In
February 1998, the Company entered into a joint venture agreement with PCM
Comunicaciones, S.A. de C.V., a licensed long distance telecommunications
service provider in Mexico, to provide domestic and international long distance
telecommunications services primarily to small and medium-sized businesses in
Mexico. The transaction is subject to regulatory approval in Mexico and other
customary conditions to closing. In March 1998, the Company agreed to acquire,
in two separate transactions, the customer base of each of First Direct
Communications Pty., Limited and Link Telecommunications Pty. Ltd., two
switchless mobile telecommunications resellers in Australia. The transactions
are subject to regulatory approval in Australia and other customary conditions
to closing.
INITIAL PUBLIC OFFERING
In October 1997, the Company sold 8,280,000 shares of Class A Common Stock
in an initial public offering of shares of Class A Common Stock (the 'Initial
Public Offering'). The shares of Class A Common Stock sold in the Initial Public
Offering were offered both in the United States and
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<PAGE>
internationally. The aggregate net proceeds of the Initial Public Offering,
after deducting underwriting discounts and commissions and expenses, were
approximately $167.5 million, $101.0 million of which will be used by the
Company to redeem (the 'Equity Clawback') part of the 1996 Notes (defined
below), as permitted under the 1996 Indenture (defined below).
INTERNET TELEPHONY/ACQUISITION OF DELTA THREE
In July 1997, the Company acquired a majority interest in Delta Three.
Thereafter, the Company acquired additional interests from minority stockholders
and, in December 1997, the Company entered into a definitive agreement to
purchase additional interests in Delta Three that will increase its equity
interests in Delta Three to approximately 98%. This transaction is currently
expected to close by the end of the first quarter of 1998. Delta Three utilizes
the Internet, traditionally a device for data communications, as a transmission
medium for voice communications. One of the services offered by Delta Three
allows customers to place long distance and international phone calls using
standard telephones, without requiring any additional equipment. Delta Three
also provides wholesale call termination services to other telecommunications
service providers.
The Company and Delta Three are also party to a services agreement pursuant
to which, among other things, Delta Three provides the Company with discounted
carrier telephony services, the Company provides Delta Three with termination
services at preferred rates and provides for the co-location of Delta Three's
Internet gateway servers with the Company's facilities. The Company believes
that the acquisition of Delta Three positions the Company at the forefront of
the rapidly emerging Internet telephony industry. See 'Business--Delta Three
Operations.'
PRIVATE PLACEMENTS OF NOTES AND EXCHANGE OFFER
In October 1996, the Company and the Note Issuer completed a private
offering (the '1996 Units Offering') of 300,000 units (the 'Units'), each
consisting of (i) $1,000 principal amount of 12 1/4% Senior Notes due 2006 of
the Note Issuer and (ii) one warrant to purchase 3.975 shares of Class A Common
Stock of the Company (each a 'Warrant'). The Units were sold for an aggregate
purchase price of $300.0 million. In May 1997, in accordance with the indenture
governing the notes included in the Units (the '1996 Indenture'), the Company
and the Note Issuer consummated an exchange offer (the 'Exchange Offer')
pursuant to which such notes were exchanged for substantially identical notes
registered under the Securities Act. The Warrants and the shares of Class A
Common Stock underlying the Warrants were not part of the Exchange Offer. The
notes issued in the 1996 Units Offering and in the Exchange Offer are referred
to collectively in this Prospectus as the '1996 Notes.'
In February 1998, the Note Issuer consummated concurrent offerings (the
'U.S. Dollar Notes Offerings') of $200.0 million 9 1/8% Senior Notes due 2008
(the 'U.S. Dollar Senior Notes') and $328.1 million ($200.0 million initial
accreted value) 10 1/8% Senior Discount Notes due 2008 (the 'U.S. Dollar Senior
Discount Notes' and, together with the U.S. Dollar Senior Notes, the 'U.S.
Dollar Notes'). The U.S. Dollar Notes are unconditionally guaranteed as to
payment of principal, interest and any other amounts thereon by the Company.
In March 1998, the Note Issuer consummated the offering (the 'German Debt
Offering' and, together with the 1996 Units Offering and the U.S. Dollar Notes
Offerings, the 'Debt Offerings') of DM296.0 (approximately $99.1 million initial
accreted value) 10% Senior Discount Notes due 2008 (the 'German Notes' and,
together with the 1996 Notes and the U.S. Dollar Notes, the 'Notes').
Subject to applicable U.S. federal and state securities laws, the Note
Issuer has agreed to file registration statements with the Commission relating
to exchange offers for, or the sale of, the U.S. Dollar Notes and the German
Notes (collectively, the '1998 Notes').
PENDING ACQUISITIONS
The Company is currently engaged in negotiations with several parties in
various markets with respect to potential strategic acquisitions and alliances.
There can be no assurance, however, that the Company will successfully complete
any of these transactions.
8
<PAGE>
CERTAIN MINORITY INTERESTHOLDER RIGHTS
The Company has granted to a number of minority shareholders and officers
of certain of its subsidiaries (the 'Minority Interestholders') options which
allow the Minority Interestholders to exchange their shares or interests in the
respective subsidiary for shares of the Class A Common Stock (the 'Roll-Up
Rights'). As of the date of this Prospectus, Minority Interestholders of RSL
Austria, RSL Italy, RSL Latin America, PrimeCall Europe Services B.V.
('PrimeCall Europe'), RSL Spain, RSL Switzerland, RSL Belgium, RSL USA, and RSL
Australia have such Roll-Up Rights.
Additionally, the Company has granted to a number of Minority
Interestholders certain piggyback registration rights with respect to shares of
Class A Common Stock acquired pursuant to an exercise of their Roll-Up Rights.
HEADQUARTERS
The Company's headquarters are located at Clarendon House, Church Street,
Hamilton HM CX Bermuda (telephone number: 441-295-2832). The Company also
maintains executive offices with respect to some of its operations at 767 Fifth
Avenue, Suite 4300, New York, New York 10153 (telephone number: 212-317-1800).
THE OFFERING
The Company has registered 1,152,715 shares of Class A Common Stock to be
issued pursuant to the terms of the warrant agreement governing the Warrants and
300,000 shares of Class A Common Stock to be sold by Bukfenc, Inc., a
corporation wholly owned by Andrew Gaspar, Vice Chairman of the Company, and
members of his family (which necessarily assumes the conversion by the Selling
Shareholder of an identical number of Shares of Class B Common Stock). The
registration of the shares underlying the Warrants was required pursuant to a
registration rights agreement entered into in connection with the issuance of
the Warrants. The Company is required to register the Selling Shareholder's
Shares pursuant to previously granted registration rights. Mr. Gaspar is not
involved in the day-to-day management of the Company and his sale would
represent approximately 8.6% of his deemed beneficial ownership in the Company.
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<PAGE>
SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA
The following tables set forth certain summary consolidated financial data
for the Company for each of the three years in the period ended December 31,
1997, which have been derived from the Consolidated Financial Statements and
notes thereto. The information as of and for the year ended December 31, 1994
was derived from the Consolidated Financial Statements of the Company's
predecessor entity, ITG. The Company's Consolidated Financial Statements for the
years ended December 31, 1997, 1996 and 1995 have been audited by Deloitte &
Touche LLP, as stated in their reports appearing herein.
The Company has experienced rapid growth over the periods set forth below,
which growth may not necessarily continue at such rate. Accordingly, the
financial and operating results set forth below may not be indicative of future
performance.
The summary consolidated financial and operating data presented below
should be read along with 'Management's Discussion and Analysis of Financial
Condition and Results of Operations' and the Consolidated Financial Statements
and the related notes included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
PREDECESSOR
1994 1995(1) 1996 1997
----------- ---------- ---------- ---------
($ IN THOUSANDS, EXCEPT LOSS PER SHARE)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues........................... $ 4,702 $ 18,617 $ 113,257 $ 300,796
Cost of services................... (4,923) (17,510) (98,461) (265,321)
----------- ---------- ---------- ---------
Gross profit (loss)................ (221) 1,107 14,796 35,475
Selling, general and administrative
expense.......................... (2,395) (9,639) (38,893) (94,712)
Depreciation and amortization...... (240) (849) (6,655) (21,819)
----------- ---------- ---------- ---------
Loss from operations............... (2,856) (9,381) (30,752) (81,056)
Interest income.................... -- 173 3,976 13,826
Interest expense................... (225) (194) (11,359) (39,373)
Other income....................... -- -- 470 6,595(2)
Minority interest.................. -- -- (180) 210
Income taxes....................... -- -- (395) (401)
----------- ---------- ---------- ---------
Net loss........................... $(3,081) $ (9,402) $ (38,240) $(100,199)
----------- ---------- ---------- ---------
----------- ---------- ---------- ---------
Loss per share(3).................. $(15.41) $ (1.67) $ (5.13) $ (5.27)
Weighted average number of shares
of Common Stock outstanding(3)... 200 5,641 7,448 19,008
OTHER FINANCIAL DATA:
EBITDA(4).......................... $(2,616) $ (8,532) $ (23,807) $ (52,432)
Capital expenditures(5)............ 1,126 6,074 23,880 49,417
Cash (used in) provided by
operating
activities....................... (1,987) 3,554 (10,475) (91,812)
Cash used in investing
activities....................... (478) (16,537) (225,000) (18,821)
Cash provided by financing
activities....................... 2,888 18,143 335,031 152,035
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------------
ACTUAL AS ADJUSTED(6)
----------- --------------
(UNAUDITED)
($ IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents...................... $ 144,894 $541,499
Marketable securities.......................... 13,858 13,858
Restricted marketable securities(7)............ 68,836 48,136
Total assets................................... 605,664 981,569
Short-term debt and current portion of capital
lease obligations(8)......................... 8,033 8,033
Long-term debt and capital lease
obligations(8)............................... 316,608 726,703
Shareholders' equity........................... 126,699 125,654
</TABLE>
- ------------------
(1) Effective with the acquisition of a majority equity interest in ITG in
September 1995, the Company began to consolidate ITG's operations. From
March 1995 (the date of the Company's initial investment) to September
1995, the Company accounted for its investment in ITG using the equity
method of accounting.
(2) Other income includes the reversal of certain liabilities accrued in
connection with the Company's obligations under an agreement that required
the Company to meet a carrier vendor's minimum usage requirements, which
agreement was entered into by a subsidiary of the Company prior to the
Company's acquisition of such subsidiary. During May 1997, the Company
renegotiated the contract with this carrier vendor resulting in the
elimination of approximately $7.0 million of previously accrued charges.
(3) Loss per share is calculated by dividing the loss attributable to the
Common Stock by the weighted average number of shares of Common Stock
outstanding, and has been retroactively restated to reflect the
2.19-for-one stock split. Shares issuable pursuant to outstanding stock
options, Roll-Up Rights and warrants (including, without limitation, the
Warrants) are not included in the loss per share calculation as their
effect is anti-dilutive. See 'Description of Capital Stock.'
(4) EBITDA consists of loss before interest, income taxes, depreciation and
amortization. EBITDA is provided because it is a measure commonly used in
the telecommunications industry. It is presented to enhance an
understanding of the Company's operating results and is not intended to
represent cash flow or results of operations in accordance with U.S. GAAP
for the periods indicated. The Company's use of EBITDA may not be
comparable to similarly titled measures used by other companies due to the
use by other companies of different financial statement components in
calculating EBITDA.
(5) Capital expenditures include assets acquired through capital lease
financing and other debt.
(6) The as adjusted figure reflects the receipt of net proceeds of
approximately $385.0 million from the sale of the U.S. Dollar Notes, the
use of approximately $101.0 million of proceeds from the Initial Public
Offering to effect the Equity Clawback, the payment of $4.1 million of
accrued interest payable in connection with the Equity Clawback, the
release of approximately $21.0 million from the restricted marketable
securities account following the Equity Clawback and the receipt of net
proceeds of approximately $96.0 million from the sale of the German Notes
(converted to U.S. Dollars at the noon buying rate for U.S. Dollars on
March 11, 1998 of DM1.8352 = $1.00.)
(7) The restricted marketable securities consist of U.S. government securities
pledged to secure the payment of interest on the principal amount of the
1996 Notes. See 'Description of Certain Indebtedness--Description of the
Notes.'
(8) As of December 31, 1997, the Company had $29.7 million of available
(undrawn) borrowing capacity under its current bank and vendor facilities.
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<PAGE>
RISK FACTORS
An investment in the Class A Common Stock offered hereby is subject to a
number of risks. Prospective investors should carefully consider the following
factors as well as the more detailed descriptions cross-referenced to the body
of this Prospectus and the other matters described in this Prospectus before
purchasing shares of Class A Common Stock.
SHORT OPERATING HISTORY; ENTRANCE INTO NEWLY OPENING MARKETS; MARGINS
The Company acquired its principal operations in the United States in 1995,
in France, Germany and The Netherlands in 1996, in Italy, Belgium, Switzerland,
Venezuela, and a minority interest in its Portuguese operations in 1997, and
commenced start-up operations in the United Kingdom, Sweden and Finland in 1996,
and Denmark and Australia in 1997. Therefore, the Company has limited experience
in operating these businesses. The businesses which now constitute the Company's
principal operations commenced operations on various dates during 1990 through
1997 and, therefore, have limited operating histories. In addition, the Company
has recently made investments in Luxembourg, Austria, Spain, and Japan and the
Company plans to acquire or start-up operations in markets where it currently
does not have operations. Furthermore, in many of its existing and future
markets, the Company plans to offer services that have been provided in the past
only by PTTs and/or services that were not previously available. Accordingly,
the Company may face difficulties in establishing or expanding such businesses,
including difficulties in hiring personnel that have experience in providing
such telecommunications services in such markets. See '--Risks Associated with
Anticipated Growth and Acquisitions.' The Company's prospects must, therefore,
be considered in light of the risks, expenses, problems and delays inherent in
establishing a new business in an evolving industry.
As a new entrant in its markets, the Company may need to grant substantial
discounts in order to attract a significant customer base. The Company has and
will continue to provide services to carrier customers at discounted prices,
resulting in lower gross margins than margins related to sales to other
customers. In addition, the Local Operators may incur significant costs
developing their network infrastructures (including the purchase of minimum
investment units ('MIUs') and indefeasible rights of use ('IRUs') in fiber optic
cable systems, switches and leased capacity) as their business grows. The fixed
costs and expenses incurred under these circumstances has resulted, and may
continue to result, in low or negative operating margins. See 'Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Overview.'
LDM has obtained, and has pending applications for, certificates of
authority to provide local exchange services in many states throughout the U.S.,
and is currently reselling such services in New York State. Because local
exchange services have, until very recently, been provided only by a single
incumbent local exchange carrier ('LEC') in any particular community, the
Company may face difficulties in establishing or expanding its local exchange
business, including difficulties in negotiating service agreements with
incumbent LECs and in hiring personnel that have experience in providing such
services in such markets. See '--Risks Associated with Anticipated Growth and
Acquisitions.' The Company's prospects must, therefore, be considered in light
of the risks, expenses, problems and delays inherent in establishing a new
business in an evolving industry.
HISTORICAL AND FUTURE NET OPERATING LOSSES AND NEGATIVE EBITDA; NEED FOR
ADDITIONAL CAPITAL;
SUBSTANTIAL INDEBTEDNESS; ABILITY TO SERVICE INDEBTEDNESS
The Company will need to continue to enhance and expand its operations and
meet the increasing demands for service quality, availability of value added
services and competitive pricing in order to establish and maintain a
competitive position in its existing markets and the additional markets it
enters. The Company has incurred, and during the next several years expects to
continue to incur, significant and increasing operating and net losses, negative
EBITDA and negative cash flow from operating activities due to the start-up
nature of the Company's business and the Company's need to expand its
operations, develop RSL-NET and build its customer base and marketing
operations. The Company may need to raise substantial additional capital in the
future to fund its acquisitions, strategic alliances,
12
<PAGE>
start-up operations, capital expenditures and anticipated substantial operating
losses. The net proceeds from the German Debt Offering, the net proceeds from
the U.S. Dollar Notes Offerings, the net proceeds from the Initial Public
Offering (net of the Equity Clawback) and the remaining net proceeds from the
1996 Units Offering, together with borrowings under the Company's $7.5 million
revolving credit facility with The Chase Manhattan Bank (the 'Revolving Credit
Facility') and vendor financing, are expected to fund the Company's planned
expansion of its existing operations and operating losses for approximatley 12
to 24 months. If the Company's plans or assumptions change or prove to be
inaccurate, if the Company consummates acquisitions in addition to those
currently contemplated, if the Company experiences unanticipated costs or
competitive pressures or if the net proceeds from the German Debt Offering, the
U.S. Dollar Notes Offerings, the Initial Public Offering (net of the Equity
Clawback) and the 1996 Units Offering, together with the proceeds of the
Revolving Credit Facility and such vendor financing, otherwise prove to be
insufficient, the Company may be required to seek additional capital. The
Company may also be required to raise capital to refinance the Notes at the time
they mature. The Company may seek to raise such additional capital from public
or private equity or debt sources. There can be no assurance that the Company
will be able to raise such capital on satisfactory terms or at all. If the
Company decides to raise additional funds through the incurrence of debt, the
Company may become subject to additional or more restrictive financial
covenants. If the Company is unable to obtain such additional capital or is
unable to obtain such additional capital on acceptable terms, the Company may be
required to reduce the scope of its existing operations and presently
anticipated expansion, which could materially adversely affect the Company's
business, results of operations and financial condition and its ability to pay
principal and interest on the Notes.
The Company has a significant level of indebtedness. As of December 31,
1997, the Company had consolidated indebtedness of $304.6 million on an actual
basis, and after giving effect to the German Debt Offering, the U.S. Dollar
Notes Offerings and the Equity Clawback would have had consolidated indebtedness
of $713.6 million. The 1996 Indenture and the indentures governing the 1998
Notes (collectively, the 'Indentures') limit, but do not prohibit, the
incurrence of additional indebtedness by the Company. The Company expects to
incur substantial amounts of additional indebtedness in the future resulting in
substantial and increasing interest expense. In addition, the Company expects to
incur negative EBITDA, negative cash flow from operations, deficiencies of
earnings to fixed charges, operating losses and net losses for future periods.
In 1996, after giving effect to the Company's acquisition of Sprint
Corporation's international voice operations in France and Germany in May 1996
(the 'Sprint Acquisitions'), the Company's acquisition of interests in ITG in
1996 (the 'ITG 1996 Acquisition') and the Company's acquisition of 75% of RSL
Netherlands in October 1996 (the 'RSL Netherlands Acquisition'), the Company
made capital expenditures of approximately $26.2 million. In 1997, the Company
made capital expenditures of approximately $49.4 million. In 1998, the Company
expects to make capital expenditures of approximately $70.0 million. The Company
has also experienced (except for the fiscal quarters during which the 1996 Units
Offering and the Initial Public Offering were closed) a consistently increasing
working capital deficit. The Company's interest expense may exceed its EBITDA
and cash flow from operations. If the Company's EBITDA is insufficient to meet
its future debt service obligations and fund its operating losses, the Company
will face substantial liquidity problems. If the Company is unable to generate
sufficient EBITDA or cash flow from operations, or otherwise obtain funds
necessary to make required payments, or if the Company otherwise fails to comply
with the material terms of its indebtedness, it would be in default thereunder,
which would permit the holders of such indebtedness to accelerate the maturity
thereof. Such defaults could result in a default on the Notes and could delay or
preclude payment of principal of, or interest on, the Notes. The ability of the
Company to meet its obligations is dependent upon the future performance of the
Company, which is subject to prevailing economic conditions (in each market,
country and region in which the Company operates, as well as globally) and to
financial, business and other factors, including factors beyond the Company's
control.
The Company's indebtedness could have important consequences to holders of
the Class A Common Stock, including the following: (i) the debt service
requirements of any existing and additional indebtedness could make it more
difficult for the Company to make payments on its existing debt; (ii) the
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<PAGE>
Company's level of indebtedness could limit the ability of the Company to obtain
any necessary financing in the future for working capital, capital expenditures,
debt service requirements or other purposes; (iii) a substantial portion of the
Company's future cash flow from operations, if any, will be dedicated to the
payment of principal and interest on the Notes, its other indebtedness and other
obligations and will not be available for the Company's business; (iv) the
Company's level of indebtedness could limit its flexibility in planning for, or
reacting to changes in, its business; (v) the Company is more highly leveraged
than certain of its competitors, which may place it at a competitive
disadvantage; and (vi) the Company's high degree of indebtedness could make it
more vulnerable in the event of a downturn in its business. See 'Selected
Consolidated Financial Data' and 'Management's Discussion and Analysis of
Financial Condition and Results of Operations.'
RISKS ASSOCIATED WITH ANTICIPATED GROWTH AND ACQUISITIONS
The Company has experienced rapid growth and intends to continue to grow
through further expansion of its existing operations, through acquisitions,
joint ventures, strategic alliances and through the establishment of new
operations. The Company constantly evaluates acquisition and joint venture
opportunities. The Company's ability to manage its anticipated future growth
will depend on its ability to evaluate new markets and investment vehicles,
monitor operations, control costs, maintain effective quality controls, obtain
satisfactory and cost-effective lease rights from, and interconnection
agreements with, competitors that own transmission lines (in many cases
intra-national and local transmission lines may be available from only one
dominant competitor) and significantly expand the Company's internal management,
technical and accounting systems. The Company's growth will also depend on its
ability to purchase successfully MIUs and IRUs, which ability may be adversely
affected by, among other factors, competition to purchase such rights and
regulatory restrictions on ownership. The Company's rapid growth has placed, and
its planned future growth will continue to place, a significant and increasing
strain on the Company's financial, management and operational resources,
including the identification of acquisition targets and joint venture partners,
the negotiation of acquisition and joint venture agreements and the maintenance
of satisfactory relations, including, when necessary, the resolution of disputes
with its joint venture partners and minority investors in acquired entities. In
addition, acquisitions and the establishment of new operations will entail
considerable expenses in advance of anticipated revenues and may cause
substantial fluctuations in the Company's operating results.
The Company may, as a result of legal restrictions or other reasons,
acquire a minority interest in strategic targets, in which case the Company
would lack control over the target company's operations and strategies. There
can be no assurance that such lack of control will not interfere with the
Company's growth and integration of its operations.
The Company may also acquire interests in operations for strategic reasons,
despite the fact that such operations have operational or managerial problems or
are incurring losses. In such cases, there can be no assurance that such
operational or managerial problems or losses will not cause the Company
significant problems or consume substantial monetary, management and other
resources of the Company.
The Company's planned new businesses will need to be integrated with its
existing operations. For acquired businesses, this will entail, among other
things, integration of switching, transmission, technical, sales, marketing,
billing, accounting, quality control, management, personnel, payroll, regulatory
compliance and other systems and operating hardware and software, some or all of
which may be incompatible. For example, the Company's U.S. operations only began
to utilize RSL-NET in the fourth quarter of 1996. Furthermore, acquired
businesses generally suffer from employee and customer attrition and turnover at
higher rates during the period commencing when employees and customers learn of
a proposed transaction and ending after the transaction has been completed. The
Company has experienced high levels of customer attrition and turnover in
certain acquired businesses in the United States, Australia, France and Germany.
In countries where the Company expands by establishing a new business, it must,
among other things, recruit, hire and train personnel, establish offices, obtain
regulatory authorization, lease transmission lines from, and obtain
interconnection
14
<PAGE>
agreements with, competitors that own intra-national transmission lines, and
install hardware and software. See '--Competition.' In addition, since the
Company operates businesses in several countries and intends to expand into
additional countries and regions, including Europe, Asia, the Pacific Rim and
Latin America, the Company must manage the problems associated with integrating
a culturally and linguistically diverse workforce. The Company has limited
experience dealing with these problems.
RISKS ASSOCIATED WITH RAPIDLY CHANGING INDUSTRY
The international telecommunications industry is changing rapidly due to,
among other things, deregulation, privatization of PTTs, technological
improvements, expansion of telecommunications infrastructure and the
globalization of the world's economies and free trade. There can be no assurance
that one or more of these factors will not vary unpredictably, which could have
a material adverse effect on the Company. There can also be no assurance, even
if these factors turn out as anticipated, that the Company will be able to
implement its strategy or that its strategy will be successful in this rapidly
evolving market. Furthermore, there can be no assurance that the Company will be
able to compete effectively or adjust its contemplated plan of development to
meet changing market conditions.
Much of the Company's planned growth is predicated upon the deregulation of
telecommunications markets. There can be no assurance that such deregulation
will occur when or as anticipated, if at all, or that the Company will be able
to grow in the manner or at the rates currently contemplated.
The telecommunications industry is in a period of rapid technological
evolution, marked by the introduction of new product and service offerings and
increased satellite and fiber optic cable transmission capacity for services
similar to those provided by the Company, including utilization of the Internet
for international voice and data communications. The Company cannot predict
which of the many possible future product and service offerings will be
important in order to establish and maintain a competitive position or what
expenditures will be required to develop and provide such products and services.
The Company's profitability will depend, in part, on its ability to anticipate
and adapt to rapid technological changes occurring in the telecommunications
industry and on its ability to offer, on a timely basis, services that meet
evolving industry standards and customer preferences. There can be no assurance
that the Company will be able to adapt to such technological changes or offer
such services on a timely basis or establish or maintain a competitive position.
As a result of existing excess international transmission capacity, the
marginal cost of carrying an additional international call is often very low for
carriers that own MIUs or IRUs. Industry observers have predicted that these low
marginal costs may result in significant pricing pressures and that, within a
few years after the end of this century, there may be no charges based on the
distance a call is carried. Certain of the Company's competitors have introduced
calling plans that provide for flat rates on calls within the U.S. and Canada,
regardless of time of day or distance of the call. If this type of pricing were
to become prevalent, it would likely have a material adverse effect on the
Company's prospects, financial condition and results of operations and its
ability to make payments on its indebtedness. See '--Dependence on Other
Carriers.'
INABILITY TO PREDICT TRAFFIC VOLUME
The Company may enter into long-term agreements for leased capacity in
anticipation of traffic volumes which do not reach expected levels and,
therefore, be obligated to pay for transmission capacity without adequate
corresponding revenues. Conversely, the Company may underestimate its need for
leased capacity and, therefore, be required to obtain transmission capacity
through more expensive means. The Company's U.S. operations have, in the past,
both overestimated and underestimated their need for leased capacity and,
therefore, have been forced to obtain capacity for overflow traffic at a higher
cost and have also leased capacity which was under-utilized and, in some
instances, led to under-utilization charges. See 'Management's Discussion and
Analysis of Financial Condition and Results of Operations.' If the Company is
unable to accurately project its needs for leased capacity in the future, such
inability may have a material adverse effect on the Company's business and
profitability. Additionally, the Company has in the past acquired, and may in
the future
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acquire, operations that have entered into long-term agreements for leased
capacity with under-utilization charge provisions. These agreements present the
same risks.
DEPENDENCE ON OTHER CARRIERS
The Company does not own any intra-national or local exchange transmission
facilities in any country in which it provides services (and does not intend to
construct or acquire any of its own transmission facilities unless required to
do so in order to receive regulatory approval to operate). Consequently, the
Company must continue to rely on providers of intra-national and local exchange
transmission facilities. All of the telephone calls made by the Company's
customers are and will continue to be connected, at least in part, through
transmission facilities that the Company leases. In all of the jurisdictions in
which the Company conducts business (other than the U.S. and the United Kingdom)
or plans to conduct business, the current provider of significant intra-national
transmission facilities is the PTT. Similarly, in the U.S., the current
providers of local exchange transmission facilities are generally only the
incumbent LECs, including the regional Bell operating companies ('RBOCs').
Accordingly, prior to full deregulation, there may be only one source of
intra-national and/or local exchange transmission facilities in these countries,
and the Company may be required to lease transmission capacity at artificially
high rates from a provider that occupies a monopoly or near monopoly position.
In fact, Deutsche Telekom AG ('Deutsche Telekom'), the German PTT, in 1997
raised the rates charged to the Company and other carriers with respect to
intra-national transmissions, and there can be no assurance that other PTTs will
not also do so. Such rates may be too high to allow the Company to generate
gross profit on intra-national calls or international calls routed to a Company
switch by means of such intra-national lines. In addition, PTTs will not
necessarily be required by law to allow the Company to lease transmission lines
upon which the Company depends. To the extent that applicable law requires PTTs
to lease transmission lines to the Company, delays may nevertheless be
encountered with respect to the commencement of operations and extensive delays
can be expected with respect to the negotiation of leases and interconnection
agreements. See '--Government Regulatory Restrictions.' In addition, disputes
can be expected with respect to pricing terms and billing. Similarly, to the
extent that the Company leases local exchange facilities in the U.S., there is
currently some uncertainty involving the prices and nature of such facilities
that LECs may offer to competitors in the local exchange market, which could
include the Company. Currently, the U.S. Court of Appeals for the Eighth Circuit
has held that the FCC does not have jurisdiction to create national rules for
the pricing of such facilities, but rather, that such jurisdiction rests with
each of the individual states. As of the date of this Prospectus, this case was
before the U.S. Supreme Court and, if the lower court decision is upheld, the
need to address different pricing regimes in different states could make it more
burdensome or expensive for the Company to enter a local exchange market.
Many of the international telephone calls made by the Company's customers
are and will continue to be transported through transmission facilities that the
Company leases. The lessors of such facilities are competitors of the Company,
including American Telephone & Telegraph, Inc. ('AT&T'), MCI Communications
Corporation ('MCI'), Teleglobe Canada, Inc. ('Teleglobe'), British
Telecommunications PLC ('British Telecom'), France Telecom S.A. ('France
Telecom'), Deutsche Telekom and Cable and Wireless Communications PLC
('Mercury'). Similarly, to the extent the Company provides local exchange
services in the U.S., it will have to lease facilities from LECs that will be
competitors of the Company, such as the RBOCs. The Company generally leases
lines on a short-term basis. These include leases on a per-minute basis (some
with minimum volume commitments) and, where the Company anticipates higher
volumes of traffic, leases of transmission capacity for point-to-point circuits
on a monthly or longer-term fixed cost basis. The negotiation of lease
agreements involves estimates regarding future supply and demand for
transmission capacity as well as estimates of the calling patterns and traffic
levels of the Company's existing and future customers. When there has been
excess transmission capacity, as was the case for many years in the United
States, lease rates have declined and short term leases have been advantageous.
Recently, capacity has been somewhat constrained in the United States and the
decline in lease rates has slowed. As a result, longer term
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leases may become more attractive. Should the Company fail to meet its minimum
volume commitments pursuant to long-term leases, it will be obligated to pay
'under-utilization' charges. See '--Inability to Predict Traffic Volume.' For
these reasons, the Company would suffer competitive disadvantages if it entered
into leases with inappropriate durations or leases based on per-minute charges
for high volume routes (or leases with fixed monthly rates for low volume
routes), or if it failed to meet its minimum volume requirements. The Company is
also vulnerable to service interruptions and poor transmission quality from
leased lines. The deterioration or termination of the Company's relationships
with one or more of its carrier vendors could have a material adverse effect
upon the Company's business, financial condition and results of operations.
DEPENDENCE ON EFFECTIVE INFORMATION SYSTEMS; YEAR 2000 TECHNOLOGY RISKS
Sophisticated information systems are vital to the Company's growth and its
ability to monitor costs, bill and receive payments from customers, reduce
credit exposure, effect least cost routing and achieve operating efficiencies.
The Company currently operates separate network management information systems
for its U.S. and European operations. The Company intends to integrate and
operate the information services for all of its Local Operators from a central
location. A failure of any of the Company's current systems, the failure of the
Company to implement or integrate new systems without difficulty, if at all, the
failure of any new systems or the failure to upgrade systems as necessary could
have a material adverse effect on the Company, its financial condition and the
results of operations.
The Company is in the process of reviewing its computer systems and
operations to identify and determine the extent to which any systems will be
vulnerable to potential errors and failures as a result of the 'Year 2000'
problem. The Year 2000 problem is the result of computer programs being written
using two digits, rather than four digits, to define the applicable year. Any of
the Company's programs that have time-sensitive software may recognize a date
using '00' as the year 1900 rather than the year 2000. This could result in a
major system failure or miscalculations.
The Company is upgrading its computer system in an effort to prevent major
system failures which could result upon the transition from 1999 to the year
2000. There can be no assurance that any such upgrades will be successfully
implemented or that additional steps will not be necessary. A failure of the
Company's computer systems or the failure of the Company's vendors or customers
to effectively upgrade their software and systems for transition to the year
2000 could have a material adverse effect on the Company's business and
financial condition or results of operations. See 'Management's Discussion and
Analysis of Financial Condition and Results of Operations--Year 2000 Technology
Risks,' 'Business--U.S. Operations' and '--European Operations--General.'
COMPETITION
The provision of telecommunications services is and will continue to be
extremely competitive. Prices for long distance calls have decreased
substantially over the last few years in most of the markets in which the
Company does business and prices are expected to decline substantially over the
next several years in all of the markets where the Company does business or
expects to do business. In addition, all of the Company's markets and expected
future markets have deregulated or are in the process of deregulating telephone
services. Customers in most of these markets are not familiar with obtaining
services from competitors to the PTTs and incumbent LECs and may be reluctant to
use new providers, such as the Company. In particular, the Company's target
customers, small and medium-sized businesses, may be reluctant to entrust their
telecommunications needs to new and unproven operators or may switch to other
service providers as a result of price competition. The Company has experienced,
and expects to continue to experience, high levels of customer attrition and
turnover as a result of the highly competitive nature of most of its markets.
The Company's success will depend upon the Company's ability to compete
with a variety of other telecommunications providers in each of its markets,
including (i) the PTTs, (ii) alliances such as AT&T's alliance with Unisource
(itself an alliance currently among PTT Telecom Netherlands, Telia AB
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and Swiss Telecom PTT) and the corresponding alliance with WorldPartners, the
entity resulting from the proposed merger of MCI and WorldCom, Inc.
('WorldCom'), and Sprint Corporation's ('Sprint') alliance with Deutsche Telekom
and France Telecom, known as 'Global One,' (iii) companies offering resold
international telecommunications services, (iv) companies such as GTE and
WorldCom offering local exchange service in conjunction with domestic long
distance and international long distance services, (v) LECs such as the RBOCs,
and (vi) other companies with business plans similar to that of the Company. The
Company expects that competition will increase in the future as the deregulation
of telecommunications markets worldwide accelerates. Many of the Company's
competitors have significantly greater financial, management and operational
resources and more experience than the Company. If any of the Company's
competitors were to devote additional resources to the provision of
international long distance voice telecommunication services to the Company's
target customer base of small and medium-sized businesses, there could be an
adverse effect on the Company's business. In addition, certain of the Company's
competitors may target discounts in one market to gain an advantage in another
market or with a particular customer. The Company may be unable to compete with
such discounts on an economically feasible basis.
Each of the Company's Local Operators is expected to separately compete
within their respective countries. There can be no assurance that any of the
Local Operators will be able to do so effectively and the success of the
Company's strategy in any one market is not necessarily indicative of its
ability to succeed in any other market.
Competition for customers is primarily on the basis of price and, to a
lesser extent, on the type and quality of services offered and customer service.
The Company attempts to price its services at a discount to the prices charged
by the PTT or major carriers in each of its markets. The Company has no control
over the prices set by its competitors and some of the Company's larger
competitors may be able to use their substantial financial resources to cause
severe price competition in the countries in which the Company operates. There
can be no assurance that severe price competition will not occur. Any price
competition could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, certain of the
Company's competitors will provide potential customers with a broader range of
services than the Company currently offers or can offer due to regulatory
restrictions. See 'Business--Industry Overview' and '--European
Operations--General.'
In addition to these competitive factors, recent and pending deregulation
in each of the Company's markets may encourage new entrants. For example, as a
result of the enactment of the Telecommunications Act of 1996 and regulatory
initiatives taken by the FCC, the RBOCs may provide international
telecommunications services, are allowed to offer domestic long distance service
through an affiliate outside their service areas as 'non-dominant' carriers and
are allowed to provide long distance service within their service areas,
provided certain competition related conditions are met. AT&T, MCI and other
long distance carriers are allowed to enter the local telephone services market,
and any entity, including cable television companies and utilities, may enter
the United States domestic long distance telecommunications market. As of the
date of this Prospectus, no RBOC has been granted authority by the FCC to
provide long distance service within its service area. However, the U.S.
District Court for the Northern District of Texas has recently ruled that
restrictions placed by the Telecommunications Act of 1996 on the RBOCs regarding
their ability to provide long distance service within their respective service
areas are unconstitutional. Moreover, certain of the RBOCs have filed with the
FCC applications for authority to provide long distance service within their
respective service areas. An appellate decision affirming the decision by the
District Court, or the grant by the FCC of the pending RBOC applications, would
enable the RBOCs to compete more effectively against the Company.
In November 1997, the FCC revised its rules to implement commitments made
by the U.S. under the Basic Telecommunications Agreement of the World Trade
Organization (the 'GBT Agreement') executed in February 1997. In its decision,
the FCC established an open entry standard for applicants from World Trade
Organization member countries seeking authority to provide international
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telecommunications service in the United States, and adopted a rebuttable
presumption that the U.S. affiliates of foreign carriers with less than 50%
market share in each relevant market on the foreign end should be treated as
non-dominant. In addition, the FCC had, on several occasions since 1984,
approved or required price reductions by AT&T because it was a 'dominant'
carrier. However, the FCC reclassified AT&T as a 'non-dominant' carrier for
domestic purposes in October 1995 and for international purposes in May 1996.
These FCC actions substantially reduced the regulatory constraints on AT&T and
affiliates of foreign carriers. As the Company expands its geographic coverage,
it will encounter additional regional competitors and increased competition.
Moreover, the Company believes that competition in non-U.S. markets will
increase and begin to resemble the competitive landscape in the United States.
The PTTs and incumbent LECs generally have certain competitive advantages
that the Company and its other competitors do not have, due to their control
over the intra-national and local exchange transmission facilities and
connection to them, their ability to delay access to lines and the reluctance of
some regulators to adopt policies and grant regulatory approvals that will
result in increased competition for the PTTs and incumbent LECs. If the PTT or
incumbent LEC in any jurisdiction uses its competitive advantages to their
fullest extent, the Local Operator in such jurisdiction would be adversely
affected.
GOVERNMENT REGULATORY RESTRICTIONS
National and local laws and regulations differ significantly among the
countries in which the Company currently operates and plans to operate. The
interpretation and enforcement of such laws and regulations vary and could limit
the Company's ability to provide certain telecommunications services, including
Internet telephony services. Furthermore, there can be no assurance that changes
in current or future laws or regulations or future judicial intervention in the
United States or in any other country would not have a material adverse effect
on the Company or that FCC or other regulatory investigation or intervention
would not have a material adverse effect on the Company. In addition, the
Company's strategy is based in large part upon the expected deregulation of the
EU and other foreign markets based on European Commission directives and the GBT
Agreement. Such deregulation of the EU and other foreign markets has already
experienced some delays. While legislation has been passed by a number of EU
member countries implementing European Commission ('EC') directives, the EC has
instituted infringement proceedings for non-compliance with EC directives
against eight member countries, and has stated its intention to institute
additional proceedings against non-compliant member countries. Such proceedings
may encourage member countries to comply with EC directives. However, there can
be no assurance that this will be the case or that other foreign markets will
proceed with the expected deregulation in the immediate future, if at all, or
that the trend towards deregulation will be effective. In addition, even if
other foreign markets act to deregulate their telecommunications markets on the
current schedule, the national governments of such foreign markets must pass
legislation to deregulate the markets within their countries. The national
governments may not necessarily pass such legislation in the form required, if
at all, or may pass such legislation only after a significant delay. In the EU,
even if a national legislature enacts appropriate regulations within the time
frame established by the EC, there may be significant resistance to the
implementation of such legislation from PTTs, regulators, trade unions and other
sources. For example, in the United Kingdom, Mercury took legal action against
the Post Office Engineering Union because the union refused to connect Mercury's
customers. In Germany, Deutsche Telecom has proposed that a fee be charged to
any customer who changes long distance service providers. These and other
potential obstacles to deregulation would have a material adverse effect on the
Company's operations by preventing the Company from expanding its operations as
currently anticipated.
In addition, the telecommunications services provided by the Company in the
United Kingdom are subject to and affected by regulations introduced by the
Office of Telecommunications ('Oftel'). Oftel has imposed mandatory rate
reductions on British Telecom in the past and is expected to continue to do so
for the foreseeable future. This will have the effect of reducing the prices the
Company can charge its U.K. customers.
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Also, the Internet telephony services provided by the Company through Delta
Three may be subject to and affected by regulations introduced by the
authorities in each country where Delta Three has or will have operations. The
regulation of Delta Three's activities may have a material adverse effect on
Delta Three's and the Company's financial condition and results of operations.
The Company is currently authorized or otherwise allowed to provide
intrastate, interexchange service in 48 states and the District of Columbia in
the United States and relies on third party carriers to originate traffic in the
other states.
RISK OF LOSS, OR DIMINUTION OF VALUE, OF OPERATING AGREEMENTS
Although the Company has 18 operating agreements, the Company presently
only utilizes six such agreements. These agreements are with carriers in the
Dominican Republic, the United Kingdom, Denmark, The Netherlands, Russia and
Norway. In order to utilize the remaining operating agreements, the Company
would have to make an investment in transmission facilities to each of these
countries, which the Company is unlikely to do unless and until it originates
sufficient calling volume to such countries to justify an investment. The
Company's failure to utilize these operating agreements may result in these
foreign carriers terminating such agreements in order to secure more profitable
agreements with carriers other than the Company and may limit the Company's
ability to secure operating agreements with additional foreign carriers. The
loss of the Company's operating agreements could have a material adverse effect
on its business, and the failure to enter into additional operating agreements
or other favorable arrangements in the future could limit the Company's ability
to increase its revenues on a positive gross margin basis. There can be no
assurance that the Company will be able to enter into additional operating and
other interconnection agreements or other favorable arrangements in the future.
In addition, the Company's operating agreements may become less valuable to
the Company. As increasing numbers of international carriers emerge, operating
agreements may become more available. Moreover, as telecommunications markets
deregulate, particularly in Europe, an increasing proportion of international
traffic is being carried outside of the traditional operating agreement/
settlement rate system.
DEPENDENCE ON CARRIER CUSTOMERS
In the United States, a substantial portion of the Company's revenues are
generated by the telecommunication services it provides to carrier customers.
Revenues derived from the provision of such services accounted for 38% of the
Company's revenues for the year ended December 31, 1997. Accordingly, the loss
of revenue from carrier customers could have a material adverse effect upon the
Company's business, financial condition and results of operations. Carrier
customers are extremely price sensitive, generate very low margin business and
frequently choose to move their business based solely on small price changes. In
addition, certain of the Company's carrier customers are unprofitable or are
only marginally profitable, resulting in a higher risk of delinquency or
non-payment than in the case of more creditworthy customers. In February 1996,
the Company terminated service to a carrier customer that accounted for 11% of
ITG's 1995 U.S. revenues for failure to pay for past services. As a result,
although the Company is attempting to recover the amounts owed by such customer,
the Company booked a $4.9 million write-off for bad debt on its 1995 financial
statements. While the Company instituted revised credit criteria to enable the
Company to reduce its exposure to the higher risks associated with carrier
customers, no assurance can be given that such criteria and methods will afford
adequate protection against such risks.
RISKS RELATED TO HOLDING COMPANY STRUCTURE
The Company is a holding company and its only material assets, other than
cash, consist of the stock of its subsidiaries. The Company intends to loan or
contribute a substantial majority of the net proceeds from the U.S. Dollar Notes
Offerings and the German Debt Offering and has loaned or
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contributed a substantial portion of the net proceeds of each of the Initial
Public Offering and the 1996 Units Offering to its subsidiaries. The Company
relies on dividends, loan repayments and other intercompany cash flows from its
subsidiaries to generate the funds necessary to meet its debt service
obligations. The payment of dividends and the repayment of loans and advances by
the Company to its subsidiaries are subject to statutory, taxation and other
restrictions, are dependent upon the earnings of such subsidiaries and are
subject to various business considerations. In addition, dividends and other
payments to the Company from the subsidiaries, in certain jurisdictions, may
have adverse tax consequences to the subsidiaries or the Company, and the
subsidiaries' ability to declare and pay dividends or make other payments to the
Company are, in certain circumstances, subject to restrictions contained in
their respective organizational documents or loan agreements. As of December 31,
1997, the total outstanding indebtedness of the Company's subsidiaries in the
Company's consolidated financial statements was approximately $304.6 million.
Moreover, claims of creditors of the Company's subsidiaries, including tax
authorities and trade creditors, will generally have a priority claim to the
assets of such subsidiaries over the claims of the Company. In addition, certain
subsidiaries have outstanding minority equity owners who will have a pro rata
claim with the Company to any dividends or other distributions by subsidiaries.
See 'Description of Certain Indebtedness' and 'Shares Eligible for Future Sale.'
DEPENDENCE UPON KEY PERSONNEL
The success of the Company is dependent, in part, upon its key management.
In particular, the Company is highly dependent upon certain of its personnel,
including Ronald S. Lauder, Chairman of the Board of the Company and its largest
and controlling shareholder, and Itzhak Fisher, the President and Chief
Executive Officer of the Company. The loss of services of Mr. Lauder, Mr. Fisher
or any of the other members of the Company's senior management team could have a
material adverse effect on the Company. The degree of Mr. Lauder's involvement
in the activities of the Company varies from time to time based on the needs of
the Company. Mr. Lauder's involvement with the Company, in addition to his
activities as Chairman of its Board of Directors and Executive Committee,
includes identifying potential local strategic partners, capital allocation,
corporate governance, setting compensation policy and recruiting top management.
However, he is not an employee of the Company and he spends a majority of his
business time on other matters. While Mr. Fisher has an employment agreement
with the Company, the Company does not have employment agreements with many of
the other members of its senior management team.
The Company believes its future success will depend in large part upon its
ability to attract, retain and motivate highly skilled employees. Such employees
are in great demand and are often subject to offers for competitive employment.
There can be no assurance that the Company can retain its key managerial
employees or that it can attract, integrate or retain such employees in the
future.
DEPENDENCE ON EQUIPMENT SUPPLIER
The Company purchases most of its switches from Ericsson, which has granted
the Company volume discounts and also provides lease financing for, and
maintenance of, this equipment. Although switches of comparable quality may be
obtained from several alternative suppliers, the failure of the Company to
acquire compatible switches from an alternative source, or the failure to
acquire additional switches (regardless of the vendor) on a timely basis or on a
similar price basis, could result in delays, operational problems or increased
expenses, which could have a material adverse effect on the Company's business,
results of operations and financial condition.
CONTROLLING SHAREHOLDERS; NEGATIVE EFFECTS OF ANTI-TAKEOVER PROVISIONS
Certain of the executive officers and directors of the Company, companies
and partnerships they control and members of their immediate families control,
in the aggregate, approximately 95.6% (95.1% after giving effect to the
Offering) of the voting power and approximately 78.5% (75.8% after giving
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effect to the Offering) of the outstanding capital stock of the Company. As a
result, the existing shareholders are able to control the election of all of the
directors and the results of other shareholder votes. Ronald S. Lauder, Chairman
of the Board of Directors of the Company, beneficially owns, in the aggregate,
approximately 56.0% (56.2% after giving effect to the Offering) of the voting
power and approximately 42.9% (41.8% after giving effect to the Offering) of the
outstanding capital stock of the Company. As a result, Mr. Lauder has majority
control of the Company, the ability to approve certain fundamental corporate
transactions and to elect all members of the Company's Board of Directors. The
exercise of the voting power by Mr. Lauder and such other persons may present
conflicts of interest between them and the other owners of the Common Stock. See
'Principal Shareholders and Selling Shareholder.'
The concentration of ownership in the Company and Mr. Lauder's intention to
maintain a controlling interest in the Company may have the effect of delaying,
deferring or preventing a change of control of the Company, a transaction which
might otherwise be beneficial to shareholders. In addition, the Company's
Memorandum of Association and Bye-Laws contain provisions that could delay,
defer or prevent a change in control without the approval of the incumbent Board
of Directors. Such a provision could impede the ability of the shareholders to
replace management even if factors warrant such a change. See 'Principal and
Selling Shareholders' and 'Description of Capital Stock--Anti-Takeover
Protections.'
BERMUDA CORPORATE LAW
The Company is a Bermuda corporation and, accordingly, is governed by The
Companies Act 1981 of Bermuda. The Companies Act 1981 of Bermuda differs in
certain aspects from laws generally applicable to United States corporations and
shareholders, including with respect to the provisions relating to interested
directors, mergers and similar arrangements, takeovers, shareholders suits,
indemnification of directors and inspection of corporate records. See
'Description of Capital Stock-- Certain Provisions of Bermuda Law.'
POSSIBLE VOLATILITY OF STOCK PRICE
The market price of the Class A Common Stock may be extremely volatile.
Factors such as adverse regulatory changes, fluctuations of liquidity,
additional debt and equity financings, acquisitions by the Company, significant
announcements by the Company and its competitors, quarterly fluctuations in the
Company's operating results and general conditions in the telecommunications
market may have a significant impact on the market price of the Class A Common
Stock. In addition, in recent years the stock market has experienced extreme
price and volume fluctuations. These fluctuations have had a substantial effect
on the market prices for many high technology and telecommunications companies,
often unrelated to the operating performance of the specific companies.
SHARES ELIGIBLE FOR FUTURE SALE
Assuming that all of the remaining Warrants were exercised and all of the
Shares offered hereby by the Selling Shareholder were sold, on the date of this
Prospectus, then as of the date hereof, the Company would have a total of
42,953,784 shares of Common Stock outstanding, including 12,493,062 shares of
Class A Common Stock and 30,460,722 shares of Class B Common Stock. Of such
shares, approximately 10,572,898 shares of the Class A Common Stock (unless
acquired in the Offering by an 'affiliate' of the Company, as that term is
defined by Rule 144 promulgated under the Securities Act ('Rule 144')) will be
freely tradeable without restriction or further registration under the
Securities Act. The remaining outstanding shares of Class A Common Stock and all
outstanding shares of Class B Common Stock would be 'restricted securities' (as
that term is defined by Rule 144). Subject to the volume and other resale
limitations set forth in Rule 144, all of such restricted securities would be
eligible for public sale after April 4, 1998, when certain lock-up agreements
between the underwriters of the Initial Public Offering and the Company's
executive officers and directors and certain other
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shareholders of the Company expire. The Shares offered hereby by the Selling
Shareholder are subject to such a lock-up agreement and cannot be resold until
after April 4, 1998 unless a waiver is granted. Additionally, certain
shareholders of the Company who beneficially own, in the aggregate, 22,725,746
shares of Class A Common Stock (including shares of Class A Common Stock
issuable upon the conversion of shares of Class B Common Stock) are entitled to
demand registration rights with respect to such shares. Such demand registration
rights are exercisable, with certain restrictions, after April 4, 1998. Certain
shareholders who beneficially own, in the aggregate, 33,022,154 shares of Class
A Common Stock (including the shares which are subject to demand rights and
shares of Class A Common Stock issuable upon the conversion of shares of Class B
Common Stock) are entitled to piggyback registration rights. See 'Description of
Capital Stock' and 'Shares Eligible for Future Sale.'
As consideration for agreeing to provide (or to arrange for a bank to
provide) the Company with a $35.0 million subordinated loan facility (the
'Shareholder Standby Facility') and a continuing guarantee of the Revolving
Credit Facility, Ronald S. Lauder, Chairman of the Board and principal and
controlling shareholder of the Company, received, in the aggregate, warrants to
purchase 459,900 shares of Class B Common Stock (the 'Lauder Warrants'),which
shares are convertible into 459,900 shares of Class A Common Stock. The Lauder
Warrants became exercisable on September 10, 1997, have an expiration date of
September 10, 2006 and a current exercise price of $.00457 per share. The terms
of the Lauder Warrants are substantially the same as the Warrants, except that
the Lauder Warrants are exercisable for shares of Class B Common Stock and the
Warrants are exercisable for shares of Class A Common Stock.
The Company has adopted the RSL Communications, Ltd. 1997 Performance
Incentive Plan (the '1997 Performance Plan'), the RSL Communications, Ltd. 1997
Stock Incentive Plan (the '1997 Plan') and the RSL Communications, Ltd. 1997
Directors' Compensation Plan (the 'Directors' Plan') which, in the aggregate,
provide for stock grants and grants of options to acquire up to 3,750,000 shares
of Class A Common Stock in the aggregate. In addition, options to acquire up to
2,004,475 shares of Class A Common Stock are outstanding under the RSL
Communications, Ltd. 1995 Amended and Restated Stock Option Plan (the '1995
Plan'). The Company registered with the Commission in November 1997 all of the
shares underlying all such options (the 'Option Shares'). Options with respect
to 1,021,227 of the Option Shares are currently exercisable or exercisable
within 60 days of the date of this Prospectus. See 'Management--Executive
Compensation of Executive Officers.'
In connection with the pending acquisition by the Company of additional
interests in Delta Three (see 'Business--International Telephony
Operation--General'), the Company is obligated to issue to certain minority
shareholders of Delta Three 411,684 shares of Class A Common Stock at the
closing of such transaction. Such shares, when issued, will be 'restricted
securities.' However, such shareholders will have piggyback registration rights
with respect to such shares, subject to certain limitations.
Sales of substantial amounts of Class A Common Stock in the public market,
and the availability of shares for future sale (including, in each case, shares
of Class A Common Stock issuable upon the conversion of shares of Class B Common
Stock, upon the exercise of options or under the Company's stock option and
compensation plans) could adversely affect the prevailing market price of the
Class A Common Stock and could impair the Company's future ability to raise
capital through an offering of its equity securities. See 'Principal
Shareholders and Selling Shareholder' and 'Shares Eligible for Future Sale.'
SUSPENSION OF THE REGISTRATION STATEMENT
Pursuant to a warrants registration rights agreement between The Chase
Manhattan Bank, as Warrant agent (the 'Warrant Agent') and the Company (the
'Warrants Registration Rights Agreement'), the Company generally has the right
during any consecutive 365-day period to suspend availability of the
Registration Statement of which this Prospectus is a part for (i) up to two
consecutive 30-day periods, if the Company's Board of Directors determines in
good faith that there is a valid
23
<PAGE>
purpose for such suspension and (ii) up to five additional, non-consecutive
three-day periods, if the Board of Directors determines in good faith that the
Company cannot provide adequate disclosure during such period due to
circumstances beyond its control. Accordingly, the Selling Shareholders will not
be able to sell any of their shares of Class A Common Stock under this
Prospectus and the Company will not be able to issue Shares hereunder upon the
exercise of Warrants during the time that the Company suspends availability of
such Registration Statement.
ABSENCE OF DIVIDENDS
The Company has never paid dividends on any class of the Common Stock and
does not anticipate paying any such dividends in the foreseeable future. In
addition, the Company's debt facilities and the Indenture contain restrictions
on the Company's ability to declare and pay dividends on each class of the
Common Stock. See 'Description of Certain Indebtedness' and 'Dividend Policy.'
CHANGE OF CONTROL
Upon the occurrence of a Change of Control (as defined in the Indentures),
the Company may be required to purchase all of the outstanding Notes at a price
equal to 101% of the principal amount (or accreted value) thereof at the date of
purchase plus accrued and unpaid interest. There can be no assurance that the
Company will have sufficient funds to purchase any of the Notes upon a Change in
Control.
DEVALUATION AND CURRENCY RISKS
An increasing portion of the Company's revenues and expenses (notably
interest and principal on the German Notes) will be denominated in non-U.S.
currencies, although a disproportionate portion of the Company's expenses,
including interest and principal on the 1996 Notes and the U.S. Dollar Notes,
will be denominated in U.S. dollars. In addition, the Company, in the future,
may acquire interests in entities that operate in countries where the
expatriation or conversion of currency is restricted. The Company currently does
not hedge against foreign currency exchange translation risks but may in the
future commence such hedging against specific foreign currency transaction risks
including currency transaction risks relating to the German Debt Offering. There
can be no assurance that the Company will be able to hedge all its exchange rate
exposure at satisfactory cost, and there can be no assurance that exchange rate
fluctuations will not have a material effect on the ability of the Note Issuer
or the Company to meet its obligations under the Notes. Because of the number of
currencies involved, the Company's constantly changing currency exposure and the
fact that all foreign currencies do not fluctuate in the same manner against the
United States dollar, the Company cannot quantify the effect of exchange rate
fluctuations on its future financial condition or results of operations.
Under the treaty on the European Economic and Monetary Union (the
'Treaty'), to which the Federal Republic of Germany is a signatory, on or before
January 1, 1999, and subject to the fulfillment of certain conditions, the
'Euro' may replace all or some of the currrencies of the member states (the
'Member States') of the EU, including the Deutsche mark. If, pursuant to the
Treaty, the Deutsche mark is replaced by the Euro, the payment of principal of,
premium, if any, and interest on, the German Notes will be effected in Euro in
conformity with legally applicable measures taken pursuant to, or by virtue of,
the Treaty. In addition, the regulations of the EU relating to the Euro will
apply to the German Notes and the indenture relating thereto.
Modifications to the Company's computer systems and programs are also being
made in order to prepare for the upcoming replacement of certain European
currencies with the Euro. Costs associated with the modifications necessary to
prepare for the Euro are being expensed by the Company during the period in
which they are incurred.
24
<PAGE>
FOREIGN PERSONAL HOLDING COMPANY AND PASSIVE FOREIGN INVESTMENT COMPANY RULES
The Company will seek to manage its affairs and the affairs of its
subsidiaries so that neither the Company nor any of its foreign corporate
subsidiaries would be classified as a passive foreign investment company
('PFIC') or, once such a subsidiary is profitable, as a foreign personal holding
company ('FPHC') under the U.S. Internal Revenue Code of 1986, as amended. If
the Company or any such subsidiary were an FPHC, the undistributed foreign
personal holding company income (generally, the taxable income, with certain
adjustments), if any, of the Company or of its foreign corporate subsidiaries
would be included in the income of a U.S. shareholder of the Company as a
dividend on a pro rata basis. If the Company were a PFIC, then each U.S. holder
of Class A Common Stock would, upon certain distributions by the Company, or
upon disposition of the Class A Common Stock at a gain, be liable to pay tax at
the then prevailing rates on ordinary income plus an interest charge, generally
as if the distribution or gain had been recognized ratably over the U.S.
shareholder's holding period (for PFIC purposes) for the Class A Common Stock,
or if a 'qualified electing fund' election were made by a U.S. holder of Class A
Common Stock, a pro rata share of the Company's ordinary earnings and net
capital gain would be required to be included in such U.S. shareholder's income
each year. Also, effective for years beginning after 1997, a U.S. shareholder
may be able to make a mark-to-market election whereby annual increases and
decreases in share value are included as ordinary income or deducted from
ordinary income by marking-to-market the value of the shares at the close of
each year. While the Company intends to manage its affairs and the affairs of
its corporate subsidiaries so as to avoid PFIC status or, once profitable, FPHC
status, there can be no assurance that the Company would be successful in this
endeavor. See 'Certain United States Federal Income Tax Considerations.'
25
<PAGE>
USE OF PROCEEDS
Gross proceeds of $5,268 would be received if all 1,152,715 shares of Class
A Common Stock are issued upon the exercise of the remaining Warrants at an
exercise price of $.00457 per share. The Company would not have any net proceeds
after payment of the expenses associated with the Offering. The Company will not
receive any proceeds from the sale of Shares by the Selling Shareholder.
DETERMINATION OF OFFERING PRICE
In accordance with a warrant agreement, dated as of October 3, 1996, by and
between the Company and the Warrant Agent (the 'Warrant Agreement'), each
outstanding Warrant may be converted into 3.975 shares of Class A Common Stock
upon payment of an exercise price of $.00457 per share. The exercise price and
conversion ratio are subject to adjustments as provided in the Warrant
Agreement. The terms, conditions and exercise prices per share for the Warrants
were determined through negotiations between the Company and the placement
agents of the Units at the time of the Debt Offering.
PLAN OF DISTRIBUTION
The Shares issuable upon the exercise of Warrants are offered solely by the
Company and the Shares offered by the Selling Shareholder are being sold by it;
no underwriters are participating in the Offering. Warrants may be exercised by
giving written notice and paying the exercise price to the Company, and as
otherwise required by the Warrant Agreement.
The Selling Shareholder expects to sell its Shares from time to time
either pursuant to this Prospectus or pursuant to Rule 144 promulgated under the
Securities Act. Sales are expected to be made in brokerage transactions
(executed on the Nasdaq National Market) at market prices related to those then
prevailing for shares of Class A Common Stock. Selling brokers will be paid
usual and customary commissions. The average high and low prices of the Class A
Common Stock as reported on the Nasdaq National Market are set out below. See
'Principal Shareholders and Selling Shareholder.'
PRICE RANGE OF CLASS A COMMON STOCK
The Class A Common Stock has been quoted on the Nasdaq National Market
under the symbol 'RSLCF' since October 1, 1997. Prior to that date, there was no
trading market for the Class A Common Stock. The following table lists, for the
periods indicated, the high and low sales prices of the Class A Common Stock as
reported on the Nasdaq National Market.
<TABLE>
<CAPTION>
PRICE OF CLASS A
COMMON STOCK
----------------
HIGH LOW
<S> <C> <C>
1997 Fourth Quarter(from October 1, 1997).................................................... $35 1/4 $22
1998 First Quarter (through March 19, 1998).................................................. 24 1/8 23 1/4
</TABLE>
On March 19, 1998, the last reported sales price for the Class A Common
Stock on the Nasdaq National Market was $23.50 per share.
26
<PAGE>
DIVIDEND POLICY
The Company has never paid dividends on any class of Common Stock and does
not anticipate paying any dividends on the Class A Common Stock or any other
class of Common Stock in the foreseeable future. Certain of the Company's credit
facilities and the Indenture contain restrictions on the Company's ability to
declare and pay dividends on the Common Stock. See 'Description of Certain
Indebtedness.' The declaration and payment of dividends by the Company are
subject to the discretion of the Board of Directors. Any determination as to the
payment of dividends in the future will depend upon results of operations,
capital requirements, restrictions in loan agreements, if any, and any such
other factors as the Board of Directors may deem relevant.
CAPITALIZATION
The following table sets forth the consolidated cash and cash equivalents,
marketable securities, restricted marketable securities and capitalization of
the Company as of December 31, 1997 and as adjusted to give effect to the
issuance of the shares of Class A Common Stock issuable upon conversion of the
Warrants (assuming all remaining Warrants are exercised), the Equity Clawback,
the U.S. Dollar Offerings, and the German Debt Offering. The table should be
read in conjunction with the Consolidated Financial Statements and the related
notes thereto and the other information included elsewhere in this Prospectus.
See 'Management's Discussion and Analysis of Financial Condition and Results of
Operations.'
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
--------------------------
AS ADJUSTED
ACTUAL (UNAUDITED)
----------- -----------
(IN THOUSANDS,
EXCEPT SHARE DATA)
--------------------------
<S> <C> <C>
Cash and cash equivalents......................... $ 144,894 $ 541,499(1)
----------- -----------
----------- -----------
Marketable securities............................. $ 13,858 $ 13,858
----------- -----------
----------- -----------
Restricted marketable securities(2)............... $ 68,836 $ 48,136
----------- -----------
----------- -----------
Short-term debt and current portion of long-term
debt and current portion of capital lease
obligations..................................... $ 8,033 $ 8,033
Long-term debt and capital lease obligations:
Capital leases.................................. 20,108 20,108
12 1/4% Senior Notes due 2006 (net of
unamortized discount of $3.5 million and $2.5
million as adjusted)(3)...................... 296,500 207,550
9 1/8% Senior Notes due 2008.................... -- 200,000
10 1/8% Senior Discount Notes due 2008.......... -- 200,000
10% Senior Discount Notes due 2008.............. -- 99,045
----------- -----------
Total long-term debt, short-term debt and
capital lease obligations(4)................ 324,641 734,736
----------- -----------
Shareholders' equity:
Common Stock, $.00457 par value; 438,000,000
authorized; 10,872,569 shares of Class A
Common Stock outstanding and 12,065,024
shares outstanding as adjusted(5)(6)......... 49 54
30,760,722 shares of Class B Common Stock
outstanding(6).............................. 141 141
Preferred Stock, $.00457 par value; 65,700,000
shares authorized; no shares outstanding..... -- --
Warrants--Common Stock.......................... 5,544 5,544
Additional paid-in capital...................... 274,192 274,192
Accumulated deficit............................. (147,939) (148,989)
Foreign currency translation adjustment......... (5,288) (5,288)
----------- -----------
Total shareholders' equity................... 126,699 125,654
----------- -----------
Total capitalization......................... $ 451,340 $ 860,390
----------- -----------
----------- -----------
</TABLE>
27
<PAGE>
- ------------------
(1) The as adjusted figure reflects the receipt of net proceeds of approximately
$385 million from the sale of the U.S. Dollar Notes, the use of
approximately $101 million of proceeds from the Initial Public Offering to
effect the Equity Clawback, the payment of $4.1 million of accrued interest
payable in connection with the Equity Clawback, the release of approximately
$21 million from the restricted marketable securities account following the
Equity Clawback and the receipt of net proceeds of approximately $96 million
from the sale of the German Notes (converted to U.S. Dollars at the noon
buying rate for U.S. dollars on March 11, 1998 of DM1.8352 = $1.00).
(2) The restricted marketable securities consist of U.S. government securities
pledged to secure the payment of interest on the principal amount of the
1996 Notes adjusted to reflect the reduction of approximately $21 million
released from the restricted marketable securities account following the
Equity Clawback. See 'Description of Certain Indebtedness--Description of
the 1996 Notes.'
(3) The as adjusted figure gives effect to the $90 million Equity Clawback,
amounting to approximately $101 million, inclusive of $11 million of
redemption premium.
(4) As of December 31, 1997, the Company had approximately $29.7 million of
available (undrawn) borrowing capacity under its current bank and vendor
facilities.
(5) Does not include (i) 2,004,475 shares of Class A Common Stock issuable upon
exercise of outstanding stock options (including 459,607 shares issuable
upon the exercise of currently exercisable options), (ii) 3,750,000 shares
of Class A Common Stock reserved for issuance pursuant to option grants
under the Guarantor's stock option and compensation plan (including options
to purchase 437,856 shares of Class A Common Stock granted to Itzhak Fisher
and others under the 1997 Plan (as defined) and options to purchase 2,273
shares of Class A Common Stock granted to each of Leonard A. Lauder, Fred H.
Langhammer and Gustavo A. Cisneros and options to purchase 6,818 and 3,409
shares of Class A Common Stock granted to Ronald S. Lauder and Andrew
Gaspar, respectively, under the Directors' Plan, (as defined) or (iii)
31,220,622 shares of Class A Common Stock issuable upon the conversion of
the shares of Class B Common Stock (including 459,900 shares of Class B
Common Stock issuable upon the exercise of Lauder Warrants (as defined)).
(6) Does not give effect to the conversion of Class B Common Stock to Class A
Common Stock by the Selling Shareholder.
28
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
Set forth below are selected consolidated financial data for each of the
years in the four year period ended December 31, 1997. The selected consolidated
financial data presented below with respect to the years ended December 31,
1997, 1996 and 1995 have been derived from the Consolidated Financial Statements
appearing elsewhere in this Prospectus. The Consolidated Financial Statements
for the three year period ended December 31, 1997 have been audited by Deloitte
& Touche LLP, independent auditors. The information as of and for the year ended
December 31, 1994 has been derived from the financial statements of the
Company's predecessor entity, ITG. The information set forth below is qualified
by reference to and should be read in conjunction with the Consolidated
Financial Statements and the notes thereto and 'Management's Discussion and
Analysis of Financial Condition and Results of Operations' included elsewhere in
this Prospectus.
The Company has experienced rapid growth over the periods set forth below,
which growth may not necessarily continue at such rate. Accordingly, the
financial and operating results set forth below may not be indicative of future
performance.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
PREDECESSOR
1994 1995(1) 1996 1997
----------- -------- -------- ---------
($ IN THOUSANDS, EXCEPT LOSS PER SHARE)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues................................... $ 4,702 $ 18,617 $113,257 $ 300,796
Cost of services........................... (4,923) (17,510) (98,461) (265,321)
----------- -------- -------- ---------
Gross profit (loss)........................ (221) 1,107 14,796 35,475
Selling, general and administrative
expenses................................. (2,395) (9,639) (38,893) (94,712)
Depreciation and amortization.............. (240) (849) (6,655) (21,819)
----------- -------- -------- ---------
Loss from operations....................... (2,856) (9,381) (30,752) (81,056)
Interest income............................ -- 173 3,976 13,826
Interest expense........................... (225) (194) (11,359) (39,373)
Other income............................... -- -- 470 6,595(2)
Minority interest.......................... -- -- (180) 210
Income taxes............................... -- -- (395) (401)
----------- -------- -------- ---------
Net loss................................... $(3,081) $ (9,402) $(38,240) $(100,199)
----------- -------- -------- ---------
----------- -------- -------- ---------
Loss per share(3).......................... $(15.41) $ (1.67) $ (5.13) $ (5.27)
Weighted average number of shares of Common
Stock outstanding(3)..................... 200 5,641 7,448 19,008
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------
PREDECESSOR
1994 1995 1996 1997
----------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
OTHER FINANCIAL DATA:
EBITDA(4).................................. $(2,616) $ (8,532) $(23,807) $(52,432)
Capital expenditures(5).................... 1,126 6,074 23,880 49,417
Cash (used in) provided by operating
activities............................... (1,987) 3,554 (10,475) (91,812)
Cash used in investing activities.......... (478) (16,537) (225,000) (18,821)
Cash provided by financing activities...... 2,888 18,143 335,031 152,035
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------------------
PREDECESSOR
1994 1995 1996 1997
----------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................. $ 452 $ 5,163 $104,068 $144,894
Marketable securities...................... -- -- 67,828 13,858
Restricted marketable securities........... -- -- 104,370 68,836
Total assets............................... 3,682 53,072 427,969 605,664
Short-term debt, current portion of long-
term debt and current portion of capital
lease obligations........................ 2,645 5,506 6,974 8,033
Long-term debt and capital lease
obligations.............................. 1,404 6,648 314,425 316,608
Shareholders' (deficiency) equity.......... (3,651) 5,705 20,843 126,699
</TABLE>
- ------------------
(1) Effective with the acquisition of a majority equity interest in ITG in
September 1995, the Company began to consolidate ITG's operations. From
March 1995 (the date of the Company's initial investment) to September 1995,
the Company accounted for its investment in ITG using the equity method of
accounting.
(2) Other income includes the reversal of certain liabilities accrued in
connection with the Company's obligations under an agreement that required
the Company to meet a carrier vendor's minimum usage requirements, which
agreement was entered into by a subsidiary of the Company prior to the
Company's acquisition of such subsidiary. During May 1997, the Company
renegotiated the contract with this carrier vendor resulting in the
elimination of approximately $7.0 million of previously accrued charges.
(3) Loss per share is calculated by dividing the loss attributable to Common
Stock by the weighted average number of shares of Common Stock outstanding,
and has been retroactively restated to reflect the 2.19-for-one stock split.
Outstanding stock options, Roll-up Rights and warrants (including, without
limitation, the Warrants) are not included in the loss per common share
calculation as their effect is anti-dilutive. See 'Description of Capital
Stock.'
(4) EBITDA consists of loss before interest, income taxes, depreciation and
amortization. EBITDA is provided because it is a measure commonly used in
the telecommunications industry. It is presented to enhance an understanding
of the Company's operating results and is not intended to represent cash
flow or results of operations in accordance with U.S. GAAP for the periods
indicated. The Company's use of EBITDA may not be comparable to similarly
titled measures used by other companies due to the use by other companies of
different financial statement components in calculating EBITDA.
(5) Capital expenditures include assets acquired through capital lease financing
and other debt.
30
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Consolidated Financial Statements, including the notes thereto, appearing
elsewhere in this Prospectus. The following contains statements which constitute
forward-looking statements regarding the intent, belief or current expectations
of the Company or its officers with respect to, among other things, the
Company's financing plans, trends affecting the Company's financial condition or
results of operations, the impact of competition, the start-up of certain
operations and acquisition opportunities. The Company's actual future results
could differ materially from those discussed herein. Prospective investors are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results may
differ materially from those in the forward-looking statements as a result of
various factors. Information contained in this Prospectus, including, without
limitation, information contained in this section of this Prospectus and
information under 'Risk Factors' and 'Business,' identifies important factors
that could cause such differences.
OVERVIEW
GENERAL
The Company is a rapidly growing multinational telecommunications company
which provides a broad array of international and domestic telephone services to
both carrier and commercial (including business and residential) accounts. These
services include international long distance calling to over 200 countries and
calling card, private line and value-added telecommunications services. The
Company focuses on providing international long distance voice services to small
and medium-sized businesses in key markets. The Company currently has revenue
generating operations in the United States, the United Kingdom, France, Germany,
Sweden, Finland, The Netherlands, Denmark, Australia, Italy, Venezuela,
Switzerland and Belgium. The Company is in the process of commencing start-up
operations through its investments in majority-owned entities in Austria, Spain,
Luxembourg and Japan, and through its 39% investment in a Portuguese
telecommunications company. In 1996, approximately 66% of all international long
distance telecommunications minutes originated in these markets. The Company
plans to expand its operations and network into additional key markets which
account for a significant portion of the world's remaining international
traffic. The Company's consolidated revenues for the years ended December 31,
1997 and 1996 were $300.8 million and $113.3 million, respectively.
THE UNITED STATES. The Company's initial operations were established in
the United States through the acquisition of interests in ITG in March 1995 and
Cyberlink, Inc. ('Cyberlink') in September 1995. ITG and Cyberlink had growing
businesses in New York and California, respectively, each with an established
customer base and sales channels, but both had operational problems which
prevented these entities from realizing their profit potential. These problems
included costly transmission capacity arrangements, vendor disputes and
inadequate credit and pricing policies. Each of ITG and Cyberlink was also
unable to obtain funding for working capital which limited their ability to
purchase transmission capacity on a cost-efficient basis which, coupled with the
foregoing problems, limited their operating performance.
Following the ITG 1996 Acquisition, which brought the Company's ownership
in ITG to 87%, the Company took steps to streamline and improve operations,
including finance, network provisioning, pricing and selling functions. During
the first quarter of 1997, the Company completed the consolidation of its U.S.
operations under one entity, RSL USA. The Company's U.S. operations, other than
its operations with respect to LDM, remain consolidated with RSL USA.
The Company has implemented solutions designed to improve RSL USA's
operations. For example, the Company added key members to its management and
purchased and developed additional management software systems which provide
current traffic provisioning and an enhanced ability to predict future traffic
volume. The Company also successfully negotiated and continues to negotiate rate
reductions and more appropriate transmission capacity arrangements based on the
Company's current and anticipated capacity requirements. In addition, the
Company's U.S. operations began to utilize the Company's own facilities in the
fourth quarter of 1996. The Company anticipates
31
<PAGE>
that expanded utilization of its own facilities (as such component of RSL-NET
continues to grow) will result in more cost-efficient methods of transport for
its U.S. business. The Company also improved vendor relations by paying bills on
a more timely basis and has implemented stricter financial controls, including
ongoing customer credit reviews and managerial procedures to reduce credit
exposure, and settled certain disputes and claims with certain of its vendors.
Although the Company's U.S. gross margin decreased for the year ended
December 31, 1997 as compared to the year ended December 31, 1996 due to the
rapid expansion of its operations, the Company expects that its gross margin in
1998 will improve as a result of the operational efficiencies implemented to
date and to be derived from continued growth, the continued development of
RSL-NET and the resulting economies of scale. However, the foregoing is a
forward-looking statement and there can be no assurances in this regard. See
'Risk Factors--Short Operating History; Entrance into Newly Opening Markets;
Margins', '--Inability to Predict Traffic Volume' and '--Risks Associated with
Rapidly Changing Industry.' Although the Company anticipated U.S. gross margin
improvements during 1997, rapid growth in excess of the Company's expectations
continued to cause traffic overflow and gross margin pressure.
As of December 31, 1997, the Company had recorded approximately $135.7
million of goodwill in connection with its U.S. acquisitions (including ITG,
Cyberlink, LDM and Delta Three). Goodwill represents the excess of cost over the
fair value of the net assets of acquired entities. The Company's component cost
and purchase price allocation for U.S. acquisitions are as follows:
<TABLE>
<CAPTION>
COMPONENT COST AND
PURCHASE PRICE ALLOCATION
-------------------------
($ IN MILLIONS)
<S> <C>
ASSETS ACQUIRED:
Cash and cash equivalents.......................... $12.4
Accounts receivable................................ 13.9
Telecommunications equipment....................... 5.3
Deposits and others................................ 2.8
Intangible assets--goodwill........................ 135.7
LIABILITIES ASSUMED:
Accounts payable and other long-term liabilities... 64.8
Long-term debt..................................... 4.7
EQUITY:
Acquisition of minority interest................... 22.4
Increase to shareholders' equity................... 32.6
</TABLE>
EUROPE. RSL COM Europe, Ltd. ('RSL Europe') is a wholly-owned subsidiary
of the Company. RSL Europe was formed in March 1995 to implement the Company's
pan-European strategy. In November 1995, RSL Europe acquired a 51% interest in
Cyberlink Communications Europe Limited ('Cyberlink Europe') which, through its
wholly-owned subsidiaries, RSL COM Finland OY ('RSL Finland') and RSL COM Sweden
AB ('RSL Sweden'), commenced operations in May 1996. In May 1996, the Company
acquired Sprint's international long distance voice businesses in France and
Germany. In October 1996, RSL Europe acquired a 75% interest in the operations
of RSL Netherlands, an international reseller which had been operating in the
Netherlands since October 1995. In 1997, RSL Europe acquired the remaining
minority interest in RSL Netherlands. A start-up wholly-owned subsidiary of RSL
Netherlands commenced operations in Denmark in May 1997. In April 1997, RSL
Europe acquired a 30.4% interest in Maxitel Servicos e Gestao de
Telecomunicacoes S.A. ('Maxitel'), a Portuguese international telecommunications
carrier, and has since increased its ownership interest in Maxitel to 39%. In
August 1997, RSL Europe acquired an 85% interest in the operations of RSL Italy,
an international telecommunications reseller that had been operating in Italy
since 1995. In August 1997, RSL Europe also acquired a 50% interest in RSL
Austria, which will initially operate as an
32
<PAGE>
international telecommunications reseller. After the completion, in September
1997, of certain corporate formalities, the Company's interest was increased to
90% of RSL Austria.
In December 1997, RSL Europe acquired an 78.5% interest in RSL Switzerland,
a long distance telecommunications carrier in Switzerland.
In December 1997, RSL Europe formed a joint venture to establish RSL Spain.
In December 1997, RSL Europe acquired a 90% interest in RSL Belgium, a
licensed international telecommunications carrier in Belgium which in turn owns
100% of RSL Luxembourg, a licensed international telecommunications carrier in
Luxembourg.
Most EU member states are in the initial stages of deregulation.
Deregulation in these countries may occur either because the member state
decides to open up its own market (e.g., the United Kingdom, Sweden and Finland)
or because it is directed to do so by the European Commission ('EC') through one
or more directives issued thereby. In the latter case, such an EC directive
would be addressed to the national legislative body of each member state,
calling for such legislative body to implement such directive through the
passage of national legislation.
Although interconnection was not available and implemented in most EU
countries by January 1, 1998 (as called for by an EC directive), the current
regulatory scheme in Europe nevertheless provides an opportunity for the Company
to provide a range of services immediately in many countries, while putting in
place adequate infrastructure to capitalize on final deregulation if and when it
occurs. The Company can provide value-added services before interconnection is
available and, in certain EU countries, the Company is already providing dial-in
access, coupled, when possible, with autodialers or the programming of
customers' phone systems to dial access codes, to route traffic over the PSTN to
the Company's switches. See 'Business--International Long Distance Mechanics.'
As of December 31, 1997, the Company had recorded an aggregate of
approximately $51.9 million of goodwill in connection with its European
acquisitions. Goodwill represents the excess of cost over the fair value of the
net assets of acquired entities. The Company's component cost and purchase price
allocation for its European acquisitions are:
<TABLE>
<CAPTION>
COMPONENT COST AND
PURCHASE PRICE ALLOCATION
-------------------------
($ IN MILLIONS)
<S> <C>
ASSETS ACQUIRED:
Cash............................................... $ 2.3
Accounts receivable................................ 0.8
Telecommunications equipment....................... 2.2
Deposits and others................................ 0.3
Intangible assets--goodwill........................ 51.9
LIABILITIES ASSUMED:
Accounts payable and other long-term liabilities... 5.5
Lease commitments.................................. 2.4
</TABLE>
REVENUES
The Company provides both domestic and international long distance services
and derives its revenues principally from the provision of international long
distance voice telecommunication services. Revenues are derived from the number
of minutes of use (or fractions thereof) billed by the Company ('revenue
minutes') and are recorded upon completion of calls. In addition, the Company
derives revenues from prepaid calling cards. These revenues are recognized at
the time of usage or upon expiration of the card. The Company maintains local
market pricing structures for its services and generally prices its services at
a discount to the prices charged by the local PTTs and major carriers. The
Company has experienced, and expects to continue to experience, declining
revenue per minute in all of its markets as a result of increasing competition
in telecommunications, which the Company
33
<PAGE>
expects will be offset by increased minute volumes and decreased operating costs
per minute. See 'Risk Factors--Risks Associated With Rapidly Changing Industry'
and '--Competition.'
U.S. OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
PREDECESSOR
1994 1995 1996 1997
----------- ------- -------- -----------
(IN THOUSANDS, EXCEPT PERCENTAGE OF CONSOLIDATED
REVENUES)
<S> <C> <C> <C> <C>
Revenues....................................... $ 4,702 $18,461 $ 85,843 $ 194,518
Percentage of consolidated revenues............ 100.0% 99.2% 75.8% 64.7%
Cost of services............................... (4,923) (17,367) (76,892) (176,780)
----------- ------- -------- -----------
Gross profit (loss)............................ (221) 1,094 8,951 17,738
Selling, general and administrative expenses... (2,395) (7,444) (17,606) (38,207)
Depreciation and amortization.................. (240) (619) (3,047) (5,650)
----------- ------- -------- -----------
Loss from operations........................... $(2,856) $(6,969) $(11,702) $ (26,119)
----------- ------- -------- -----------
----------- ------- -------- -----------
</TABLE>
Prior to 1997, the Company's revenues had been primarily derived from its
operations within the United States. The Company's U.S. revenues result
primarily from the sale of long distance voice services on a wholesale basis to
other carriers, on a retail basis to commercial customers and on a bulk discount
basis to distributors of prepaid calling cards. The Company has experienced, and
expects to continue to experience, significant month to month changes in
revenues generated by its carrier customers. The Company believes such carrier
customers will react to temporary price fluctuations and spot market
availability that will impact the Company's carrier revenues. The Company has
shifted its marketing focus in the United States to small and medium-sized
businesses and has restructured its pricing of wholesale services to other
carriers. The Company has derived increased revenues from its small and
medium-sized business customers, as it has been reducing its reliance on
wholesale carrier revenues. See 'Risk Factors--Dependence on Carrier Customers'
and '--Overview.'
EUROPEAN OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------------------
1995 1996 1997
------- -------- -----------
(IN THOUSANDS, EXCEPT PERCENTAGE
OF CONSOLIDATED REVENUES)
<S> <C> <C> <C>
Revenues....................................... $ 156 $ 27,414 $ 73,653
Percentage of consolidated revenues............ 0.8% 24.2% 24.5%
Cost of services............................... (143) (21,569) (59,516)
------- -------- -----------
Gross profit................................... 13 5,845 14,137
Selling, general and administrative expenses... (539) (17,377) (43,004)
Depreciation and amortization.................. (12) (1,906) (7,038)
------- -------- -----------
Loss from operations........................... $ (538) $(13,438) $ (35,905)
------- -------- -----------
------- -------- -----------
</TABLE>
The Company commenced European operations with the introduction of
operations in the United Kingdom, Finland and Sweden in the second quarter of
1996. In addition, the Company acquired operations in France and Germany during
the second quarter of 1996 and acquired operations in The Netherlands in the
fourth quarter of 1996. During the second quarter of 1997, the Company commenced
operations in Denmark and during the fourth quarter of 1997 commenced operations
in Italy. Each of the countries in which the Company operates has experienced
different levels of deregulation, resulting in various levels of competition and
differing ranges of services which the Company is permitted to offer. The
Company also believes that as it pursues its strategic growth strategy it will
continue to encounter various degrees of start-up time.
Substantially all revenues from the Company's European operations are
derived from commercial sales to end-users, which often generate a higher gross
profit than wholesale sales to carriers. Sales
34
<PAGE>
are targeted at small and medium-sized corporate customers, as well as to niche
consumer markets (including selected ethnic communities). To reduce its credit
risk, the Company primarily offers prepaid products to its targeted consumer
markets.
EFFECT OF DEREGULATION ON EUROPEAN REVENUES. The Company operates or will
soon operate in various countries in Europe, each of which is in a different
state of deregulation. In certain of these countries, current regulatory
restrictions limit the Company's ability to offer a broader array of products
and services and limit the availability of those services to customers.
Accordingly, the Company anticipates that deregulation will have a favorable
impact on revenues because (i) customers will be able to access the Company's
services more easily and (ii) the Company will have the ability to provide a
broader array of products and services. It is anticipated that most European
countries will deregulate various aspects of the telecommunications industry
beginning in 1998. The Company believes that, with established or start-up
operations in 14 European countries, it will be well positioned to benefit from
the anticipated deregulation of European markets. However, there can be no
assurance regarding the timing or extent of deregulation in any particular
country. See 'Risk Factors--Risks Associated with Rapidly Changing Industry,'
'--Government Regulatory Restrictions' and 'Business--European
Operations--Regulatory Environment.'
OTHER OPERATIONS
During April 1997, the Company acquired a customer base of approximately
1,700 customers from Pacific Star Communications Limited ('Pac Star'), an
Australian-based switchless reseller. As of October 1997, RSL Australia acquired
100% of the issued capital stock of the members of the Call Australia Group and
the copyright in the billing software used by the Call Australia Group. In
November 1997, RSL Australia purchased 85% of EZI Phonecard Holdings Pty.
Limited ('EZI'), an international reseller and prepaid calling card services
provider. In March 1998, the Company agreed to acquire, in two separate
transactions, the customer base of each of First Direct Communications Pty.,
Limited and Link Telecommunications Pty., Ltd., two switchless mobile
telecommunications resellers in Australia. The transactions are subject to
regulatory approval in Australia and other customary conditions to closing.
Through December 31, 1997, Australian operations as a whole have generated
revenues of approximately $32.0 million.
The Company also acquired operations in Venezuela in mid-1997 as a result
of the Latin American joint venture with the Cisneros Group. To date, the
Company's start-up operations in Venezuela have generated approximately $300,000
in revenues.
In addition, during the second quarter of 1997, the Company incorporated
RSL COM Japan K.K. ('RSL Japan') and, in the third quarter of 1997, recruited a
managing director to oversee its operations in Japan. In February 1998, RSL
Japan was granted an International Simple Resale license by Japan's MPT to
provide international telephony, fax and data services to and from Japan. To
date, the Company's Japanese operations have not generated revenues. The Company
anticipates generating revenues from its operations in Japan during mid-1998.
The other countries in which the Company operates or will soon operate also
have experienced different levels of deregulation. As a result, the level of
competition in each country varies. The Company believes that as it pursues its
strategic growth strategy, the commencement of new operations will entail
varying degrees of time and cost.
COST OF SERVICES
The Company's cost of services is comprised of costs associated with
gaining local access and the transport and termination of calls over RSL-NET.
The majority of the Company's cost of services are variable, including local
access charges and transmission capacity leased on a per-minute of use basis.
The Company expects that an increasing amount of its total operating costs will
be fixed in the future, as the volume of the Company's calls carried over its
IRUs, MIUs and point-to-point fixed cost leases increases. The depreciation
expense with respect to the Company's MIUs and IRUs is not accounted for in cost
of services. In addition, the Company intends to lower its variable cost of
termination as a percentage of revenues by carrying traffic pursuant to more of
its existing operating agreements and by
35
<PAGE>
negotiating additional operating agreements on strategic routes. The Company has
directly linked certain of its Local Operators in Europe and the United States
utilizing lines leased on a fixed cost point-to-point basis and MIUs and IRUs.
To the extent traffic can be transported between two Local Operators over MIUs
or IRUs, there is only marginal cost to the Company with respect to the
international portion of a call other than the fixed lease payment or the
capital expenditure incurred in connection with the purchase of the MIUs or
IRUs. The Company's cost of transport and termination will decrease to the
extent that it is able to bypass the settlement rates associated with the
transport of international traffic. By integrating its operations in this
manner, the Company expects to continue to improve its gross margins. For a
discussion of important factors that adversely affect the Company's gross
margins, see 'Risk Factors--Short Operating History; Entrance into Newly Opening
Markets; Margins,' '--Inability to Predict Traffic Volume' and '--Dependence on
Carrier Customers,' '--Overview' in this section and 'Business--Network
Strategy.' However, the Company does not intend to purchase or construct its own
intranational transmission facilities in any of its markets unless required to
do so in order to receive regulatory approval to operate. Accordingly, variable
costs will continue to be a majority of the Company's cost of services for the
foreseeable future.
The Company's cost of services is affected by the volume of traffic
relative to its owned facilities and facilities leased on a point-to-point fixed
cost basis and capacity leased on a per minute basis with volume discounts. To
the extent that volume exceeds capacity on leased facilities that have been
arranged for in advance, the Company is forced to acquire capacity from
alternative carriers on a spot rate per-minute ('overflow') basis at a higher
cost. Acquiring capacity on an overflow basis has a negative impact on margins,
but enables the Company to maintain uninterrupted service to its customers. See
'Risk Factors--Short Operating History; Entrance into Newly Opening Markets;
Margins,' and '--Inability to Predict Traffic Volume.'
EFFECT OF DEREGULATION ON EUROPEAN COST OF SERVICES
The Company's current cost structure varies from country to country, in
part, as a result of the different level of regulatory policies in place in each
country. In general, the Company's cost structure is lower in countries that
have been substantially deregulated than in those which are partially
deregulated. In countries that are not substantially deregulated, the Company's
access to the local exchange network is subject to more expensive means (i.e.,
leased lines or dial-in access). This results in higher costs to the Company for
carrying international traffic originating within a country and terminating in
another country. In addition, local regulations in many countries restrict the
Company from purchasing capacity on international cable and fiber systems. The
Company must instead either enter into long-term lease agreements for
international capacity at a high fixed cost or purchase per-minute of use
termination rates from the dominant carrier. Deregulation in countries in which
the Company operates is expected to permit the Company to (i) interconnect its
switches with the local exchange network and (ii) purchase its own international
facilities. The Company believes that as a result of deregulation, its cost
structure will improve. Deregulation is also expected to permit the Company to
terminate international inbound traffic in a country which will result in an
improved cost structure for the Company as a whole. However, the foregoing is a
forward-looking statement and there can be no assurance that deregulation will
proceed as expected or lower the Company's cost of services.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The Company's selling, general and administrative expenses consist of costs
incurred to support the continued expansion of RSL-NET, the introduction of new
services and the provision of ongoing customer service. These costs are
principally comprised of costs associated with employee compensation, occupancy,
insurance, professional fees, sales and marketing (including sales commissions)
and bad debt expenses. In addition, as the Company commences operations in
different countries, it incurs significant start-up costs, particularly for
hiring, training and retention of personnel, leasing of office space and
advertising. In addition, the Company's selling, general and administrative
expense includes the settlement of various claims and disputes relating to
pre-acquisition periods.
36
<PAGE>
The Company has grown and intends to continue to grow by establishing
operations in countries that are in the process of being deregulated and that
originate and terminate large volumes of international traffic or offer other
strategic benefits. Each of the Company's operations is in a different stage of
development. The early stages of development of a new operation involve
substantial start-up costs in advance of revenues. Upon the commencement of such
operations, the Company generally incurs additional fixed costs to facilitate
growth. The Company expects that during periods of significant expansion,
selling, general and administrative expenses will increase materially.
Accordingly, the Company's consolidated results of operations will vary
depending on the timing and speed of the Company's expansion strategy and,
during a period of rapid expansion, will not necessarily reflect the performance
of the more established Local Operators.
FOREIGN EXCHANGE
The Company is exposed to fluctuations in foreign currencies relative to
the U.S. dollar, as its revenues, costs, assets and liabilities are, for the
most part, denominated in local currencies. The results of operations of the
Company's subsidiaries, as reported in U.S. dollars, may be significantly
affected by fluctuations in the value of the local currencies in which the
Company transacts business.
The Company recorded a foreign currency translation adjustment of $4.7
million for the year ended December 31, 1997. Such amount is recorded upon the
translation of the foreign subsidiaries' financial statements into U.S. dollars,
and is dependent upon the various foreign exchange rates and the magnitude of
the foreign subsidiaries' financial statements.
The Company incurs settlement costs when it exchanges traffic via operating
agreements with foreign correspondents. These costs currently represent a small
portion of total costs; however, as the Company's international operations
increase, it expects that these costs will become a more significant portion of
its cost of services. Such costs are settled by utilizing a net settlement
process with the Company's foreign correspondents comprised of special drawing
rights ('SDRs'). SDRs are the established method of settlement among
international telecommunications carriers. The SDRs are valued based upon a
basket of foreign currencies and the Company believes that this mitigates, to
some extent, its foreign currency exposure. As the Company establishes
operations in countries the currencies of which are not represented in SDRs, the
Company will consider the implementation of hedging policies, as appropriate.
The Company has monitored and will continue to monitor its currency
exposure. See 'Risk Factors--Devaluation and Currency Risks.'
ACQUISITION ACCOUNTING
Since its formation in 1994, the Company has expanded its revenues,
customer base and network through internal growth and acquisitions. All of its
acquisitions were negotiated on an arm's length basis with unaffiliated third
parties. The Company accounted for all of its acquisitions of controlling
interests using the purchase method of accounting and, accordingly, the
respective purchase prices have been allocated to the assets acquired and
liabilities assumed based on their estimated fair values at their dates of
acquisition. The excess of the purchase price over the estimated fair values of
the net assets acquired has been recorded as goodwill, which is being amortized
over a 15-year period. For periods prior to April 1, 1996, the Company had
included 100% of the losses of its loss generating subsidiaries in its results
of operations because the book value of the minority interests in these
subsidiaries has been reduced to below zero. The Company's non-U.S. subsidiaries
denominate revenues, costs, assets and liabilities for the most part in local
currencies. All of the subsidiaries, however, report their financial results in
U.S. dollars pursuant to U.S. GAAP. See '--Foreign Exchange.'
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997 AND 1996
REVENUES. Revenues increased to $300.8 million for the year ended December
31, 1997 compared to $113.3 million for the year ended December 31, 1996, an
increase of 165.6%. This increase is due primarily to an increase in the
Company's U.S. revenues from $85.8 million for the year
37
<PAGE>
ended December 31, 1996 to $194.5 million for the same period this year and the
Company's European revenues, which increased from $27.4 million for the year
ended December 31, 1996 to $73.7 million for the same period this year. The
Company generated revenues in the United States, in 10 European countries, and
in Australia and Venezuela during the fourth quarter of 1997. The Company had
revenue producing operations in only the United States and five European
countries in 1996. The increase in U.S. revenues was primarily due to increased
traffic volume from existing customers, increases in the Company's U.S.
commercial customer base and acquisitions. The increase in the Company's
European revenues was primarily due to increased traffic volume from existing
customers, increases in the Company's commercial customer base in the United
Kingdom, Sweden, Finland, Germany and the Netherlands and acquisitions.
COST OF SERVICES. Cost of services increased to $265.3 million for the
year ended December 31, 1997 from $98.5 million for the year ended December 31,
1996, an increase of 169.5%. This increase is primarily due to increased traffic
and increased rates paid to the Company's carrier vendors. As a percentage of
revenues, cost of services increased to 88.2% for the year ended December 31,
1997 from 86.9% for the year ended December 31, 1996. The increase in cost of
services as a percentage of revenues is primarily attributable to the Company's
U.S. operations' cost of services which represent 66.6% of the Company's total
cost of services. The Company's European operations have generated greater gross
margins (19.2% for the year ended December 31, 1997) than the Company's U.S.
operations (9.1% for the year ended December 31, 1997). The Company is currently
seeking to purchase additional capacity on routes on which it has experienced,
or anticipates experiencing, increasing overflow traffic as a result of the
Company's significant increase in traffic. In addition, the Company's prices to
customers utilizing these routes are often adjusted to take into account an
increased expectation of overflow traffic.
GROSS MARGINS. The Company's consolidated gross margins decreased to 11.8%
for the year ended December 31, 1997 from 13.1% for the year ended December 31,
1996. Gross margins in the United States decreased to 9.1% from 10.4% for the
year ended December 31, 1997 as compared to the same period in 1996. Gross
margins in the Company's European operations decreased to 19.2% for the year
ended December 31, 1997 from 21.3% for the year ended December 31, 1996.
Although the Company anticipated U.S. and European gross margin improvements
during 1997, rapid growth in excess of the Company's expectations continued to
cause traffic overflow and gross margin pressure.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense for the year ended December 31, 1997 increased by $55.8
million, or 143.5%, to $94.7 million from $38.9 million for the year ended
December 31, 1996. This increase is primarily attributable to the reasons
previously provided for revenues and cost of services above. As a percent of
U.S. revenues, the Company's U.S. selling, general and administrative expense
decreased to 19.6% for the year ended December 31, 1997 from 20.5% in the
comparable period last year. As a percent of European revenues, the Company's
European selling, general and administrative expense decreased to 50.4% for the
year ended December 31, 1997 from 60.6% in the comparable period last year. The
Company's consolidated selling, general and administrative expense in Europe is
45.4% of its total consolidated selling, general and administrative expense,
despite such operations accounting for only 24.5% of the Company's total
revenues because of a greater proportion of start-up and expansion costs.
Selling, general and administrative expense as a percentage of revenues is
expected to increase as a result of start-up costs and infrastructure expansion
attributable to new local operations.
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expense increased 227.9% to $21.8 million for the year ended December 31, 1997
from $6.7 million for the year ended December 31, 1996, an increase of $15.1
million. This increase is primarily attributable to the increased amortization
of goodwill recorded as a result of the Company's acquisitions. Depreciation and
amortization expense is expected to increase in the future as the Company
acquires additional businesses and assets.
INTEREST INCOME. Interest income increased to $13.8 million for the year
ended December 31, 1997 from $4.0 million for the year ended December 31, 1996,
primarily as a result of interest earned on the remaining net proceeds of the
1996 Notes and the proceeds from the Initial Public Offering.
38
<PAGE>
INTEREST EXPENSE. Interest expense increased to $39.4 million for the year
ended December 31, 1997 from $11.4 million for the year ended December 31, 1996,
an increase of approximately $28.0 million, as a result of interest related to
the 1996 Notes. Interest expense will increase substantially in future periods
due to the interest payments on the Notes.
NET LOSS. Net loss increased to $100.2 million for the year ended December
31, 1997, as compared to a net loss of $38.2 million for the year ended December
31, 1996 due to the factors described above.
YEARS ENDED DECEMBER 31, 1996 AND 1995
REVENUES. Revenues increased to $113.3 million for the year ended December
31, 1996 from $18.6 million for the year ended December 31, 1995, an increase of
509%. This increase is due primarily to the full year of U.S. operations that is
consolidated in the 1996 results of operations compared to only three months of
the Company's U.S. operations consolidated in the historical statement of
operations for 1995. The Company experienced an increase in commercial customers
at each of the Company's operations. The Company's Swedish, Finnish and U.K.
operations began generating revenues in May 1996 and contributed approximately
$7.8 million to 1996 revenues. The Company purchased Sprint's international
voice operations in France and Germany in May 1996. These operations contributed
approximately $13.1 million to 1996 revenues. The Company's European operations
generated minimal revenues in 1995. For the year ended December 31, 1996,
approximately 24% of the Company's revenues were generated from the Company's
European operations. The Company expects European operations to increase as a
percentage of its total consolidated revenues as the Company proceeds with its
expansion of its operations in geographic areas outside the U.S. The foregoing
is a forward-looking statement and there can be no assurance in this regard.
Factors which could affect such statement include (i) changes to or the
Company's inability to effect its growth strategy, (ii) regulatory actions or
inactions which adversely affect the Company's existing operations or ability to
expand outside of the U.S. and (iii) changes in the competitive and economic
environments in each of the Company's existing and new markets.
In connection with the Company's shift in marketing focus to small and
medium-sized businesses, the Company determined in December 1995 that certain
carrier customers provided the Company with margins below its targeted levels
for margin contribution. Accordingly, the Company established new pricing
structures and terminated service to the low or zero margin customers which did
not agree to the new pricing structures. In addition, the Company terminated
service in February 1996 to its largest wholesale customer because of such
customer's inability to pay for past services. This customer represented
approximately 11% of ITG's revenues in 1995. The Company has commenced legal
proceedings to recover amounts owed to the Company by such customer. The Company
has also instituted stricter credit criteria to reduce its bad debt exposure.
To compensate for the loss of such revenues, the Company accelerated its
U.S. sales efforts to small and medium-sized businesses during 1996, resulting
in increased sales to this segment.
COST OF SERVICES. Cost of services increased to $98.5 million for the year
ended December 31, 1996 from $17.5 million for the year ended December 31, 1995,
an increase of 463%. This increase is due primarily to the full year of U.S.
operations that is consolidated in the 1996 results of operations compared to
only three months of the Company's U.S. operations consolidated in the
historical statement of operations for 1995. As a percentage of revenues, cost
of services decreased to 86.9% for the year ended December 31, 1996 from 94.1%
for the year ended December 31, 1995. The decrease in cost of services as a
percentage of revenues is primarily attributable to the Company's growing
European revenues which generate greater gross margins (21.3% in 1996) than the
Company's U.S. operations (10.4% in 1996) and, to a lesser extent, to a decrease
in overflow traffic and increased utilization of the Company's operating
agreements. The Company is currently seeking to purchase additional capacity on
routes on which it has experienced, or anticipates experiencing, overflow
traffic. In addition, the Company's prices to customers utilizing these routes
are often adjusted to take into account an increased expectation of overflow
traffic.
39
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense for the year ended December 31, 1996 increased to $38.9
million from $9.6 million for the year ended December 31, 1995. This increase is
primarily attributable to the Company's investment in sales personnel and
marketing expense in order to generate increased revenue. Costs for start-up and
expansion of the Company's U.K., Dutch, Finnish and Swedish Local Operators
represented 30.1% and 5.6% of the Company's total selling, general and
administrative expense for the years ended December 31, 1996 and 1995,
respectively, although they only accounted for 9.9% and less than 1.0% of the
Company's total revenues for the same periods. Selling, general and
administrative expense as a percentage of revenues will vary from period to
period as a result of new Local Operators' start-up costs. For existing Local
Operators however, such costs are not expected to increase in proportion to
revenues.
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expense increased 689% to $6.7 million for the year ended December 31, 1996 from
$849,000 for the year ended December 31, 1995. This increase is primarily
attributable to the increased amortization of goodwill recorded as a result of
acquisitions. For the years ended December 31, 1996 and 1995, amortization of
goodwill amounted to approximately $2.9 million and $548,000, respectively.
Depreciation and amortization expense is expected to increase in the future as
the Company acquires additional businesses and assets. The Company depreciates
its switches over a five- to seven-year life, office equipment is depreciated
over their estimated useful lives which range from three to seven years and its
investments in MIUs and IRUs are depreciated over a 15-year life. Goodwill is
amortized over 15 years.
INTEREST INCOME. Interest income increased to $4.0 million for the year
ended December 31, 1996 from $173,000 for the year ended December 31, 1995,
primarily as a result of interest earned on the net proceeds from the 1996 Units
Offering.
INTEREST EXPENSE. Interest expense increased to $11.4 million for the year
ended December 31, 1996 from $194,000 for the year ended December 31, 1995, an
increase of approximately $11.2 million, as a result of interest related to the
1996 Notes ($9.2 million) and borrowings under the Revolving Credit Facility
($748,000) and the remaining amounts due to interest related to capital leases.
Interest expense will increase substantially in future periods due to the
interest payments on the Notes.
PERIODS PRIOR TO JANUARY 1, 1995
The Company had no operations in 1994 other than insignificant salary
expense. The Company's predecessor, ITG, had $4.7 million of revenue and a net
loss of $3.1 million for the year ended December 31, 1994. In 1995, the Company
had virtually no operations other than its initial investments in its U.S.
operations and an investment in Cyberlink Europe, which had no material
operations. The majority of the Company's investments (in terms of acquisition
value) were made at the end of the third quarter of 1996. Therefore, a
comparison of historical results for 1995 compared to 1994 would not be
meaningful. Accordingly, the discussion set forth above focuses on the
historical information for the years ended December 31, 1995, 1996 and 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company has incurred significant operating and net losses, due in large
part to the start-up and development of the Company's operations and RSL-NET.
The Company expects that such losses will increase as the Company implements its
growth strategy. Historically, the Company has funded its operating losses and
capital expenditures through capital contributions, borrowings and a portion of
the net proceeds of each of the 1996 Units Offering and the Initial Public
Offering.
Cash provided by operating activities for the year ended December 31, 1995
and cash used in operating activities for the years ended December 31, 1996 and
1997 equaled $3.6 million, $10.5 million and $91.8 million, respectively.
Capital expenditures for the years ended December 31, 1995, 1996 and 1997 were
$6.1 million, $23.9 million and $49.4 million, respectively. These capital
expenditures are principally for switches and related telecommunications
equipment. Funds expended for acquisitions during the years ended December 31,
1995, 1996 and 1997 were $15.4 million, $38.6 million and $77.8 million,
respectively. During 1996, the Company funded such operating losses,
40
<PAGE>
capital expenditures and acquisitions with borrowings of $44.5 million and a
portion of the net proceeds of the 1996 Units Offering. During 1997, the Company
funded such operating losses, capital expenditures and acquisitions with a
portion of the net proceeds of the 1996 Units Offering and a portion of the net
proceeds of the Initial Public Offering. At December 31, 1997, the Company had
$83.1 million of working capital as compared to a $124.9 million of working
capital at December 31, 1996.
The Company had 'other income' for the year ended December 31, 1997 of
approximately $7.0 million, primarily as a result of favorable amendments to
certain transmission capacity agreements entered into by the Company which
resulted in elimination of previously accrued charges.
The Company's indebtedness was approximately $304.6 million at December 31,
1997, of which $300.0 million represents long-term debt and $4.6 million
represents short-term debt. Substantially all such indebtedness is attributable
to the 1996 Units Offering.
The 1996 Notes, which are guaranteed by the Company, are redeemable, at the
Note Issuer's option, subsequent to November 15, 2001, initially at 106.1250% of
their principal amount, declining to 103.0625% of their principal amount for the
calendar year subsequent to November 15, 2002, and at 100% of the principal
amount subsequent to November 15, 2003. In addition, at any time on or before
November 15, 1999, the Company may redeem up to $90.0 million of the original
aggregate principal amount of the 1996 Notes with the net proceeds of a sale of
common equity at a redemption price equal to 112.25% of the principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the date of
redemption, provided that at least $210.0 million of aggregate principal amount
of 1996 Notes remains outstanding immediately after such redemption. The Company
intends to redeem $90.0 million of the original aggregate principal amount of
the 1996 Notes with the net proceeds of the Initial Public Offering. The Company
has until April 3, 1998 to effect such a redemption.
The Indentures contain certain restrictive covenants which impose
limitations on the Company and certain of its subsidiaries ability to, among
other things: (i) incur additional indebtedness, (ii) pay dividends or make
certain other distributions, (iii) issue capital stock of certain subsidiaries,
(iv) guarantee debt, (v) enter into transactions with shareholders and
affiliates, (vi) create liens, (vii) enter into sale-leaseback transactions, and
(viii) sell assets.
In connection with the issuance of the 1996 Notes, the Company was required
to purchase and maintain restricted marketable securities, which are held by the
trustee under the 1996 Indenture, in order to secure the payment of the first
six scheduled interest payments on the 1996 Notes. The market value of such
restricted marketable securities was approximately $68.9 million at December 31,
1997. (The market value of such securities, as adjusted to reflect the use of
such securities in connection with the Equity Clawback, was approximately $47.9
million.)
In February 1998, the Note Issuer consummated the U.S. Dollar Notes
Offerings of $200.0 million 9 1/8% Senior Notes due 2008 and $328.1 million
($200.0 million initial accreted value) 10 1/8% Senior Discount Notes due 2008.
In March 1998 the Note Issuer consummated the German Debt Offering of DM296.0
(approximately $99.1 million initial accreted value) 10% Senior Discount Notes.
A portion of the net proceeds from the German Debt Offering may be used to
purchase, in the open market, an undetermined amount of the 1996 Notes.
The Company has a $7.5 million Revolving Credit Facility. There were no
amounts outstanding under the facility at December 31, 1997 or as of the date of
this Prospectus. The Revolving Credit Facility is payable on April 1, 1998 and
accrues interest, at the Company's option, at (i) the lender's prime rate per
annum or (ii) LIBOR plus 1% per annum.
The Company, through LDM, has a $10.0 million revolving credit facility.
There was $3.6 million outstanding under this facility at December 31, 1997.
This facility is payable in full on September 30, 2000 and accrues interest at
prime rate plus 2.5% per annum.
One of the Company's primary equipment vendors has also provided to certain
of the Company's subsidiaries an aggregate of approximately $50.0 million vendor
financing facility to fund the purchase of additional capital equipment. At
December 31, 1996 and 1997, approximately $39.0 million and $15.8 million was
available, respectively, under this facility. Borrowings from this vendor accrue
interest
41
<PAGE>
at a rate of LIBOR plus either 5.25% or 4.5% depending on the equipment
purchased. See 'Description of Certain Indebtedness.'
While the Company believed that the remaining net proceeds of the Initial
Public Offering and of the 1996 Units Offering, together with the available
borrowings under the Revolving Credit Facility, vendor financing and short-term
lines of credit and overdraft facilities from local banks, would be sufficient
to fund the Company's planned expansion of its existing operations and operating
losses for approximately 12 to 24 months, the Company took advantage of the
current low interest rate environment to raise additional capital through the
U.S. Dollar Notes Offerings and the German Debt Offering and utilized a portion
of the net proceeds from the Initial Public Offering to prepay some of the 1996
Notes. See 'Risk Factors--Historical and Future Operating Losses and Negative
EBITDA; Need for Additional Capital; Substantial Indebtedness; Ability to
Service Indebtedness.'
EFFECTS OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the FASB issued SFAS No. 130 'Reporting Comprehensive
Income.' This statement is effective for financial statements issued for periods
beginning after December 15, 1997. Management has evaluated the effect on its
financial reporting from the adoption of this statement and has found the
majority of required disclosures to be not applicable and the remainder to be
not significant.
In June 1997, the FASB issued SFAS No. 131 'Disclosure about Segments of an
Enterprise and Related Information.' SFAS No. 131 requires the reporting of
profit and loss, specific revenue and expense items, and assets for reportable
segments. It also requires the reconciliation of total segment revenues, total
segment profit or loss, total segment assets, and other amounts disclosed for
segments to the corresponding amounts in the general purpose financial
statements. SFAS No. 131 is effective for fiscal years beginning after December
15, 1997. The Company uses data at the subsidiary level to manage its operations
and the Company will expand its current footnote disclosure to meet this
criteria.
INFLATION
The Company does not believe that inflation has had a significant impact on
the Company's consolidated operations.
SEASONALITY
The Company's European operations experience seasonality during July and
August, December and January, and, to a lesser extent, March, as these months
are traditional holiday months in most European countries and many European
businesses, which are the Company's principal European customers, are closed
during portions of these months.
YEAR 2000 TECHNOLOGY RISKS
The Company is in the process of reviewing its computer systems and
operations to identify and determine the extent to which any systems will be
vulnerable to potential errors and failures as a result of the 'Year 2000'
problem. The Year 2000 problem is the result of computer programs being written
using two digits, rather than four digits, to define the applicable year. Any of
the Company's programs that have time-sensitive software may recognize a date
using '00' as the year 1900 rather than the year 2000. This could result in a
major system failure or miscalculations.
The Company is upgrading its computer system in an effort to prevent major
system failures which could result upon the transition from 1999 to the year
2000. There can be no assurance that any such upgrades will be successfully
implemented or that additional steps will not be necessary. The Company
anticipates that it will be fully Year 2000 compliant by the end of 1999;
however a failure of the Company's computer systems or the failure of the
Company's vendors or customers to effectively upgrade their software and systems
for transition to the year 2000 could have a material adverse effect on the
Company's business and financial position or results of operations. The Company
currently estimates that the cost to become Year 2000 compliant is approximately
$2.0 million. Costs associated with software modification are expensed by the
Company when incurred. See 'Risk Factors-- Dependence on Effective Information
Systems; Year 2000 Technology Risks,' 'Business--U.S. Operations' and
'--European Operations--General.'
42
<PAGE>
BUSINESS
COMPANY OVERVIEW
The Company is a rapidly growing multinational telecommunications company
which provides a broad array of international and domestic telephone services to
both carrier and commercial (including business and residential) accounts. These
services include international long distance calling to over 200 countries and
calling card, private line and value-added telecommunications services. The
Company focuses on providing international long distance voice services to small
and medium-sized businesses in key markets. The Company currently has revenue
generating operations in the United States, the United Kingdom, France, Germany,
Sweden, Finland, The Netherlands, Denmark, Australia, Italy, Switzerland,
Venezuela and Belgium. The Company is in the process of commencing start-up
operations through its investments in majority-owned entities in Austria, Spain,
Luxembourg and Japan, and through its 39% investment in a Portuguese
telecommunications company. In 1996, approximately 66% of all international long
distance telecommunications minutes originated in these markets. The Company
plans to expand its operations and network into additional key markets which
account for a significant portion of the world's remaining international
traffic.
The Company was formed by Ronald S. Lauder and Itzhak Fisher in 1994 to
capitalize on the opportunities created by the growth, deregulation, and
profitability of the international long distance market. The Company has grown
rapidly through acquisitions, strategic investments and joint ventures, as well
as through the start-up of its own operations in key markets. The Company began
its operations in the United States in order to establish a presence in the
largest and one of the most deregulated telecommunications markets in the world,
and has since expanded its presence to key European countries in anticipation of
continued telecommunication deregulation in the EU. In order to pursue
opportunities in Latin America, the Company formed in mid-1997 a joint venture
with entities controlled by the Cisneros Group. The Company has also established
a presence in Asia and the Pacific Rim through its operations in Australia and
the start-up of its operations in Japan. The Company intends to continue to
expand rapidly by establishing or acquiring operations in additional countries
as they deregulate.
COMPANY STRUCTURE
The Company was incorporated under the laws of Bermuda in March 1996. The
Company is the successor in interest to RSL Communications Inc., a British
Virgin Islands corporation ('RSL BVI'), which was amalgamated into the Company
in July 1996. RSL BVI is the successor in interest to RSL Communications, Inc.,
a Delaware corporation ('RSL Delaware'), which was merged into RSL BVI in April
1995. RSL Delaware and RSL BVI were incorporated in July 1994 and April 1995,
respectively.
UNITED STATES. The Company operates in the United States through ITG, an
international telecommunications carrier which operates through its 97% owned
subsidiary, RSL USA. The Company owns 100% of ITG. During the first quarter of
1997, the Company completed the consolidation of its U.S. operations under RSL
USA. RSL USA's operations include the operations of Cyberlink and LDM.
EUROPE. RSL Europe is a United Kingdom limited liability company and a
wholly-owned subsidiary of the Company, which was formed in March 1995 to
implement the Company's pan-European strategy. RSL Europe also serves as the
Company's Local Operator in the United Kingdom. In addition, RSL Europe owns RSL
Sweden and RSL Finland.
In May 1996, the Company acquired the international long distance voice
businesses of Sprint in France and Germany through its indirectly wholly-owned
subsidiaries RSL COM France S.A., a French corporation ('RSL France'), and RSL
COM Deutschland GmbH, a German limited liability company ('RSL Germany').
In October 1996, RSL Europe acquired a 75% interest in the operations of
RSL Netherlands, an international reseller which had been operating in the
Netherlands since October 1995, and, in October 1997, acquired the remaining 25%
interest in RSL Netherlands. RSL Netherlands in turn owns 100% of RSL COM
Danmark A/S ('RSL Denmark'). RSL Denmark commenced operations in Denmark in May
1997.
43
<PAGE>
In April 1997, RSL Europe acquired a 30.4% interest in Maxitel, a
Portuguese international telecommunications carrier, and has since increased its
ownership interest in Maxitel to 39%. RSL Europe and the other two principal
shareholders of Maxitel entered into a shareholders' agreement pursuant to
which, among other things, (i) certain major decisions by the Board of Directors
of Maxitel can only be approved with the consent of RSL Europe and (ii) RSL
Europe has the right to designate two directors to the Board of Directors of
Maxitel.
In August 1997, RSL Europe acquired an 85% interest in the operations of
RSL Italy, an international telecommunications reseller that had been operating
in Italy since 1995.
In August 1997, RSL Europe acquired 50% of RSL Austria, which is initially
commencing its operations as an international telecommunications reseller. After
the completion in September 1997 of certain corporate formalities, the Company's
interest was increased to 90% of RSL Austria.
In December 1997, RSL Europe acquired a 78.5% interest in RSL Switzerland,
a Swiss long distance telecommunications carrier.
In December 1997, RSL Europe formed a joint venture to establish RSL Spain.
RSL Europe has a 90% interest in the joint venture, and the managing director of
RSL Spain owns the remaining 10% interest.
In December 1997, RSL Europe acquired a 90% interest in RSL Belgium, an
international telecommunications carrier in Belgium, which in turn owns 100% of
RSL Luxembourg, an international telecommunications carrier in Luxembourg.
ASIA AND PACIFIC RIM
The Company carries on its Australian operations through its wholly-owned
subsidiary, RSL COM Asia, Ltd. ('RSL Asia'). The Company carries on other
regional operations in Asia and the Pacific Rim through RSL COM Asia Pacific
Ltd. In October 1996, RSL Asia established RSL Australia to carry on its
Australian operations. In April 1997, RSL Australia acquired substantially all
of the commercial contracts of Pac Star, an Australian switchless reseller.
As of October 1997, RSL Australia acquired 100% of the issued capital of,
and the copyrights in the billing software used by, the members of the Call
Australia Group, leading Australian resellers. In November 1997, RSL Australia
purchased 85% of EZI, an international reseller and prepaid calling card
services provider. In March 1998, the Company agreed to acquire, in two separate
transactions, the customer base of each of First Direct Communications Pty.,
Limited and Link Telecommunications Pty., Ltd., two switchless mobile
telecommunications resellers in Australia. The transactions are subject to
regulatory approval in Australia and other customary conditions to closing.
In March 1997, the Company also incorporated RSL Japan, a wholly-owned
subsidiary of RSL Asia, to initiate the Company's operations in Japan. To date,
the Company has not generated revenues in Japan. The Company expects to commence
generating revenues in Japan in mid-1998.
LATIN AMERICA
The Company conducts its operations in Latin America through RSL Latin
America. RSL Latin America is a joint venture which is 51% owned by the Company
and 49% owned by the Cisneros Group of Companies. RSL Latin America owns 100% of
RSL Venezuela, a telecommunications carrier in Venezuela.
In February 1998, the Company entered into a joint venture agreement with
PCM Communicaciones, S.A. de C.V., a licensed long distance telecommunications
service provider in Mexico, to provide domestic and international long distance
telecommunications services primarily to small and medium-sized businesses in
Mexico. The transaction is subject to regulatory approval in Mexico and other
customary conditions to closing.
INDUSTRY OVERVIEW
International telecommunications involves the transmission of voice and
data from the domestic telephone network of one country to that of another.
According to industry sources, international long distance switched
telecommunications traffic worldwide increased from 28 billion minutes in 1989
to
44
<PAGE>
70 billion minutes in 1996 and is projected to reach between approximately 99
and 151 billion minutes by the year 2000. The market for these services is
highly concentrated in more developed countries, with Europe and the United
States accounting for approximately 41% and 27%, respectively, of the industry's
1996 total worldwide minutes of use.
International telecommunications is currently recognized as one of the
fastest growing and most profitable segments of the long distance
telecommunications industry, having experienced a compounded growth in total
minutes of 14.0% per annum from 1989 to 1996. The industry has been undergoing
rapid change due to the continued deregulation of the telecommunications market,
the construction of additional infrastructure and the introduction of new
technologies, which has resulted in increased competition and demand for
telecommunications services worldwide. Forecasts by the International
Telecommunications Union (the 'ITU'), a worldwide telecommunications
organization under the auspices of the United Nations, and Analysys Ltd., a
telecommunications industry consulting group, project this trend to continue
with an annual growth rate between approximately 11% and 17% through the year
2000.
The size of each market in which the Company currently operates or is in
the process of commencing operations is set forth below.
<TABLE>
<CAPTION>
COUNTRY'S
1996 MARKET COUNTRY'S PERCENTAGE
SIZE IN OF 1996 GLOBAL
COUNTRY OF MILLIONS OF INTERNATIONAL
OPERATION MINUTES(1) TRAFFIC
- ------------------- ----------- --------------------
<S> <C> <C>
USA................ 18,874 27.0
Germany............ 5,100 7.3
UK................. 4,569 6.5
France............. 3,116 4.5
Italy.............. 2,124 3.0
Switzerland........ 1,936 2.8
Japan.............. 1,698 2.4
The Netherlands.... 1,534 2.2
Australia.......... 1,305 1.9
Belgium............ 1,228 1.8
Spain.............. 1,189 1.7
Sweden............. 1,026 1.5
Austria............ 960 1.4
Denmark............ 573 0.8
Portugal........... 340 0.5
Finland............ 332 0.5
Luxembourg......... 249 0.4
Venezuela.......... 139 0.2
----------- --------
46,292 66.4%
</TABLE>
- ------------------
(1) All data, with the exception of U.S. outbound traffic, were taken from
Telegeography 1997/1998, which is published by Telegeography, Inc. and the
International Telecommunications Union. U.S. data were derived from FCC Rule
Section 43.61 filings which are publicly available.
The increasing pace of deregulation in telecommunications is evidenced by
the recent GBT Agreement. The GBT Agreement, signed by 69 countries, calls for
relaxed restrictions on foreign ownership and a commitment to deregulate
telecommunications and allow competition. Of the 69 signatories to the GBT
Agreement, 65 have agreed to adopt certain regulatory principles which call for
deregulation of telecommunications markets and the initiation of competition
based on the following actions: (i) pro-competitive regulation; (ii) creation of
favorable interconnect terms, (iii) standard licensing criteria, (iv)
establishment of an independent regulator, and (v) non-discriminatory allocation
of scarce resources (e.g., rights of way, frequencies, telephone numbers). Each
of the signatory nations which adopted these principles has set a different
timetable for the enactment of such principles,
45
<PAGE>
although there can be no assurance of such enactment. In November 1997 the FCC
revised its rules to implement commitments made by the U.S. under the GBT
Agreement.
Deregulation has coincided with technological innovation in the telephone
industry. New technologies include fiber optic cable and improvements in
computer software, digital compression and processing technology. Fiber optic
cable, which has widely replaced traditional wire lines, has dramatically
increased the capacity, speed and flexibility of telephone lines. In addition,
recent developments in software and hardware enable the transmission of voice
over the Internet through the use of special access servers, although the
quality of the call is not yet comparable to the quality of calls made over
traditional cable lines. In part as a result of these technological innovations,
lack of capacity is a less significant barrier to entry for new international
telephone companies and the transmission costs per minute of an international
call have decreased substantially.
Deregulation and privatization of telecommunications services and the onset
of competition have also resulted in (i) the broadening of service offerings,
including advanced and enhanced services (such as global voicemail, faxmail and
electronic mail, itemized and multicurrency billing and the ability to allow
customers to pay for long distance calls made from any telephone using a single
account (e.g., calling cards)) and (ii) lower end-user prices. These factors
have contributed to an increase in the volume of both inbound and outbound call
traffic. Despite falling prices, the overall market for international long
distance traffic has been growing and the decline in prices generally has been
more than offset by an increase in telecommunications usage.
PROJECTED GROWTH OF INTERNATIONAL LONG DISTANCE VOICE TRAFFIC
[CHART]
Billions of Outgoing Minutes
____________________________
| |
| Compound Annual |
| Growth Rate |
| 16.9% of Minutes of Use* |
|____________________________|
Europe USA & Canada Asia/Pacific Rim Other Total
------ ------------ ---------------- ----- -----
1997 33.2 27.9 14.8 18.6 94.5
1998 37.7 32.8 17.8 21.9 110.2
1999 42.9 38.5 21.6 25.8 128.8
2000 48.8 45.4 26.2 30.5 150.9
(Footnotes on next page)
46
<PAGE>
(Footnotes from previous page)
- ------------------
Source: Analysys Ltd.
* Prices have declined and are expected to continue to decline. Accordingly,
growth in revenues is expected to be substantially less than growth in
minutes. The data presented above constitutes a forward-looking statement.
Important factors that could cause actual minutes of use to differ materially
from the forward-looking data above are noted herein. See 'Risk Factors--Risks
Associated with Rapidly Changing Industry' and '--Government Regulatory
Restrictions.'
U.S. INTERNATIONAL LONG DISTANCE MARKET
The U.S. international long distance switched telecommunications market
accounted for approximately 27% of global international long distance call
originations in 1996 based on minutes of use. The industry is large and growing,
with revenues for U.S.-originated international long distance telephone services
rising from approximately $6.9 billion (6.8 billion minutes) in 1990 to
approximately $13.9 billion (18.9 billion minutes) in 1996. The growth of the
U.S.-originated international long distance market was initially attributable to
deregulation and the decrease in prices which accompanied the onset of
competition. Deregulation and the resulting competition also led to improvement
in service offerings and customer service. More recently, in addition to further
U.S. deregulation, the growth of the U.S.-originated international long distance
market has been attributable to (i) the continued deregulation of other
telecommunications markets throughout the world, (ii) the privatization of PTTs,
(iii) increased capacity, improved quality and lower operating costs
attributable to technological improvements, (iv) the expansion of
telecommunications infrastructure and (v) the globalization of the world's
economies and free trade.
The profitability of the traditional U.S.-originated international long
distance market is principally driven by the difference between settlement rates
(i.e., the rates paid to other carriers to terminate an international call) and
billed revenues. Increased competition arising from deregulation and
privatization and pressure arising from increased global trade have brought
about reductions in settlement rates and end-user prices, reducing termination
costs for United States based carriers. Based on FCC data for the period 1989
through 1996, per minute settlement payments by United States based carriers to
foreign PTTs fell 39%, from $.70 per minute to $.43 per minute. The FCC issued
in September of 1997 benchmark levels for settlement rates, of between $.15 and
$.23 per minute, in an effort to reduce the settlement rates charged and paid by
U.S. carriers. Such benchmark rates are substantially lower than the current
settlement rates. The FCC has encouraged carriers to use alternative measures to
terminate international traffic other than through operating agreements and the
international settlement process. The Company believes that as settlement rates
and costs for leased capacity continue to decline, international long distance
will continue to provide high revenue and gross profit per minute, although
there can be no assurance in this regard.
Although the Company focuses on the international telecommunications
market, it also provides domestic long distance services to many of its
customers. According to the FCC, the U.S. domestic long distance market grew in
total minutes at an annual compound rate of approximately 7.6% from 1989 to 1995
while the U.S.-originated international long distance market grew in total
minutes at an annual compound rate of approximately 15.4% during the same
period. Although the domestic market is much larger, the profit per minute of
use for international traffic has generally been higher than for domestic
traffic. See '--U.S. Operations.'
EUROPEAN INTERNATIONAL LONG DISTANCE MARKET
The European international long distance market is the largest in the
world, accounting for approximately 29 billion minutes or approximately 41% of
worldwide minute originations in 1996 based on minutes.
The European PTTs have historically had monopolies on providing telephone
services, making the cost of international telephone calls from Europe much
higher than similar calls from the United States. In addition, the Company
believes that many PTTs have used profits from international traffic to
subsidize domestic calling. Customers in many European markets are not able to
obtain a number of
47
<PAGE>
value-added features taken for granted in the United States, such as itemized
billing, touch tone dialing, voice mail and other enhanced services.
Deregulation, together with significant advances in technology that have
decreased the cost of providing services and allowed the provision of more
sophisticated value-added features, have made it possible for other telephone
companies to compete with the PTTs in providing international voice
telecommunications services.
A 1990 EC directive (the '1990 Directive') required each EU member state to
liberalize by 1992 all telephony services offered over its PSTN, with the
exception of basic 'voice telephony' and specified other services. The effect of
the 1990 Directive was that value-added services and the delivery of voice
telephony to closed user groups (i.e., to a specified group of people) were
liberalized to the extent that they do not come within the 1990 Directive's
definition of basic 'voice telephony.' Different interpretations as to whether a
service should be regarded as a value-added service or as a basic 'voice
telephony' service, and as to what constitutes a closed user group, have led to
variations among the EU member states as to what services may be delivered and
the manner in which they can be provided. In addition, certain EU member states
are late in enacting the relevant legislation implementing the 1990 Directive,
which has created further regulatory uncertainty. Under a 1996 EC directive (the
'Full Competition Directive'), voice telephony services were to be liberalized
by January 1, 1998 in most of the EU member states. However, many of the EU
countries in which the Company operates did not meet the January 1, 1998
requirement of the Full Competition Directive and there can be no assurance
regarding the timing or extent of liberalization in any particular country or
the EU in general. See '--European Operations--General' for a more detailed
discussion of the Full Competition Directive and related regulatory matters.
In response to these European regulatory changes, a number of different
competitors, including the Company, are emerging to compete with the European
PTTs. At one end of the scale, the large U.S. telecommunications service
providers and European PTTs have begun to form 'mega-carrier' alliances to
compete in offering value-added services and the resale of calling services
across Europe. At the other end of the scale, a number of competitors have
emerged that primarily provide long distance 'call back' telephone service.
Other companies are developing networks in Europe to service specific markets.
The Company believes, along with many industry observers, that the
deregulation currently underway in many countries in continental Europe will
lead to market developments similar to those that occurred in the United States
and the United Kingdom upon deregulation of long distance telecommunications
services. Such deregulation in the United States and the United Kingdom has
resulted in an increase in call traffic and the emergence of multiple new
telecommunications services providers of varying sizes. In addition, significant
reductions in prices, particularly for domestic long distance calls, as well as
improvement in both the services offered and the level of overall responsiveness
to customers, have occurred. Although pricing has become competitive in both
countries, pricing levels continue to permit services to be profitably provided.
There can be no assurance, however, that this will continue to be the case.
LATIN AMERICAN INTERNATIONAL LONG DISTANCE MARKET
Various countries in Latin America have taken initial steps towards
deregulation in the telecommunications market during the last few years. Certain
countries have competitive local and/or long distance sectors, most notably
Chile, which has competitive operators in all sectors. Colombia has granted an
operating license to a local company, ending the monopoly of Colombia's PTT. In
addition, various Latin American countries have completely or partially
privatized their national carriers, including Argentina, Chile, Mexico, Peru and
Venezuela. Venezuela has also legalized value-added services and has targeted
January 1, 2000 as the date for deregulation. Brazil has adopted a
constitutional amendment requiring the privatization of its PTT, the
establishment of an independent regulator and the opening of the
telecommunications market to competition. In Mexico, the former PTT has been
privatized, its exclusive long distance concession expired in August 1996 and it
has been obligated to interconnect with the networks of competitors since
January 1997. Competition in Mexico has been initiated and an independent
regulator has been established.
48
<PAGE>
OTHER MARKETS
Deregulation is spreading throughout many of the major markets in Asia and
the Pacific Rim. A significant number of countries in these regions are
signatories of the GBT Agreement and have committed to open their markets to
competition. Australia, the Philippines and New Zealand have already opened
their markets to full competition and Hong Kong, Indonesia, Japan, South Korea
and Malaysia have legalized the provision of value added services. Hong Kong
also licensed three new carriers in 1997 to provide local service and Singapore
will be licensing two new operators in 1998.
Despite the growth and deregulatory trends in the global telecommunications
market, the pace of change and emergence of competition in many countries,
particularly in parts of Africa, remains slow, with domestic and international
traffic still dominated by the government-controlled PTTs. The Company believes
that international carriers, such as itself, which have already established, or
are in negotiations to establish, operating agreements with the PTTs in many
such countries will be well-positioned to capture the benefits of increasing
traffic flows as the telecommunications infrastructure in these countries is
expanded.
The Company believes that the trend towards deregulation creates numerous
opportunities for international carriers such as itself to increase their access
to developing telecommunications markets and to increase their market share for
calls both into and out of these emerging markets. The Company believes that
many of the emerging carriers in developing countries, as well as certain
recently privatized PTTs, are likely to seek alliances, partnerships or joint
ventures with other international carriers to expand their global networks, and
that the size of many of the markets may lead them to seek alliances with
carriers like the Company as opposed to the mega-carriers, such as Uniworld,
Concert and Global One. Although there is a general trend towards deregulation
worldwide, there can be no assurance regarding the timing or the nature of
deregulation, whether any deregulation will occur at all or whether any trend
towards deregulation will not be reversed in any particular country.
INTERNATIONAL LONG DISTANCE MECHANICS
A long distance telephone call generally consists of three segments:
origination, transport and termination.
[CHART]
- --------------------- ----------------------------- ---------------------
| ORIGINATION | | TRANSPORT | | TERMINATION |
- --------------------- ----------------------------- ---------------------
Satellite Connection
/\
Originating Country / \ Terminating Country
/ \
Private Line / \ Private Line
|--------------------| / \ |--------------------|
| | / \ | |
- ------------ ----------------- / \ ----------------- ------------
| Calling | | International |/ Half Circuit \| International | | Called |
| Customer | | Switch |----------------| Switch | | Customer |
- ------------ ----------------- ----------------- ------------
| | | |
| | | |
|------( PSTN )------| |------( PSTN )------|
Cable Connection
o Resale/Lease
o MIU/IRU
A typical international long distance call originates on a local exchange
network or private line and is carried to the international gateway switch of a
long distance carrier. The call is then transported along a fiber optic cable or
a satellite connection to an international gateway switch in the terminating
49
<PAGE>
country and finally to another local exchange network or private line where the
call is terminated. A domestic long distance call is similar to an international
long distance call, but typically involves only one long distance carrier, which
transports the call on fiber, microwave radio or via a satellite connection
within the country of origination and termination. Generally, only a small
number of carriers are licensed by a foreign country for international long
distance and, in many countries, only the PTT is licensed to provide
international long distance service. Although the Company is licensed or
otherwise permitted (or not prohibited) to operate as an international long
distance carrier in most of its current markets, the range of services that may
be offered pending further deregulation is, in certain countries, limited to
value-added services and closed-user group services. See '--European
Operations--General'. Any carrier that desires to transport switched calls to or
from a particular country must, in addition to obtaining a license or other
permission (if required), enter into operating agreements or other arrangements
with the PTT or another international carrier in that country or lease capacity
from a carrier that already has such arrangements.
ORIGINATION
The Company can originate calls in all countries where it currently has
revenue-generating operations and route them to its local switch through a
dedicated telephone line between the customer and the Company's switch (commonly
known as 'direct access'). In addition, depending on local regulations, the
Company can originate calls by using the PSTN. In the United States, all
licensed long distance carriers are provided with 'equal access,' which allows
such carriers to directly interconnect with the PSTN on the same basis. As a
result of equal access, all long distance calls from a customer are routed
directly to the Company's local switch without requiring the customer to dial
any special access numbers. This is accomplished by the local telephone company
in the customer's territory programming its network to direct all of the
Company's customers' long distance calls to the selected switch. Outside the
United States, certain restrictions require the Company to utilize one of the
following methods to originate a call via the PSTN.
PREFIX DIALING. Prefix dialing allows a customer to access the Company's
switch via the PSTN by dialing a multiple digit access code (the 'prefix')
assigned to the Company prior to dialing the destination telephone number.
Prefix dialing requires direct interconnection with the operator of the PSTN,
typically the PTT or another major carrier, in order to allow the PSTN to
recognize the prefix and direct the call to the Company's switch. In order to
make the use of prefix dialing service transparent to the customer, the Company
can either program the customer's telephone system or install an auto-dialer
device to automatically dial the prefix on behalf of the customer when
appropriate. The auto-dialer device is purchased, installed and maintained by
the Company.
In Europe, prefix dialing is currently provided only by the Company's
operations in the United Kingdom, Sweden and Finland because prefix dialing
service requires interconnection with the PSTN, which is either not currently
permitted or not implemented by the Company in the remainder of Europe. Prefix
dialing was scheduled to be provided in the remainder of the EU after January 1,
1998, when deregulation was required under the Full Competition Directive, but
such schedule has not been met and is unlikely to be met, for the most part,
until the second half of 1998, at the earliest. See 'Risk Factors--Government
Regulatory Restrictions.' In France, RSL France has been granted a four digit
prefix by the French national telecommunications regulatory authority and has a
pending application for authorization, pursuant to articles L33.1 and L34.1 of
the Postal and Telecommunications code, to operate a public network. Prefix
dialing requires the Company to incur a substantial up-front fixed fee that is
payable to the PTT or other operator of the PSTN for interconnection. The
Company is then charged a variable local access charge to route each call to the
Company's switch. Despite such fees, for customers generating relatively low
volumes of calls or in remote locations, prefix dialing is a more cost-effective
form of call origination than through a direct access line.
DIRECT ACCESS. Direct access allows a customer to connect its phone system
directly to the Company's switch utilizing a dedicated phone line. Dedicated
phone lines are leased on a monthly or longer-term fixed cost basis from the PTT
or other local exchange carrier. This method of origination is only
cost-effective for those customers which generate substantial volumes of
international traffic, given the fixed cost of leasing a dedicated line.
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DIAL-IN. In countries where interconnection with the PTT or other operator
of the PSTN is currently not available, the Company can provide dial-in services
to closed user groups by allowing the customer to directly call the Company's
switch via the PSTN by dialing a pre-assigned telephone number (local or
toll-free), followed by a pin-code (which allows the switch to recognize the
customer) and the destination telephone number. The mechanics of this service
are substantially similar to calling card services currently provided by the
Company and other carriers in the United States. What constitutes a closed user
group has been the subject of a fair degree of interpretation among EU member
states, but is generally interpreted as meaning that the customer can only call
a limited predetermined group of destinations. As with prefix dialing, the
Company can make this service more transparent to the customer by programming
the customer's telephone system or installing an auto-dialer, subject to local
regulation. Given the greater number of digits required to be dialed by the
customer, however, a slight delay in placing a call cannot be avoided by this
service. Dial-in service involves a variable local access charge to route the
call to the Company's switch.
TRANSPORT
The transport of telephone calls is accomplished via land-based cables or
undersea cables, which are usually fiber optic, or by microwave radios or
satellites. A carrier can obtain half circuits on cable systems through MIUs,
IRUs or leases. In instances where a carrier has not purchased interests in a
cable prior to the time when the cable was placed in service, the carrier is
only permitted to acquire capacity on the cable through the purchase, by way of
a lump sum payment, of an IRU. The fundamental difference between an IRU holder
and an owner of MIUs is that the IRU holder is not entitled to participate in
management decisions relating to the cable system. Between two countries, a
carrier from each country owns a 'half-circuit' of a cable, essentially dividing
the ownership of the cable into two equal components. In the event that the
Company commences utilizing its remaining operating agreements, it will have to
either invest in additional IRUs or MIUs, or acquire satellite capacity, to
enable it to connect to a carrier in such countries. Additionally, any carrier
may generally lease circuits on a cable from another carrier with an MIU or IRU.
Satellite circuits are also obtained on a leased basis.
Traditionally, international long distance traffic is exchanged under
bilateral operating agreements between international carriers which own MIUs or
IRUs on the same fiber optic cable system in two countries or through leased
satellite capacity. Operating agreements provide for the termination of traffic
in, and return of traffic to, the carriers' respective countries at negotiated
accounting rates. Operating agreements typically provide that carriers will
return to their correspondents a percentage of the minutes received from such
correspondents ('return traffic'). In the United States, this percentage is set
by the FCC to be the relative ratio of U.S. inbound traffic to U.S. outbound
traffic to each country. In addition, operating agreements provide for network
coordination and accounting and settlement procedures between the carriers.
Accounting rates are reciprocal between each party to an operating
agreement. For example, if a foreign carrier charges a U.S. carrier $0.30 per
minute to terminate a call in the foreign country, the U.S. carrier would charge
the foreign carrier the same $0.30 per minute to terminate a call in the United
States. All U.S. carriers face a single accounting rate for each country unless
otherwise permitted by the FCC.
The term 'settlement' rates arises because carriers pay each other for
traffic exchanged utilizing the accounting rate structure on a net basis
determined by the difference between inbound and outbound traffic between them.
Settlement rates differ between countries. For example, a U.S. carrier may have
a settlement rate of $.30 to terminate a call in one country and $.35 in another
country while a U.K. carrier may have settlement rates of $.45 and $.40 to
terminate calls in the same countries. By linking its Local Operators over owned
and leased facilities, the Company bypasses this traditional settlement process
and lowers its cost of transporting its international traffic.
The FCC has established a policy that effectively prohibits foreign
carriers from discriminating among U.S. carriers (the 'International Settlements
Policy'). The International Settlements Policy requires: (1) the equal division
of accounting rates; (2) non-discriminatory treatment of U.S. carriers; and (3)
proportionate return of inbound traffic. In December 1996, the FCC modified its
rules to allow
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alternative payment arrangements that deviate from the International Settlements
Policy between any U.S. carrier and any foreign correspondent in a country that
satisfies the FCC's effective competitive opportunities test. The FCC also
stated that it would allow alternative settlement arrangements between a U.S.
carrier and a foreign correspondent in a country that does not satisfy the
effective competitive opportunities test, if the U.S. carrier can demonstrate
that deviation from the International Settlements Policy will promote
market-oriented pricing and competition while precluding abuse of market power
by the foreign correspondent.
In September 1997, the FCC adopted new lower benchmark rates that U.S.
carriers must pay to foreign carriers in order to settle calls originating from
the U.S. The benchmark rates were adopted to remedy a growing U.S. settlement
deficit, which results from the imbalance between outbound and inbound call
volume, which is estimated to be approximately 70% higher than the actual cost
of terminating international calls. Three benchmarks were established to fit the
income level of foreign countries, with a low of $0.15 per minute for high
income countries and a high of $0.23 per minute for low income countries.
Implementation periods, ranging from one year for high income nations to five
years for nations with less than one telephone line for every 100 inhabitants,
were also adopted. The FCC also determined that a grant of authorization to
provide international facilities-based switched service from the United States
to an affiliated market would be conditioned on the carrier's foreign affiliate
offering U.S. international carriers a settlement rate at or below the relevant
benchmark. If, after the carrier has commenced service to an affiliated market,
the FCC learns that the carrier's service offering has distorted market
performance, the FCC will take enforcement action. The new benchmarks are
intended to promote a competitive environment in which rates will more closely
reflect costs; officials also hope that the FCC's order will encourage
multilateral negotiations and lead to an international agreement to reduce costs
further.
The GBT Agreement requires signatories to open their telecommunications
markets to competition. Consistent with the commitments made by the U.S. under
the GBT Agreement, the FCC has revised its rules to establish an open entry
standard for applicants from World Trade Organization member countries seeking
authority to provide international telecommunications service in the U.S., and
has adopted a rebuttable presumption that the U.S. affiliates of foreign
carriers with less than 50% market share in each relevant market on the foreign
end should be treated as non-dominant. These open entry policies will apply to
applicants of all World Trade Organization member countries, including those who
are not signatories to the GBT Agreement.
A carrier which does not have an operating agreement with a carrier in a
particular country is able to provide international service to that country by
leasing capacity from a carrier which does. Until recently, in many foreign
countries there was only one operating agreement in place between that country's
PTT and a foreign based international carrier as a result of monopolies held by
such PTTs. For example, in the United States, before the deregulation of
telecommunications services, AT&T was the only carrier that had operating
agreements with foreign carriers. However, after deregulation, MCI and Sprint,
over a period of years, each negotiated its own operating agreements with
foreign carriers. Since then, a limited number of other U.S.-based companies,
including the Company, have been able to secure operating agreements with
foreign carriers. Operating agreements are expected to become increasingly
available as international markets deregulate and new carriers that are seeking
business partners emerge in countries previously subject to a PTT monopoly or
other limited competition market. See 'Risk Factors--Risks Associated with
Rapidly Changing Industry' and '--Risk of Loss, or Diminution of Value, of
Operating Agreements.'
For an international long distance company without operating agreements or
its own international network, the profitability of originating international
traffic is a function of, among other things, the difference between its billing
rates and the rates it must pay another carrier to transport and terminate such
traffic.
For a company with operating agreements that provide for return traffic,
the profitability of originating international traffic will be a function of,
among other things, the volume of its originating traffic and its billing rates,
as well as the relative volume of its originating and return traffic minutes.
Under the settlement process, a carrier which originates more traffic than it
receives, will, on a net basis, make payments to the corresponding carrier,
while a carrier which receives more traffic than it
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originates will receive payments from the corresponding carrier. If the incoming
and outgoing flows of traffic are equal in the number of minutes transmitted,
there is no net settlement payment to either carrier. Therefore, in addition to
all of the other factors that can influence the profitability of a long distance
carrier, the profitability of an international carrier is dependent on its
relative flows of incoming and outgoing traffic.
Return traffic can be more profitable than outgoing traffic when there is a
significant disparity in the cost of terminating traffic between the two
countries that are party to an operating agreement. This is particularly true
for a U.S. carrier because the actual cost for a U.S. carrier to terminate a
call in the United States generally is less expensive than the settlement cost
under an operating agreement with any foreign carrier and return traffic does
not involve any origination costs. The receipt of more profitable return traffic
reduces the aggregate cost to a carrier to transport traffic pursuant to an
operating agreement, and carriers with significant levels of return traffic can
price their international transport and termination services at a discount to
the settlement cost and recover the discount on the return traffic.
TERMINATION
The termination of an international call occurs after the call has been
transported to an international carrier in the destination country. The
international carrier then transports the call to a local exchange network where
it is then terminated. In many countries, only the PTT is licensed to provide
international long distance service and local exchange services.
COMPANY STRATEGY
The Company's strategic objective is to create a low-cost facilities-based
global network that provides high quality international telecommunications
services to small and medium-sized businesses in key markets. The key elements
of the Company's strategy to achieve this objective are as follows.
FOCUS ON PROVIDING INTERNATIONAL LONG DISTANCE SERVICES
The international long distance public switched telecommunications market
generated an estimated $61.3 billion in revenue and 70.0 billion minutes in 1996
with minutes of use projected to grow at a rate of between approximately 11% and
approximately 17% per annum through the year 2000. The Company currently has
significantly less than a 1% share of this market. Although prices are expected
to decline, resulting in substantially slower growth in revenues, the
international long distance switched telecommunications market is currently
recognized as one of the fastest growing and most profitable segments of the
long distance industry. The Company provides a broad array of international and
domestic services but focuses on providing services to end-users which generate
significant calling traffic between countries to capitalize on (i) the continued
growth of international traffic and (ii) the margin opportunity created by the
high end-user rates currently maintained by PTTs and other dominant carriers. If
any of the factors contributing to the growth of traffic or the pricing scheme
by the PTTs and other major carriers should cease to apply, growth and
profitability in the international market and the Company's prospects would be
negatively impacted. The United States market, one of the most deregulated and
competitive markets in the world, illustrates the greater profitability of
international traffic versus domestic traffic in the current market and
regulatory environment. Based on FCC statistics and other available information,
the Company estimates that industry-wide gross profit (before access charges) in
1996 for U.S.-originated traffic averaged $.29 per minute of international use,
compared to a 1995 gross profit of $.08 per minute of domestic use, although the
actual gross profit per minute of use may vary significantly depending on the
destination, route and time of day of a particular call. From 1989 to 1996, per
minute settlement payments by United States based carriers to foreign PTTs fell
approximately 39% from $.70 to $.43. Despite declining costs, dominant carriers
and PTTs have maintained high end-user rates for international long distance
services, allowing them to provide domestic services at lower rates. The Company
believes that as settlement rates and costs for purchased capacity continue to
decline, international long distance should continue to provide high revenue and
gross profit per minute, although increased competition may, to a certain
extent, moderate such revenues and gross profits. The foregoing is a
forward-looking statement and there can be no assurances in this regard. See
'--Industry Overview.'
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ESTABLISH OPERATIONS IN KEY MARKETS
The Company establishes operations in markets that (i) originate or
terminate significant levels of international traffic and (ii) are, or are in
the process of being, deregulated. The Company has structured its Local
Operators to be managed independently and expects its Local Operators to be
separately profitable, while benefiting from centralized strategic, financial
and network support provided by the Company. The Local Operators are each
developed to be stand-alone operations shaped by local market conditions and
preferences. The Company currently provides each Local Operator with centralized
business development, financial, and marketing support and has commenced a plan
of operation to provide billing and RSL-NET management. See '--Headquarters
Operations.' The Company currently operates or is in the process of commencing
operations in 18 markets that, in the aggregate, accounted for approximately 66%
of all international long distance telecommunications minutes in 1996. By
expanding its operations into additional key markets, in which significant
volumes of international traffic are originated and terminated and which are in
the process of deregulation, the Company seeks to rapidly establish a broad
market coverage. The Company currently plans to initiate operations in five to
10 additional countries over the next two years which, together with the markets
in which the Company currently operates, accounted for approximately 75% of the
1996 worldwide international long distance minutes of use.
The Company enters additional countries primarily by acquiring a
controlling interest in existing companies that are either operating in or are
in the process of establishing operations in the international
telecommunications industry in that country or by means of a start-up operation
which the Company funds and manages on its own or together with a local
strategic partner. In the case of an acquisition, the Company seeks to acquire
an international carrier which matches the criteria set forth below. In the case
of the establishment of new operations, the Company identifies an experienced
and professional management team to develop the new operation. In the formation
of a joint venture, the Company identifies a local strategic partner with a good
reputation and knowledge of the local marketplace.
ENTER MARKETS EARLY
The Company seeks to enter new markets ahead of full deregulation in an
attempt to gain competitive advantages over carriers which attempt to enter a
market after deregulation is complete. These advantages include (i) the
development of multiple sales channels and the establishment of a customer base
prior to widespread competition, (ii) the early acquisition of scarce
experienced technical and marketing personnel and distribution channels and
(iii) the achievement of name recognition as one of the early competitors to the
incumbent PTTs. The Company employs multiple marketing and distribution
channels, including direct sales forces, telemarketing organizations, agents and
resellers, while also forming marketing alliances with other service providers,
such as Internet service providers and mobile service providers.
The Company believes that its early entry into deregulating markets will
provide it with an advantage in obtaining licenses as they become available over
carriers which attempt to enter the market after deregulation is complete. The
securing of necessary licenses, which is limited in some circumstances to a
small number of entrants into the deregulating market, is essential to the
Company's strategy and the Company will endeavor to enter into arrangements with
a licensee to gain access to such market if the Company cannot secure
successfully the license.
In countries that are in the process of deregulating, competition is often
restricted to a limited number of specific services. In such cases, the Company
employs a two-stage market penetration strategy whereby initially the Company
takes advantage of current market conditions and, within the context of its
established strategy and service offerings, provides the fullest range of
services permissible under local regulation. The Company thereby gains an early
toehold in the market, affording it the opportunity to become a recognized
international carrier and to begin to build its own marketing channels and
customer base prior to the opening of markets to broader competition.
Subsequently, as deregulation permits, the Company expands its service offerings
thereby giving the Company the
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opportunity to increase the amount of business it does with its existing
customers and to increase its market penetration by building on its name
recognition, marketing channels and expanded service offerings to attract
additional customers. However, there can be no assurance regarding the timing or
extent of deregulation in any particular country. See 'Risk Factors--Government
Regulatory Restrictions.'
TARGET SMALL AND MEDIUM-SIZED BUSINESSES
The Company focuses on offering high quality products and services to small
and medium-sized businesses that originate in excess of $500 in international
telephone calls per month. The Company believes that this segment offers
significant market opportunities because it has traditionally been underserved
by the major global telecommunications carriers and the PTTs, which offer their
lowest rates and best services primarily to higher volume multinational business
customers. The Company believes that in most markets, small and medium-sized
businesses account for a significant percentage of international calling traffic
and will continue to do so in the future.
Small and medium-sized businesses account for the majority of all
businesses. For example, the EU estimates that there are 15 million small and
medium-sized businesses in the EU and that the businesses that employ fewer than
100 workers in the aggregate account for more than one half of all EU employment
and almost half of all business revenue. In addition, Europe's small to
medium-sized businesses are projected to produce total telecommunications
revenues larger than those of the major multinational business sector. For the
year ended December 31, 1997, approximately 40% of the Company's revenues were
derived from sales to other carriers, 43% were derived from commercial
customers, including small and medium-sized businesses, and 17% were derived
from calling card customers.
DEVELOP A COST COMPETITIVE GLOBAL NETWORK
Most of the Local Operators maintain network switching facilities to
establish POPs to provide international voice and other telecommunications
services in their markets. The Company presently has an international gateway
and/or a domestic switch located in each of New York, Los Angeles, London,
Paris, Frankfurt, Rotterdam, Amsterdam, Stockholm, Helsinki, Sydney, Melbourne,
Brisbane, Vienna, Copenhagen, Lisbon and Caracas. The Company intends to link
its current and future switches via owned international facilities or leased
capacity to form an integrated network for international telecommunications. By
integrating its current and future POPs into RSL-NET, the Company believes that
it will be able to originate, transport and terminate traffic utilizing its own
network, thereby bypassing the high costs associated with the transport of the
international portion of a call through a third party carrier. This is expected
to enable the Company to reduce significantly its operating costs for calls that
originate and terminate in markets in which the Company has Local Operators, as
well as its overall operating costs. See '--Network' and '--Network Strategy.'
The Company uses state-of-the-art technology in its switching facilities.
The Ericsson switches used by the Company allow the Company to interconnect its
switches to existing PTT and carrier networks around the world and to develop
new services and upgrade network software on an efficient basis.
PURSUE STRATEGIC ACQUISITIONS AND ALLIANCES
The Company intends to enter additional markets and expand its operations
through acquisitions, joint ventures, strategic alliances and the establishment
of new operations. The Company is continuously reviewing acquisition
opportunities and seeks to acquire control of businesses with an established
customer base, compatible operations, licenses to operate as an international
carrier, experience with additional or emerging telecommunications products and
technologies and/or experienced management. The Company intends to pursue
acquisitions which it believes will expand or enhance its current operations by
providing the Company with the opportunity to enter additional key markets or to
strengthen its operations in an existing market. The Company also seeks to enter
into joint
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ventures and strategic alliances which the Company believes will enhance its
ability to grow its business. For example, the Company has entered into a joint
venture with the Cisneros Group and a strategic alliance with Ericsson.
The Company believes that many of the emerging carriers in developing
countries, as well as certain recently privatized PTTs, are likely to seek
alliances, partnerships or joint ventures to compete more effectively in their
local markets and abroad. The Company actively seeks out opportunities for
alliances with such carriers to expand the scope of its network and improve its
competitive abilities. The Company believes that it is uniquely positioned as an
attractive alternative strategic partner for such carriers as opposed to the
mega-carriers such as Uniworld, Concert and Global One.
LEVERAGE EXPERTISE OF MANAGEMENT TEAM
The Company has retained a number of experienced management personnel in
the telecommunications industry, many of whom have had significant experience
with incumbent providers, as well as early competitors in deregulating markets.
As a result, the Company believes that it is well positioned to manage the rapid
growth of its customer base and network infrastructure.
MANAGE NETWORK INVESTMENTS
The Company seeks to manage the investment of capital within its network on
an incremental basis in order to maximize the efficiency of its capital
expenditures program. In general, the Company transmits traffic by leasing
capacity on a variable cost per minute basis until it believes that a direct
investment in facilities or a fixed cost lease arrangement between countries or
on a particular route is warranted. When the cost of owning facilities is
justified relative to leasing facilities, and the Company invests in such
facilities, the Company generally experiences higher gross margins and lower
overall transmission costs. See 'Risk Factors--Short Operating History; Entrance
Into Newly Opening Markets; Margins' and 'Management's Discussion and Analysis
of Financial Condition and Results of Operations--Overview.'
NETWORK
The Company generally utilizes a single switch technology platform for its
international gateway switches comprised of state-of-the-art Ericsson AXE-10
switches. The Company believes that a single switch platform gives the Company a
strategic advantage in developing new services and allows the Company to upgrade
network software on a more efficient basis when compared to other global
carriers which may employ multiple switch technologies. The Company is also
pursuing alternative transmission technologies such as the Internet in order to
minimize its operating costs. See 'Prospectus Summary-- Certain Recent
Developments--Internet Telephony/Acquisition of Delta Three' and '--Internet
Telephony Operation--General.'
OWNED FACILITIES
The Company's owned facilities include switches and interests in
international fiber optic cable systems. The Company's 11 international gateway
switches are located in New York, Los Angeles, London, Stockholm, Paris,
Frankfurt, Helsinki, Vienna, Copenhagen, Lisbon and Sydney. In addition, the
Company operates seven domestic switches in Rotterdam, Amsterdam, New York,
London, Melbourne, Brisbane and Caracas, although the Company's Australian
switches cannot be used until they are interconnected with the Australian PSTN
which is anticipated to occur by the end of the first quarter of 1998. The
Company's existing international gateway switches conform to international
signaling and transmission standards provided for in CCITT recommendations and
allow the Company to interconnect its network to existing PTT and carrier
networks around the world while maintaining quality and dependable services. The
Company's switch and related equipment purchases have been financed by Ericsson
and the Company believes it has developed a favorable working relationship with
Ericsson which will enable the Company to benefit from Ericsson financing for
future Ericsson purchases, although there can be no assurance that this will be
the case. See 'Risk Factors--
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Dependence on Equipment Supplier.' The Company's switching facilities are easily
expandable to accommodate growth.
The Company also owns capacity on certain international digital fiber optic
cable systems. The Company's United States operations currently own IRUs on four
undersea fiber optic cable systems, which are the CANUS-1, CANTAT-3, PTAT-1 and
the TAT-12/TAT-13 systems and owns MIUs on six undersea fiber optic cable
systems, which are the Antillas I, Odin, Rioja, APCN, NPCard JASAURUS systems.
The Company also owns MIUs on the CMC and MCC terrestrial fiber optic cables.
The Company also is currently in negotiations to purchase IRUs for its United
States operations on the Columbus II, TPC-5, America's One, T-C and Eurafrica
Systems and on Ariane-2, Aphrodite and GEMINI undersea fiber optic cable
systems. The Company's Swedish operation owns IRUs on the CANTAT-3 and MIUs on
the KATTEGAT-1 transoceanic cables. The Company's United Kingdom operations owns
IRUs on the UK-NL14, CANTAT-3 and PTAT-1 undersea fiber optic cable systems and
plans to purchase MIUs on the FLAG and GEMINI transoceanic cable systems. The
Company's Australian operation owns MIUs on the APCN, JASAURUS and NPC undersea
fiber optic cable systems and on the CMC and MCC terrestrial fiber optic cables.
OPERATING AGREEMENTS
The Company's operating agreements provide the Company with the ability to
transmit traffic directly to foreign carriers over jointly-owned facilities
rather than utilizing leased capacity. The Company's U.S. operations currently
hold 18 operating agreements (one of which allows the Company to transmit
traffic into three countries), which provide potential direct access to
Australia, Azerbaijan, Bolivia, Chile, Denmark, the Dominican Republic, Japan,
Jordan, the Netherlands, New Zealand, Norway, Russia, Sweden, Switzerland,
Suriname and the United Kingdom. The Company currently only transmits and
terminates traffic pursuant to operating agreements in the Dominican Republic,
the United Kingdom, Denmark, The Netherlands, Russia and Norway. See '--U.S.
Operations--U.S. Network Architecture.' The Company believes that these
agreements constitute significant assets and that the Company is one of only a
limited number of carriers within the United States that has been able to secure
a significant number of operating agreements with non-U.S. carriers. The
Company's Swedish operation currently utilizes two operating agreements which
enable it to exchange traffic with Denmark and Norway. Operating agreements
lower the cost of transmitting traffic by allowing the Company to utilize its
MIUs and IRUs to correspond directly with its foreign carriers, thereby
eliminating the cost of transmitting a call through leased capacity. In
addition, if the Company can develop sufficient traffic into another country, it
can potentially develop an additional source of revenue through return traffic
or other settlement arrangements with the PTT or other carriers in that country.
See 'Risk Factors--Risk of Loss, or Diminution of Value, of Operating
Agreements.'
LEASED CAPACITY
For all routes where the Company does not own facilities or utilize
operating agreements, the Company utilizes leased capacity. In addition, the
Company has arrangements with local carriers in each country in which it
originates traffic to transmit domestic calls from its end-users to its switch.
The Company does not own or intend to own intra-national transmission facilities
networks, unless required to do so in order to receive regulatory approvals to
operate, due to the general availability of such facilities for lease and the
high cost associated with the development and operation of a transmission line
infrastructure. Leased capacity is typically obtained on a per minute basis or a
point-to-point fixed cost basis. The Company utilizes leased satellite
facilities for traffic to and from those countries where digital undersea fiber
optic cables are not available or cost-effective. Leased satellite facilities
are also used for redundancy when digital undersea cable service is temporarily
interrupted. See 'Risk Factors--Dependence on Other Carriers.'
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NETWORK MANAGEMENT SYSTEMS
The Company generally utilizes redundant, highly automated state-of-the-art
telecommunications equipment in its network and can, in cases of component or
facility failure, use the network management facilities to redirect calls to
another carrier's facilities. Back-up power systems and automatic traffic
re-routing enable the Company to provide a high level of reliability to its
customers. Computerized automatic network monitoring equipment allows fast and
accurate analysis and resolution of service problems. The Company maintains
separate network management facilities for its U.S. and European operations
which maintain separate least cost routing systems. U.S. network management is
operated from the Company's facilities in New York and Los Angeles. European
network management for the United Kingdom, Sweden, France, Germany and Finland
is operated centrally from the Company's switching center in London. See 'Risk
Factors--Risks Associated with Rapidly Changing Industry,' '--Dependence on
Effective Information Systems; Year 2000 Technology Risks' and '--Dependence on
Equipment Supplier.'
NETWORK STRATEGY
The Company has switches in most of the countries in which it operates. The
Company has connected its current switches and expects to connect its future
switches by investing in IRUs and MIUs or fixed point-to-point leases, subject
to local regulatory conditions. In countries in which the Company currently
operates without a switch and in each new market the Company enters, the Company
intends to install its own switching facilities which will then be integrated
into RSL-NET to improve the Company's overall cost structure. The Company
transmits traffic from its Local Operators on capacity leased on a variable cost
per minute basis until it believes an investment in owned facilities or fixed
cost lease arrangements between countries or on a particular route is warranted.
To the extent traffic can be transported between two Local Operators over MIUs
and IRUs or lines leased on a fixed cost point-to-point basis, there is almost
no marginal cost to the Company. In such cases, the Company will be able to
bypass the traditional settlement process for the transport and termination of
international traffic. The settlement rates for international correspondence are
based on negotiated rates which are, according to the FCC, up to 70% higher than
the actual cost. The Company expects that it will realize significant cost
savings by routing an increasing portion of its international traffic over its
owned and leased facilities as opposed to corresponding via operating
agreements, in particular, once the markets in which the Company operates
deregulate sufficiently to allow interconnect. See 'Management's Discussion and
Analysis of Financial Condition and Results of Operations--Effect of
Deregulation on European Cost of Services.' In addition, each of the Local
Operators maintains an independent cost structure for all other traffic. By
directly linking its operations, the Company will be better able to implement a
least cost routing system. See '--International Long Distance Mechanics,' 'Risk
Factors--Short Operating History; Entrance into Newly Opening Markets; Margins,'
'--Inability to Predict Traffic Volume' and '-- Dependence on Other Carriers.'
For calls to countries where the Company does not have a Local Operator,
the Company seeks to establish and utilize an operating agreement with a local
carrier. While this method generates higher costs than transporting calls
between the Local Operators, it has the potential to generate higher margin
return minutes. The Company has not generated significant return minutes to
date. In addition, by strategically establishing its Local Operators and
obtaining operating agreements, the Company will seek to arbitrage the
differential in settlement rates between countries.
Origination and termination of traffic is accomplished through transmission
capacity leased on a per minute basis, except where the Company provides private
line service. As the Company's operations in a given country grow, the Company
generally will install additional POPs and lease transmission capacity (on a
point-to-point fixed cost basis) to connect the new POP to its international
gateway switch. This will enable the Company to reduce its dependence on
relatively high cost-per-minute leases by reducing the distance calls will
travel over capacity leased on that basis.
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PRODUCTS AND SERVICES
The Company offers a variety of long distance products and services to its
customers, as well as certain value-added services. Although the Company focuses
on providing international service, it also provides domestic long distance
services, where permitted under relevant regulations, to accommodate customer
demands.
The Company provides the services described below to the extent permitted
by local regulation in each of its markets. See 'Risk Factors--Government
Regulatory Restrictions' and '--Industry Overview,' '--International Long
Distance Mechanics,' '--U.S. Operations' and '--European Operations--General.'
LONG DISTANCE SERVICES
The Company provides domestic and international long distance service to
its customers. Currently, the Company provides domestic services in the United
States, the United Kingdom, Sweden, Belgium, Finland and Australia. In the
United States, the Company is certified and tariffed or otherwise authorized to
originate intrastate, interexchange calls in 48 states and the District of
Columbia and can terminate calls throughout the United States.
PRIVATE LINE SERVICE
The Company can provide dedicated point-to-point connections to businesses
requiring dedicated private telephone lines for high volumes of voice and data
between the customer's offices in all countries where the Company has revenue
generating operations.
CALLING CARDS
The Company's calling cards are either prepaid cards or post paid cards
(for which calls are billed in arrears). The Company's calling cards provide
international call access to or between all countries that have direct dial
service with the United States. Prepaid calling cards are similar products to
other calling cards, but differ in marketing focus as well as the method of
payment. A customer purchases a prepaid card that entitles the customer to make
phone calls on the card up to some limit. The Company also offers prepaid
calling cards that are rechargeable. In all cases, the card number is
proprietary to the customer and is secured by means of a personal identification
number. The Company currently offers these products only in the United States,
the United Kingdom, the Netherlands, Australia, Denmark and Venezuela. The
Company plans to offer these products in the rest of its existing European
operations through PrimeCall Europe during 1998 and throughout its global
operations in subsequent years, to the extent permitted under the laws and
regulations of each market.
VALUE-ADDED SERVICES
The Company currently offers facsimile services in all of its operations,
toll-free dialing in the United States, the United Kingdom and Sweden and
Internet access in Sweden and, in the future, intends to offer most of these
services in all markets where it is allowed to do so. The Company also intends
to introduce the following services: (i) voice mail, (ii) video-teleconferencing
and (iii) international directory assistance. In addition, through Delta Three,
the Company can offer international long distance voice service to niche markets
utilizing the Internet at discounts to standard international calls.
INTERNATIONAL TERMINATION AND TRANSIT
International termination on a wholesale basis involves the sale of long
distance services to another long distance company that resells the services to
its customers. Selling bulk capacity to other carriers generates traffic
sufficient to allow the Company to obtain volume discounts when it leases
capacity on a per-minute basis and allows it to generate revenues from otherwise
unused capacity on its MIUs, IRUs and point-to-point leases. See 'Risk
Factors--Dependence On Carrier Customers.' Transit traffic
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originates and terminates outside of a particular country, but is transported
through that country on a carrier's network to take advantage of lower costs.
MARKETING AND SALES
The Company markets its services on a retail basis to business customers
and residential customers and on a wholesale basis to other carriers and
resellers. The Company markets its products and services utilizing its direct
sales forces, networks of independent agents and distributors and telemarketing
organizations. The Company's services are currently marketed independently by
the Local Operators. The Company is in the process of developing a universal
brand name to provide uniformity of image and brand and to create worldwide name
recognition for the Company.
CUSTOMERS
SMALL AND MEDIUM-SIZED BUSINESSES. The Company's target customers are
small and medium-sized businesses with significant international telephone usage
(i.e., generally in excess of $500 in international phone calls per month). The
Company has focused on industries which traditionally have significant volumes
of international traffic. The Company believes that small and medium-sized
businesses have generally been underserved by the major global
telecommunications carriers and the PTTs, which have focused on offering their
lowest rates and best services primarily to higher volume multinational business
customers. The Company offers these companies significantly discounted
international calling rates as compared to the standard rates charged by the
major carriers and PTTs.
Small and medium-sized businesses account for the majority of all
businesses and the Company believes that in most markets they account for a
significant percentage of the international long distance traffic originated in
those markets. For example, the EU estimates that in 1996 there were 15 million
small and medium-sized businesses in the EU and that businesses that employ
fewer than 100 workers accounted for more than one half of all EU employment in
1996, almost half of all business revenue and about $30 billion per year in
total telecommunications revenue. Consistent with that, it is estimated that in
the United Kingdom, companies employing fewer than 250 people spend about $6
billion to $7 billion per year on telecommunications services as compared to
about $8 billion to $9 billion per year for businesses employing in excess of
250 people and only $3 billion per year for the multinationals.
CARRIERS. The Company offers international termination and transit traffic
services to other carriers, including resellers, on a wholesale basis, as a
'carriers' carrier.' The Company's carrier customers as a group currently
provide the Company with a relatively stable customer base and thereby assist
the Company in projecting potential utilization of its network facilities. In
addition, the significant levels of traffic volume generated by such carrier
customers enable the Company to obtain large usage discounts based on volume
commitments. The Company believes that revenues from its carrier customers will
continue to represent a significant portion of the Company's overall revenues in
the future. See 'Risk Factors--Inability to Predict Traffic Volume' and
'--Dependence on Carrier Customers.'
RESIDENTIAL CUSTOMERS. The Company targets customers with high
international calling patterns. The Company intends to capitalize on global
immigration patterns to target ethnic communities, primarily for its prepaid
calling cards.
LARGE CORPORATIONS. The Company services a number of large corporations
through its French and German operations (acquired as part of the Sprint
Acquisitions) and the Company intends to continue to target large corporations
on those routes where the Company's cost structure allows it to compete
effectively. See '--French Operations.'
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SALES CHANNELS
The Company markets its services through a variety of channels, including
sales by the Company's own direct sales force, indirect sales through
independent agents, sales through distributors and telemarketing sales by
outside organizations, depending, in part, on local business practices and
business environment. Residential customers are targeted in neighborhoods with
large immigrant populations, utilizing resource materials and third party market
research companies, among other things, as resources for this information.
Carriers typically approach the Company directly to inquire about the Company's
transit and termination rates.
DIRECT SALES. Most Local Operators maintain their own direct sales force.
Generally, sales representatives are compensated on a commission basis. The
Company intends to expand its direct sales force as it expands existing
operations and commences additional operations.
INDEPENDENT AGENTS. The Company also markets its services through an
indirect sales force comprised of independent agents. These agents include,
among others, companies which have a sales force or individuals marketing
related services such as telephone systems, copiers, fax machines or other
office equipment to the Company's targeted customer segments. The Company's
indirect sales force will be an increasingly important sales channel to access
the local market.
DISTRIBUTORS. The Company has relationships with a small number of
distributors in the United States as well as the Netherlands for the sale of
prepaid cards and will seek such arrangements in its other markets.
TELEMARKETING SALES. As a result of its acquisition of LDM, the Company's
U.S. operations have added its own telemarketing sales as an additional
marketing channel. The Company's European operations use the services of
independent telemarketing sales organizations in certain of their markets.
Telemarketing sales are targeted to cover small to medium-sized business and
niche residential customers. Commercial customers are offered long distance
services while residential customers are offered long distance services and a
blend of prepaid and similar products.
CUSTOMER MANAGEMENT
The Company strives to provide competitive pricing, high quality services
and superior customer service and believes that these factors are important to
its ability to compete effectively. The Company works closely with its customers
to develop competitively priced telecommunications and value-added services
(such as customized billing) that are tailored to their needs. The Company has
invested significant resources in developing information systems to allow it to
provide accurate and timely responses to customer inquiries. In addition, each
of the Local Operators has customer service and engineering personnel available
to address service and technical problems as they arise.
HEADQUARTERS OPERATIONS
The Company directs the operations of its subsidiaries, including the
management of the growth of current operations, the expansion of operations into
new markets, the formation of potential joint ventures and strategic alliances
and the execution of acquisitions. Identification of key markets, determination
of the vehicles through which, as well as the manner in which, the Company will
enter such markets and oversight of the implementation of these plans is also
done at the Company level. The Company is continuously reviewing and considering
investment and acquisition opportunities. The Company intends to pursue
acquisitions which it believes will expand or enhance its current operations.
All such acquisitions will be identified, negotiated and consummated at the
Company level, generally working together with local and regional management in
cases where the acquisitions supplement existing operations. In addition, the
Company seeks alliances with carriers to expand the scope of the Company's
network and improve its competitive profile.
The Company currently provides centralized financial services for all of
the Local Operators, including financial planning and analysis, cost control and
network management. The Company attempts to coordinate the acquisition of
additional transmission capacity (either leased or purchased)
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with the growth of traffic volumes of each Local Operator. The Company assists
in securing financing and discounts for these expenditures as well as other
capital expenditures through its arrangements with particular vendors. The
Company also maintains global treasury functions, including the management of
cash flows between the Local Operators for the transmission of traffic between
them, as well as the allocation of working capital.
The Company will eventually link all of its switching facilities to a
central billing system administered at the Company level. The Company will
provide the billing information to Local Operators which will then invoice the
customers directly. The invoice will be branded with the Company's name and will
be payable to a Company account in the Local Operator's country.
The Company manages the expansion of RSL-NET, including the acquisition of
additional capacity for existing operations and the integration of developing
and new Local Operators into RSL-NET. The Company coordinates the routing of
traffic on RSL-NET to effect routing on a least cost basis. Least cost routing
involves the programming of the Company's switches to transport international
calls over the route which is most likely to produce the lowest cost to the
Company without compromising call quality. The Company consolidates the least
cost routing information of each of its Local Operators to allow them to take
advantage of each others' cost structure.
The Company is in the process of coordinating the marketing activities of
the Local Operators and defining its own unique approach to branding and
marketing its services on a global basis. In addition, the Company intends to
direct the service offerings of the Local Operators to enable the Company to
provide services to a single customer in more than one country. The Company
intends to then provide the customer with a single bill and designate a primary
customer service representative to address the customer's overall needs.
U.S. OPERATIONS
OVERVIEW
The United States is the largest single market in terms of international
long distance call terminations and originations. The top seven destinations for
U.S.-originated calls in 1996 were Canada, Mexico, the United Kingdom, Germany,
Japan, Hong Kong and France. The Company initiated its U.S. operations in March
1995 with its initial investment in ITG and has grown the business significantly
since then. As of October 1997, the Company acquired a 100% interest in LDM. The
Company operates in the United States as a full service international long
distance carrier with multiple '214' licenses issued under the Communications
Act, which permit it to provide international telecommunications services. The
Company currently has offices located in the New York, Los Angeles and Miami
metropolitan areas. The Company is planning to open additional offices in
several large metropolitan areas by the end of 1999.
The Company primarily operates in the United States through RSL USA. The
Company's predecessor operations in the United States began generating revenues
in May 1990 and the operations have shown considerable growth since then.
International traffic carried by RSL USA has experienced substantial growth.
During 1996, the Company initiated a program focused on enhancing
profitability, revenues and the quality of services to customers. The Company
shifted the marketing focus of its U.S. operations from wholesale 'carriers'
carrier' business to higher margin services targeted at end-user customers in an
effort to increase operating margins. In connection with this effort, the
Company determined that the rates offered to certain customers provided the
Company with inadequate margins. Accordingly, the Company increased rates to
these customers and, as a result, these customers either accepted the rate
increases or terminated their arrangements with the Company, thus reducing the
Company's exposure to low or negative margin business. Beginning in the fourth
quarter of 1996, the Company began restructuring its U.S. operations and
recorded a charge of $750,000 in connection with such restructuring.
Operational, managerial and technical functions were consolidated under a single
organization. The Company has hired experienced management, implemented new
managerial and
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financial controls, and introduced a new marketing focus and plan. Although
these activities, in conjunction with the Company's investment in MIUs, IRUs and
switches, receipt of multiple international operating agreements and increased
focus on customer service, have resulted in rapid growth of the business, gross
margins for the U.S. operations were lower for the year ended December 31, 1997
compared to the year ended December 31, 1996 due to the rapid expansion of the
Company's operations. See 'Risk Factors--Short Operating History; Entrance into
Newly Opening Markets; Margins' and 'Dependence on Other Carriers' and
'Management's Discussion and Analysis of Financial Condition and Results of
Operations.'
SERVICES AND CUSTOMERS
The Company offers its customers in the United States international and
domestic long distance, private line, calling card and value added services.
Since the first quarter of 1996, the Company has been refocusing its U.S.
operations from providing international long distance services to other carriers
to providing international and domestic long distance services to small and
medium-sized businesses as well as certain residential markets.
In addition, through RSL COM PrimeCall, Inc. ('RSL PrimeCall'), the Company
specializes in the provision of prepaid calling cards for niche ethnic markets
and for promotional use by large corporate subscribers in entertainment, retail,
banking and other industries.
MARKETING AND SALES
The Company markets its services and products in the United States through
a variety of channels, including direct sales, indirect sales through
independent agents and distributors. The Company's U.S. operations employ sales
and marketing employees and has had relationships with master agents with an
underlying network of independent agents, distributors and telemarketing sales.
In addition, the Company employs a retail and wholesale sales force dedicated to
the sale of promotional post and prepaid card products. The Company intends to
expand its direct sales force as a part of its growth strategy by adding sales
personnel to its New York City, Los Angeles and Miami metropolitan area sales
offices and by opening additional sales offices in several other large
metropolitan areas by the end of 1999. The Company believes that, due to the
existence of a competitive marketplace in the United States for over a decade,
it can hire capable, experienced sales representatives and managers and that use
of a direct sales force is the most efficient means for it to grow its business.
U.S. NETWORK ARCHITECTURE
The Company operates two international gateway switches in the United
States, an Ericsson AXE-10 located in New York and a Northern Telecom DMS
250/300 located in Los Angeles. The Company plans to add an Ericsson switch to
the existing Northern Telecom switch by the end of the first quarter of 1998 in
order to increase switching capacity. The Company's New York international
gateway switch and Los Angeles international gateway switch conform to CCITT
recommendations and are directly connected to each other via leased lines on a
fixed cost, point-to-point basis. The Company also operates a domestic switch
and a prepaid card platform in each of New York and Los Angeles. The Company is
developing a plan for installation of additional switches in strategic sites
throughout the United States, which may include a third international gateway
switch in Florida. Traffic to Asia and the Pacific Rim is generally routed via
the Company's Los Angeles international gateway switch and traffic to Europe,
Africa and Latin America is generally routed via the Company's New York
international gateway switch.
The Company currently owns IRUs in four undersea fiber optic cable systems
which are the CANUS-1, CANTAT-3, PTAT-1 and the T-12/TAT-13 systems and owns
MIUs on five undersea fiber optic cable systems, which are the Antillas I Odin,
Rioja, APCN, NPC and JASAURUS systems. The Company also owns MIUs on the CMC and
MCC terrestrial fiber optic cables. The Company also is currently in
negotiations to purchase IRUs for its United States operations on the Columbus
II, TPC-5,
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America's One, T-C and Eurafrica transoceanic cable systems and on Ariane-2,
Aphrodite and GEMINI undersea fiber optic cable systems.
The Company currently is a party to 18 operating agreements (one of which
allows the Company to transmit traffic into three countries), which provide
potential direct access from the U.S. to Australia, Azerbaijan, Bolivia, Chile,
Denmark, the Dominican Republic, Japan, Jordan, The Netherlands, New Zealand,
Norway, Russia, Sweden, Switzerland, Suriname and the United Kingdom. The
Company believes that it is one of only a limited number of carriers within the
United States that has been able to secure a significant number of operating
agreements with carriers outside the United States. The Company currently only
transmits and terminates traffic pursuant to the operating agreements in the
Dominican Republic, the United Kingdom, Denmark, the Netherlands, Russia and
Norway. The Company transmits call traffic bound for all other destinations
through leased capacity. The remaining operating agreements are inactive because
the Company has not yet invested in international transmission capacity for
those routes, in certain cases because call volume on such routes does not
warrant such an investment. By activating these operating agreements as well as
any additional operating agreements it may obtain, the Company believes it will
be able to significantly lower its costs of terminating international traffic.
The Company's failure to begin transmitting traffic pursuant to any such
operating agreement could lead to the termination of the agreement. See 'Risk
Factors--Risk of Loss, or Diminution of Value, of Operating Agreements.'
The Company also operates the network management control facilities from
which the Company administers and monitors the Company's switches and facilities
and provides customer service, 24-hour network monitoring, trouble reporting and
response procedures, service implementation and billing assistance. The Company
designates a specific customer service representative for each commercial
customer to oversee the installation and maintenance of the phone equipment, the
start-up of service and problem resolution.
INFORMATION SYSTEMS AND BILLING
The Company owns and operates an Electronic Data Systems ('EDS') IXPlus
System that runs on an IBM AS/400 hardware platform. The Company is utilizing
the EDS system in the U.S. to: (i) provide sophisticated billing information
that can be tailored to meet a specific customer's requirements, (ii) provide
high quality customer service, (iii) detect and reduce fraud, (iv) integrate
efficiently additions to its customer base and (v) provide real time traffic and
call detail management. The EDS IXPlus System is operated and maintained by the
Company in its Los Angeles office. The Company has also implemented a customer
care and trouble management system, as well as developed a state of the art
information system that produces, among other things, profitability margin
analysis, routing statistics and overall traffic trends by country, customer,
vendor and switch. In addition, the Company has installed a Wide Area Network
linking all of its offices in the U.S. enabling the use of its systems within
the organization. The Company's information systems are important to its
operations as they allow the Company to assess and determine quickly customer
billing and collection problems, production by and compensation or commissions
owed to agents, sales representatives and distributors, proper pricing for the
Company's services and other matters which are important to the operation of the
Company.
The Company has reviewed the EDS IXPlus System in connection with the Year
2000 problem and the Company expects to receive from its vendor, at no
additional cost to the Company, a Year 2000 compliant version of the EDS IXPlus
System by the end of 1998. The Year 2000 compliant EDS system is expected to be
operational in early 1999. In addition, the Company's standardized desktop and
server configurations and software applications are already Year 2000 compliant.
See 'Risk Factors-- Dependence on Effective Information Systems; Year 2000
Technology Risks.'
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COMPETITION
The Company competes with AT&T, MCI, Sprint, WorldCom and other United
States-based and foreign carriers, many of which have considerably greater
financial and other resources than the Company. Certain of the larger United
States based carriers have entered into joint ventures with foreign carriers to
provide international services. In addition, certain foreign carriers have
entered into joint ventures with other foreign carriers to provide international
services and have begun to compete or invest in the United States market,
creating greater competitive pressures on the Company. The Company believes that
its services are competitive in terms of price and quality with the service
offerings of its U.S. competitors.
REGULATORY ENVIRONMENT
The Company's United States operations are subject to extensive federal and
state regulation. Federal laws and FCC regulations apply to interstate
telecommunications (including international telecommunications that originate or
terminate in the United States), while particular state regulatory authorities
have jurisdiction over telecommunications originating and terminating within the
state. There can be no assurance that future regulatory, judicial and
legislative changes will not have a material adverse effect on the Company, that
domestic or international regulators or third parties will not raise material
issues with regard to the Company's compliance or noncompliance with applicable
regulations or that regulatory activities will not have a material adverse
effect on the Company.
FEDERAL. The FCC currently regulates the Company as a non-dominant carrier
with respect to both its domestic and international long distance services.
Generally, the FCC has chosen not to exercise its statutory power to closely
regulate the charges, practices or classifications of non-dominant carriers.
Nevertheless, the FCC acts upon complaints against such carriers for failure to
comply with statutory obligations or with the FCC's rules, regulations and
policies. The FCC also has the power to impose more stringent regulation
requirements on the Company, to change its regulatory classification, to impose
monetary forfeiture and to revoke its authority. In the current regulatory
atmosphere, the Company believes that the FCC is unlikely to do so with respect
to the Company's domestic service offerings. With respect to the Company's
international services, however, it is possible that the FCC could classify the
Company as dominant for the provision of services on specific international
routes on the basis of the Company's foreign ownership and affiliations or a
determination that the Company had the ability to discriminate against U.S.
competitors. In 1997, for example, the FCC classified Sprint as a dominant
carrier for the provision of U.S. international services on the U.S.-France and
U.S.-Germany routes in connection with investments in Sprint by France Telecom
and Deutsche Telekom.
Among domestic carriers, LECs are currently classified as dominant carriers
with respect to the local exchange services they provide, and no interstate,
interexchange carriers, including RBOCs which are permitted to offer long
distance service outside their service areas, are classified as dominant. Until
recently, AT&T was classified as a dominant carrier, but AT&T successfully
petitioned the FCC for non-dominant status in the domestic interstate,
interexchange and international markets. Therefore, certain pricing restrictions
that once applied to AT&T have been eliminated, likely making AT&T's prices more
competitive than the Company's prices. Nonetheless, the FCC placed certain
conditions on AT&T's reclassification to promote the development of vigorous
competition in the international services marketplace.
The Company has the authority to provide domestic, interstate
telecommunications services. The Company has also been granted authority by the
FCC to provide switched international telecommunications services through the
resale of switched services of United States facilities based carriers, to
generally resell international private lines not connected to the PSTN or which
are connected to the PSTN in Canada, New Zealand, Australia, Sweden or the
United Kingdom, and to provide international telecommunication services by
acquiring circuits on various undersea cables or leasing satellite facilities.
The FCC reserves the right to condition, modify or revoke such domestic and
international authority for violations of the Communications Act or the FCC's
regulations, rules or policies promulgated thereunder. Although the Company
believes the probability to be remote, a rescission by the FCC of the Company's
domestic or international authority or a refusal by the FCC to grant additional
international authority would have a material adverse effect on the Company.
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Both domestic and international non-dominant carriers must maintain tariffs
on file with the FCC. The Company must file tariffs containing detailed actual
rate schedules. In reliance on the FCC's past relaxed tariff filing requirements
for non-dominant domestic carriers, the Company and most of its competitors did
not maintain detailed rate schedules for domestic offerings in their tariffs, as
the FCC's rules currently require. Until the two year statute of limitations
expires, the Company could be held liable for damages for its past failure to
file tariffs containing actual rate schedules. The Company believes that such an
outcome is remote and would not have a material adverse effect on its financial
condition or results of operations. The Company has always been required to
include detailed rate schedules in its international tariffs.
In February 1996, the Telecommunications Act of 1996 was signed into law.
Under the Telecommunications Act, the RBOCs will be permitted to provide long
distance services in competition with the Company. The law includes safeguards
against anti-competitive conduct which could result from a RBOC having access to
all customers on its existing network as well as its ability to cross-subsidize
its services and discriminate in its favor against its competitors.
Except with respect to transit agreements, authorizations held under
Section 214 of the Communications Act (such as those held by the Company) for
international services are limited to providing services or using facilities
between the United States and countries specified in the authorizations. The
Company holds all necessary Section 214 authorizations for conducting its
present business but may need additional authority in the future. Additionally,
carriers may not lease private lines between the United States and an
international point for the purpose of offering switched services unless the FCC
has first determined that the foreign country affords resale opportunities to
United States carriers equivalent to those available under United States law.
The FCC has made such a determination with respect to New Zealand, Australia,
Canada, Sweden and the United Kingdom and the Company is authorized to resell
international private lines to these points for the provision of basic services
interconnected to the PSTN.
The FCC has promulgated certain rules governing the offering of
international switched telecommunications. Such calls typically involve a
bilateral, correspondent relationship between a carrier in the United States and
a carrier in the foreign country. Until recently, the United States was one of a
few countries to allow multiple carriers to handle international calls; almost
all foreign countries authorized only a single carrier, often a state-owned
monopoly, to provide telecommunication services. In light of the disparate
bargaining positions of the United States carriers, the FCC imposed certain
requirements to try to minimize the opportunities that dominant foreign
telecommunications providers would have to favor one United States carrier over
another. These policies include provisions of the International Settlement
Policy, which requires the equal division of accounting rates, non-
discriminatory treatment of U.S. carriers, and that return minutes from a
foreign carrier must be proportional to the traffic that the United States
carrier terminates to a foreign carrier. In December 1996, the FCC modified its
rules to allow payment arrangements that deviate from the International
Settlements Policy between any U.S. carrier and any foreign correspondent in a
country that satisfies the FCC's effective competitive opportunities test. The
FCC also stated that it would allow alternative settlement arrangements between
a U.S. carrier and a foreign correspondent in a country that does not satisfy
the effective opportunities test if the U.S. carrier can demonstrate that
deviation from the International Settlement Policy will promote market-oriented
pricing and competition, while precluding abuse of market power by the foreign
correspondent. The Company has numerous agreements with foreign carriers
providing for the handling of switched calls.
In September 1997, the FCC adopted lower benchmarks for settlement rates
that U.S. carriers must pay to foreign carriers in order to settle calls
originating from the U.S. The benchmark rates were adopted to remedy a growing
U.S. settlement deficit, which results from the imbalance outbound and inbound
call volume which is estimated to be approximately 70% higher than the actual
cost of terminating international calls. Three benchmarks were established to
fit the income level of foreign countries, with a low of $0.15 per minute for
high income countries and a high of $0.23 per minute for low income countries.
Implementation periods, ranging from one year for high income nations to five
years for nations with less than one telephone line for every 100 inhabitants,
were also adopted. The
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FCC also determined that it would condition any carrier's authorization to
provide international facilities-based switched service from the United States
to an affiliated market on the carrier's foreign affiliate offering U.S.
international carriers a settlement rate at or below the relevant benchmark. If,
after the carrier has commenced service to an affiliated market, the FCC learns
that the carrier's service offering has distorted market performance, the FCC
will take enforcement action. The new benchmarks are intended to promote a
competitive environment in which rates will more closely reflect costs;
officials also hope that the FCC's order will encourage multilateral
negotiations and lead to an international agreement to reduce costs further.
The GBT Agreement, executed in February 1997, requires signatories to open
their telecommunications markets to competition. Consistent with the commitments
made by the U.S. under the GBT Agreement, the FCC has revised its rules to
establish an open entry standard for applicants from World Trade Organization
member countries seeking authority to provide international telecommunications
service in the U.S., and has adopted a rebuttable presumption that the U.S.
affiliates of foreign carriers with less than 50% market share in each relevant
market on the foreign end should be treated as non-dominant. These open entry
policies will apply to applicants of all World Trade Organization member
countries, including those who are not signatories to the GBT Agreement.
Additionally, the FCC enforces certain requirements which derive from the
regulations of the ITU. These regulations may further circumscribe the
correspondent relationships described above. In addition to settlement rates,
these regulations govern certain aspects of transit arrangements, wherein the
originating carrier may contract with an interim carrier in a second country to
terminate service in a third country. The Company has transit agreements with
foreign carriers. Such agreements may allow the Company to pay less than the
full accounting rate it would have to pay if it had a direct operating agreement
with the terminating country. However, the Company is unaware of any instance in
which a terminating country has objected with respect to any of the Company's
traffic. If a terminating country objects in the future to such transit
arrangements, the Company may be required to secure alternative arrangements.
STATE. The intrastate, long distance telecommunications operations of the
Company are also subject to various state laws, regulations, rules and policies.
Currently, the Company is certified and tariffed or otherwise authorized to
provide intrastate, interexchange service in 48 states and the District of
Columbia and uses a third party carrier to originate calls in states where it
needs, but does not have, authorization to provide services. See 'Risk
Factors--Government Regulatory Restrictions.'
The vast majority of states require carriers to apply for certification to
provide telecommunications services before commencing intrastate service and to
file and maintain detailed tariffs listing the rates for intrastate service.
Many states also impose various reporting requirements and require prior
approval for all transfers of control of certified carriers, assignments of
carrier assets, carrier stock offerings and the incurrence by carriers of
certain debt obligations. In some states, regulatory approval may be required
for acquisitions of telecommunications operations. In the past, the Company has
sought and successfully obtained such approval for its acquisitions.
EUROPEAN OPERATIONS--GENERAL
OVERVIEW
RSL Europe is a wholly-owned subsidiary of the Company. RSL Europe was
formed in March 1995 to implement the Company's pan-European strategy. In
November 1995, RSL Europe acquired a 51% interest of Cyberlink Europe, which,
through its wholly-owned subsidiaries, RSL Finland and RSL Sweden, commenced
operations in May 1996. During the period from August 1996 through March 1997,
RSL Europe acquired the remaining 49% interest in Cyberlink Europe. In May 1996,
the Company acquired the international long distance voice businesses of Sprint
in France and Germany. In October 1996, RSL Europe acquired a 75% interest in
the operations of RSL Netherlands, an international reseller which had been
operating in The Netherlands since October 1995, and, in the fourth quarter of
1997, acquired the remaining 25% interest in RSL Netherlands. RSL Denmark
commenced operations in Denmark in May 1997.
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In April 1997, RSL Europe entered into an agreement with Gerard van Leest,
the founder of RSL Netherlands, and the First Worldwide Network Management &
Consultant N.V. ('FWN'), a corporation wholly-owned by RSL Netherlands' founder,
pursuant to which RSL Europe and FWN are to jointly develop, market and
distribute a prepaid calling card product targeted at select customers
throughout Europe.
In April 1997, RSL Europe acquired a 30.4% interest in Maxitel, a
Portuguese international telecommunications carrier, and has since increased its
ownership interest in Maxitel to 39%. RSL Europe and the other two principal
shareholders of Maxitel entered into a shareholders' agreement, pursuant to
which, among other things, (i) certain major decisions by the Board of Directors
of Maxitel can only be approved with the consent of RSL Europe and (ii) RSL
Europe has the right to designate two directors to the Board of Directors of
Maxitel.
In August 1997, RSL Europe acquired an 85% interest in the operations of
RSL Italy, an international telecommunications reseller that had been operating
in Italy since 1995 providing value-added services.
In August 1997, the Company acquired 50% of RSL Austria, which is initially
expected to commence operations by June 1998 as a switchless international
telecommunications reseller. After the completion, in September of 1997, of
certain corporate formalities, the Company's interest was increased to 90% of
RSL Austria.
In December 1997, RSL Europe acquired a 78.5% interest in RSL Switzerland,
a Swiss long distance telecommunications carrier.
In December 1997, RSL Europe formed a joint venture to establish RSL Spain.
RSL Europe has a 90% interest in the joint venture, and the managing director of
RSL Spain owns the remaining 10% interest.
In December 1997, RSL Europe acquired a 90% interest in RSL Belgium, an
international telecommunications carrier in Belgium, which in turn owns 100% of
RSL Luxembourg, an international telecommunications carrier in Luxembourg.
As of February 25, 1998, the Company had 553 employees in Europe.
INFORMATION SERVICES, SYSTEMS AND BILLING
RSL Europe has developed its own proprietary information and billing system
employing a Hewlett Packard 9000 UNIX server and a Sybase, Inc. ('Sybase')
developed customized software package (collectively, the 'System'). The System
provides for billing, customer service, management information, financial
reporting and related functions. The Company has invested significant resources
into the development of the System and the Company's management worked closely
with Sybase to develop software which reflects the experiences of the Company's
management in the telecommunications industry. The System has been designed to
be easily integrated into the operations of each of its current, planned and
future European Local Operators and may ultimately be used as the centralized
information system for the Company. The System currently provides centralized
billing, customer service, and information systems to the Company's United
Kingdom, Sweden and Finland operations, with France and Germany expected to be
brought online by April 1998. The Company believes that the System is a key
asset of the Company and an important advantage in the management of its growth.
The System provides for sophisticated, automatic, itemized billing that can
be tailored to meet each customer's specific requirements, including customized
tariffs and discount schemes. The Company expects that the System will also
facilitate integration and central oversight of its European operations through
automated data entry by its Local Operators and through easily generated
financial status, sales information, performance and sales commission reports.
The Company has reviewed the System in connection with the Year 2000
problem and has determined that the System is Year 2000 compliant. The Company's
standardized desktop and server configurations and software applications in
Europe are also Year 2000 compliant. The Company is in the process of reviewing
its Ericsson international gateway and domestic switches in Europe in
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connection with the Year 2000 problem and the Company expects that its switches
will be Year 2000 compliant by the end of 1998.
REGULATORY ENVIRONMENT
Most EU member states are in the initial stages of deregulation.
Deregulation in these countries may occur either because the member state
decides to open up its own market (e.g., the United Kingdom, Sweden and Finland)
or because it is directed to do so by the European Commission ('EC') through one
or more directives issued thereby. In the latter case, such an EC directive
would be addressed to the national legislative body of each member state,
calling for such legislative body to implement such directive through the
passage of national legislation.
Since most European countries currently restrict competition to a limited
number of specific services, the Company has developed a two stage market
penetration strategy to capitalize on the current and future opportunities in
Europe. The first step is to take advantage of current market conditions and,
within the parameters of the Company's established service offerings, to provide
the fullest range of services permissible under local regulation. The Company
thereby seeks to become a recognized international carrier in the targeted
countries as its operations grow. The second step, as deregulation permits, is
to build on its name recognition, marketing channels and existing customer base
in the market to expand its service offerings to both existing and new
customers. By the time that the telecommunications markets throughout Europe are
open to broader competition, the Company intends to have established Local
Operators in all major European telecommunications markets. However, there can
be no assurance regarding the timing or extent of deregulation in any particular
country. See 'Risk Factors--Government Regulatory Restrictions.'
The EC issued in 1997 an interconnect directive (the 'Interconnect
Directive'), which is expected to be implemented in various countries at
different times during 1998 and is expected to require the incumbent PTTs to
interconnect to other carriers using CCITT C-7 signaling standards. Such
connection will provide 'Calling Line Identity' ('CLI'), also known as ANI or
PIC, which will allow the Company's customers to access more easily the
Company's local switch (e.g., through prefix dialing instead of dial-in access)
and will remove the local access fee levied in addition to the Company's charge
for the call. After interconnection, rates charged by the PTT for the PSTN
portion of the call are expected to be incurred by carriers at wholesale rates
and it is expected that carriers will be allowed to compete against the PTT in
the domestic long distance market, as well as the international market. However,
the implementation of this or any EC directive by member states is subject to
substantial delay. See 'Risk Factors--Government Regulatory Restrictions.'
Member States have limited flexibility to interpret EC directives. If the
EC determines that a member state's legislation implementing an EC directive
does not adequately do so, the EC may test such interpretation through legal
proceedings in a court of law. This process is time consuming. Accordingly,
while a date has been set for the liberalization of voice telephony services
within the EU, the actual date on which liberalization actually occurs could be
months or years later. See 'Risk Factors--Government Regulatory Restrictions.'
There also may be practical considerations in implementing a directive
which could result in a delay of its implementation, as there are considerable
doubts as to the preparedness of many EC countries for a wide-ranging change.
For example, the negotiation of interconnection agreements can take a
significant amount of time. Even after such agreements are negotiated and
implemented, substantial ongoing disputes with the incumbent PTTs regarding
prices and billing are to be expected.
In an attempt to speed up the market entry of new operators despite the
obstacles referred to above, the Full Competition Directive allowed alternative
entities to the PTTs (typically utility and cable television companies) to
supply infrastructure, beginning July 1, 1996. This permits the Company to
purchase cable capacity from companies other than the local PTTs as such
companies build transmission facilities. To date, however, there has not been
substantial construction of such facilities by competitors to the PTTs in EU
countries, although several member states have enacted national legislation to
adopt the Full Competition Directive.
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Although it is not expected that interconnect will be available and
implemented in most countries of interest immediately, the current regulatory
scheme in Europe nevertheless provides an opportunity for the Company to provide
a range of services immediately in many countries, while putting in place
adequate infrastructure to capitalize on final deregulation when it occurs. The
Company provides value-added services and, in certain EC countries beginning
later in 1998 but prior to interconnection, the Company can provide dial-in
access, coupled, when possible, with autodialers or the programming of
customers' phone systems to dial access codes, to route traffic over the PSTN to
the Company's switches. See '--International Long Distance Mechanics.'
U.K. OPERATIONS
OVERVIEW
The United Kingdom originated approximately 4.6 billion minutes of
international traffic in 1996. The Company's U.K. operations began generating
revenues in May 1996.
SERVICES AND CUSTOMERS
The Company offers its customers in the United Kingdom international and
domestic long distance services. Customers access these services by direct
access, prefix dialing and dial-in. Direct access services are provided by
connecting customers to the Company's London switches by means of lines leased
from British Telecom or Mercury. Prefix dialing services are provided by means
of access to the Company's London switches by way of the PSTN using the
Company's access codes. The Company's customer base in the United Kingdom
consists primarily of carriers, commercial customers and prepaid account
customers. The Company's current commercial customers include multinationals,
large national companies, as well as small and medium-sized businesses.
MARKETING AND SALES
The Company markets its services in the United Kingdom through a variety of
channels, including direct sales, indirect sales through independent agents and
telemarketing sales. RSL Europe intends to expand its direct sales force as a
part of its growth strategy by adding sales representatives to its London office
as well as establishing additional sales offices in the United Kingdom. The
Company also relies heavily on its network of agents to sell its long distance
calling services in the United Kingdom. The Company believes that several of the
agents have existing relationships with businesses in the Company's target
market which better position them to identify and sell services to prospective
customers. The Company has acquired one of these agents and is negotiating to
acquire a second, with the strategic aim of providing the Company with local
presence in certain regions of the U.K.
U.K. NETWORK ARCHITECTURE
RSL UK operates two Ericsson switches, one an international gateway switch,
the other a domestic switch, located in London. Prior to December 1996, the
Company was prohibited from owning interests in fiber optic cable coming in or
out of the United Kingdom. As a result, the Company had been transmitting call
traffic bound for destinations outside of the United Kingdom through leased
capacity provided by British Telecom and Mercury. The Company has since
purchased IRUs on the UK-NL14, CANTAT-3 and PTAT-1 undersea fiber optic cable
systems and continues to utilize leased capacity for all other international
destinations. The Company is currently in negotiations to purchase MIUs on the
FLAG and GEMINI transoceanic cable systems. The Company will attempt to acquire
additional MIUs and IRUs as warranted.
COMPETITION
The Company's principal competitors in the United Kingdom are British
Telecom, the dominant supplier of telecommunications services in the United
Kingdom, and Mercury. The Company also faces competition from emerging licensed
public telephone operators (who are constructing their own
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facilities-based networks) such as Energis, and from resellers including ACC
Corporation, WorldCom, Esprit and Global One. The Company believes its services
are competitive, in terms of price and quality, with the service offerings of
its UK competitors.
REGULATORY ENVIRONMENT
The Company was awarded an International Facilities Based
Telecommunications License (an 'IFBTL') in the United Kingdom in December 1996.
An IFBTL entitles the Company to acquire IRUs and MIUs on international
satellite and cable systems, resell international private lines, as well as
interconnect with, and lease capacity at, wholesale rates from British Telecom
and Mercury. In addition, the Company holds an International Simple Resale
('ISR') license in the United Kingdom. An ISR license allows the Company to
resell international private lines, as well as interconnect with, and lease
capacity at wholesale rates from, British Telecom and Mercury.
GERMAN OPERATIONS
OVERVIEW
Germany originated 5.1 billion minutes of international traffic in 1996.
RSL Germany was formed in April 1996 for the purpose of acquiring Sprint's
international voice business in Germany. Sprint, which commenced its German
voice business in 1993, was required to divest itself of its German and French
international voice businesses pursuant to the terms of the Global One joint
venture agreement.
SERVICES AND CUSTOMERS
National and international long distance services are offered by the
Company to members of closed user groups. International long distance services
are further offered to customers that are not members of closed user groups
utilizing direct access over leased lines from Deutsche Telekom. The Company's
current customer base in Germany primarily consists of large national or
multinational corporations and a larger number of small and medium-sized
business customers. See '--Products and Services.'
MARKETING AND SALES
The Company employs direct sales and marketing employees in Germany. The
Company currently has four sales offices in Germany, located in Munich, Hamburg,
Wiehl and Frankfurt. RSL Germany is expanding its direct sales force as a part
of its growth strategy by adding additional sales representatives. The Company
currently markets its services in Germany through a variety of channels
including indirect sales, through resellers and agents, and direct sales. The
Company continues to develop a network of independent sales agents to sell its
services in Germany.
GERMAN NETWORK ARCHITECTURE
RSL Germany currently operates a Wyatts MRX 2000 domestic switch in its
offices in Frankfurt, and has installed an Ericsson AXE 10 international gateway
switch, which has been operational since August 1, 1997. International
transmission facilities are leased from international carriers. The Company has
interlinks with other carriers for termination of its international traffic. The
Company is integrating these services into its own systems and is making such
other arrangements as are necessary to ensure these services are provided to the
Company.
COMPETITION
In Germany, the Company competes with facilities-based carriers and
resellers. The Company's principal competitor in Germany is Deutsche Telekom,
the dominant supplier of telecommunications services in Germany. The Company
also faces competition from emerging public telephone operators (who are
constructing their own facilities-based networks) such as Arcor (Mannesmann and
DBKom), O.telo (RWE and VEBA) and VIAG Interkom (VIAG and British Telecom), from
resellers including WorldCom and Viatel, Inc. ('Viatel') and call-back providers
such as TelePassport. After deregulation
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on January 1, 1998, alternative networks became available to route and terminate
voice traffic. The Company believes its services are competitive, in terms of
price and quality, with the service offerings of its German competitors.
REGULATORY ENVIRONMENT
The German Parliament passed the German Telecommunications Act 1996 (the
'German Act'), which became effective August 1, 1996, in order to liberalize the
German telecommunications market. Until January 1, 1998, 'voice telephony' as
defined in the German Act in accordance with the 1990 Directive was only
permitted to be provided by Deutsche Telekom. 'Voice telephony' as defined in
the German Act does not, however, include the delivery of voice telephony to
'closed user groups'. International direct dialing services offered to customers
utilizing direct access over leased lines also do not come within the German
Act's definition of 'voice telephony '.
Under the German Act, licenses for the offering of voice telephony services
are issued to an applicant unless (i) such applicant fails to meet certain good
standing requirements, (ii) such applicant lacks the competence to run a
telecommunications business or (iii) the offering of telecommunications services
by such applicant would be regarded as a danger to public safety. Under the
German Act, Deutsche Telekom is required to permit competitors to be
interconnected to its network. RSL Germany has been granted a Germany-wide,
Class 4 license for public switched telephony services by the Federal Ministry
of Posts and Telecommunications ('Bundes Amt for Post Und Telekommunikation' ).
The Class 4 license permits RSL Germany to transmit voice traffic via the
Company's international telecommunications network.
On January 1, 1998, the last remaining monopoly of Deutsche Telekom, the
'voice telephony' monopoly, ceased to exist. The German Act provides, among
other things, for regulations regarding licensing, rate and interconnection
regulation, numbering and customer protection. A Regulatory Authority has been
established as successor to the former Federal Ministry of Posts and
Telecommunications. The Regulatory Authority has been provided with certain
powers, described in the German Act, in order to promote the introduction of
competition in the German telecommunications market.
DUTCH OPERATIONS
OVERVIEW
The Netherlands originated 1.5 billion minutes of international traffic in
1996. The Company operates in The Netherlands through RSL Netherlands. RSL
Netherlands is an international carrier with switches installed in Rotterdam and
Amsterdam. RSL Netherlands began generating revenues in October 1995.
SERVICES AND CUSTOMERS
The Company offers its customers in The Netherlands international long
distance services utilizing direct access, prefix dialing and dial-in access,
and prepaid calling cards. The Company's customer base in The Netherlands
consists primarily of commercial customers.
MARKETING AND SALES
The Company markets its services in The Netherlands through a variety of
channels, including direct sales through representatives, indirect sales through
independent agents and telemarketing sales. The Company believes that many of
the agents have existing relationships with businesses in the Company's target
market which better position them to identify and sell services to prospective
customers. The Company sells its prepaid calling card through independent
distributors.
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DUTCH NETWORK ARCHITECTURE
In The Netherlands, the Company operates two Nortel Meridian switches,
directly linked by leased capacity, from its offices in Rotterdam and Amsterdam.
RSL Netherlands is linked directly to the Company's London gateway by leased
facilities and resells the services of British Telecom and Global One on all
routes where it is economical to do so.
COMPETITION
The Company's principal competitor in The Netherlands is PTT Telecom
Netherlands, the dominant supplier of telecommunications services In The
Netherlands. The Company also faces competition from emerging licensed public
telephone operators (who are constructing their own facilities-based networks)
such as WorldCom, and from mega-carriers including Concert and Global One. The
Company believes its services are competitive, in terms of price and quality,
with the service offerings of its competitors in The Netherlands.
Assuming deregulation occurs in 1998, it is expected that alternative
networks currently under construction will become available to route and
terminate voice traffic.
REGULATORY ENVIRONMENT
As of July 1, 1997, restrictions on voice telephony services over cable
infrastructure were liberalized, in effect bringing about full liberalization of
the telecommunications market in The Netherlands.
Under the current licensing regime, two new licensees other than the Dutch
PTT may operate nationwide fixed telecommunications networks: Telfort, a joint
venture between British Telecom and the Dutch Railway Company, and Enertel, a
consortium of Dutch electricity companies and a large Dutch cable television
company. Furthermore, hundreds of licenses to operate regional fixed networks
have been granted mainly to electricity and cable television companies.
Nevertheless, neither the use of leased lines capacity and other leased
facilities, nor the services provided by the Company, requires a license.
A new telecommunications act is expected to take effect by the end of the
first quarter of 1998. The new act is expected to consolidate the full
liberalization of the Dutch telecommunications market and introduce a new
licensing regime. Although the details of that new regime are not yet certain,
the Company expects it will be required to obtain a registration from the new
Regulatory Authority in order to provide its current services. Such a
registration is, however, mainly a formality, and is not intended to restrict
access to the market. Although it is not part of the current bill, the new
telecommunications act may require an individual license for the provision of
voice telephony services between the Netherlands and non-EU countries. The
Company, however, does not believe such a license will be required for the
services it provides in The Netherlands, although there can be no assurance in
this regard.
FRENCH OPERATIONS
OVERVIEW
France originated 3.1 billion minutes of international traffic in 1996. RSL
France was formed in April 1996 for the purpose of acquiring Sprint's
international voice business in France. Sprint was required to divest itself of
its French and German international voice businesses under the terms of the
Global One joint venture agreement. Sprint commenced its international voice
business in France in 1994.
SERVICES AND CUSTOMERS
The Company offers its customers in France international and domestic long
distance services and national long distance services, both fixed-to-mobile and
fixed-to-fixed, utilizing direct access over leased lines and dial-in access.
Dial-in access is currently restricted to closed-user groups. Upon grant of RSL
France's pending application for authorization, pursuant to articles L 33.1 and
L 34.1 of the
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Postal and Telecommunications Code, to operate a public network, dial-in access
will no longer be restricted to closed-user groups. The Company expects such
authorization to be granted during 1998 although there can be no assurance in
this regard.
Direct access is provided via a leased line connection between the
customer's phone system and the Company's switches. The Company's French
customer base consists of carrier customers and direct access and dial-in access
commercial customers. The Company's customers in France include small and
medium-sized businesses, as well as certain large national and multinational
businesses that were part of Sprint France's customer base and which remain
customers of the purchased business.
MARKETING AND SALES
The Company markets its services through a variety of channels, including
direct sales and indirect sales through independent agents as well as private
installers and consultants. The Company's French operations employ sales
representatives and has relationships with various independent agents. The
Company intends to expand its direct sales force and agent network as a part of
its growth strategy.
FRENCH NETWORK ARCHITECTURE
RSL France operates an Ericsson AXE-10 international gateway switch in its
offices in Paris. RSL France also operates three POPs, one located in each of
Paris, Nice-Sophia Antipolis and Marseilles. The services are today available in
six regions in France which include Paris and the Paris area, Nice, Marseilles,
Lyon, Bordeaux, Toulouse and Lille, with RSL representatives in Paris, Nice,
Marseilles and Toulouse. In addition, the Company intends to install additional
POPs in major business centers outside Paris to lower its cost of providing
services in seven more regions during 1998 which include Montpelier, Nantes,
Grenoble, Reims, Bordeaux, Metz and Dijon. French regulations currently do not
allow the Company to purchase its own international transmission facilities and
it is uncertain when or if the law will be changed. As a result, international
transmission facilities are leased from France Telecom. The Company connected
its French operations to RSL-NET in December 1996.
COMPETITION
The Company's principal competitor in France is France Telecom, the
dominant supplier of telecommunications services in France, and the Modulance
Partenaire International which offers discount long distance services to the
largest commercial customers. The Company also faces competition from emerging
licensed public telephone operators (who are constructing fiber networks in
major metropolitan areas) such as AT&T, Bouygues and CEGETEL and from resellers
including Esprit and Viatel. Upon deregulation, alternative networks currently
under construction are expected to become available to route and terminate
traffic domestically. The Company believes its services are competitive, in
terms of price and quality, with the service offerings of its French market
competitors.
REGULATORY ENVIRONMENT
The services currently provided by the Company in France do not require a
license. In accordance with the Telecommunications Laws passed in July 1996, the
liberalization process is regulated by a new government authority, the French
Telecommunications Authority ('Autorite de regulation des Telecommunications'),
which was established in January 1997. The telecommunications market in France
was scheduled to be liberalized on January 1, 1998. The French
Telecommunications authority is working toward liberalization. In accordance
with the standard terms and conditions and price lists for interconnection with
France Telecom duly approved by the French Telecommunications Authority on April
9, 1997, new operators of public networks would be able to interconnect with
France Telecom's PSTN starting January 1, 1998. The Company has applied for a
license which will permit it to provide international and domestic long distance
services utilizing direct access or dial-in access in those areas where the
Company establishes POPs. These services would be provided utilizing direct
access through interconnection with other operators of a public network (i.e.,
operators holding an L 33.1 license). Currently, France Telecom is the only such
operator capable of providing interconnection
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services on a national scale in France. The terms and conditions of
interconnection offered by France Telecom would provide for 'direct
interconnection' of calls originated by RSL France subscribers to France Telecom
subscribers throughout France, even where RSL France has no POPs, while
'indirect interconnection' of calls originated by France Telecom subscribers to
RSL France subscribers would be available only in those areas where RSL France
has POPs. If this license is granted, the French government is expected to
require the Company to commit approximately $10 million in capital expenditures
for infrastructure over the next three to five years, which is in excess of
amounts the Company believes it will spend on capital expenditures in all of its
other European operations. See 'Risk Factors--Government Regulatory
Restrictions.'
In November 1997, RSL France entered into a joint venture agreement with
the Chamber of Commerce and Industry of Marseille Provence (the 'CCIMP') and
Teleport Marseille Provence ('Teleport'), a licensed telecommunications service
provider in Marseille, France, to promote international telecommunications
services in certain regions of France. Through Teleport, RSL France will be
permitted to provide, to a maximum of 20,000 users, telecommunications services
in Marseille and in other regions of France.
RSL France has filed a complaint with the governmental body in charge of
telecommunications matters regarding the squeeze effects entailed by low retail
tariffs, that RSL France has alleged prevent competition and set barriers to
entry for entrants.
RSL France has requested the French Ministry to withdraw its approval of
certain France Telecom International French Ministry retail tariffs. The
ministry could rule on such request in March 1998.
SWEDISH OPERATIONS
OVERVIEW
Sweden originated approximately one billion minutes of international
traffic in 1996. The Company operates in Sweden through RSL Sweden. The Company
acquired a majority interest in RSL Sweden in November 1995. RSL Sweden is
licensed as an international carrier in Sweden, which permits it to transmit
long distance services nationally and internationally. The Company's Swedish
operations began operating and generating revenues in May 1996.
SERVICES AND CUSTOMERS
The Company offers domestic and international long distance and value-added
services to its customers in Sweden. Customers access the Company's switch
utilizing prefix dialing and direct access. The Company's customer base in
Sweden consists primarily of commercial customers and residential customers.
MARKETING AND SALES
The Company's Swedish operation markets its services through a variety of
channels, including direct sales, indirect sales through independent agents and
telemarketing sales. The Company employs full-time sales and marketing employees
in Sweden. The Company primarily relies on its network of independent sales
agents to sell its long distance calling services in Sweden. In addition, the
Company sells its services through a chain of independent telecommunications
stores with locations throughout Sweden, as well as through a large association
comprised of individuals and businesses. The Company believes that many of its
agents have existing relationships with businesses in the Company's target
market which better position them to identify, and sell services to, prospective
customers.
SWEDISH NETWORK ARCHITECTURE
In Sweden, the Company operates an Ericsson AXE-10 international gateway
switch from its offices outside of Stockholm. RSL Sweden is connected to RSL-NET
by leased facilities. RSL Sweden utilizes its IRUs on the CANTAT-3 transoceanic
cable and resells services from WorldCom and Telia
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(the former monopoly PTT in Sweden). RSL Sweden also owns MIUs on the KATTEGAT-1
transoceanic cable system. RSL Sweden currently has operating agreements with
carriers in Denmark and Norway, as well as direct connections to the Company's
operations in the United Kingdom, United States and Finland.
COMPETITION
The Company's principal competitor in Sweden is Telia, the dominant
supplier of telecommunications services in Sweden. The Company also faces
competition from emerging licensed public telephone operators (which are
constructing their own fiber networks) such as Tele 2 and WorldCom, and from
resellers including Telenordia, Telecom Finland and Tele 8. Upon the completion
of the construction of the new fiber networks, the Company will have alternative
means of routing and terminating calls. The Company believes its services are
competitive, in terms of price and quality, with the service offerings of its
Swedish competitors.
REGULATORY ENVIRONMENT
All types of telecommunications services were liberalized in Sweden in
1993. Through RSL Sweden, the Company holds an unrestricted license to provide
national and international telephony in the Swedish market. As a licensed
carrier, the Company may buy IRUs or lease fixed capacity from other providers,
or utilize the former PTT network to originate and terminate its traffic. The
Company's services are accessed primarily by prefix dialing. It is generally
believed that the Swedish Parliament will amend the Swedish Telecom Act to
facilitate equal access for all carriers after 1998.
FINNISH OPERATIONS
OVERVIEW
Finland originated 332 million minutes of international traffic in 1996 and
is a strategically important market because it serves as a gateway to Russia.
The Company operates in Finland through RSL Finland. The Company acquired a
majority interest in RSL Finland in November 1995. RSL Finland is a fully
licensed international long distance carrier in Finland. The Company's Finnish
operations began operating and generating revenues in May 1996.
SERVICES AND CUSTOMERS
The Company offers its customers in Finland international and domestic long
distance services utilizing direct access, prefix dialing and dial-in access.
The Company's customer base in Finland consists primarily of commercial and
residential customers.
MARKETING AND SALES
The Company markets its services in Finland through a variety of channels,
including direct sales and indirect sales through independent agents. The
Company employs sales and marketing employees in Finland. The Company relies
heavily on its network of independent sales agents to sell its long distance
calling services in Finland. The Company believes that many of the agents have
existing relationships with businesses in the Company's target market which
better position them to identify and sell services to prospective customers. As
of January 1998, the Company acquired a 90% interest in Telecenter Oy, an
independent sales agent in Finland.
FINNISH NETWORK ARCHITECTURE
In Finland, the Company operates an Ericsson AXE-10 international gateway
switch in its offices in Helsinki. RSL Finland primarily utilizes RSL Europe's
network for international termination. International termination is also
achieved by RSL Finland through connections to Telecom Finland's and other
carriers' international circuits. RSL Finland utilizes an operating agreement
with a Russian carrier and is directly connected to RSL Sweden.
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COMPETITION
The Company's principal competitor in Finland is Telecom Finland, the
dominant supplier of telecommunications services in Finland. The Company also
faces competition from emerging licensed public telephone operators (who are
constructing their own facilities-based networks) such as Global One, Finnet and
Telivo, a subsidiary of Telia, and from resellers including Tele 1. The Company
believes its services are competitive, in terms of price and quality, with the
service offerings of its Finnish competitors.
REGULATORY ENVIRONMENT
There are two classes of operators in Finland, (i) network operators, which
have their own network of domestic transmission lines, and (ii) service
operators, which cannot own domestic transmission lines or IRUs, but can have
their own switching facilities. RSL Finland was granted a license to provide
services as a network operator in March 1997.
In August 1997, the New Telecommunications Market Law was enacted, which
removes the last restrictions applicable to telecommunications and enforces
competition. As a result, network operators are obligated to rent full network
capacity, including local loops, to other operators. In addition, the New
Telecommunications Market Law provides that companies will only need to hold a
license in order to provide services as a mobile phone network operator.
DANISH OPERATIONS
Denmark originated 573 million minutes of international traffic in 1996.
The Company operates in Denmark through RSL Denmark, a wholly owned subsidiary
of RSL Netherlands, which initiated its operations in April 1997 and began
generating revenues in May 1997.
SERVICES AND CUSTOMERS
RSL Denmark currently offers its customers international and domestic long
distance services utilizing prefix dialing. The services are offered to
commercial customers as a subscription service and to private customers by
prepaid cards.
MARKETING AND SALES
The services are distributed through direct sales by the Company and
through a third party marketing company. The Company's interconnect prefix,
which was recently installed, provides customers with the option of using the
Company's direct line, without requiring a physical connection.
DANISH NETWORK ARCHITECTURE
The Company has installed an Ericsson AXE-10 international gateway switch
in Copenhagen. All traffic is currently transmitted through leased lines
terminating at RSL Netherlands' domestic switches located in Rotterdam and
Amsterdam. The Company routes all calls through Tele Danmark's network via the
interconnect agreement between the Company and Tele Danmark.
COMPETITION
The Company's principal competitor in Denmark is Tele Danmark, the dominant
PTT supplier of telecommunications services in Denmark. In January 1998, the
Danish government sold a controlling interest in the Danish PTT, Tele Danmark,
to U.S. based Ameritech. The Company also faces competition from various other
carriers, primarily Telia (the Swedish PTT), the smaller Netcom Services and
Global One, which are all connected to Tele Danmark's fixed line network via
interconnect agreements.
Tele Danmark offers full scale telephony in all areas. Telia offers both
long distance services through prefix dialing and other related services such as
call center solutions and data services.
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REGULATORY ENVIRONMENT
All telecommunications services in Denmark were liberalized in 1996.
Currently, the Company may, through RSL Denmark, provide national and
international telephony in the Danish market, except mobile telephony which
requires a license. The Company currently can only either buy or lease fixed
lines from the PTT operator, Tele Danmark, which has an effective (but not
legal) monopoly on the ownership and construction of fixed lines. It is
expected, however, that pending regulation will limit Tele Danmark's market
control, although there can be no assurance in this regard. In December 1997, an
amendment of Tele Danmark's tariff structure was adopted, to be effective April
1, 1998. The amendment of the tariff structure is expected to result in a
reduction of Tele Danmark's minute rates and an increase in the price of the
basic telephony subscription service. This amendment may ultimately force RSL
Denmark to lower its rates as a result of stronger price competition.
PORTUGUESE OPERATIONS
Portugal originated 340 million minutes of international traffic in 1995.
The Company operates in Portugal through its 39% investment in Maxitel. The
Company made its initial 30.4% investment in Maxitel in April 1997. Maxitel
commenced operations in the international voice and data business in December
1994.
SERVICES AND CUSTOMERS
Maxitel offers international and long distance voice services to closed
user groups of companies utilizing autodialers and direct access. In addition,
Maxitel offers store and forward and real-time fax services.
MARKETING AND SALES
Maxitel markets its services through a direct sales force and is developing
an indirect sales force through independent agents. Maxitel operates primarily
in the Lisbon and Oporto areas.
PORTUGUESE NETWORK ARCHITECTURE
Maxitel operates an Ericsson AXE-10 international gateway switch in its
offices in Lisbon. Maxitel is in the process of converting its entire customer
terminal equipment to this new platform. The Oporto node is already working in
this new configuration. Additionally, Maxitel leases satellite transmission
capacity on Orion, Hispasat and Intelsat.
COMPETITION
Maxitel's primary competitor is Portugal Telecom, the dominant supplier of
telecommunications services in Portugal. The Company also competes with the
local Portuguese affiliates of global carriers such as Global One, and with
resellers in the Portuguese market.
REGULATORY ENVIRONMENT
Fixed voice telephony services, except mobile, were subject to a monopoly
until March 1997. A second GSM mobile operator has been licensed since 1992 and
a third operator was licensed for GSM and PCN (DCS 1800). Under the terms of the
current legislation it is possible for companies other than the PTT to offer
both national and international voice services to closed user groups.
Interconnection to the Portugal Telecom PSTN is permitted for such services. The
privatization process of Portugal Telecom was concluded at the end of 1997 and
the Portugese government maintains a 25% interest in Portugal Telecom. Full
deregulation is expected to occur by January 1, 2000.
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ITALIAN OPERATIONS
OVERVIEW
Italy originated 2.1 billion minutes of international traffic in 1996. The
Company operates in Italy through RSL Italy in which it acquired an 85% interest
in August 1997. RSL Italy, under its former ownership, commenced operations in
1995.
SERVICES AND CUSTOMERS
RSL Italy offers its customers in Italy international and domestic long
distance services utilizing dial-in access via autodialers and dedicated access
lines. RSL Italy's current customer base consists primarily of small and
medium-sized businesses.
MARKETING AND SALES
RSL Italy markets its services through a direct sales force and is
developing an indirect sales force of independent agents.
ITALIAN NETWORK ARCHITECTURE
RSL Italy currently operates as a reseller, purchasing wholesale facilities
from other Italian carriers. RSL Italy is in the process of installing an
Ericsson AXE-10 international gateway switch in Milan and has installed a POP in
Rome. The Company is in the process of linking RSL Italy with RSL-NET and
expects to complete this process by the end of the first quarter of 1998.
COMPETITION
RSL Italy's primary competitor is Telecom Italia S.p.A. ('Telecom Italia'),
the dominant supplier of telecommunications services in Italy. The Company also
competes with the local Italian affiliates of global carriers such as British
Telecom and Global One. In addition, the Company competes with
telecommunications providers in the Italian market such as Infostrada.
REGULATORY ENVIRONMENT
The 'voice telephony' monopoly in Italy was formally abolished on January
1, 1998, but 'voice telephony' is currently still provided by Telecom Italia
only. The domestic and international voice services presently offered by RSL
Italy do not fall within the definition of 'voice telephony' as construed by
Italian authorities. Under the current regime, in order to render certain
liberalized services, RSL Italy is required to file a declaration with, or
obtain an ad hoc authorization from, the Italian Ministry for Communications.
Whether RSL Italy needs the declaration or the authorization depends on the type
of links to the PSTN actually used to render the services. In fact, for voice
services offered through switched links to the PSTN, the declaration is
required, whereas an ad hoc authorization is needed for voice services offered
through dedicated links. RSL Italy has filed a declaration and an application
with the Ministry for Communications to obtain the ad hoc authorization and
approval which are required to offer the services that it currently offers. Such
ad hoc authorization and approval have been received.
In July 1997, the Italian Parliament passed Law No. 249/97 for the creation
of the National Regulatory Authority ('NRA') in the telecommunications field.
The NRA is not operating yet. However, when the NRA is actually established and
operative, it will assume most of the regulatory and supervisory functions
currently carried out by the Italian Ministry for Communications. The NRA will
have to ensure the application of EU liberalization principles in Italy.
On September 19, 1997, Presidential Decree No. 318/97 established the
regulatory framework to implement a number of EC directives (including the Full
Competition Directive and the Interconnect Directive) aimed at creating a fully
competitive environment also with respect to 'voice telephony.' The decree
should gradually assure 'full competition' in accordance with the Full
Competition Directive. Pursuant to the above-mentioned Presidential Decree No.
318/97, further secondary legislation (to be
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issued by the NRA or, in its absence, by the Ministry for Communications) is
required for the implementation of the EC Directives covered by said
Presidential Decree. In this respect, on November 25, 1997, the Ministry for
Communications issued a decree containing the provisions for the obtainment of
individual licenses in the telecommunications field. However, further secondary
legislation is expected to be issued shortly in order to regulate significant
matters, including interconnection, universal service as well as fees to be paid
in connection with individual licenses. The actual liberalization of the Italian
telecommunications market will depend also on such secondary legislation and on
its actual application by the NRA or, in its absence, the Ministry for
Communications.
AUSTRIAN OPERATIONS
OVERVIEW
Austria originated 960 million minutes of international traffic in 1996.
The Company will operate in Austria through RSL Austria in which it currently
holds a 90% interest.
SERVICES AND CUSTOMERS
RSL Austria intends to offer international voice services utilizing
autodialers and direct access beginning in the second quarter of 1998. RSL
Austria's targeted customers will be small to medium-sized businesses.
MARKETING AND SALES
RSL Austria intends to market its services through both a direct and
indirect sales force as well as independent agents.
AUSTRIAN NETWORK ARCHITECTURE
RSL Austria anticipates that it will begin offering services by the end of
the second quarter of 1998 as an international telecommunications reseller. The
Company has installed an Ericsson AXE-10 international gateway switch in Vienna
which is operational. An international gateway switch in Austria enables RSL
Austria to expand the products and services it offers.
COMPETITION
RSL Austria's primary competitor in Austria will be Post und Telecom
Austria (the 'PTA'), the dominant supplier of telecommunications services in
Austria. The Company will compete with the local Austrian affiliates of global
carriers such as British Telecom and Global One. In addition, the Company
expects to compete with resellers in the Austrian market.
REGULATORY ENVIRONMENT
The telecommunications monopoly has remained largely intact and the PTA has
a legal monopoly on voice telephony, telex and telegram services. New
telecommunications legislation, however, was passed in July 1997 which permitted
interconnection with the PTA's PSTN beginning on January 1, 1998. Competition in
voice telephony services is now permitted. Telecommunications services are
subject to licenses granted by an Austrian regulatory authority to applicants
with sufficient technical and economic facilities. The Company has been granted
a license to operate as a full service telecommunications provider of local,
long distance and international services in Austria.
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SPANISH OPERATIONS
OVERVIEW
Spain originated 1.2 billion minutes of international traffic in 1996. RSL
Spain was formed in December 1997. The Company operates in Spain through RSL
Europe which holds a 90% interest in RSL Spain. It is expected that RSL Spain
will begin generating revenues by June 1998.
SERVICES AND CUSTOMERS
Only Telefonica de Espana, S.A. ('Telefonica de Espana') and Retevision,
S.A. ('Retevision') are licensed to provide international long distance services
in Spain. The range of services that can currently be provided by RSL Spain,
pending further deregulation, is limited to closed-user group services.
MARKETING AND SALES
RSL Spain intends to market its services through both a direct and indirect
sales force.
SPANISH NETWORK ARCHITECTURE
RSL Spain anticipates installing an Ericsson AXE-10 international gateway
switch in Spain by the end of 1998. An international gateway switch will allow
RSL Spain to expand the products and services it offers.
COMPETITION
The Company's main competitor in Spain will be Telefonica de Espana, the
company that has traditionally enjoyed a monopoly in the provision of
telecommunications services and the current dominant supplier of
telecommunications services in Spain. The Company also faces competition from
Retevision, an emerging public telephone operator which was granted the second
nation-wide license to provide voice telephony services, and which is in the
process of building its own network. Retevision, started operations at the
beginning of 1998. In addition, the Government has called for bids to award a
third nation-wide license to provide voice telephony, as well as carrier
services. Cable operators have been authorized to provide voice telephony
services since January 1998. The Company also faces competition from resellers,
which at present, generally, have small operations in Spain, and from mega-
carriers interested in long distance services upon deregulation of the market.
REGULATORY ENVIRONMENT
Market deregulation is expected in Spain by December 1, 1998. Spain was one
of the EU Member States which was granted a waiver of up to five years to
implement the Full Competition Directive. After negotiations to determine the
specific duration of the waiver period, the EU Commission granted Spain an
additional period, until November 30, 1998, for the complete deregulation of
voice telephony and public telecommunications networks. Spain is now moving
towards deregulation. Major events in the Spanish telecommunications market have
occurred in the last two years including (i) the complete privatization of
Telefonica de Espana which took place at the beginning of 1997; (ii) the
licensing of Retevision, and its privatization; (iii) the recent call for a
competitive bid for the granting of a third basic telephony license no later
than May 1998 and authorization to cable operators to provide voice telephony as
of January 1998; and (iv) the creation of the Telecommunications Market
Commission as a regulatory independent entity.
The 1987 Telecommunications Act (the 'LOT') was previously enacted for a
monopolistic market. A draft of the General Telecommunications Act, a new
telecommunications act (the 'Draft-LGT'), was presented to the Parliament by the
Government in June 1997. The legislation is intended to address issues inherent
to a competitive market such as a new licensing procedure, universal service,
definition of public service obligations, interconnection rules, numbering,
tariffs, etc., and will require further implementation by means of regulations.
Approval of the Draft-LGT is expected by mid-1998, and
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subsequent implementing regulations should be enacted during 1998, so that the
regulatory framework is in place by December 1, 1998.
Telecommunications services in Spain are subject to licenses granted by a
Spanish regulatory authority. In February 1998, RSL Spain was granted a license
to provide closed-user group services in Spain. RSL Spain has also applied for
licenses to resell telecommunications services and to provide value added
services.
BELGIAN OPERATIONS
OVERVIEW
Belgium originated 1.2 billion minutes of international traffic in 1996.
The Company operates in Belgium through RSL Belgium, in which the Company
currently holds a 90% interest.
SERVICES AND CUSTOMERS
RSL Belgium offers its customers in Belgium international long distance
voice services utilizing dial-in access via autodialers. RSL Belgium's customer
base consists primarily of small and medium-sized businesses.
MARKETING AND SALES
RSL Belgium markets its services through a direct and indirect sales force
as well as independent agents.
BELGIAN NETWORK ARCHITECTURE
RSL Belgium currently operates as a reseller, purchasing wholesale
facilities from other carriers operating in Belgium. The Company anticipates
installing an Ericsson AXE-10 international gateway switch in Belgium by the end
of 1998.
COMPETITION
RSL Belgium's primary competitor is Belgacom, the former PTT and the
dominant supplier of telecommunications services in Belgium. RSL Belgium also
competes with local Belgian affiliates of global carriers such as Global One and
Unisource and local resellers.
REGULATORY ENVIRONMENT
The Belgian Parliament passed the first Belgian Telecommunications Act
(the 'Belgian Act') in March 1991, in order to liberalize the Belgian
telecommunications market. Since then, the Belgian Act was amended on numerous
occasions, most recently in December 1997. On January 1, 1998, the last
remaining monopolies of Belgacom ceased to exist. The Belgian Act provides,
among other things, for regulations regarding licensing, rate and
interconnection regulation, universal service obligations, numbering and
customer protection. However, a number of the Royal Decrees necessary to
implement the provisions of the Belgian Act have yet to become law. Pending
these Royal Decrees becoming law, providers of voice telephony services can
apply for a so-called temporary license (which the Company has done). When the
Royal Decrees become law, the applicants (including the Company) will have to
re-apply for a definitive license. There is no specific procedure to
automatically grant definitive licenses to companies that have successfully
applied for and obtained a temporary license. Both the temporary license and the
definitive license have to be applied for with the BIPT. The licenses, temporary
or definitive, are granted by the Minister for Telecommunications, upon
recommendation from the BIPT. The failure by RSL Belgium to receive a temporary
license, or the failure at a later stage to receive a definitive license, would
have a material adverse effect on the ability of RSL Belgium to offer national
and international telecommunications services in Belgium and could have a
material adverse effect on the Company, its financial condition and its results
of operations.
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SWISS OPERATIONS
OVERVIEW
Switzerland originated 1.9 billion minutes of international traffic in
1996. The Company operates in Switzerland through RSL Switzerland in which it
currently holds a 78.5% interest. RSL Switzerland started operations in 1995 as
a long distance carrier for closed user groups.
SERVICES AND CUSTOMERS
While in the past RSL Switzerland targeted multinationals and supplied
international voice and fax services, in the future RSL Switzerland will, in
addition to such multinationals, target small to medium-sized businesses.
MARKETING AND SALES
RSL Switzerland markets its services through both a direct sales force and
an indirect sales force.
SWISS NETWORK ARCHITECTURE
The Company is in the process of installing an Ericsson AXE-10
international gateway switch. Customer access will be over leased lines or over
the three carrier selection codes which were assigned to the Company in December
1997.
COMPETITION
RSL Switzerland's primary competitors in Switzerland are Swisscom, Diax,
Sunrise, GlobalOne, Colt, WorldCom, Equant and other smaller resellers.
REGULATORY ENVIRONMENT
The sale of value-added telecommunication services (data networks) as well
as telecommunications
equipment such as telephones and fax machines was liberalized in 1992. The
transmission of voice for closed user groups has been permitted since July 1,
1995. With the new law on telecommunication services which came into force on
January 1, 1998, Switzerland is a fully liberalized telecommunications market.
LATIN AMERICAN OPERATIONS--GENERAL
RSL Latin America was formed in mid-1997 as a joint venture pursuant to a
shareholders' agreement (the 'Joint Venture Agreement'), between the Company and
Coral Gate Investments Ltd., a British Virgin Islands corporation ('Coral
Gate'), which is an affiliate of Inversiones Divtel, D.T., C.A. ('Divtel'), a
Venezuelan corporation, and a member of the Cisneros Group. RSL Latin America is
51% owned by RSL and 49% owned by the Cisneros Group. To date, RSL Latin America
is in an early stage of its development and most of Latin America is in the
earliest stages of deregulation. As a result, the Company's Latin American
operations have not generated significant revenues.
RSL Latin America's primary purpose is to develop, through local operating
companies formed in conjunction with local partners, a pan-Latin American
network and operations spanning Mexico, Central and South America and the
Caribbean.
Pursuant to the Joint Venture Agreement, RSL Latin America acquired 100% of
RSL Venezuela, from Divtel and Megatel Telecomunicaciones, C.A. ('Megatel'). RSL
Venezuela has terminated its agreements with each of Sprint and Global One to
distribute each of their products in Venezuela and has begun to provide calling
cards and enhanced fax services for RSL Latin America.
In February 1998, the Company entered into a joint venture agreement with
PCM Comunicaciones, S.A. de C.V., a licensed long distance telecommunications
service provider in Mexico, to provide domestic and international long distance
telecommunications services primarily to small and medium-
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sized businesses in Mexico. The transaction is subject to regulatory approval in
Mexico and other customary conditions to closing.
Various countries in Latin America have taken initial steps towards
deregulation in the telecommunications market during the last few years. Certain
countries have competitive local and/or long distance sectors, most notably
Chile, which has competitive operators in all sectors, and Colombia, which has
granted an operating license to a local company, ending the monopoly of the
state-owned PTT. In addition, various Latin American countries have completely
or partially privatized their national carriers, including Argentina, Chile,
Mexico, Peru and Venezuela. Brazil has adopted a constitutional amendment
requiring the privatization of its PTT, the establishment of an independent
regulator and the opening of the telecommunications market to competition.
Since most Latin American countries currently restrict competition to a
limited number of specific services, the Company has developed a two stage
market penetration strategy to capitalize on the current and future
opportunities in Latin America. The first step is to take advantage of current
market conditions and, within the parameters of the Company's product line, to
provide the fullest range of services permissible under the local regulation.
The Company seeks to build a customer base within its target segments prior to
full market liberalization, and when the market opens to competition, the
Company will have an established base in its target areas.
VENEZUELAN OPERATIONS
OVERVIEW
Venezuela originated 139 million minutes of international traffic in 1996.
The Company operates in Venezuela through RSL Venezuela and provides value-added
telecommunications services for RSL Latin America. RSL Venezuela was organized
in 1992.
SERVICES AND CUSTOMERS
RSL Venezuela offers its customers in Venezuela international long distance
voice services utilizing dedicated access along with prepaid and postpaid cards.
RSL Venezuela's customer base consists primarily of small and medium-sized
businesses.
MARKETING AND SALES
RSL Venezuela markets its services through a direct sales force,
telemarketing and uses distributors to market its prepaid calling card products.
VENEZUELAN NETWORK ARCHITECTURE
RSL Venezuela currently operates an Ericsson MD 110 switch directly linked
via a Panamsat-1 satellite circuit to the Company's New York international
gateway switch.
COMPETITION
RSL Venezuela's primary competitor is CANTV, the dominant supplier of
telecommunications services in Venezuela. RSL Venezuela also competes with local
Venezuelan affiliates of global carriers such as British Telecom, Global One and
Mercury, regional competitors such as Telefonica de Espana, Impsat, Texcom S.A.
and Charter Communications, and callback operators.
REGULATORY ENVIRONMENT
The Venezuelan telecommunications market is regulated by the Ministry of
Transportation and Telecommunications, by means of the National
Telecommunications Commission ('Conatel'). CANTV holds an exclusive monopoly on
the provision of local, domestic and international switched fixed telephone
services within Venezuela until November 2000. However, certain value-added
services are open to competition with a concession. RSL Venezuela currently
holds Concessions for Value Added
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and Data Services which allow it to provide international voice services via
dedicated access provided on a private network. RSL Venezuela is not required to
obtain a concession to provide prepaid and post paid card services.
RSL Latin America, which is 51% owned by the Company and 49% owned by the
Cisneros Group, was required to register its investment in RSL Venezuela with
the Venezuelan Office of the Superintendent of Foreign Investments ('SIEX')
within 60 days of the acquisition of RSL Venezuela, which was completed as to
49% on August 4, 1997 and as to the remaining 51% on January 26, 1998. Until RSL
Latin America completes the registration, RSL Latin America will be entitled to
receive dividends from RSL Venezuela but will not be able to repatriate capital
or remit the dividends from Venezuela. An application for registration of the
initial 49% investment was filed on February 27, 1998, and the Company expects
that RSL Latin America will file shortly an application with SIEX to register
the balance of its investment. Although both applications for registration will
have been filed after the requisite 60-day period, the Company has been advised
by its counsel in Venezuela, Baker & McKenzie, that it is reasonable to expect
that SIEX will accept the registration of RSL Latin America's investment in RSL
Venezuela and, as a result thereof, RSL Venezuela will not be restricted from
repatriating capital or remitting dividends from Venezuela.
ASIA AND PACIFIC RIM OPERATIONS
In Asia, the Company carries on its Australian operations through RSL Asia,
a wholly-owned subsidiary of the Company, based in Hong Kong. The Company
carries on its other regional operations in Asia through RSL COM Asia Pacific
Ltd. RSL Asia was formed to expand the Company's operations into the
Asian/Pacific Rim market and, in March 1997, the Company incorporated RSL Japan
to initiate the Company's operations in Japan. RSL Asia intends to capitalize on
the trend toward deregulation within the region to establish operations in key
countries. The Company has hired a managing director to oversee and develop RSL
Japan's operations. In February 1998, RSL Japan was granted an International
Simple Resale license by the MPT to resell international telephony, fax and data
services to and from Japan. RSL Japan has received a Type II value added network
provider license and expects to provide such services by the end of the second
quarter of 1998. RSL Japan has applied for a Type I license in Japan to provide
facilities-based international long distance service. The Company plans to
install an Ericsson AXE-10 international gateway switch in its offices in Tokyo
by the end of 1998.
In October 1996, RSL Asia established RSL Australia to carry on its
Australian operations. In April 1997, the Company acquired substantially all of
the commercial contracts of Pac Star, an Australian based switchless reseller.
As of October 1997, RSL Australia acquired 100% of the issued capital of
the Call Australia Group, leading Australian switchless resellers and the
copyright in the billing software of the Call Australia Group.
In November 1997, RSL Australia purchased 85% of EZI, an international
reseller and prepaid calling card services provider.
In March 1998, the Company agreed to acquire, in two separate transactions,
the customer base of each of First Direct Communications Pty., Limited and Link
Telecommunications Pty. Ltd., two switchless mobile telecommunications resellers
in Australia. The transactions are subject to regulatory approval in Australia
and other customary conditions to closing.
AUSTRALIAN OPERATIONS
OVERVIEW
Australia originated 1.3 billion minutes of international traffic in 1996.
The Company operates in Australia through RSL Australia, a wholly-owned
subsidiary of RSL Asia. The Company began generating revenues in Australia in
April 1997. From April 1, 1997 through December 31, 1997, RSL Australia
generated $32.3 million of revenues.
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SERVICES AND CUSTOMERS
As a result of its transaction with Pac Star and the recent acquisition of
the Call Australia Group, the Company's customer base in Australia has grown
significantly and consists primarily of commercial customers. The Company offers
these customers local services and domestic and international long distance
services. As a result of its acquisition of EZI, RSL Australia offers prepaid
cards to residential customers.
MARKETING AND SALES
The Company plans to market its services in Australia through a variety of
channels, including direct sales and indirect sales through independent agents.
The Company's current revenues are generated primarily from the customer base
acquired from Pac Star and the Call Australia Group. In addition, RSL Australia
maintains an extensive calling card distribution network.
AUSTRALIAN NETWORK STRUCTURE
The Company has installed an Ericsson AXE-10 international gateway switch
in its offices in Sydney and two domestic switches in Melbourne and Brisbane
which are directly linked to each other. In addition, RSL Australia operates a
prepaid card platform. The Company owns MIUs on the APCN, JASAURUS and NPC
undersea fiber optic cable systems and on the CMC and MCC terrestrial fiber
optic cables.
COMPETITION
The Company's principal competitors in Australia are the two licensed
general carriers Telstra Corporation Limited (the former PTT) and Optus
Communications Pty. Limited. Each of these competitors provides a bundle of
services including mobile, local, and domestic and international long distance.
In addition, the Company faces competition from switch-based and switchless
resellers such as Spectrum Network Systems Limited, Axicorp Pty. Limited and
AAPT Pty. Limited.
REGULATORY ENVIRONMENT
RSL Australia has been enrolled with the Australian Telecommunications
Authority ('Austel') under the provisions of the International Service Providers
Class License as a provider of services with double-ended interconnection. The
Telecommunications Act 1991 allows enrollment as a provider of services with
double-ended interconnection, provided that Austel is satisfied that the
services to be offered are in the public interest. Double-ended interconnection
allows the Company to interconnect with the Australian PSTN, to resell general
carrier services, and to transmit international calls over owned international
transmission facilities. Customers are able to access the Company's network from
the PSTN utilizing a four digit prefix code issued by Austel and via 'national
access,' a preselect and override code service for domestic long distance and
international calls. International long distance services may be provided by the
use of satellite based facilities or international cable capacity. Full
deregulation of the Australian telecommunications market occurred in July 1997
with the repeal of the Telecommunications Act 1991 and the introduction of the
Telecommunications Act 1997. RSL Australia can, at any time, apply for a general
carriers license under the new act, but obtaining such a license may impose
certain restrictions and costs rather than expand the scope of operations of RSL
Australia. Since there have been delays in implementing the new act, the Company
has continued to operate as it has under the old act pursuant to the
transitional provisions of the new act. See 'Risk Factors-- Government
Regulatory Restrictions.'
INTERNET TELEPHONY OPERATION--GENERAL
In July 1997, the Company acquired a 51% interest in Delta Three, a
telecommunications provider utilizing the Internet and networks based on
Internet protocols to provide telecommunications services and to transmit voice
communications. Since July 1997, the Company has acquired an additional 21% and
as of December 1997 agreed to acquire an additional approximately 26% interest
in Delta Three
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which would bring the Company's total ownership interest in Delta Three to
approximately 98%. Concurrently with the execution of the acquisition agreement
relating to the Company's initial investment, the Company and Delta Three
entered into a services agreement, pursuant to which, among other things, Delta
Three provides the Company with discounted Internet telephony services and the
Company provides Delta Three with termination services at preferred rates. Such
services agreement also provides for the co-location of Delta Three's servers
with the Company's facilities.
The Internet is an interconnected global computer network of tens of
thousands of packet-switched networks using Internet protocols. Technology
trends over the past decade have removed the distinction between voice and data
segments. Traditionally, voice conversations have been routed on analog lines.
Today, voice conversations are routinely converted into digital signals and sent
together with other data over high-speed lines. In order to satisfy the high
demand for low-cost communication, software and hardware developers began to
develop technologies capable of allowing the Internet to be utilized for voice
communications.
Several companies, including Delta Three, now offer services that provide
real-time voice conversations over the Internet ('Internet Telephony'). These
services work by the use of an Internet gateway server ('Internet Gateway'),
which provides a connection between the PSTN and the Internet and converts
analog voice signals into digital signals. These signals are in turn compressed
and split into packets which are sent over the Internet like any other packets
and reassembled by a second Internet Gateway as audio output at the receiving
end. The packets are converted back into analog format and transferred to the
PSTN and then to the telephone number dialed.
Most Internet Telephony software today requires both users to use computers
that are connected to the Internet at the time of the call, but services
provided by Delta Three allows both parties to use their ordinary telephones.
Current Internet Telephony does not provide comparable sound quality to
traditional long distance service. The sound quality of Internet Telephony,
however, has increased over the past few years, and the Company expects such
quality to continue to improve, although there can be no assurance in this
regard.
DELTA THREE OPERATIONS
OVERVIEW
Delta Three began operations in May 1996 and began offering commercial
Internet Telephony services in January 1997. Delta Three currently offers
commercial service between 15 countries and it plans to extend the service to
additional countries within the next two years.
SERVICE AND CUSTOMERS
Delta Three utilizes the Internet, traditionally a network for data
communications, as a transmission medium for ordinary telephone calls. The
service offered by Delta Three enables customers to place long distance and
international phone calls over the Internet while using a standard telephone,
without any additional equipment. Delta Three also offers a service that enables
customers to place long distance calls from a personal computer to a standard
telephone. Delta Three offers these services at a price which is at a
significant discount to standard international calls.
Delta Three operates as a wholesale carrier for international long distance
resellers on a point-to-point basis and as a retail carrier, servicing its own
network and marketing the use of its network to consumers in designated areas
and corporations.
The Company currently provides its U.S. customers Delta Three's Internet
Telephony service for telephone service from the United States to Hong Kong,
Israel, Cali and Bogota, Colombia and Sao Paolo, Brazil.
In January 1998, RSL Japan entered into an agreement with Nifty Corp.
('Nifty'), a large on-line Internet service provider in Japan and a joint
venture company owned by Fujitsu Ltd. and Nissho Iwai Corp., to provide Delta
Three's Internet Telephony service in Japan to Nifty's customers.
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MARKETING AND SALES
Delta Three's strategy is initially to utilize wholesale contracts to
increase the volume on its network and then to add retail and corporate clients
onto the network, which it will market under its name. In addition, Delta Three
utilizes the worldwide web as an additional sales venue to offer services to
retail customers. Delta Three focuses on supplying its services to high-margin
international niches. Delta Three also offers the Company the ability to
purchase minutes wholesale at preferred rates.
DELTA THREE NETWORK
The Delta Three network consists of 16 Internet Gateways, located within
key metropolitan areas in target countries. A Delta Three customer dials an
access number where a Delta Three system prompts the customer for an access code
and the desired phone number. The system then opens a connection with a remote
Internet Gateway and instructs the Internet Gateway to place a local call to the
telephone the customer has dialed. Once the local call is transmitted, the
Internet Gateway converts the call into a form which can be routed over the
Internet and transfers the call to a second Internet Gateway. The Internet
Gateway may be connected by (i) the Internet accessed through an Internet
service provider, (ii) capacity leased on a private Intranet and (iii) leased
private lines. By routing calls in such a manner, Delta Three is able to avoid
the high costs associated with the settlement process.
REGULATORY ENVIRONMENT
While regulation still plays a significant role in traditional
telecommunications markets, the Internet is largely unregulated, permitting
business opportunities to flourish and to rapidly follow technological
developments. To date, the FCC has never directly exercised regulatory
jurisdiction over Internet-based services. The rapid development of the
Internet, however, raises the question of whether the language of the
Communications Act of 1934, as amended by the Telecommunications Act of 1996, or
existing FCC regulations, covers particular services offered over the Internet.
The FCC and most foreign regulators have not yet attempted to regulate the
companies that provide the software and hardware for Internet Telephony, the
access providers that transmit their data, or the service providers, as common
carriers or telecommunications services providers. Therefore, the existing
systems of access charges and international accounting rates, to which
traditional long distance carriers are subject, are not imposed on providers of
Internet Telephony services. As a result, such providers may offer calls at a
significant discount to standard international calls. There can be no assurance,
however, that the FCC and foreign regulators will not regulate Internet
Telephony or Internet service providers in the future.
The level of regulation of Internet Telephony differs significantly from
country to country and, in many countries, Internet Telephony is not regulated
any differently than other Internet service. In some countries Internet
Telephony is illegal. There can be no assurance that regulation of Internet
Telephony will not increase around the world. See 'Risk Factors--Government
Regulatory Restrictions'.
EMPLOYEES
As of February 25, 1998, the Company employed approximately 1,186 people,
including officers, administrative and salaried selling personnel. The Company
considers its relationship with its employees to be good.
PROPERTIES
The Company's principal office is at Clarendon House, Church Street,
Hamilton, Bermuda.
The Company maintains executive offices at 767 Fifth Avenue, New York, New
York, where the Company occupies approximately 11,000 square feet under a lease
which expires on January 31, 2002. The lease provides for annual lease payments
of $767,000.
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The Company also maintains a 3,040 square foot office at 60 Hudson Street,
New York, New York which houses the Company's international gateway and domestic
switches located in New York. The lease extends until March 2006 and provides
for annual lease payments of $312,240.
The Company has entered into a lease to maintain a 14,000 square foot
office at 430 Park Avenue, New York, New York for RSL USA's Eastern United
States offices. The lease extends until June 29, 2001 and provides for annual
lease payments of $375,000.
The Company maintains a 15,000 square foot office at 5550 Topanga Canyon
Boulevard, Woodland Hills, California which houses RSL USA's western offices.
The lease for such space extends until January 15, 2003 and provides for annual
lease payments of $333,000.
The Company maintains an office at Churchill House, 142-146 Old Street,
London, England which is used as the location for the London international
gateway switch and the London domestic switch. The lease extends until October
1, 2005 and provides for annual lease payments of $83,000 until March 1998 and
may be increased thereafter.
The Company maintains office space at Victoria House, London Square, Cross
Lanes, Guildford, Surrey, which is RSL Europe's headquarters. The lease extends
until August 20, 2006 and provides for annual lease payments of approximately
$245,000.
In addition, the Company maintains offices with respect to its other
foreign operations, for which the aggregate annual lease payments equal
approximately $3.0 million.
The Company, through its direct and indirect subsidiaries, also leases
additional office spaces for its operations.
LEGAL PROCEEDINGS
AT&T recently filed with the FCC an opposition to the Company's requests
for modification of the International Settlement Policy to implement the
Company's accounting rates for international long distance service between the
United States and each of Denmark, the Dominican Republic, Finland, Norway and
the United Kingdom. AT&T has alleged, inter alia, that the requests violate the
principles underlying the International Settlement Policy and the FCC's
non-discrimination policy. The Company does not believe that the FCC's
resolution of this matter reasonably can be expected to have a material adverse
effect on its business or results of operations.
On April 14, 1997, the Attorney General of the State of Illinois filed a
complaint against LDM arising from alleged instances of unauthorized changes in
subscribers' selections of interexchange carriers ('slamming'). On October 24,
1997, the Attorney General of the State of New Jersey served a subpoena on LDM
seeking information also relating to various 'slamming' complaints lodged
against LDM. Both the Illinois Complaint and the New Jersey Subpoena relate to
alleged activity by LDM occurring prior to its acquisition by RSL USA. Under the
terms of the stock purchase agreement between LDM and RSL USA, RSL USA is
indemnified from, among other things, liability relating to litigation
proceedings. The Company does not believe that the resolution of these matters
reasonably can be expected to have a material adverse effect on its business or
results of operations.
The Company also is, from time to time, a party to litigation that arises
in the normal course of its business operations. The Company is not presently a
party to any such litigation that the Company believes could reasonably be
expected to have a material adverse effect on its business or results of
operations.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Certain information concerning directors and executive officers of the
Company and certain of its subsidiaries is set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------------- ------- ----------------------------------------------
<S> <C> <C>
Ronald S. Lauder.............................. 54 Director and Chairman of the Board
Itzhak Fisher................................. 42 Director, President and Chief Executive
Officer
Andrew Gaspar................................. 50 Director and Vice Chairman of the Board
Jacob Z. Schuster............................. 49 Director, Executive Vice President, Chief
Financial Officer, Assistant Secretary and
Treasurer
Richard E. Williams........................... 46 President and Chief Executive Officer of RSL
Europe
Adrian Coote.................................. 43 Managing Director of RSL Australia
Karen van de Vrande........................... 47 Vice President of Marketing
Nir Tarlovsky................................. 31 Vice President of Business Development
Nesim N. Bildirici............................ 31 Vice President of Mergers and Acquisitions
Mark J. Hirschhorn............................ 33 Vice President--Finance, Global Controller and
Assistant Secretary
Roland T. Mallcott............................ 51 Vice President of Engineering
Andrew C. Shields............................. 41 Vice President of International Carrier
Relations
Avery S. Fischer.............................. 30 Legal Counsel
Tucker Hall................................... 42 Secretary
Gustavo A. Cisneros........................... 52 Director
Fred H. Langhammer............................ 54 Director
Leonard A. Lauder............................. 65 Director
Eugene Sekulow................................ 65 Director
Nicolas G. Trollope........................... 50 Director
</TABLE>
All directors hold office, subject to death, removal or resignation, until
the next annual meeting of shareholders and thereafter until their successors
have been elected and qualified. Officers of the Company serve at the pleasure
of their respective Boards of Directors, subject to any written arrangements
with the Company. See '--Employment Arrangements.' Set forth below is certain
information with respect to the directors, executive officers and other senior
management of the Company.
Ronald S. Lauder co-founded the Company, has served as its Chairman since
1994 and is the principal and controlling shareholder of the Company. He is also
a founder and has served as the non-executive Chairman of the Board of Central
European Media Enterprises Ltd. ('CME'), an owner and operator of commercial
television stations and networks in Central and Eastern Europe since 1994. Mr.
Lauder is a principal shareholder of The Estee Lauder Companies Inc. ('Estee
Lauder') and has served as Chairman of Estee Lauder International, Inc. and
Chairman of Clinique Laboratories, Inc. since returning to the private sector
from government service in 1987. From 1983 to 1986, Mr. Lauder served as Deputy
Assistant Secretary of Defense for European and NATO affairs. From 1986 to 1987,
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Mr. Lauder served as U.S. Ambassador to Austria. Mr. Lauder is a director of
Estee Lauder. He is Chairman of the Board of Trustees of the Museum of Modern
Art, and Treasurer of the World Jewish Congress.
Itzhak Fisher, a co-founder of the Company, has been a director, President
and Chief Executive Officer of the Company since its inception in 1994. Mr.
Fisher is also the President and Chief Executive Officer of ITG, the Chief
Executive Officer of RSL USA and the Chairman of RSL Europe. From 1992 to 1994,
Mr. Fisher served as General Manager of Clalcom Inc., the telecommunications
subsidiary of Clal (Israel), Ltd., Israel's largest investment corporation
('Clal'). Prior to joining Clalcom, from 1990 to 1992, Mr. Fisher served as the
Special Consultant to the President of BEZEQ, the Israel Telecomunication Corp.
Ltd., Israel's national telecommunications company. From 1990 to 1991, Mr.
Fisher was a consultant to Mobil Oil Corporation, in the telecommunications
field. In 1989, Mr. Fisher co-founded Medic Media, Inc., a company engaged in
the business of renting telephone and television systems in hospitals throughout
Israel, and was a director and its President and Chief Executive Officer through
1991. Mr. Fisher remains a director of Medic Media, Inc.
Andrew Gaspar has served as a director and Vice Chairman of the Board of
the Company since its inception in 1994. Mr. Gaspar has been (through a limited
liability company) the managing member of Lauder Gaspar Ventures LLC ('LGV')
since its inception in September 1996 and has been President of the corporate
general partner of R.S. Lauder, Gaspar & Co., L.P. ('RSLAG') since 1991. Both
RSLAG and LGV are venture capital companies. Mr. Gaspar has also been a director
of CME since June 1994. From 1982 until 1991, Mr. Gaspar was a partner of
Warburg, Pincus & Co., a venture capital firm. From 1973 until 1981, Mr. Gaspar
served in various executive capacities at RCA Global Communications, Inc. and
its affiliates.
Jacob Z. Schuster has been a director, Secretary or Assistant Secretary,
Treasurer and Executive Vice President of the Company since 1994 and has been
Chief Financial Officer of the Company since February 1997. From 1986 to 1992,
Mr. Schuster was a General Partner and the Treasurer of Goldman, Sachs & Co.
('Goldman Sachs'). Mr. Schuster has been President and Treasurer of RSL
Management Corporation since November 1995 and Executive Vice President of RSL
Investments Corporation since March 1994. Mr. Schuster joined Goldman Sachs in
1980, served as Treasurer of the firm from 1985 until his retirement from the
firm in 1992 and was made a General Partner in 1986. In 1993, Mr. Schuster
served as a consultant to Goldman Sachs.
Richard E. Williams has served as President and Chief Executive Officer of
RSL Europe since August 1995. From 1992 through 1994, Mr. Williams served as a
director of IDB WorldCom, with responsibility for sales and marketing. From 1990
to 1992, Mr. Williams served as Managing Director and Vice President of
Operations (Europe, Africa and Middle East) of WICAT Systems, a computer systems
company. From 1968 to 1990, Mr. Williams served in various technical, research,
sales, and management capacities at British Telecom, most recently serving as a
General Manager from 1988 to 1990.
Adrian Coote has been Managing Director of RSL Australia since October
1996. From May 1993 to October 1996, Mr. Coote served as Director of Engineering
and Operations of Vodafone Pty. Limited, an Australian mobile carrier,
responsible for the design, implementation and operation of its mobile network
and subscriber administration systems. From 1987 to 1993, Mr. Coote was General
Manager, Sales of British Telecom Australasia responsible for introducing and
managing its private switching systems and global data networks. Prior to
joining British Telecom Australasia, Mr. Coote served in various capacities at
Philips Telecommunications Systems.
Karen van de Vrande has been Vice President of Marketing of the Company
since March 1996. From March 1993 to February 1996, Ms. van de Vrande served as
Managing Director of AT&T's Consumer Communications Services for Europe, the
Middle East and Africa. From 1990 to 1993, Ms. van de Vrande served as Managing
Director of AT&T's Israeli operations. She served in various marketing and sales
capacities at AT&T from 1981 to 1990.
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Nir Tarlovsky has been Vice President of Business Development of the
Company since April 1995 and served as a director of the Company from April 1,
1995 until March 1997. Mr. Tarlovsky is also Vice President of ITG. From 1992 to
March 1995, Mr. Tarlovsky served as Senior Economist of Clal, where he was
responsible for oversight of the operations and budgets of 150 of Clal
subsidiaries. While at Clal, he was also responsible for the development of new
international telecommunications ventures. Prior to 1992, Mr. Tarlovsky served
as an officer in the Israeli Army, where he was responsible for management and
financial oversight of international research and development projects.
Nesim N. Bildirici has been Vice President of Mergers and Acquisitions of
the Company since 1995 and served as a director of the Company from April 1995
until March 1997. From August 15, 1993 to December 31, 1996, Mr. Bildirici was
employed by both RSLAG and the Company. Mr. Bildirici is also a Managing
Director of RSLAG. Prior to joining RSLAG, Mr. Bildirici was an investment
banker at Morgan Stanley & Co. Incorporated from 1989 to 1991. From 1991 to
1993, Mr. Bildirici was a graduate student at Harvard Business School, where he
received his MBA.
Mark J. Hirschhorn has been Vice President-Finance of the Company since
August 1997 and has been Global Controller of the Company since January 1996.
Mr. Hirschhorn has also served as the Assistant Secretary of the Company since
September 1996. From October 1987 to December 1995, Mr. Hirschhorn was employed
at Deloitte & Touche LLP, most recently as a Senior Manager specializing in
emerging business and multinational consumer product companies.
Roland T. Mallcott has been Vice President of Engineering of the Company
since February 1997. From December 1995 until January 1997, Mr. Mallcott served
as Director of Joint Ventures of Concert, through British Telecom and MCI, in
Canada, Mexico and Germany. From January 1991 to December 1995, Mr. Mallcott
served as Director of Engineering and Operations for British Telecom (US)
responsible for building and managing the British Telecom and Concert global
data and voice networks. Prior to 1991, Mr. Mallcott served in various network
engineering capacities for British Telecom.
Andrew C. Shields has been Vice President of International Carrier
Relations since August 1997. From October 1993 until August 1997, Mr. Shields
served as Vice President of International Business Development of LCI
International, with responsibility for international business development and
international carrier relations. From June 1991 until October 1993, Mr. Shields
served as Director of Global Alliances for Northern Telecom responsible for
international infrastructure expansion. Mr. Shields also served as Northern
Telecom's Director of International Marketing from June 1989 until June 1991.
From 1984 to 1989, Mr. Shields served as Senior Manager, International Relations
for MCI International responsible for negotiating bilateral direct operating
agreements with international carriers. Mr. Shields also served, in various
capacities at MCI International, MCI Telecommunications, and ITT World
Communications from 1979 to 1984.
Avery S. Fischer has served as Legal Counsel of the Company since January
1997. From 1994 to 1997, Mr. Fischer was an associate with the law firm of
Rosenman & Colin LLP, New York, New York, with a practice concentrating in
mergers and acquisitions, securities and general corporate counseling. From 1993
to 1994, Mr. Fischer was an associate with the law firm of Shea & Gould, New
York, New York, with a practice concentrating in commercial and securities
litigation. From 1990 to 1993, Mr. Fischer was a student at Brooklyn Law School,
where he received his Juris Doctor.
Tucker Hall, Secretary of the Company since March 1997, has been a manager
of Codan Services Limited, Hamilton, Bermuda, a corporate service company
associated with the law firm of Conyers, Dill & Pearman, Hamilton Bermuda,
Bermuda counsel to the Company, since 1989.
Gustavo A. Cisneros has been a director of the Company since March 1997.
For more than five years, Mr. Cisneros, together with other members of his
family and trusts established for their benefit, have owned indirect beneficial
interests in certain companies that own or are engaged in a number of diverse
commercial enterprises principally in Venezuela, the United States, Brazil,
Chile and Mexico. Mr. Cisneros has also been the Chairman of the Board of
Directors of Pueblo Xtra International, Inc. since June 1993 and a Director of
Univision Communications Inc. since May 1994.
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Fred H. Langhammer, a director of the Company since September 1997, has
been President of Estee Lauder since 1995, and Chief Operating Officer of Estee
Lauder since 1985, and was Executive Vice President of Estee Lauder from 1985
until 1995. Mr. Langhammer joined Estee Lauder in 1975 as President of its
operations in Japan. In 1982, he was appointed Managing Director of Estee
Lauder's operations in Germany. Prior to joining Estee Lauder, Mr. Langhammer
was General Manager of Dodwell (Japan), a global trading company. He is a member
of the Board of Directors of the Cosmetics, Toiletries and Fragrance
Association, an industry group, and serves on the Board of the American
Institute for Contemporary German Studies at Johns Hopkins University.
Leonard A. Lauder has been a director of the Company since March 1997. Mr.
Lauder is a principal shareholder and has served as Chief Executive Officer of
Estee Lauder since 1982 and as President of Estee Lauder from 1972 until 1995.
He became Chairman of the Board of Directors of Estee Lauder in 1995. He has
been a director of Estee Lauder since 1958. Mr. Lauder formally joined Estee
Lauder in 1958 after serving as an officer in the United States Navy. He is
Chairman of the Board of Trustees of the Whitney Museum of American Art, a
Charter Trustee of the University of Pennsylvania and a Trustee of The Aspen
Institute. He also served as a member of the White House Advisory Committee on
Trade Policy and Negotiations under President Reagan.
Eugene Sekulow has been a director of the Company since September 1995.
Until his retirement in December 1993, Mr. Sekulow served as Executive Vice
President-International of NYNEX Corporation, having served as President of
NYNEX International Company from 1986 to 1991. Prior to joining NYNEX
International Company, Mr. Sekulow had served as President of RCA International,
Ltd. since 1973. Mr. Sekulow previously served as a member of the United States
State Department Advisory Committee on International Communications and
Information Policy and on the State Department Task Force on Telecommunications
in Eastern Europe.
Nicolas G. Trollope, a director of the Company since July 1996, has been a
partner with the law firm of Conyers, Dill & Pearman, Hamilton, Bermuda, since
1991. Mr. Trollope has been with Conyers, Dill & Pearman since 1975. Mr.
Trollope has served as a director of CME since June 1994 and also serves as
Vice-President and Secretary of CME.
Other than Ronald S. Lauder and Leonard A. Lauder, who are brothers, no
family relationship exists between any director or executive officer of the
Company.
COMMITTEES OF THE BOARD
The Company's Board of Directors (the 'Board of Directors') has an
Executive Committee (the 'Executive Committee'), a Compensation Committee (the
'Compensation Committee') and an Audit Committee (the 'Audit Committee').
EXECUTIVE COMMITTEE
The Executive Committee is composed of Ronald S. Lauder, Andrew Gaspar,
Itzhak Fisher, Jacob Schuster and Eugene Sekulow. A majority of the members of
the Executive Committee must approve any action taken by the Executive
Committee. During the period between meetings of the Board of Directors, the
Executive Committee has all powers and authority of the Board of Directors to
manage the Company's business, except that the Executive Committee, acting
alone, cannot (i) amend the Company's Memorandum of Association or Bye-laws
(which also require shareholder approval); (ii) adopt an agreement of merger or
consolidation or approve the sale, lease or exchange of all or substantially all
of the Company's property and assets; or (iii) approve or recommend to the
Company's shareholders a dissolution of the Company.
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COMPENSATION COMMITTEE
The Compensation Committee is composed of Ronald S. Lauder, Gustavo A.
Cisneros and Eugene A. Sekulow. The Compensation Committee is responsible for
determining executive compensation policies and guidelines and for administering
the Company's stock option and compensation plans.
AUDIT COMMITTEE
The Audit Committee is composed of Itzhak Fisher, Eugene A. Sekulow and
Fred Langhammer. The Audit Committee is charged with (i) recommending the
engagement of independent accountants to audit the Company's financial
statements, (ii) discussing the scope and results of the audit with the
independent accountants, (iii) reviewing the functions of the Company's
management and independent accountants pertaining to the Company's financial
statements and (iv) performing such other related duties and functions as are
deemed appropriate by the Audit Committee and the Board of Directors.
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table summarizes all plan and non-plan compensation awarded
to, earned by or paid to the Company's current Chief Executive Officer and four
other most highly compensated executive officers for services rendered in all
capacities to the Company in the last two fiscal years (together, the 'Named
Executive Officers'). See 'Employment Agreements.'
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------------
AWARDS
ANNUAL SECURITIES
COMPENSATION UNDERLYING
------------------------ OPTIONS/
SALARY BONUS SARS
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#)
- --------------------------------------------------------------------- ---- ------- ------- ------------------
<S> <C> <C> <C> <C>
Itzhak Fisher........................................................ 1997 400,000 650,000 432,856
President and Chief Executive Officer 1996 350,000 150,000 --
Nir Tarlovsky........................................................ 1997 187,500 300,000 --
Vice President of Business Development 1996 178,000 75,000 --
Richard E. Williams (1).............................................. 1997 240,000 165,000 350,400
President and Chief Executive Officer of RSL Europe 1996 172,000 50,000 --
Nesim N. Bildirici (2)............................................... 1997 185,000 300,000 --
Vice President of Mergers and Acquisitions 1996 165,000 75,000 --
Mark Hirschhorn...................................................... 1997 155,000 232,500 16,206
Vice President--Finance 1996 140,000 50,000 93,294
</TABLE>
- ------------------
(1) Mr. Williams' salary has been converted to U.S. dollars for the purposes of
this table based upon the average exchange rate of British pounds to U.S.
dollars for the periods covered.
(2) Mr. Bildirici is employed by the Company but, during 1996, was employed by
both the Company and RSLAG. For purposes of this Prospectus, he is treated as an
employee of the Company only for the relevant periods. See '--Fiscal Year-End
Option Values,' and '--Compensation Committee Interlocks and Insider
Participation.'
No other annual compensation, restricted stock awards, stock appreciation
rights or long-term incentive plan payouts or other compensation (all as defined
in the regulations of the Commission) were awarded to, earned by or paid to the
Named Executive Officers during 1996 or 1997.
STOCK OPTION AND COMPENSATION PLANS
AMENDED AND RESTATED 1995 STOCK OPTION PLAN
In April 1995, the Board of Directors of the Company authorized, and the
shareholders of the Company approved, the 1995 Plan (which was later amended and
restated). Under the 1995 Plan, the Company's Compensation Committee was
authorized to grant options for up to 2,847,000 shares of
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Class A Common Stock. As of December 31, 1997, the Company had granted options
to purchase 2,716,617 shares of Class A Common Stock under the 1995 Plan. In
general, options granted under the 1995 Plan terminate on the tenth anniversary
of the date of grant. The 1995 Plan was developed to provide incentives to
employees of the Company and to attract new employees and non-employee
directors. In connection with the Initial Public Offering, the 1995 Plan was
replaced by the stock option plans described below and the Company will not
grant further options under the 1995 Plan.
1997 STOCK INCENTIVE PLAN
In connection with the Initial Public Offering, the Company adopted the
1997 Plan. Under the 1997 Plan, the Company's Compensation Committee is
authorized to grant options for up to 3,100,000 shares of Class A Stock. Options
will be granted under the 1997 Plan for the purposes of attracting and
motivating key employees of the Company.
The 1997 Plan is administered by the Compensation Committee and provides
for the grant of (i) incentive and non-incentive stock options to purchase Class
A Common Stock; (ii) stock appreciation rights ('SARs'), which may be granted in
tandem with stock options, in addition to stock options, or freestanding; (iii)
restricted stock and restricted units; (iv) incentive stock and incentive units;
(v) deferred stock units; and (vi) stock in lieu of cash (collectively,
'Awards'). The number of shares of Class A Common Stock which are available for
Awards granted under the 1997 Plan during its term is approximately 7.0% of the
total number of shares of Class A Common Stock outstanding on a fully diluted
basis. The maximum number of shares for which options or stock appreciation
rights may be granted to any one participant in a calendar year is 500,000. The
Company granted to Itzhak Fisher, pursuant to his new employment agreement,
options to acquire 432,856 shares of Class A Common Stock under the 1997 Plan
representing 1% of the Common Stock, on a fully-diluted basis. As of January 31,
1998, the Company had granted options to acquire 437,856 Class A Common Stock
under the 1997 Plan. See '--Employment Arrangements'.
1997 PERFORMANCE INCENTIVE COMPENSATION PLAN
In connection with the Initial Public Offering, the Company adopted the
1997 Performance Plan. Awards under the 1997 Performance Plan may be made to key
employees recommended by the Chief Executive Officer, selected by the
Compensation Committee and approved by the Board of Directors, including
officers of the Company and its subsidiaries. Directors who are not also
employees of the Company or any of its subsidiaries are not eligible for awards
under the 1997 Performance Plan. The 1997 Performance Plan was effective for
1997 and is effective for each of calendar years 1998, 1999 and 2000, unless
extended or earlier terminated by the Board of Directors.
With respect to calendar year 1997, a cash bonus pool of $2,675,000 was
established. Since the Company achieved the specified performance targets for
1997 set by the Compensation Committee, $650,000 was awarded to the Company's
Chief Executive Officer, Mr. Itzhak Fisher, and the remainder was awarded to
certain key employees of the Company and its subsidiaries based upon the
recommendation of the Company's Chief Executive Officer and approved by the
Compensation Committee and the Board of Directors, with no individual receiving
more than $650,000. The awards were paid promptly following the completion of
the audit of the Company's 1997 financial statements.
Bonuses will be payable under the 1997 Performance Plan for a year if the
Company meets any one or more of the performance criteria for such year selected
by the Compensation Committee from among the following: (i) amount of or
increase in consolidated EBITDA; (ii) revenues; (iii) earnings per share; (iv)
net income; (v) gross profit margin; (vi) maximum capital expenditures; (vii)
return on equity; and/or (viii) return on total capital.
OTHER PLANS
The Company is in the process of developing both short and long-term
programs for the employees of its subsidiaries which will be designed to reward
for outstanding performance, retain key employees, and align employees'
interests with those of the Company's shareholders. The Company's goals are
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also to make its employee compensation packages competitive and to provide
employees with the opportunity to share in the long-term equity appreciation of
the Company.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to grants of stock
options to purchase Class A Common Stock granted to the Named Executive Officers
during the fiscal year ended December 31, 1997. No stock appreciation rights
have been granted by the Company.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTION/SARS
UNDERLYING GRANTED TO
OPTIONS/SARS EMPLOYEES EXERCISE OR GRANT DATE
GRANTED IN FISCAL BASE PRICE PRESENT VALUE
NAME (#) YEAR ($/SH) EXPIRATION DATE $(1)
- ------------------------------------- ------------ ------------ ----------- --------------- ------------------
<S> <C> <C> <C> <C> <C>
Itzhak Fisher(2)..................... 432,856 29.7 22.00 10/5/04 4,297,105
Nir Tarlovsky........................ -- -- -- -- --
Richard E. Williams(3)............... 350,400 24.0 .00457 10/5/07 7,707,325
Mark Hirschhorn(4)................... 16,206 1.1 .00457 1/1/07 344,329
Nesim N. Bildirici................... -- -- -- -- --
</TABLE>
- ------------------
(1) The grant date present value has been calculated as of the grant date which
dates were October 6, 1997, October 3, 1997 and January 1, 1997 for Itzhak
Fisher, Richard Williams and Mark Hirschhorn, respectively, in accordance
with the Black-Scholes model.
(2) Shares issuable upon the exercise of options granted under the 1997 Plan
pursuant to his employment agreement dated September 2, 1997. The exercise
price per share is initially $22.00 and is increased on the first day of
each calendar quarter after the date of grant, compounded annually, by an
amount based on the yield to maturity on U.S. Treasury Securities with a
maturity of approximately seven years on the date that the options are
granted. Forty percent of the options are exercisable on December 31, 2000,
70% are exercisable on December 31, 2001 and 100% are exercisable on
December 31, 2002.
(3) Shares of Class A Common Stock issuable upon the exercise of options granted
on October 6, 1997, in connection with an employment agreement dated as of
August 5, 1995 between Mr. Williams and the Company, pursuant to which Mr.
Williams was granted the RSL Europe Option Rights (as defined). The options
are fully vested.
(4) Shares of Class A Common Stock issuable upon the exercise of options granted
on January 1, 1997 under the 1995 Plan. The options became fully vested on
January 1, 1998.
96
<PAGE>
FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to each exercise of
stock options during the fiscal year ended December 31, 1997 by the Named
Executive Officers and the value at December 31, 1997 of unexercised stock
options held by the Named Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
VALUE OPTIONS/SARS AT OPTIONS/SARS AT
SHARES ACQUIRED ON REALIZED FY-END (#) FY-END($)(2)
NAME EXERCISE (#) $(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------- ------------------- ------------ --------------------------- ----------------------------
<S> <C> <C> <C> <C>
Itzhak Fisher............ 0 0 0/432,856 0/0
Nir Tarlovsky............ 509,580 13,121,452 0/366,420 0/8,061,073
Richard E. Williams...... 0 0 350,400/0 7,707,325/0
Mark Hirschhorn.......... 0 0 62,196/47,304 1,268,798/990,857
Nesim N. Bildirici....... 202,562 5,215,819 0/344,938 0/7,588,478
</TABLE>
- ------------------
(1) The value realized on the exercise of options was calculated by multiplying
the number of underlying shares by the difference between the closing price
of the Class A Common Stock on the date of exercise and the option exercise
price.
(2) The value of unexercised in-the-money options was calculated by multiplying
the number of underlying shares held by the difference between the closing
price of the Class A Common Stock on December 31, 1997 and the option
exercise price.
COMPENSATION OF DIRECTORS
The Company believes that the interests of its non-employee directors
should be aligned with the interests of the Company's shareholders. To this end,
the Company intends to require such directors to make investments in the Class A
Common Stock and to compensate such directors for their services to the Company
principally through the grant of stock options and stock awards.
With respect to the ownership of Class A Common Stock future directors
generally will be required, based on each such director's financial means, prior
to joining the Board, to purchase, at the then fair market value shares of Class
A Common Stock.
1997 DIRECTORS' COMPENSATION PLAN
In connection with the Initial Public Offering, the Company adopted the
Directors' Plan. Under the Directors' Plan, on the first business day following
each annual meeting of the Company's shareholders during the 10-year term of the
Directors' Plan, each non-employee Director (including for these purposes, the
Chairman and Vice Chairman of the Board of Directors) (a 'Non-Employee
Director'), will be granted options to acquire a number of shares of Class A
Common Stock with an aggregate fair market value on the date of grant equal to
$50,000 ($150,000 and $75,000 in the case of Ronald S. Lauder and Andrew Gaspar,
respectively, in their respective capacities as Chairman and Vice Chairman of
the Board of Directors). Each such option will have a 10-year term. The exercise
price of the options initially will equal the fair market value of the Class A
Common Stock on the date of grant and will be increased on the first day of each
calendar quarter by an amount, compounded annually, equal to one-quarter of the
yield to maturity of United States Treasury Securities having a maturity, at the
time of grant of the options, approximately equal to the term of such options.
Under the Directors' Plan, options to purchase 2,273 shares of Class A Common
Stock were granted to each of Leonard A. Lauder, Fred H. Langhammer and Gustavo
A. Cisneros and options to purchase 6,818 and 3,409 shares of Class A Common
Stock were granted to Ronald S. Lauder and Andrew Gaspar, respectively, on the
closing date of the Initial Public Offering. Such options have an initial
exercise price of $22 per share.
Options granted under the Directors' Plan become exercisable in five equal
annual installments commencing on the first anniversary of the date of grant.
The maximum number of shares that may be issued under the Directors Plan is
250,000.
97
<PAGE>
KEY MAN LIFE INSURANCE
The Company maintains $5.0 million key man life insurance policies on the
lives of each of Itzhak Fisher and Richard E. Williams. The Company is the sole
beneficiary of such policies.
EMPLOYMENT ARRANGEMENTS
On September 2, 1997, each of the Company and ITG entered into new
employment agreements with Itzhak Fisher, which commenced on October 6, 1997 and
terminate on December 31, 2002. The employment agreements provide that Mr.
Fisher is to serve as President and Chief Executive Officer of the Company and
specify certain of his other duties and reporting responsibilities. The Company
is obligated to use its best efforts to ensure that Mr. Fisher continues to
serve as a director and member of the Executive Committee of the Company and ITG
is obligated to use its best efforts to ensure that Mr. Fisher continues to
serve as a director of ITG. Under the employment agreements, Mr. Fisher is
entitled to receive, in the aggregate, a base salary of $400,000, increased by
not less than $50,000 on each January 1, commencing January 1, 1999, plus an
additional amount based on the increase in the consumer price index in the New
York metropolitan area. In no event may Mr. Fisher's base salary, in the
aggregate, be less than $50,000 more than the aggregate base salary of any other
executive officer of the Company. The employment agreements also provide that
Mr. Fisher is to be a participant in the 1997 Performance Plan, and that Mr.
Fisher is to receive additional bonuses of $1,500,000 and $1,000,000 if the
total return to the Company's shareholders from the closing of the Initial
Public Offering to December 31, 2000 and December 31, 2007, respectively,
exceeds the return to shareholders of peer companies for the same periods. If
Mr. Fisher's employment is terminated for any reason other than by the Company
for Cause (as defined) or by Mr. Fisher without Good Reason (as defined,
including in the event of a change in control), Mr. Fisher is entitled to a
pro-rated bonus if the total return objective is achieved through the date of
such termination. Pursuant to the employment agreements, upon the closing of the
Initial Public Offering, Mr. Fisher was granted options under the 1997 Plan to
purchase 432,856 shares of Class A Common Stock representing 1.0% of the
outstanding Common Stock on a fully-diluted basis. Forty percent of such options
will be exercisable on December 31, 2000, an additional 30% on December 31,
2001, and an additional 30% on December 31, 2001, except that all such options
will become exercisable in the event that Mr. Fisher's employment is terminated
by the Company without Cause or Mr. Fisher terminates his employment for Good
Reason or by reason of his death or Disability (as defined). The employment
agreement also contains noncompetition provisions applicable during the term of
the employment agreement and for one-year thereafter. If Mr. Fisher's employment
is terminated by the Company without Cause, or by Mr. Fisher for Good Reason,
the employment agreements provide that Mr. Fisher is entitled to receive
benefits and his salary (in addition to any vested benefits and previously
earned but unpaid salary) for the balance of the term of the employment
agreement or for at least 12 months, whichever is longer, plus an amount equal
to his bonus under the 1997 Performance Plan for the immediately preceding year.
In the event of Mr. Fisher's death or Disability, he (or his representative or
estate or beneficiary) will be paid, in addition to any previously earned but
unpaid salary and vested benefits, 12 months salary (reduced, in the case of
disability, by any disability benefits he receives). If Mr. Fisher's employment
is terminated for any other reason, he is entitled to receive any previously
earned but unpaid salary and any vested benefits.
The Company and ITG have also entered into employment agreements, dated as
of April 1, 1995, with Nir Tarlovsky, the Vice President of Business Development
of the Company and a Vice President of ITG, the terms of which expire on March
31, 1998. Mr. Tarlovsky's employment agreements provide that his aggregate
initial base salary will be $150,000 per annum, which amount may be increased at
the sole discretion of the respective Board of Directors of each of the Company
and ITG. Pursuant to the agreement with the Company, the Company granted to Mr.
Tarlovsky options under its 1995 Plan to acquire up to 876,000 shares of the
Class A Common Stock. Mr. Tarlovsky's options to acquire shares of Class A
Common Stock vest in an amount no greater than 2% of the outstanding shares of
capital stock as of the date on which his current employment agreement expires.
The agreements contain non-compete covenants having a term of one year following
the termination of the agreements and a
98
<PAGE>
confidentiality covenant. The agreement with the Company relates to services to
be provided by Mr. Tarlovsky solely outside of the United States, while the
agreement with ITG relates to services to be provided by Mr. Tarlovsky solely
within the United States. The Company is currently re-negotiating Mr.
Tarlovsky's employment agreements.
RSL Europe has entered into an employment agreement, dated as of August 5,
1995, with Richard E. Williams, the Chief Executive Officer of RSL Europe, the
term of which expires on August 4, 1998. The employment agreement provides that
Mr. Williams' base salary shall be pounds 100,000 (approximately $160,000) per
annum, which amount may be increased at the sole discretion of RSL Europe's
Board of Directors, the majority of whom are members of the management of the
Company. Pursuant to the agreement, RSL Europe granted to Mr. Williams the
option to purchase shares of capital stock of RSL Europe equal to up to 2% of
the outstanding capital stock of RSL Europe (the 'RSL Europe Option Rights'). In
addition, Mr. Williams is, under circumstances more fully described in the
agreement, entitled to receive certain annual bonus payments based upon certain
performance-based goals. The agreement contains a non-compete covenant having a
term of nine months following the termination of the agreement and a
confidentiality covenant. The Company entered into an agreement pursuant to
which the Company, in consideration for his waiver of the RSL Europe Option
Rights, granted to Mr. Williams options to purchase 350,400 shares of Class A
Common Stock, which options became exercisable upon the closing date of the
Initial Public Offering at an exercise price per share of $.00457.
The Company has also entered into, or is in the process of entering into,
employment agreements with other executive officers of the Company and the
country managers of its Local Operators in the United States, the United
Kingdom, France, Sweden, Finland, Australia, Italy, Japan and the Netherlands.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee currently are Ronald S. Lauder,
Gustavo A. Cisneros and Eugene A. Sekulow. During the portion of 1997 prior to
the Initial Public Offering, Andrew Gaspar and Itzhak Fisher were members of the
Compensation Committee.
RSL Management Corporation ('RSL Management'), which is wholly-owned by
Ronald S. Lauder, the Chairman of the Board of the Company and the principal and
controlling shareholder of the Company, subleases an aggregate of 11,000 square
feet of office space to the Company at an annual rent of $767,000. RSL
Management subleases such space from The Estee Lauder Companies, Inc. Ronald S.
Lauder is also a principal stockholder of Estee Lauder and Leonard A. Lauder, a
director of the Company, is the Chairman, Chief Executive Officer of Estee
Lauder. Ronald S. Lauder and Leonard A. Lauder are brothers. In addition, RSL
Management provides payroll and benefits services to the Company for an annual
fee of $6,000. During 1996, Jacob Z. Schuster, Chief Financial Officer,
Executive Vice President, Treasurer and a director of the Company, was the
President and Treasurer of RSL Management. Mr. Schuster received compensation in
1996 only for his services to RSL Management (and such compensation was paid by
RSL Management). As of August 1, 1997, Mr. Schuster became a full time employee
of the Company and is being compensated by the Company.
In September 1996, the Company borrowed $35.0 million from Ronald S.
Lauder, the Chairman of the Board of the Company and the principal and
controlling shareholder of the Company in the form of a subordinated loan,
bearing interest at the rate of 11% per annum (the 'Subordinated Shareholder
Loan'). The Company repaid the Subordinated Shareholder Loan with the proceeds
of the Shareholder Equity Investment (described below).
The Company used the proceeds of the Subordinated Shareholder Loan to repay
$35.0 million of the amounts outstanding under the Revolving Credit Facility and
reduced the outstanding commitment amount under the Revolving Credit Facility to
$15.0 million. The outstanding commitment under the Revolving Credit Facility
was reduced to $7.5 million in October 1997. The Revolving Credit Facility is
personally guaranteed by Ronald S. Lauder, the Chairman of the Board of the
Company and the principal and controlling shareholder of the Company.
99
<PAGE>
Prior to the closing of the Debt Offering, Ronald S. Lauder, Leonard A.
Lauder, and LGV, an investment vehicle the principal investors of which are
Ronald S. Lauder and Leonard A. Lauder and the managing member (through a
wholly-owned company) of which is Andrew Gaspar, a director of the Company and
Vice Chairman, purchased an aggregate of 4,117,521 shares of Class B Common
Stock (approximately 9.3% of the outstanding common shares of the Company on a
fully diluted basis) for $50.0 million (the 'Shareholder Equity Investment').
LGV purchased one-half of such shares and Ronald S. Lauder and Leonard A. Lauder
each purchased one-quarter of such shares. The Company has applied the proceeds
of the Shareholder Equity Investment to the repayment in full of the
Subordinated Shareholder Loan, together with accrued interest.
In addition, Ronald S. Lauder had agreed, upon the request of the Company,
to provide (or arrange for a bank to provide) the Company with the Shareholder
Standby Facility. If this facility was provided by a bank, Mr. Lauder was to
personally guarantee the Company's obligations under the facility up to $35.0
million. The Shareholder Standby Facility expired upon the closing of the
Initial Public Offering and had never been utilized.
As consideration for the Shareholders Standby Facility and Mr. Lauder's
continuing guarantee of the Revolving Credit Facility, Mr. Lauder received, in
the aggregate, warrants to purchase 459,900 shares of Class B Common Stock, of
the Company. The exercise price, exercise period and other terms of the Lauder
Warrants are substantially the same as the terms of the Warrants, other than
with respect to the class of stock which will be issued upon their exercise. The
Warrants and the Lauder Warrants became exercisable on October 3, 1997.
During 1996, Nesim N. Bildirici, the Vice President of Mergers and
Acquisitions of the Company, was an employee of both the Company and RSLAG, a
venture capital company of which Ronald S. Lauder, the Company's Chairman and
its largest and controlling shareholder, and Leonard A. Lauder are the principal
investors. Andrew Gaspar, the Company's Vice Chairman, is the president of
RSLAG's corporate general partner. In the past, Mr. Bildirici's salary was paid
by RSLAG and the Company reimbursed RSLAG for a majority of Mr. Bildirici's
salary. In 1996, the Company reimbursed RSLAG approximately $130,000 for Mr.
Bildirici's services. Mr. Bildirici currently dedicates substantially all of his
business time to the business of the Company and, as of January 1, 1997, became
a full-time employee of the Company.
The Company entered into a consulting agreement as of September 1, 1995
with Eugene Sekulow, a director of the Company. The consulting agreement expired
August 31, 1997. The consulting agreement provided that Mr. Sekulow receive a
$24,000 annual fee, as well as an annual grant of options to purchase 21,900
shares of Class A Common Stock, for services rendered as a consultant to the
Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company intends to avoid entering into agreements and arrangements
(such as consulting agreements) with its non-employee directors or their
affiliates which, directly or indirectly, would result in compensation being
received by such directors.
The law firm of Conyers, Dill & Pearman, of which Nicolas Trollope, a
director of the Company is a partner, was engaged as the Company's counsel in
Bermuda for the fiscal year ended December 31, 1997 and will continue to be so
engaged for the fiscal year ending December 31, 1998.
For additional disclosure with respect to certain transactions between the
Company and certain of its directors, see 'Compensation--Committee Interlocks
and Insider Participation.'
100
<PAGE>
PRINCIPAL SHAREHOLDERS AND SELLING SHAREHOLDER
PRE-OFFERING
The following table sets forth certain information with respect to the
beneficial ownership of the Class A Common Stock and the Class B Common Stock at
March 20, 1998 by (i) each person known by the Company to own beneficially more
than 5% of the outstanding shares of either the Class A Common Stock or Class B
Common Stock, (ii) each director of the Company and each Named Executive Officer
who owns shares of any class of the Company's capital stock and (iii) the
Company's directors and executive officers as a group. Except as otherwise noted
below, each of the shareholders identified in the table has sole voting and
investment power over the shares beneficially owned by such person. The table
gives effect to distributions of Class B Common Stock by LGV to its members and
by RSLAG to its partners (see notes 5 and 6).
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
OF BENEFICIAL OWNERSHIP COMMON STOCK
CLASS A COMMON OF CLASS B COMMON ---------------------------
STOCK(1) STOCK % OF
--------------------- ---------------------- VOTING
NUMBER PERCENT NUMBER PERCENT POWER(2) % OWNERSHIP(2)
--------- ------- ---------- ------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
Ronald S. Lauder (3)(4)(5)(6)(7)... 48,464 * 18,086,296 57.9 % 56.0% 42.9%
Andrew Gaspar (3)(5)(6)(8)......... -- -- 3,476,138 11.3 10.9 8.3
Itzhak Fisher (3)(9)............... -- -- 4,590,986 14.9 14.4 11.0
Leonard A. Lauder
(3)(5)(6)(7)(10)................... -- -- 6,399,831 20.8 20.1 15.3
RSL Investments Corporation
(3)(4)............................. -- -- 9,348,563 30.4 29.3 22.4
EL/RSLG Media, Inc. (3)(7)......... -- -- 1,786,350 5.8 5.6 4.3
Bukfenc, Inc. (3)(8)............... -- -- 2,253,033 7.3 7.1 5.4
Jacob Z. Schuster (3)(11).......... -- -- 1,720,715 5.6 5.4 4.1
Gustavo A. Cisneros (12)........... 1,408,629 12.8% -- -- * 3.4
Nir Tarlovsky (3)(13).............. 648,917 5.8 345,301(14) 1.1 1.3 2.4
Nesim Bildirici (15)............... 547,499 4.8 178,513 * * 1.7
Mark J. Hirschhorn................. 78,402 * -- -- * *
Eugene Sekulow (16)................ 43,800 * -- -- * *
Fred H. Langhammer................. 12,226 * -- -- * *
Richard Williams (17).............. 350,400 3.1 -- -- * *
Nicolas G. Trollope (18)........... 1,000 * -- -- * *
All directors and executive
officers as a group (19 persons)
(19)............................... 3,276,062 27.3 30,670,436 98.2 95.6 78.5
Essex Investment Management Company
(20)............................... 1,163,420 10.5 -- * * 2.9
Nicholas-Applegate Capital
Management(21)..................... 683,600 6.2 -- -- * 1.6
</TABLE>
- ------------------
<TABLE>
<C> <S>
* Less than 1%.
(1) Does not include 31,220,622 shares of Class A Common Stock issuable upon conversion of shares of Class B
Common Stock (including 459,900 shares of Class B Common Stock issuable upon the exercise of Lauder Warrants).
Shares of Class B Common Stock are convertible at any time into shares of Class A Common Stock for no
additional consideration on a share-for-share basis.
(2) Represents the percentage of total voting power and the percentage ownership of the Class A Common Stock and
the Class B Common Stock beneficially owned as of March 20, 1998 by each identified shareholder and all
directors and executive officers as a group. The Class A Common Stock and the Class B Common Stock are the
only authorized classes of the Company's capital stock with shares outstanding.
(3) The business address of each of the indicated holders of the Company's securities is 767 Fifth Avenue, New
York, New York 10153.
(4) Includes (a) 48,464 shares of Class A Common Stock owned directly by Ronald S. Lauder; (b) 261,407 shares of
Class B Common Stock owned by RSLAG (see note 6); (c) 909,090 shares of Class B Common Stock owned by LGV (see
note 5); (d) 9,348,563 shares of Class B Common Stock owned by RSL Investments Corporation, a corporation
wholly-owned by Mr. Lauder; (e) 1,786,350 shares of Class B Common Stock owned by EL/RSLG Media, Inc.
('EL/RSLG') (see note 7); (f) 893,175 shares of Class B Common Stock owned by RAJ Family Partners L.P., of
which Mr. Lauder is a limited partner and a shareholder of the general partner; (g) 4,427,811 shares of Class
B Common Stock owned directly by Ronald S. Lauder; and (h) 459,900 shares of Class B Common Stock issuable
upon exercise of the Lauder Warrants.
(5) Andrew Gaspar is the managing member of LGV and Ronald S. Lauder and Leonard A. Lauder are both members with
substantial ownership interests in LGV, and as such each may be deemed to beneficially own all of the shares
of Class B Common Stock owned by LGV. Such shares, however, are only included once in the computation of
shares beneficially owned by directors and executive officers of the group. The managing member of LGV has
executed an irrevocable proxy in favor of Ronald S. Lauder to vote Ronald S. Lauder's allocable interest in such
shares as directed by him. Ronald S. Lauder, Leonard A. Lauder and Andrew Gaspar each disclaim
beneficial ownership of some of such shares.
On March 20, 1998, LGV distributed an aggregate of 1,149,669 shares of Class B Common Stock to its members. As
a result of such distribution, (a) 571,727 shares of Class B Common Stock were transferred to Ronald S.
Lauder; (b) 571,727 shares of Class B
</TABLE>
101
<PAGE>
<TABLE>
<C> <S>
Common Stock were transferred to Leonard A. Lauder; (c) an aggregate of 4,972 shares of Class B Common Stock
were transferred to Andrew Gaspar and Bukfenc LLC (see note 8); and (d) 909,090 shares of Class B Common Stock
remain in LGV.
(6) Andrew Gaspar is president of the corporate general partner of RSLAG, and Ronald S. Lauder is directly and
indirectly the owner of a majority of the limited partnership interests in RSLAG, and, as such, may be deemed
to beneficially own all of the shares of Class B Common Stock owned by RSLAG. The general partner of RSLAG has
executed an irrevocable proxy in favor of Ronald S. Lauder to vote Ronald S. Lauder's allocable interest in such
shares as directed by him. In addition, Leonard A. Lauder owns limited partnership interests in RSLAG.
Ronald S. Lauder, Leonard A. Lauder and Andrew Gaspar each disclaim beneficial ownership of some of such
shares. The shares of Class B Common Stock owned by RSLAG which may be deemed to be beneficially owned by
Ronald S. Lauder, Andrew Gaspar and Leonard A. Lauder are only included once in the computation of shares
beneficially owned by directors and executive officers of the group.
On March 20, 1998, RSLAG distributed an aggregate of 16,366,325 shares of Class B Common Stock to its
partners. As a result of such distribution, (a) an aggregate of 12,028,088 shares of Class B Common Stock were
transferred to certain entities over which Ronald S. Lauder has control or the stock holdings of which he may
be deemed to have beneficial ownership; (b) an aggregate of 3,274,975 shares of Class B Common Stock were
transferred to Leonard A. Lauder and certain entities over which he has control or the stock holdings of which
he may be deemed to have beneficial ownership; (c) an aggregate of 2,300,669 shares of Class B Common Stock
were transferred to Andrew Gaspar and Bukfenc, Inc. (see note 8); and (d) 261,407 shares of Class B Common
Stock remain in RSLAG.
(7) The 1995 Estee Lauder RSL Trust, of which Ronald S. Lauder is a trustee and the beneficiary, and the 1995
Estee Lauder LAL Trust, of which Leonard A. Lauder is a trustee and the beneficiary, each own 50% of EL/RSLG's
outstanding common stock. As such, Ronald S. Lauder and Leonard A. Lauder may each be deemed to beneficially
own all of the shares of Class B Common Stock owned by EL/RSLG. Ronald S. Lauder and Leonard A. Lauder each
disclaim beneficial ownership of some of such shares. Such shares, however, are only included once in the
computation of shares beneficially owned by directors and executive officers as a group.
(8) Includes (a) 48,879 shares of Class B Common Stock owned directly by Mr. Gaspar; (b) an aggregate of 1,170,497
shares of Class B Common Stock owned by LGV and RSLAG (see notes 5 and 6); (c) 2,253,033 shares of Class B
Common Stock owned by Bukfenc, Inc., a corporation wholly owned by Mr. Gaspar and members of his family; and
(d) 3,729 shares of Class B Common Stock owned by Bukfenc, LLC, a limited liability company, of which Mr.
Gaspar and members of his family are the only members.
(9) Such shares are owned by Fisher Investment Partners, L.P., a Delaware limited partnership, of which Itzhak
Fisher is the sole general partner and the Fisher 1997 Family Trust is the sole limited partner. Mr. Fisher
disclaims beneficial ownership of such shares.
(10) Includes (a) an aggregate of 1,170,497 shares of Class B Common Stock owned by LGV and RSLAG (see notes 5 and
6); (b) 2,196,558 shares of Class B Common Stock owned directly by Leonard A. Lauder; (c) 4,866 shares of
Class B Common Stock owned by Mr. Lauder's wife; (d) 348,385 shares of Class B Common Stock owned by LAL
Family Partners, L.P., of which Mr. Lauder is a general partner; (e) 1,786,350 shares of Class B Common Stock
owned by EL/RSLG (see note 7); and (f) 893,175 shares of Class B Common Stock owned by LWG Family Partners,
L.P., a partnership whose managing partner is a corporation which is one-third owned by Mr. Lauder. Mr. Lauder
disclaims beneficial ownership of the shares of Class B Common Stock owned by his wife.
(11) Such shares are owned by Schuster Family Partners I, L.P., a New York limited partnership, of which Jacob Z.
Schuster is the sole general partner and the limited partners of which are certain of Mr. Schuster's children.
Mr. Schuster disclaims beneficial ownership of such shares.
(12) Such shares are owned by Coral Gate, an investment business company organized under the laws of the British
Virgin Islands, which is beneficially owned by Gustavo A. Cisneros and his brother, Ricardo Cisneros. The
business address for Gustavo Cisneros is 36 East 61st Street, New York, New York 10021.
(13) Includes 509,580 shares of Class A Common Stock owned directly by Mr. Tarlovsky and 139,337 shares of Class A
Common Stock issuable upon the exercise of an equal number of options granted to Mr. Tarlovsky under the 1995
Plan, which options become exercisable on April 1, 1998.
(14) Such shares are owned by Tarlovsky Investment Partners, L.P., a Delaware limited partnership of which Nir
Tarlovsky is the sole general partner and the Tarlovsky 1997 Family Trust is the sole limited partner. Mr.
Tarlovsky disclaims beneficial ownership of such shares.
(15) Includes 202,561 shares of Class A Common Stock owned directly by Mr. Bildirici and 344,938 shares of Class A
Common Stock issuable upon the exercise of an equal number of options granted to Mr. Bildirici under the 1995
Plan, which options become exercisable on April 15, 1998.
(16) Consists of 43,800 shares of Class A Common Stock issuable upon the exercise of an equal number of presently
exercisable options granted to Mr. Sekulow under the 1995 Plan.
(17) Consists of 350,400 shares of Class A Common Stock issuable upon the exercise of an equal number of presently
exercisable options granted to Mr. Williams under the 1995 Plan.
(18) Such shares are owned by The Proverbs Trust, a Bermuda trust, of which Mr. Trollope and his wife are the
trustees and beneficiaries.
(19) Includes 966,075 shares of Class A Common Stock issuable upon the exercise of an equal number of options
granted to certain of the directors and executive officers as a group.
(20) Information as to the shares owned by Essex Investment Company, an investment adviser registered under Section
203 of the Investment Advisers Act of 1940, is as of December 31, 1997, and is taken from a Schedule 13G/A
filed with the Securities and Exchange Commission (the 'Commission') on March 12, 1998. The address for Essex
Investment Management Company is 125 High Street, Boston, Massachussetts 02110.
(21) Information as to the shares owned by Nicholas-Applegate Capital Management, an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940, is as of December 31, 1997, and is taken from a Schedule
13G filed with the Commission on February 3, 1998. The address for Nicholas-Applegate Capital Management is
600 West Broadway, 29th Floor, San Diego, California 92101.
</TABLE>
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POST-OFFERING
The following table sets forth certain information with respect to the
beneficial ownership of the Class A Common Stock and the Class B Common Stock at
March 20, 1998 by (i) each person known by the Company to own beneficially more
than 5% of the outstanding shares of either the Class A Common Stock or Class B
Common Stock, (ii) each director of the Company and each Named Executive Officer
who owns shares of any class of the Company's capital stock and (iii) the
Company's directors and executive officers as a group, assuming (a) the exercise
on March 20, 1998 of all of the remaining Warrants and (b) the sale on March 20,
1998 by the Selling Shareholder, Bukfenc, Inc., a corporation wholly owned by
Andrew Gaspar, Vice Chairman of the Company, and members of his family, of all
300,000 shares of Class A Common Stock offered by it hereby (which necessarily
assumes the conversion by the Selling Shareholder of an identical number of
shares of Class B Common Stock (see note 8 to the table)). Mr. Gaspar is not
involved in the day-to-day management of the Company and his sale would
represent approximately 8.6% of his deemed beneficial ownership in the Company.
The Selling Shareholder cannot sell its Shares prior to April 4, 1998, when a
lock-up agreement between Mr. Gaspar and the underwriters of the Initial Public
Offering expires, unless a waiver is granted. Ronald S. Lauder, the Company's
Chairman and largest and controlling shareholder, Itzhak Fisher, the Company's
Chief Executive Officer, Jacob Z. Schuster, the Company's Chief Financial
Officer, and all other directors and members of management have indicated that
they have no intention as of the date of this Prospectus to register for sale
any of their shares of Common Stock. Except as otherwise noted below, each of
the shareholders identified in the table has sole voting and investment power
over the shares beneficially owned by such person.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP COMMON STOCK
OF CLASS A OF CLASS B ---------------------------
COMMON STOCK(1) COMMON STOCK % OF
--------------------- ---------------------- SHARES VOTING
NUMBER PERCENT NUMBER PERCENT OFFERED POWER(2) % OWNERSHIP(2)
--------- ------- ---------- ------- -------- -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald S. Lauder (3)(4)(5)(6)(7)... 48,464 * 18,086,296 58.5% -- 56.2% 41.8%
Andrew Gaspar (3)(5)(6)(8)......... -- -- 3,176,138 10.4 300,000 10.0 7.4
Itzhak Fisher (3)(9)............... -- -- 4,590,986 15.1 -- 14.5 10.7
Leonard A. Lauder
(3)(5)(6)(7)(10)................... -- -- 6,399,831 21.0 -- 20.2 14.9
RSL Investments Corporation
(3)(4)............................. -- -- 9,348,563 30.7 -- 29.5 21.8
EL/RSLG Media, Inc. (3)(7)......... -- -- 1,786,350 5.9 -- 5.6 4.2
Bukfenc, Inc. (3)(8)............... -- -- 1,953,033 6.4 300,000 6.2 4.5
Jacob Z. Schuster (3)(11).......... -- -- 1,720,715 5.6 -- 5.4 4.0
Gustavo A. Cisneros (12)........... 1,408,629 11.3% -- -- -- * 3.3
Nir Tarlovsky (3)(13).............. 652,759 5.2 345,301(14) 1.1 -- 1.3 2.3
Nesim Bildirici (15)............... 547,499 4.3 178,513 * -- -- 1.7
Mark J. Hirschhorn................. 78,402 * -- -- -- * *
Eugene Sekulow (16)................ 43,800 * -- -- -- * *
Fred H. Langhammer................. 12,226 * -- -- -- * *
Richard Williams (17).............. 350,400 2.7 -- -- -- * *
Nicolas G. Trollope (18)........... 1,000 * -- -- -- * *
All directors and executive
officers as a group (19 persons)
(8)(19)............................ 3,279,904 24.4 30,370,436 98.2 300,000 95.1 75.8
Essex Investment Management Company
(20)............................... 1,163,420 9.3 -- * -- * 2.7
Nicholas-Applegate Capital
Management (21).................... 683,600 5.5 -- -- -- * 1.6
</TABLE>
- ------------------
<TABLE>
<C> <S>
* Less than 1%.
(1) Does not include 30,920,622 shares of Class A Common Stock issuable upon conversion of shares of Class B
Common Stock (including 459,900 shares of Class B Common Stock issuable upon the exercise of Lauder Warrants).
Shares of Class B Common Stock are convertible at any time into shares of Class A Common Stock for no
additional consideration on a share-for-share basis.
(2) Represents the percentage of total voting power and the percentage ownership of the Class A Common Stock and
the Class B Common Stock beneficially owned as of March 20, 1998 by each identified shareholder and all
directors and executive officers as a group after making the assumptions described in the first sentence of
the lead-in paragraph to the foregoing table. The Class A Common Stock and the Class B Common Stock are the
only authorized classes of the Company's capital stock with shares outstanding.
</TABLE>
(Footnotes continued on next page)
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<TABLE>
<C> <S>
(3) The business address of each of the indicated holders of the Company's securities is 767 Fifth Avenue, New
York, New York 10153.
(4) Includes (a) 48,464 shares of Class A Common Stock owned directly by Ronald S. Lauder; (b) 261,407 shares of
Class B Common Stock owned by RSLAG (see note 6); (c) 909,090 shares of Class B Common Stock owned by LGV (see
note 5); (d) 9,348,563 shares of Class B Common Stock owned by RSL Investments Corporation, a corporation
wholly owned by Mr. Lauder; (e) 1,786,350 shares of Class B Common Stock owned by EL/RSLG Media (see note 7);
(f) 893,175 shares of Class B Common Stock owned by RAJ Family Partners, L.P., of which Mr. Lauder is a
limited partner and a shareholder of the general partner; (g) 4,427,811 shares of Class B Common Stock owned
directly by Ronald S. Lauder; and (h) 459,900 shares of Class B Common Stock issuable upon exercise of the
Lauder Warrants.
(5) Andrew Gaspar is the managing member of LGV and Ronald S. Lauder and Leonard A. Lauder are both members with
substantial ownership interests in LGV, and as such each may be deemed to beneficially own all of the shares
of Class B Common Stock owned by LGV. Such shares, however, are only included once in the computation of
shares beneficially owned by directors and executive officers of the group. The managing member of LGV has
executed an irrevocable proxy in favor of Ronald S. Lauder to vote Ronald S. Lauder's allocable interest in such
shares as directed by him. Ronald S. Lauder, Leonard A. Lauder and Andrew Gaspar each disclaim
beneficial ownership of some of such shares.
On March 20, 1998, LGV distributed an aggregate of 1,149,669 shares of Class B Common Stock to its members. As
a result of such distribution, (a) 571,727 shares of Class B Common Stock were transferred to Ronald S.
Lauder; (b) 571,727 shares of Class B Common Stock were transferred to Leonard A. Lauder; (c) an aggregate of
4,972 shares of Class B Common Stock were transferred to Andrew Gaspar and Bukfenc LLC (see note 8); and (d)
909,090 shares of Class B Common Stock remain in LGV.
(6) Andrew Gaspar is president of the corporate general partner of RSLAG, and Ronald S. Lauder is directly and
indirectly the owner of a majority of the limited partnership interests in RSLAG, and, as such, may be deemed
to beneficially own all of the shares of Class B Common Stock owned by RSLAG. The general partner of RSLAG has
executed an irrevocable proxy in favor of Ronald S. Lauder to vote Ronald S. Lauder's allocable interest in such
shares as directed by him. In addition, Leonard A. Lauder owns limited partnership interests in RSLAG.
Ronald S. Lauder, Leonard A. Lauder and Andrew Gaspar each disclaim beneficial ownership of some of such
shares. The shares of Class B Common Stock owned by RSLAG which may be deemed to be beneficially owned by
Ronald S. Lauder, Andrew Gaspar and Leonard A. Lauder are only included once in the computation of shares
beneficially owned by directors and executive officers of the group.
On March 20, 1998, RSLAG distributed an aggregate of 16,366,325 shares of Class B Common Stock to its
partners. As a result of such distribution, (a) an aggregate of 12,028,088 shares of Class B Common Stock were
transferred to certain entities over which Ronald S. Lauder has control or the stock holdings of which he may
be deemed to have beneficial ownership; (b) an aggregate of 3,274,975 shares of Class B Common Stock were
transferred to Leonard A. Lauder and certain entities over which he has control or the stock holdings of which
he may be deemed to have beneficial ownership; (c) an aggregate of 2,300,669 shares of Class B Common Stock
were transferred to Andrew Gaspar and Bukfenc, Inc. (see note 8); and (d) 261,407 shares of Class B Common
Stock remain in RSLAG.
(7) The 1995 Estee Lauder RSL Trust, of which Ronald S. Lauder is a trustee and the beneficiary, and the 1995
Estee Lauder LAL Trust, of which Leonard A. Lauder is a trustee and the beneficiary, each own 50% of EL/RSLG's
outstanding common stock. As such, Ronald S. Lauder and Leonard A. Lauder may each be deemed to beneficially
own all of the shares of Class B Common Stock owned by EL/RSLG. Ronald S. Lauder and Leonard A. Lauder each
disclaim beneficial ownership of some of such shares. Such shares, however, are only included once in the
computation of shares beneficially owned by directors and executive officers as a group.
(8) Includes (a) 48,879 shares of Class B Common Stock owned directly by Mr. Gaspar; (b) an aggregate of 1,170,497
shares of Class B Common Stock owned by LGV and RSLAG (see notes 5 and 6); (c) 1,953,033 shares of Class B
Common Stock owned by Bukfenc, Inc., a corporation wholly owned by Mr. Gaspar and members of his family; and
(d) 3,729 shares of Class B Common Stock owned by Bukfenc, LLC, a limited liability company, of which Mr.
Gaspar and members of his family are the only members.
The 300,000 shares being offered by the Selling Shareholder are issuable upon conversion of an identical
number of shares of Class B Common Stock which were included in the shares of Class B Common Stock distributed
to the Selling Shareholder as part of the distributions by RSLAG and LGV on March 20, 1998 of shares of Class
B Common Stock owned by each of them. (Shares of Class B Common Stock are convertible at any time into shares
of Class A Common Stock for no additional consideration on a share-for-share basis.) These shares cannot be
sold by the Selling Shareholder prior to April 4, 1998, when a lock-up agreement between Mr. Gaspar and the
underwriters of the Initial Public Offering expires, unless a waiver is granted.
The share information in the table for Mr. Gaspar, the Selling Shareholder and the directors and executive
officers as a group assumes the conversion and sale of such shares.
</TABLE>
(Footnotes continued on next page)
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<TABLE>
<C> <S>
(9) Such shares are owned by Fisher Investment Partners, L.P., a Delaware limited partnership, of which Itzhak
Fisher is the sole general partner and the Fisher 1997 Family Trust is the sole limited partner. Mr. Fisher
disclaims beneficial ownership of such shares.
(10) Includes (a) an aggregate of 1,170,497 shares of Class B Common Stock owned by LGV and RSLAG (see notes 5 and
6); (b) 2,196,558 shares of Class B Common Stock owned directly by Leonard A. Lauder; (c) 4,866 shares of
Class B Common Stock owned by Mr. Lauder's wife; (d) 348,385 shares of Class B Common Stock owned by LAL
Family Partners, L.P., of which Mr. Lauder is a general partner; (e) 1,786,350 shares of Class B Common Stock
owned by EL/RSLG (see note 7); and (f) 893,175 shares of Class B Common Stock owned by LWG Family Partners,
L.P., a partnership whose managing partner is a corporation which is one-third owned by Mr. Lauder. Mr. Lauder
disclaims beneficial ownership of the shares of Class B Common Stock owned by his wife.
(11) Such shares are owned by Schuster Family Partners I, L.P., a New York limited partnership, of which Jacob Z.
Schuster is the sole general partner and the limited partners of which are certain of Mr. Schuster's children.
Mr. Schuster disclaims beneficial ownership of such shares.
(12) Such shares are owned by Coral Gate, an investment business company organized under the laws of the British
Virgin Islands, which is beneficially owned by Gustavo A. Cisneros and his brother, Ricardo Cisneros. The
business address for Gustavo Cisneros is 36 East 61st Street, New York, New York 10021.
(13) Includes 509,580 shares of Class A Common Stock owned directly by Mr. Tarlovsky and 143,179 shares of Class A
Common Stock issuable upon the exercise of an equal number of options granted to Mr. Tarlovsky under the 1995
Plan, which options become exercisable on April 1, 1998. Under the terms of Mr. Tarlovsky's option agreement,
Mr. Tarlovsky is entitled to a number of options based on the number of outstanding shares of Common Stock on
the vesting date. Assuming the exercise of all remaining Warrants prior to the next vesting date (and the
subsequent issuance of 1,152,715 shares of Class A Common Stock), Mr. Tarlovsky's exercisable options would
increase by 3,842 to 143,179 from 139,337.
(14) Such shares are owned by Tarlovsky Investment Partners, L.P., a Delaware limited partnership of which Nir
Tarlovsky is the sole general partner and the Tarlovsky 1997 Family Trust is the sole limited partner. Mr.
Tarlovsky disclaims beneficial ownership of such shares.
(15) Includes 202,561 shares of Class A Common Stock owned directly by Mr. Bildirici and 344,938 shares of Class A
Common Stock issuable upon the exercise of an equal number of options granted by Mr. Bildirici under the 1995
Plan, which options become exercisable on April 15, 1998.
(16) Consists of 43,800 shares of Class A Common Stock issuable upon the exercise of an equal number of presently
exercisable options granted to Mr. Sekulow under the 1995 Plan.
(17) Consists of 350,400 shares of Class A Common Stock issuable upon the exercise of an equal number of presently
exercisable options granted to Mr. Williams under the 1995 Plan.
(18) Based upon a Schedule 13G filed with the Commission on January 29, 1998. The business address for Essex
Investment Management Company is 125 High Street, Boston, Massachusetts 02110.
(18) Such shares are owned by The Proverbs Trust, a Bermuda trust, of which Mr. Trollope and his wife are the
trustees and beneficiaries.
(19) Includes 969,917 shares of Class A Common Stock issuable upon the exercise of an equal number of options
granted to certain of the directors and executive officers as a group.
(20) Information as to the shares owned by Essex Investment Company, an investment adviser registered under Section
203 of the Investment Advisers Act of 1940, is as of December 31, 1997, and is taken from a Schedule 13G/A
filed with the Securities and Exchange Commission (the 'Commission') on March 12, 1998. The address for Essex
Investment Management Company is 125 High Street, Boston, Massachusetts 02110.
(21) Information as to the shares owned by Nicholas-Applegate Capital Management, an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940, is as of December 31, 1997, and is taken from a Schedule
13G filed with the Commission on February 3, 1998. The address for Nicholas-Applegate Capital Management is
600 West Broadway, 29th Floor, San Diego, California 92101.
</TABLE>
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DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of the Company is qualified
in its entirety by reference to the provisions of the Company's Memorandum of
Association and Bye-Laws, copies of which have been filed with the Commission.
In September 1997, in connection with the Initial Public Offering, the
Company revised its capital structure to effect a 2.19-for-one stock split and
to increase the number of authorized shares of Common Stock and of the Company's
Preferred Stock (the 'Preferred Stock'). As a result, the Company is authorized
to issue 438,000,000 shares of Common Stock, which may be issued as shares of
Class A Common Stock or Class B Common Stock. The Company is also authorized to
issue 65,700,000 shares of Preferred Stock. The Company has in the past used and
intends in the future to use shares of its capital stock to pay for
acquisitions.
CLASS A COMMON STOCK
As of the date of this Prospectus, 11,040,347 shares of Class A Common
Stock were issued and outstanding. The holders of the Class A Common Stock are
entitled to one vote per share and are entitled to vote as a single class
together with the holders of the Class B Common Stock and the Preferred Stock on
all matters subject to shareholder approval, except that the holders of the
Class A Common Stock will vote as a separate class on any matter requiring class
voting by The Companies Act 1981 of Bermuda. The holders of the outstanding
shares of Class A Common Stock are entitled to receive dividends as and when
declared by the Board of Directors, pari passu with the holders of the Class B
Common Stock, out of funds legally available therefor after the payment of any
dividends declared but unpaid on any shares of Preferred Stock then outstanding.
The holders of the Class A Common Stock have no preemptive or cumulative voting
rights and no rights to convert their shares of Class A Common Stock into any
other securities. On liquidation, dissolution or winding up of the Company, the
holders of Class A Common Stock are entitled to receive, pari passu with the
holders of Class B Common Stock, pro rata the net assets of the Company
remaining after preferential distribution to holders of Preferred Stock and the
payment of all creditors and liquidation preferences, if any.
TRANSFER AGENT AND REGISTRAR
The Company's transfer agent and registrar for the Class A Common Stock is
American Stock Transfer & Trust Company.
CLASS B COMMON STOCK
As of the date of this Prospectus, there were 19 holders of Class B Common
Stock and 30,760,722 shares of Class B Common Stock were issued and outstanding.
The holders of the Class B Common Stock are entitled to 10 votes per share and
are entitled to vote as a single class together with the holders of the Class A
Common Stock and the Preferred Stock on all matters subject to shareholder
approval, except that the holders of the Class B Common Stock vote as a separate
class on any matter requiring class voting by The Companies Act 1981 of Bermuda.
The holders of the outstanding shares of Class B Common Stock are entitled to
receive dividends as and when declared by the Board of Directors, pari passu
with the holders of Class A Common Stock, out of funds legally available
therefor. The holders of the Class B Common Stock can convert their shares of
Class B Common Stock on a share-for-share basis into Class A Common Stock.
Shares of Class B Common Stock may be transferred only to other original holders
of Class B Common Stock or to members of the family of the original holder by
gift, devise or otherwise through laws of inheritance, descent, distribution or
to a trust established by the holder for the holder's family members, to
corporations the majority of beneficial owners of which are or will be owned by
the holders of Class B Common Stock and from corporations or partnerships which
are the holders of Class B Common Stock, to their shareholders or partners, as
the case may be (each a 'Permitted Transferee'). Any other transfer of Class B
Common Stock is void, although the Class B Common Stock may be converted at any
time into Class A Common Stock on a one to one basis and then sold, subject to
the conditions and restrictions of Rule 144.
On liquidation or winding up of the Company, the holders of the Class B
Common Stock are entitled to share ratably, pari passu with the holders of Class
A Common Stock, the assets remaining after
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payment of all debts and other liabilities and after distribution in full of the
preferential amounts to be distributed to the holders of Preferred Stock.
PREFERRED STOCK
As of the date of this Prospectus, the Company is authorized to issue
65,700,000 shares of Preferred Stock and no such shares are currently
outstanding.
WARRANTS
SHAREHOLDER WARRANTS
As consideration for the Shareholders Standby Facility and Mr. Lauder's
continuing guarantee of the Revolving Credit Facility, Mr. Lauder received, in
the aggregate, warrants to purchase 459,900 shares of Class B Common Stock, of
the Company. The exercise price, exercise period and other terms of the Lauder
Warrants are substantially the same as the terms of the Warrants, other than
with respect to the class of stock which will be issued upon their exercise. The
Lauder Warrants became exercisable beginning on October 3, 1997. Mr. Lauder has
waived his rights under the warrant agreement governing the Lauder Warrants to
register under the Registration Statement of which this Prospectus is a part the
shares of Class A Common Stock issuable upon conversion of the shares of Class B
Common Stock issuable upon the exercise of the Lauder Warrants.
WARRANTS ISSUED IN DEBT OFFERING
The Company issued an aggregate of 300,000 Warrants to the purchasers of
the Units in the 1996 Units Offering. The Warrants were issued pursuant to the
Warrant Agreement between the Company and the Warrant Agent.
Each Warrant is evidenced by a certificate and currently entitles the
holder thereof to purchase 3.975 shares of Class A Common Stock from the Company
at an exercise price of $.00457 per share, subject to adjustment as provided in
the Warrant Agreement. The Warrants may be exercised at any time prior to the
close of business on October 3, 2007. Warrants that are not exercised by such
date will expire.
The aggregate number of shares of Class A Common Stock issuable upon
exercise of the Warrants is equal to approximately 10.4% of the outstanding
shares of Class A Common Stock, as of the date of this Prospectus.
CERTAIN TERMS
The Warrant Agreement contains provisions (to which there are certain
exceptions) adjusting the exercise price and the number of shares of Class A
Common Stock or other securities issuable upon exercise of a Warrant in the
event of (i) a division, consolidation or reclassification of the shares of
Class A Common Stock, (ii) the issuance of rights, options, warrants or
convertible or exchangeable securities to all holders of shares of Class A
Common Stock entitling such holders to subscribe for or purchase shares of Class
A Common Stock at a price per share which is lower than the then current value
per share of Class A Common Stock, subject to certain exceptions, (iii) the
issuance of shares of Class A Common Stock at a price per share that is lower
than the then current value of such shares, except for issuances in connection
with an acquisition, merger or similar transaction with a third party, (iv)
certain distributions to all holders of shares of Class A Common Stock of
evidences of indebtedness or assets and (v) in the discretion of the Company's
Board of Directors, in certain other circumstances.
In addition, in accordance with the Warrant Agreement, the shares of Class
A Common Stock issuable upon exercise of the Warrants are being registered under
the Registration Statement of which this Prospectus is a part.
ANTI-TAKEOVER PROTECTIONS
The voting provisions of the Class B Common Stock and the ability of the
Company to issue Preferred Stock could substantially impede the ability of one
or more shareholders (acting in concert) to acquire sufficient influence over
the election of directors and other matters to effect a change in control or
management of the Company. As a result, such provisions may be deemed to have an
anti-takeover effect and may delay, defer or prevent a tender offer or takeover
attempt that a shareholder might
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consider in such shareholder's best interest, including attempts that might
result in a premium over the market price for the Class A Common Stock held by
shareholders.
CERTAIN PROVISIONS OF BERMUDA LAW
The Company has been designated as a non-resident under the Exchange
Control Act of 1972 (the 'Control Act') by the Bermuda Monetary Authority whose
permission for the issuance of shares of Class A Common Stock has been obtained.
This designation allows the Company to engage in transactions in currencies
other than the Bermuda dollar. The permission of the Bermuda Monetary Authority
does not constitute a guarantee by the Bermuda Monetary Authority as to the
performance or creditworthiness of the Company and in giving such pemission the
Bermuda Monetary Authority will not be liable for the correctness of any
opinions expressed herein.
The transfer of shares of Class A Common Stock between persons regarded as
resident outside Bermuda for exchange control purposes and the issuance of such
shares after the completion of the Offering to or by such persons may be
effected without specific consent under the Control Act and regulations
thereunder. Issues and transfers of shares involving any person regarded as
resident in Bermuda for exchange control purposes require specific prior
approval under the Control Act.
Non-Bermuda owners of shares of Class A Common Stock are not restricted in
the exercise of the rights to hold or vote their shares. Because the Company has
been designated as a non-resident for Bermuda exchange control purposes there
are no restrictions on its ability to transfer funds in and out of Bermuda or to
pay dividends to United States residents who are holders of Class A Common
Stock, other than in respect of local Bermuda currency.
In accordance with Bermuda law, share certificates are only issued in the
names of corporations, partnerships or individuals. In the case of an applicant
acting in a special capacity (for example as a trustee), certificates may, at
the request of the applicant, record the capacity in which the applicant is
acting. Notwithstanding the recording of any such special capacity the Company
is not bound to investigate or incur any responsibility in respect of the proper
administration of any such trust.
The Company will take no notice of any trust applicable to any of its
shares whether or not it had notice of such trust.
As an 'exempted company', the Company is exempt from Bermuda laws which
restrict the percentage of share capital that may be held by non-Bermudians but,
as an exempted company, the Company may not participate in certain business
transactions including: (1) the acquisition or holding of land in Bermuda
(except that required for its business and held by way of lease or tenancy for
terms of not more than 21 years); (2) the taking of mortgages on land in Bermuda
to secure an amount in excess of $50,000 without the consent of the Minister of
Finance of Bermuda; (3) the acquisition of securities created or issued by, or
any interest in, any local company or business, other than certain types of
Bermuda government securities or another 'exempted' company, partnership or
other corporation resident in Bermuda but incorporated abroad; or (4) the
carrying on of business of any kind in Bermuda, except in furtherance of the
business of the Company carried on outside Bermuda or with the permission of, or
under a license granted by, the Minister of Finance of Bermuda.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
REVOLVING CREDIT FACILITIES
On October 5, 1995, The Chase Manhattan Bank (the 'Bank') extended a $10
million revolving credit facility to Ronald S. Lauder, Chairman of the Board of
the Company and its largest and controlling shareholder. On June 26, 1996, the
Bank replaced the original Revolving Credit Facility, which had been increased
to $25.0 million, by extending a $40.0 million Revolving Credit Facility
directly to the Company which was increased to $50.0 million in August 1996.
Pursuant to the Subordinated Shareholder Loan, $35.0 million of this facility
was repaid and the Revolving Credit Facility was reduced to $7.5 million. The
remaining outstanding amounts under the Revolving Credit Facility were repaid
with a portion of the proceeds of the Shareholder Equity Investment. The Company
intends to maintain the Revolving Credit Facility and, accordingly, such amounts
may be subsequently reborrowed. Mr. Lauder has guaranteed the Company's
obligations under the Revolving Credit Facility. The Revolving Credit Facility
accrues interest on all amounts outstanding at the Company's option at either
(i) the Bank's publicly announced prime rate per annum or (ii) LIBOR plus 1% per
annum, with such interest rate to be determined by the Company. As of the date
of this Prospectus, the full amount of the Revolving Credit Facility was
available to the Company. The Revolving Credit Facility is payable on demand or
is otherwise due and payable by the Company on June 30, 1998.
The Company, through LDM, has a $10.0 million revolving credit facility
with Coast Business Credit. There was $4.5 million outstanding under this
facility at December 31, 1997. This facility is payable in full on September 30,
2000 and accrues interest at prime rate plus 2.5% per annum.
VENDOR FINANCING
Ericsson has provided to certain of the Company's subsidiaries an aggregate
of approximately $50 million in financing commitments to fund the purchase of
additional switches and related equipment. At December 31, 1997, approximately
$15.8 million of this facility was available. Borrowings from this equipment
vendor will accrue interest at a rate of LIBOR plus either 5.25% or 4.5%
depending on the equipment purchased.
1996 NOTES
GENERAL
On October 3, 1996, the Company and the Note Issuer (together, the
'Issuers') issued $300.0 million of 12 1/4% Senior Notes pursuant to the 1996
Indenture among the Issuers and The Chase Manhattan Bank, as trustee (the
'Trustee'). The 1996 Notes are unconditionally guaranteed by the Company. On May
22, 1997, the Company consummated the Exchange Offer to exchange the 1996 Notes
issued in the 1996 Units Offering for $300.0 million of 1996 Notes that had been
registered under the Securities Act.
PRINCIPAL, MATURITY AND INTEREST
The 1996 Notes are limited in aggregate principal amount to $300.0 million
and will mature on October 3, 2006. Interest on the 1996 Notes accrues at
12 1/4% per annum and is payable semiannually in arrears on May 15 and November
15 of each year. Interest is computed on the basis of a 360-day year comprised
of 12 30-day months. At the closing of the 1996 Units Offering, the Note Issuer
used $102.8 million of the net proceeds of the 1996 Units Offering to purchase a
portfolio of securities, initially consisting of U.S. government securities
(including any securities substituted in respect thereof, the 'Pledged
Securities'), to pledge as security for payment of interest on the principal of
the 1996 Notes. Proceeds from the Pledged Securities may be used by the Note
Issuer to make interest payments on the 1996 Notes through November 15, 1999.
The Pledged Securities are being held by the Trustee pending disbursement. The
Note Issuer is under no obligation to escrow additional securities.
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RANKING
The 1996 Notes are unsecured senior obligations of the Note Issuer, rank
pari passu in right of payment with all existing and future senior obligations
of the Issuers, including, without limitation, the 1998 Notes and the German
Notes, and rank senior in right of payment to all future subordinated
obligations of the Issuers.
REDEMPTION
The 1996 Notes are not redeemable at the Note Issuer's option prior to
November 15, 2001. Thereafter, the 1996 Notes are subject to redemption at the
option of the Note Issuer, in whole or in part, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest thereon to the applicable redemption date, if redeemed during
the 12-month period beginning on November 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ----------------------------------------------------------------------------------------- -----------
<S> <C>
2001..................................................................................... 106.125%
2002..................................................................................... 103.0625%
2003 and thereafter...................................................................... 100.000%
</TABLE>
In addition, at any time on or before November 15, 1999, the Company may
redeem up to $90.0 million of the original aggregate principal amount of the
1996 Notes with the net proceeds of a sale of common equity at a redemption
price equal to 112.25% of the principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the date of redemption, provided that at least
$210.0 million of aggregate principal amount of 1996 Notes remains outstanding
immediately after such redemption. The Company intends to redeem $90.0 million
of the original aggregate principal amount of the 1996 Notes with the Equity
Clawback. The Company has until April 3, 1998 to effect such a redemption.
COVENANTS
The 1996 Indenture restricts, among other things, the Company's ability to
incur additional indebtedness, pay dividends or make certain other restricted
payments, incur certain liens to secure pari passu or subordinated indebtedness,
engage in any sale and leaseback transaction, sell, assign, transfer, lease,
convey or otherwise dispose of substantially all of the assets of the Company,
enter into certain transactions with affiliates, or incur indebtedness that is
subordinated in right of payment to any senior indebtedness and senior in right
of payment to the 1996 Notes. The 1996 Indenture permits, under certain
circumstances, the Company's subsidiaries to be deemed unrestricted subsidiaries
and thus not subject to the restrictions of the 1996 Indenture.
EVENTS OF DEFAULT
The 1996 Indenture contains standard events of default, including (i)
defaults in the payment of principal, premium or interest, (ii) defaults in the
compliance with covenants contained in the 1996 Indenture, (iii) cross defaults
on more than $10 million of other indebtedness, (iv) failure to pay more than
$10 million of judgments that have not been stayed by appeal or otherwise and
(v) the bankruptcy of the Company or certain of its subsidiaries.
U.S. DOLLAR NOTES
GENERAL
On February 27, 1998, the Note Issuer issued $200.0 million of 9 1/8%
Senior Notes due 2008 and $328.1 million ($200.0 million initial accreted value)
10 1/8% Senior Discount Notes due 2008 pursuant to the indentures governing the
U.S. Dollar Notes among the Issuers and Trustee. The U.S. Dollar Notes are
unconditionally guaranteed by the Company.
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PRINCIPAL, MATURITY AND INTEREST
The U.S. Dollar Notes are initially limited in aggregate principal amount
at maturity to $528.1 million and will mature on March 1, 2008. Interest on the
U.S. Dollar Senior Notes accrues at 9 1/8% per annum and is payable semiannually
on March 1 and September 1 of each year, commencing September 1, 1998. No
interest will be payable on the U.S. Dollar Senior Discount Notes prior to
September 1, 2003. From and after March 1, 2003, interest on the U.S. Dollar
Senior Discount Notes will accrue at 10 1/8% on the principal amount at maturity
of such notes and is payable semiannually on March 1 and September 1 of each
year, commencing September 1, 2003. Interest on the U.S. Dollar Notes is
computed on the basis of a 360-day year comprised of 12 30-day months.
RANKING
The U.S. Dollar Notes are unsecured senior obligations of the Issuers, rank
pari passu in right of payment with the 1996 Notes, the German Notes and all
other existing and future senior obligations of the Issuers, and rank senior in
right of payment to all future subordinated obligations of the Issuers.
REDEMPTION
The U.S. Dollar Notes are subject to redemption at the option of the Note
Issuer, in whole or in part, at the redemption prices (expressed as percentages
of stated principal amount) set forth below plus accrued and unpaid interest
thereon to (but excluding) the applicable redemption date, if redeemed during
the 12-month period beginning on March 1 of the years indicated below:
U.S. DOLLAR SENIOR NOTES
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ------------------------------------------------------------------------------------ ----------------
<S> <C>
2003................................................................................ 104.562%
2004................................................................................ 103.042%
2005................................................................................ 101.521%
2006 and thereafter................................................................. 100.000%
</TABLE>
U.S. DOLLAR SENIOR DISCOUNT NOTES
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ------------------------------------------------------------------------------------ ----------------
<S> <C>
2003................................................................................ 105.062%
2004................................................................................ 103.375%
2005................................................................................ 101.687%
2006 and thereafter................................................................. 100.000%
</TABLE>
In addition, at any time on or before March 1, 2001, in the event the
Company receives net cash proceeds from the public or private sale of the Common
Stock, the Note Issuer (to the extent it receives such proceeds and has not used
such proceeds, directly or indirectly, to redeem or repurchase other securities
pursuant to optional redemption provisions) may, at its option, apply an amount
equal to any such net cash proceeds or any portion thereof to redeem up to
33 1/3% of the aggregate principal amount at maturity of the U.S. Dollar Notes
at a redemption price equal to 109.125% of the principal amount thereof, in the
case of the U.S. Dollar Senior Notes, and 110.125% of the accreted value, in the
case of the U.S. Dollar Senior Discount Notes, plus accrued and unpaid interest
thereon, if any, to the date of redemption, provided that at least 66 2/3% of
aggregate principal amount at maturity of the U.S. Dollar Senior Notes or U.S.
Dollar Senior Discount Notes, as applicable, remains outstanding immediately
after such redemption.
COVENANTS
The indenture governing the U.S. Dollar Notes restricts, among other
things, the Company's ability to incur additional indebtedness, pay dividends or
make distributions in respect of its capital stock, make investments or certain
other restricted payments, create liens, sell assets, issue or sell capital
stock of
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certain subsidiaries, enter into transactions with stockholders or affiliates or
effect a consolidation or merger.
EVENTS OF DEFAULT
The U.S. Dollar Notes indenture contains standard events of default,
including (i) failure to pay principal of (or premium, if any, on) any U.S.
Dollar Note when due, (ii) failure to pay any interest on any U.S. Dollar Note
when due, continued for 30 days, (iii) failure to perform covenants or
agreements under the U.S. Dollar Notes indenture or the U.S. Dollar Notes, (iv)
cross-defaults against certain other indebtedness, (v) failure to pay more than
$10.0 million of judgments that have not been stayed by appeal and (vi) certain
events of bankruptcy, insolvency or reorganization affecting the Company and
certain of its subsidiaries.
GERMAN NOTES
GENERAL
On March 15, 1998, the Note Issuer issued DM296.0 million (DM181.8 initial
accreted value) of 10% Senior Discount Notes due 2008 pursuant to the German
Note indenture among the Issuers and the Trustee. The German Notes are
unconditionally guaranteed by the Company.
PRINCIPAL, MATURITY AND INTEREST
The German Notes are initially limited in aggregate principal amount at
maturity to DM296.0 (approximately $99.1 million initial accreted value) and
will mature on March 15, 2008. No interest is payable on the German Notes prior
to September 15, 2003. From and after March 15, 2003, interest on the German
Notes will accrue on the principal amount at maturity of such notes at the rate
of 10% per annum and is payable semiannually on March 15 and September 15 of
each year, commencing September 15, 2003. Interest is computed on the basis of a
360-day year comprised of 12 30-day months.
RANKING
The German Notes are unsecured senior obligations of the Issuers, rank pari
passu in right of payment with the 1996 Notes, the U.S. Dollar Notes and all
other existing and future senior obligations of the Issuers and rank senior in
right of payment to all future subordinated obligations of the Issuers.
REDEMPTION
The German Notes are subject to redemption, at the option of the Note
Issuer, in whole or in part, at any time on or after March 15, 2003 and prior to
maturity, in principal amounts of DM1,000 or an integral multiple of DM1,000, at
the following redemption prices (expressed as percentages of the principal
amount thereof) plus accrued interest to but excluding the redemption date
(subject to the right of holders 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 March 15 of the years indicated:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ------------------------------------------------------ ----------------
<S> <C>
2003.................................................. 105.000%
2004.................................................. 103.333%
2005.................................................. 101.667%
2006 and thereafter................................... 100.000%
</TABLE>
In addition, at any time prior to March 15, 2001, in the event the Company
receives net cash proceeds from the public or private sale of the Common Stock,
the Note Issuer (to the extent it receives such proceeds and has not used such
proceeds, directly or indirectly, to redeem or repurchase other securities
pursuant to optional redemption provisions) may, at its option, apply an amount
equal to any such net cash proceeds or any portion thereof to redeem, from time
to time, German Notes in a principal
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<PAGE>
amount at maturity of up to an aggregate amount equal to 33 1/3% of the
aggregate principal amount at maturity of the German Notes, provided, however,
that German Notes in an amount equal to at least 66 2/3% of the aggregate
principal amount at maturity of the German Notes remain outstanding immediately
after each redemption.
COVENANTS; EVENTS OF DEFAULT
The German Notes indenture contains covenants and provides for events of
default which are identical in all material respects to the covenants and events
of default contained in the U.S. Dollar Notes indenture.
SHARES ELIGIBLE FOR FUTURE SALE
As of the date of this Prospectus, the Company has 41,801,069 shares of
Common Stock outstanding, including 11,040,347 shares of Class A Common Stock
and 30,760,722 shares of Class B Common Stock. Assuming that all of the
remaining Warrants were exercised and all of the Shares offered hereby by the
Selling Shareholder were sold, on the date of this Prospectus, then as of the
date hereof, the Company would have a total of 42,953,784 shares of Common Stock
outstanding, including 12,493,062 shares of Class A Common Stock and 30,460,722
shares of Class B Common Stock. The foregoing Class A Common Stock share figures
do not include (i) up to 2,004,475 shares of Class A Common Stock issuable upon
the exercise of an equal number of options granted under the 1995 Plan
(1,021,227 of which are presently exercisable or exercisable within 60 days of
the date of this Prospectus), (ii) up to an aggregate of 3,750,000 shares of
Class A Common Stock reserved for issuance under the 1997 Performance Incentive
Plan, 1997 Stock Incentive Plan and Directors' Compensation Plan, (iii)
31,220,634 shares (30,920,634 shares, assuming the sale of all of the Selling
Shareholder's Shares) of Class A Common Stock issuable upon the conversion of
shares of Class B Common Stock (including 459,900 shares of Class B Common Stock
issuable upon the exercise of Lauder Warrants (which are currently
exercisable)), and (iv) 411,684 shares of Class A Common Stock to be issued upon
the closing of the pending acquisition by the Company of additional interests in
Delta Three (see 'Business--International Telephony Operation--General'). See
'Description of Capital Stock.'
Of the 12,493,062 shares of Class A Common Stock which are assumed would be
outstanding after completion of the Offering, approximately 10,572,898 shares
(including the shares of Class A Common Stock sold in the Initial Public
Offering, other than those purchased by affiliates of the Company) would be
freely tradeable without restriction or further registration under the
Securities Act. The remaining outstanding shares of Class A Common Stock and all
of the outstanding shares of Class B Common Stock would be subject to the volume
and other resale limitations set forth in Rule 144. All of such restricted
securities (other than the shares of Class A Common Stock issuable if the Delta
Three transaction is completed) would be eligible for public sale, subject to
compliance with Rule 144, after April 4, 1998, when certain lock-up agreements
between the underwriters of the Initial Public Offering and the Company's
executive officers and directors and certain other shareholders of the Company
expire. The Shares offered hereby by the Selling Shareholder are subject to such
a lock-up agreement and cannot be sold until after April 4, 1998 unless a waiver
is granted.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are required to be aggregated) who has been deemed to have
beneficially owned shares for at least one year, including an affiliate, is
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of 1% of the then outstanding number of shares of Class A
Common Stock of the Company or the average weekly trading volume in shares of
Class A Common Stock during the four calendar weeks preceding the filing of the
required notice of such sale. Sales under Rule 144 may also be subject to
certain manner of sale provisions, notice requirements and the availability of
current public information about the Company. A person (or persons whose shares
are required to be aggregated) who is not deemed to have been an affiliate of
the Company during the three months preceding a sale, and who has beneficially
owned shares for at least two years is entitled to sell such shares under
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<PAGE>
Rule 144 without regard to the volume limitation, manner of sale provisions,
notice requirements or public information requirements of Rule 144. Affiliates
continue to be subject to such limitations.
Ronald S. Lauder, the Chairman of the Company's Board of Directors and its
largest and controlling shareholder, Itzhak Fisher, President and Chief
Executive Officer of the Company, the other holders of Class B Common Stock,
Coral Gate and the Company have entered into a Registration Rights Agreement
(the 'Registration Rights Agreement'), pursuant to which Mr. Lauder has been
granted three demand registration rights exercisable at any time after April 4,
1998 and Mr. Fisher has been granted two demand registration rights exercisable
after termination of his employment with the Company, other than as a result of
a termination by the Company for Cause or a termination by Itzhak Fisher without
Good Reason (a 'Qualified Severance Event'). Messrs. Lauder and Fisher, such
other holders of Class B Common Stock, Coral Gate and such additional holders of
Class A Common Stock as Mr. Lauder and Mr. Fisher may jointly designate to the
Company have an unlimited number of piggyback registration rights that will
allow such holders to include their shares of Class A Common Stock in any
registration statement filed by the Company, subject to certain limitations.
Prior to the occurrence of a Qualified Severance Event, Mr. Fisher may not
register any shares pursuant to his piggyback registration rights if, after
giving effect to the sale of such shares, Mr. Fisher and his Family Members (as
defined) would hold less than 70% of the shares of Class A Common Stock held as
of the closing date of the Initial Public Offering. Mr. Lauder, Mr. Fisher and
the other holders of Class B Common Stock may assign their rights under the
Registration Rights Agreement to their respective Family Members, Coral Gate and
Messrs. Gustavo and Ricardo Cisneros (the beneficial owners of Coral Gate) may
assign their rights to Family Members, and Mr. Lauder and Mr. Fisher may assign
their rights to lenders to whom they pledge any of their shares of Class A
Common Stock. The Selling Shareholder was entitled to register its Shares for
sale in the Offering pursuant to the Registration Rights Agreement.
The Company has agreed to pay all expenses (other than legal expenses,
underwriting discounts and commissions of the selling shareholders and taxes
payable by the selling shareholders) in connection with any registration
pursuant to the exercise of demand registration rights or piggyback registration
rights under the Registration Rights Agreement and has also agreed to indemnify
such persons against certain liabilities, including liabilities arising under
the Securities Act. Pursuant to the Registration Rights Agreement, the Company
is paying such expenses of the Selling Shareholder, and is indemnifying the
Selling Shareholder against such liabilities, in connection with the Offering.
The Company also has granted to a number of Minority Interestholders
certain registration rights with respect to shares of Class A Common Stock
acquired by the Minority Interestholders pursuant to an exercise of their
Roll-Up Rights. In general, if the Company files with the Commission a
registration statement on Form S-3 under the Securities Act, which registration
statement includes shares being sold by or for the account of shareholders of
the Company, the Company will, at the option of any such Minority Interestholder
who is then a registered owner of Class A Common Stock and subject to certain
limitations, register all or any portion of such person's Class A Common Stock
concurrently with the registration of such other securities. In addition,
certain Minority Interestholders in RSL Latin America have demand registration
rights on or after the Company becomes eligible to file a registration statement
on Form S-3.
See 'Risk Factors--Shares Eligible for Future Sale' for a discussion of the
potential adverse effect on the market price of the Class A Common Stock which
could result from the sale of substantial amounts of Class A Common Stock, or
the availability of shares for future sale.
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<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Rosenman & Colin LLP, U.S. counsel to the Company, the
following correctly describes certain material U.S. federal income tax
consequences to the Company and its subsidiaries and to the ownership and
disposition of Class A Common Stock by an initial U.S. and non-U.S. shareholder.
For purposes of this discussion, the term 'U.S. shareholder' includes (i) a U.S.
citizen or resident, (ii) a U.S. corporation or other U.S. entity taxable as a
corporation, (iii) a trust if a U.S. court is able to exercise primary
supervision over the administration of the trust and one or more U.S.
fiduciaries have the authority to control all substantial decisions of the
trust, and (iv) an estate that is subject to U.S. federal income tax on its
income regardless of its source. A 'non-U.S. shareholder' is any shareholder
other than a U.S. shareholder. The discussion is based upon provisions of the
U.S. Internal Revenue Code of 1986, as amended (the 'Code'), its legislative
history, judicial authority, current administrative rulings and practice, and
existing and proposed Treasury Regulations, all as in effect and existing on the
date hereof. Legislative, judicial or administrative changes or interpretations
may be forthcoming that could alter or modify the conclusions set forth below,
possibly on a retroactive basis, which could adversely affect a holder of Class
A Common Stock. This discussion assumes that such Class A Common Stock will be
held as capital assets (as defined in Section 1221 of the Code) by the holders
thereof.
The following discussion generally does not address the tax consequences to
a person who holds (or will hold), directly or indirectly, shares in the Company
giving the holder the right to exercise 10% or more of the total voting power of
the Company's outstanding stock (a '10% Shareholder'). 10% Shareholders are
advised to consult their own tax advisors regarding the tax considerations
incident to an investment in the Class A Common Stock. In addition, this
discussion does not purport to deal with all aspects of U.S. federal income
taxation that might be relevant to particular holders in light of their personal
investment circumstances or status, nor does it discuss the U.S. federal income
tax consequences to certain types of holders that may be subject to special
rules under the U.S. federal income tax laws, such as financial institutions,
insurance companies, dealers in securities or foreign currency, tax-exempt
organizations, foreign corporations or nonresident alien individuals or persons
whose functional currency is not the U.S. dollar. Moreover, the effect of any
applicable state, local or foreign or other tax laws is not discussed.
THE FOLLOWING DISCUSSION IS FOR GENERAL INFORMATION ONLY. EACH PURCHASER IS
STRONGLY URGED TO CONSULT WITH ITS OWN TAX ADVISORS TO DETERMINE THE IMPACT OF
SUCH PURCHASER'S PERSONAL TAX SITUATION ON THE ANTICIPATED TAX CONSEQUENCES,
INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN OR OTHER TAX LAWS, OF
THE OWNERSHIP AND DISPOSITION OF CLASS A COMMON STOCK.
TAXATION OF THE COMPANY AND ITS SUBSIDIARIES
In general, the Company and its foreign (non-U.S.) subsidiaries will be
subject to U.S. federal income tax only to the extent they have income which has
its source in the United States or is effectively connected with a U.S. trade or
business. Except with respect to interest on pledged securities, it is
anticipated that the Company and its foreign subsidiaries will derive
substantially all of their income from foreign sources and that none of their
income will be effectively connected with a U.S. trade or business. As a result,
the Company and its foreign subsidiaries should not be subject to material U.S.
federal income tax. On the other hand, the domestic (U.S.) subsidiaries of the
Company will be subject to U.S. federal income tax on their worldwide income
regardless of its source (subject to reduction by allowable foreign tax
credits), and distributions by such U.S. subsidiaries to the Company or its
foreign subsidiaries generally will be subject to U.S. withholding taxes.
TAXATION OF U.S. SHAREHOLDERS
A U.S. shareholder receiving a distribution on Class A Common Stock
generally will be required to include such distribution in gross income as a
taxable dividend to the extent such distribution is paid from the current or
accumulated earnings and profits of the Company as determined under U.S. federal
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income tax principles. Distributions in excess of the earnings and profits of
the Company generally will first be treated, for U.S. federal income tax
purposes, as a nontaxable return of capital to the extent of the U.S.
shareholder's basis in the Class A Common Stock and then as gain from the sale
or exchange of a capital asset. Dividends received on the Class A Common Stock
by U.S. corporate shareholders will not be eligible for the corporate dividends
received deduction.
A U.S. shareholder will be entitled to claim a foreign tax credit with
respect to income received from the Company only for foreign taxes (such as
withholding taxes), if any, imposed on dividends paid to such U.S. shareholder,
and not for taxes, if any, imposed on the Company or on any entity in which the
Company has made an investment. It is not anticipated, however, under current
Bermuda law that any such withholding taxes would be imposed by Bermuda on
distributions made by the Company to a U.S. shareholder. See 'Certain Bermuda
Tax Considerations.' For so long as the Company is a 'U.S.-owned foreign
corporation,' distributions with respect to the Class A Common Stock that are
taxable as dividends generally will be treated as foreign source passive income
(or, for U.S. shareholders that are 'financial service entities' as defined in
the Treasury Regulations, foreign source financial services income) or U.S.
source income for U.S. foreign tax credit purposes, in proportion to the
earnings and profits of the Company in the year of such distribution allocable
to foreign and U.S. sources, respectively. For this purpose, the Company will be
treated as a U.S.-owned foreign corporation so long as stock representing 50
percent or more of the voting power or value of the Company is owned, directly
or indirectly, by 'U.S. shareholders.'
With certain exceptions, gain or loss on the sale or exchange of the Class
A Common Stock will be treated as U.S. source capital gain or loss. Such capital
gain or loss will be long-term capital gain or loss if the U.S. shareholder has
held the Class A Common Stock for more than one year at the time of the sale or
exchange. In the case of non-corporate taxpayers, capital gain from assets held
for more than eighteen months will be taxed at a maximum federal rate of 20%
(long-term rate) and capital gain from assets held for more than one year and up
to eighteen months at a maximum federal rate of 28% (mid-term rate).
Various provisions contained in the Code impose special taxes in certain
circumstances on U.S. or foreign corporations and their stockholders. The
following is a summary of certain provisions which could have an adverse impact
on the Company and the U.S. shareholders.
PERSONAL HOLDING COMPANIES
A corporation that is a personal holding company ('PHC') is subject to a
39.6% tax on its undistributed personal holding company income (generally, U.S.
taxable income with certain adjustments, reduced by distributions to
shareholders). A corporation that is neither a foreign personal holding company
nor a passive foreign investment company, discussed below, generally is a PHC if
(i) more than 50% of the stock of which measured by value is owned, directly or
indirectly, by five or fewer individuals (without regard to their citizenship or
residence) and (ii) it receives 60% or more of gross income, as specifically
adjusted, form certain passive sources. For purposes of this gross income test,
a foreign corporation generally only includes taxable income derived from U.S.
sources or income that is effectively connected with a U.S. trade or business.
More than 50% of the outstanding shares of the Company and each of its
corporate subsidiaries, by value, is currently owned, directly or indirectly, by
five or fewer individuals. It is expected that this will remain the case on a
going forward basis. Since it is anticipated that the Company will derive
substantially all of its U.S. source gross income from interest on its pledged
securities, which the Company believes may constitute undistributed personal
holding company income for PHC purposes, the Company may be subject to PHC tax
with respect to a taxable year in which the Company is not treated as either a
foreign personal holding company or a passive foreign investment company and
during which the Company has held or continues to hold pledged securities.
However, if any of the Company's foreign corporate subsidiaries were to derive
any income from U.S. sources, less than 50% of any such income can be expected
to be from passive sources. Accordingly, the Company believes that none of such
subsidiaries will satisfy the foregoing income test and therefore none of them
will be
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classified as a PHC. In addition, since it is anticipated that the Company's
U.S. subsidiaries will derive most or all of their income from non-passive
sources, the Company further believes that none of such subsidiaries will
satisfy the foregoing income test and, thus, none of them will be classified as
a PHC. The Company intends to manage its affairs and the affairs of its
subsidiaries so as to attempt to avoid or minimize the imposition of the PHC
tax, to the extent such management of its affairs is consistent with its other
business goals.
FOREIGN PERSONAL HOLDING COMPANIES
In general, if the Company or any of its foreign corporate subsidiaries
were to be classified as a FPHC the undistributed foreign personal holding
company income (generally, taxable income with certain adjustments) of the
Company or such subsidiary would be imputed to all of the U.S. shareholders who
were deemed to hold the Company's stock or the stock of such subsidiary on the
last day of its taxable year. Such income would be taxable to such persons as a
dividend, even if no cash dividend were actually paid. U.S. shareholders who
dispose of their Class A Common Stock prior to such date generally would not be
subject to U.S. federal income tax under these rules. If the Company were to
become an FPHC, U.S. shareholders who acquire Class A Common Stock from
decedents would, in certain circumstances, be denied the step-up of the income
tax basis for such Class A Common Stock to fair market value at the date of
death which would otherwise have been available and instead would have a tax
basis equal to the lower of the fair market value or the decedent's basis.
A foreign corporation will be classified as an FPHC if (i) five or fewer
individuals, who are U.S. citizens or residents, directly or indirectly, own
more than 50% of the corporation's stock (measured either by voting power or
value) (the 'stockholder test') and (ii) the corporation receives at least 60%
of its gross income (regardless of source), as specifically adjusted, from
certain passive sources (the 'income test'). After a corporation becomes an
FPHC, the income test percentage for each subsequent taxable year is reduced to
50%.
Five or fewer individuals who are U.S. citizens or residents currently own
a beneficial interest of more than 50% of the voting power of the outstanding
Class A Common Stock of the Company and its foreign corporate subsidiaries for
purposes of the FPHC rules, and the Company believes that the stockholder test
will likely be met on a going forward basis. The Company believes, however, that
neither the Company nor its foreign corporate subsidiaries, once profitable,
should be classified as a FPHC because the Company and each of the subsidiaries
should not then satisfy the foregoing income test.
While the Company currently believes that neither it nor any of its foreign
corporate subsidiaries would be classified as an FPHC once profitable, it is
possible that the Company or one or more of such subsidiaries would meet the
foregoing income test in a given taxable year and would qualify as a FPHC for
that year. If the Company concludes that it or any of its foreign corporate
subsidiaries would be classified as an FPHC for any profitable taxable year, the
Company intends to manage its affairs and the affairs of the subsidiaries so as
to attempt to avoid or minimize having income imputed to the U.S. shareholders
under these rules, to the extent such management of its affairs is consistent
with its other business goals.
PASSIVE FOREIGN INVESTMENT COMPANIES
If 75% or more of the gross income of the Company (taking into account
under an income 'look-through' rule, the Company's pro rata share of the gross
income of any company of which the Company is considered to own 25% or more of
the stock by value) in a taxable year is passive income, or if at least 50% of
the average percentage of assets of the Company (also taken into account, under
an asset 'look-through' rule, the pro rata share of the assets of any company of
which the Company is considered to own 25% or more of the stock by value) in a
taxable year produce or are held for the production of passive income, the
Company would be classified as a PFIC. Passive income for purposes of the PFIC
rules generally includes dividends, interest and other types of investment
income and would include amounts derived by reason of the investment of a
portion of the funds raised in the
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<PAGE>
Offerings. If the Company were a PFIC at any time during a U.S. shareholder's
holding period, each U.S. shareholder (regardless of the percentage of stock
owned) would, upon certain distributions by the Company and upon disposition of
the Class A Common Stock at a gain, be liable to pay tax plus an interest
charge. The tax would be determined by allocating such distribution or gain
ratably to each day of the U.S. shareholder's holding period for the Class A
Common Stock which, for this purpose, would be deemed to include a U.S.
shareholder's holding period in the Warrants the exercise of which resulted in
the acquisition of Class A Common Stock. The amount allocated to years prior to
the taxable year of the distribution or disposition would be taxed at the
highest marginal rates for ordinary income for such years (if the Company was a
PFIC during such years). The U.S. shareholder would also be liable for interest
on the amount of such additional tax due with respect to such prior years in
which the Company was a PFIC (including years in which a U.S. shareholder held
Warrants and for which the Company was a PFIC.) The amount allocated to the
current taxable year and any non-PFIC years would be taxed in the same manner as
other ordinary income earned in the current taxable year.
Under certain circumstances, if the Company were to become a PFIC,
distributions and dispositions in respect of shares in a direct or indirect
foreign corporate subsidiary of the Company may be attributed in whole or in
part to a U.S. investor, and such U.S. investor may be taxed under the PFIC
rules with respect to such distributions or dispositions.
If the Company were to become a PFIC, U.S. shareholders who acquire Class A
Common Stock from decedents could be denied the step-up of the income tax basis
for such Class A Common Stock to fair market value at the date of death which
would otherwise have been available and instead could have a tax basis equal to
the lower of the fair market value of the decedent's basis.
The above results may be eliminated (at least in part) if a U.S.
shareholder permanently elects to treat the Company as a 'qualified electing
fund' ('QEF') for U.S. federal income tax purposes. A stockholder of a QEF is
required for each taxable year to include in income a pro rata share of the
ordinary income of the QEF as ordinary income and a pro rata share of the net
capital gain of the QEF as long-term capital gain (in the case of non-corporate
taxpayers taxable at the applicable long-term or mid-term rate). If a U.S.
shareholder in a PFIC has made a QEF election effective beginning in a year
subsequent to the year in which such investor acquired an interest in the PFIC,
the U.S. shareholder must agree in the year of such election to either (1)
recognize gain equal to such U.S. shareholder's unrealized appreciation in such
stock or (2) assuming the Company is a controlled foreign corporation (discussed
below) include in income as a dividend his pro rata share of the Company's
earnings and profits up to the first day of the tax year for which such election
was made (in each case subject to the tax consequences discussed above for
non-QEF PFICs) so that thereafter any additional gain on the sale of such stock
in the future generally will be characterized as capital gain and the denial of
basis step-up at death and the interest charge (as well as the other PFIC tax
consequences described above) would not continue to apply.
Effective for taxable years beginning after December 31, 1997, a U.S.
shareholder of a PFIC may, in lieu of making a QEF election, also avoid the
above results by electing to 'mark-to-market' the PFIC stock as of the close of
each taxable year so long as such stock is 'marketable'. The Company expects
that the Class A Common Stock will be 'marketable' for this purpose. Under this
election, the U.S. shareholder will include in income each year as ordinary
income, an amount equal to the excess, if any, of the fair market value of the
stock at the close of the year over such U.S. shareholders adjusted basis. If
the stock declines in value during any year, such U.S. shareholder will be
entitled to a deduction from ordinary income the excess of such U.S.
shareholder's adjusted basis over the stock's value at the close of such year
but only to the extent of net mark-to-market gains previously included in
income. Any gain or loss on the sale of the stock of the PFIC will be ordinary
income or ordinary loss (but only to the extent of the previously included net
mark-to-market gains). In the case of a U.S. shareholder who makes this
mark-to-market election for PFIC stock as to which a QEF election was not in
effect during his period of ownership, a coordination rule applies to ensure
that the shareholder does not avoid the interest charge for periods prior to
this election. An election to mark-to-market applies to the year for which the
election is made and following years unless the PFIC stock ceases to be
marketable or the Internal Revenue Service consents to the revocation of such
election.
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<PAGE>
The Company intends to manage its business and the businesses of the
subsidiaries so as to attempt to avoid PFIC status. The Company will notify U.S.
shareholders in the event that it concludes that it will be treated as a PFIC
for any taxable year to enable U.S. shareholders to consider whether to elect to
treat the Company as a QEF for U.S. federal income tax purposes or to make the
mark-to-market election. In addition, the Company will, at the request of a U.S.
shareholder who elects to have the Company treated as a QEF, comply with the
applicable information reporting requirements. Recently issued Treasury
Regulations set forth rules on the filing of a protective statement by a U.S.
person who owns stock in a foreign corporation which is reasonably believed by
such person not to be a PFIC. The purpose of this protective statement is to
enable such person to make a retroactive QEF election in the event that such
foreign corporation is subsequently determined to be a PFIC and to permit the
Internal Revenue Service ('IRS') to make an otherwise barred assessment of tax
under the QEF rules. In the event that the Company should be determined to have
been a PFIC, generally, a U.S. shareholder who has not filed a protective
statement may not make a retroactive QEF election except with the consent of the
IRS which may or may not be granted. Accordingly, U.S. shareholders should
consider with their own U.S. tax advisors whether the filing of a protective
statement with respect to Class A Common Stock in the Company is advisable.
CONTROLLED FOREIGN CORPORATIONS
If 10% Shareholders, who are also U.S. persons, own, in the aggregate,
directly or indirectly, more than 50% (measured by voting power or value) of the
shares of a foreign corporation, that foreign corporation would be a controlled
foreign corporation ('CFC'). If a foreign corporation were characterized as a
CFC, then some portion of the undistributed income of the foreign corporation
may be imputed to such 10% Shareholders, and some portion of the gains
recognized by such 10% Shareholders on the disposition of their shares in the
foreign corporation (which would otherwise qualify for capital gains treatment)
may be converted into ordinary dividend income. The Company is currently a CFC,
and it is likely that 10% Shareholders who are also U.S. persons will continue
to own (or be deemed to own) more than 50% of the voting power of the
outstanding Common Stock of the Company and, thus, that the Company will
continue to be characterized as a CFC. However, the CFC rules referred to above
only apply with respect to such 10% Shareholders. For 1997, because the Company
is a CFC, the asset test to determine whether the Company would be a PFIC is
made by comparing the relative adjusted tax bases of the Company's assets and
not the relative fair market values of such assets, making it more difficult for
the Company to manage its affairs so as to avoid PFIC status. However, for
taxable years beginning after December 31, 1997, in the case of CFC's with
publicly traded shares, the asset test to determine whether the CFC is a PFIC
will be made on the basis of the relative fair market values of such assets. The
Company expects to be publicly traded for this purpose.
TAXATION OF NON-U.S. SHAREHOLDERS
For U.S. federal income tax purposes, a non-U.S. shareholder should not be
subject to tax on distributions made with respect to, and gains realized from
the disposition of, Class A Common Stock unless such distributions and gains are
attributable to an office or fixed place of business maintained by such non-U.S.
shareholder in the U.S. A non-U.S. shareholder generally will not be subject to
U.S. federal income or withholding tax in respect of gain recognized in the
disposition of Class A Common Stock.
UNITED STATES BACKUP WITHHOLDING AND INFORMATION REPORTING
U.S. SHAREHOLDERS
Under certain circumstances, a U.S. shareholder who is an individual may be
subject to backup withholding at a 31% rate on dividends received on Class A
Common Stock. This withholding generally applies only if such individual U.S.
shareholder (i) fails to furnish his or her taxpayer identification number
('TIN') to the U.S. financial institution or any other person responsible for
the payment of dividends on the Class A Common Stock, (ii) furnishes an
incorrect TIN, (iii) is notified by the U.S.
119
<PAGE>
Internal Revenue Service ('IRS') that such U.S. shareholder has failed to
properly report payments of interest and dividends and the IRS has notified the
Company that such U.S. shareholder is subject to backup withholding, or (iv)
fails, under certain circumstances, to provide a certified statement, signed
under penalty or perjury, that the TIN provided is such U.S. shareholder's
correct number and that such U.S. shareholder is not subject to backup
withholding rules.
Amounts withheld under the backup withholding rules do not constitute a
separate U.S. Federal income tax. Rather, any amounts withheld under the backup
withholding rules will be refunded or allowed as a credit against the U.S.
shareholder's U.S. federal income tax liability, if any, provided the required
information or appropriate claim for refund is filed with the Internal Revenue
Service.
NON-U.S. SHAREHOLDERS
Currently, U.S. information reporting requirements and backup withholding
will not apply to dividends on the Class A Common Stock paid to non-U.S.
shareholders at an address outside the U.S. (provided that the payor does not
have definite knowledge that the payee is a U.S. person). As a general matter,
information reporting and backup withholding will not apply to a payment of the
proceeds of a sale effected outside the U.S. of the Class A Common Stock by a
foreign office of a foreign holder. However, information reporting requirements
(but not backup withholding) will apply to a payment of the proceeds of a sale
effected outside the U.S. of the Class A Common Stock through a 'U.S. Broker',
unless the U.S. Broker has documentary evidence in its records that the non-U.S.
shareholder is not a U.S. person and has no actual knowledge that such evidence
is false, or the non-U.S. shareholder otherwise establishes an exemption. For
purposes of the preceding sentence, a U.S. Broker is a broker that (i) is a U.S.
person, (ii) is a foreign person that derives 50% or more of its gross income
for certain periods from the conduct of a trade or business in the U.S. or (iii)
is a Controlled Foreign Corporation. Payment by a broker of the proceeds of a
sale of the Shares effected inside the United States is subject to both backup
withholding and information reporting unless the non-U.S. shareholder certifies
under penalties of perjury that such non-U.S. shareholder is not a United States
person and provides such non-U.S. shareholder's name and address or the non-U.S.
shareholder otherwise establishes an exemption. Any amounts withheld under the
backup withholding rules from a payment to a non-U.S. shareholder will be
allowed as a refund or a credit against such non-U.S. shareholder's U.S. Federal
income tax, provided that the required information or appropriate claim for
refund is furnished to the IRS.
The United States Treasury issued final regulations on October 6, 1997
which, among other things, alter the information reporting and backup
withholding rules applicable to non-U.S. shareholders by providing certain
presumptions under which a non-U.S. shareholder would be subject to backup
withholding and information reporting until the Company receives certification
from such shareholder of non-U.S. status. The regulations are generally
effective with respect to dividends paid after December 31, 1998. The foregoing
discussion is not intended to be a complete discussion of the provisions of
these regulations, and prospective shareholders are urged to consult their tax
advisors with respect to the effect that these regulations would have on an
investment in Class A Common Stock.
THE WARRANTS
U.S. WARRANTHOLDER
A 'U.S. Warrantholder' is any person who would be a U.S. shareholder, as
defined above, were such holder to exercise his Warrant.
Upon a sale or exchange of a Warrant (including the receipt of cash in lieu
of a fractional share of Class A Common Stock upon exercise of a Warrant), a
U.S. Warrantholder will recognize capital gain or loss equal to the difference
between the amount realized upon the sale or exchange and the holder's basis in
the Warrant (as determined above). Such gain or loss will be long-term if, at
the time of the sale or exchange, the Warrant was held for more than one year.
In the case of non-corporate taxpayers, such gain will be taxed at the
applicable mid-term or long-term rate as described above. Adjustments to
120
<PAGE>
the exercise price or conversion ratio, or the failure to make adjustments, may
result in the receipt of a constructive dividend by the holder.
Upon the exercise of a Warrant, a U.S. Warrantholder's tax basis in the
interest acquired upon such exercise will be equal to his tax basis in the
Warrant plus the exercise price of the Warrant. His or her holding period with
respect to such interest will commence on the date of exercise. If a Warrant
expires without being exercised, the holder will have a capital loss equal to
his tax basis in the Warrant as if the Warrant had been sold on such date for no
consideration.
Special onerous U.S. tax rules will apply to a taxable disposition of a
Warrant, or the taxable disposition of Class A Common Stock acquired upon
exercise of a Warrant, by a U.S. Warrantholder if the Company was a PFIC at any
time during such U.S. Warrantholder's holding period in the Warrant. U.S.
Warrantholders are urged to consult with their tax advisors regarding the
potential impact of these rules on an investment in Warrants.
NON-U.S. WARRANTHOLDER
A 'non-U.S. Warrantholder' is any Warrantholder other than a U.S.
Warrantholder. For U.S. federal income tax purposes, a non-U.S. Warrantholder
should not be subject to tax on gains realized from disposition of the Warrants
unless such gains are attributable to an office or fixed place of business
maintained by such non-U.S. Warrantholder in the U.S.
121
<PAGE>
CERTAIN BERMUDA TAX CONSIDERATIONS
In the opinion of Conyers, Dill & Pearman, the following correctly
describes a summary of certain material anticipated tax consequences of an
investment in the Class A Common Stock under current Bermuda tax laws. This
discussion does not address the tax consequences under non-Bermuda tax laws and,
accordingly, each prospective investor should consult his or her tax advisor
regarding the tax consequences of an investment in the Class A Common Stock. The
discussion is based upon laws and relevant interpretation thereof in effect as
of the date of this Prospectus, all of which are subject to change.
BERMUDA TAXATION
At the date hereof, there is no Bermuda income, corporation or profits tax,
withholding tax, capital gains tax, capital transfer tax, estate duty or
inheritance tax payable by the Company or its shareholders other than those who
are ordinarily resident in Bermuda. The Company is not subject to stamp or other
similar duty on the issue, transfer or redemption of its Class A Common Stock.
The Company has obtained an assurance from the Minister of Finance of
Bermuda under the Exempted Undertakings Tax Protection Act 1966 that, in the
event there is enacted in Bermuda any legislation imposing tax computed on
profits or income or computed on any capital assets, gain or appreciation or any
tax in the nature of estate duty or inheritance tax, such tax shall not be
applicable to the Company or to its operations, or to the shares or other
obligations of the Company until March 28, 2016 except insofar as such tax
applies to persons ordinarily resident in Bermuda and holding such shares or
other obligations of the Company or any real property or leasehold interests in
Bermuda owned by the Company. No reciprocal tax treaty affecting the Company
exists between Bermuda and the United States.
As an exempted company, the Company is liable to pay in Bermuda a
registration fee based upon its authorized share capital and the premium on its
issued shares at a rate not exceeding $25,000 per annum.
LEGAL MATTERS
The validity of the Class A Common Stock offered hereunder will be passed
upon for the Company by the Company's counsel, Conyers, Dill & Pearman,
Hamilton, Bermuda. 'Service of Process of And Enforcement of Liabilities',
'Certain Bermuda Tax Considerations' and 'Description of Capital Stock-- Certain
Provisions of Bermuda Law,' have been passed upon by Conyers, Dill & Pearman,
Bermuda and are stated herein on their authority.
Robert L. Kohl, a member of Rosenman & Colin LLP, was granted an option to
purchase up to 4,380 shares of Class A Common Stock, which shares have a fair
market value of $102,930 at March 19, 1998.
There is no minimum amount which in the opinion of the directors of the
Company must be raised by the offer of the shares of Class A Common Stock in
order to provide for the matters referred to in Section 28 of The Companies Act
1981 of Bermuda.
EXPERTS
The Consolidated Financial Statements of RSL Communications, Ltd. for the
years ended December 31, 1995, 1996, and 1997 and for each of the three years in
the period ended December 31, 1997 and International Telecommunications Group,
Ltd. for the nine months ended September 30, 1995, included in this Prospectus,
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their reports appearing herein and are included in reliance upon the reports of
such firm given upon their authority as experts in accounting and auditing.
122
<PAGE>
The Consolidated Financial Statements of Cyberlink, Inc. as of August 31,
1995 and for the eight months then ended, included in this Prospectus, have been
audited by Brown, Leifer, Slatkin + Berns, independent auditors, as stated in
their report appearing herein.
SERVICE OF PROCESS AND ENFORCEMENT OF LIABILITIES
The Company is a Bermuda corporation. Certain of its directors and
officers, and certain of the experts named herein, are not residents of the
United States. All or a substantial portion of the assets of such persons are or
may be located outside the United States. As a result, it may not be possible
for investors to effect service of process within the United States upon such
persons or to enforce against them judgments obtained in the United States
courts. The Company has been advised by its legal counsel in Bermuda, Conyers,
Dill & Pearman, that there is doubt as to the enforcement in Bermuda, in
original actions or in actions for enforcement of judgments of United States
courts, of liabilities predicated upon U.S. Federal securities laws, although
Bermuda courts will enforce foreign judgments for liquidated amounts in civil
matters, subject to certain conditions and exceptions.
123
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
RSL COMMUNICATIONS, LTD.
Independent Auditors' Report.............................................................................. F-2
Consolidated Balance Sheets as of December 31, 1996 and December 31, 1997................................. F-3
Consolidated Statements of Operations for the Years Ended December 31, 1995, December 31, 1996 and
December 31, 1997....................................................................................... F-4
Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 1995, December 31, 1996
and December 31, 1997................................................................................... F-5
Consolidated Statements of Cashflows for the Years Ended December 31, 1995, December 31, 1996 and December
31, 1997................................................................................................ F-6
Notes to Consolidated Financial Statements................................................................ F-7
INTERNATIONAL TELECOMMUNICATIONS GROUP LTD. AND SUBSIDIARIES
Independent Auditors' Report.............................................................................. F-26
Consolidated Statement of Operations and Accumulated Deficit for the Nine Months Ended September 30,
1995.................................................................................................... F-27
Consolidated Statement of Cash Flows for the Nine Months Ended September 30, 1995......................... F-28
Notes to Consolidated Financial Statements................................................................ F-29
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
RSL Communications, Ltd.
We have audited the accompanying consolidated balance sheets of RSL
Communications, Ltd., a Bermuda corporation, and its subsidiaries (together, the
'Company'), as of December 31, 1997 and 1996, and the related consolidated
statements of operations, shareholders' equity and cash flows for the three
years ended December 31, 1997. Our audits also included the consolidated
financial statement schedules listed in the Index at Item 16(b). These
consolidated financial statements and the consolidated financial statement
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements and the
consolidated financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of the Company and
its subsidiaries at December 31, 1997 and 1996, and the results of their
operations and their cash flows for the three years ended December 31, 1997 in
conformity with accounting principles generally accepted in the United States of
America. Also, in our opinion, such consolidated financial statement schedules,
when considered in relation to the basic consolidated financial statements taken
as a whole, present fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
NEW YORK, NEW YORK
FEBRUARY 18, 1998
F-2
<PAGE>
RSL COMMUNICATIONS, LTD.
CONSOLIDATED BALANCE SHEETS
($ IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents....................................................... $104,068 $ 144,894
Accounts receivable............................................................. 26,479 70,610
Marketable securities--available for sale....................................... 67,828 13,858
Prepaid expenses and other current assets....................................... 3,969 16,073
------------ ------------
Total current assets.............................................................. 202,344 245,435
------------ ------------
Marketable Securities--Held to maturity........................................... 104,370 68,836
------------ ------------
Property and Equipment:
Telecommunications equipment.................................................... 29,925 63,998
Furniture, fixtures and other................................................... 5,926 21,583
------------ ------------
35,851 85,581
Less accumulated depreciation................................................... (3,513) (13,804)
------------ ------------
Property and equipment--net..................................................... 32,338 71,777
------------ ------------
Goodwill--and other intangible assets net of accumulated amortization............. 87,605 214,983
------------ ------------
Deposits and Other Assets......................................................... 1,312 4,633
------------ ------------
Total Assets...................................................................... $427,969 $ 605,664
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable................................................................ $ 49,370 $ 94,149
Accrued expenses................................................................ 12,701 49,965
Notes payable................................................................... 6,538 4,604
Deferred revenue................................................................ 3,570 5,368
Other liabilities............................................................... 5,236 8,271
------------ ------------
Total current liabilities......................................................... 77,415 162,357
------------ ------------
Other Liabilities--noncurrent..................................................... 15,286 --
------------ ------------
Long-term Debt--less current portion.............................................. 6,032 --
------------ ------------
Senior Notes, 12 1/4% due 2006, net............................................... 296,000 296,500
------------ ------------
Capital Lease Obligations--less current portion................................... 12,393 20,108
------------ ------------
Total Liabilities................................................................. 407,126 478,965
------------ ------------
Commitments and Contingencies
Shareholders' Equity
Common stock, Class A--par value $0.00457; 0 and 10,872,568 issued and
outstanding at December 31, 1996 and 1997, respectively....................... -- 49
Common stock, Class B--par value $0.00457; 10,528,887 and 30,760,726, issued and
outstanding at December 31, 1996 and 1997, respectively....................... 48 141
Common stock Class C--par value $0.00457; no shares issued...................... -- --
Preferred stock par value $0.00457; 65,700,000 shares authorized, 9,243,866 and
0 shares issued and outstanding at December 31, 1996 and 1997, respectively... 93 --
Warrants--Common Stock, exercise price of $0.00457.............................. 5,544 5,544
Additional paid-in capital...................................................... 65,064 274,192
Accumulated deficit............................................................. (47,740) (147,939)
Foreign currency translation adjustment......................................... (622) (5,288)
Deferred financing costs........................................................ (1,544) --
------------ ------------
Total shareholders' equity........................................................ 20,843 126,699
------------ ------------
Total Liabilities and Shareholders' Equity........................................ $427,969 $ 605,664
------------ ------------
------------ ------------
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
RSL COMMUNICATIONS, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
($ AND SHARES IN THOUSANDS, EXCEPT LOSS PER SHARE)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Revenues.......................................................... $ 18,617 $ 113,257 $ 300,796
Cost of services.................................................. 17,510 98,461 265,321
------------ ------------ ------------
Gross profit.................................................... 1,107 14,796 35,475
Selling, general and administrative expenses...................... 9,639 38,893 94,712
Depreciation and amortization..................................... 849 6,655 21,819
------------ ------------ ------------
Loss from operations.............................................. (9,381) (30,752) (81,056)
Interest income................................................... 173 3,976 13,826
Interest expense.................................................. (194) (11,359) (39,373)
Other income...................................................... -- 470 6,595
Minority interest................................................. -- (180) 210
Income taxes...................................................... -- (395) (401)
------------ ------------ ------------
Net loss.......................................................... $ (9,402) $ (38,240) $ (100,199)
------------ ------------ ------------
------------ ------------ ------------
Loss per share.................................................... $ (1.67) $ (5.13) $ (5.27)
Weighted average number of shares of common stock outstanding..... 5,641 7,448 19,008
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
RSL COMMUNICATIONS, LTD.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
($ AND SHARES IN THOUSANDS)
<TABLE>
<CAPTION>
CLASS A CLASS B PREFERRED COMMON STOCK FOREIGN
COMMON STOCK COMMON STOCK STOCK WARRANTS ADDITIONAL CURRENCY DEFERRED
-------------- -------------- -------------- -------------- PAID-IN ACCUMULATED TRANSLATION FINANCING
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT COSTS
------ ------ ------ ------ ------ ------ ------ ------ ---------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
January 1, 1995..... -- $ -- -- $ -- -- $ -- -- $ -- $ -- $ (98) $ -- $ --
Issuance of Preferred
Stock............... -- -- -- -- 9,244 93 -- -- 13,261 -- -- --
Issuance of Common
Stock............... -- -- 6,411 29 -- -- -- -- 1,822 -- -- --
Net loss............. -- -- -- -- -- -- -- -- -- (9,402) -- --
------ ------ ------ ------ ------ ------ ------ ------ ---------- ----------- ---------- ---------
BALANCE,
December 31, 1995... -- -- 6,411 29 9,244 93 -- -- 15,083 (9,500) -- --
Issuance of warrants
in connection with
Notes Offering...... -- -- -- -- -- -- 657 4,000 -- -- -- --
Issuance of warrants
in connection with
shareholder standby
facility and
revolving credit
facility............ -- -- -- -- -- -- 460 1,544 -- -- -- (1,544)
Issuance of Common
Stock............... -- -- 4,118 19 -- -- -- -- 49,981 -- -- --
Foreign Currency
Translation
Adjustment.......... -- -- -- -- -- -- -- -- -- -- (622) --
Net loss............. -- -- -- -- -- -- -- -- -- (38,240) -- --
------ ------ ------ ------ ------ ------ ------ ------ ---------- ----------- ---------- ---------
BALANCE,
December 31, 1996... -- -- 10,529 48 9,244 93 1,117 5,544 65,064 (47,740) (622) (1,544)
Issuance of Class A
Common Stock........ 10,873 49 -- -- -- -- -- -- 209,128 -- -- --
Conversion of
Preferred Stock In
Exchange for Class B
Common Stock........ -- -- 20,232 93 (9,244) (93) -- -- -- -- -- --
Foreign Currency
Translation
Adjustment.......... -- -- -- -- -- -- -- -- -- -- (4,666) --
Amortization of
deferred financing
costs............... -- -- -- -- -- -- -- -- -- -- -- 1,544
Net loss............. -- -- -- -- -- -- -- -- -- (100,199) -- --
------ ------ ------ ------ ------ ------ ------ ------ ---------- ----------- ---------- ---------
BALANCE
December 31, 1997... 10,873 $ 49 30,761 $141 -- $ -- 1,117 $5,544 $274,192 $(147,939) $ (5,288) $ --
------ ------ ------ ------ ------ ------ ------ ------ ---------- ----------- ---------- ---------
------ ------ ------ ------ ------ ------ ------ ------ ---------- ----------- ---------- ---------
<CAPTION>
TOTAL
---------
<S> <C>
BALANCE,
January 1, 1995..... $ (98)
Issuance of Preferred
Stock............... 13,354
Issuance of Common
Stock............... 1,851
Net loss............. (9,402)
---------
BALANCE,
December 31, 1995... 5,705
Issuance of warrants
in connection with
Notes Offering...... 4,000
Issuance of warrants
in connection with
shareholder standby
facility and
revolving credit
facility............ --
Issuance of Common
Stock............... 50,000
Foreign Currency
Translation
Adjustment.......... (622)
Net loss............. (38,240)
---------
BALANCE,
December 31, 1996... 20,843
Issuance of Class A
Common Stock........ 209,177
Conversion of
Preferred Stock In
Exchange for Class B
Common Stock........ --
Foreign Currency
Translation
Adjustment.......... (4,666)
Amortization of
deferred financing
costs............... 1,544
Net loss............. (100,199)
---------
BALANCE
December 31, 1997... $ 126,699
---------
---------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
RSL COMMUNICATIONS, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows provided by (used in) operating activities:
Net loss.......................................................... $ (9,402) $ (38,240) $ (100,199)
Adjustments to reconcile net loss to net cash provided by (used
in) operating activities, net of effects of purchase of
subsidiaries:
Accretion of interest receivable on restricted marketable
securities.................................................. -- (1,562) (5,504)
Depreciation and amortization................................. 848 6,655 21,819
Foreign currency transaction (gain)........................... -- (788) --
Loss on disposal of fixed assets.............................. -- 368 --
Provision for losses on accounts receivable................... 149 2,830 10,908
Reversal of accrued liabilities............................... -- -- (7,000)
Changes in assets and liabilities:
Increase in accounts receivable............................... (2,453) (17,034) (45,069)
Decrease (increase) in deposits and other assets.............. 366 (3,249) (2,929)
Decrease (increase) in prepaid expenses and other current
assets...................................................... 297 (925) (13,196)
Increase in accounts payable and accrued expenses............. 3,511 44,243 56,354
Increase (decrease) in deferred revenue and other current
liabilities................................................. 1,501 4,279 (2,155)
Increase (decrease) in other liabilities...................... 8,737 (7,052) (4,841)
------------ ------------ ------------
Net cash provided by (used in) operating activities............... 3,554 (10,475) (91,812)
------------ ------------ ------------
Cash flows used in investing activities:
Acquisition of subsidiaries..................................... (15,413) (38,552) (77,813)
Purchase of marketable securities............................... -- (82,529) --
Proceeds from marketable securities............................. -- 14,701 54,167
Purchase of restricted marketable securities.................... -- (102,808) --
Proceeds from restricted marketable securities.................. -- -- 41,038
Purchase of property and equipment.............................. (1,124) (15,983) (36,357)
Proceeds from sale of equipment................................. -- 171 144
------------ ------------ ------------
Net cash used in investing activities............................. (16,537) (225,000) (18,821)
------------ ------------ ------------
Cash flows provided by financing activities:
Proceeds from issuance of common and preferred stock and
warrants...................................................... 15,205 50,000 182,160
Underwriting fees and expenses.................................. -- -- (14,618)
Proceeds from notes payable..................................... 3,000 -- --
Payment of notes payable........................................ -- (3,000) (3,348)
Proceeds from issuance of 12 1/4% Senior Notes and warrants..... -- 300,000 --
Payments of offering costs...................................... -- (10,989) --
Proceeds from long-term debt.................................... -- 44,000 --
Payments of long-term debt...................................... -- (44,598) (9,402)
Principal payments under capital lease obligations.............. (62) (382) (2,757)
------------ ------------ ------------
Net cash provided by financing activities......................... 18,143 335,031 152,035
------------ ------------ ------------
Increase in cash and cash equivalents............................. 5,160 99,556 41,402
Effects of foreign currency exchange rates on cash................ -- (651) (576)
Cash and cash equivalents at beginning of period.................. 3 5,163 104,068
------------ ------------ ------------
Cash and cash equivalents at end of period........................ $ 5,163 $ 104,068 $ 144,894
------------ ------------ ------------
------------ ------------ ------------
Supplemental disclosure of cash flows information:
Cash paid for:
Interest...................................................... $ 31 $ 1,639 $ 41,285
------------ ------------ ------------
------------ ------------ ------------
Supplemental schedule of noncash investing and financing
activities--
Assets acquired under capital lease obligations................. $ 4,950 $ 7,897 $ 13,060
------------ ------------ ------------
------------ ------------ ------------
Issuance of notes to acquire stock.............................. $ -- $ 9,328 $ --
------------ ------------ ------------
Issuance of warrants for shareholder standby facility........... $ -- $ 1,544 $ --
------------ ------------ ------------
------------ ------------ ------------
Issuance of Class A Common Stock................................ $ -- $ -- $ 41,635
------------ ------------ ------------
------------ ------------ ------------
Acquisition cost included in current liabilities................ $ -- $ -- $ 17,929
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
1. BUSINESS DESCRIPTION
RSL Communications, Ltd. ('RSL'), a Bermuda corporation, is the successor
in interest to RSL Communications Inc., a British Virgin Islands corporation,
which is the successor in interest to RSL Communications, Inc., a Delaware
corporation. RSL, together with its direct and indirect subsidiaries are
referred to herein as the 'Company.' The Company is a multinational
telecommunications company which provides an array of international and domestic
telephone services. The Company focuses on providing international long distance
voice services to small and medium-sized businesses in key markets. The Company
currently has revenue producing operations and provides services in the United
States, the United Kingdom, France, Belgium, Germany, the Netherlands, Sweden,
Finland, Australia, Venezuela, Italy, Switzerland and Denmark. In 1996,
approximately 60% of the world's international long distance telecommunications
minutes originated in these markets.
2. ACQUISITIONS
1997 Acquisitions/New Operations
Callcom AG fur TeleKommunikation
In December 1997, RSL Europe acquired a 78.5% interest in Callcom AG fur
TeleKommunikation ('RSL Switzerland'). The Company invested approximately $2.1
million in cash in RSL Switzerland for common shares.
EZI Phonecard Holdings Pty. Limited
In October 1997, RSL Com Australia Holdings Pty. Ltd. ('RSL Australia')
acquired 85% of EZI Phonecard Holdings Pty. Limited for approximately $200,000
in cash and the assumption of net liabilities of $1.3 million. In connection
with this purchase, RSL Australia recorded approximately $1.5 million of
goodwill.
Call Australia Group
In October 1997, the Company through its wholly-owned subsidiary, RSL
Australia acquired 100% of the issued capital of each of Call Australia Pty.
Ltd., Associated Service Providers Pty. Limited, Digiplus Pty. Limited, Power
Serve Communications Consultants Pty. Limited, Talk 2000 Networks Pty. Limited
and Telephone Bill Pty. Limited (collectively the 'Call Australia Group'),
leading Australian switchless resellers, for approximately $24.5 million. In
connection with this purchase, RSL Australia recorded approximately $24.5
million of goodwill.
LDM Systems, Inc.
In October 1997, the Company acquired 100% of the outstanding common stock
of LDM Systems, Inc. ('LDM'). The total purchase price was $14.9 million. In
connection with this acquisition, the Company recorded an equal amount of
goodwill.
Delta Three, Inc.
During 1997, the Company acquired a majority interest in Delta Three, Inc.
('Delta Three'). The Company paid approximately $8.8 million for approximately
72% ownership of the Company and agreed to acquire an additional 26% interest
during 1998. In connection with this transaction, the Company recorded
approximately $3.8 million in goodwill.
F-7
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
2. ACQUISITIONS--(CONTINUED)
Maxitel
In April 1997, RSL Com Europe Ltd ('RSL Europe') acquired a 30.4% interest
in Maxitel, a Portuguese international telecommunications carrier, and has since
increased its ownership interest in Maxitel to 39%. The total investment in
Maxitel is approximately $2.1 million. The investment in Maxitel is accounted
for under the equity method of accounting.
Newtelco
In August 1997, RSL Europe purchased 90% of the stock of Newtelco Telekom
AG ('RSL Austria'), an Austrian start-up telecommunications company for an
$800,000 investment in the company.
RSL Com Italia S.r.l
In August 1997, RSL Europe acquired 85% of the stock in RSL Italy ('RSL
Italy'), an Italian telecommunications reseller. The Company paid approximately
$1.7 million for its investment in RSL Italy.
European Telecom S.A./N.V.
In December 1997, RSL Europe acquired 90% of European Telecom S.A./N.V.
('RSL Belgium') which in turn owns 100% of European Telecom SARL (RSL
Luxemburg). The Company paid approximately $18.6 million for this acquisition
and recorded an equal amount of goodwill.
Other
In April 1997, the Company acquired substantially all of the commercial
customer contracts of Pacific Star Communications Limited, an Australian based
company. The Company paid approximately $1.5 million in cash and recorded this
amount as a customer base.
1996 Acquisitions/New Operations
Certain Assets of Sprint in France and Germany
In May 1996, the Company acquired the net assets, principally
telecommunications equipment and facilities, constituting the international long
distance voice businesses of Sprint in France and Germany through its
wholly-owned subsidiaries RSL COM France S.A., a French corporation ('RSL
France'), and RSL COM Deutschland GmbH, a German limited liability company ('RSL
Germany'). Pursuant to the applicable asset purchase agreements, the Company can
not disclose the purchase price of the net assets. In connection with this
transaction, the Company recorded approximately $7.9 million of goodwill.
Belnet Nederland B.V.
In October 1996, the Company acquired 38,710 shares of Belnet Nederland
B.V. ('Belnet/RSL'), representing 75% of the outstanding stock for $10.0 million
and the assumption of liabilities of $500,000. In 1997, the Company acquired the
remaining shares for approximately $7.3 million. In connection with the purchase
of Belnet/RSL, the Company recorded approximately $15.6 million of goodwill.
F-8
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
2. ACQUISITIONS--(CONTINUED)
Incom (UK) Limited
In August 1996, the Company acquired the assets and assumed certain limited
liabilities of Incom (UK) Limited ('Incom'), a United Kingdom reseller, for
$500,000 plus 3,954 non-voting shares of International Telecommunications Group,
Ltd. ('ITG') (the 'Purchased Shares'). In addition, 3,333 voting shares of ITG
currently held by Incom were exchanged for an equal number of non-voting shares.
In connection with this acquisition, the Company recorded approximately $3.8
million of goodwill.
1995 Acquisitions/New Operations
On March 10, 1995, the Company entered into a stock purchase agreement (the
'Agreement') with ITG and RSL COM U.S.A., Inc. (formerly known as International
Telecommunications Corporation) ('RSL USA'), pursuant to which the Company
initially purchased from ITG 66,667 shares of ITG's Series A convertible
preferred stock (which represented 25% of ITG's then outstanding stock,
including common and preferred shares) for $4.8 million. The Company
subsequently purchased additional shares of ITG's common stock at various times
during 1995, 1996 and 1997 for a total purchase price of cash, secured notes,
issuance of shares and the assumption of net liabilities aggregating $12.9
million, $25.0 million, and $87.3 million at December 31, 1995, 1996 and 1997
respectively, resulting in recorded goodwill of $85.5 million. At December 31,
1996 and 1997, the Company's investment in ITG was $54.2 million and $87.3
million, respectively, which represented in excess of 87% (at December 31, 1996)
and 100% (at December 31, 1997) of the outstanding shares of ITG.
Effective September 1, 1995, ITG's subsidiary RSL USA, purchased 51% of the
capital stock of Cyberlink, Inc. ('Cyberlink'). During the period August 1996
through December 1996, RSL USA purchased 1,023,807 shares of the capital stock
of Cyberlink for approximately $7.2 million. In addition, through March 1997,
the Company acquired the remaining outstanding shares.
The total purchase price consisted of approximately $9.5 million, and
assumption of net liabilities of $21.1 million. In connection with the purchase
of Cyberlink, the Company recorded approximately $30.6 million of goodwill.
In November 1995, the Company, through its wholly-owned subsidiary RSL COM
Europe, Ltd. ('RSL COM Europe') completed the acquisition of 51% of Cyberlink
Communications Europe Ltd. ('Cyberlink Europe'). Cyberlink Europe is a holding
company which owned 100% of the shares of RSL COM Sweden AB, Cyberlink
International Telesystems Germany GmbH and RSL COM Finland OY.
During the period August 1996 through March 1997, RSL COM Europe purchased
the remaining 49% of the Cyberlink Europe shares for approximately $2.1 million
and the assumption of liabilities. The total cash paid was approximately $3.7
million. In connection with the purchase of Cyberlink Europe, the Company
recorded approximately $5.4 million of goodwill.
Accounting Treatment
The acquisitions, unless otherwise stated, have been accounted for by the
purchase method of accounting and, accordingly, the purchase prices have been
allocated to the assets acquired, primarily fixed assets and accounts
receivable, and liabilities assumed based on their estimated fair values at the
dates of acquisition. The excess of the purchase price over the estimated fair
values of the net assets acquired has been recorded as goodwill, which is
amortized over fifteen years. The valuation of the acquired assets and
liabilities acquired in the 1997 acquisitions is preliminary and as a result,
the allocation of the acquisition costs among the tangible and intangible assets
may change.
F-9
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
2. ACQUISITIONS--(CONTINUED)
The following presents the unaudited pro forma consolidated statements of
operations data of the Company for the years ended December 31, 1996 and 1997 as
though the acquisitions of RSL COM France, RSL COM Germany, Belnet/RSL, LDM,
Call Australia Group, and EZI had occurred on January 1, 1996. All other
acquisitions had insignificant operations prior to the date of acquisition. The
consolidated statements do not necessarily represent what the Company's results
of operations would have been had such acquisitions actually occurred on such
date.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1997
----------------- -----------------
(UNAUDITED)
($ IN THOUSANDS, EXCEPT LOSS PER
SHARE)
<S> <C> <C>
Revenues...................................................... $ 203,075 $ 371,757
----------------- -----------------
----------------- -----------------
Net loss...................................................... $ (40,916) $(103,697)
----------------- -----------------
----------------- -----------------
Net loss per share............................................ $ (5.49) $ (5.46)
----------------- -----------------
----------------- -----------------
</TABLE>
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation--The consolidated
financial statements include the accounts of RSL Communications, Ltd. and its
majority-owned subsidiaries from the date of acquisition or commencement of
operations. The Company has included 100% of certain subsidiaries' operating
losses since the minority interests' investments have been reduced to zero.
Minority interest represents another entity's ownership interest in Belnet/RSL
at December 31, 1996 and Belnet/RSL, RSL Com Austria, RSL Com Italy, and RSL Com
Venezuela at December 31, 1997. All material intercompany accounts and
transactions have been eliminated. Each of the Company's subsidiaries has a year
end of December 31.
Management Assumptions--The preparation of the consolidated financial
statements requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities and the reported amounts of revenues and expenses. Such
estimates primarily relate to reserves recorded for doubtful accounts and
accruals for other claims. Actual results could differ from these estimates.
Foreign Currency Translation--Assets and liabilities of foreign entities
have been translated into United States dollars using the exchange rates in
effect at the balance sheet dates. Results of operations of foreign entities are
translated using the average exchange rates prevailing throughout the period.
Local currencies are considered the functional currencies of the Company's
foreign operating entities. The Company utilizes a net settlement process with
its correspondents comprised of special drawing rights ('SDRs'). SDRs are the
established method of settlements among international telecommunications
carriers. The SDRs are valued based upon the values of a basket of foreign
currencies. Translation effects are accumulated as part of the cumulative
foreign currency translation adjustment in equity. Gains and losses from foreign
currency transactions are included in the consolidated statements of operations
for each respective period, and were not significant in the periods presented.
Cash and Cash Equivalents--The Company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents.
Accounts Receivable--Accounts receivable are stated net of the allowance
for doubtful accounts of $3,900,000 and $12,000,000 at December 31, 1996 and
1997, respectively. The Company recorded
F-10
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
bad debt expense of $149,000, $2,830,000 and $10,900,000 for the years ended
December 31, 1995, 1996 and 1997, respectively.
Accrued Expenses--Accrued expenses for the years ended December 31, 1996
and 1997 consist primarily of accrued interest, accrued acquisition costs and
accrued transmission costs. Accrued interest as of December 31, 1996 was
$9,447,000. Accrued interest as of December 31, 1997 was not significant.
Marketable Securities--Marketable securities consist principally of US.
Treasury bills, commercial paper and corporate notes with a maturity date
greater than three months when purchased. Available for sale securities are
stated at market and the held to maturity securities are stated at amortized
costs. Gains and losses, both realized and unrealized, are measured using the
specific identification method. Market value is determined by the most recently
traded price of the security at the balance sheet date. Marketable securities
are defined as either available for sale or held to maturity securities under
the provisions of SFAS No. 115, 'Accounting for Certain Investments in Debt and
Equity Securities,' depending on the security.
Property and Equipment and Related Depreciation--Property and equipment are
stated at cost or fair values at the date of acquisition, and in the case of
equipment under capital leases, the present value of the future minimum lease
payments, less accumulated depreciation. Depreciation is calculated using the
straight-line method over the estimated useful lives of the depreciable assets,
which range from five to fifteen years. Improvements are capitalized, while
repair and maintenance costs are charged to operations as incurred. Depreciation
expense was $302,000, $3,462,000 and $9,794,000 for the years ended December 31,
1995, 1996 and 1997, respectively.
Goodwill and Related Amortization--Goodwill represents the excess of cost
over the fair value of the net assets of acquired entities, and is being
amortized using the straight-line method over fifteen years. The Company
periodically reviews the value of its goodwill to determine if an impairment has
occurred. The Company measures the potential impairment of recorded goodwill by
the undiscounted value of expected future cash flows in relation to its net
capital investment in the subsidiary. Based on its review, the Company does not
believe that an impairment of its goodwill has occurred.
Deferred Financing Costs--The deferred financing costs incurred in
connection with the Senior Notes are being amortized on a straight line basis
over ten years.
Deposits and Other Assets--Deposits consist principally of amounts paid to
the Company's carrier vendors.
Revenue Recognition and Deferred Revenue--The Company records revenue based
on minutes (or fractions thereof) of customer usage. The Company records
payments received in advance for prepaid calling card services and services to
be supplied under contractual agreements as deferred revenues until such related
services are provided.
Cost of Services--Cost of services is comprised primarily of transmission
costs.
Selling Expenses--Selling costs such as commissions, marketing costs, and
other customer acquisition costs are treated as period costs. Such costs are
recorded in selling, general and administrative expenses in the Company's
consolidated statement of operations.
Income Taxes--The Company accounts for income taxes under the provisions of
Statement of Financial Accounting Standards ('SFAS') No. 109, Accounting for
Income Taxes. SFAS No. 109 establishes financial accounting and reporting
standards for the effect of income taxes that result from activities during the
current and preceding years. SFAS No. 109 requires an asset and liability
approach
F-11
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
for financial reporting for income taxes. The Company's foreign subsidiaries
file separate income tax returns in the jurisdiction of their operations. The
Company's United States subsidiaries file stand-alone United States income tax
returns.
Loss per Common Share--In accordance with the Company's adoption of SFAS
No. 128, 'Earnings Per Share', the loss per common share is calculated by
dividing the loss attributable to common shares by the weighted average number
of shares outstanding. Outstanding common stock options and warrants are not
included in the loss per common share calculation as their effect is anti-
dilutive. The adoption of SFAS No. 128, 'Earnings Per Share' did not affect the
Company's method of computing the loss per common share.
EFFECTS OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the FASB issued SFAS No. 130, 'Reporting Comprehensive
Income.' This statement is effective for financial statements issued for periods
beginning after December 15, 1997. Management has evaluated the effect on its
financial reporting from the adoption of this statement and has found the
majority of required disclosures to be not applicable and the remainder to be
not significant.
In June 1997, the FASB issued SFAS No. 131, 'Disclosure about Segments of
an Enterprise and Related Information.' SFAS No. 131 requires the reporting of
profit and loss, specific revenue and expense items, and assets for reportable
segments. It also requires the reconciliation of total segment revenues, total
segment profit or loss, total segment assets, and other amounts disclosed for
segments to the corresponding amounts in the general purpose financial
statements. SFAS No. 131 is effective for fiscal years beginning after December
15, 1997. The Company uses data at the subsidiary level to manage the operations
and the Company will expand its current footnote disclosure to meet this
criteria.
4. CONCENTRATION OF CREDIT RISK
The Company is subject to significant concentrations of credit risk which
consist principally of trade accounts receivable, cash and cash equivalents, and
marketable securities. The Company's U.S. subsidiaries sell a significant
portion of their services to other carriers and, as a result, maintains
significant receivable balances with certain carriers. If the financial
condition and operations of these customers deteriorate below critical levels,
the Company's operating results could be adversely affected.
The Company maintains its cash with high quality credit institutions, and
its cash equivalents and marketable securities are in high quality securities.
F-12
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
5. MARKETABLE SECURITIES
A summary of the Company's available for sale marketable securities at
December 31, 1996 and December 31, 1997 is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1997
-------------------- --------------------
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Corporate notes........................................ $40,728 $40,678 $ 2,500 $ 2,500
Medium term notes...................................... 10,951 10,938 -- --
Commercial Paper....................................... 10,261 10,257 4,390 4,388
Federal agency notes................................... 5,888 5,884 6,968 6,973
--------- ------- --------- -------
$67,828 $67,757 $13,858 $13,861
--------- ------- --------- -------
--------- ------- --------- -------
</TABLE>
The Company has recorded its available for sale marketable securities at
amortized cost as the difference between amortized cost and market value is
immaterial to the consolidated financial statements.
The carrying value of the available for sale marketable securities by
maturity date as of December 31, 1996 and December 31, 1997 is as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
Matures in one year........................................... $57,548 $11,856
Matures after one year through three years.................... 10,280 2,002
----------------- -----------------
Total......................................................... $67,828 $13,858
----------------- -----------------
----------------- -----------------
</TABLE>
Proceeds from the sale of available for sale marketable securities for the
years ended December 31, 1996 and 1997 were $14,701,000 and $27,675,000,
respectively. Gross gains (losses) of $56,000 and ($2,000) were realized on
these sales for the years ended December 31, 1996 and 1997.
Securities classified as held to maturity, which are comprised of Federal
agency notes, are stated at amortized cost. Such securities are restricted in
order to make the first six scheduled interest payments on the 12 1/4% Senior
Notes (see Note 7). The held to maturity securities at December 31, 1996 and
1997 are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1997
--------------------- --------------------
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
--------- -------- --------- -------
<S> <C> <C> <C> <C>
Matures in one year.................................. $ 39,692 $ 39,738 $35,455 $35,522
Matures after one year through three years........... 64,678 65,002 33,381 33,377
--------- -------- --------- -------
Total................................................ $ 104,370 $104,740 $68,836 $68,899
--------- -------- --------- -------
--------- -------- --------- -------
</TABLE>
6. INCOME TAXES
The Company has incurred losses since inception for both book and tax
purposes. The Company's Netherlands subsidiary recorded income tax expense of
approximately $395,000 for the year ended December 31, 1996 and $401,000 for the
year ended December 31, 1997. As of December 31, 1996 and December 31, 1997, the
Company had net operating loss carryforwards generated primarily in the United
States of approximately $47,000,000 and $147,000,000, respectively. The net
operating loss carryforwards will expire at various dates beginning in 2009
through 2013 if not utilized. The utilization of the net operating loss
carryforwards is subject to certain limitations.
F-13
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
6. INCOME TAXES--(CONTINUED)
In accordance with SFAS No. 109, the Company has computed the components of
deferred income taxes as of December 31, 1996 and 1997, as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1997
------------ --------
<S> <C> <C>
Deferred tax assets.............................................. $ 18,800 $ 59,000
Less valuation allowance......................................... (18,800) (59,000)
------------ --------
Net deferred tax assets.......................................... $ -- $ --
------------ --------
------------ --------
</TABLE>
The Company's net operating losses generated the deferred tax assets. At
December 31, 1996 and 1997, a valuation allowance of $18,800,000 and
$59,000,000, respectively, is provided as the realization of the deferred tax
assets are not likely.
7. NOTES PAYABLE AND LONG-TERM DEBT
Senior Notes
On October 3, 1996, RSL Communications PLC ('RSL PLC'), a wholly-owned
subsidiary of RSL, issued (the 'Debt Offering') 300,000 Units, each consisting
of an aggregate of one $1,000 Senior Note (collectively, the 'Notes') due 2006
bearing interest at the rate of 12 1/4% and one warrant to purchase 3.975 Class
A common shares which expire in ten years (collectively, the 'Warrants'). The
exercise price of such Warrants is $.00457.
The value ascribed to the Warrants was $4,000,000. The unamortized discount
is recorded as a reduction against the face value of the Notes, and is amortized
over the life of the Notes. Such discount was $4,000,000 and $3,500,000 at
December 31, 1996 and December 31, 1997, respectively.
The Notes, which are guaranteed by RSL, are redeemable, at RSL PLC's
option, subsequent to November 15, 2001, initially at 106.1250% of their
principal amount, declining to 103.0625% of their principal amount for the
calendar year subsequent to November 15, 2002, and at 100% of the principal
amount subsequent to November 15, 2003. The Notes, or a portion thereof, may
also be redeemed upon the consummation of a public equity offering which yields
proceeds in excess of a specified amount.
In connection with the issuance of the Notes, the Company is required to
maintain restricted marketable securities in order to make the first six
scheduled interest payments on the Notes. Such restricted marketable securities
amounted to $104,370,000 and $68,836,000 at December 31, 1996 and December 31,
1997, respectively.
The indenture pursuant to which the Notes were issued contains certain
restrictive covenants which impose limitations on RSL and certain of its
subsidiaries ability to, among other things: (i) incur additional indebtedness,
(ii) pay dividends or make certain other distributions, (iii) issue capital
stock of certain subsidiaries, (iv) guarantee debt, (v) enter into transactions
with shareholders and affiliates, (vi) create liens, (vii) enter into
sale-leaseback transactions, and (viii) sell assets.
At December 31, 1996 and 1997, the Company is in compliance with the above
restrictive covenants.
F-14
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
7. NOTES PAYABLE AND LONG-TERM DEBT--(CONTINUED)
Credit Facilities
At December 31, 1996 and 1997, the Company had a $7,500,000 revolving
credit facility with a bank (the 'Revolving Credit Facility'), guaranteed by the
Company's Chairman, all of which was available. At December 31, 1996, the
Company also had a $35,000,000 shareholder standby facility with the Company's
Chairman.
The shareholder standby facility bears interest at the rate of 11% per
annum. In connection with this facility and the Company's Chairman's personal
guarantee of the Revolving Credit Facility, the Company's Chairman received
warrants, which vested over one year, to purchase 459,900 Class B common shares
of the Company (the 'Class B Common Stock'). The Company recorded $1,544,000 as
the value of the warrants at the time of their issuance. The Revolving Credit
Facility bears interest at the rate of LIBOR plus 1%. The Shareholder Standby
Facility, in accordance with the contractual agreement, expired upon receipt of
the net cash proceeds from the initial public offering.
The warrants became exercisable on October 3, 1997 at an exercise price of
$.00457 per share and expire in October 2006.
During August 1996, the Company obtained a $50,000,000 revolving credit
facility with a bank, guaranteed by the Company's Chairman, and utilized this
facility to repay the bank for all amounts due under the previously outstanding
Revolving Loan Facility provided by the bank and guaranteed by the Company's
Chairman, which was $44,000,000 at the time of repayment. Immediately prior to
the Debt Offering, the Company repaid $35,000,000 of the $44,000,000 borrowed
under the Revolving Credit Facility with the proceeds of the Subordinated
Shareholder Loan (see Note 11) and reduced the outstanding commitment under the
Revolving Credit Facility to $7,500,000.
The Company has a credit agreement which provides for up to $5,000,000 in
committed credit lines to finance its accounts receivable. Interest is payable
at 2 1/4% over the prime rate of interest (prime being 8 1/4% and 8 1/2% at
December 31, 1996 and 1997, respectively). A second credit line provides for up
to $2,000,000 in capital expenditure financing. Interest on this line is payable
at 2 1/2% over the prime rate of interest. During the year ended December 31,
1997, the lines of credit were reduced to $570,000 and $-0-, respectively. The
total amounts outstanding at December 31, 1996 from the above credit lines were
$680,000 and $606,000, respectively, and at December 31, 1997 was $475,000 and
$0-, respectively. The remaining credit line terminates on August 31, 1998.
Borrowings under both of these credit lines are collateralized by a letter of
credit.
The Company, through LDM, has a $10.0 million revolving credit facility.
There was $3.6 million outstanding under this facility at December 31, 1997.
This facility is payable in full on September 30, 2000 and accrues interest at
prime rate plus 2.5% per annum.
Other Financing
In connection with the September 1996 purchase of additional shares of
ITG's common stock, the Company issued secured notes totaling approximately
$9,328,000. Such notes and interest were secured by the common stock acquired,
and were payable in annual and quarterly installments, respectively, and bore
interest at the rate of 6%. In 1997, the Company satisfied the remaining loan
obligations with such minority shareholders.
F-15
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
7. NOTES PAYABLE AND LONG-TERM DEBT--(CONTINUED)
Vendor Financing
At December 31, 1996 and 1997, RSL USA has a series of current notes
payable to different vendors in the amount of $4,282,000 and $976,000,
respectively, which bear interest at the rates from 8% to 14.5%.
One of the Company's primary equipment vendors has provided to certain of
the Company's subsidiaries an aggregate of approximately $50 million in vendor
financing commitments to fund the purchase of additional capital equipment. At
December 31, 1996 and 1997, approximately $39.0 million and $15.8 million was
available, respectively. Borrowings under this agreement are recorded as capital
lease obligations.
Long-term debt maturities at December 31, 1997 are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED
- ---------------------------------------------------------------------------------
<S> <C>
1998............................................................................. $ 4,604
1999............................................................................. --
2000............................................................................. --
2001............................................................................. --
2002............................................................................. --
2003 and thereafter.............................................................. 300,000
--------
Total............................................................................ 304,604
Less current maturities.......................................................... (4,604)
--------
Long Term Debt and 12 1/4% Senior Notes.......................................... $300,000
--------
--------
</TABLE>
RSL's notes payable had fair values that approximated their carrying
amounts at December 31, 1996. At December 31, 1997, the Senior Notes had a fair
value of aproximately $330,000,000. The increase in fair value is primarily due
to changes in the interest rate environment. The remainder of the notes had fair
values which approximated their carrying amounts.
Interest expense on the above notes was approximately $461,000, $10,457,000
and $37,136,000 for the years ended December 31, 1995, 1996 and 1997,
respectively.
8. GOODWILL AND OTHER INTANGIBLE ASSETS
Intangible assets at December 31, 1996 and 1997 consist of the following
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1997
------------ --------
<S> <C> <C>
Goodwill and other............................................... $ 80,358 $216,858
Deferred financing costs......................................... 10,988 11,655
------------ --------
91,346 228,513
Less accumulated amortization.................................... (3,741) (13,530)
------------ --------
Intangible assets--net........................................... $ 87,605 $214,983
------------ --------
------------ --------
</TABLE>
Amortization expense for the years ended December 31, 1995, 1996 and 1997
was $548,000, $3,193,000 and $9,980,000, respectively.
F-16
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
9. SHAREHOLDERS' EQUITY
Common Stock
During 1996, the Company issued 4,117,522 shares of Class B Common Stock
for cash aggregating $50,000,000. During 1995, 6,411,365 shares of Class B
Common Stock were issued for $1,851,000.
On September 30, 1997, the Company revised its capital structure (the
'Recapitalization'), in part to (i) effect a 2.19-for-one stock split for each
outstanding share of each class of common shares and each outstanding share of
Preferred Stock, (ii) increase the number of authorized shares of its Class A
Common Stock and Class B Common Stock to an aggregate of 438,000,000 shares and
(iii) increase the number of authorized shares of its Preferred Stock to
65,700,000. The holders of the Class A Common Stock are entitled to one vote per
share, and the holders of the Class B Common Stock are entitled to ten votes per
share.
On September 30, 1997, The Company commenced an initial public offering of
8,280,000 shares of its Class A Shares. The aggregate offering price of the
8,280,000 shares of Class A Common Stock sold in the equity offering to the
public was $182,160,000, with net proceeds to the Company of $167,542,000.
In June 1997, ITG's Founder and former Chairman, elected to exchange his
shares in ITG, a subsidiary of the Company, for shares in the Company.
Accordingly, the Company issued 1,457,094 of the Class A Common Stock, par value
$0.00457 per share, of the Company in exchange for 15,619 shares of common stock
of ITG and recorded approximately $32,575,000 as additional paid in capital.
During 1997, the Company issued 712,142 shares of Class A Common Stock upon
the exercise of options.
During 1997, in connection with the acquisition of certain minority
interests, the Company issued 411,105 shares of Class A Common Stock.
Preferred Stock
During 1995, the Company issued 9,243,866 shares of its preferred stock to
the holders of its Class B Common Stock for cash of $13,354,000. The preferred
stock ranked senior to the Company's common stock as to dividends and a
liquidation preference of $1.00 per share. Each share was convertible at the
holder's option into 2.19 shares of Class B Common Stock. All preferred shares
were automatically converted into the Company's Class B Common Stock as the
public offering yielded proceeds in excess of $25,000,000, in accordance with
the terms of the Preferred Stock agreement. Dividends, at the rate of 8%, were
cumulative. Upon conversion of the shares of the preferred stock, the cumulative
dividends were deemed to be cancelled and waived upon conversion. The cumulative
amount of such dividends was approximately $16,000.
F-17
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
10. CAPITAL LEASE OBLIGATIONS
Future minimum annual payments applicable to assets held under capital
lease obligations for years subsequent to December 31, 1997 are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED
- --------------------------------------------------------------
<S> <C>
1998.......................................................... $ 7,189
1999.......................................................... 8,346
2000.......................................................... 6,528
2001.......................................................... 4,018
2002.......................................................... 3,373
2003 and thereafter........................................... 625
---------
Total minimum lease obligations............................... 30,079
Less interest................................................. (6,542)
---------
Present value of future minimum lease obligations............. 23,537
Less current portion, included in other current liabilities... (3,429)
---------
Long-term lease obligations at December 31, 1997.............. $20,108
---------
---------
</TABLE>
The assets and liabilities under capital leases are recorded at the present
value of the minimum lease payments using effective interest rates ranging from
9% to 11% per annum.
Assets held under capital leases aggregated $13,225,000 and $26,632,000 at
December 31, 1996 and 1997, respectively. The related accumulated depreciation
was $825,000 and $2,557,000, respectively.
11. RELATED PARTY TRANSACTIONS
In September 1996, the Company borrowed $35,000,000 from Ronald S. Lauder,
the Chairman of the Board of the Company and the principal shareholder of the
Company, bearing interest at the rate of 11% per annum (the 'Subordinated
Shareholder Loan'). The Company repaid the Subordinated Shareholder Loan with
the proceeds of the Shareholder Equity Investment (described below).
The Company used the proceeds of the Subordinated Shareholder Loan to repay
$35,000,000 of the amounts outstanding under the Revolving Credit Facility
available in August 1996 (see Note 7) and reduced the outstanding commitment
amount under the Revolving Credit Facility to $15,000,000 at December 31, 1996
and $7,500,000 at December 31, 1997. The Revolving Credit Facility is personally
guaranteed by the Company's Chairman.
Prior to the closing of the Debt Offering, Ronald S. Lauder, the Company's
Chairman, Leonard A. Lauder, a director of the Company and Ronald S. Lauder's
brother, and Lauder Gaspar Venture LLC ('LGV'), an investment vehicle the
principal investors of which are Ronald S. Lauder and Leonard A. Lauder and the
managing member (through a wholly owned company) of which is Andrew Gaspar, a
director of the Company, purchased an aggregate of 4,117,522 shares of Class B
Common Stock (approximately 11.6% of the outstanding common shares of the
Company on a fully diluted basis) for $50,000,000 (the 'Shareholder Equity
Investment'). LGV purchased one-half of such shares and Ronald S. Lauder and
Leonard A. Lauder each purchased one-quarter of such shares.
Nesim N. Bildirici, a director and the Vice President of Mergers and
Acquisitions of the Company, was an employee of both the Company and R.S.
Lauder, Gaspar & Co., L.P. ('RSLAG'), a venture capital company owned and
controlled by Ronald S. Lauder and Andrew Gaspar. During 1996 Mr. Bildirici's
salary was paid by RSLAG and the Company reimbursed RSLAG for a majority of
F-18
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
11. RELATED PARTY TRANSACTIONS--(CONTINUED)
Mr. Bildirici's salary. During the years ended December 31, 1996 and 1997, the
Company reimbursed RSLAG approximately $130,000 and $287,000, respectively, for
Mr. Bildirici's services. Mr. Bildirici became a full time employee of the
Company as of January 1, 1997.
RSL Management Corporation ('RSL Management'), which is wholly owned by
Ronald S. Lauder, the Chairman of the Board of the Company and the principal
shareholder of the Company, subleases an aggregate of 11,000 square feet of
office space to the Company at an annual rent of $767,000 per annum. RSL
Management subleases such space from The Estee Lauder Companies Inc. ('Estee
Lauder'). Ronald S. Lauder is also a principal shareholder of Estee Lauder and
Leonard A. Lauder, a director of the Company, is the Chief Executive Officer of
Estee Lauder. In addition, RSL Management provides payroll and benefit services
to the Company for an annual fee of $6,000.
The Company has employment contracts with certain of its executive
officers. These agreements expire beginning April 1998 through January 2002
unless terminated earlier by the executive or the Company, and provide for
annual salaries and bonuses based on the performance of the Company. Salary
expense for these officers was approximately $646,000, $1,419,000 and $1,555,000
for the years ended December 31, 1995, 1996 and 1997, respectively. The
aggregate commitment for annual future salaries pursuant to the employment
agreements at December 31, 1997, excluding bonuses, is approximately $1,371,000,
$1,098,000, $615,000, $550,000 and $600,000 for 1998, 1999, 2000, 2001, and
2002, respectively.
12. DEFINED CONTRIBUTION PLAN
In 1996, the Company instituted a defined contribution plan which provides
retirement benefits for most of its domestic employees. The Company's
contributions to the defined contribution plan, which are based on a percentage
of the employee's annual compensation subject to certain limitations, were not
significant for the years ended December 31, 1996 and 1997.
13. STOCK OPTION PLANS
1995 Stock Option Plan
In April 1995, the Company established an Incentive Stock Option Plan (as
amended and restated, the '1995 Plan') to reward employees, nonemployee
consultants and directors for service to the Company and to provide incentives
for future service and enhancement of shareholder value. The 1995 Plan is
administered by the Compensation Committee of the Board of Directors of the
Company (the 'Committee'). The Committee consists of three members of the Board
of Directors. The Plan provides for awards of up to 2,847,000 shares of Class A
Common Stock of the Company.
The options granted in 1995 vest over a period of three years commencing on
the first anniversary of the date of grant such that the option holder may not
acquire more than 2% of the outstanding capital stock as of the date upon which
the related employment agreement expires. The options granted in 1996 vest in
one-third increments on each of the first, second and third anniversaries of the
grant date, unless a different vesting schedule is designated by the committee.
Further, the options granted under the 1995 Plan terminate on the tenth
anniversary of the date of grant. A total of 2,716,617 options have been granted
under this plan. The Company will not grant further options under the 1995 Plan.
F-19
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
13. STOCK OPTION PLANS--(CONTINUED)
1997 Stock Incentive Plan
During 1997, the Company established the 1997 Stock Incentive Plan (the
'1997 Plan') to attract and motivate key employees of the Company. The 1997 Plan
is administered by the Committee. The 1997 Plan provides for the grant of the
incentive and non-incentive stock options, stock appreciation rights, restricted
stock, and various combinations thereof. The maximum number of shares of Class A
Common Stock available under the 1997 Plan is 3,100,000, with no more than
500,000 options or stock appreciation rights to be granted to any one
participant in a calendar year. The options vest over a three-year period,
unless a different vesting schedule is designated by the Committee. A total of
432,856 options have been granted under this plan.
1997 Performance Incentive Compensation Plan
During 1997, the Company established the 1997 Performance Incentive
Compensation Plan (the '1997 Performance Plan') to reward employees for superior
performance. Awards under the 1997 Performance Plan may be made to key employees
recommended by the Chief Executive Officer, selected by the Committee and
approved by the Board of Directors. The 1997 Performance Plan provides for the
grant of up to 400,000 shares of Class A Common Stock.
1997 Directors' Compensation Plan
During 1997, the Company adopted the 1997 Directors' Compensation Plan
(the '1997 Directors' Plan'). During the ten year term of the 1997 Directors'
Plan, each non-employee Director will be granted options to acquire a number of
Class A Common Stock with an aggregate fair market value on the date of grant
equal to $50,000, except for the Chairman and the Vice Chairman of the Board,
whose grants have a fair market value of $75,000 and $150,000, respectively. The
exercise price of the options initially will equal the fair market value of the
Class A Common Stock on the date of the grant and will be increased quarterly
based on the yield to maturity of United States Treasury Securities having a
maturity approximately equal to the term of such options. The 1997 Directors'
Plan provides for
F-20
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
13. STOCK OPTION PLANS--(CONTINUED)
the grant of up to 250,000 shares of Class A Common Stock. The options vest over
a five-year period, subject to certain acceleration provisions. A total of
17,046 options have been granted under this plan.
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE
OPTIONS EXERCISE PRICE EXERCISE PRICE
--------- -------------- --------------
<S> <C> <C> <C>
Outstanding at January 1, 1995
Granted............................................ 1,423,500 $ 0.000457 $ 0.000457
Exercised.......................................... -- -- --
Rescinded/Canceled................................. -- -- --
--------- -------------- --------------
Outstanding at December 31, 1995..................... 1,423,500 0.000457 0.000457
Granted............................................ 283,824 1.60-2.51 1.73
Exercised.......................................... -- -- --
Rescinded/Canceled................................. -- -- --
--------- -------------- --------------
Outstanding at December 31, 1996..................... 1,707,324 0.000457-2.51 0.29
Granted............................................ 1,459,195 .00457-22.00 10.44
Exercised.......................................... 712,142 .000457 .000457
Rescinded/Canceled................................. -- -- --
--------- -------------- --------------
Outstanding at December 31, 1997..................... 2,454,377 $.000457-22.00 $ 6.41
--------- -------------- --------------
--------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
WEIGHTED
RESERVED FOR AVERAGE
EXERCISABLE FUTURE GRANTS EXERCISE PRICE
----------- ------------- -----------------
<S> <C> <C> <C>
December 31, 1995..................................... -- 766,500 $ --
December 31, 1996..................................... 177,701 482,676 0.000457
December 31, 1997..................................... 459,607 3,430,481 0.44
</TABLE>
The following table summarizes information concerning the remaining options
outstanding as of December 31, 1997.
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
- ------------------------------------------------------------------------------------- OPTIONS EXERCISABLE
WEIGHTED -----------------------
WEIGHTED AVERAGE WEIGHTED
NUMBER AVERAGE REMAINING NUMBER OF AVERAGE
RANGE OF OF SHARES EXERCISE CONTRACTUAL SHARES EXERCISE
EXERCISE PRICES OUTSTANDING PRICES LIFE EXERCISABLE PRICES
- ------------------------------------------- ----------- --------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 0.000457 711,358 $0.000457 7.83 -- --
$ 0.00457 590,584 $ 0.00457 9.66 350,400 $0.00457
$ 1.60 - $ 2.51 283,824 $ 1.73 8.73 109,207 $ 1.83
$12.142 - $22.00 868,611 $ 17.53 7.98 -- --
----------- -----------
2,454,377 459,607
----------- -----------
----------- -----------
</TABLE>
SFAS Statement No. 123, 'Accounting for Stock Based Compensation' ('SFAS
No. 123') was issued by the FASB in 1995 and if fully adopted, changes the
methods for recognition of costs on plans similar to those of the Company.
Adoption of the recognition provisions of SFAS No. 123 is optional; however, pro
forma disclosures as if the Company adopted the cost recognition requirements
under SFAS No. 123 are presented below.
Under SFAS No. 123, for options granted, the fair value at the date of
grant was estimated using the Black-Scholes option pricing model. The fair value
was estimated using the minimum value method. Under this method, a volatility
factor of approximately 0.45 was used for options granted on or after the
F-21
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
13. STOCK OPTION PLANS--(CONTINUED)
date of the initial public offering and the minimum value method was used for
options granted prior to the date of the initial public offering, as there was
no market for the Company's common stock in which to measure the stock price
volatility.
The following weighted average assumptions were used in calculating the
fair value of the options granted in the years ended December 31, 1995, 1996 and
1997, respectively: risk-free interest rates between 5.63% and 5.95%; no
dividends are expected to be declared; expected life of the options are between
30 and 42 months, between 39 and 51 months and between 18 and 72 months,
respectively; and a maximum contractual life of 10 years.
For purposes of the pro forma disclosures the estimated fair value of the
options granted is amortized to compensation expense over the options' vesting
period. The Company's pro forma information is as follows:
<TABLE>
<CAPTION>
($ IN THOUSANDS, EXCEPT LOSS PER
COMMON SHARE
AND WEIGHTED AVERAGE FAIR VALUE
OF OPTIONS GRANTED)
YEAR ENDED DECEMBER 31,
--------------------------------
1995 1996 1997
------- -------- ---------
<S> <C> <C> <C>
Net loss
As reported.................................................... $(9,402) $(38,240) $(100,199)
Pro forma...................................................... $(9,404) $(38,315) $(118,176)
Net loss per common share:
As reported.................................................... $ (1.67) $ (5.13) $ (5.27)
Pro forma...................................................... $ (1.67) $ (5.14) $ (6.22)
Weighted average fair value of options granted during the
Period......................................................... $0.0002 $ 0.26 $ 12.32
</TABLE>
14. COMMITMENTS AND CONTINGENCIES
At December 31, 1997, the Company was committed to unrelated parties for
the rental of office space under operating leases. Minimum annual lease payments
with respect to the leases is as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
- ---------------------------------------------------------------------------------
<S> <C>
1998............................................................................. $ 4,018
1999............................................................................. 3,621
2000............................................................................. 3,285
2001............................................................................. 2,798
2002............................................................................. 2,172
2003 and thereafter.............................................................. 1,427
--------
$ 17,321
--------
--------
</TABLE>
Rent expense on the above leases for the years ended December 31, 1995,
1996, and 1997 was $210,000, $2,276,000, and $3,842,000 respectively.
F-22
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
14. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
The Company is committed to pay for transmission capacity under certain
operating leases. The minimum annual lease payments with respect to these
agreements is as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
- ---------------------------------------------------------------------------------
<S> <C>
1998............................................................................. $ 10,842
1999............................................................................. 8,592
2000............................................................................. 8,087
2001............................................................................. 6,000
2002............................................................................. 5,330
--------
$ 38,851
--------
--------
</TABLE>
Rent expense for the year ended December 31, 1997 was approximately
$9,100,000.
Commitments and Contingencies--The Company is involved in various claims
that arose in the ordinary course of its acquired business, and certain claims
that arose in the ordinary course of its business. The expected settlements from
certain of these matters have been accrued and are recorded as 'Other
Liabilities.' In management's opinion, the settlement of such claims would not
have a material adverse effect on the Company's consolidated financial position
or results of its operations.
In connection with the acquisition of one of its United States
subsidiaries, the Company recorded what management believed to be its best
estimate of the unfavorable portion related to certain transmission capacity
agreements. During 1997, the Company successfully amended such transmission
capacity agreements. The resulting settlement of approximately $7,000,000 has
been recorded as Other Income.
In connection with certain acquisitions, the Company has entered into
agreements whereby the minority shareholders have the right to put their
remaining shares to the Company.
The Company is contractually committed to the purchase of three
international gateway and two domestic switches. This commitment amounts to
approximately $8.0 million, all of which will be financed under the Company's
existing $50.0 million facility provided by one of the Company's primary
equipment vendors.
Letters of Credit--The Company has outstanding letters of credit
aggregating $550,000 and $6,047,000 at December 31, 1996 and 1997, respectively,
expiring at various dates. Such letters of credit, which were issued as deposits
to vendors or security on leased premises, are fully secured by marketable
securities, certificates of deposit, and the Revolving Credit Facility and are
classified as current assets.
15. SIGNIFICANT CUSTOMER
For the years ended December 31, 1997 and 1996 no customer accounted for
more than 10% of the Company's revenues. For the year ended December 31, 1995,
one customer accounted for 26% of the Company's revenues.
F-23
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
16. REVENUES BY GEOGRAPHIC AREA
The following table provides certain geographic data on the Company's
operations for the years ended December 31, 1995, 1996 and 1997 (in thousands).
<TABLE>
<CAPTION>
OPERATING IDENTIFIABLE
REVENUE INCOME (LOSS) ASSETS
-------- ------------- ------------
<S> <C> <C> <C>
Year ended December 31, 1995
US..................................................................... $ 18,461 $ (6,969) $ 37,760
Corporate and other.................................................... 156 (2,412) 15,312
-------- ------------- ------------
$ 18,617 $ (9,381) $ 53,072
-------- ------------- ------------
-------- ------------- ------------
Year ended December 31, 1996
US..................................................................... $ 85,843 $ (11,702) $ 54,509
Europe................................................................. 27,414 (13,438) 50,147
Corporate and other.................................................... -- (5,612) 323,313
-------- ------------- ------------
$113,257 $ (30,752) $427,969
-------- ------------- ------------
-------- ------------- ------------
Year ended December 31, 1997
US..................................................................... $194,518 $ (26,119) $118,363
Europe................................................................. 73,653 (35,905) 106,746
Asia and Others........................................................ 32,625 (3,430) 58,905
Corporate.............................................................. -- (15,602) 321,650
-------- ------------- ------------
$300,796 $ (81,056) $605,664
-------- ------------- ------------
-------- ------------- ------------
</TABLE>
Intersegment and intergeographic revenue are not significant to the revenue
of any business segment or geographic location. There is no export revenue from
the United States. Corporate and other assets consist principally of cash and
cash equivalents, marketable securities and goodwill.
17. SUMMARIZED FINANCIAL INFORMATION
The following presents summarized financial information of RSL
Communications PLC a company incorporated in 1996 ('RSL PLC') as of December 31,
1996 and 1997. RSL PLC is a 100% wholly owned subsidiary of the Company. RSL PLC
had no independent operations other than serving solely as a foreign holding
company for certain of the Company's U.S. and European operations. The Notes
issued by RSL PLC are fully and unconditionally guaranteed by the Company. The
Company's financial statements are, except for the Company's capitalization,
corporate overhead expenses, certain operations and available credit facilities,
identical to the financial statements of RSL PLC (in thousands).
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1997
-------------------- --------------------
<S> <C> <C>
Current Assets.................................................... $306,104 $212,568
Non-current Assets................................................ 120,761 324,118
Current Liabilities............................................... 74,948 122,672
Non-current Liabilities........................................... 394,556 557,448
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1997
-------------------- --------------------
<S> <C> <C>
Net Revenue....................................................... $113,257 $266,142
Gross Profit...................................................... 14,796 30,992
Net Loss.......................................................... (34,309) (95,824)
</TABLE>
F-24
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
18. SUBSEQUENT EVENTS
In January 1998, the Company acquired 90% of European Telecom S.A./N.V. The
Company paid $18.6 million in cash.
In January 1998, the Company purchased 90% of Telecenter Oy, a Finnish
agent customer base. The Company paid approximately $10.0 million in cash with a
purchase price adjustment based on future results to be calculated in two years.
On February 8, 1998, the Board of Directors authorized the issuance of
$200,000,000 Senior Notes (collectively '1998 Notes') due 2008 and Senior
Discount Notes (collectively '1998 Discount Notes') with a discounted value of
approximately $200,000,000.
Such issuance is expected to occur on February 23, 1998. Both the 1998
Notes and the 1998 Discount Notes are guaranteed as to payment of principal and
interest by RSL Communications, Ltd.
19. SUPPLEMENTAL FINANCIAL INFORMATION
The following table sets forth selected unaudited quarterly financial
information for the years ended December 31, 1997 and 1996.
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT LOSS PER SHARE)
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997 FIRST SECOND THIRD FOURTH
-------- -------- -------- --------
Revenues...................................................... $ 42,168 $ 67,193 $ 83,243 $108,192
-------- -------- -------- --------
-------- -------- -------- --------
Gross profit.................................................. $ 5,199 $ 7,366 $ 8,837 $ 14,073
-------- -------- -------- --------
-------- -------- -------- --------
Net loss...................................................... $(19,147) $(21,570) $(27,342) $(32,140)
-------- -------- -------- --------
-------- -------- -------- --------
Loss per share................................................ $ (1.82) $ (1.90) $ (2.28) $ (0.77)
-------- -------- -------- --------
-------- -------- -------- --------
Weighted average number of shares of common stock
outstanding................................................. 10,541 11,378 11,998 41,633
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
<S> <C> <C> <C> <C>
Revenues...................................................... $ 15,864 $ 23,900 $ 30,458 $ 43,035
-------- -------- -------- --------
-------- -------- -------- --------
Gross profit.................................................. $ 1,180 $ 2,927 $ 4,530 $ 6,159
-------- -------- -------- --------
-------- -------- -------- --------
Net loss...................................................... $ (4,789) $ (7,489) $ (8,431) $(17,531)
-------- -------- -------- --------
-------- -------- -------- --------
Loss per share................................................ $ (0.75) $ (1.17) $ (1.31) $ (1.66)
-------- -------- -------- --------
-------- -------- -------- --------
Weighted average number of shares of common stock
outstanding................................................. 6,411 6,411 6,426 10,541
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
20. SUBSEQUENT EVENTS (UNAUDITED)
On February 27, 1998, RSL PLC consummated concurrent offerings of
$200,000,000 9 1/8% Senior Notes due 2008 and $328,084,000 ($200,000,000 initial
accreted value) 10 1/8% Senior Discount Notes due 2008. The notes will be
guaranteed by RSL.
On February 24, 1998, the Board of Directors authorized the issuance of
$100,000,000 of Senior Discount Notes due 2008 denominated in Deutsche marks.
Such issuance is expected to occur on March 16, 1998. These notes will be
guaranteed by RSL.
F-25
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
International Telecommunications Group Ltd. and Subsidiaries
We have audited the consolidated statements of operations and accumulated
deficit and of cash flows of International Telecommunications Group Ltd. and
subsidiaries for the nine months ended September 30, 1995. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements of International
Telecommunications Group Ltd. and subsidiaries present fairly, in all material
respects, the results of their operations and their cash flows for the nine
months ended September 30, 1995 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
New York, New York
March 14, 1997
F-26
<PAGE>
INTERNATIONAL TELECOMMUNICATIONS GROUP LTD.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
NINE MONTHS ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C>
Revenues......................................................................................... $ 26,351,634
Cost of Services................................................................................. 24,614,337
------------
Gross Profit................................................................................... 1,737,297
Selling, General and Administrative Expenses..................................................... 6,299,188
------------
Loss from Operations............................................................................. (4,561,891)
Interest Income.................................................................................. 56,148
Interest Expense................................................................................. (345,212)
------------
Net Loss......................................................................................... (4,850,955)
Accumulated Deficit, January 1, 1995............................................................. (5,153,000)
------------
Accumulated Deficit, September 30, 1995.......................................................... $(10,003,955)
------------
------------
</TABLE>
See notes to consolidated financial statements.
F-27
<PAGE>
INTERNATIONAL TELECOMMUNICATIONS GROUP LTD.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C>
Cash Flows from Operating Activities:
Net loss........................................................................................ $(4,850,955)
Adjustments to reconcile net loss to net cash provided by operating activities, net of effects
of purchase of subsidiaries:
Depreciation and amortization................................................................ 379,782
Provision for losses on accounts receivable.................................................. 2,881,440
Changes in operating assets and liabilities:
Increase in accounts receivables........................................................... (9,204,455)
Decrease in accounts receivables-affiliates................................................ 111,434
Increase in prepaid expenses and other current assets...................................... (325,013)
Increase in deposits and other assets...................................................... (398,003)
Increase in accounts payable and accrued expenses.......................................... 11,849,193
Increase in other current liabilities...................................................... 601,084
Increase in other liabilities.............................................................. 1,355,703
Decrease in due to affiliates.............................................................. (534,941)
-----------
Net cash provided by operating activities............................................... 1,865,269
-----------
Cash Flows From Investing Activities:
Acquisition of subsidiary, net of cash acquired................................................. (1,500,000)
Purchase of marketable debt securities.......................................................... (2,200,000)
Purchase of property and equipment.............................................................. (446,517)
-----------
Net cash used in investing activities........................................................ (4,146,517)
-----------
Cash Flows from Financing Activities:
Repayment of short-term note payable............................................................ (1,000,000)
Proceeds from issuance of common stock.......................................................... 5,749,300
Proceeds from issuance of preferred stock....................................................... 3,000,000
Principal payments under capital lease obligations.............................................. (100,166)
Repayment of long-term debt..................................................................... (241,080)
-----------
Net cash provided by financing activities.................................................... 7,408,054
-----------
Increase in Cash.................................................................................. 5,126,806
Cash at January 1, 1995........................................................................... 451,865
Cash at September 30, 1995........................................................................ $ 5,578,671
-----------
-----------
Supplemental Disclosure of Cash Flows Information:
Cash paid for:
Interest........................................................................................ $ 185,996
-----------
-----------
Supplemental Schedule of Noncash Investing Activities-Assets acquired under capital lease
obligation...................................................................................... $ 443,710
-----------
-----------
</TABLE>
See notes to consolidated financial statements.
F-28
<PAGE>
INTERNATIONAL TELECOMMUNICATIONS GROUP LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1995
1. BUSINESS DESCRIPTION
International Telecommunications Group Ltd. and its subsidiaries ('ITG')
operate a domestic and international communications network which provides
international and domestic long distance telephone services for businesses and
individuals in the United States and abroad.
2. ACQUISITION
Effective September 1, 1995, ITG's subsidiary International
Telecommunications Corporation ('RSL USA') (collectively, 'ITG') consummated a
stock purchase agreement with Cyberlink, Inc. ('Cyberlink') and Cyberlink's
principal stockholder.
The agreement provided for the purchase of 51% of the capital stock of
Cyberlink. The purchase price consisted of $1,500,000 paid to Cyberlink and
assumption of net liabilities of $14,131,000. In connection with the purchase of
Cyberlink, the Company recorded approximately $15,631,000 of goodwill as of
September 30, 1995.
In connection with the acquisition of Cyberlink, the 49% minority
stockholders of Cyberlink may sell their shares to RSL USA at fair market value
if RSL USA consummates an initial public offering of its securities. RSL USA can
call the 49% minority stockholders shares at any time after December 31, 1996
for a price equal to 49% of the sum of eight times Cyberlink's average monthly
revenues of the last quarter prior to exercise date plus cash minus long-term
liabilities.
The acquisition has been accounted for by the purchase method of
accounting, and accordingly, the purchase price has been allocated to the assets
acquired and liabilities assumed based on their estimated fair values at the
date of acquisition. The excess of the purchase price over the estimated fair
values of the net assets acquired has been recorded as goodwill, which will be
amortized over fifteen years.
The accompanying consolidated statements of operations and accumulated
deficit and cash flows include the results of Cyberlink from its date of
acquisition through September 30, 1995.
The following presents the unaudited pro forma consolidated statement of
operations of the Company for the nine months ended September 30, 1995, assuming
the Company had purchased Cyberlink at January 1, 1995. The consolidated
statement does not necessarily represent what the Company's results of
operations would have been had such acquisition actually occurred on such date,
or of results to be achieved in the future:
<TABLE>
<CAPTION>
PRO FORMA FOR THE NINE
MONTHS ENDED SEPTEMBER
30, 1995
----------------------
(UNAUDITED)
<S> <C>
Revenue.................................................... $ 40,504,172
Cost of services........................................... 37,087,243
----------------------
Gross Profit............................................... 3,416,929
Selling, general and administrative expenses............... 23,555,216
----------------------
Loss from operations....................................... (20,138,287)
Interest income............................................ 56,148
Interest expense........................................... (738,496)
----------------------
Net loss................................................... $(20,820,635)
----------------------
----------------------
</TABLE>
F-29
<PAGE>
INTERNATIONAL TELECOMMUNICATIONS GROUP LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1995
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation--The consolidated
financial statements include the accounts of International Telecommunications
Group Ltd. and its majority-owned subsidiaries. The Company has included 100% of
its subsidiaries' operating losses since the minority interests' investment has
been reduced to zero. All material intercompany accounts and transactions have
been eliminated. All of the Company's subsidiaries' fiscal years end December
31.
Management Assumptions--The preparation of the consolidated financial
statements requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities and the reported amounts of revenues and expenses. Such
estimates primarily relate to reserves recorded for doubtful accounts and
accruals for litigation and other claims. Actual results could differ from these
estimates.
Revenue Recognition--The Company records revenue based on minutes (or
fractions thereof) of customer usage.
The Company records payments received in advance for prepaid calling card
services and services to be supplied under contractual agreements as deferred
revenues until such related services are provided. Deferred revenue is included
in other current liabilities.
Goodwill--Goodwill represents the excess of cost over the fair value of the
net assets of acquired entities, and is being amortized using the straight-line
method over fifteen years. The Company periodically reviews the value of its
goodwill to determine if an impairment has occurred. The Company measures the
potential impairment of recorded goodwill by the undiscounted value of expected
future cash flows in relation to its net capital investment in the subsidiary.
Based on its review, the Company does not believe that an impairment of its
goodwill has occurred.
Amortization expense for the nine months ended September 30, 1996 was
$86,838.
Property and Equipment and Related Depreciation--Property and equipment are
stated at cost or fair values at the date of acquisition, and in the case of
equipment under capital leases, the present value of the future minimum lease
payments, less accumulated depreciation. Depreciation is calculated using the
straight-line method over the estimated useful lives of the depreciable assets,
which range from five to fifteen years. Improvements are capitalized, while
repair and maintenance costs are charged to operations as incurred. Construction
in progress represents costs incurred in connection with the building of a
switch facility center.
Deposits--Deposits consist principally of amounts paid to the Company's
providers of telephone access lines.
Income Taxes--The Company accounts for income taxes under the provisions of
Statement of Financial Accounting Standards ('SFAS') No. 109, Accounting for
Income Taxes. SFAS No. 109 establishes financial accounting and reporting
standards for the effect of income taxes that result from activities during the
current and preceding years. SFAS No. 109 requires an asset and liability
approach for financial reporting for income taxes.
New Accounting Standards--During 1995, the Company adopted SFAS No. 121,
Impairment of Long-Lived Assets. There was no adjustment recorded as a result of
adopting this standard. The Company periodically compares the carrying value of
its long-lived assets, principally property and equipment, to undiscounted cash
flows generated by the long-lived assets. The Company's undiscounted cash flows
exceed the carrying value of its long-lived assets.
4. CONCENTRATION OF CREDIT RISK
The Company is subject to significant concentrations of credit risk which
consist principally of trade accounts receivable. The Company sells a
significant portion of its services to other carriers and, as a
F-30
<PAGE>
INTERNATIONAL TELECOMMUNICATIONS GROUP LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1995
4. CONCENTRATION OF CREDIT RISK--(CONTINUED)
result, maintains significant receivable balances with certain carriers. If the
financial condition and operations of these customers deteriorate below critical
levels, the Company's operating results could be adversely affected. During
1995, one of the Company's customers, which represented approximately 18% of the
Company's sales for the nine months ended September 30, 1995, failed to meet
minimum payments schedules and, as a result, the Company terminated services to
this customer. Consequently, the customer refused to pay outstanding receivable
balances totaling approximately $4,653,000. At September 30, 1995, the Company
had written off the entire $4,653,000. The Company has commenced legal
proceedings to recover amounts owed to the Company.
The Company now performs ongoing credit evaluations of its customer's
financial condition and requires collateral in the form of deposits in certain
circumstances.
5. INCOME TAXES
No provision for income taxes has been made because the Company has
sustained cumulative losses since the commencement of its operations in 1994.
For the nine months ended September 30, 1995, the Company had net operating loss
carryforwards generated primarily in the United States of approximately
$10,000,000. The net operating loss carryforwards will expire at various dates
beginning in 2009 through 2010 if not utilized.
In accordance with SFAS No. 109, the Company has computed the components of
deferred income taxes as follows:
<TABLE>
<S> <C>
Deferred tax assets....................................... $ 8,120,000
Less valuation allowance.................................. (8,120,000)
-----------
Net deferred tax assets................................. $ --
-----------
-----------
</TABLE>
The Company's net operating losses and legal reserves generated the
deferred tax assets. At September 30, 1995, a valuation allowance of $8,120,000
is provided as the realization of the deferred tax benefits is not likely.
6. NOTES PAYABLE AND LONG-TERM DEBT
RSL USA has a series of notes payable to different vendors in the amount of
$1,136,712 which bear interest at rates from 8% to 14.5%, of which $874,066 is
current.
Cyberlink has a credit agreement which provides for up to $5,000,000 in
committed credit lines to finance its accounts receivable. Interest is payable
at 2 1/4% over the prime rate of interest (prime being 8.75% at September 30,
1995). A second credit line provides for up to $2,000,000 in capital expenditure
financing with interest payable at 2 1/2% over the prime rate. The total amounts
outstanding at September 30, 1995 from the above credit lines are $1,713,296 and
$0, respectively. The credit lines terminate on August 31, 1998.
Cyberlink has a long-term note payable to a vendor in the amount of
$1,000,000 which bears interest at the rate of 10%, commencing January 1, 1997.
ITG's notes payable had fair values that approximated their carrying
amounts.
Interest expense on the above notes was approximately $190,603 for the nine
months ended September 30, 1995.
7. EMPLOYMENT AGREEMENTS
The Company has employment contracts with certain of its executive
officers. These agreements expire beginning April 1998 through May 2000 unless
terminated earlier by the executive or the Company, and provides for an annual
base salary. Salary expense for the officers was $253,750 for the
F-31
<PAGE>
INTERNATIONAL TELECOMMUNICATIONS GROUP LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1995
7. EMPLOYMENT AGREEMENTS--(CONTINUED)
nine months ended September 30, 1995. The aggregate commitment for annual future
salaries at September 30, 1995, excluding bonuses, was approximately $453,750
for 1996, $454,500, $300,000, $200,000 and $116,667 for 1997, 1998, 1999 and
2000, respectively.
8. COMMITMENTS AND CONTINGENCIES
At September 30, 1995, the Company is committed to unrelated parties for
the purchase of certain capital assets and the rental of office space under
operating leases. Minimum annual lease payments with respect to the leases and
capital commitment is as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
- ----------------------------------------------------------
<S> <C>
1996...................................................... $ 849,435
1997...................................................... 808,300
1998...................................................... 546,760
1999...................................................... 366,998
2000...................................................... 305,226
2001 and thereafter....................................... 431,612
-----------
$ 3,308,331
-----------
-----------
</TABLE>
Rent expense for the nine months ended September 30, 1995 was $173,072.
The Company is committed to the rental of transmission capacity under
certain operating leases. The minimum annual lease payments with respect to
these agreements is as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
- ----------------------------------------------------------
<S> <C>
1996...................................................... $20,400,000
1997...................................................... 38,000,000
1998...................................................... 7,500,000
-----------
$65,900,000
-----------
-----------
</TABLE>
The Company is currently negotiating the termination of these operating
leases.
Litigation and Other Claims--The Company is involved in various litigation
and other claims that arose in the ordinary course of its acquired businesses
prior to the Company's acquisition of such businesses. The expected settlements
from these matters have been accrued and are recorded as 'Other Liabilities.' In
management's opinion, the settlement of such litigation and claims would not
have a material adverse effect on the Company's consolidated financial position
or results of its operations.
Letters of Credit--The Company has outstanding letters of credit
aggregating approximately $76,000 at September 30, 1995, expiring at various
dates between June 1, 1996 and August 8, 1996. Such letters of credit, which
were issued as deposits to vendors or security on leased premises, are fully
secured by certificates of deposit and are classified as current assets.
9. SIGNIFICANT CUSTOMER
For the nine months ended September 30, 1995, one customer accounted for
18% of the Company's revenues.
F-32
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, and, if given or
made, such information or representations must not be relied upon as having been
authorized. This Prospectus does not constitute an offer to sell or the
solicitation of an offer to sell or the solicitation of an offer to buy any
securities other than the securities to which it relates or an offer to sell or
the solicitation of an offer to buy such securities in any circumstances in
which such offer or solicitation is unlawful. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that there has been no change in the affairs of the Company
since the date hereof or that the information contained herein is correct as of
any time subsequent to its date.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information........................................... 2
Prospectus Summary.............................................. 3
Risk Factors.................................................... 12
Use of Proceeds................................................. 26
Determination of Offering Price................................. 26
Plan of Distribution............................................ 26
Price Range of Class A Common Stock............................. 26
Dividend Policy................................................. 27
Capitalization.................................................. 27
Selected Consolidated Financial Data............................ 29
Management's Discussion and Analysis of Financial Condition and
Results of Operations......................................... 31
Business........................................................ 43
Management...................................................... 90
Certain Relationships and Related Transactions.................. 100
Principal Shareholders and Selling Shareholder.................. 101
Description of Capital Stock.................................... 106
Description of Certain Indebtedness............................. 109
Shares Eligible for Future Sale................................. 113
Certain United States Federal Income Tax Considerations......... 115
Certain Bermuda Tax Considerations.............................. 122
Legal Matters................................................... 122
Experts......................................................... 122
Service of Process and Enforcement of Liabilities............... 123
Index to Consolidated Financial Statements...................... F-1
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1,452,715 SHARES
RSL COMMUNICATIONS, LTD.
CLASS A COMMON SHARES
(PAR VALUE $.00457 PER SHARE)
[LOGO]
RSLCOM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The Registrant's expenses in connection with the issuance of the securities
being registered, are estimated as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee.............. $ 1,828
Printing and Engraving........................................... 100,000*
Counsel Fees and Expenses........................................ 200,000*
Accountants' Fees and Expenses................................... 30,000*
Transfer Agent and Registrar Fees and Expenses................... 10,000*
Nasdaq Listing Fee............................................... 17,500
Miscellaneous.................................................... 15,672*
----------
Total....................................................... $ 375,000
----------
----------
</TABLE>
- ------------------
* Estimated
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Bermuda law and the [Registrant's] Memorandum of Association and
bye-laws, the directors, secretary and other officers for the time being of the
[Registrant] and the liquidator or trustees (if any) for the time being acting
in relation to any of the affairs of the [Registrant] and every one of them, and
their heirs, executors and administrators, shall be indemnified and secured
harmless out of the assets of the [Registrant] from and against all actions,
costs, charges, losses, damages and expenses which they or any of them, their
heirs, executors or administrators, shall or may incur or sustain by or by
reason of any act done, concurred in or omitted in or about the execution of
their duty, or supposed duty, or in their respective offices or trusts, and none
of them shall be answerable for the acts, receipts, neglects or defaults of the
others of them or for joining in any receipts for the sake of conformity, or for
any bankers or other persons with whom any moneys or effects belonging to the
[Registrant] shall or may be lodged or deposited for safe custody, or for
insufficiency or deficiency of any security upon which any moneys of or
belonging to the [Registrant] shall be placed out on or invested, or for any
other loss, misfortune or damage which may happen in the execution of their
respective offices or trusts, or in relation thereto, provided that this
indemnity shall not extend to any matter in respect of any fraud or dishonesty
which may attach to any of said persons.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following discussion does not give effect to the recapitalization
effected by the Registrant in connection with the initial public offering of its
Class A Common Shares (the 'Initial Public Offering').
In August 1994, RSL Communications, Inc. (a predecessor of the Registrant)
('RSL Delaware') issued one share of common stock, par value $.01 per share (the
'RSL Delaware Common Stock'), to Ronald S. Lauder, Chairman of the Board of
Directors and a co-founder of the Registrant, for aggregate consideration of
$.01. The issuance of such shares of RSL Delaware Common Stock to Mr. Lauder was
exempt from registration under the Securities Act pursuant to Section 4(2)
thereof.
In February 1995, RSL Delaware issued: (i) 3,000 shares of RSL Delaware
Common Stock to Itzhak Fisher, the President and Chief Executive Officer,
co-founder and a Director of the Registrant for aggregate consideration of
$2,000; (ii) 400 shares of preferred stock, par value $1.00 per share (the 'RSL
Delaware Preferred Stock'), to Itzhak Fisher for aggregate consideration of
$400,000; (iii) 5,878,286 shares of RSL Delaware Preferred Stock to R. S. Lauder
Gaspar & Co., L.P. for aggregate consideration of $5,878,286; (iv) 100 shares of
RSL Delaware Preferred Stock to Ronald S. Lauder for aggregate consideration of
$900,000; (v) 300 shares of RSL Delaware Preferred Stock to Jacob Schuster,
Chief Financial Officer, Assistant Secretary and Treasurer and a Director of the
Registrant, for aggregate consideration of $300,000 and (vi) 121,714 shares of
RSL Delaware Preferred
II-1
<PAGE>
Stock to Nesim Bildirici, Vice President of Mergers and Acquisitions of the
Registrant, for aggregate consideration of $121,714. The issuance of such shares
was exempt from registration under the Securities Act pursuant to Section 4(2)
thereof.
In April 1995, RSL Delaware merged into RSL Communications Inc. ('RSL
BVI'). In connection with such merger, each shareholder of RSL Delaware
exchanged their respective shares of RSL Delaware common stock and RSL Delaware
Preferred Stock for an equal number of shares of RSL BVI's common stock, par
value $.01 per share (the 'RSL BVI Common Stock'), and preferred stock, par
value $.01 per share (the 'RSL BVI Preferred Stock'). Simultaneous with the
merger, RSL BVI increased the number of authorized shares of each of the RSL BVI
Common Stock and RSL BVI Preferred Stock from 10,000 to 10,000,000 and declared
a share dividend of 1,000 shares of RSL BVI Common Stock and RSL BVI Preferred
Stock for each share of such stock respectively issued and outstanding.
In April 1995, RSL BVI increased the number of authorized shares of each of
the RSL BVI Common Stock and RSL BVI Preferred Stock from 10,000,000 to
20,000,000 and declared a share dividend of two shares of RSL BVI Common Stock
and RSL BVI Preferred Stock for each share of such stock respectively issued and
outstanding. Additionally, in April 1995, RSL BVI issued: (i) 59,306 shares of
RSL BVI Common Stock to Ronald S. Lauder for aggregate consideration of
$207,572; (ii) 197,837 shares of RSL BVI Preferred Stock to Ronald S. Lauder for
aggregate consideration of $692,428; (iii) 13,179 shares of RSL BVI Common Stock
to Itzhak Fisher for aggregate consideration of $46,873; (iv) 43,964 shares of
RSL BVI Preferred Stock to Itzhak Fisher for aggregate consideration of
$153,873; (v) 422,130 shares of RSL BVI Common Stock to R. S. Lauder Gaspar &
Co., L.P. for aggregate consideration of $1,477,457; (vi) 1,292,156 shares of
RSL BVI Preferred Stock to R. S. Lauder Gaspar & Co., L.P. for aggregate
consideration of $4,522,543; (vii) 3,954 shares of RSL BVI Common Stock to
certain members of the family of Jacob Schuster for aggregate consideration of
$13,834.20; (viii) 13,189 shares of RSL BVI Preferred Stock to certain members
of the family of Jacob Schuster for aggregate consideration of $46,161.80 and
(ix) 13,179 shares of RSL BVI Preferred Stock to Nir Tarlovsky for aggregate
consideration of $153,873. The issuance of such shares was exempt from
registration under the Securities Act pursuant to Section 4(2) thereof.
In April 1995, the Board of Directors of the Company authorized, and the
shareholders of the Registrant approved, the Amended and Restated 1995 Stock
Option Plan (the '1995 Plan'). Under the 1995 Plan, the Registrant's
Compensation Committee is authorized to grant options for up to 1,300,000 shares
of the Registrant's Class A Common Stock. As of October 3, 1997, the last day of
which options under the 1995 Plan were granted, the Registrant had granted
options to purchase 1,275,291 shares of the Registrant's Class A Common Stock
under the 1995 Plan. In general, options granted under the 1995 Plan terminate
on the tenth anniversary of the date of grant. The 1995 Plan was developed to
provide incentives to employees of the Registrant and to attract new employees
and non-employee directors. The issuance of such shares pursuant to the 1995
Plan is exempt from registration under the Securities Act pursuant to Rule 701
thereof.
In July 1996, RSL BVI was amalgamated into the Registrant. Subsequently,
the Registrant increased the number of authorized shares of each class of its
common stock, par value $.01 per share (the 'RSL Common Stock'), and preferred
stock, par value $.01 per share (the 'RSL Preferred Stock'), to 20,000,000.
Thereafter, the Registrant issued: (i) 59,306 shares of RSL Common Stock to
Ronald S. Lauder for aggregate consideration of $593.06; (ii) 1,097,837 shares
of RSL Preferred Stock to Ronald S. Lauder for aggregate consideration of
$10,978.37; (iii) 2,013,179 shares of RSL Common Stock to Itzhak Fisher for
aggregate consideration of $12,000; (iv) 243,964 shares of RSL Preferred Stock
to Itzhak Fisher for aggregate consideration of $2,439.64; (v) 422,130 shares of
RSL Common Stock to R. S. Lauder Gaspar & Co., L.P. for aggregate consideration
of $4,221.30; (vi) 7,170,442 shares of RSL Preferred Stock to R. S. Lauder
Gaspar & Co., L.P. for aggregate consideration of $71,704.42; (vii) 419,770
shares of RSL Common Stock to the Schuster Family Partners I, L.P. for aggregate
consideration of $4,197.70; (viii) 365,945 shares of RSL Preferred Stock to the
Schuster Family Partners I, L.P. for aggregate consideration of $3,659.49; (ix)
13,179 shares of RSL Common Stock to Nir Tarlovsky for aggregate consideration
of $131.79; (x) 243,964 shares of RSL Preferred Stock to Nir Tarlovsky for
aggregate consideration of $2,439.64 and (xi) 121,714 shares of RSL Preferred
Stock to
II-2
<PAGE>
Nesim Bildirici for aggregate consideration of $1,217.14. The issuance of such
shares was exempt from registration under the Securities Act pursuant to Section
4(2) thereof.
In September 1996, the Registrant's capital stock was reclassified as
follows: (i) the Class A Common Shares and Class B Common Shares were authorized
with the RSL Common Shares being converted into Class A Common Shares; (ii) the
Registrant's authorized Class B Common Shares were reclassified as Class C
Common Shares with no changes to the rights of such shares; (iii) the authorized
Class A Common Shares were reclassified as Class B Common Shares with no changes
in the rights of such stock except that each share of Class B Common Shares are
entitled to 10 votes per share; and (iv) the new Class A Common Shares was
authorized.
In September 1996, the Registrant issued to Ronald S. Lauder a warrant to
purchase 210,000 shares of the Registrant's Class B Common Shares in
consideration of a loan from Mr. Lauder to the Registrant in the aggregate
amount of $35 million. Additionally, the Registrant issued: (i) 940,073 shares
of the Registrant's Class B Common Shares to Lauder Gaspar Ventures LLC for
aggregate consideration of $25 million; (ii) 470,037 shares of the Registrant's
Class B Common Shares to Ronald S. Lauder for aggregate consideration of $12.5
million and (iii) 470,037 shares of the Registrant's Class B Common Shares to
Leonard A. Lauder for aggregate consideration of $12.5 million. The issuance of
such shares was exempt from registration under the Securities Act pursuant to
Section 4(2) thereof.
In May 1997, the Registrant issued to Mr. Charles M. Piluso 665,340 shares
of the Registrant's Class A Common Shares in connection with the Registrant's
acquisition of 15,619 shares of common stock of ITG held by Mr. Piluso. The
issuance of such shares was exempt from registration under the Securities Act
pursuant to Section 4(2) thereof.
The following discussion does give effect to the recapitalization effected
by the Registrant in connection with its Initial Public Offering.
In August 1995, RSL COM Europe Ltd. ('RSL Europe'), a U.K. limited
liability company and a wholly-owned subsidiary of the Company, entered into an
employment agreement with Richard E. Williams, the Chief Executive Officer of
RSL Europe, the term of which expires in August 1998. Pursuant to the agreement,
RSL Europe granted to Mr. Williams the option to purchase shares of capital
stock of RSL Europe equal to up to 2.0% of the outstanding capital stock of RSL
Europe (the 'RSL Europe Option Rights'). In September 1997, the Company entered
into an agreement pursuant to which the Company, in consideration for his waiver
of the RSL Europe Options Rights, granted to Mr. Williams options to purchase
350,400 shares of Class A Common Stock, which options became exercisable upon
the closing date of the Initial Public Offering, at an exercise price per share
of $.00457. The issuance of such shares is exempt from registration under the
Securities Act pursuant to Section 4(2) thereof.
In October 1996, the Company and RSL Communications PLC, a wholly owned
subsidiary of the Company (the 'Note Issuer'), completed an offering (the '1996
Units Offering') of 300,000 units (the 'Units'), each Unit consisting of (i)
$1,000 principal amount of 12 1/4% Senior Notes due 2006 of the Note Issuer
(unconditionally guaranteed by the Company) and (ii) one warrant to purchase
3.975 shares of Class A Common Stock (the 'Warrants'). The Units were sold for
an aggregate purchase price of $300.0 million. The placement agents for the 1996
Units Offering consisted of Morgan Stanley & Co. Incorporated, Bear, Stearns &
Co. Inc. and Dillon, Read & Co. Inc. The aggregate commissions were
approximately $9.0 million. The Units were not registered under the Securities
Act in reliance on Rule 144A of the Securities Act and were sold only to
'qualified institutional buyers' and to a limited number of 'institutional
accredited investors.'
In connection with the Initial Public Offering, the Company issued to
certain members of management and original shareholders of certain of the
Company's subsidiaries an aggregate of 411,105 shares of Class A Common Stock in
exchange for shares of certain of the Registrant's subsidiaries held by such
persons. The issuance of such shares is exempt from registration under the
Securities Act pursuant to Section 4(2) thereof.
In February 1998, the Note Issuer completed an offering (the 'U.S. Dollar
Notes Offering') of $200.0 million 9 1/8% Senior Notes due 2008 and $328.1
million of 10 1/8% Senior Discount Notes due
II-3
<PAGE>
2008 of the Note Issuer (the 'U.S. Dollar Notes') and unconditionally guaranteed
by the Company pursuant to an indenture governing the U.S. Dollar Notes. The
placement agents for the U.S. Dollar Notes Offering consisted of Goldman, Sachs
& Co., Merril Lynch & Co., Chase Securities, Inc., J.P. Morgan & Co., and SBC
Warburg Dillon Read Inc. The aggregate commissions were approximately
$12.0 million. The U.S. Dollar Notes were sold to 'qualified institutional
buyers' in the U.S. and were not registered under the Securities Act in reliance
on Rule 144A of the Securities Act.
In March 1998, the Note Issuer completed an offering (the 'German Debt
Offering') of DM296.0 million (approximately $99.1 million) face amount at
maturity 10% Senior Discount Notes due 2008 (the 'German Notes') unconditionally
guaranteed by the Company pursuant to an indenture governing the German Notes.
The placement agents for the German Debt Offering consisted of Goldman, Sachs &
Co oHG and Merril Lynch International. The aggregate commissions were
approximately $3.0 million. The German Notes were sold outside the U.S. to
non-U.S. persons in reliance on Regulation S under the Securities Act and
through their respective selling agents, Goldman, Sachs & Co. and Merrill Lynch
& Co., and in the United States only to 'qualified institutional buyers' in
reliance on Rule 144A under the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER+ DESCRIPTION
- -------- ------------------------------------------------------------
<S> <C>
*3.1 -- Certificate of Incorporation of RSL Communications, Ltd.,
issued by the Bermuda Registrar of Companies on March 14,
1996.
*3.2 -- Memorandum of Association of RSL Communications, Ltd., filed
with the Bermuda Registrar of Companies on March 14, 1996.
**3.3 -- Bye-Laws of RSL Communications, Ltd. (as amended through
September 2, 1997).
*4.1 -- Indenture, dated October 3, 1996, by and among RSL
Communications PLC, RSL Communications, Ltd. and The Chase
Manhattan Bank, as Trustee, containing, as exhibits,
specimens of 12 1/4% Senior Notes due 2006.
*4.2 -- Notes Registration Rights Agreement, dated October 3, 1996,
by and among RSL Communications PLC, RSL Communications,
Ltd. and the Placement Agents.
*4.3 -- Note Deposit Agreement, dated October 3, 1996, by and among
RSL Communications PLC, RSL Communications, Ltd. and The
Chase Manhattan Bank, as Book Entry Depositary.
*4.4 -- Collateral Pledge and Security Agreement, dated October 3,
1996, by and among RSL Communications PLC and Trustee.
*4.5 -- Form of Letter of Transmittal.
++4.6 -- Form of 12 1/4% Senior Note due 2006.
**4.7 -- Form of Class A Common Share Certificate.
4.8 -- Exchange and Registration Rights Agreement, dated as of
February 27, 1998, among RSL Communications PLC, RSL
Communications, Ltd., Goldman, Sachs & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Chase Securities Inc.,
J.P. Morgan Securities Inc., and SBC Warburg Dillon Read
Inc.
4.9 -- Note Deposit Agreement, dated as of February 27, 1998, among
RSL Communications PLC, RSL Communications, Ltd. and The
Chase Manhattan Bank as Book-Entry Depositary.
4.10 -- Note Deposit Agreement, dated as of February 27, 1998, among
RSL Communications PLC, RSL Communications, Ltd. and The
Chase Manhattan Bank as Book-Entry Depositary.
4.11 -- Indenture, dated as of February 27, 1998, by RSL
Communications PLC and RSL Communications, Ltd. to The Chase
Manhattan Bank as Trustee.
4.12 -- Indenture, dated as of February 27, 1998, by RSL
Communications PLC and RSL Communications, Ltd. to The Chase
Manhattan Bank as Trustee.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER+ DESCRIPTION
- -------- ------------------------------------------------------------
<S> <C>
4.13 -- Exchange and Registration Rights Agreement, dated as of
February 27, 1998, among RSL Communications PLC, RSL
Communications, Ltd. and Goldman, Sachs & Co., oHG and
Merrill Lynch International.
4.14 -- Note Deposit Agreement, dated as of March 16, 1998, by and
between RSL Communications PLC and The Chase Manhattan Bank
as Book-Entry Depositary.
4.15 -- Indenture, dated as of March 16, 1998, by RSL Communications
PLC and RSL Communications, Ltd. to The Chase Manhattan Bank
as Trustee.
5.1 -- Opinion of Conyers, Dill & Pearman.
8.1 -- Opinion of Rosenman & Colin LLP.
8.2 -- Opinion of Conyers, Dill & Pearman.
*10.1 -- Warrant Agreement, dated October 3, 1996, between RSL
Communications, Ltd., as Issuer, and The Chase Manhattan
Bank, as warrant agent.
*10.2 -- Warrant Registration Rights Agreement, dated October 3,
1996, between RSL Communications, Ltd., as issuer, and The
Chase Manhattan Bank, as warrant agent.
*10.3 -- Amendment to the Revolving Credit Facility, dated August 20,
1996, from The Chase Manhattan Bank to RSL Communications,
Inc.
*10.4 -- Amendment to the Revolving Credit Facility, dated September
10, 1996, from The Chase Manhattan Bank to RSL
Communications, Ltd.
*10.5 -- Subordinated Promissory Note, dated September 10, 1996, from
RSL Communications, Ltd. to Ronald S. Lauder.
*10.6 -- Warrant for 210,000 shares of Class B Common Stock of RSL
Communications, Ltd. issued to Ronald S. Lauder on September
10, 1996.
*10.7 -- Standby Facility Agreement, dated October 1, 1996, by and
between RSL Communications, Ltd. and Ronald S. Lauder.
*10.8 -- Consulting Agreement, dated September 15, 1995, between
Eugene Sekulow and RSL Communications, Inc.
*10.9 -- Amendment to Consulting Agreement, dated August 8, 1996,
between Eugene Sekulow and RSL Communications, Ltd.
*10.10 -- RSL Communications, Ltd.'s 1995 Amended and Restated Stock
Option Plan.
*10.11 -- Employment Agreement, dated September 15, 1995, between
Itzhak Fisher and International Telecommunications Group,
Ltd.
*10.12 -- Employment Agreement, dated September 15, 1995, between
Itzhak Fisher and RSL Communications Inc.
*10.13 -- Employment Agreement, dated April 1, 1995, between Nir
Tarlovsky and International Telecommunications Group, Ltd.
*10.14 -- Employment Agreement, dated April 1, 1995, between Nir
Tarlovsky and RSL Communications Inc.
*10.15 -- Employment Agreement, dated August 9, 1995, between RSL COM
Europe Limited and Richard Williams.
*10.16 -- Memorandum of Agreement, dated July 30, 1996, between
International Telecommunications Corporation and Codetel.
*10.17 -- General Purchase Agreement, dated September 14, 1995,
between Ericsson Inc. and International Telecommunications
Corporation.
*10.18 -- Lease Agreement between AB LM Ericsson Finans and
International Telecommunications Corporation.
*10.19 -- Lease Agreement, dated April 10, 1996, between RSL COM
Europe Ltd. and AB LM Ericsson Finans.
*10.20 -- Lease Agreement, dated December 30, 1996, between RSL COM
Europe Ltd. and AB LM Ericsson Finans.
*10.21 -- Loan and Security Agreement, dated September 8, 1995,
between Cyberlink Inc. and CoastFed Business Credit
Corporation.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER+ DESCRIPTION
- -------- ------------------------------------------------------------
<S> <C>
*10.22 -- Accounts Collateral Security Agreement, dated September 8,
1995, between Cyberlink Inc. and CoastFed Business Credit
Corporation.
*10.23 -- Equipment Collateral Security Agreement, dated September 8,
1995, between Cyberlink Inc. and CoastFed Business Credit
Corporation.
*10.24 -- Security Stock Pledge Agreement, dated September 8, 1995,
between CoastFed Business Credit Corporation and Cyberlink
Inc.
*10.25 -- Security Agreement, dated September 8, 1995, between
CoastFed Business Credit Corporation and
Cyberlink-California Inc.
*10.26 -- Security Agreement, dated September 8, 1995, between
CoastFed Business Credit Corporation and Cyberlink-Nevada
Inc.
*10.27 -- Asset Purchase Agreement, dated as of May 8, 1996, by and
between RSL COM France S.A. and Sprint Telecommunications
France Inc.
*10.28 -- Transition Services Agreement, dated May 8, 1996, by and
among Sprint Telecommunications France Inc., Sprint
International France S.A. and RSL COM France S.A.
*10.29 -- Transition Services Agreement, dated May 8, 1996, by and
between Sprint Communications Company L.P. and RSL COM
France S.A.
*10.30 -- Amendment No. 1 to the Transition Services Agreement,
effective as of May 8, 1996, among Sprint Communications
Company L.P., Sprint International France S.A. and RSL COM
France S.A.
*10.31 -- Transition Services Agreement, dated May 8, 1996, by and
between Global One Communications World Operations, Limited
and RSL COM France S.A.
*10.32 -- Asset Purchase Agreement, dated as of May 8, 1996, by and
among Siena Vermogensverwaltungs-GmbH, Sprint
Telecommunication Services GmbH and Sprint Fon Inc.
*10.33 -- Transition Services Agreement, dated May 8, 1996, by and
among Sprint Telecommunication Services GmbH, Sprint Fon
Inc. and Siena Vermogensverwaltungs- GmbH.
*10.34 -- Transition Services Agreement, dated May 8, 1996, by and
between Sprint Communications Company L.P. and RSL COM
Deutschland GmbH.
*10.35 -- Amendment No. 1 to the Transition Services Agreement,
effective as of May 8, 1996, among Sprint Communications
Company L.P., Sprint Telecommunication Services GmbH and RSL
COM Deutschland GmbH.
*10.36 -- Transition Services Agreement, dated May 8, 1996, by and
between Global One Communications World Operations, Limited
and Siena Vermogensverwaltungs-GmbH.
*10.37 -- Asset Purchase Agreement, August 12, 1996, by and between
RSL COM UK Limited and Incom (UK) Ltd.
*10.38 -- Stock Purchase Agreement, dated July 3, 1996, between RSL
Communications Limited, Charles Piluso and International
Telecommunications Group, Ltd.
*10.39 -- Secured Promissory Note, dated September 9, 1996, from RSL
Communications PLC to Charles Piluso.
*10.40 -- Stock Pledge and Security Agreement, dated September 9, 1996
between RSL Communications PLC, Charles Piluso and Fletcher,
Heald & Hildreth, P.L.C.
*10.41 -- New Shareholders Agreement, dated September 9, 1996 among
Charles Piluso, Jacqueline and Victoria Piluso, Richard
Rebetti, RSL Communications PLC, RSL Communications, Ltd and
International Telecommunications Group, Ltd.
*10.42 -- Stock Purchase Agreement, dated September 9, 1996, between
RSL Communications PLC, Richard Rebetti, Jr. and
International Telecommunications Group, Ltd.
*10.43 -- Secured Promissory Note, dated September 9, 1996, from RSL
Communications PLC to Richard Rebetti.
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER+ DESCRIPTION
- -------- ------------------------------------------------------------
<S> <C>
*10.44 -- Stock Pledge and Security Agreement, dated September 9,
1996, between RSL Communications PLC, Richard Rebetti, Jr.
and Fletcher, Heald & Hildreth, P.L.C.
*10.45 -- Agreement and Plan of Reorganization, dated September 9,
1996, among RSL Communications PLC, RSL Communications, Ltd.
and Charles Piluso.
*10.46 -- Tax Agreement, dated September 9, 1996, between RSL
Communications PLC, RSL Communications, Ltd. and Charles
Piluso.
*10.47 -- Stock Purchase Agreement, dated September 22, 1995, by and
between RSL Communications, Inc. and Charles Piluso.
*10.48 -- Stock Purchase Agreement, dated September 22, 1995, by and
between Richard Rebetti and RSL Communications, Inc.
*10.49 -- Amendment to the Stock Purchase Agreement, dated September
22, 1995, between and among International Telecommunications
Group, Ltd., International Telecommunications Corporation
and RSL Communications, Inc.
*10.50 -- Stock Purchase Agreement, dated March 10, 1995, between RSL
Communication, Inc., International Telecommunications Group,
Ltd. and International Telecommunications Corporation.
*10.51 -- Amendment to Shareholders' Agreement, dated March 10, 1995,
between and among Charles Piluso, Richard Rebetti, Incom
(UK) Ltd., International Telecommunications Group, Ltd. and
RSL Communications, Inc.
*10.52 -- Indemnity Agreement, dated March 10, 1995, between and among
International Telecommunications Group, Ltd., International
Telecommunications Corporation and RSL Communications, Inc.
*10.53 -- Sublease, dated July 18, 1996, between RSL Communications,
Ltd. and RSL Management Corporation.
*10.54 -- Lease, dated as of January 15, 1997, between Longstreet
Associates L.P. and RSL COM U.S.A., Inc.
*10.55 -- Employment Agreement, dated January 31, 1997, between Roland
T. Mallcott and RSL Communications, Ltd.
*10.56 -- Amendment of Lease, dated as of December 6, 1995, between
Hudson Telegraph Associates and International
Telecommunications Corporation.
**10.57 -- Shareholders Agreement of RSL Communications, Latin America,
Ltd., dated August 4, 1997, between and among RSL
Communications, Latin America, Ltd., RSL Communications,
Ltd. and Coral Gates Investments Ltd.
**10.58 -- Stockholders' Agreement, dated July 23, 1997, by and among
Delta Three, Inc., RSL Communications, Ltd., and the other
shareholders of Delta Three, Inc.
**,***10.59 -- Delta Three, Inc. Services Agreement.
**10.60 -- Employment Agreement, dated July 31, 1997, between Andrew C.
Shields and RSL Communications, Ltd.
**10.61 -- Shareholders Agreement, dated October 10, 1996, between RSL
COM Europe, Limited, Gerard van Leest and Belnet Nederland
B.V.
+10.62 -- RSL Communications, Ltd. 1997 Performance Incentive Plan.
+10.63 -- RSL Communications, Ltd. 1997 Stock Incentive Plan.
**10.64 -- Lease Agreement, dated June 19, 1997 for property at 430
Park Avenue, New York, New York.
**10.65 -- Stock Purchase Agreement of Delta Three, Inc.
**10.66 -- Employment Agreement, dated September 2, 1997, between
Itzhak Fisher and RSL Communications, Ltd.
**10.67 -- Employment Agreement, dated September 2, 1997, between
Itzhak Fisher and International Telecommunications Group,
Ltd.
+10.68 -- RSL Communications Ltd. 1997 Directors' Compensation Plan.
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER+ DESCRIPTION
- -------- ------------------------------------------------------------
**10.69 Registration Rights Agreement, dated September 2, 1997,
among RSL Communications, Ltd., Ronald S. Lauder, Itzhak
Fisher and Coral Gate Investments Ltd.
<S> <C>
**10.70 International Telecommunication Services Agreement, dated
July 1, 1995, between International Telecommunications
Corporation and TELECOM Denmark.
**10.71 International Telecommunication Operating Agreement, dated
July 15, 1995 between Telenor Carrier Services A.S. and
International Telecommunications Corporation.
**10.72 International Telecommunication Services Agreement, dated
May 10, 1994, between Mercury Communications Limited and
International Telecommunications Corporation.
**10.73 Agreement Concerning Voice Distribution of International
Telephony Traffic, undated, between Unisource Carrier
Services AG and International Telecommunications
Corporation.
**10.74 International Telecommunications Service Agreement, dated
May 31, 1994, between Compania Dominicana De Telefonos, C.
Por A. and International Telecommunications Corporation.
**10.75 Second Supplementary Agreement to the UK-Netherlands 14
Cable System Construction & Maintenance Agreement, effective
February 18, 1997, among the parties on the Annex thereto.
**10.76 Fourth Supplementary Agreement to the ODIN Construction and
Maintenance Agreement, dated October 24, 1996, among the
parties on the Annex thereto.
**10.77 Second Supplementary Agreement to Antillas I Construction &
Maintenance Agreement, dated February 13, 1997, among the
parties on the Annex thereto.
**10.78 Canus I Cable System Indefeasible Right of Use Agreement and
Financing Agreement, dated June 4, 1996, between Optel
Communications, Inc. and International Telecommunications
Corporation.
**10.79 Cantat-3 Cable System Indefeasible Right of Use Agreement
and Financing Agreement, dated March 12, 1996, between
Teleglobe Cantat-3 Inc. and International Telecommunications
Corporation.
**10.80 PTAT-1 Submarine System Indefeasible Right of Use Agreement,
dated May 12, 1994, between Private Transatlantic
Telecommunications System, Inc. and International
Telecommunications Corporation.
**10.81 Third Supplementary Agreement to the TAT-12/TAT-13 Cable
Network Construction and Maintenance Agreement, dated
October 17, 1995, among the parties on the Annex thereto.
*10.82 -- Placement Agreement, dated as of September 30, 1996, by and
among RSL Communications PLC, RSL Communications, Ltd. and
Morgan Stanley & Co. Incorporated, Bear Stearns Co. Inc. and
Dillon Read & Co. Inc.
21.1 -- Subsidiaries of the Company.
23.1 -- Consent of Deloitte & Touche LLP (included on page II-11).
23.3 -- Consent of Conyers, Dill & Pearman (included in Exhibits 5.1
and 8.2 hereto).
23.4 -- Consent of Rosenman & Colin LLP (included in Exhibit 8.1
hereto).
24.1 -- Powers of Attorney (included in the signature pages to the
Registration Statement).
27.1 -- Financial Data Schedule.
</TABLE>
- ------------------
+ Unless otherwise indicated, the exhibits have been previously filed as part
of this Registration Statement.
* Incorporated by reference to Registrant's Registration Statement on Form S-4
(Registration No. 333-25749).
(Footnotes continued on next page)
II-8
<PAGE>
(Footnotes continued from previous page)
** Incorporated by reference to Registrant's Registration Statement on Form S-1
(Registration No. 333-34281)
*** Confidential Treatment was granted by the Commission with respect to certain
information contained in this exhibit.
+ Incorporated by reference to Registrant's Registration Statement on Form S-8
(Registration No. 333-40085)
++ Incorporated by reference to Registrant's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1997.
(b) Financial Statement Schedules:
For the years ended December 31, 1995, 1996 and 1997.
Schedule I - Condensed Financial Information of RSL Communications PLC
(included at page S-1).
Scheduled II - Schedule of Valuation Allowances (included at page S-4).
II-9
<PAGE>
ITEM 17. UNDERTAKINGS
1. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to the registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933 (the 'Act');
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the 'Calculation of Registration Fee' table in
the effective registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in this registration statement.
(2) That, for the purpose of determining any liability under the Act, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
2. Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that, in the opinion of the Commission, such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York on the 20th day of March, 1998.
RSL COMMUNICATIONS, LTD.
By: /s/ Itzhak Fisher
----------------------------------
Itzhak Fisher
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Itzhak Fisher his true and lawful
attorney-in-fact and agent, acting alone, with full power of substitution and
resubstitution, for him and in his name, place, and stead, in any and all
capacities, to sign any or all amendments (including post-effective amendments)
to this registration statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and reform each and every act and thing requisite or necessary
to be done in and about the premises, as person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------- ---------------------------- ------------------
<S> <C> <C>
* Director and Chairman of the March 20, 1998
- ---------------------------- Board of Directors
(Ronald S. Lauder)
/s/ Itzhak Fisher Director, President and March 20, 1998
- ---------------------------- Chief Executive Officer
(Itzhak Fisher) (Principal Executive
Officer)
* Director and Vice Chairman March 20, 1998
- ---------------------------- of the Board of Directors
(Andrew Gaspar)
/s/ Jacob Z. Schuster Director, Executive Vice March 20, 1998
- ---------------------------- President, Chief Financial
(Jacob Z. Schuster) Officer, Assistant Secretary
and Treasurer (Principal
Financial Officer)
</TABLE>
II-11
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------- ---------------------------- ------------------
<S> <C> <C>
/s/ Mark J. Hirschhorn Vice President-Finance, March 20, 1998
- ---------------------------- Global Controller and
(Mark J. Hirschhorn) Assistant Secretary
(Controller and Principal
Accounting Officer)
* Director March 20, 1998
- ----------------------------
(Gustavo A. Cisneros)
* Director March 20, 1998
- ----------------------------
(Fred H. Langhammer)
* Director March 20, 1998
- ----------------------------
(Leonard A. Lauder)
* Director March 20, 1998
- ----------------------------
(Eugene Sekulow)
* Director March 20, 1998
- ----------------------------
(Nicolas G. Trollope)
*By /s/ Itzhak Fisher
-------------------------
Itzhak Fisher,
Attorney-in-Fact
</TABLE>
II-12
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-46125 of RSL Communications, Ltd. on Form S-1 of our report dated February
18, 1998 relating to the consolidated financial statements of RSL
Communications, Ltd. and subsidiaries and of our report dated March 14, 1997
relating to the consolidated financial statements of International
Telecommunications Group Ltd. and subsidiaries, appearing in the Prospectus,
which is part of this Registration Statement, and of our report dated February
18, 1998 relating to the consolidated financial statement schedules of RSL
Communications, Ltd. and subsidiaries appearing elsewhere in this Registration
Statement.
We also consent to the reference to us under the headings 'Selected Financial
Data' and 'Experts' in such Prospectus.
DELOITTE & TOUCHE LLP
New York, New York
March 16, 1998
II-13
<PAGE>
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF
RSL COMMUNICATIONS PLC
CONDENSED BALANCE SHEETS
AS OF DECEMBER 31,
($ IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1997
----------------- -------------
<S> <C> <C>
ASSETS
Current Assets.......................... $ 201,734 $ 212,568
Marketable Securities--Held to
maturity.............................. 104,370 68,836
Property and Equipment.................. 31,941 64,649
Other Assets............................ 88,820 190,633
----------------- -------------
Total................................. $ 426,865 $ 536,686
----------------- -------------
----------------- -------------
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current Liabilities..................... $ 74,948 $ 122,672
Long Term Debt.......................... 94,556 257,448
Senior Notes, 12 1/4% Due 2006.......... 300,000 300,000
Shareholders' Deficiency................ (42,639) (143,434)
----------------- -------------
Total................................. $ 426,865 $ 536,686
----------------- -------------
----------------- -------------
</TABLE>
S-1
<PAGE>
SCHEDULE I (CONTINUED)
RSL COMMUNICATIONS PLC
CONDENSED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31,
($ IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1997
------------ ----------
<S> <C> <C>
Revenues..................................... $113,257 $266,142
Cost of Services............................. 98,461 235,150
------------ ----------
Gross Profit............................ 14,796 30,992
Expenses..................................... 41,619 100,118
------------ ----------
Loss from Operations......................... (26,823) (69,126)
Interest Expense............................. (7,384) (39,576)
Interest Income.............................. -- 13,565
Other (Expense) Income--Net.................. 473 (375)
Minority Interest............................ (180) 88
Income Taxes................................. (395) (400)
------------ ----------
Net Loss................................ $(34,309) $(95,824)
------------ ----------
------------ ----------
</TABLE>
S-2
<PAGE>
SCHEDULE I (CONTINUED)
RSL COMMUNICATIONS PLC
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31
($ IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1997
------------ -----------
<S> <C> <C>
Net Loss..................................... $ (34,309) $ (95,824)
Depreciation and amortization................ 6,618 20,270
Working capital change and other............. 16,911 (15,909)
------------ -----------
Net cash used in operating activities... (10,780) (91,463)
------------ -----------
Purchases of Property and Equipment.......... (15,983) (29,866)
Acquisitions of Subsidiaries................. (38,552) (50,814)
Purchase of Marketable Securities............ (82,529) --
Proceeds from Sales of Marketable
Securities................................. 14,701 41,038
(Purchase) Proceeds of Restricted Marketable
Securities................................. (102,808) 54,167
Other........................................ 171 144
------------ -----------
Net cash (used in) provided by investing
activities............................. (225,000) 14,669
------------ -----------
Proceeds from notes payable.................. 300,000 --
Advances from Parent......................... 51,362 118,999
Offering Cost and Other...................... (11,969) (15,653)
------------ -----------
Net cash provided by financing
activities............................. 339,393 103,346
------------ -----------
Net increase in cash.................... 103,613 26,552
Effect of Foreign Currency on Cash...... -- (785)
Cash and cash equivalents at beginning
of period.............................. -- 103,613
------------ -----------
Cash and cash equivalents at end of
period................................. $ 103,613 $ 129,380
------------ -----------
------------ -----------
</TABLE>
S-3
<PAGE>
SCHEDULE II
SCHEDULE OF VALUATION ALLOWANCES
($ IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
JANUARY 1, COSTS AND OTHER DECEMBER 31,
1997 EXPENSES ACCOUNTS DEDUCTIONS 1997
---------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Bad debt provision... $ 3,881 $ 10,908 $ -- $ (2,456) $ 12,333
</TABLE>
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
JANUARY 1, COSTS AND OTHER DECEMBER 31,
1996 EXPENSES ACCOUNTS DEDUCTIONS 1996
---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Bad debt provision... $ 1,596 $ 2,829 $ -- $ (544) $ 3,881
</TABLE>
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
JANUARY 1, COSTS AND OTHER DECEMBER 31,
1995 EXPENSES ACCOUNTS(1) DEDUCTIONS 1995
---------- ---------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Bad debt provision... $ -- $ 149 $ 1,447 $ -- $ 1,596
</TABLE>
- ------------------
(1) The bad debt provision was previously recorded in the financial statements
of RSL Communications, Ltd.'s (the 'Company') predecessor, International
Telecommunications Group, Ltd. ('ITG'). The Company began consolidating ITG
effective with its acquisition of interests in ITG in September 1995.
S-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER+ DESCRIPTION PAGE
- -------- ------------------------------------------------------------ ----
<S> <C> <C>
*3.1 -- Certificate of Incorporation of RSL Communications, Ltd.,
issued by the Bermuda Registrar of Companies on March 14,
1996.
*3.2 -- Memorandum of Association of RSL Communications, Ltd., filed
with the Bermuda Registrar of Companies on March 14, 1996.
**3.3 -- Bye-Laws of RSL Communications, Ltd. (as amended through
September 2, 1997).
*4.1 -- Indenture, dated October 3, 1996, by and among RSL
Communications PLC, RSL Communications, Ltd. and The Chase
Manhattan Bank, as Trustee, containing, as exhibits,
specimens of 12 1/4% Senior Notes due 2006.
*4.2 -- Notes Registration Rights Agreement, dated October 3, 1996,
by and among RSL Communications PLC, RSL Communications,
Ltd. and the Placement Agents.
*4.3 -- Note Deposit Agreement, dated October 3, 1996, by and among
RSL Communications PLC, RSL Communications, Ltd. and The
Chase Manhattan Bank, as Book Entry Depositary.
*4.4 -- Collateral Pledge and Security Agreement, dated October 3,
1996, by and among RSL Communications PLC and Trustee.
*4.5 -- Form of Letter of Transmittal.
++4.6 -- Form of 12 1/4% Senior Note due 2006.
**4.7 -- Form of Class A Common Share Certificate.
4.8 -- Exchange and Registration Rights Agreement, dated as of
February 27, 1998, among RSL Communications PLC, RSL
Communications, Ltd., Goldman, Sachs & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Chase Securities Inc.,
J.P. Morgan Securities Inc., and SBC Warburg Dillon Read
Inc.
4.9 -- Note Deposit Agreement, dated as of February 27, 1998, among
RSL Communications PLC, RSL Communications, Ltd. and The
Chase Manhattan Bank as Book-Entry Depositary.
4.10 -- Note Deposit Agreement, dated as of February 27, 1998, among
RSL Communications PLC, RSL Communications, Ltd. and The
Chase Manhattan Bank as Book-Entry Depositary.
4.11 -- Indenture, dated as of February 27, 1998, by RSL
Communications PLC and RSL Communications, Ltd. to The Chase
Manhattan Bank as Trustee.
4.12 -- Indenture, date as of February 27, 1998, by RSL
Communications PLC and RSL Communications, Ltd. to The Chase
Manhattan Bank as Trustee.
4.13 -- Exchange and Registration Rights Agreement, dated as of
March 16, 1998, among RSL Communications PLC, RSL
Communications, Ltd. and Goldman, Sachs & Co. oHG and
Merrill Lynch International.
4.14 -- Note Deposit Agreement, dated as of March 16, 1998, by and
between RSL Communications PLC and The Chase Manhattan Bank
as Book-Entry Depositary.
4.15 -- Indenture, dated as of March 16, 1998 by RSL Communications
PLC and RSL Communications, Ltd. to The Chase Manhattan Bank
as Trustee.
5.1 -- Opinion of Conyers, Dill & Pearman.
8.1 -- Opinion of Rosenman & Colin LLP.
8.2 -- Opinion of Conyers, Dill & Pearman.
*10.1 -- Warrant Agreement, dated October 3, 1996, between RSL
Communications, Ltd., as Issuer, and The Chase Manhattan
Bank, as warrant agent.
*10.2 -- Warrant Registration Rights Agreement, dated October 3,
1996, between RSL Communications, Ltd., as issuer, and The
Chase Manhattan Bank, as warrant agent.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER+ DESCRIPTION PAGE
- -------- ------------------------------------------------------------ ----
<S> <C> <C>
*10.3 -- Amendment to the Revolving Credit Facility, dated August 20,
1996, from The Chase Manhattan Bank to RSL Communications,
Inc.
*10.4 -- Amendment to the Revolving Credit Facility, dated September
10, 1996, from The Chase Manhattan Bank to RSL
Communications, Ltd.
*10.5 -- Subordinated Promissory Note, dated September 10, 1996, from
RSL Communications, Ltd. to Ronald S. Lauder.
*10.6 -- Warrant for 210,000 shares of Class B Common Stock of RSL
Communications, Ltd. issued to Ronald S. Lauder on September
10, 1996.
*10.7 -- Standby Facility Agreement, dated October 1, 1996, by and
between RSL Communications, Ltd. and Ronald S. Lauder.
*10.8 -- Consulting Agreement, dated September 15, 1995, between
Eugene Sekulow and RSL Communications, Inc.
*10.9 -- Amendment to Consulting Agreement, dated August 8, 1996,
between Eugene Sekulow and RSL Communications, Ltd.
*10.10 -- RSL Communications, Ltd.'s 1995 Amended and Restated Stock
Option Plan.
*10.11 -- Employment Agreement, dated September 15, 1995, between
Itzhak Fisher and International Telecommunications Group,
Ltd.
*10.12 -- Employment Agreement, dated September 15, 1995, between
Itzhak Fisher and RSL Communications Inc.
*10.13 -- Employment Agreement, dated April 1, 1995, between Nir
Tarlovsky and International Telecommunications Group, Ltd.
*10.14 -- Employment Agreement, dated April 1, 1995, between Nir
Tarlovsky and RSL Communications Inc.
*10.15 -- Employment Agreement, dated August 9, 1995, between RSL COM
Europe Limited and Richard Williams.
*10.16 -- Memorandum of Agreement, dated July 30, 1996, between
International Telecommunications Corporation and Codetel.
*10.17 -- General Purchase Agreement, dated September 14, 1995,
between Ericsson Inc. and International Telecommunications
Corporation.
*10.18 -- Lease Agreement between AB LM Ericsson Finans and
International Telecommunications Corporation.
*10.19 -- Lease Agreement, dated April 10, 1996, between RSL COM
Europe Ltd. and AB LM Ericsson Finans.
*10.20 -- Lease Agreement, dated December 30, 1996, between RSL COM
Europe Ltd. and AB LM Ericsson Finans.
*10.21 -- Loan and Security Agreement, dated September 8, 1995,
between Cyberlink Inc. and CoastFed Business Credit
Corporation.
*10.22 -- Accounts Collateral Security Agreement, dated September 8,
1995, between Cyberlink Inc. and CoastFed Business Credit
Corporation.
*10.23 -- Equipment Collateral Security Agreement, dated September 8,
1995, between Cyberlink Inc. and CoastFed Business Credit
Corporation.
*10.24 -- Security Stock Pledge Agreement, dated September 8, 1995,
between CoastFed Business Credit Corporation and Cyberlink
Inc.
*10.25 -- Security Agreement, dated September 8, 1995, between
CoastFed Business Credit Corporation and
Cyberlink-California Inc.
*10.26 -- Security Agreement, dated September 8, 1995, between
CoastFed Business Credit Corporation and Cyberlink-Nevada
Inc.
*10.27 -- Asset Purchase Agreement, dated as of May 8, 1996, by and
between RSL COM France S.A. and Sprint Telecommunications
France Inc.
*10.28 -- Transition Services Agreement, dated May 8, 1996, by and
among Sprint Telecommunications France Inc., Sprint
International France S.A. and RSL COM France S.A.
*10.29 -- Transition Services Agreement, dated May 8, 1996, by and
between Sprint Communications Company L.P. and RSL COM
France S.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER+ DESCRIPTION PAGE
- -------- ------------------------------------------------------------ ----
<S> <C> <C>
*10.30 -- Amendment No. 1 to the Transition Services Agreement,
effective as of May 8, 1996, among Sprint Communications
Company L.P., Sprint International France S.A. and RSL COM
France S.A.
*10.31 -- Transition Services Agreement, dated May 8, 1996, by and
between Global One Communications World Operations, Limited
and RSL COM France S.A.
*10.32 -- Asset Purchase Agreement, dated as of May 8, 1996, by and
among Siena Vermogensverwaltungs-GmbH, Sprint
Telecommunication Services GmbH and Sprint Fon Inc.
*10.33 -- Transition Services Agreement, dated May 8, 1996, by and
among Sprint Telecommunication Services GmbH, Sprint Fon
Inc. and Siena Vermogensverwaltungs- GmbH.
*10.34 -- Transition Services Agreement, dated May 8, 1996, by and
between Sprint Communications Company L.P. and RSL COM
Deutschland GmbH.
*10.35 -- Amendment No. 1 to the Transition Services Agreement,
effective as of May 8, 1996, among Sprint Communications
Company L.P., Sprint Telecommunication Services GmbH and RSL
COM Deutschland GmbH.
*10.36 -- Transition Services Agreement, dated May 8, 1996, by and
between Global One Communications World Operations, Limited
and Siena Vermogensverwaltungs-GmbH.
*10.37 -- Asset Purchase Agreement, August 12, 1996, by and between
RSL COM UK Limited and Incom (UK) Ltd.
*10.38 -- Stock Purchase Agreement, dated July 3, 1996, between RSL
Communications Limited, Charles Piluso and International
Telecommunications Group, Ltd.
*10.39 -- Secured Promissory Note, dated September 9, 1996, from RSL
Communications PLC to Charles Piluso.
*10.40 -- Stock Pledge and Security Agreement, dated September 9, 1996
between RSL Communications PLC, Charles Piluso and Fletcher,
Heald & Hildreth, P.L.C.
*10.41 -- New Shareholders Agreement, dated September 9, 1996 among
Charles Piluso, Jacqueline and Victoria Piluso, Richard
Rebetti, RSL Communications PLC, RSL Communications, Ltd and
International Telecommunications Group, Ltd.
*10.42 -- Stock Purchase Agreement, dated September 9, 1996, between
RSL Communications PLC, Richard Rebetti, Jr. and
International Telecommunications Group, Ltd.
*10.43 -- Secured Promissory Note, dated September 9, 1996, from RSL
Communications PLC to Richard Rebetti.
*10.44 -- Stock Pledge and Security Agreement, dated September 9,
1996, between RSL Communications PLC, Richard Rebetti, Jr.
and Fletcher, Heald & Hildreth, P.L.C.
*10.45 -- Agreement and Plan of Reorganization, dated September 9,
1996, among RSL Communications PLC, RSL Communications, Ltd.
and Charles Piluso.
*10.46 -- Tax Agreement, dated September 9, 1996, between RSL
Communications PLC, RSL Communications, Ltd. and Charles
Piluso.
*10.47 -- Stock Purchase Agreement, dated September 22, 1995, by and
between RSL Communications, Inc. and Charles Piluso.
*10.48 -- Stock Purchase Agreement, dated September 22, 1995, by and
between Richard Rebetti and RSL Communications, Inc.
*10.49 -- Amendment to the Stock Purchase Agreement, dated September
22, 1995, between and among International Telecommunications
Group, Ltd., International Telecommunications Corporation
and RSL Communications, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER+ DESCRIPTION PAGE
- -------- ------------------------------------------------------------ ----
<S> <C> <C>
*10.50 -- Stock Purchase Agreement, dated March 10, 1995, between RSL
Communication, Inc., International Telecommunications Group,
Ltd. and International Telecommunications Corporation.
*10.51 -- Amendment to Shareholders' Agreement, dated March 10, 1995,
between and among Charles Piluso, Richard Rebetti, Incom
(UK) Ltd., International Telecommunications Group, Ltd. and
RSL Communications, Inc.
*10.52 -- Indemnity Agreement, dated March 10, 1995, between and among
International Telecommunications Group, Ltd., International
Telecommunications Corporation and RSL Communications, Inc.
*10.53 -- Sublease, dated July 18, 1996, between RSL Communications,
Ltd. and RSL Management Corporation.
*10.54 -- Lease, dated as of January 15, 1997, between Longstreet
Associates L.P. and RSL COM U.S.A., Inc.
*10.55 -- Employment Agreement, dated January 31, 1997, between Roland
T. Mallcott and RSL Communications, Ltd.
*10.56 -- Amendment of Lease, dated as of December 6, 1995, between
Hudson Telegraph Associates and International
Telecommunications Corporation.
**10.57 -- Shareholders Agreement of RSL Communications, Latin America,
Ltd., dated August 4, 1997, between and among RSL
Communications, Latin America, Ltd., RSL Communications,
Ltd. and Coral Gates Investments Ltd.
**10.58 -- Stockholders' Agreement, dated July 23, 1997, by and among
Delta Three, Inc., RSL Communications, Ltd., and the other
shareholders of Delta Three, Inc.
**,***10.59-- Delta Three, Inc. Services Agreement.
**10.60 -- Employment Agreement, dated July 31, 1997, between Andrew C.
Shields and RSL Communications, Ltd.
**10.61 -- Shareholders Agreement, dated October 10, 1996, between RSL
COM Europe, Limited, Gerard van Leest and Belnet Nederland
B.V.
+10.62 -- RSL Communications, Ltd. 1997 Performance Incentive Plan.
+10.63 -- RSL Communications, Ltd. 1997 Stock Incentive Plan.
**10.64 -- Lease Agreement, dated June 19, 1997 for property at 430
Park Avenue, New York, New York.
**10.65 -- Stock Purchase Agreement of Delta Three, Inc.
**10.66 -- Employment Agreement, dated September 2, 1997, between
Itzhak Fisher and RSL Communications, Ltd.
**10.67 -- Employment Agreement, dated September 2, 1997, between
Itzhak Fisher and International Telecommunications Group,
Ltd.
+10.68 -- RSL Communications Ltd. 1997 Directors Compensation Plan.
**10.69 Registration Rights Agreement, dated September 2, 1997,
among RSL Communications, Ltd., Ronald S. Lauder, Itzhak
Fisher and Coral Gate Investments Ltd.
**10.70 International Telecommunication Services Agreement, dated
July 1, 1995, between International Telecommunications
Corporation and TELECOM Denmark.
**10.71 International Telecommunication Operating Agreement, dated
July 15, 1995 between Telenor Carrier Services A.S. and
International Telecommunications Corporation.
**10.72 International Telecommunication Services Agreement, dated
May 10, 1994, between Mercury Communications Limited and
International Telecommunications Corporation.
**10.73 Agreement Concerning Voice Distribution of International
Telephony Traffic, undated, between Unisource Carrier
Services AG and International Telecommunications
Corporation.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER+ DESCRIPTION PAGE
- -------- ------------------------------------------------------------ ----
<S> <C> <C>
**10.74 International Telecommunications Service Agreement, dated
May 31, 1994, between Compania Dominicana De Telefonos, C.
Por A. and International Telecommunications Corporation.
**10.75 Second Supplementary Agreement to the UK-Netherlands 14
Cable System Construction & Maintenance Agreement, effective
February 18, 1997, among the parties on the Annex thereto.
**10.76 Fourth Supplementary Agreement to the ODIN Construction and
Maintenance Agreement, dated October 24, 1996, among the
parties on the Annex thereto.
**10.77 Second Supplementary Agreement to Antillas I Construction &
Maintenance Agreement, dated February 13, 1997, among the
parties on the Annex thereto.
**10.78 Canus I Cable System Indefeasible Right of Use Agreement and
Financing Agreement, dated June 4, 1996, between Optel
Communications, Inc. and International Telecommunications
Corporation.
**10.79 Cantat-3 Cable System Indefeasible Right of Use Agreement
and Financing Agreement, dated March 12, 1996, between
Teleglobe Cantat-3 Inc. and International Telecommunications
Corporation.
**10.80 PTAT-1 Submarine System Indefeasible Right of Use Agreement,
dated May 12, 1994, between Private Transatlantic
Telecommunications System, Inc. and International
Telecommunications Corporation.
**10.81 Third Supplementary Agreement to the TAT-12/TAT-13 Cable
Network Construction and Maintenance Agreement, dated
October 17, 1995, among the parties on the Annex thereto.
*10.82 -- Placement Agreement, dated as of September 30, 1996, by and
among RSL Communications PLC, RSL Communications, Ltd. and
Morgan Stanley & Co. Incorporated, Bear Stearns Co. Inc. and
Dillon Read & Co. Inc.
21.1 -- Subsidiaries of the Company.
23.1 -- Consent of Deloitte & Touche LLP (included on page II-11).
23.3 -- Consent of Conyers, Dill & Pearman (included in Exhibits 5.1
and 8.2 hereto).
23.4 -- Consent of Rosenman & Colin LLP (included in Exhibit 8.1
hereto).
24.1 -- Powers of Attorney (included in the signature pages to the
Registration Statement).
27.1 -- Financial Data Schedule.
</TABLE>
- ------------------
+ Unless otherwise indicated, the exhibits have been previously filed as part
of this Registration Statement.
* Incorporated by reference to Registrant's Registration Statement on Form S-4
(Registration No. 333-25749).
** Incorporated by reference to Registrant's Registration Statement on Form S-1
(Registration No. 333-34281).
*** Confidential Treatment was granted by the Commission with respect to
certain information contained in this exhibit.
+ Incorporated by reference to Registrant's Registration Statement on Form S-8
(Registration No. 333-40085).
++ Incorporated by reference to Registrant's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1997.
<PAGE>
EXECUTION COPY
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT, dated as of February 27, 1998,
among RSL Communications PLC, a United Kingdom corporation (the "Issuer"), RSL
Communications, Ltd. (the "Guarantor') and Goldman, Sachs & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Chase Securities Inc., J. P. Morgan
Securities Inc., and SBC Warburg Dillon Read Inc. (together, the "Purchasers"),
identified on Schedule I to the Purchase Agreement (as defined herein) as the
purchasers of the 9 1/8% Senior Notes due 2008 (the "Senior Notes") and of the
10 1/8% Senior Discount Notes due 2008 (the "Senior Discount Notes" and,
together with the Senior Notes, the "Notes") of the Issuer.
The Issuer proposes to issue and sell to the Purchasers upon the terms set
forth in the Purchase Agreement the Securities (as defined herein). As an
inducement to the Purchasers to enter into the Purchase Agreement and in
satisfaction of a condition to the obligations of the Purchasers thereunder, the
Issuer agrees with the Purchasers for the benefit of holders (as defined herein)
from time to time of the Registrable Securities (as defined herein) as follows:
1. Certain Definitions.
For purposes of this Exchange and Registration Rights Agreement, the
following terms shall have the following respective meanings:
"Base Interest" shall mean the interest that would otherwise accrue on
the Securities under the terms thereof and the Indentures, without giving
effect to the provisions of this Agreement.
The term "broker-dealer" shall mean any broker or dealer registered
with the Commission under the Exchange Act.
"Closing Date" shall mean February 27, 1998.
"Commission" shall mean the 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," in the case of (i) an Exchange Registration, shall
mean the time and date as of which the Commission declares the Exchange
Registration Statement effective or as of which the Exchange Registration
Statement otherwise becomes effective and (ii) a Shelf Registration, shall
mean the time and date as of which the Commission declares the Shelf
Registration Statement effective or as of which the Shelf Registration
Statement otherwise becomes effective.
"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.
-1-
<PAGE>
"Exchange Registration" shall have the meaning assigned thereto in
Section 3(d) hereof.
"Exchange Registration Statement" shall have the meaning assigned
thereto in Section 2(a) hereof.
"Exchange Securities" shall have the meaning assigned thereto in
Section 2(a) hereof.
The term "holder" shall mean each of the Purchasers and other persons
who acquire Registrable Securities from time to time (including any
successors or assigns), in each case for so long as such person owns any
Registrable Securities.
"Indentures" shall mean the Senior Notes Indenture, dated as of
February 27, 1998 (the "Senior Notes Indenture"), between the Issuer, the
Guarantor and The Chase Manhattan Bank, as Trustee (the "Trustee"), as the
same shall be amended from time to time and the Senior Discount Notes
Indenture, dated as of February 27, 1998 (the "Senior Discount Notes
Indenture"), between the Issuer, the Guarantor and the Trustee, as the same
shall be amended from time to time.
The term "person" shall mean a corporation, association, partnership,
organization, business, limited liability company, individual, government
or political subdivision thereof or governmental agency.
"Purchase Agreement" shall mean the Purchase Agreement, dated as of
February 24, 1998, between the Purchasers, the Issuer and the Guarantor
relating to the Securities.
"Registrable Securities" shall mean the Securities; provided, however,
that a Security shall cease to be a Registrable Security when (i) in the
circumstances contemplated by Section 2(a) hereof, the Security has been
exchanged for an Exchange Security in an Exchange Offer as contemplated in
Section 2(a) (provided that any Exchange Security received by a
broker-dealer in an Exchange Offer in exchange for a Registrable Security
that was not acquired by the broker-dealer directly from the Issuer will
also be a Registrable Security through and including the earlier of the
90th day after the Exchange Offer is completed or such time as such
broker-dealer no longer owns such Security); (ii) in the circumstances
contemplated by Section 2(b) hereof, a Shelf Registration Statement
registering such Security under the Securities Act has been declared or
becomes effective and such Security has been sold or otherwise transferred
by the holder thereof pursuant to and in a manner contemplated by such
effective Shelf Registration Statement; (iii) such Security is sold
pursuant to Rule 144 (or any successor provision) under circumstances in
which any legend borne by such Security relating to restrictions on
transferability thereof, under the Securities Act or otherwise, is removed
by the Issuer or pursuant to the Indentures; (iv) such Security is
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eligible to be sold pursuant to paragraph (k) of Rule 144; or (v) such
Security shall cease to be outstanding.
"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.
"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 Issuer 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 Securities Act) of the 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 Registrable Securities acquired by the broker-dealer directly
from the Issuer.
"Rule 144," "Rule 405" and "Rule 415" shall mean, in each case, such
rule promulgated under the Securities Act (or any successor provision), as
the same shall be amended from time to time.
"Securities" shall mean, collectively, the Senior Notes and the Senior
Discount Notes to be issued and sold to the Purchasers, and securities
issued in exchange therefor or in lieu thereof pursuant to the Indentures.
Each security will be unconditionally guaranteed as to payment of
principal, interest and any other amounts due thereon by the Guarantor, as
provided (i) by the Senior Notes Indenture, under which the Senior Notes
will be issued, in the case of the Senior Notes (the "Senior Notes
Guarantee") and (ii) by the Senior Discount Notes Indenture, under which
the Senior Notes will be issued, in the case of the Senior Discount Notes
(the "Senior Discount Notes Guarantee" and, together with the Senior Notes
Guarantee, (the "Notes Guarantees"). Unless the context otherwise requires,
any reference herein to "Security," or "Exchange Security" or a
"Registrable Security" shall include a reference to the related Notes
Guarantees.
"Securities Act" shall mean the Securities Act of 1933, or any
successor thereto, as the same shall be amended from time to time.
"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.
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"Special Interest" shall have the meaning assigned thereto in Section
2(c) hereof.
"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.
2. Registration Under the Securities Act.
(a) Except as set forth in Section 2(b) below, the Issuer agrees to file
under the Securities Act and use its reasonable best efforts to cause to be
declared effective, a registration statement relating to an offer to exchange
(such registration statement, the "Exchange 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 Issuer and guaranteed by the
Guarantor, which debt securities and guarantees are substantially identical to
the Securities (and are entitled to the benefits of a trust indenture which is
substantially identical to the Senior Notes Indentures or the Senior Discount
Notes Indenture, as applicable, or is the Senior Notes Indenture or the Senior
Discount Notes Indenture, as applicable, and which has been qualified under the
Trust Indenture Act), except that they have been registered pursuant to an
effective registration statement under the Securities Act and do not contain
registration rights, transfer restrictions and provisions for the additional
interest contemplated in Section 2(c) below (such new debt securities
hereinafter called "Exchange Securities"). The Issuer agrees to use its
reasonable best efforts to cause the Exchange Registration Statement to become
effective under the Securities Act and to consummate the Exchange Offer as soon
as practicable, but no later than 270 days after the Closing Date. The Exchange
Offer will be registered under the Securities Act on the appropriate form
required by the Commission and will comply with all applicable tender offer
rules and regulations under the Exchange Act and all applicable federal and
state securities laws. The Issuer further agrees to use its reasonable best
efforts to hold the Exchange Offer open for at least 30 days and issue Exchange
Securities for all Registrable 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 and
related guarantees received by holders other than Restricted Holders in the
Exchange Offer for Registrable Securities are, upon receipt, transferable by
each such holder without need for further compliance with Section 5 of the
Securities Act (except for the requirement to deliver a prospectus included in
the Exchange Registration Statement applicable to resales by broker-dealers of
Exchange Securities received by such broker-dealer pursuant to an Exchange Offer
in exchange for Registrable Securities other than
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<PAGE>
those acquired by the broker-dealer directly from the Issuer) 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 Issuer
having exchanged the Exchange Securities for all outstanding Registrable
Securities pursuant to the Exchange Offer and (ii) the Issuer having exchanged,
pursuant to the Exchange Offer, Exchange Securities for all Registrable
Securities that have been properly tendered and not withdrawn before the
expiration of the Exchange Offer, which shall be on a date that is at least 30
days following the commencement of the Exchange Offer. The Issuer agrees (x) to
include in the Exchange 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 Registrable Securities acquired by the
broker-dealer directly from the Issuer, and (y) to keep such Exchange
Registration Statement effective for a period (the "Resale Period") beginning
when Exchange Securities are first issued in the Exchange Offer and ending upon
the earlier of (x) the expiration of the 90th day after the Exchange Offer has
been completed and (y) such time as such broker-dealers no longer own any
Registrable Securities. With respect to such Exchange Registration Statement,
each broker-dealer that holds Exchange Securities received in an Exchange Offer
in exchange for Registerable Securities not acquired by it directly from the
Issuer shall have the benefit of the rights of indemnification and contribution
set forth in Sections 6(a), (c), (d) and (e) hereof.
(b) If prior to the time the Exchange Offer is completed existing
Commission interpretations are changed such that the debt securities or any
related guarantees received by holders other than Restricted Holders in the
Exchange Offer for Registrable Securities are not or would not be, upon receipt,
transferable by each such holder without need for further compliance with
Section 5 of the Securities Act (except for the requirement to deliver a
prospectus included in the Exchange Registration Statement applicable to resales
by broker-dealers of Exchange Securities received by such broker-dealer pursuant
to an Exchange Offer in exchange for Registrable Securities other than those
acquired by the broker-dealer directly from the Issuer) in lieu of conducting
the Exchange Offer contemplated by Section 2(a), the Issuer shall file under the
Securities Act and use its reasonable best efforts to cause to be declared
effective 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
Registrable Securities, pursuant to Rule 415 or any similar rule that may be
adopted by the Commission (such filing, the "Shelf Registration" and such
registration statement, the "Shelf Registration Statement"). In addition, in the
event that the Purchasers shall not have resold all of the Securities initially
purchased by them from the Issuer pursuant to the Purchase Agreement, prior to
the consummation of the Exchange Offer, the Issuer shall file under the
Securities Act as soon as practicable a Shelf Registration Statement, which if
permitted by the Commission may be by way of a post-effective amendment to the
Exchange Registration Statement. The Issuer agrees to use its best efforts to
cause the Shelf Registration Statement to become or be declared effective no
later than 270 days after the Closing Date and to keep such Shelf Registration
Statement
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<PAGE>
continuously effective for a period ending on the earlier of (x) the second
anniversary of the Closing Date and (y) such time as there are no longer any
Registrable Securities outstanding. The Issuer further 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 Issuer for such Shelf Registration Statement or by the Securities Act or
rules and regulations promulgated thereunder for a shelf registration, and the
Issuer agrees to furnish to the holders of the Registrable Securities copies of
any such supplement or amendment to such registration statement prior to its
being used or promptly following its filing with the Commission. Attached as
Exhibit A hereto is a form of Notice of Registration Statement and Selling
Securityholder Questionnaire to be completed by holders in connection with a
Shelf Registration pursuant to this Section 2(b).
(c) In the event that (i) the Exchange Offer has not been completed, or a
Shelf Registration Statement has not been declared effective, within 270 days
after the Closing Date or (ii) any Exchange Registration Statement or Shelf
Registration Statement required by Section 2(a) or 2(b) hereof is filed and
declared effective but shall thereafter, prior to the time such Exchange
Registration Statement or Shelf Registration Statement is no longer required to
be effective pursuant to Section 2(a) or 2(b) hereof, as the case may be, either
be withdrawn by the Issuer or shall become subject to an effective stop order
issued pursuant to Section 8(d) of the Securities Act suspending the
effectiveness of such registration statement (except as specifically permitted
herein) without being succeeded immediately by an additional registration
statement filed and declared effective (each such event referred to in clauses
(i) and (ii), a "Registration Default" and each period during which a
Registration Default has occurred and is continuing, a "Registration Default
Period"), then, as liquidated damages for such Registration Default, subject to
the provisions of Section 9(b), special interest ("Special Interest"), in
addition to the Base Interest, shall accrue at a per annum rate of 0.50% for the
Registration Default Period. The Special Interest shall be payable in cash
semi-annually in arrears on each March 1 and September 1. Special Interest, if
any, shall be computed on the basis of a 360 day year of twelve 30-day months
and the number of days actually elapsed.
(d) The Issuer and the Guarantor shall take all actions reasonably
necessary or advisable to be taken by them to ensure that the transactions
contemplated herein are effected as so contemplated.
(e) 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 be
deemed to include any document incorporated, or deemed to be incorporated,
therein by reference as of such time.
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<PAGE>
3. Registration Procedures.
(a) (i) In connection with the Exchange Offer, the Issuer shall comply with
all of the provisions of Section 3(d) and Section 3(e) below, shall use its
reasonable best efforts to effect such exchange to permit the sale of
Registrable Securities being sold in accordance with the intended method or
methods of distribution thereof, and, prior to effectiveness of the Exchange
Offer Registration Statement, shall, if required by the Commission, provide a
supplemental letter to the Commission (A) stating that the Issuer is registering
the Exchange Offer in reliance on the position of the Commission enunciated in
Exxon Capital Holdings Corporation (available May 13, 1988) and Morgan Stanley
and Co., Inc. (available June 5, 1991) and (B) including a representation that
the Issuer has not entered into any arrangement or understanding with any person
to distribute the Exchange Securities to be received in the Exchange Offer and
that, to the best of the Issuer's information and belief, each holder
participating in the Exchange Offer is acquiring the Exchange Securities in its
ordinary course of business and has no arrangement or understanding with any
person to participate in the distribution of the Exchange Securities received in
the Exchange Offer.
(ii)As a condition to its participation in the Exchange Offer pursuant to
the terms of this Agreement, each holder of Registrable Securities shall
furnish, upon the request of the Issuer, prior to the consummation thereof, a
written representation to the Issuer (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 Issuer or the Guarantor, (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. In addition, all such
holders of Registrable Securities shall otherwise cooperate in the Issuer's and
the Guarantor's preparations for the Exchange Offer. Each holder hereby
acknowledges and agrees that any broker-dealer and any such holder, in either
case, exchanging Registrable Securities in the Exchange Offer, in connection
with the resale of Exchange Securities 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 Securities Act in
connection with a secondary resale transaction and that such a secondary resale
transaction should be covered by an effective 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 Registrable Securities acquired by such holder
directly from the Issuer.
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<PAGE>
If the Issuer files a registration statement pursuant to Section 2(a) or
Section 2(b), the following provisions shall apply:
(b) At or before the Effective Time of the Exchange Offer or the Shelf
Registration, as the case may be, the Issuer shall qualify the Indentures under
the Trust Indenture Act.
(c) In the event that such qualification would require the appointment of a
new trustee under either of the Indentures, the Issuer shall appoint a new
trustee thereunder pursuant to the applicable provisions of such Indenture.
(d) In connection with the Issuer's obligations with respect to the
registration of Exchange Securities as contemplated by Section 2(a) (the
"Exchange Registration"), if applicable, the Issuer shall, as soon as reasonably
possible (or as otherwise specified):
(i) prepare and file with the Commission an Exchange Registration
Statement on any form which may be utilized by the Issuer and which shall
permit the Exchange Offer and resales of Exchange Securities by
broker-dealers during the Resale Period to be effected as contemplated by
Section 2(a), and use its reasonable best efforts to cause such Exchange
Registration Statement to become effective and to consummate the Exchange
Offer, as soon as practicable thereafter, but no later than 270 days after
the Closing Date;
(ii) as soon as practicable prepare and file with the Commission such
amendments and supplements to such Exchange Registration Statement and the
prospectus included therein as may be necessary to effect and maintain the
effectiveness of such Exchange 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 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 Securities 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;
(iii) promptly notify the Purchasers and their counsel and (with
respect to clause C, E and F below only), any broker-dealer that has
advised the Issuer or the Guarantor that it is entitled to a resale
prospectus during the Resale Period, and confirm such advice in writing,
(A) when such Exchange 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 Registration
Statement or any post-effective amendment, when the same has become
effective, (B) of any comments by the Commission and by the Blue Sky or
securities commissioner or regulator
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<PAGE>
of any state with respect thereto or any request by the Commission for
amendments or supplements to such Exchange Registration Statement or
prospectus or for additional information, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of such Exchange
Registration Statement or the initiation or threatening of any proceedings
for that purpose, (D) if at any time the representations and warranties of
the Issuer and the Guarantor contemplated by Section 5 hereof cease to be
true and correct in all material respects, (E) of the receipt by the Issuer
or the Guarantor 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 (F) at
any time during the Resale Period when a prospectus is required to be
delivered under the Securities Act, that such Exchange Registration
Statement, prospectus, prospectus amendment or supplement or post-effective
amendment thereto does not conform in all material respects to the
applicable requirements of the Securities 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;
(iv) in the event that the Issuer would be required, pursuant to
Section 3(d)(iii)(F) above, to notify any broker-dealer entitled to a
resale prospectus during the Resale Period, prepare and furnish without
delay 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
Securities 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) use its reasonable best efforts to obtain the withdrawal of any
order suspending the effectiveness of such Exchange Registration Statement
or any post-effective amendment thereto at the earliest practicable date;
(vi) use its reasonable best efforts to (A) register or qualify the
Exchange Securities under the securities laws or blue sky laws of such
jurisdictions in the United States as are contemplated by Section 2(a) no
later than the commencement of the Exchange Offer, (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 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 neither
the Issuer nor the Guarantor shall be required for any such purpose to (1)
qualify as a foreign corporation
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in any jurisdiction wherein it would not otherwise be required to qualify
but for the requirements of this Section 3(d)(vi), (2) consent to general
service of process in any such jurisdiction, (3) become subject to any tax
or (4) make any changes to its certificate of incorporation or by-laws or
any agreement between it and its stockholders;
(vii) use its reasonable 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 security holders as soon as
practicable but no later than eighteen months after the effective date of
such Exchange Registration Statement, an earning statement of the Issuer,
the Guarantor and their subsidiaries complying with Section 11(a) of the
Securities Act (including, at the option of the Issuer, Rule 158
thereunder).
(e) In connection with the Issuer's obligations with respect to the Shelf
Registration, if applicable, the Issuer shall use its reasonable best efforts to
cause the Shelf Registration to permit the disposition of the Registrable
Securities by the holders thereof in accordance with the intended method or
methods of disposition thereof provided for in the Shelf Registration Statement.
In connection therewith, the Issuer shall, as soon as reasonably possible (or as
otherwise specified):
(i) prepare and file with the Commission, as soon as practicable, a
Shelf Registration Statement on any form which may be utilized by the
Issuer and which shall permit the disposition of the Registrable Securities
in accordance with the intended method or methods thereof, as specified in
writing by the holders of the Registrable Securities, and use its
reasonable best efforts to cause such Shelf Registration Statement to
become or be declared effective as soon as practicable thereafter, but no
later than 270 days after the Closing Date;
(ii) as soon as practicable prepare and file with the Commission such
amendments and supplements to such Shelf Registration Statement and the
prospectus included therein 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 holders of the
Registrable Securities copies of any such supplement or amendment
simultaneously with or prior to its being used or filed with the
Commission;
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(iii) comply with the provisions of the Securities Act with respect to
the disposition of all of the Registrable Securities covered by such Shelf
Registration Statement in accordance with the intended methods of
disposition by the holders thereof provided for in such Shelf Registration
Statement;
(iv) provide (A) the holders of the Registrable Securities to be
included in such Shelf Registration Statement, (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 Securities Act), if any, thereof, (C) any sales or
placement agent therefor, (D) counsel for any such underwriter or agent and
(E) not more than one counsel for all the holders of such Registrable
Securities 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;
(v) 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 Issuer's principal place of
business or such other reasonable place for inspection by the persons
referred to in Section 3(e)(iv) who shall certify to the Issuer that they
have a current intention to sell the Registrable Securities pursuant to the
Shelf Registration such financial and other information and books and
records of the Issuer as reasonably requested, and cause the officers,
employees, counsel and independent certified public accountants of the
Issuer 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
Securities Act; provided, however, that each such party shall be required
to maintain in confidence and not disclose to any other person any
information or records reasonably desig nated by the Issuer 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 body having jurisdiction over the matter
(subject to the requirements of such order, and only after such person
shall have given the Issuer prompt prior written notice of such
requirement), or (C) after the Effective Time and after having requested,
without compliance, that the Issuer include such information in such Shelf
Registration Statement or an amendment or supplement thereto, such
information 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 thereto, 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
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<PAGE>
necessary to make the statements therein not misleading in light of the
circumstances then existing;
(vi) promptly notify the selling holders of Registrable Securities,
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) and confirm such
advice in writing, (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 any comments by the Commission and by the Blue Sky
or securities commissioner or regulator of any state with respect thereto
or any request by the Commission for amendments or supplements to such
Shelf Registration Statement or prospectus or for additional information,
(C) 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, (D) if at any time the
representations and warranties of the Issuer and the Guarantor contemplated
by Section 3(e)(xv) or Section 5 hereof cease to be true and correct in all
material respects, (E) of the receipt by the Issuer and the Guarantor of
any notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, or (F) if at any time when
a prospectus is required to be delivered under the Securities 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 Securities 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;
(vii) use its reasonable 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;
(viii) if requested by any managing underwriter or underwriters, any
placement or sales agent or any holder of Registrable Securities, 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 holder specifies should be included therein relating to the terms of
the sale of such Registrable Securities, including information with respect
to the principal amount of Registrable Securities being sold by such holder
or agent or to any underwriters, the name and description of such holder,
agent or underwriter, the offering price of such Registrable 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 Registrable Securities to
be sold by
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<PAGE>
such 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;
(ix) upon request, furnish to each holder of Registrable Securities,
each placement or sales agent, if any, therefor, each underwriter, if any,
thereof and the respective counsel referred to in Section 3(e)(iv) an
executed copy (or, in the case of a holder of Registrable Securities, 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 a holder of Registrable 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
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 Securities Act and the
Trust Indenture Act and the rules and regulations of the Commission
thereunder, and such other documents, as such holder, agent, if any, and
underwriter, if any, may reasonably request in order to facilitate the
offering and disposition of the Registrable Securities owned by such
holder, offered or sold by such agent or underwritten by such underwriter
and to permit such holder, agent and underwriter to satisfy the prospectus
delivery requirements of the Securities Act; and, subject to Sections 2(a)
and (b) and 3(e)(vi)(C), (E) and (F), the Issuer hereby consents to the use
of such prospectus (including such preliminary and summary prospectus) and
any amendment or supplement thereto by each such holder and by any such
agent and underwriter, in each case in the form most recently provided to
such person by the Issuer, in connection with the offering and sale of the
Registrable Securities covered by the prospectus (including such
preliminary and summary prospectus) or any supplement or amendment thereto;
(x) use its reasonable best efforts to (A) register or qualify the
Registrable Securities to be included in such Shelf Registration Statement
under such securities laws or blue sky laws of such jurisdictions as any
holder of such Registrable Securities 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 or, if a shorter
period, for so long as may be necessary to enable any such holder, agent or
underwriter to complete its distribution of Securities pursuant to such
Shelf Registration Statement and (C) take any and all other actions as may
be reasonably necessary or advisable to enable each such holder, agent, if
any, and underwriter, if any, to consummate the disposition in such
jurisdictions of such Registrable Securities; provided, however, that
neither the Issuer nor the Guarantor shall
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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(e)(x), (2) consent to general
service of process in any such jurisdiction, (3) become subject to any tax
or (4) make any changes to its certificate of incorporation or by-laws or
any agreement between it and its stockholders;
(xi) use its reasonable 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 Registrable Securities;
(xii) cooperate with the holders of the Registrable Securities and the
managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable 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 Registrable Securities to be in such denominations and in such names
as the managing underwriters may request at least two business days prior
to any sale of the Registrable Securities;
(xiii) provide a CUSIP number for all Registrable Securities, not
later than the applicable Effective Time;
(xiv) 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 holders of Registrable Securities aggregating
at least 20% aggregate principal amount of the Registrable Securities at
the time outstanding shall reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities; provided, that
the Issuer shall not be required to enter into any such agreement more than
once with respect to all of the Registrable Securities and may delay
entering into such agreement until the consummation of any underwritten
public offering which the Issuer shall have then engaged;
(xv) whether or not an agreement of the type referred to in Section
3(e)(xiv) 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 holders of the Registrable
Securities covered by such Shelf Registration 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
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<PAGE>
to the Issuer and the Guarantor 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 holders of at least 20% in
aggregate principal amount of the Registrable Securities at the time
outstanding may reasonably request, addressed to such holder or 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 Registrable 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 of the Issuer, the Guarantor and their
material subsidiaries; the qualification of the Issuer, the Guarantor and
their material U.S. subsidiaries to transact business as foreign
corporations; the due authorization, execution and delivery of the relevant
agreement of the type referred to in Section 3(d)(xiv) hereof; the due
authorization, execution, authentication and issuance, and the validity and
enforceability, of the Registrable Securities; the absence of material
legal or governmental proceedings involving the Issuer; the absence of a
breach by the Issuer or any of its subsidiaries of, or a default under,
material agreements binding upon the Issuer or any subsidiary of the
Issuer; the absence of governmental approvals required to be obtained in
connection with the Shelf Registration, the offering and sale of the
Registrable Securities, this Exchange and Registration Rights Agreement or
any agreement of the type referred to in Section 3(e)(xiv) hereof, except
such approvals 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 Indentures with
the requirements of the Securities Act and the Trust Indenture Act and the
rules and regulations of the Commission thereunder, respectively; and,
subject to reasonable and customary limitations and exceptions; and, such
counsel shall also state that, 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, the absence from such Shelf Registration
Statement and the prospectus included therein, as then amended or
supplemented, and from the documents incorporated by reference therein (in
each case other than the financial statements and related footnotes and
schedules and other financial information contained therein) of an untrue
statement of a material fact or the omission to state therein a material
fact necessary to make the statements therein not misleading (in the case
of such documents, in the light of the circumstances existing at the time
that such documents were filed with the Commission under the Exchange
Act)); (C) obtain a "cold comfort" letter or letters from the independent
certified public accountants of the Issuer addressed to the selling holders
of Registrable Securities, 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 state ments as of a date or for a
period subsequent to that of the latest such
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<PAGE>
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 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 holders of at least a
20% in aggregate principal amount of the Registrable 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 Issuer or the Guarantor; and (E)
undertake such obligations relating to expense reimbursement,
indemnification and contribution as are provided in Section 6 hereof;
(xvi) notify in writing each holder of Registrable Securities of any
proposal by the Issuer 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;
(xvii) in the event that any broker-dealer registered under the
Exchange Act shall underwrite any Registrable 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 Registrable 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 comply ing 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 the schedules
thereto (or any successor thereto)) to participate in the preparation of
the Shelf Registration Statement relating to such Registrable 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 Registrable Securities, (B) indemnifying any
such qualified independent underwriter to the extent of the indemnification
of underwriters provided in Section 6 hereof, 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
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<PAGE>
(xviii) comply with all applicable rules and regulations of the
Commission, and make generally available to its security holders 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 Issuer, the Guarantor and their subsidiaries complying with Section
11(a) of the Securities Act (including, at the option of the Issuer, Rule
158 thereunder).
(f) In the event that the Issuer would be required, pursuant to Section
3(e)(vi)(F) above, to notify the selling holders of Registrable Securities, the
placement or sales agent, if any, therefor and the managing underwriters, if
any, thereof, as applicable, the Issuer shall without delay prepare and furnish
to each such holder, to each placement or sales agent, if any, and to each such
under writer, if any, a reasonable number of copies of a prospectus supplemented
or amended so that, as thereafter delivered to purchasers of Registrable
Securities, such prospectus shall conform in all material respects to the
applicable requirements of the Securities 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 holder of Registrable Securities
agrees that upon receipt of any notice from the Issuer pursuant to Section
3(e)(vi)(F) hereof, such holder shall forthwith discontinue the disposition of
Registrable Securities pursuant to the Shelf Registration Statement applicable
to such Registrable Securities until such holder shall have received copies of
such amended or supplemented prospectus, and if so directed by the Issuer, such
holder shall deliver to the Issuer, (at the Issuer's expense) all copies, other
than permanent file copies, then in such holder's possession of the prospectus
covering such Registrable Securities at the time of receipt of such notice.
(g) The Issuer may require each holder of Registrable Securities as to
which any Shelf Registration pursuant to Section 2(b) is being effected to
furnish to the Issuer such information regarding such holder and such holder's
intended method of distribution of such Registrable Securities as the Issuer may
from time to time reasonably request in writing, but only to the extent that
such information is required in order to comply with the Securities Act. Each
such holder agrees to notify the Issuer as promptly as practicable of any
inaccuracy or change in information previously furnished by such holder to the
Issuer 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 holder or such holder's
intended method of disposition of such Registrable Securities or omits to state
any material fact regarding such holder or such holder's intended method of
disposition of such Registrable 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 Issuer 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 holder or the disposition of such Registrable Securities, an untrue
statement of a material fact or omit to
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<PAGE>
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.
(h) Until the expiration of two years after the Closing Date, the Issuer
will not, and will not permit any of its "affiliates" (as defined in Rule 144)
to, resell any of the Securities that have been reacquired by any of them except
pursuant to an effective registration statement under the Securities Act.
4. Registration Expenses.
The Issuer and the Guarantor, jointly and severally, agree to bear and to
pay or cause to be paid promptly, upon request, all expenses incident to the
Issuer's and the Guarantor'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, (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(e)(x) hereof and
determination of their eligibility for investment under the laws of such
jurisdictions as any managing underwriters or the holders of such Registrable
Securities may designate, including any reasonable fees and disbursements of
counsel for the selling holders 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 reproducing and distributing 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 of the Issuer
and the Guarantor 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 Indentures, 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 Issuer's and the Guarantor's
officers and employees performing legal or accounting duties), (g) fees,
disbursements and expenses of counsel and independent certified public
accountants of the Issuer and the Guarantor (including the expenses of any
opinions or "cold comfort" letters required by or incident to such performance
and compliance), (h) reasonable fees, disbursements and expenses of any
"qualified independent underwriter" engaged pursuant to Section 3(e)(xvii)
hereof (i) reasonable fees, disbursements and expenses of one counsel for the
holders of Registrable Securities retained in connection with an Exchange
Registration and a Shelf Registration, as selected by the holders of at least a
majority in aggregate principal amount of the Registrable Securities being
registered (which counsel shall be reasonably satisfactory to the Issuer), (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
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Issuer or the Guarantor 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 Registrable Securities or any
placement or sales agent therefor or underwriter thereof, the Issuer and the
Guarantor, jointly and severally, shall reimburse such person for the full
amount of the Registration Expenses so incurred, assumed or paid promptly after
receipt of a request therefor. It is understood, however, that except as
provided in this Section and in Section 6, the holders of the Registrable
Securities being registered shall pay all of their own costs and expenses,
including, but not limited to, all agency fees and commissions and underwriting
discounts and commissions attributable to the sale of such Registrable
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 refereed to above).
5. Representations and Warranties.
The Issuer and the Guarantor, jointly and severally, represents and
warrants to, and agrees with, each Purchaser and each of the holders from time
to time of Registrable Securities that:
(a) Each registration statement covering Registrable Securities and
each prospectus (including any preliminary or summary prospectus) contained
therein or furnished pursuant to Section 3(e) or Section 3(d) 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
Registrable 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 Securities 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 Securities
Act, other than from (i) such time as a notice has been given to holders of
Registrable Securities pursuant to Section 3(e)(vi)(F) or Section
3(d)(iii)(F) hereof until (ii) such time as the Issuer furnishes an amended
or supplemented prospectus pursuant to Section 3(f) or Section 3(d)(iv)
hereof, each such registration statement, and each prospectus (including
any summary prospectus) contained therein or furnished pursuant to Section
3(e) or Section 3(d) hereof, as then amended or supplemented, will conform
in all material respects to the applicable requirements of the Securities
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; 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
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to the Issuer by or on behalf of a holder of Registrable 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 Securities
Act or the Exchange Act, as applicable, and none of such documents will
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 Issuer by or on behalf of a holder of Registrable Securities
expressly for use therein.
(c) The compliance by the Issuer and the Guarantor with all of the
provisions of this Exchange and Registration Rights Agreement and the
consummation of the transactions herein contemplated will not (i) result in
any violation of the provisions of the Memorandum and Articles of
Association of the Issuer, the Memorandum of Association or Bye-laws of the
Guarantor, (ii) 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
Issuer or the Guarantor or any of their subsidiaries is a party or by which
the Issuer or the Guarantor or any of their subsidiaries is bound or to
which any of the property or assets of the Issuer or the Guarantor or any
of their subsidiaries is subject, nor (iii) will such action result in any
violation of any existing statute, order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Issuer, the
Guarantor or any of their subsidiaries or any of their properties except,
in the case of clauses (ii) and (iii) above, such breaches or violations
which would not, individually or in the aggregate, be reasonably likely to
have a material adverse change, in or affecting the general affairs,
management, financial position, shareholders' equity or results of
operations of the Issuer, the Guarantor and their subsidiaries taken as a
whole; and no consent, approval, authorization, order, registration or
qualification of or with any such governmental agency is required for the
issue and sale of the Securities or the consummation by the Issuer or the
Guarantor of the transactions contemplated by this Registration Rights
Agreement, except the registration under the Securities Act of the
Securities, qualification of the Indentures 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 Issuer and the Guarantor .
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6. Indemnification.
(a) Indemnification by the Issuer and the Guarantor. The Issuer and the
Guarantor, jointly and severally, will indemnify and hold harmless each of the
holders of Registrable Securities included in a registration statement filed
pursuant to Section 2(a) or 2(b) hereof, and each person who participates as a
placement or sales agent or as an underwriter in any offering or sale of such
Registrable Securities against any losses, claims, damages or liabilities, joint
or several, to which such holder, agent or underwriter 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
registration statement under which such Registrable Securities were registered
under the Securities Act, or any preliminary, final or summary prospectus
contained therein or furnished by the Issuer or the Guarantor to any such
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 necessary to make the statements therein not misleading, and will
reimburse such 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 Issuer and the Guarantor 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 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 Issuer or the Guarantor by
or on behalf of holders of Registrable Securities expressly for use therein;
(b) Indemnification by the Holders and any Agents and Underwriters. The
Issuer may require, as a condition to including any Registrable Securities in
any registration statement filed pursuant to Section 2(b) hereof and to entering
into any underwriting agreement with respect thereto, that the Issuer shall have
received an undertaking reasonably satisfactory to it from the holder of such
Registrable Securities and from each underwriter named in any such underwriting
agreement, severally and not jointly, to (i) indemnify and hold harmless the
Issuer and the Guarantor, and all other holders of Registrable Securities,
against any losses, claims, damages or liabilities to which the Issuer or the
Guarantor or such other holders of Registrable Securities 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
such registration statement, or any preliminary, final or summary prospectus
contained therein or furnished by the Issuer to any such 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
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statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Issuer or the Guarantor by or on behalf of such holder or underwriter expressly
for use therein, and (ii) reimburse the Issuer or the Guarantor for any legal or
other expenses reasonably incurred by the Issuer or the Guarantor in connection
with investigating or defending any such action or claim as such expenses are
incurred; provided, however, that no such 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 holder from the sale of
such holder's Registrable Securities pursuant to such registration.
(c) Notices of Claims, Etc. 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 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, and 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
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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 holder from the sale of any Registrable 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 Registrable
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 Securities 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 Registrable Securities registered or underwritten, as the case may be,
by them and not joint.
(e) The obligations of the Issuer and the Guarantor under this Section 6
shall be in addition to any liability which the Issuer or the Guarantor 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 Securities 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 Issuer and the Guarantor (including any person who, with his
consent, is named in any registration statement as about to become a director of
the Issuer or the Guarantor) and to each person, if any, who controls the Issuer
or the Guarantor within the meaning of the Securities Act.
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<PAGE>
7. Underwritten Offerings.
(a) Selection of Underwriters. If any of the Registrable 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 the
holders of at least a majority in aggregate principal amount of the Registrable
Securities to be included in such offering, provided that such designated
managing underwriter or underwriters is or are reasonably acceptable to the
Issuer.
(b) Participation by Holders. Each holder of Registrable 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 Registrable 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.
Each of the Issuer and the Guarantor covenants to the holders of
Registrable Securities that to the extent it shall be required to do so under
the Exchange Act, it shall timely file the reports required to be filed by it
under the Exchange Act or the Securities 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 Securities Act) and the rules and
regulations adopted by the Commission thereunder, and shall take such further
action as any holder of Registrable Securities may reasonably request, all to
the extent required from time to time to enable such holder to sell Registrable
Securities without registration under the Securities Act within the limitations
of the exemption provided by Rule 144 under the Securities 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
Registrable Securities in connection with that holder's sale pursuant to Rule
144, the Issuer or the Guarantor, as applicable, shall deliver to such holder a
written statement as to whether it has complied with such requirements.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Issuer represents, warrants, covenants
and agrees that it has not granted, and shall not grant, registration rights
with respect to Registrable 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 any party fails to perform any of their
respective obligations hereunder and that each party may be irreparably harmed
by any such failure, and accordingly agree that each party, in addition to any
other
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<PAGE>
remedy to which they may be entitled at law or in equity, shall be entitled to
compel specific performance of the respective obligations of any other party
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: If to the Issuer or the
Guarantor, to it at 767 Fifth Avenue, Suite 4300, New York, New York 10153, c/o
RSL Communications, N. America, Inc., Attention: Avery Fischer, Esq. with a copy
to Debevoise & Plimpton, 875 Third Avenue, New York, New York 10022, Attention:
George Maguire, Esq., and if to a holder, to the address of such holder set
forth in the security register or other records of the Issuer, or to such other
address as the Issuer 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 Registrable Securities and the respective successors and assigns of
the parties hereto and such holders. In the event that any transferee of any
holder of Registrable Securities shall acquire Registrable 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 Registrable Securities shall be
held subject to all of the terms of this Exchange and Registration Rights
Agreement, and by taking and holding such Registrable 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 Issuer shall so request, any
such successor, assign or transferee shall acknowledge in writing that such
successor, assign, or transferee will acquire and hold the Registrable
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 the Purchasers or any holder of Registrable 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 Registrable
Securities pursuant to the Purchase Agreement and the transfer and registration
of Registrable Securities by such holder and the consummation of an Exchange
Offer.
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<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 Indentures
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 Issuer and the holders of at least a majority in aggregate principal amount
of the Registrable Securities at the time outstanding. Each holder of any
Registrable 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 Registrable Securities or is delivered to such holder. Notwithstanding the
foregoing, a waiver or consent to departure from the provisions hereof that
relates exclusively to the rights of holders whose Registrable Securities are
being tendered pursuant to the Exchange Offer and that does not affect directly
or indirectly the rights of other holders whose Registrable Securities are not
being tendered pursuant to such Exchange Offer may be given by the holders of at
least a majority of the outstanding principal amount of Registrable Securities
being tendered or registered.
(i) Inspection. For so long as this Exchange and Registration Rights
Agreement shall be in effect, this Exchange and Registration Rights Agreement
and a complete list of the names and addresses of all the holders of Registrable
Securities shall be made available for inspection and copying on any business
day by any holder of Registrable Securities for proper purposes only (which
shall include any purpose related to the rights of the holders of Registrable
Securities under the Securities, the Indentures and this Agreement) at the
offices of the Issuer at the address thereof set forth in Section 9(c) above and
at the office of the Trustee under the Indentures.
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<PAGE>
(j) 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.
Agreed to and accepted as of the date referred to above.
RSL COMMUNICATIONS PLC
By:_____________________________
Name:
Title:
RSL COMMUNICATIONS, LTD.
By:______________________________
Name:
Title:
GOLDMAN, SACHS & CO.
MERRILL LYNCH, PIERCE,
FENNER & SMITH INCORPORATED,
CHASE SECURITIES INC.,
J. P. MORGAN SECURITIES INC.,
SBC WARBURG DILLON READ INC.
On behalf of each of the Purchasers,
By:____________________________
(Goldman, Sachs & Co.)
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<PAGE>
Exhibit A
RSL COMMUNICATIONS PLC
RSL COMMUNICATIONS LTD.
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 RSL Communications PLC (the
"Issuer") [ ]% Senior Notes due 2008 (the "Senior Notes") and the [ ]% Senior
Discount Notes due 2008, (the "Senior Discount Notes") and together with the
Senior Notes, the "Notes) are held. The Notes are unconditionally guaranteed as
to payment of principal, interest and any other amounts due thereon (the "Notes
Guarantees") by RSL Communications, Ltd. (the "Guarantor"). The Notes and the
Notes Guarantees, collectively, are the "Securities".
The Issuer 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
[________________________________________________] , Attention:
[_________________________________________].
.
- --------
(1) Not less than 28 calendar days from date of mailing.
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<PAGE>
RSL Communications PLC
RSL Communications, Ltd.
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 RSL Communications
PLC (the "Issuer"), RSL Communications, Ltd. (the "Guarantor") and the
Purchasers named therein. Pursuant to the Exchange and Registration Rights
Agreement, the Issuer 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 "Securities Act"), of the Issuer's [ ]%
Senior Notes due 2008 (the "Senior Notes") and the [ ]% Senior Discount Notes
due 2008 (the "Senior Discount Notes", and together with the Senior Notes, the
"Notes"). The Notes are unconditionally guaranteed as to payment of principal,
interest and any other amounts due thereon (the "Notes Guarantees") by RSL
Communications, Ltd. (the "Guarantor"). The Notes Guarantees together with the
Notes are 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 Registrable Securities (as defined below) is
entitled to have the Registrable Securities beneficially owned by it included in
the Shelf Registration Statement. In order to have Registrable 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 Issuer's counsel at the address
set forth herein for receipt ON OR BEFORE [DEADLINE FOR RESPONSE]. Beneficial
owners of Registrable 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 Registrable Securities.
Certain legal consequences arise from being named as a selling
securityholder in the Shelf Registration Statement and related Prospectus.
Furthermore, pursuant to the Exchange and Registration Rights Agreement, you may
be liable to the Issuer, the Guarantor and other selling securityholders for any
losses that result from inaccuracies or omissions in the information you are
requested to provide herein. Accordingly, holders and beneficial owners of
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<PAGE>
Registrable 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 "Registrable Securities" is defined in the Exchange and
Registration Rights Agreement.
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<PAGE>
ELECTION
The undersigned holder (the "Selling Securityholder") of Registrable
Securities hereby elects to include in the Shelf Registration Statement the
Registrable Securities beneficially owned by it and listed below in Item (3).
The undersigned, by signing and returning this Notice and Questionnaire, agrees
to be bound with respect to such Registrable 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 Registration
Rights Agreement, as if the undersigned Selling Securityholder were an original
party thereto.
Upon any sale of Registrable Securities pursuant to the Shelf Registration
Statement, the Selling Securityholder will be required to deliver to the Issuer
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
Issuer and represents and warrants that such information is accurate and
complete:
<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 Registrable Securities Listed in
Item (3) below:
(ii) Full Legal Name of DTC Participant (if applicable and
if not the same as (i) above) Through Which Registrable
Securities Listed in Item (3) 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 (3), the undersigned does not
beneficially own any Securities.
(i) Principal amount of Registrable Securities beneficially
owned:
CUSIP No(s). of such Registrable Securities:
(ii) Principal amount of Securities other than Registrable
Securities beneficially owned:
CUSIP No(s). of such other Securities:
<PAGE>
(iii) Principal amount of Registrable Securities which the
undersigned wishes to be included in the Shelf
Registration Statement:
CUSIP No(s). of such Registrable Securities to be included in the Shelf
Registration Statement:
(d) Beneficial Ownership of Other Securities of the Issuer and
the Guarantor:
Except as set forth below in this Item (4), the undersigned Selling
Securityholder is not the beneficial or registered owner of any other securities
of the Issuer or the Guarantor, other than the Securities listed above in Item
(3).
State any exceptions here:
(e) Relationships with the Issuer and the Guarantor:
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
Issuer or the Guarantor (or their 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 Registrable Securities listed above in Item (3) only as
follows (if at all): Such Registrable Securities may be sold from time to time
directly by the undersigned Selling Securityholder or, alternatively, through
underwriters, broker-dealers or agents. Such Registrable 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 Registered 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 writing of options. In connection with sales of the Registrable Securities
or otherwise, the Selling Securityholder may enter into hedging transactions
with broker-dealers, which may in turn engage in short sales of the Registrable
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<PAGE>
Securities in the course of hedging the positions they assume. The Selling
Securityholder may also sell Registrable Securities short and deliver
Registrable Securities to close out such short positions, or loan or pledge
Registrable 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 Exchange Act and the rules and regulations thereunder,
particularly Regulation M.
In the event that the Selling Securityholder transfers all or any portion
of the Registrable Securities listed in Item (3) above after the date on which
such information is provided to the Issuer, 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 (1) through (6) 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 Issuer and the Guarantor 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) 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 promptly notify the Issuer 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
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 Issuer and the Guarantor:
(c/o RSL COM USA)
RSL Communications PLC
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<PAGE>
RSL Communications Ltd.
[_________________________________]
[_________________________________]
Attention:
(ii) With a copy to:
[_________________________________]
[_________________________________]
[_________________________________]
Attention:
Once this Notice and Questionnaire is executed by the Selling
Securityholder and received by the Issuer '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
Issuer, the Guarantor and the Selling Securityholder (with respect to the
Registrable Securities beneficially owned by such Selling Securityholder and
listed
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<PAGE>
in Item (3) above. This Agreement shall be governed in all respects by the laws
of the State of New York.
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 Registrable Securities)
By:
Name:
Title:
PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT ON
OR BEFORE [DEADLINE FOR RESPONSE] TO THE ISSUER'S COUNSEL AT:
[_________________________________]
[_________________________________]
[_________________________________]
[_________________________________]
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<PAGE>
Exhibit B
NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT
RSL Communications PLC
c/o Trustee
[_________________________________]
[_________________________________]
[_________________________________]
Attention: Trust Officer
Re: RSL Communications PLC (the "Issuer")
[ ]% Senior Notes due 2008
[ ]% Senior Discount Notes due 2008
Dear Sirs:
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
Issuer.
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)
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<PAGE>
================================================================================
RSL COMMUNICATIONS PLC
as Issuer, with RSL Communications, Ltd. of
$328,084,000, 10 1/8% Senior Discount Notes Due 2008
of RSL Communications PLC
and
THE CHASE MANHATTAN BANK
as Book-Entry Depositary
NOTE DEPOSIT AGREEMENT
Dated as of February 27, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND OTHER GENERAL PROVISIONS......................................1
SECTION 1.1 Definitions.............................................1
SECTION 1.2 Rules of Construction...................................4
ARTICLE II
GLOBAL NOTES, DEPOSITARY INTERESTS............................................5
SECTION 2.1 Deposit of the Global Notes.............................5
SECTION 2.2 Book-Entry System.......................................5
SECTION 2.3 Registration of Transfer of Depositary Interests........6
SECTION 2.4 Transfer of Global Notes and
Depositary Interests; Termination.......................6
SECTION 2.5 Cancellation............................................7
SECTION 2.6 Payments in Respect of the Global Notes.................7
SECTION 2.7 Changes in Principal Amount of the Global Notes.........8
SECTION 2.8 Record Date.............................................9
SECTION 2.9 Action in Respect of the Depositary Interests...........9
SECTION 2.10 Changes Affecting the Global Notes....................11
SECTION 2.11 Surrender of the Global Notes.........................11
SECTION 2.12 Reports...............................................11
ARTICLE III
THE BOOK-ENTRY DEPOSITARY....................................................11
SECTION 3.1 Certain Duties and Responsibilities....................11
SECTION 3.2 Notice of Default......................................13
SECTION 3.3 Certain Rights of Book-Entry Depositary................13
SECTION 3.4 Not Responsible for Recitals or Issuance of Notes......14
SECTION 3.5 Money Held in Trust....................................15
SECTION 3.6 Compensation and Reimbursement.........................15
SECTION 3.7 Book-Entry Depositary Required: Eligibility............16
SECTION 3.8 Resignation and Removal, Appointment of Successor......16
SECTION 3.9 Acceptance of Appointment by Successor.................18
SECTION 3.10 Merger, Conversion, Consolidation or
Succession to Business................................19
SECTION 3.11 Compliance with Letter of Representations.............19
i
<PAGE>
ARTICLE IV
MISCELLANEOUS PROVISIONS.....................................................19
SECTION 4.1 Notices to Book-Entry Depositary or Issuer.............19
SECTION 4.2 Notice to the Depositary; Waiver.......................20
SECTION 4.3 Effect of Headings and Table of Contents...............21
SECTION 4.4 Successors and Assigns.................................21
SECTION 4.5 Separability Clause....................................21
SECTION 4.6 Benefits of Agreement..................................21
SECTION 4.7 GOVERNING LAW..........................................21
SECTION 4.8 Jurisdiction...........................................21
SECTION 4.9 Counterparts...........................................22
SECTION 4.10 Inspection of Agreement...............................22
SECTION 4.11 Satisfaction and Discharge............................22
SECTION 4.12 Amendments............................................23
SECTION 4.13 Book-Entry Depositary To Sign Amendments..............23
ii
<PAGE>
EXECUTION COPY
THIS NOTE DEPOSIT AGREEMENT is made as of this 27th day of February, 1998
by and between RSL Communications PLC, a United Kingdom corporation (the
"Issuer") and The Chase Manhattan Bank, a New York banking corporation, as
book-entry depositary (the "Book-Entry Depositary").
ARTICLE I
DEFINITIONS AND OTHER GENERAL PROVISIONS
SECTION 1.1 Definitions. The following terms, as used herein, have the
following meanings:
"144A Depositary Interest" means the certificateless book-entry interest
representing a 100% beneficial interest in the principal of, premium, if any,
and interest on the underlying 144A Global Note, and issued to the Depositary by
the Book-Entry Depositary.
"144A Global Note" means one or more global bearer bonds issued by the
Issuer to the Book-Entry Depositary and bearing the Restricted Legend
representing the total aggregate principal amount of the Notes sold in reliance
on Rule 144A under the Securities Act.
"Asset Disposition" has the meaning set forth in the Indenture.
"Board Resolution" means a duly adopted resolution of the Board of
Directors of the Issuer in full force and effect on the date of certification,
certified by any Director, Secretary or Assistant Secretary of the Issuer.
"Book-Entry Depositary" means The Chase Manhattan Bank or, in the event
that The Chase Manhattan Bank is succeeded as Book-Entry Depositary here under,
the Person designated as its successor pursuant to Section 3.8 hereof.
"Book-Entry Notes" means an indirect certificateless beneficial interest in
a Global Note held through a corresponding Depositary Interest.
"Book-Entry Register" has the meaning set forth in Section 2.3 hereof.
"Cedel" means Cedel Bank, societe anonyme.
<PAGE>
"Change of Control" has the meaning set forth in the Indenture.
"Corporate Trust Office" means the office of the Book-Entry Depositary in
the Borough of Manhattan, The City of New York, from which at any particular
time its corporate trust business shall be principally administered, which at
the date hereof is located at 450 West 33rd Street, New York, New York
10001-2697, Atten tion: Global Trust Services.
"Depositary" means DTC, or any successor, as the holder of the Depositary
Interests as recorded on the Book-Entry Register.
"Depositary Interests" means each of the 144A Depositary Interests and the
Regulation S Depositary Interests.
"DTC" means The Depository Trust Company and its nominees.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Event of Default" shall have the meaning set forth in the Indenture.
"Exchange Act" means the United States Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Global Notes" means each of the 144A Global Note and the Regulation S
Global Note.
"Holdings" means RSL Communications, Ltd., guarantor of the Notes pursuant
to the Indenture until a successor replaces it pursuant to the applicable
provisions of the Indenture and, thereafter, means such successor.
"Indenture" means the indenture dated as of February 27, 1998 among the
Issuer, Holdings and the Trustee relating to the Notes, as originally executed
or as it may be supplemented, modified or amended from time to time.
"Issuer" means RSL Communications PLC until a successor replaces it
pursuant to the applicable provisions of the Indenture and, thereafter, means
such successor.
2
<PAGE>
"Issuer Order" or "Issuer Request" means a written order or request signed
in the name of the Issuer by two Officers thereof.
"Letter of Representations" means the Letter of Representations to DTC
dated as of February 27, 1998 from the Issuer, the Trustee and the Book-Entry
Depositary.
"Notes" means the $328,084,000 aggregate principal amount at maturity of
the Issuer's 10 1/8% Senior Discount Notes due 2008 issued under the Indenture.
"Offer to Purchase" has the meaning set forth in the Indenture.
"Officer" means, with respect to the Issuer, (i) the Chairman of the Board,
the Chief Executive Officer and other Directors and (ii) the Treasurer or any
Assistant Treasurer, or the Secretary or any Assistant Secretary.
"Officers' Certificate" means a certificate signed by two Officers, at
least one of which must be an Officer listed in clause (i) of the definition
thereof.
"Opinion of Counsel" means a written opinion from legal counsel, who may be
an employee of or counsel to the Issuer, and who shall be reasonably acceptable
to the Book-Entry Depositary.
"Participant" means, with respect to DTC, Euroclear or Cedel, any Person
who has an account with DTC, Euroclear or Cedel, respectively (and, with respect
to DTC, shall include Euroclear and Cedel).
"Paying Agent" means The Chase Manhattan Bank and any successor paying
agent hereunder.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Registered Notes" means certificated Notes registered in the name of the
holder thereof issued pursuant to the Indenture in substantially the form set
forth in Section 2.02 of the Indenture.
"Regulation S Depositary Interest" means the certificateless book-entry
interest representing a 100% beneficial interest in the principal of, premium,
if any,
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and interest on the underlying Regulation S Global Note, and issued to the
Depositary by the Book-Entry Depositary.
"Regulation S Global Note" means one or more global bearer bonds issued by
the Issuer to the Book-Entry Depositary and bearing the Regulation S Legend
representing the total aggregate principal amount of the Notes sold in reliance
on Regulation S under the Securities Act.
"Regulation S Legend" has the meaning set forth in the Indenture.
"Responsible Officer", with respect to the Book-Entry Depositary, means any
Vice President, Assistant Vice President, the Secretary, any Assistant
Secretary, the Treasurer, any Assistant Treasurer, or any Trust Officer or any
other officer of the Book-Entry Depositary customarily performing functions
similar to those performed by any of the above-designated officers and also
means, with respect to a particular corporate trust or agency matter, any other
officer to whom such matter is referred because of his or her knowledge and
familiarity with the particular subject.
"Restricted Legend" has the meaning set forth in the Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Trustee" means The Chase Manhattan Bank acting as trustee under the
Indenture or, in the event The Chase Manhattan Bank is succeeded as trustee
under the Indenture, such Person who shall be appointed to succeed as trustee
pursuant to the applicable provisions of the Indenture.
SECTION 1.2 Rules of Construction. Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) "or" is not exclusive;
(3) "including" means including without limitation;
(4) words in the singular include the plural and words in the plural
include the singular; and
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(5) references herein to holders of Depositary Interests shall mean
references to the Depositary.
ARTICLE II
GLOBAL NOTES, DEPOSITARY INTERESTS
SECTION 2.1 Deposit of the Global Notes. The Book-Entry Depositary hereby
accepts custody of the Global Notes from the Trustee and shall act as Book-Entry
Depositary in accordance with the terms of this Agreement. The Book-Entry
Depositary shall hold each such Global Note at its Corporate Trust Office or at
such place or places as it shall determine with the prior written consent of the
Issuer and shall issue the Depositary Interests in accordance with the Letter of
Repre sentations. In the event that the Issuer shall issue and execute, and the
Trustee, upon the order of the Issuer, shall authenticate additional Global
Notes, the Book-Entry Depositary shall hold each such Global Note at its
Corporate Trust Office or at such place or places as it shall determine with the
prior written consent of the Issuer and shall issue the Depositary Interests in
such Global Notes to the Depositary in accor dance with the Letter of
Representations.
SECTION 2.2 Book-Entry System. (a) Upon acceptance by DTC of the Depositary
Interests for entry into its book-entry settlement system in accordance with the
terms of the Letter of Representations, Book-Entry Notes shall be issued by DTC
and traded through DTC's book-entry system, and ownership of such Book-Entry
Notes shall be shown in, and the transfer of such ownership shall be effected
only through, a book-entry system maintained by (i) DTC or its successors or
(ii) Par ticipants. DTC shall treat the holders of Book-Entry Notes and their
successors as the absolute owners of the Depositary Interests for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Issuer, the Trustee, the Book-Entry Depositary or any agent of the Issuer, the
Trustee or the Book-Entry Depositary from giving effect to any written
certification, proxy or other authorization furnished by the Depositary or
impair, as between the Book-Entry Depositary and the Depositary and its
Participants, the operation of customary practices of such Depositary governing
the exercise of the rights of an owner of a beneficial interest in any Global
Note or Depositary Interest.
(b) The Depositary Interests shall be issuable only to DTC, or suc cessors
of DTC or their respective nominees. Except as provided in Section 2.4 hereof
and Section 3.05(d) of the Indenture, no owner of beneficial interests in such
Depositary Interests shall be entitled to receive a Registered Note on account
of such
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beneficial interest, and such beneficial owner's interest therein shall be shown
only in accordance with the procedures of DTC as set forth in the Letter of
Representations.
SECTION 2.3 Registration of Transfer of Depositary Interests. (a) The
Issuer appoints the Book-Entry Depositary as its agent to maintain at the
Book-Entry Depositary's Corporate Trust Office a register (the "Book-Entry
Register") in which the Book-Entry Depositary shall (i) record the right of the
Depositary to receive payment of principal of, premium, if any, and interest on
the Global Notes and (ii) record the registration and transfer of the Depositary
Interests. No Depositary Interest can be transferred unless such transfer is
recorded on the Book-Entry Register.
(b) With respect to any Global Note, clause (a) of this Section 2.3 shall
not (i) impose an obligation on the Book-Entry Depositary to record the
interests in or transfers of Book-Entry Notes held by institutions that have
accounts with DTC or its successors or Persons that may hold Book-Entry Notes
through such institutions and (ii) restrict transfers of such Book-Entry Notes
held by such institutions or Persons. The Book-Entry Depositary shall treat the
Depositary or its nominee as the absolute owner of the Depositary Interests for
all purposes whatsoever and shall not be bound or affected by any notice to the
contrary, other than an order of a court having jurisdiction over the Book-Entry
Depositary.
SECTION 2.4 Transfer of Global Notes and Depositary Interests; Termination.
The Book-Entry Depositary shall hold the Global Notes in custody for the benefit
of the Depositary. The Book-Entry Depositary shall not transfer or lend any
Global Note or any interest therein except that (i) the Book-Entry Depositary
shall deliver Global Notes to the Trustee if required in accordance with Section
3.05(e) of the Indenture so that the Trustee may make such notations on the
Global Notes as may be required to evidence transfers and exchanges of
Book-Entry Notes, (ii) a Global Note may be exchanged in whole or in part
pursuant to Section 3.05(d) of the Indenture, (iii) a Global Note may be
exchanged or replaced pursuant to Sections 3.04 and 3.06 of the Indenture, (iv)
any Global Note may be delivered to the Trustee for cancellation pursuant to
Section 3.09 of the Indenture and (v) the Global Notes may be transferred to a
successor Book-Entry Depositary with the prior written consent of the Issuer.
Notwithstanding the foregoing, the Depositary may not under any circumstances
request the Book-Entry Depositary to surrender or deliver the Global Notes.
If the Book-Entry Depositary notifies the Issuer and the Trustee in writing
under Section 3.8 hereof that it is unwilling or unable to continue as
Book-Entry Depositary and no successor Book-Entry Depositary has been appointed
by the
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Issuer within 90 days of such notification, then the Book-Entry Depositary shall
promptly notify the Trustee and request the Trustee to issue Registered Notes in
such names and denominations as the Depositary shall specify in writing in
accordance with Section 3.05 of the Indenture and the Book-Entry Depositary
agrees that in such event it shall promptly surrender the Global Notes held by
it to the Trustee in connection with such exchange and that such Global Notes
shall be canceled upon issuance of such Registered Notes.
If DTC notifies the Issuer or the Book-Entry Depositary in writing that it
or its nominee is unwilling or unable to continue as Depositary with respect to
any or all of the Depositary Interests or if at any time it or its nominee is
unable to or ceases to be a clearing agency under the Exchange Act and, in
either case, a successor Depositary registered as a clearing agency under the
Exchange Act is not appointed by the Issuer within 90 days, then the Book-Entry
Depositary shall promptly notify the Trustee and request the Trustee to issue
Registered Notes with respect to the Global Notes in such names and
denominations as the Depositary shall specify in writing in accordance with
Section 3.05 of the Indenture and the Book-Entry Depositary agrees that in such
event it shall promptly surrender the applicable Global Notes held by it to the
Trustee in connection with such exchange and that such Global Notes shall be
canceled upon issuance of such Registered Notes.
If at any time the Issuer, subject to and in compliance with Section
3.05(d) of the Indenture, determines that the Global Notes should be exchanged,
in whole but not in part, for Registered Notes, then the Issuer shall promptly
notify the Trustee and the Book-Entry Depositary and request the Trustee to
issue Registered Notes with respect to the Global Notes in such names and
denominations as the Depositary shall specify in writing in accordance with
Section 3.05 of the Indenture and the Book-Entry Depositary agrees that in such
event it shall promptly surrender the applicable Global Notes held by it to the
Trustee in connection with such exchange and that such Global Notes shall be
canceled upon issuance of such Registered Notes.
Upon the issuance of Registered Notes in exchange for Global Notes
representing the entire principal amount of Notes, this Agreement will
terminate.
SECTION 2.5 Cancellation. If any Global Note is surrendered for payment, or
for redemption or purchase of Notes evidenced thereby or in exchange for
Registered Notes, then such Global Note shall, if surrendered to any Person
other than the Trustee notwithstanding the first paragraph of Section 2.4
hereof, be delivered to the Trustee for cancellation.
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SECTION 2.6 Payments in Respect of the Global Notes. (a) Except for
payments made pursuant to an Offer to Purchase with respect to any Asset
Disposition or Change of Control, whenever the Book-Entry Depositary shall
receive from the Trustee (or other paying agent under the Indenture) any payment
of the principal of, premium, if any, and interest on the Global Notes, such
payments shall be distributed promptly to the Depositary on the payment date for
the Global Notes.
(b) Whenever the Book-Entry Depositary shall receive from the Trustee (or
other paying agent under the Indenture) any payment of the principal of,
premium, if any, and interest on the Global Notes pursuant to an Offer to
Purchase by the Issuer with respect to any Asset Disposition or Change of
Control, the Book-Entry Depositary shall distribute such payment to the
Depositary for the accounts of holders of Book-Entry Notes who elected to have
Book-Entry Notes repurchased pursuant to such Offer to Purchase.
(c) So long as DTC or its nominee is the Depositary, payments pursuant to
Section 2.6(a) and 2.6(b) hereof with respect to the Global Notes shall be made
in accordance with the Letter of Representations. In the event that DTC or its
nominee shall cease to be the Depositary, such payments shall be made according
to procedures agreed between the Book-Entry Depositary and the successor
Depositary, which shall be reasonably satisfactory to the Issuer.
(d) The Book-Entry Depositary shall forward to the Issuer or its agents at
the Issuer's cost and expense such information from its records as the Issuer
may reasonably request to enable the Issuer or its agents to file necessary
reports with governmental agencies, and the Book-Entry Depositary, the Issuer or
its agents may (but shall not be required to) file any such reports necessary to
obtain benefits under any applicable tax treaties for the Depositary or the
holders of Book-Entry Notes.
SECTION 2.7 Changes in Principal Amount of the Global Notes. (a) In the
event that the Issuer exercises any right of redemption in respect of any Notes
constituting a part of the Global Notes or purchases any Notes constituting a
part of the Global Notes pursuant to an Offer to Purchase under Section 10.13 or
10.17 of the Indenture, the Book-Entry Depositary shall, promptly upon receipt
of the redemption price or purchase price, deliver such Global Notes to the
Trustee (i) and request the Trustee to endorse on such Global Note to reflect
the reduction in the principal amount of such Global Note as a result of such
redemption or purchase or (ii) in exchange for a Global Note with a principal
amount that represents only the portion of such Global Note not so redeemed or
purchased. The redemption price or purchase price in connection with the
redemption of a portion of such Global Note shall be equal to the
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amount received by the Book-Entry Depositary in respect of the aggregate
principal amount at maturity of the Notes so redeemed or repurchased.
(b) Pursuant to Section 3.05 of the Indenture, upon written notice from the
Trustee to the Book-Entry Depositary of an increase or decrease in the aggregate
principal amount of any Global Note, the Book-Entry Depositary shall enter or
cause to be entered in the Book-Entry Register a corresponding increase or
decrease in the aggregate principal amount of the Depositary Interest
corresponding to such Global Note.
SECTION 2.8 Record Date. Whenever any payment is to be made in respect of
the Global Notes or the Book-Entry Depositary shall receive written notice of
any action to be taken by the Depositary, or whenever the Book-Entry Depositary
otherwise deems it appropriate in respect of any other matter, the Book-Entry De
positary shall fix a record date for the determination of the holders of the
Depositary Interests who shall be entitled to receive payment in respect of the
Depositary Interests or to take any such action or to act in respect of any such
matter and such record date shall be unless otherwise impracticable the record
date as would be set under the Indenture if such securities were Registered
Notes. Subject to the provisions of this Agreement, only the Depositary which is
registered on the Book-Entry Register at the close of business on such record
date shall be entitled to receive any such payment, to give instructions as to
such action or to act in respect of any such matter.
The Depositary shall be entitled to rely on such record date as the date of
determination for purposes of further distribution of the payments disbursed,
and so long as DTC or its nominee is the Depositary, such record date applicable
to the Depositary shall comply with the requirements of the Letter of
Representations.
SECTION 2.9 Action in Respect of the Depositary Interests. (a) As soon as
practicable after receipt by the Book-Entry Depositary of written notice from
the Issuer of any solicitation of consents or request for a waiver or other
action by the Depositary under this Agreement or the Indenture, the Book-Entry
Depositary shall mail to the Depositary a notice containing (i) such information
as is contained in such notice, (ii) a statement that the holders of Depositary
Interests at the close of business on a specified record date (established in
accordance with Section 2.8 hereof) will be entitled, subject to the provisions
of or governing the Depositary Interests, to instruct the Book-Entry Depositary
as to the consent, waiver or other action, if any, pertaining to the Global
Notes and (iii) a statement as to the manner in which such instructions may be
given. Upon the written request of the Depositary received on or before the date
established by the Book-Entry Depositary for such purpose, the Book-Entry
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Depositary shall endeavor insofar as practicable and permitted under the
provisions of or governing the Depositary Interests to take such action
regarding the requested consent, waiver or other action in respect of the Global
Notes in accordance with any instructions set forth in such request. The
Book-Entry Depositary shall not itself exercise any discretion in the granting
of consents or waivers or the taking of any other action in respect of the
Global Notes and, as holder of the Global Notes, the Book-Entry Depositary
promptly shall cause such consents or waivers to be granted and such action to
be taken with respect to the Global Notes as the Depositary had given or had
taken.
(b) As soon as practicable after receipt by the Book-Entry Depositary of an
Offer to Purchase with respect to the Global Notes, the Book-Entry Depositary
shall mail to the Depositary a notice containing (i) such information as is
contained in such notice, (ii) a statement that the holders of Depositary
Interests at the close of business on a specified record date (established in
accordance with Section 2.8 hereof) will be entitled, subject to the provisions
of or governing the Depositary Interests, to elect to have all or any portion of
their interest in the Global Notes repurchased in accordance with such Offer to
Purchase and (iii) such documentation provided by the Issuer as is necessary for
the Depositary to elect to have all or any portion of the Depositary Interests
repurchased pursuant to such Offer to Purchase. So long as DTC or its nominee is
acting as Depositary, such notice shall also comply with the Letter of
Representations. Upon receipt of elections relating to such Offer to Purchase
from the Depositary received on or before the date established by the Issuer for
such purpose, the Book-Entry Depositary shall endeavor insofar as practicable
and permitted under the provisions of or governing the Depositary Interests and
the Global Notes to tender the Global Notes or portions thereof requested to be
tendered by the Depositary for repurchase in accordance with such Offer to
Purchase. The Book-Entry Depositary shall not itself exercise any discretion in
the tender of any Global Notes pursuant to an Offer to Purchase.
(c) As soon as practicable after receipt by the Book-Entry Depositary of
any notice of redemption with respect to the Global Notes pursuant to Section
11.01 of the Indenture, the Book-Entry Depositary shall mail to the Depositary a
notice con taining (i) such information as is contained in such notice and (ii)
a statement that Notes called for redemption must be surrendered to the Paying
Agent in order to collect the Redemption Price. So long as DTC or its nominee is
acting as Depositary, such notice shall also comply with the Letter of
Representations.
(d) The Depositary may direct in writing the time, method and place of
conducting any proceeding for any remedy available to the Book-Entry Depositary
with
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respect to the Global Notes or exercising any power conferred on the Book-Entry
Depositary. However, the Book-Entry Depositary may refuse to follow any
direction that conflicts with law, the Indenture or this Agreement, that may
involve the Book-Entry Depositary in personal liability, or that the Book-Entry
Depositary determines in good faith may be unduly prejudicial to the rights of
the holders of Book-Entry Notes not joining in the giving of such direction and
may take any other action it deems proper that is not inconsistent with any
directions received from the Depositary pursuant to this Section 2.9(d).
SECTION 2.10 Changes Affecting the Global Notes. Upon any reclassification
of the Global Notes, or upon any recapitalization, reorganization, merger or
consolidation or sale of assets affecting the Issuer or to which the Issuer is a
party, any securities that shall be received by the Book-Entry Depositary in
exchange for or in respect of a Global Note shall be treated as a new Global
Note under this Agreement and any corresponding Depositary Interests shall
thenceforth represent such new securities so received; provided, however, that
any security issued in exchange for or in respect of a Global Note under such
circumstances shall not be deemed to be a new security if the Issuer delivers to
the Book-Entry Depositary an Opinion of Counsel, to the effect that the
recapitalization, reorganization, merger or consolidation or sale of assets, as
appropriate, did not result in the creation of a security materially different
from that represented by such Global Note.
SECTION 2.11 Surrender of the Global Notes. In the event of the redemption,
payment or purchase in full of all the Notes represented by any of the Global
Notes, then the applicable Global Note shall become void and the Book-Entry
Depositary shall surrender such Global Note to the Trustee for cancellation. In
the event of a partial redemption of the Notes represented by a Global Note, the
Book-Entry Depositary shall comply with the requirements of Section 2.7 hereof.
SECTION 2.12 Reports. The Book-Entry Depositary shall promptly send to the
Depositary any notices, reports and other communications received from the
Issuer that are received by the Book-Entry Depositary as holder of the Global
Notes.
ARTICLE III
THE BOOK-ENTRY DEPOSITARY
SECTION 3.1 Certain Duties and Responsibilities. (a) The Book-Entry
Depositary undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement.
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(b) No provision of this Agreement shall be construed to relieve the
Book-Entry Depositary from liability for its own negligent action, its own
negligent failure to act, or its own bad faith or willful misconduct, except
that:
(1) the duties and obligations of the Book-Entry Depositary with
respect to the Global Notes and the Depositary Interests shall be
determined solely by the express provisions of this Agreement and neither
the Book-Entry Depositary nor its officers, directors, employees and agents
shall be liable except for the performance of such duties and obligations
as are specifically set forth in this Agreement, and no implied covenants
or obligations shall be read into this Agreement against the Book-Entry
Depositary; and
(2) in the absence of bad faith on its part, the Book-Entry Depositary
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any certificates or
opinions furnished to the Book-Entry Depositary and conforming to the
requirements of this Agreement, but in the case of any such certificates or
opinions that by any provision hereof are specifically required to be
furnished to the Book-Entry Depositary, the Book-Entry Depositary shall be
under a duty to examine the same to determine whether or not they conform
to the requirements of this Agreement.
(c) The Book-Entry Depositary shall not be liable for any error of judgment
made in good faith by a Responsible Officer of the Book-Entry Depositary, unless
it shall be proved that the Book-Entry Depositary was grossly negligent in
ascertaining the pertinent facts.
(d) The Book-Entry Depositary shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with the
written direction of the Depositary pursuant to Section 2.9 hereof relating to
the time, method and place of conducting any proceeding for any remedy available
to the Book-Entry Depositary, or exercising any power conferred upon the
Book-Entry Depositary, under this Agreement.
(e) No provision of this Agreement will require the Book-Entry Depositary
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
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
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(f) Whether or not therein expressly so provided, every provision of this
Agreement relating to the conduct or affecting the liability of or affording
protection to the Book-Entry Depositary shall be subject to the provisions of
this Section.
(g) The Book-Entry Depositary owes no fiduciary duties to any person by
virtue of this Agreement except as expressly set forth herein.
SECTION 3.2 Notice of Default. The Book-Entry Depositary shall (x) within
90 days after the occurrence of any Event of Default in respect of the Global
Notes of which a Responsible Officer of the Book-Entry Depositary assigned to
its Global Trust Services department has actual knowledge or (y) promptly after
being notified of an Event of Default by the Trustee, transmit by mail to the
Depositary in the manner provided in Section 4.2, notice of such Event of
Default, unless such Event of Default shall have been cured or waived.
SECTION 3.3 Certain Rights of Book-Entry Depositary. Subject to the
provisions of Section 3.1 hereof:
(a) the Book-Entry Depositary 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, coupon, security, or other paper or document delivered to it in
accordance with the terms of this Agreement and believed by it to be genuine and
to have been signed or presented by the proper party or parties;
(b) any request, direction, order or demand of the Issuer mentioned herein
shall be sufficiently evidenced by an Officers' Certificate, Issuer Order or
Issuer Request, and any resolution of the Board of Directors of the Issuer may
be sufficiently evidenced by a Board Resolution;
(c) the Book-Entry Depositary may consult with counsel and the advice of
such counsel confirmed in writing or any Opinion of Counsel shall be full and
complete authorization and protection with respect to any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon in accordance
with such advice or Opinion of Counsel;
(d) the Book-Entry Depositary shall not be bound to make any in vestigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
appraisal, bond, debenture, note, coupon, security or other paper or document,
but the Book-Entry
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Depositary, may (but shall have no obligation to) make reasonable further
inquiry or investigation into such facts or matters related to the issuance of
the Global Notes and, if the Book-Entry Depositary shall determine to make such
further inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Issuer, at the Issuer's expense, at reasonable times
during normal business hours, personally or by agent or attorney;
(e) the Book-Entry Depositary may execute any of the powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Book-Entry Depositary shall not be responsible for any
misconduct or negligence on the part of any such agent or attorney appointed
with due care;
(f) the Book-Entry Depositary shall be under no obligation to exercise any
of the rights or powers vested in it by this Agreement at the request, order or
direction of the Depositary pursuant to this Agreement, unless the Depositary
shall have offered or caused to be offered to the Book-Entry Depositary security
or in demnity reasonably satisfactory to it against the costs, expenses and
liabilities that might be incurred by it in compliance with such request or
direction, provided that such request, order or direction shall not expose the
Book-Entry Depositary to personal liability;
(g) the Book-Entry Depositary shall not be liable for any action taken or
omitted by it in good faith and reasonably believed by it to be authorized or
within the discretion, rights or powers conferred upon it by this Agreement; and
(h) whenever in the administration of its duties under this Agreement the
Book-Entry Depositary shall deem it necessary or desirable that a matter be
proved or established prior to taking or suffering or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence or bad faith on the
part of the Book-Entry Depositary, be deemed to be conclusively proved and
established by an Officers' Certificate delivered to the Book-Entry Depositary,
and such certificate, in the absence of negligence or bad faith on the part of
the Book-Entry Depositary, shall be full warrant to the Book-Entry Depositary
for any action taken, suffered or omitted by it under the provisions of the
Agreement, upon the faith thereof.
SECTION 3.4 Not Responsible for Recitals or Issuance of Notes. The recitals
contained in the Indenture and in the Notes, except the Trustee's certificates
of authentication, shall be taken as the statements of the Issuer, and the
Book-Entry Depositary assumes no responsibility for their correctness. The
Book-Entry Depositary
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makes no representation as to (i) the validity or sufficiency of the Indenture
or of the Notes, (ii) the sufficiency of this Agreement or (iii) the validity,
with respect to the Issuer, of this Agreement. The Book-Entry Depositary shall
not be accountable for the use or application by the Issuer of the proceeds with
respect to the Notes.
SECTION 3.5 Money Held in Trust. Money held by the Book-Entry Depositary in
trust hereunder need not be segregated from other funds held by the Book-Entry
Depositary, except to the extent required by law. The Book-Entry Depositary
shall be under no obligation to invest or pay interest on any money received by
it hereunder, except as otherwise agreed in writing with the Issuer. Any
interest accrued on funds deposited with the Book-Entry Depositary under this
Agreement shall be paid to the Issuer from time to time and the Depositary shall
have no claim to any such interest.
SECTION 3.6 Compensation and Reimbursement. The Issuer and Holdings,
jointly and severally agree:
(a) to pay to the Book-Entry Depositary from time to time reasonable
compensation agreed in writing for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law with regard to the com
pensation of a trustee of an express trust);
(b) except as otherwise expressly provided herein, to reimburse the
Book-Entry Depositary upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Book-Entry Depositary in
accordance with any provision of this Agreement (including the reasonable
compensation, expenses and disbursements of its agents and counsel), except any
such expense, disbursement or advance as may be attributable to its negligence,
bad faith or willful misconduct; and
(c) to indemnify the Book-Entry Depositary and its directors, officers,
agents and employees for, and to hold it harmless against, any loss, liability
or expense incurred without negligence, bad faith on its part, arising out of or
in connection with the acceptance or administration of this Agreement and its
duties hereunder, including the costs and expenses of defending itself against
or investigating any claim of liability in connection with the exercise or
performance of any of its powers or duties hereunder.
The obligations of the Issuer under this Section to compensate and
indemnify the Book-Entry Depositary and to pay or reimburse the Book-Entry De
positary for reasonable expenses, disbursements and advances shall survive the
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satisfaction and discharge of this Agreement or the earlier of the resignation
or the removal of the Book-Entry Depositary. Such obligations shall be a senior
claim to that of the Notes upon all property and funds held or collected by the
Book-Entry Depositary as such, except funds held in trust for the benefit of the
holders of the Notes.
SECTION 3.7 Book-Entry Depositary Required: Eligibility. At all times when
there is a Book-Entry Depositary hereunder, such Book-Entry Depositary shall be
a corporation organized and doing business under the laws of the United States
of America, any State thereof or the District of Columbia, having, together with
its parent, a combined capital and surplus of at least $50,000,000, subject to
supervision or examination by federal, state or District of Columbia authority,
willing to act on reasonable terms. Such corporation shall have its principal
place of business in the Borough of Manhattan, The City of New York, if there be
such a corporation in such location willing to act upon reasonable and customary
terms and conditions. If such corporation, or its parent, publishes reports of
condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such corporation shall be deemed to
be its combined capital and surplus as set forth in its most recent report of
condition so published. The Book-Entry Depositary shall have executed a letter
of representations to DTC acceptable in form and substance to DTC and the Issuer
with respect to the Depositary Interests. The Book-Entry Depositary hereunder
shall at all times be the Trustee under the Indenture, subject to receipt by the
Issuer of an Opinion of Counsel that the same Person is precluded by law from
acting in such capacities. If at any time the Book-Entry Depositary 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 3.8 Resignation and Removal, Appointment of Successor. (a) No
resignation or removal of the Book-Entry Depositary and no appointment of a
successor Book-Entry Depositary pursuant to this Article shall become effective
until (i) the approval in writing of a successor Book-Entry Depositary by the
Issuer and the acceptance of the appointment by such successor Book-Entry
Depositary in accordance with the applicable requirements of Section 3.9 hereof
or (ii) the issuance of Registered Notes in accordance with Section 2.4 hereof
and the Indenture.
(b) The Book-Entry Depositary may resign all of its rights and duties with
respect to the Global Notes and the Depositary Interests by giving written
notice thereof to the Issuer and the Depositary in accordance with Sections 4.1
and 4.2 hereof. The Book-Entry Depositary may be removed at any time upon 30
days' notice by the
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filing with it of an instrument in writing signed on behalf of the Issuer and
specifying such removal and the date when it is intended to become effective. If
the instrument of acceptance by a successor Book-Entry Depositary or the
approval by the Issuer required by Section 3.9 hereof shall not have been
delivered to the Book-Entry Depositary within 30 days after the giving of such
notice of resignation, the resigning Book-Entry Depositary may petition any
court of competent jurisdiction for the appointment of a successor Book-Entry
Depositary.
(c) If at any time:
(1) the Book-Entry Depositary shall cease to be eligible under Section
3.7 hereof or shall cease to be eligible as Trustee under the Indenture,
and shall fail to resign after written request therefor by the Issuer or
the Depositary, or
(2) the Book-Entry Depositary shall become incapable of acting with
respect to the Global Notes and the Depositary Interests, or shall be
adjudged bankrupt or insolvent, or a receiver or liquidator of the
Book-Entry Depositary or its property shall be appointed or any public
officer shall take charge or control of the Book-Entry Depositary or its
property or affairs for the purpose of rehabilitation, conservation or
liquidation,
then, in any such case, (i) the Issuer, by Board Resolution, may remove the
Book-Entry Depositary and appoint a successor Book-Entry Depositary and (ii) if
the Issuer does not remove the Book-Entry Depositary and appoint a successor
pursuant to clause (i), the Depositary, upon the direction of holders of at
least a majority of the total aggregate principal amount of the Book-Entry Notes
outstanding, may petition any court of competent jurisdiction for the removal of
the Book-Entry Depositary with respect to the Global Notes and the Depositary
Interests and the appointment of a successor Book-Entry Depositary or Book-Entry
Depositaries unless Registered Notes have been issued in accordance with the
Indenture. Such court may thereupon, after such notice, if any, as it may deem
proper and prescribe, remove the Book-Entry Depositary with respect to the
Global Notes and the Depositary Interests and appoint a successor Book-Entry
Depositary for the Global Notes and the Depositary Interests.
(d) If the Book-Entry Depositary shall resign. be removed or become
incapable of acting, or if a vacancy shall occur in the office of Book-Entry
Depositary for any cause, the Issuer, by Board Resolution, shall promptly
appoint a successor Book-Entry Depositary (other than the Issuer) and shall
comply with the applicable requirements of Section 3.9 hereof. If no successor
Book-Entry Depositary with respect to the Notes shall have been so appointed by
the Issuer and accepted appoint-
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ment in the manner required by Section 3.9, the Depositary, upon direction of
holders of at least a majority of the total aggregate principal amount of
Book-Entry Notes outstanding, may petition any court of competent jurisdiction
for the appointment of a successor Book-Entry Depositary unless Registered Notes
have been issued in accor dance with the Indenture and Section 2.4 hereof.
(e) The Issuer shall give, or shall cause such successor Book-Entry
Depositary to give, notice of each resignation and each removal of a Book-Entry
Depositary and each appointment of a successor Book-Entry Depositary to the De
positary in accordance with Section 4.2 hereof. Each notice shall include the
name of the successor Book-Entry Depositary and the address of its Corporate
Trust Office.
(f) If a Book-Entry Depositary hereunder shall resign, it shall not be
relieved of any responsibility for its actions or omissions hereunder solely by
virtue of such resignation.
SECTION 3.9 Acceptance of Appointment by Successor. (a) In case of the
appointment hereunder of a successor Book-Entry Depositary, every such successor
Book-Entry Depositary so appointed shall execute, acknowledge and deliver to the
Issuer and to the retiring Book-Entry Depositary an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Book-Entry
Depositary shall become effective and such successor Book-Entry Depositary,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, agencies and duties of the retiring Book-Entry Depositary, with
like effect as if originally named as Book-Entry Depositary hereunder; but, on
the request of the Issuer or the successor Book-Entry Depositary, such retiring
Book-Entry Depositary shall, upon payment of all amounts due and payable to it
pursuant to Section 3.6 hereof, execute and deliver an instrument transferring
to such successor Book-Entry Depositary all the rights and powers of the
retiring Book-Entry Depositary and shall duly assign, transfer and deliver to
such successor Book-Entry Depositary all property and money held by such
retiring Book-Entry Depositary hereunder. Any retiring Book-Entry Depositary
shall, nonetheless, retain a prior claim upon all property or funds held or
collected by such Book-Entry Depositary to secure any amounts then due it
pursuant to Section 3.6 hereof. The Book-Entry Depositary will not be liable for
any acts or omissions of any successor Book-Entry Depositary appointed pursuant
to Section 3.8 hereof.
(b) Upon request of any such successor Book-Entry Depositary, the Issuer
shall execute any and all instruments for more fully and certainly vesting in
and
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confirming to such successor Book-Entry Depositary all such rights, powers and
agencies referred to in paragraph (a) of this Section.
(c) No successor Book-Entry Depositary shall accept its appointment unless
at the time of such acceptance such successor Book-Entry Depositary shall be
eligible to serve as such under this Article.
(d) Upon acceptance of appointment by any successor Book-Entry Depositary
as provided in this Section, the Issuer shall give notice thereof to the
Depositary in accordance with Section 4.02 hereof. If the acceptance of
appointment is substantially contemporaneous with the resignation of the
Book-Entry Depositary, then the notice called for by the preceding sentence may
be combined with the notice called for by Section 3.8 hereof. If the Issuer
fails to give such notice within ten days after acceptance of appointment by the
successor Book-Entry Depositary, the successor Book-Entry Depositary shall cause
such notice to be given at the expense of the Issuer.
SECTION 3.10 Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Book-Entry Depositary 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 Book-Entry Depositary shall be
a party, or any corporation succeeding to all or substantially all the agency
business of the Book-Entry Depositary, shall be the successor of the Book-Entry
Depositary hereunder, without the execution or filing of any paper or any
further act on the part of any of the parties hereto; provided that such
corporation shall be otherwise eligible to serve as Book-Entry Depositary under
this Article.
SECTION 3.11 Compliance with Letter of Representations. As long as DTC or
its nominee is the Depositary, the Book-Entry Depositary shall comply with all
of its representations made to DTC in the Letter of Representations, and any
successor Book-Entry Depositary shall comply with all representations made to
DTC in a similar letter of representations in form and substance acceptable to
DTC and the Issuer.
ARTICLE IV
MISCELLANEOUS PROVISIONS
SECTION 4.1 Notices to Book-Entry Depositary or Issuer. Any request,
demand, authorization, direction, notice, consent, or waiver or other document
provided or permitted by this Agreement to be made upon, given or furnished to,
or filed with:
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(a) the Book-Entry Depositary by the Depositary, by the Trustee or by the
Issuer shall be sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if made, given, furnished or filed in writing and personally
delivered or mailed, by overnight delivery or certified mail, postage prepaid,
to the Book-Entry Depositary at the following address:
The Chase Manhattan Bank
450 West 33rd Street
New York, NY 10001
Attention: Global Trust Services
Facsimile: 1-212-946-7799
or at any other address furnished in writing by the Book-Entry Depositary to the
Depositary, the Trustee and the Issuer; or
(b) the Issuer by the Book-Entry Depositary or by the Depositary shall be
sufficient for every purpose hereunder (unless otherwise herein expressly
provided) if made, given, furnished or filed in writing and personally delivered
or mailed, by overnight delivery or first-class postage prepaid, to the
following address:
RSL Communications PLC
767 Fifth Avenue
Suite 4300
New York, New York 10153
with a copy to:
George E.B. Maguire
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Facsimile: (212) 909-6836
or at any other addresses furnished in writing to the Book-Entry Depositary by
the Issuer. Any communication sent pursuant to this Section 4.1 shall be deemed
given when delivered, if personally delivered or sent by overnight delivery and
three days after deposit in the U.S. mail, if sent by certified mail.
SECTION 4.2 Notice to the Depositary; Waiver. Where this Agree ment
provides for notice to the Depositary of any event, such notice shall be suf-
20
<PAGE>
ficiently given (unless otherwise herein expressly provided or as provided in
the Letter of Representations) if in writing and mailed, first-class postage
prepaid, to the Depositary at the address that the Depositary has notified in
writing to the Book-Entry Depositary, in each case not later than the latest
date, and not earlier than the earliest date, prescribed for the giving of such
notice. Where this Agreement 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 the Depositary shall be filed with the Book-Entry
Depositary, 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 Book-Entry Depositary
shall constitute a sufficient notification for every purpose hereunder.
SECTION 4.3 Effect of Headings and Table of Contents. The Article and
Section headings herein are for convenience only and shall not affect the con
struction hereof.
SECTION 4.4 Successors and Assigns. All covenants and agreements in this
Agreement and the Notes by the Issuer shall bind its successors and assigns,
whether so expressed or not.
SECTION 4.5 Separability Clause. In case any provision in this Agreement or
in the Notes shall be invalid, illegal or unenforceable, the validity. legality
and enforceability of the remaining provisions hereof and thereof shall not in
any way be affected or impaired thereby.
SECTION 4.6 Benefits of Agreement. Nothing in this Agreement, the Notes, or
the Indenture, express or implied, shall give to any Person, other than the
parties hereto and their successors hereunder, any benefits or any legal or
equitable right, remedy or claim under this Agreement. By the acceptance of the
Depositary Interests representing the Notes, the Depositary shall be party to
this Agreement and shall be bound by all of the terms and conditions hereof and
of the Indenture and the Notes.
SECTION 4.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, BUT WITHOUT
GIVING EFFECT TO AP-
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PLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 4.8 Jurisdiction. The Issuer agrees that any legal suit, action or
proceeding against the Issuer brought by the Depositary or the Book-Entry De
positary arising out of or based upon this Agreement may be instituted in any
state or federal court in the Borough of Manhattan, The City of New York, and
waives any objection which it may now or hereafter have to the laying of venue
of any such proceeding and irrevocably submits to the non-exclusive jurisdiction
of such courts in any suit, action or proceeding. The Issuer has appointed RSL
Communications N. America, Inc., 767 Fifth Avenue, Suite 4300, New York, New
York 10153, as its authorized agent (together with any successor, the
"Authorized Agent") upon whom process may be served in any legal suit, action or
proceeding arising out of or based upon this Agreement which may be instituted
in any state or federal court in the Borough of Manhattan, The City of New York,
by the Depositary or the Book-Entry Depositary and expressly accepts the
nonexclusive jurisdiction of any such court in respect of any such action. The
Issuer represents and warrants that the Authorized Agent has agreed to act as
said agent for service of process, and the Issuer agrees to take any and all
action, including the filing of any and all documents and instruments, that may
be necessary to continue such appointment in full force and effect as afore
said. Service of process upon the Authorized Agent shall be deemed, in every
respect, effective service of process upon the Issuer. Notwithstanding the
foregoing, any action based on this Agreement may be instituted by the
Book-Entry Depositary in any competent court in England.
SECTION 4.9 Counterparts. This Agreement may be executed in any number of
counterparts by the parties hereto on separate counterparts, each of which, when
so executed and delivered, shall be deemed an original, but all of which shall
together constitute one and the same instrument.
SECTION 4.10 Inspection of Agreement. A copy of this Agreement shall be
available at all reasonable times during normal business hours at the Corporate
Trust Office of the Book-Entry Depositary for inspection by the Depositary.
SECTION 4.11 Satisfaction and Discharge. Upon Issuer Request to terminate
this Agreement, this Agreement shall cease to be of further effect and the
Book-Entry Depositary shall execute proper instruments acknowledging
satisfaction and discharge of this Agreement, when (i) the Indenture has been
satisfied and discharged pursuant to the provisions thereof or Registered Notes
have been issued and all Global
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<PAGE>
Notes have been canceled in accordance with the provisions of the Indenture and
Sections 3.05 and 3.09 thereof, (ii) the Issuer has paid or caused to be paid
all sums payable hereunder by the Issuer and (iii) the Issuer has delivered to
the Book-Entry Depositary an Officers' Certificate, stating that all conditions
precedent provided herein relating to the satisfaction and discharge of this
Agreement have been complied with.
SECTION 4.12 Amendments. The Issuer and the Book-Entry Depositary may
amend this Agreement without the consent of the Depositary:
(a) to cure any ambiguity, defect or inconsistency, provided that such
amendment or supplement does not adversely affect the rights of the Depositary
or any holder of Book-Entry Notes;
(b) to evidence the succession of another person to the Issuer (when a
similar amendment with respect to the Indenture is being executed) and the
assumption by any such successor of the covenants of the Issuer herein;
(c) to evidence or provide for a successor Book-Entry Depositary,
(d) to make any amendment, change or supplement that does not adversely
affect the Depositary or holders of Book-Entry Notes;
(e) to add to the covenants of the Issuer or the Book-Entry Depositary; or
(f) to comply with the United States federal and United Kingdom. securities
laws.
No amendment may be made to this Agreement that adversely affects the
Depositary without the consent of the Depositary and no amendment may be made to
this Agreement that adversely affects the holders of Book-Entry Notes without
the consent of a majority of the aggregate principal amount of Book-Entry Notes
out standing.
SECTION 4.13 Book-Entry Depositary To Sign Amendments. The Book-Entry
Depositary shall sign any amendment authorized pursuant to Section 4.12 hereof
if the amendment does not adversely affect the rights, duties, liabilities or
immunities of the Book-Entry Depositary. If it does, the Book-Entry Depositary
may but need not sign it. In signing such amendment the Book-Entry Depositary
shall be entitled to receive indemnity satisfactory to it and to receive, and
shall be fully
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<PAGE>
protected in reasonably relying upon. an Officers' Certificate (which need only
cover the matters set forth in clause (a) below) and an Opinion of Counsel to
the effect that:
(a) such amendment is authorized or permitted by this Agreement;
(b) the Issuer has all necessary corporate power and authority to execute
and deliver the amendment and that the execution, delivery and performance of
such amendment has been duly authorized by all necessary corporate action;
(c) the execution, delivery and performance of the amendment do not
conflict with, or result in the breach of or constitute a default under any of
the terms, conditions or provisions of (i) this Agreement, (ii) the Memorandum
and Articles of Association of the Issuer, (iii) any law or regulation
applicable to the Issuer, (iv) any material order, writ, injunction or decree of
any court or governmental instrumentality applicable to the Issuer or (v) any
material agreement or instrument to which the Issuer is subject; and
(d) such amendment has been duly and validly executed and delivered by the
Issuer, and this Agreement together with such amendment constitutes a legal,
valid and binding obligation of the Issuer enforceable against the Issuer in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally and general equitable principles.
[signature page follows]
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
RSL COMMUNICATIONS PLC
By: /s/ Mark J. Hirschhorn
--------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK
as Book-Entry Depositary
By: /s/ ROBERT S. PESCHLER
--------------------------------
Name: Robert S. Peschler
Title: Trust Officer
With respect to the provisions of Section 3.6 only
RSL COMMUNICATIONS, Ltd.
By: /s/ Mark J. Hirschhorn
-------------------------------
Name:
Title:
25
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================================================================================
RSL COMMUNICATIONS PLC
as Issuer, with RSL Communications, Ltd. of
$200,000,000, 9 1/8% Senior Notes Due 2008
of RSL Communications PLC
and
THE CHASE MANHATTAN BANK
as Book-Entry Depositary
NOTE DEPOSIT AGREEMENT
Dated as of February 27, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND OTHER GENERAL PROVISIONS......................................1
SECTION 1.1 Definitions.............................................1
SECTION 1.2 Rules of Construction...................................4
ARTICLE II
GLOBAL NOTES, DEPOSITARY INTERESTS............................................5
SECTION 2.1 Deposit of the Global Notes.............................5
SECTION 2.2 Book-Entry System.......................................5
SECTION 2.3 Registration of Transfer of Depositary Interests........6
SECTION 2.4 Transfer of Global Notes and
Depositary Interests; Termination.......................6
SECTION 2.5 Cancellation............................................7
SECTION 2.6 Payments in Respect of the Global Notes.................7
SECTION 2.7 Changes in Principal Amount of the Global Notes.........8
SECTION 2.8 Record Date.............................................9
SECTION 2.9 Action in Respect of the Depositary Interests...........9
SECTION 2.10 Changes Affecting the Global Notes....................11
SECTION 2.11 Surrender of the Global Notes.........................11
SECTION 2.12 Reports...............................................11
ARTICLE III
THE BOOK-ENTRY DEPOSITARY....................................................11
SECTION 3.1 Certain Duties and Responsibilities....................11
SECTION 3.2 Notice of Default......................................13
SECTION 3.3 Certain Rights of Book-Entry Depositary................13
SECTION 3.4 Not Responsible for Recitals or Issuance of Notes......14
SECTION 3.5 Money Held in Trust....................................15
SECTION 3.6 Compensation and Reimbursement.........................15
SECTION 3.7 Book-Entry Depositary Required: Eligibility............16
SECTION 3.8 Resignation and Removal, Appointment of Successor......16
SECTION 3.9 Acceptance of Appointment by Successor.................18
SECTION 3.10 Merger, Conversion, Consolidation
or Succession to Business.............................19
SECTION 3.11 Compliance with Letter of Representations.............19
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ARTICLE IV
MISCELLANEOUS PROVISIONS.....................................................19
SECTION 4.1 Notices to Book-Entry Depositary or Issuer.............19
SECTION 4.2 Notice to the Depositary; Waiver.......................20
SECTION 4.3 Effect of Headings and Table of Contents...............21
SECTION 4.4 Successors and Assigns.................................21
SECTION 4.5 Separability Clause....................................21
SECTION 4.6 Benefits of Agreement..................................21
SECTION 4.7 GOVERNING LAW..........................................21
SECTION 4.8 Jurisdiction...........................................21
SECTION 4.9 Counterparts...........................................22
SECTION 4.10 Inspection of Agreement...............................22
SECTION 4.11 Satisfaction and Discharge............................22
SECTION 4.12 Amendments............................................23
SECTION 4.13 Book-Entry Depositary To Sign Amendments..............23
ii
<PAGE>
THIS NOTE DEPOSIT AGREEMENT is made as of this 27th day of February, 1998
by and between RSL Communications PLC, a United Kingdom corporation (the
"Issuer") and The Chase Manhattan Bank, a New York banking corporation, as
book-entry depositary (the "Book-Entry Depositary").
ARTICLE I
DEFINITIONS AND OTHER GENERAL PROVISIONS
SECTION 1.1 Definitions. The following terms, as used herein, have the
following meanings:
"144A Depositary Interest" means the certificateless book-entry interest
representing a 100% beneficial interest in the principal of, premium, if any,
and interest on the underlying 144A Global Note, and issued to the Depositary by
the Book-Entry Depositary.
"144A Global Note" means one or more global bearer bonds issued by the
Issuer to the Book-Entry Depositary and bearing the Restricted Legend
representing the total aggregate principal amount of the Notes sold in reliance
on Rule 144A under the Securities Act.
"Asset Disposition" has the meaning set forth in the Indenture.
"Board Resolution" means a duly adopted resolution of the Board of
Directors of the Issuer in full force and effect on the date of certification,
certified by any Director, Secretary or Assistant Secretary of the Issuer.
"Book-Entry Depositary" means The Chase Manhattan Bank or, in the event
that The Chase Manhattan Bank is succeeded as Book-Entry Depositary here under,
the Person designated as its successor pursuant to Section 3.8 hereof.
"Book-Entry Notes" means an indirect certificateless beneficial interest in
a Global Note held through a corresponding Depositary Interest.
"Book-Entry Register" has the meaning set forth in Section 2.3 hereof.
"Cedel" means Cedel Bank, societe anonyme.
<PAGE>
"Change of Control" has the meaning set forth in the Indenture.
"Corporate Trust Office" means the office of the Book-Entry Depositary in
the Borough of Manhattan, The City of New York, from which at any particular
time its corporate trust business shall be principally administered, which at
the date hereof is located at 450 West 33rd Street, New York, New York
10001-2697, Atten tion: Global Trust Services.
"Depositary" means DTC, or any successor, as the holder of the Depositary
Interests as recorded on the Book-Entry Register.
"Depositary Interests" means each of the 144A Depositary Interests and the
Regulation S Depositary Interests.
"DTC" means The Depository Trust Company and its nominees.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Event of Default" shall have the meaning set forth in the Indenture.
"Exchange Act" means the United States Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Global Notes" means each of the 144A Global Note and the Regulation S
Global Note.
"Holdings" means RSL Communications, Ltd., guarantor of the Notes pursuant
to the Indenture until a successor replaces it pursuant to the applicable
provisions of the Indenture and, thereafter, means such successor.
"Indenture" means the indenture dated as of February 27, 1998 among the
Issuer, Holdings and the Trustee relating to the Notes, as originally executed
or as it may be supplemented, modified or amended from time to time.
"Issuer" means RSL Communications PLC until a successor replaces it
pursuant to the applicable provisions of the Indenture and, thereafter, means
such successor.
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<PAGE>
"Issuer Order" or "Issuer Request" means a written order or request signed
in the name of the Issuer by two Officers thereof.
"Letter of Representations" means the Letter of Representations to DTC
dated as of February 27, 1998 from the Issuer, the Trustee and the Book-Entry
Depositary.
"Notes" means the $200,000,000 aggregate principal amount of the Issuer's 9
1/8% Senior Notes due 2008 issued under the Indenture.
"Offer to Purchase" has the meaning set forth in the Indenture.
"Officer" means, with respect to the Issuer, (i) the Chairman of the Board,
the Chief Executive Officer and other Directors and (ii) the Treasurer or any
Assistant Treasurer, or the Secretary or any Assistant Secretary.
"Officers' Certificate" means a certificate signed by two Officers, at
least one of which must be an Officer listed in clause (i) of the definition
thereof.
"Opinion of Counsel" means a written opinion from legal counsel, who may be
an employee of or counsel to the Issuer, and who shall be reasonably acceptable
to the Book-Entry Depositary.
"Participant" means, with respect to DTC, Euroclear or Cedel, any Person
who has an account with DTC, Euroclear or Cedel, respectively (and, with respect
to DTC, shall include Euroclear and Cedel).
"Paying Agent" means The Chase Manhattan Bank and any successor paying
agent hereunder.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Registered Notes" means certificated Notes registered in the name of the
holder thereof issued pursuant to the Indenture in substantially the form set
forth in Section 2.02 of the Indenture.
"Regulation S Depositary Interest" means the certificateless book-entry
interest representing a 100% beneficial interest in the principal of, premium,
if any,
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and interest on the underlying Regulation S Global Note, and issued to the
Depositary by the Book-Entry Depositary.
"Regulation S Global Note" means one or more global bearer bonds issued by
the Issuer to the Book-Entry Depositary and bearing the Regulation S Legend
representing the total aggregate principal amount of the Notes sold in reliance
on Regulation S under the Securities Act.
"Regulation S Legend" has the meaning set forth in the Indenture.
"Responsible Officer", with respect to the Book-Entry Depositary, means any
Vice President, Assistant Vice President, the Secretary, any Assistant
Secretary, the Treasurer, any Assistant Treasurer, or any Trust Officer or any
other officer of the Book-Entry Depositary customarily performing functions
similar to those performed by any of the above-designated officers and also
means, with respect to a particular corporate trust or agency matter, any other
officer to whom such matter is referred because of his or her knowledge and
familiarity with the particular subject.
"Restricted Legend" has the meaning set forth in the Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Trustee" means The Chase Manhattan Bank acting as trustee under the
Indenture or, in the event The Chase Manhattan Bank is succeeded as trustee
under the Indenture, such Person who shall be appointed to succeed as trustee
pursuant to the applicable provisions of the Indenture.
SECTION 1.2 Rules of Construction. Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) "or" is not exclusive;
(3) "including" means including without limitation;
(4) words in the singular include the plural and words in the plural
include the singular; and
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<PAGE>
(5) references herein to holders of Depositary Interests shall mean
references to the Depositary.
ARTICLE II
GLOBAL NOTES, DEPOSITARY INTERESTS
SECTION 2.1 Deposit of the Global Notes. The Book-Entry Depositary hereby
accepts custody of the Global Notes from the Trustee and shall act as Book-Entry
Depositary in accordance with the terms of this Agreement. The Book-Entry
Depositary shall hold each such Global Note at its Corporate Trust Office or at
such place or places as it shall determine with the prior written consent of the
Issuer and shall issue the Depositary Interests in accordance with the Letter of
Repre sentations. In the event that the Issuer shall issue and execute, and the
Trustee, upon the order of the Issuer, shall authenticate additional Global
Notes, the Book-Entry Depositary shall hold each such Global Note at its
Corporate Trust Office or at such place or places as it shall determine with the
prior written consent of the Issuer and shall issue the Depositary Interests in
such Global Notes to the Depositary in accor dance with the Letter of
Representations.
SECTION 2.2 Book-Entry System. (a) Upon acceptance by DTC of the Depositary
Interests for entry into its book-entry settlement system in accordance with the
terms of the Letter of Representations, Book-Entry Notes shall be issued by DTC
and traded through DTC's book-entry system, and ownership of such Book-Entry
Notes shall be shown in, and the transfer of such ownership shall be effected
only through, a book-entry system maintained by (i) DTC or its successors or
(ii) Par ticipants. DTC shall treat the holders of Book-Entry Notes and their
successors as the absolute owners of the Depositary Interests for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Issuer, the Trustee, the Book-Entry Depositary or any agent of the Issuer, the
Trustee or the Book-Entry Depositary from giving effect to any written
certification, proxy or other authorization furnished by the Depositary or
impair, as between the Book-Entry Depositary and the Depositary and its
Participants, the operation of customary practices of such Depositary governing
the exercise of the rights of an owner of a beneficial interest in any Global
Note or Depositary Interest.
(b) The Depositary Interests shall be issuable only to DTC, or suc cessors
of DTC or their respective nominees. Except as provided in Section 2.4 hereof
and Section 3.05(d) of the Indenture, no owner of beneficial interests in such
De positary Interests shall be entitled to receive a Registered Note on account
of such
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beneficial interest, and such beneficial owner's interest therein shall be shown
only in accordance with the procedures of DTC as set forth in the Letter of
Representations.
SECTION 2.3 Registration of Transfer of Depositary Interests. (a) The
Issuer appoints the Book-Entry Depositary as its agent to maintain at the
Book-Entry Depositary's Corporate Trust Office a register (the "Book-Entry
Register") in which the Book-Entry Depositary shall (i) record the right of the
Depositary to receive payment of principal of, premium, if any, and interest on
the Global Notes and (ii) record the registration and transfer of the Depositary
Interests. No Depositary Interest can be transferred unless such transfer is
recorded on the Book-Entry Register.
(b) With respect to any Global Note, clause (a) of this Section 2.3 shall
not (i) impose an obligation on the Book-Entry Depositary to record the
interests in or transfers of Book-Entry Notes held by institutions that have
accounts with DTC or its successors or Persons that may hold Book-Entry Notes
through such institutions and (ii) restrict transfers of such Book-Entry Notes
held by such institutions or Persons. The Book-Entry Depositary shall treat the
Depositary or its nominee as the absolute owner of the Depositary Interests for
all purposes whatsoever and shall not be bound or affected by any notice to the
contrary, other than an order of a court having jurisdiction over the Book-Entry
Depositary.
SECTION 2.4 Transfer of Global Notes and Depositary Interests; Termination.
The Book-Entry Depositary shall hold the Global Notes in custody for the benefit
of the Depositary. The Book-Entry Depositary shall not transfer or lend any
Global Note or any interest therein except that (i) the Book-Entry Depositary
shall deliver Global Notes to the Trustee if required in accordance with Section
3.05(e) of the Indenture so that the Trustee may make such notations on the
Global Notes as may be required to evidence transfers and exchanges of
Book-Entry Notes, (ii) a Global Note may be exchanged in whole or in part
pursuant to Section 3.05(d) of the Indenture, (iii) a Global Note may be
exchanged or replaced pursuant to Sections 3.04 and 3.06 of the Indenture, (iv)
any Global Note may be delivered to the Trustee for cancellation pursuant to
Section 3.09 of the Indenture and (v) the Global Notes may be transferred to a
successor Book-Entry Depositary with the prior written consent of the Issuer.
Notwithstanding the foregoing, the Depositary may not under any circumstances
request the Book-Entry Depositary to surrender or deliver the Global Notes.
If the Book-Entry Depositary notifies the Issuer and the Trustee in writing
under Section 3.8 hereof that it is unwilling or unable to continue as
Book-Entry Depositary and no successor Book-Entry Depositary has been appointed
by the
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Issuer within 90 days of such notification, then the Book-Entry Depositary shall
promptly notify the Trustee and request the Trustee to issue Registered Notes in
such names and denominations as the Depositary shall specify in writing in
accordance with Section 3.05 of the Indenture and the Book-Entry Depositary
agrees that in such event it shall promptly surrender the Global Notes held by
it to the Trustee in connection with such exchange and that such Global Notes
shall be canceled upon issuance of such Registered Notes.
If DTC notifies the Issuer or the Book-Entry Depositary in writing that it
or its nominee is unwilling or unable to continue as Depositary with respect to
any or all of the Depositary Interests or if at any time it or its nominee is
unable to or ceases to be a clearing agency under the Exchange Act and, in
either case, a successor Depositary registered as a clearing agency under the
Exchange Act is not appointed by the Issuer within 90 days, then the Book-Entry
Depositary shall promptly notify the Trustee and request the Trustee to issue
Registered Notes with respect to the Global Notes in such names and
denominations as the Depositary shall specify in writing in accordance with
Section 3.05 of the Indenture and the Book-Entry Depositary agrees that in such
event it shall promptly surrender the applicable Global Notes held by it to the
Trustee in connection with such exchange and that such Global Notes shall be
canceled upon issuance of such Registered Notes.
If at any time the Issuer, subject to and in compliance with Section
3.05(d) of the Indenture, determines that the Global Notes should be exchanged,
in whole but not in part, for Registered Notes, then the Issuer shall promptly
notify the Trustee and the Book-Entry Depositary and request the Trustee to
issue Registered Notes with respect to the Global Notes in such names and
denominations as the Depositary shall specify in writing in accordance with
Section 3.05 of the Indenture and the Book-Entry Depositary agrees that in such
event it shall promptly surrender the applicable Global Notes held by it to the
Trustee in connection with such exchange and that such Global Notes shall be
canceled upon issuance of such Registered Notes.
Upon the issuance of Registered Notes in exchange for Global Notes
representing the entire principal amount of Notes, this Agreement will
terminate.
SECTION 2.5 Cancellation. If any Global Note is surrendered for payment, or
for redemption or purchase of Notes evidenced thereby or in exchange for
Registered Notes, then such Global Note shall, if surrendered to any Person
other than the Trustee notwithstanding the first paragraph of Section 2.4
hereof, be delivered to the Trustee for cancellation.
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SECTION 2.6 Payments in Respect of the Global Notes. (a) Except for
payments made pursuant to an Offer to Purchase with respect to any Asset
Disposition or Change of Control, whenever the Book-Entry Depositary shall
receive from the Trustee (or other paying agent under the Indenture) any payment
of the principal of, premium, if any, and interest on the Global Notes, such
payments shall be distributed promptly to the Depositary on the payment date for
the Global Notes.
(b) Whenever the Book-Entry Depositary shall receive from the Trustee (or
other paying agent under the Indenture) any payment of the principal of,
premium, if any, and interest on the Global Notes pursuant to an Offer to
Purchase by the Issuer with respect to any Asset Disposition or Change of
Control, the Book-Entry Depositary shall distribute such payment to the
Depositary for the accounts of holders of Book-Entry Notes who elected to have
Book-Entry Notes repurchased pursuant to such Offer to Purchase.
(c) So long as DTC or its nominee is the Depositary, payments pursuant to
Section 2.6(a) and 2.6(b) hereof with respect to the Global Notes shall be made
in accordance with the Letter of Representations. In the event that DTC or its
nominee shall cease to be the Depositary, such payments shall be made according
to procedures agreed between the Book-Entry Depositary and the successor
Depositary, which shall be reasonably satisfactory to the Issuer.
(d) The Book-Entry Depositary shall forward to the Issuer or its agents at
the Issuer's cost and expense such information from its records as the Issuer
may reasonably request to enable the Issuer or its agents to file necessary
reports with governmental agencies, and the Book-Entry Depositary, the Issuer or
its agents may (but shall not be required to) file any such reports necessary to
obtain benefits under any applicable tax treaties for the Depositary or the
holders of Book-Entry Notes.
SECTION 2.7 Changes in Principal Amount of the Global Notes. (a) In the
event that the Issuer exercises any right of redemption in respect of any Notes
constituting a part of the Global Notes or purchases any Notes constituting a
part of the Global Notes pursuant to an Offer to Purchase under Section 10.13 or
10.17 of the Indenture, the Book-Entry Depositary shall, promptly upon receipt
of the redemption price or purchase price, deliver such Global Notes to the
Trustee (i) and request the Trustee to endorse on such Global Note to reflect
the reduction in the principal amount of such Global Note as a result of such
redemption or purchase or (ii) in exchange for a Global Note with a principal
amount that represents only the portion of such Global Note not so redeemed or
purchased. The redemption price or purchase price in connection with the
redemption of a portion of such Global Note shall be equal to the
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amount received by the Book-Entry Depositary in respect of the aggregate
principal amount at maturity of the Notes so redeemed or repurchased.
(b) Pursuant to Section 3.05 of the Indenture, upon written notice from the
Trustee to the Book-Entry Depositary of an increase or decrease in the aggregate
principal amount of any Global Note, the Book-Entry Depositary shall enter or
cause to be entered in the Book-Entry Register a corresponding increase or
decrease in the aggregate principal amount of the Depositary Interest
corresponding to such Global Note.
SECTION 2.8 Record Date. Whenever any payment is to be made in respect of
the Global Notes or the Book-Entry Depositary shall receive written notice of
any action to be taken by the Depositary, or whenever the Book-Entry Depositary
otherwise deems it appropriate in respect of any other matter, the Book-Entry De
positary shall fix a record date for the determination of the holders of the
Depositary Interests who shall be entitled to receive payment in respect of the
Depositary Interests or to take any such action or to act in respect of any such
matter and such record date shall be unless otherwise impracticable the record
date as would be set under the Indenture if such securities were Registered
Notes. Subject to the provisions of this Agreement, only the Depositary which is
registered on the Book-Entry Register at the close of business on such record
date shall be entitled to receive any such payment, to give instructions as to
such action or to act in respect of any such matter.
The Depositary shall be entitled to rely on such record date as the date of
determination for purposes of further distribution of the payments disbursed,
and so long as DTC or its nominee is the Depositary, such record date applicable
to the Depositary shall comply with the requirements of the Letter of
Representations.
SECTION 2.9 Action in Respect of the Depositary Interests. (a) As soon as
practicable after receipt by the Book-Entry Depositary of written notice from
the Issuer of any solicitation of consents or request for a waiver or other
action by the Depositary under this Agreement or the Indenture, the Book-Entry
Depositary shall mail to the Depositary a notice containing (i) such information
as is contained in such notice, (ii) a statement that the holders of Depositary
Interests at the close of business on a specified record date (established in
accordance with Section 2.8 hereof) will be entitled, subject to the provisions
of or governing the Depositary Interests, to instruct the Book-Entry Depositary
as to the consent, waiver or other action, if any, pertaining to the Global
Notes and (iii) a statement as to the manner in which such instructions may be
given. Upon the written request of the Depositary received on or before the date
established by the Book-Entry Depositary for such purpose, the Book-Entry
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Depositary shall endeavor insofar as practicable and permitted under the
provisions of or governing the Depositary Interests to take such action
regarding the requested consent, waiver or other action in respect of the Global
Notes in accordance with any instructions set forth in such request. The
Book-Entry Depositary shall not itself exercise any discretion in the granting
of consents or waivers or the taking of any other action in respect of the
Global Notes and, as holder of the Global Notes, the Book-Entry Depositary
promptly shall cause such consents or waivers to be granted and such action to
be taken with respect to the Global Notes as the Depositary had given or had
taken.
(b) As soon as practicable after receipt by the Book-Entry Depositary of an
Offer to Purchase with respect to the Global Notes, the Book-Entry Depositary
shall mail to the Depositary a notice containing (i) such information as is
contained in such notice, (ii) a statement that the holders of Depositary
Interests at the close of business on a specified record date (established in
accordance with Section 2.8 hereof) will be entitled, subject to the provisions
of or governing the Depositary Interests, to elect to have all or any portion of
their interest in the Global Notes repurchased in accordance with such Offer to
Purchase and (iii) such documentation provided by the Issuer as is necessary for
the Depositary to elect to have all or any portion of the Depositary Interests
repurchased pursuant to such Offer to Purchase. So long as DTC or its nominee is
acting as Depositary, such notice shall also comply with the Letter of
Representations. Upon receipt of elections relating to such Offer to Purchase
from the Depositary received on or before the date established by the Issuer for
such purpose, the Book-Entry Depositary shall endeavor insofar as practicable
and permitted under the provisions of or governing the Depositary Interests and
the Global Notes to tender the Global Notes or portions thereof requested to be
tendered by the Depositary for repurchase in accordance with such Offer to
Purchase. The Book-Entry Depositary shall not itself exercise any discretion in
the tender of any Global Notes pursuant to an Offer to Purchase.
(c) As soon as practicable after receipt by the Book-Entry Depositary of
any notice of redemption with respect to the Global Notes pursuant to Section
11.01 of the Indenture, the Book-Entry Depositary shall mail to the Depositary a
notice con taining (i) such information as is contained in such notice and (ii)
a statement that Notes called for redemption must be surrendered to the Paying
Agent in order to collect the Redemption Price. So long as DTC or its nominee is
acting as Depositary, such notice shall also comply with the Letter of
Representations.
(d) The Depositary may direct in writing the time, method and place of
conducting any proceeding for any remedy available to the Book-Entry Depositary
with
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respect to the Global Notes or exercising any power conferred on the Book-Entry
Depositary. However, the Book-Entry Depositary may refuse to follow any
direction that conflicts with law, the Indenture or this Agreement, that may
involve the Book-Entry Depositary in personal liability, or that the Book-Entry
Depositary determines in good faith may be unduly prejudicial to the rights of
the holders of Book-Entry Notes not joining in the giving of such direction and
may take any other action it deems proper that is not inconsistent with any
directions received from the Depositary pursuant to this Section 2.9(d).
SECTION 2.10 Changes Affecting the Global Notes. Upon any reclassification
of the Global Notes, or upon any recapitalization, reorganization, merger or
consolidation or sale of assets affecting the Issuer or to which the Issuer is a
party, any securities that shall be received by the Book-Entry Depositary in
exchange for or in respect of a Global Note shall be treated as a new Global
Note under this Agreement and any corresponding Depositary Interests shall
thenceforth represent such new securities so received; provided, however, that
any security issued in exchange for or in respect of a Global Note under such
circumstances shall not be deemed to be a new security if the Issuer delivers to
the Book-Entry Depositary an Opinion of Counsel, to the effect that the
recapitalization, reorganization, merger or consolidation or sale of assets, as
appropriate, did not result in the creation of a security materially different
from that represented by such Global Note.
SECTION 2.11 Surrender of the Global Notes. In the event of the redemption,
payment or purchase in full of all the Notes represented by any of the Global
Notes, then the applicable Global Note shall become void and the Book-Entry
Depositary shall surrender such Global Note to the Trustee for cancellation. In
the event of a partial redemption of the Notes represented by a Global Note, the
Book-Entry Depositary shall comply with the requirements of Section 2.7 hereof.
SECTION 2.12 Reports. The Book-Entry Depositary shall promptly send to the
Depositary any notices, reports and other communications received from the
Issuer that are received by the Book-Entry Depositary as holder of the Global
Notes.
ARTICLE III
THE BOOK-ENTRY DEPOSITARY
SECTION 3.1 Certain Duties and Responsibilities. (a) The Book-Entry
Depositary undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement.
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(b) No provision of this Agreement shall be construed to relieve the
Book-Entry Depositary from liability for its own negligent action, its own
negligent failure to act, or its own bad faith or willful misconduct, except
that:
(1) the duties and obligations of the Book-Entry Depositary with
respect to the Global Notes and the Depositary Interests shall be
determined solely by the express provisions of this Agreement and neither
the Book-Entry Depositary nor its officers, directors, employees and agents
shall be liable except for the performance of such duties and obligations
as are specifically set forth in this Agreement, and no implied covenants
or obligations shall be read into this Agreement against the Book-Entry
Depositary; and
(2) in the absence of bad faith on its part, the Book-Entry Depositary
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any certificates or
opinions furnished to the Book-Entry Depositary and conforming to the
requirements of this Agreement, but in the case of any such certificates or
opinions that by any provision hereof are specifically required to be
furnished to the Book-Entry Depositary, the Book-Entry Depositary shall be
under a duty to examine the same to determine whether or not they conform
to the requirements of this Agreement.
(c) The Book-Entry Depositary shall not be liable for any error of judgment
made in good faith by a Responsible Officer of the Book-Entry Depositary, unless
it shall be proved that the Book-Entry Depositary was grossly negligent in
ascertaining the pertinent facts.
(d) The Book-Entry Depositary shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with the
written direction of the Depositary pursuant to Section 2.9 hereof relating to
the time, method and place of conducting any proceeding for any remedy available
to the Book-Entry Depositary, or exercising any power conferred upon the
Book-Entry Depositary, under this Agreement.
(e) No provision of this Agreement will require the Book-Entry Depositary
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
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
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(f) Whether or not therein expressly so provided, every provision of this
Agreement relating to the conduct or affecting the liability of or affording
protection to the Book-Entry Depositary shall be subject to the provisions of
this Section.
(g) The Book-Entry Depositary owes no fiduciary duties to any person by
virtue of this Agreement except as expressly set forth herein.
SECTION 3.2 Notice of Default. The Book-Entry Depositary shall (x) within
90 days after the occurrence of any Event of Default in respect of the Global
Notes of which a Responsible Officer of the Book-Entry Depositary assigned to
its Global Trust Services department has actual knowledge or (y) promptly after
being notified of an Event of Default by the Trustee, transmit by mail to the
Depositary in the manner provided in Section 4.2, notice of such Event of
Default, unless such Event of Default shall have been cured or waived.
SECTION 3.3 Certain Rights of Book-Entry Depositary. Subject to the
provisions of Section 3.1 hereof:
(a) the Book-Entry Depositary 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, coupon, security, or other paper or document delivered to it in
accordance with the terms of this Agreement and believed by it to be genuine and
to have been signed or presented by the proper party or parties;
(b) any request, direction, order or demand of the Issuer mentioned herein
shall be sufficiently evidenced by an Officers' Certificate, Issuer Order or
Issuer Request, and any resolution of the Board of Directors of the Issuer may
be sufficiently evidenced by a Board Resolution;
(c) the Book-Entry Depositary may consult with counsel and the advice of
such counsel confirmed in writing or any Opinion of Counsel shall be full and
complete authorization and protection with respect to any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon in accordance
with such advice or Opinion of Counsel;
(d) the Book-Entry Depositary shall not be bound to make any in vestigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
appraisal, bond, debenture, note, coupon, security or other paper or document,
but the Book-Entry
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Depositary, may (but shall have no obligation to) make reasonable further
inquiry or investigation into such facts or matters related to the issuance of
the Global Notes and, if the Book-Entry Depositary shall determine to make such
further inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Issuer, at the Issuer's expense, at reasonable times
during normal business hours, personally or by agent or attorney;
(e) the Book-Entry Depositary may execute any of the powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Book-Entry Depositary shall not be responsible for any
misconduct or negligence on the part of any such agent or attorney appointed
with due care;
(f) the Book-Entry Depositary shall be under no obligation to exercise any
of the rights or powers vested in it by this Agreement at the request, order or
direction of the Depositary pursuant to this Agreement, unless the Depositary
shall have offered or caused to be offered to the Book-Entry Depositary security
or in demnity reasonably satisfactory to it against the costs, expenses and
liabilities that might be incurred by it in compliance with such request or
direction, provided that such request, order or direction shall not expose the
Book-Entry Depositary to personal liability;
(g) the Book-Entry Depositary shall not be liable for any action taken or
omitted by it in good faith and reasonably believed by it to be authorized or
within the discretion, rights or powers conferred upon it by this Agreement; and
(h) whenever in the administration of its duties under this Agreement the
Book-Entry Depositary shall deem it necessary or desirable that a matter be
proved or established prior to taking or suffering or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence or bad faith on the
part of the Book-Entry Depositary, be deemed to be conclusively proved and
established by an Officers' Certificate delivered to the Book-Entry Depositary,
and such certificate, in the absence of negligence or bad faith on the part of
the Book-Entry Depositary, shall be full warrant to the Book-Entry Depositary
for any action taken, suffered or omitted by it under the provisions of the
Agreement, upon the faith thereof.
SECTION 3.4 Not Responsible for Recitals or Issuance of Notes. The recitals
contained in the Indenture and in the Notes, except the Trustee's certificates
of authentication, shall be taken as the statements of the Issuer, and the
Book-Entry Depositary assumes no responsibility for their correctness. The
Book-Entry Depositary
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makes no representation as to (i) the validity or sufficiency of the Indenture
or of the Notes, (ii) the sufficiency of this Agreement or (iii) the validity,
with respect to the Issuer, of this Agreement. The Book-Entry Depositary shall
not be accountable for the use or application by the Issuer of the proceeds with
respect to the Notes.
SECTION 3.5 Money Held in Trust. Money held by the Book-Entry Depositary in
trust hereunder need not be segregated from other funds held by the Book-Entry
Depositary, except to the extent required by law. The Book-Entry Depositary
shall be under no obligation to invest or pay interest on any money received by
it hereunder, except as otherwise agreed in writing with the Issuer. Any
interest accrued on funds deposited with the Book-Entry Depositary under this
Agreement shall be paid to the Issuer from time to time and the Depositary shall
have no claim to any such interest.
SECTION 3.6 Compensation and Reimbursement. The Issuer and Holdings,
jointly and severally agree:
(a) to pay to the Book-Entry Depositary from time to time reasonable
compensation agreed in writing for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law with regard to the com
pensation of a trustee of an express trust);
(b) except as otherwise expressly provided herein, to reimburse the
Book-Entry Depositary upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Book-Entry Depositary in
accordance with any provision of this Agreement (including the reasonable
compensation, expenses and disbursements of its agents and counsel), except any
such expense, disbursement or advance as may be attributable to its negligence,
bad faith or willful misconduct; and
(c) to indemnify the Book-Entry Depositary and its directors, officers,
agents and employees for, and to hold it harmless against, any loss, liability
or expense incurred without negligence, bad faith on its part, arising out of or
in connection with the acceptance or administration of this Agreement and its
duties hereunder, including the costs and expenses of defending itself against
or investigating any claim of liability in connection with the exercise or
performance of any of its powers or duties hereunder.
The obligations of the Issuer under this Section to compensate and
indemnify the Book-Entry Depositary and to pay or reimburse the Book-Entry De
positary for reasonable expenses, disbursements and advances shall survive the
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satisfaction and discharge of this Agreement or the earlier of the resignation
or the removal of the Book-Entry Depositary. Such obligations shall be a senior
claim to that of the Notes upon all property and funds held or collected by the
Book-Entry Depositary as such, except funds held in trust for the benefit of the
holders of the Notes.
SECTION 3.7 Book-Entry Depositary Required: Eligibility. At all times when
there is a Book-Entry Depositary hereunder, such Book-Entry Depositary shall be
a corporation organized and doing business under the laws of the United States
of America, any State thereof or the District of Columbia, having, together with
its parent, a combined capital and surplus of at least $50,000,000, subject to
supervision or examination by federal, state or District of Columbia authority,
willing to act on reasonable terms. Such corporation shall have its principal
place of business in the Borough of Manhattan, The City of New York, if there be
such a corporation in such location willing to act upon reasonable and customary
terms and conditions. If such corporation, or its parent, publishes reports of
condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such corporation shall be deemed to
be its combined capital and surplus as set forth in its most recent report of
condition so published. The Book-Entry Depositary shall have executed a letter
of representations to DTC acceptable in form and substance to DTC and the Issuer
with respect to the Depositary Interests. The Book-Entry Depositary hereunder
shall at all times be the Trustee under the Indenture, subject to receipt by the
Issuer of an Opinion of Counsel that the same Person is precluded by law from
acting in such capacities. If at any time the Book-Entry Depositary 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 3.8 Resignation and Removal, Appointment of Successor. (a) No
resignation or removal of the Book-Entry Depositary and no appointment of a
successor Book-Entry Depositary pursuant to this Article shall become effective
until (i) the approval in writing of a successor Book-Entry Depositary by the
Issuer and the acceptance of the appointment by such successor Book-Entry
Depositary in accordance with the applicable requirements of Section 3.9 hereof
or (ii) the issuance of Registered Notes in accordance with Section 2.4 hereof
and the Indenture.
(b) The Book-Entry Depositary may resign all of its rights and duties with
respect to the Global Notes and the Depositary Interests by giving written
notice thereof to the Issuer and the Depositary in accordance with Sections 4.1
and 4.2 hereof. The Book-Entry Depositary may be removed at any time upon 30
days' notice by the
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filing with it of an instrument in writing signed on behalf of the Issuer and
specifying such removal and the date when it is intended to become effective. If
the instrument of acceptance by a successor Book-Entry Depositary or the
approval by the Issuer required by Section 3.9 hereof shall not have been
delivered to the Book-Entry Depositary within 30 days after the giving of such
notice of resignation, the resigning Book-Entry Depositary may petition any
court of competent jurisdiction for the appointment of a successor Book-Entry
Depositary.
(c) If at any time:
(1) the Book-Entry Depositary shall cease to be eligible under Section
3.7 hereof or shall cease to be eligible as Trustee under the Indenture,
and shall fail to resign after written request therefor by the Issuer or
the Depositary, or
(2) the Book-Entry Depositary shall become incapable of acting with
respect to the Global Notes and the Depositary Interests, or shall be
adjudged bankrupt or insolvent, or a receiver or liquidator of the
Book-Entry Depositary or its property shall be appointed or any public
officer shall take charge or control of the Book-Entry Depositary or its
property or affairs for the purpose of rehabilitation, conservation or
liquidation,
then, in any such case, (i) the Issuer, by Board Resolution, may remove the
Book-Entry Depositary and appoint a successor Book-Entry Depositary and (ii) if
the Issuer does not remove the Book-Entry Depositary and appoint a successor
pursuant to clause (i), the Depositary, upon the direction of holders of at
least a majority of the total aggregate principal amount of the Book-Entry Notes
outstanding, may petition any court of competent jurisdiction for the removal of
the Book-Entry Depositary with respect to the Global Notes and the Depositary
Interests and the appointment of a successor Book-Entry Depositary or Book-Entry
Depositaries unless Registered Notes have been issued in accordance with the
Indenture. Such court may thereupon, after such notice, if any, as it may deem
proper and prescribe, remove the Book-Entry Depositary with respect to the
Global Notes and the Depositary Interests and appoint a successor Book-Entry
Depositary for the Global Notes and the Depositary Interests.
(d) If the Book-Entry Depositary shall resign. be removed or become
incapable of acting, or if a vacancy shall occur in the office of Book-Entry
Depositary for any cause, the Issuer, by Board Resolution, shall promptly
appoint a successor Book-Entry Depositary (other than the Issuer) and shall
comply with the applicable requirements of Section 3.9 hereof. If no successor
Book-Entry Depositary with respect to the Notes shall have been so appointed by
the Issuer and accepted appoint-
17
<PAGE>
ment in the manner required by Section 3.9, the Depositary, upon direction of
holders of at least a majority of the total aggregate principal amount of
Book-Entry Notes outstanding, may petition any court of competent jurisdiction
for the appointment of a successor Book-Entry Depositary unless Registered Notes
have been issued in accor dance with the Indenture and Section 2.4 hereof.
(e) The Issuer shall give, or shall cause such successor Book-Entry
Depositary to give, notice of each resignation and each removal of a Book-Entry
Depositary and each appointment of a successor Book-Entry Depositary to the De
positary in accordance with Section 4.2 hereof. Each notice shall include the
name of the successor Book-Entry Depositary and the address of its Corporate
Trust Office.
(f) If a Book-Entry Depositary hereunder shall resign, it shall not be
relieved of any responsibility for its actions or omissions hereunder solely by
virtue of such resignation.
SECTION 3.9 Acceptance of Appointment by Successor. (a) In case of the
appointment hereunder of a successor Book-Entry Depositary, every such successor
Book-Entry Depositary so appointed shall execute, acknowledge and deliver to the
Issuer and to the retiring Book-Entry Depositary an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Book-Entry
Depositary shall become effective and such successor Book-Entry Depositary,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, agencies and duties of the retiring Book-Entry Depositary, with
like effect as if originally named as Book-Entry Depositary hereunder; but, on
the request of the Issuer or the successor Book-Entry Depositary, such retiring
Book-Entry Depositary shall, upon payment of all amounts due and payable to it
pursuant to Section 3.6 hereof, execute and deliver an instrument transferring
to such successor Book-Entry Depositary all the rights and powers of the
retiring Book-Entry Depositary and shall duly assign, transfer and deliver to
such successor Book-Entry Depositary all property and money held by such
retiring Book-Entry Depositary hereunder. Any retiring Book-Entry Depositary
shall, nonetheless, retain a prior claim upon all property or funds held or
collected by such Book-Entry Depositary to secure any amounts then due it
pursuant to Section 3.6 hereof. The Book-Entry Depositary will not be liable for
any acts or omissions of any successor Book-Entry Depositary appointed pursuant
to Section 3.8 hereof.
(b) Upon request of any such successor Book-Entry Depositary, the Issuer
shall execute any and all instruments for more fully and certainly vesting in
and
18
<PAGE>
confirming to such successor Book-Entry Depositary all such rights, powers and
agencies referred to in paragraph (a) of this Section.
(c) No successor Book-Entry Depositary shall accept its appointment unless
at the time of such acceptance such successor Book-Entry Depositary shall be
eligible to serve as such under this Article.
(d) Upon acceptance of appointment by any successor Book-Entry Depositary
as provided in this Section, the Issuer shall give notice thereof to the
Depositary in accordance with Section 4.02 hereof. If the acceptance of
appointment is substantially contemporaneous with the resignation of the
Book-Entry Depositary, then the notice called for by the preceding sentence may
be combined with the notice called for by Section 3.8 hereof. If the Issuer
fails to give such notice within ten days after acceptance of appointment by the
successor Book-Entry Depositary, the successor Book-Entry Depositary shall cause
such notice to be given at the expense of the Issuer.
SECTION 3.10 Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Book-Entry Depositary 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 Book-Entry Depositary shall be
a party, or any corporation succeeding to all or substantially all the agency
business of the Book-Entry Depositary, shall be the successor of the Book-Entry
Depositary hereunder, without the execution or filing of any paper or any
further act on the part of any of the parties hereto; provided that such
corporation shall be otherwise eligible to serve as Book-Entry Depositary under
this Article.
SECTION 3.11 Compliance with Letter of Representations. As long as DTC or
its nominee is the Depositary, the Book-Entry Depositary shall comply with all
of its representations made to DTC in the Letter of Representations, and any
successor Book-Entry Depositary shall comply with all representations made to
DTC in a similar letter of representations in form and substance acceptable to
DTC and the Issuer.
ARTICLE IV
MISCELLANEOUS PROVISIONS
SECTION 4.1 Notices to Book-Entry Depositary or Issuer. Any request,
demand, authorization, direction, notice, consent, or waiver or other document
provided or permitted by this Agreement to be made upon, given or furnished to,
or filed with:
19
<PAGE>
(a) the Book-Entry Depositary by the Depositary, by the Trustee or by the
Issuer shall be sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if made, given, furnished or filed in writing and personally
delivered or mailed, by overnight delivery or certified mail, postage prepaid,
to the Book-Entry Depositary at the following address:
The Chase Manhattan Bank
450 West 33rd Street
New York, NY 10001
Attention: Global Trust Services
Facsimile: 1-212-946-7799
or at any other address furnished in writing by the Book-Entry Depositary to the
Depositary, the Trustee and the Issuer; or
(b) the Issuer by the Book-Entry Depositary or by the Depositary shall be
sufficient for every purpose hereunder (unless otherwise herein expressly
provided) if made, given, furnished or filed in writing and personally delivered
or mailed, by overnight delivery or first-class postage prepaid, to the
following address:
RSL Communications PLC
767 Fifth Avenue
Suite 4300
New York, New York 10153
with a copy to:
George E.B. Maguire
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Facsimile: (212) 909-6836
or at any other addresses furnished in writing to the Book-Entry Depositary by
the Issuer. Any communication sent pursuant to this Section 4.1 shall be deemed
given when delivered, if personally delivered or sent by overnight delivery and
three days after deposit in the U.S. mail, if sent by certified mail.
SECTION 4.2 Notice to the Depositary; Waiver. Where this Agree ment
provides for notice to the Depositary of any event, such notice shall be suf-
20
<PAGE>
ficiently given (unless otherwise herein expressly provided or as provided in
the Letter of Representations) if in writing and mailed, first-class postage
prepaid, to the Depositary at the address that the Depositary has notified in
writing to the Book-Entry Depositary, in each case not later than the latest
date, and not earlier than the earliest date, prescribed for the giving of such
notice. Where this Agreement 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 the Depositary shall be filed with the Book-Entry
Depositary, 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 Book-Entry Depositary
shall constitute a sufficient notification for every purpose hereunder.
SECTION 4.3 Effect of Headings and Table of Contents. The Article and
Section headings herein are for convenience only and shall not affect the con
struction hereof.
SECTION 4.4 Successors and Assigns. All covenants and agreements in this
Agreement and the Notes by the Issuer shall bind its successors and assigns,
whether so expressed or not.
SECTION 4.5 Separability Clause. In case any provision in this Agreement or
in the Notes shall be invalid, illegal or unenforceable, the validity. legality
and enforceability of the remaining provisions hereof and thereof shall not in
any way be affected or impaired thereby.
SECTION 4.6 Benefits of Agreement. Nothing in this Agreement, the Notes, or
the Indenture, express or implied, shall give to any Person, other than the
parties hereto and their successors hereunder, any benefits or any legal or
equitable right, remedy or claim under this Agreement. By the acceptance of the
Depositary Interests representing the Notes, the Depositary shall be party to
this Agreement and shall be bound by all of the terms and conditions hereof and
of the Indenture and the Notes.
SECTION 4.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, BUT WITHOUT
GIVING EFFECT TO AP-
21
<PAGE>
PLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 4.8 Jurisdiction. The Issuer agrees that any legal suit, action or
proceeding against the Issuer brought by the Depositary or the Book-Entry De
positary arising out of or based upon this Agreement may be instituted in any
state or federal court in the Borough of Manhattan, The City of New York, and
waives any objection which it may now or hereafter have to the laying of venue
of any such proceeding and irrevocably submits to the non-exclusive jurisdiction
of such courts in any suit, action or proceeding. The Issuer has appointed RSL
Communications N. America, Inc., 767 Fifth Avenue, Suite 4300, New York, New
York 10153, as its authorized agent (together with any successor, the
"Authorized Agent") upon whom process may be served in any legal suit, action or
proceeding arising out of or based upon this Agreement which may be instituted
in any state or federal court in the Borough of Manhattan, The City of New York,
by the Depositary or the Book-Entry Depositary and expressly accepts the
nonexclusive jurisdiction of any such court in respect of any such action. The
Issuer represents and warrants that the Authorized Agent has agreed to act as
said agent for service of process, and the Issuer agrees to take any and all
action, including the filing of any and all documents and instruments, that may
be necessary to continue such appointment in full force and effect as afore
said. Service of process upon the Authorized Agent shall be deemed, in every
respect, effective service of process upon the Issuer. Notwithstanding the
foregoing, any action based on this Agreement may be instituted by the
Book-Entry Depositary in any competent court in England.
SECTION 4.9 Counterparts. This Agreement may be executed in any number of
counterparts by the parties hereto on separate counterparts, each of which, when
so executed and delivered, shall be deemed an original, but all of which shall
together constitute one and the same instrument.
SECTION 4.10 Inspection of Agreement. A copy of this Agreement shall be
available at all reasonable times during normal business hours at the Corporate
Trust Office of the Book-Entry Depositary for inspection by the Depositary.
SECTION 4.11 Satisfaction and Discharge. Upon Issuer Request to terminate
this Agreement, this Agreement shall cease to be of further effect and the
Book-Entry Depositary shall execute proper instruments acknowledging
satisfaction and discharge of this Agreement, when (i) the Indenture has been
satisfied and discharged pursuant to the provisions thereof or Registered Notes
have been issued and all Global
22
<PAGE>
Notes have been canceled in accordance with the provisions of the Indenture and
Sections 3.05 and 3.09 thereof, (ii) the Issuer has paid or caused to be paid
all sums payable hereunder by the Issuer and (iii) the Issuer has delivered to
the Book-Entry Depositary an Officers' Certificate, stating that all conditions
precedent provided herein relating to the satisfaction and discharge of this
Agreement have been complied with.
SECTION 4.12 Amendments. The Issuer and the Book-Entry Depositary may
amend this Agreement without the consent of the Depositary:
(a) to cure any ambiguity, defect or inconsistency, provided that such
amendment or supplement does not adversely affect the rights of the Depositary
or any holder of Book-Entry Notes;
(b) to evidence the succession of another person to the Issuer (when a
similar amendment with respect to the Indenture is being executed) and the
assumption by any such successor of the covenants of the Issuer herein;
(c) to evidence or provide for a successor Book-Entry Depositary,
(d) to make any amendment, change or supplement that does not adversely
affect the Depositary or holders of Book-Entry Notes;
(e) to add to the covenants of the Issuer or the Book-Entry Depositary; or
(f) to comply with the United States federal and United Kingdom. securities
laws.
No amendment may be made to this Agreement that adversely affects the
Depositary without the consent of the Depositary and no amendment may be made to
this Agreement that adversely affects the holders of Book-Entry Notes without
the consent of a majority of the aggregate principal amount of Book-Entry Notes
out standing.
SECTION 4.13 Book-Entry Depositary To Sign Amendments. The Book-Entry
Depositary shall sign any amendment authorized pursuant to Section 4.12 hereof
if the amendment does not adversely affect the rights, duties, liabilities or
immunities of the Book-Entry Depositary. If it does, the Book-Entry Depositary
may but need not sign it. In signing such amendment the Book-Entry Depositary
shall be entitled to receive indemnity satisfactory to it and to receive, and
shall be fully
23
<PAGE>
protected in reasonably relying upon. an Officers' Certificate (which need only
cover the matters set forth in clause (a) below) and an Opinion of Counsel to
the effect that:
(a) such amendment is authorized or permitted by this Agreement;
(b) the Issuer has all necessary corporate power and authority to execute
and deliver the amendment and that the execution, delivery and performance of
such amendment has been duly authorized by all necessary corporate action;
(c) the execution, delivery and performance of the amendment do not
conflict with, or result in the breach of or constitute a default under any of
the terms, conditions or provisions of (i) this Agreement, (ii) the Memorandum
and Articles of Association of the Issuer, (iii) any law or regulation
applicable to the Issuer, (iv) any material order, writ, injunction or decree of
any court or governmental instrumentality applicable to the Issuer or (v) any
material agreement or instrument to which the Issuer is subject; and
(d) such amendment has been duly and validly executed and delivered by the
Issuer, and this Agreement together with such amendment constitutes a legal,
valid and binding obligation of the Issuer enforceable against the Issuer in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally and general equitable principles.
[signature page follows]
24
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
RSL COMMUNICATIONS PLC
By: /s/ Mark J. Hirschhorn
--------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK
as Book-Entry Depositary
By: /s/ ROBERT S. PESCHLER
--------------------------------
Name: Robert S. Peschler
Title: Trust Officer
With respect to the provisions of Section 3.6 only
RSL COMMUNICATIONS, Ltd.
By: /s/ Mark J. Hirschhorn
-------------------------------
Name:
Title:
25
EXECUTION COPY
================================================================================
RSL COMMUNICATIONS PLC
As Issuer
RSL COMMUNICATIONS, LTD.
As Guarantor
TO
THE CHASE MANHATTAN BANK
As Trustee
----------
Indenture
Dated as of February 27, 1998
----------
10 1/8% SENIOR DISCOUNT NOTES DUE 2008
================================================================================
<PAGE>
Certain Sections of this Indenture relating to
Sections 3.10 through 3.18 of the
Trust Indenture Act of 1939:
Trust Indenture Indenture
Act Section Section
- --------------- ---------
ss.3.10(a)(1) ................................................... 609
(a)(2) ................................................ 609
(a)(3) ................................................ Not
Applicable
(a)(4) ................................................ Not
Applicable
(b) ................................................... 6.08
6.10
ss. 3.11(a) ..................................................... 6.13
(b) ..................................................... 6.13
ss. 3.12(a) ..................................................... 7.01
7.02(a)
(b) .................................................... 7.02(b)
(c) .................................................... 7.02(c)
ss. 3.13(a) ..................................................... 7.03(a)
(a)(4) ................................................. 7.03(a)
(b) .................................................... 7.03(a)
(c) .................................................... 7.03(a)
(d) .................................................... 7.03(b)
ss. 3.14(a) ..................................................... 7.04
10.18
(b) .................................................... Not
Applicable
(c)(1) ................................................. 1.02
(c)(2) ................................................. 1.02
(c)(3) ................................................. Not
Applicable
(d) .................................................... Not
Applicable
(e) .................................................... 1.02
ss. 3.15(a) ..................................................... 6.01
(b) .................................................... 6.02
(c) .................................................... 6.01
(d) .................................................... 6.01
(e) .................................................... 5.14
- ----------
Note: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of the Indenture.
-i-
<PAGE>
Trust Indenture Indenture
Act Section Section
- --------------- ---------
ss. 3.16(a)(1)(A) ........................................ 5.02
........................................ 5.12
(a)(1)(B) ......................................... 5.13
(a)(2) ............................................ Not
Applicable
(b) ............................................... 5.08
(c) ............................................... 1.04
ss. 3.17(a)(1) ............................................. 5.03
(a)(2) ............................................ 5.04
(b) ............................................... 10.03
ss. 3.18(a) ................................................ 1.07
- ----------
Note: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of the Indenture.
-ii-
<PAGE>
TABLE OF CONTENTS
Page
----
Parties...................................................................... 1
Recitals of the Issuer ...................................................... 1
ARTICLE I
Definitions and Other Provisions
of General Application
SECTION 1.01. Definitions .................................................. 2
Act................................................................. 2
Accreted Value...................................................... 2
Acquired Debt....................................................... 3
Additional Amounts.................................................. 4
Affiliate........................................................... 4
Agent Member........................................................ 4
Applicable Procedures............................................... 4
Asset Disposition................................................... 4
Average Life........................................................ 5
beneficial interest................................................. 5
Board of Directors.................................................. 5
Board Resolution.................................................... 5
Book-Entry Depositary............................................... 5
Business Day........................................................ 5
Capital Lease Obligation............................................ 5
Capital Stock....................................................... 6
Cedel............................................................... 6
Change of Control................................................... 6
Commission.......................................................... 6
Common Stock........................................................ 6
Consolidated Cash Flow Available for Fixed Charges.................. 6
Consolidated Income Tax Expense..................................... 7
Consolidated Interest Expense....................................... 7
Consolidated Net Income............................................. 7
Consolidated Net Worth.............................................. 8
Consolidated Tangible Assets........................................ 8
Corporate Trust Office.............................................. 8
corporation......................................................... 8
Credit Facility..................................................... 8
- ----------
Note: This table of contents shall not, for any purpose, be deemed to be
part of the Indenture.
-iii-
<PAGE>
Page
----
Debt................................................................ 9
Defaulted Interest.................................................. 10
Definitive Security................................................. 10
Deposit Agreement................................................... 10
Depositary.......................................................... 10
Depositary Interest................................................. 10
Disqualified Stock.................................................. 10
Eligible Institution................................................ 11
Equity Clawback..................................................... 11
Euroclear........................................................... 11
Event of Default.................................................... 11
Exchange Act........................................................ 11
Exchange and Registration Rights Agreement.......................... 11
Exchange Offer...................................................... 11
Exchange Offer Registration Statement............................... 11
Exchange Security................................................... 11
Existing Stockholders............................................... 12
Expiration Date..................................................... 12
Global Security..................................................... 12
Government Securities............................................... 12
Guarantee........................................................... 12
Guarantor........................................................... 12
Holder.............................................................. 13
Incremental Paid-in Capital......................................... 13
Incur............................................................... 13
Indenture........................................................... 13
Indirect Participant................................................ 13
Initial Purchasers.................................................. 13
Interest Payment Date............................................... 14
Interest Rate or Currency Protection Agreement...................... 14
Investment.......................................................... 14
Issuer.............................................................. 15
Issuer Request or Issuer Order...................................... 15
Lien................................................................ 15
Listing Failure..................................................... 15
Marketable Securities............................................... 15
Maturity............................................................ 16
Net Available Proceeds.............................................. 16
Non-Discount Securities............................................. 17
Non-Discount Securities Indenture................................... 17
Offer to Purchase................................................... 17
- ----------
Note: This table of contents shall not, for any purpose, be deemed to be
part of the Indenture.
-iv-
<PAGE>
Page
----
Officers' Certificate............................................... 19
Opinion of Counsel.................................................. 20
Original Securities................................................. 20
Outstanding......................................................... 20
Participant......................................................... 21
Paying Agent........................................................ 21
Permitted Interest Rate or Currency Protection
Agreement........................................................... 21
Permitted Investment................................................ 21
Permitted Liens..................................................... 22
Person.............................................................. 22
Predecessor Security................................................ 23
Purchase Agreement.................................................. 23
Purchase Money Debt................................................. 23
readily marketable cash equivalents................................. 23
Receivables......................................................... 24
Receivables Sale.................................................... 24
Redemption Date..................................................... 24
Redemption Price.................................................... 24
Registered Securities............................................... 24
Regular Record Date................................................. 24
Regulation S........................................................ 24
Regulation S Certificate............................................ 24
Regulation S Global Security........................................ 24
Regulation S Legend................................................. 24
Regulation S Securities............................................. 24
Related Person...................................................... 25
Resale Registration Statement....................................... 25
Responsible Officer................................................. 25
Restricted Global Security.......................................... 25
Restricted Period................................................... 25
Restricted Securities............................................... 25
Restricted Securities Certificate................................... 26
Restricted Securities Legend........................................ 26
Restricted Subsidiary............................................... 26
RSLNA............................................................... 26
Rule 144A........................................................... 26
Rule 144A Securities................................................ 26
Securities.......................................................... 26
Securities Act...................................................... 26
Securities Act Legend............................................... 26
- ----------
Note: This table of contents shall not, for any purpose, be deemed to be
part of the Indenture.
-v-
<PAGE>
Page
----
Securities Guarantee................................................ 26
Security Register and Security Registrar............................ 26
Significant Subsidiary.............................................. 26
Special Interest.................................................... 27
Special Record Date................................................. 27
Stated Maturity..................................................... 27
Step-Down Date...................................................... 27
Step-Up............................................................. 27
Strategic Investor.................................................. 27
Subordinated Debt................................................... 27
Subsidiary.......................................................... 28
Subsidiary Guarantor................................................ 29
Substitute Securities............................................... 29
Successor Security.................................................. 29
Tax................................................................. 29
Taxing Authority.................................................... 29
Telecommunications Assets........................................... 29
Telecommunications Business......................................... 29
Trustee............................................................. 30
Trust Indenture Act................................................. 30
Unrestricted Securities Certificate................................. 30
Unrestricted Subsidiary............................................. 30
Vice President...................................................... 31
Voting Stock........................................................ 31
Wholly Owned Subsidiary............................................. 31
SECTION 1.02. Compliance Certificates and Opinions.......................... 31
SECTION 1.03. Form of Documents Delivered to Trustee........................ 32
SECTION 1.04. Acts of Holders; Record Dates................................. 32
SECTION 1.05. Notices, Etc., to Trustee, Issuer and
Guarantor..................................................... 35
SECTION 1.06. Notice to Holders; Waiver..................................... 36
SECTION 1.07. Application of Trust Indenture Act............................ 36
SECTION 1.08. Effect of Headings and Table of Contents...................... 37
SECTION 1.09. Successors and Assigns........................................ 37
SECTION 1.10. Separability Clause........................................... 37
SECTION 1.11. Benefits of Indenture......................................... 37
SECTION 1.12. Governing Law................................................. 37
SECTION 1.13. Legal Holidays................................................ 37
SECTION 1.14. Agent for Service; Submission to
Jurisdiction; Waiver of Immunities............................ 37
- ----------
Note: This table of contents shall not, for any purpose, be deemed to be
part of the Indenture.
-vi-
<PAGE>
Page
----
ARTICLE II
Security Forms
SECTION 2.01. Forms Generally............................................... 38
SECTION 2.02. Form of Face of Security...................................... 40
SECTION 2.03. Form of Reverse of Security................................... 46
SECTION 2.04. Form of Trustee's Certificate of
Authentication................................................ 51
ARTICLE III
The Securities
SECTION 3.01. Title and Terms............................................... 51
SECTION 3.02. Denominations................................................. 53
SECTION 3.03. Execution, Authentication, Delivery and
Dating........................................................ 53
SECTION 3.04. Temporary Securities.......................................... 54
SECTION 3.05. Registration, Registration of Transfer and
Exchange...................................................... 55
SECTION 3.06. Mutilated, Destroyed, Lost and Stolen
Securities.................................................... 62
SECTION 3.07. Payment of Interest; Interest
Rights Preserved.............................................. 63
SECTION 3.08. Persons Deemed Owners......................................... 64
SECTION 3.09. Cancelation .................................................. 65
SECTION 3.10. Computation of Interest....................................... 65
SECTION 3.11. CUSIP and ISIN Numbers........................................ 65
ARTICLE IV
Guarantee Of Securities
SECTION 4.01. Guarantee .................................................. 65
SECTION 4.02. Obligations Unconditional..................................... 67
SECTION 4.03. Notice to Trustee............................................. 68
- ----------
Note: This table of contents shall not, for any purpose, be deemed to be
part of the Indenture.
-vii-
<PAGE>
Page
----
ARTICLE V
Remedies
SECTION 5.01. Events of Default............................................. 68
SECTION 5.02. Acceleration of Maturity; Rescission and
Annulment..................................................... 70
SECTION 5.03. Collection of Indebtedness and Suits for
Enforcement by Trustee........................................ 72
SECTION 5.04. Trustee May File Proofs of Claim.............................. 73
SECTION 5.05. Trustee May Enforce Claims Without
Possession of Securities...................................... 73
SECTION 5.06. Application of Money Collected................................ 74
SECTION 5.07. Limitation on Suits........................................... 74
SECTION 5.08. Unconditional Right of Holders To Receive
Principal, Premium and Interest............................... 75
SECTION 5.09. Restoration of Rights and Remedies............................ 75
SECTION 5.10. Rights and Remedies Cumulative................................ 75
SECTION 5.11. Delay or Omission Not Waiver.................................. 76
SECTION 5.12. Control by Holders............................................ 76
SECTION 5.13. Waiver of Past Defaults....................................... 76
SECTION 5.14. Undertaking for Costs......................................... 77
SECTION 5.15. Waiver of Stay or Extension Laws.............................. 77
ARTICLE VI
The Trustee
SECTION 6.01. Certain Duties and Responsibilities........................... 78
SECTION 6.02. Notice of Defaults............................................ 79
SECTION 6.03. Certain Rights of Trustee..................................... 79
SECTION 6.04. Not Responsible for Recitals
or Issuance of Securities..................................... 81
SECTION 6.05. May Hold Securities........................................... 81
SECTION 6.06. Money Held in Trust........................................... 81
SECTION 6.07. Compensation and Reimbursement................................ 81
SECTION 6.08. Disqualification; Conflicting Interests....................... 82
SECTION 6.09. Corporate Trustee Required; Eligibility....................... 83
- ----------
Note: This table of contents shall not, for any purpose, be deemed to be
part of the Indenture.
-viii-
<PAGE>
Page
----
SECTION 6.10. Resignation and Removal; Appointment of
Successor..................................................... 83
SECTION 6.11. Acceptance of Appointment by Successor........................ 85
SECTION 6.12. Merger, Conversion, Consolidation or
Succession to Business........................................ 85
SECTION 6.13. Preferential Collection of Claims Against
Issuer or Guarantor........................................... 85
SECTION 6.14. Appointment of Authenticating Agent........................... 86
SECTION 6.15. Withholding Taxes............................................. 88
ARTICLE VII
Holders' Lists and Reports by Trustee and Issuer
SECTION 7.01. Issuer to Furnish Trustee Names and
Addresses of Holder........................................... 88
SECTION 7.02. Preservation of Information;
Communications to Holders..................................... 89
SECTION 7.03. Reports by Trustee............................................ 89
SECTION 7.04. Reports by Issuer and Guarantor............................... 90
SECTION 7.05. Officers' Certificate with Respect to
Change in Interest Rates...................................... 90
ARTICLE VIII
Merger, Consolidation, Etc.
SECTION 8.01. Mergers, Consolidations and Certain
Sales of Assets............................................... 90
SECTION 8.02. Successor Substituted......................................... 92
ARTICLE IX
Supplemental Indentures
SECTION 9.01. Supplemental Indentures Without Consent
of Holders.................................................... 92
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Note: This table of contents shall not, for any purpose, be deemed to be
part of the Indenture.
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SECTION 9.02. Supplemental Indentures with Consent of
Holders....................................................... 93
SECTION 9.03. Execution of Supplemental Indentures.......................... 94
SECTION 9.04. Effect of Supplemental Indentures............................. 94
SECTION 9.05. Conformity with Trust Indenture Act........................... 94
SECTION 9.06. Reference in Securities to Supplemental
Indentures.................................................... 95
ARTICLE X
Covenants
SECTION 10.01. Payment of Principal, Premium and
Interest..................................................... 95
SECTION 10.02. Maintenance of Office or Agency.............................. 95
SECTION 10.03. Money for Security Payments To Be Held
in Trust..................................................... 96
SECTION 10.04. Existence .................................................. 97
SECTION 10.05. Maintenance of Properties.................................... 98
SECTION 10.06. Payment of Taxes and Other Claims............................ 98
SECTION 10.07. Maintenance of Insurance..................................... 98
SECTION 10.08. Limitation on Consolidated Debt.............................. 99
SECTION 10.09. Additional Amounts...........................................102
SECTION 10.10. Limitation on Restricted Payments............................104
SECTION 10.11. Limitation on Dividend and Other
Payment Restrictions Affecting
Restricted Subsidiaries......................................107
SECTION 10.12. Limitation on Transactions with
Affiliates and Related Persons...............................108
SECTION 10.13. Limitation on Asset Dispositions.............................109
SECTION 10.14. Limitation on Issuances and Sales of
Capital Stock of Restricted
Subsidiaries.................................................111
SECTION 10.15. Limitation on Liens..........................................111
SECTION 10.16. Limitation on Issuance of Guarantees
of Debt by Restricted Subsidiaries...........................112
SECTION 10.17. Change of Control............................................113
SECTION 10.18. Provision of Financial Information...........................115
SECTION 10.19. Statement by Officers as to Default..........................115
SECTION 10.20. Waiver of Certain Covenants..................................116
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Note: This table of contents shall not, for any purpose, be deemed to be
part of the Indenture.
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SECTION 10.21. Paying Agent.................................................116
SECTION 10.22. Internal Revenue Service Filing..............................116
ARTICLE XI
Redemption of Securities
SECTION 11.01. Right of Redemption..........................................116
SECTION 11.02. Applicability of Article.....................................118
SECTION 11.03. Election To Redeem; Notice to Trustee........................118
SECTION 11.04. Securities To Be Redeemed Pro Rata...........................118
SECTION 11.05. Notice of Redemption.........................................119
SECTION 11.06. Deposit of Redemption Price..................................120
SECTION 11.07. Securities Payable on Redemption Date........................120
SECTION 11.08. Securities Redeemed in Part..................................121
ARTICLE XII
Discharge of Indenture
SECTION 12.01. Termination of Issuer's Obligations..........................121
SECTION 12.02. Defeasance and Discharge of Indenture........................122
SECTION 12.03. Defeasance of Certain Obligations............................125
SECTION 12.04. Application of Trust Money...................................128
SECTION 12.05. Repayment to Issuer..........................................128
SECTION 12.06. Reinstatement................................................128
SECTION 12.07. Insiders ..................................................129
TESTIMONIUM..................................................................130
SIGNATURES AND SEALS.........................................................130
ACKNOWLEDGMENTS...............................................................
ANNEX A -- Form of Regulation S Certificate
ANNEX B -- Form of Restricted Securities Certificate
ANNEX C -- Form of Unrestricted Securities Certificate
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Note: This table of contents shall not, for any purpose, be deemed to be
part of the Indenture.
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INDENTURE, dated as of February 27, 1998, between RSL COMMUNICATIONS PLC, a
United Kingdom corporation, as issuer (the "Issuer"), having its principal
office at Victoria House, London Square, Guilford, Surrey, England GU1 1UJ, RSL
COMMUNICATIONS, LTD., a Bermuda corporation, as guarantor (the "Guarantor"),
having its principal office at Clarendon House, Church Street, Hamilton HM CX,
Bermuda, and THE CHASE MANHATTAN BANK, a corporation duly organized and existing
under the laws of the State of New York, as Trustee (herein called the
"Trustee").
RECITALS OF THE ISSUER
The Issuer has duly authorized the creation of $328,084,000 aggregate
pricipal amount at maturity of the Issuer's 101/8% Senior Discount 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
and/or Exchange Securities, each as defined herein. The Original Securities and
the Exchange Securities shall rank pari passu with one another and shall
together constitute a single class of securities.
All things necessary (i) 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, (ii) to make the Securities Guarantee, when
executed and delivered by the Guarantor hereunder, the valid obligation of the
Guarantor, and (iii) to make this Indenture a valid agreement of the Issuer and
the Guarantor, in accordance with 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
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proportionate benefit of all Holders of the Securities, as follows:
ARTICLE I
Definitions and Other Provisions
of General Application
SECTION 1.01. Definitions. For all purposes of this Indenture, except as
otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(b) 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;
(c) 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 accepted
accounting principles" with respect to any computation required or
permitted hereunder shall mean such accounting principles as are generally
accepted as consistently applied by the Issuer or the Guarantor, as
applicable, at the date hereof; and
(d) 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.
Certain terms, used principally in Article Six, are defined in that
Article.
"Act", when used with respect to any Holder, has the meaning specified in
Section 1.04.
"Accreted Value" is defined to mean, for any "Specified Date", the amount
calculated pursuant to clauses (i), (ii), (iii) or (iv) below for each $1,000
principal amount at maturity of Securities:
(i) if the Specified Date occurs on one or more of the following dates
(each a "Semiannual Accrual Date"), the
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Accreted Value will equal the amount set forth below for such Semiannual
Accrual Date:
Semiannual Accreted
Accrual Date Value
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September 1, 1998 $ 641.16
March 1, 1999 $ 673.62
September 1, 1999 $ 707.72
March 1, 2000 $ 743.55
September 1, 2000 $ 781.19
March 1, 2001 $ 820.74
September 1, 2001 $ 862.29
March 1, 2002 $ 905.95
September 1, 2002 $ 951.81
March 1, 2003 $1,000.00
(ii) if the Specified Date occurs before the first Semiannual accrual
Date, the Accreted Value will equal the sum of (a) $609.60; and (b) an
amount equal to the product of (x) the Accreted Value for the first
Semiannual Accrual date less $609.60 multiplied by (y) a fraction, the
numerator of which is the number of days from the issue date of the
Securities to the Specified Date, using a 360-day year of twelve 30-day
months, and the denominator of which is the number of days elapsed from the
issue date of the Securities to the first Semiannual Accrual Date, using a
360-day year of twelve 30-day months;
(iii) if the Specified Date occurs between two Semiannual Accrual
Dates, the Accreted Value will equal the sum of (a) the Accreted Value for
the Semiannual Accrual Date immediately preceding such Specified Date and
(b) an amount equal to the product of (x) the Accreted Value for the
immediately following Semiannual Accrual Date less the Accreted Value for
the immediately preceding Semiannual Accrual Date multiplied by (y) a
fraction, the numerator of which is the number of days from the immediately
preceding Semiannual Accrual Date to the Specified Date, using a 360-day
year of twelve 30-day months, and the denominator of which is 180; or
(iv) if the Specified Date occurs after the last Semiannual Accrual
Date, the Accreted Value will equal $1,000.
"Acquired Debt" means, with respect to any specified Person, (i) Debt of
any other Person existing at the time such Person merges with or into or
consolidates with or becomes a Subsidiary of such specified Person and
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(ii) Debt secured by a Lien encumbering any asset acquired by such specified
Person, which Debt was not Incurred in anticipation of, and was outstanding
prior to, such merger, consolidation or acquisition.
"Additional Amounts" has the meaning specified in Section 10.09.
"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.
"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 from time to
time.
"Asset Disposition" by any Person means any transfer, conveyance, sale,
lease or other disposition by such Person or any of its Subsidiaries (including
a consolidation or merger or other sale of any such Subsidiary with, into or to
another Person in a transaction in which such Subsidiary ceases to be a
Subsidiary of the specified Person, but excluding a disposition by a Subsidiary
of such Person to such Person or a Wholly Owned Subsidiary of such Person or by
such Person to a Wholly Owned Subsidiary of such Person or by a Restricted
Subsidiary to the Guarantor or a Restricted Subsidiary or by the Guarantor to a
Restricted Subsidiary) of (i) shares of Capital Stock or other ownership
interests of a Subsidiary of such Person; (ii) substantially all of the assets
of such Person or any of its Subsidiaries representing a division or line of
business (other than as part of a Permitted Investment); or (iii) other assets
or rights of such Person or any of its Subsidiaries outside of the ordinary
course of business, provided in the case of each of the preceding clauses (i),
(ii) and (iii) that the aggregate consideration for such
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transfer, conveyance, sale, lease or other disposition is equal to $2.0 million
or more in any 12-month period.
"Average Life" means, at any date of determination with respect to any
Debt, the quotient obtained by dividing (i) the sum of the products of (a) the
number of years from such date of determination to the dates of each successive
scheduled principal payment of such Debt and (b) the amount of such principal
payment by (ii) the sum of all such principal payments.
"beneficial interest" means an indirect beneficial interest in a Global
Security held through a corresponding Depositary Interest and shown on, and
transferred only through, records maintained in book-entry form by the
Depositary (with respect to the Participants) and its Participants.
"Board of Directors" means either the board of directors of the Guarantor
or the Issuer, as applicable, or any duly authorized committee of that board
duly authorized to act with respect to this Indenture from time to time.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Guarantor or the Issuer, as applicable, 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.
"Book-Entry Depositary" means The Chase Manhattan Bank in its capacity as
book-entry depositary pursuant to the terms of the Deposit Agreement, until a
successor Book-Entry Depositary shall have become such pursuant to the terms of
the Deposit Agreement, and thereafter "Book-Entry Depositary" shall mean such
successor Book-Entry Depositary.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in the Borough of Manhattan,
the City of New York, New York 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 generally accepted accounting
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principles (a "Capital Lease"). The stated maturity of such obligation shall be
the date of the last payment of rent or any other amount due under such lease
prior to the first date upon which such lease may be terminated by the lessee
without payment of a penalty. 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 generally accepted accounting principles.
"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.
"Cedel" means Cedel Bank, S.A. (or any successor securities clearing
agency).
"Change of Control" has the meaning specified in Section 10.17.
"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 or not 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 Cash Flow Available for Fixed Charges" for any period means
the Consolidated Net Income of the Guarantor and its Restricted Subsidiaries for
such period increased by the sum of (i) Consolidated Interest Expense of the
Guarantor and its Restricted Subsidiaries for such period, plus (ii)
Consolidated Income Tax Expense of the Guarantor and its Restricted Subsidiaries
for such period, plus (iii) the consolidated depreciation and amortization
expense included in the income statement of the Guarantor and its Restricted
Subsidiaries for such period, plus (iv) any noncash expense related to the
issuance to employees of the Guarantor or any Restricted Subsidiary of the
Guarantor of options to purchase Capital Stock of the Guarantor or such
Restricted Subsidiary, plus (v) any charge
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related to any premium or penalty paid in connection with redeeming or retiring
any Debt prior to its stated maturity; provided, however, that there shall be
excluded therefrom the Consolidated Cash Flow Available for Fixed Charges (if
positive) of any Restricted Subsidiary of the Guarantor (calculated separately
for such Restricted Subsidiary in the same manner as provided above for the
Guarantor) that is subject to a restriction which prevents the payment of
dividends or the making of distributions to the Guarantor or another Restricted
Subsidiary of the Guarantor to the extent of such restriction.
"Consolidated Income Tax Expense" for any period means the aggregate
amounts of the provisions for income taxes of the Guarantor and its Restricted
Subsidiaries for such period calculated on a consolidated basis in accordance
with generally accepted accounting principles.
"Consolidated Interest Expense" means for any period the interest expense
included in a consolidated income statement (excluding interest income) of the
Guarantor and its Restricted Subsidiaries for such period in accordance with
generally accepted accounting principles, 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 with
respect to interest rate swap or similar agreements or foreign currency hedge,
exchange or similar agreements; (iv) Preferred Stock dividends of the Guarantor
and its Restricted Subsidiaries (other than dividends paid in shares of
Preferred Stock that is not Disqualified Stock) declared and paid or payable;
(v) accrued Disqualified Stock dividends of the Guarantor and its Restricted
Subsidiaries, whether or not declared or paid; (vi) interest on Debt guaranteed
by the Guarantor and its Restricted Subsidiaries (but only to the extent such
interest is actually paid by the Guarantor or a Restricted Subsidiary); and
(vii) the portion of any Capital Lease Obligation paid during such period that
is allocable to interest expense; excluding, however, any premiums, fees and
expenses (and any amortization thereof) payable in connection with the offerings
of the Securities; all of the foregoing as determined on a consolidated basis
(without taking into account Unrestricted Subsidiaries) in conformity with
generally accepted accounting principles.
"Consolidated Net Income" for any period means the net income (or loss) of
the Guarantor and its Restricted Subsidiaries for such period determined on a
consolidated
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basis in accordance with generally accepted accounting principles; provided that
there shall be excluded therefrom (a) the net income (or loss) of any Person
acquired by the Guarantor or a Restricted Subsidiary of the Guarantor 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 Guarantor except to the extent of the amount of dividends or
other distributions actually paid to the Guarantor or a Restricted Subsidiary of
the Guarantor by such Person during such period, (c) gains or losses on Asset
Dispositions by the Guarantor or its Restricted Subsidiaries, (d) all
extraordinary gains and extraordinary losses, determined in accordance with
generally accepted accounting principles, (e) the cumulative effect of changes
in accounting principles, (f) noncash gains or losses resulting from
fluctuations in currency exchange rates and (g) the tax effect of any of the
items described in clauses (a) through (f) above.
"Consolidated Net Worth" of any Person means the stockholders' equity of
such Person, determined on a consolidated basis in accordance with generally
accepted accounting principles, less amounts attributable to Disqualified Stock
of such Person.
"Consolidated Tangible Assets" of any Person means the total amount of
assets (less applicable reserves and other properly deductible items) which
under generally accepted accounting principles would be included on a
consolidated balance sheet of such Person and its Subsidiaries after deducting
therefrom all goodwill, trade names, trademarks, patents, unamortized debt
discount and expense and other like intangibles, which in each case under
generally accepted accounting principles would be included on such consolidated
balance sheet.
"Corporate Trust Office" means the principal office of the Trustee in the
Borough of Manhattan, The City of New York, New York, at which at any particular
time its corporate trust business shall be administered, which at the date
hereof is located at 450 West 33rd Street, New York, NY 10001-2697.
"corporation" means a corporation, association, company, limited liability
company, joint-stock company or business trust.
"Credit Facility" means credit agreements, vendor financings or other
facilities or arrangements made
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available from time to time to the Guarantor and its Restricted Subsidiaries by
banks, other financial institutions and/or equipment manufacturers for the
Incurrence of Debt, including the private or public issuance of debt securities
or the provision of letters of credit and any related notes, Guarantees,
collateral documents, instruments and agreements executed in connection
therewith, as the same may be amended, supplemented, modified or restated from
time to time.
"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, the amount of (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, (iv) every obligation of such Person issued or assumed as the deferred
purchase price of property or services (including securities repurchase
agreements but excluding trade accounts payable or accrued liabilities arising
in the ordinary course of business which are not overdue or which are being
contested in good faith), (v) every Capital Lease Obligation of such Person,
(vi) all Receivables Sales of such Person, together with any obligation of such
Person to pay any discount, interest, fees, indemnities, penalties, recourse,
expenses or other amounts in connection therewith, (vii) all obligations to
redeem Disqualified Stock issued by such Person, (viii) every obligation under
Interest Rate and Currency Protection Agreements of such Person and (ix) every
obligation of the type referred to in clauses (i) through (viii) of another
Person and all dividends of another Person the payment of which, in either case,
such Person has Guaranteed to the extent the same is Guaranteed by such Person.
The "amount" or "principal amount" of Debt at any time of determination as used
herein represented by (a) 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 generally accepted accounting
principles, (b) any Receivables Sale shall be the amount of the unrecovered
capital or principal investment of the purchaser (other than the Guarantor or a
Wholly Owned Restricted Subsidiary of the Guarantor) thereof to the extent such
Person is liable therefor, excluding amounts representative of yield or interest
earned on such investment or (c) any Disqualified
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Stock shall be the maximum fixed redemption or repurchase price in respect
thereof.
"Defaulted Interest" has the meaning specified in Section 3.07.
"Definitive Security" means a certificated Security registered in the name
of the Holder thereof and issued in accordance with Section 3.05(d) hereof.
"Deposit Agreement" means the Note Deposit Agreement, dated as of the date
hereof, between the Issuer and The Chase Manhattan Bank, as Book-Entry
Depositary, with respect to the Global Securities, as amended from time to time
in accordance with the terms thereof.
"Depositary" means, with respect to the Securities issuable or issued in
whole or in part in the form of one or more Global Securities, The Depository
Trust Company for so long as it shall be a clearing agency registered under the
Exchange Act, or such successor as the Issuer shall designate from time to time
in an Officers' Certificate delivered to the Trustee.
"Depositary Interest" means a certificateless depositary interest
representing a 100% beneficial interest in a Global Security.
"Disqualified Stock" of any Person means any Capital Stock of such Person
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of such Person, any
Subsidiary of such Person or the holder thereof, in whole or in part, on or
prior to the final Stated Maturity of the Securities; provided, however, that
any Preferred Stock which would not constitute Disqualified Stock but for
provisions thereof giving holders thereof the right to require such Person to
repurchase or redeem such Preferred Stock upon the occurrence of a Change of
Control occurring prior to the final maturity of the Securities shall not
constitute Disqualified Stock if the change of control provisions applicable to
such Preferred Stock are no more favorable to the holders of such Preferred
Stock than the provisions applicable to the Securities contained in Section
10.17 and such Preferred Stock specifically provides that such Person will not
repurchase or redeem any such stock pursuant to such provisions prior
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to such Person's repurchase of such Securities as are required to be repurchased
pursuant to Section 10.17.
"Eligible Institution" means a commercial banking institution that has
combined capital and surplus of not less than $500 million or its equivalent in
foreign currency, whose debt is rated "A" (or higher) according to Standard &
Poor's Ratings Service or Moody's Investors Service, Inc. at the time as of
which any investment or rollover therein is made.
"Equity Clawback" means the planned redemption by the Issuer of a portion
of its outstanding 12-1/4% Senior Notes due 2006 (the "Existing Notes") with a
portion of the proceeds of the Guarantor's initial public offering of Common
Stock, which closed in October, 1997. The Issuer intends to apply approximately
$101.25 million of the initial public offering proceeds to the redemption of the
Existing Notes.
"Euroclear" means the Euroclear Clearance System (or any successor
securities clearing agency).
"Event of Default" has the meaning set forth in Section 5.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended (or
any successor act), and the rules and regulations thereunder.
"Exchange and Registration Rights Agreement" means the Exchange and
Registration Rights Agreement, dated as of February 27, 1998 among the Issuer,
the Guarantor and the Initial Purchasers, as purchasers, and the Holders from
time to time as provided therein, as such agreement may be amended from time to
time.
"Exchange Offer" has the meaning set forth in the form of the Securities
contained in Section 2.02.
"Exchange Offer Registration Statement" has the meaning set forth in the
form of the Securities contained in Section 2.02.
"Exchange Security" means any Security issued in exchange for an Original
Security or Original Securities pursuant to the Exchange Offer or otherwise
registered under the Securities Act and any Security with respect to which the
next preceding Predecessor Security of such Security was an Exchange Security.
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"Existing Stockholders" means (A) R.S. Lauder, Gaspar & Co., L.P., ("LGC"),
(B) partners in LGC and Lauder Gaspar Ventures LLC and their Affiliates, in each
case as of the Closing Date, (C) Itzhak Fisher, Ronald S. Lauder, Leonard
Lauder, Jacob Z. Schuster, Nir Tarlovsky, Nesim N. Bildirici, Andrew Gaspar and
Eugene Sekulow, (D) family members of any of the foregoing, (E) trusts, the only
beneficiaries of which are persons or entities described in clauses (A) through
(D) above and (F) partnerships which are controlled by the persons or entities
described in clauses (A) through (D) above.
"Expiration Date" has the meaning specified in the definition of "Offer to
Purchase".
"Global Security" means the security or securities issued initially in
bearer form that evidences all or part of the Securities and bears the legend
set forth in Section 2.02.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged and
which have a remaining weighted average life to maturity of not less than one
year from the date of Investment therein.
"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" and "Guaranteeing"
shall have meanings correlative to the foregoing); provided, however, that the
Guarantee by any Person shall not include endorsements by such Person for
collection or deposit, in either case, in the ordinary course of business.
"Guarantor" means the Person named as the "Guarantor" in the first
paragraph of this instrument until
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a successor Person shall have become such Person pursuant to the applicable
provisions of this Indenture and thereafter "Guarantor" shall mean such
successor Person.
"Holder" means a Person (i) who is the bearer of a Global Security (which
shall initially be the Book-Entry Depositary) or (ii) in whose name a Definitive
Security is registered in the Security Register.
"Incremental Paid-in Capital" means as of any date the cumulative aggregate
amount of the increase in paid-in capital (determined in accordance with
generally accepted accounting principles applied on a consistent basis) since
September 30, 1997, as determined based on the most recent unaudited quarterly
or audited annual financial statements of the Guarantor and its consolidated
subsidiaries filed with the Commission, as compared with the Guarantor's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1997.
"Incur" means, with respect to any Debt or other obligation of any Person,
to create, issue, incur (by conversion, exchange or otherwise), assume, enter
into a Guarantee in respect of or otherwise become liable in respect of such
Debt or other obligation including by acquisition of Subsidiaries or the
recording, as required pursuant to generally accepted accounting principles 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
generally accepted accounting principles that results in an obligation of such
Person that exists at such time becoming Debt shall not be deemed an Incurrence
of such Debt and that neither the accrual of interest nor the accretion of
original issue discount shall be deemed an Incurrence of 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.
"Indirect Participant" means a Person who holds an interest through a
Participant in a Depositary Interest issued by the Book-Entry Depositary to the
Depositary.
"Initial Purchasers" means Goldman, Sachs & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Chase
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Securities Inc., J.P. Morgan Securities Inc. and SBC Warburg Dillon Read Inc.
"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.
"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, but excluding any loan, advance or extension of credit to an
employee of the Guarantor or any of its Subsidiaries in the ordinary course of
business and commercially reasonable extensions of trade credit. Without
limiting the foregoing, the term "Investment" shall include (i) the designation
of a Restricted Subsidiary as an Unrestricted Subsidiary and (ii) the fair
market value of the Capital Stock (or any other Investment), held by the
Guarantor or any of its Restricted Subsidiaries, of (or in) any Person that has
ceased to be a Restricted Subsidiary. For purposes of the definition of
"Unrestricted Subsidiary" and Section 10.10, (i) "Investment" shall include the
fair market value of the assets (net of liabilities (other than liabilities to
the Guarantor or any of its Restricted Subsidiaries)) of any Restricted
Subsidiary at the time that such Restricted Subsidiary is designated an
Unrestricted Subsidiary, (ii) the fair market value of the assets (net of
liabilities (other than liabilities to the Guarantor or any of its Restricted
Subsidiaries)) of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary shall be considered a reduction
in outstanding Investments and (iii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the time of
such transfer. Notwithstanding the foregoing, an acquisition of assets
(including, without limitation, Capital Stock or rights to acquire Capital
Stock) by the Guarantor or any of its
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Restricted Subsidiaries shall be deemed not to be an Investment to the extent
that the consideration therefor consists of Common Stock of the Guarantor.
"Issuer" means the Person named as the "Issuer" in the first paragraph of
this instrument until a successor Person shall have become such pursuant to the
applicable provisions of this Indenture and thereafter "Issuer" shall mean such
successor Person.
"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 Vice
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, Receivables Sale, deposit
arrangement, security interest, lien, charge, easement (other than any easement
not materially impairing usefulness), 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).
"Listing Failure" has the meaning specified in Section 10.09.
"Marketable Securities" means: (i) Government Securities; (ii) any
certificate of deposit maturing not more than 270 days after the date of
acquisition issued by, or time deposit of, an Eligible Institution; (iii)
commercial paper maturing not more than 270 days after the date of acquisition
issued by a corporation (other than an Affiliate of the Guarantor) with a
rating, at the time as of which any investment therein is made, of "A-1" (or
higher) according to Standard & Poor's Ratings Service or "P-1" (or higher)
according to Moody's Investor Service, Inc.; (iv) any banker's acceptances or
money market deposit accounts issued or offered by an Eligible Institution; (v)
time deposits, certificates of deposit, bank promissory notes and bankers'
acceptances maturing not more than 180 days after the acquisition thereof and
guaranteed or issued by any of the ten largest banks (based on assets as of the
immediately preceding December 31), organized under the laws of any jurisdiction
in which one of the Restricted
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Subsidiaries does business or any foreign country recognized by the United
States and which are not under intervention, bankruptcy or similar proceeding,
not to exceed $10 million outstanding at any one term; and (vi) any fund
investing exclusively in investments of the types described in clauses (i)
through (iv) above.
"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 Available Proceeds" from any Asset Disposition by any Person means
cash or readily marketable cash equivalents received (including amounts received
by way of sale or discounting of any note, installment receivable or other
receivable, but excluding any other consideration received in the form of
assumption by the acquiror of Debt or other obligations relating to such
properties or assets) therefrom by such Person, net of (i) all legal, title and
recording tax expenses, commissions and other fees and expenses Incurred and all
Federal, state, provincial, foreign and local taxes required to be accrued as a
liability as a consequence of such Asset Disposition, (ii) all payments made by
such Person or its 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 Disposition or by applicable law, be repaid out of the proceeds
from such Asset Disposition, (iii) all distributions and other payments made to
minority interest holders in Subsidiaries of such Person as a result of such
Asset Disposition and (iv) appropriate amounts to be provided by such Person or
any Subsidiary thereof, as the case may be, as a reserve in accordance with
generally accepted accounting principles against any liabilities associated with
such assets and retained by such Person or any Subsidiary thereof, as the case
may be, after such Asset Disposition, including, without limitation, liabilities
under any indemnification obligations and severance and other employee
termination costs associated with such Asset Disposition, in each case as
determined by the board of directors of such Person, in its reasonable good
faith judgment; provided, however, that any reduction in such reserve within 12
months following the consummation of such Asset Disposition will be treated for
all purposes of the Indenture and the Securities as a new Asset Disposition at
the time of such reduction with Net Available Proceeds equal to the amount of
such reduction.
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"Non-Discount Securities" means the 9 1/8% Senior Notes due 2008 issued
pursuant to the Non-Discount Securities Indenture.
"Non-Discount Securities Indenture" means the indenture dated as of the
date hereof with respect to the 91/8% Senior Notes due 2008 among the Issuer,
the Guarantor and The Chase Manhattan Bank, as trustee.
"Offer to Purchase" means a written offer (the "Offer") sent by or on
behalf of the Issuer by first class mail, postage prepaid, to each Holder of
Securities at his address appearing in the related Security Register on the date
of the Offer offering to purchase up to the Accreted Value 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 "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 Expiration Date. The Issuer shall
notify in writing 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 Guarantor and its Subsidiaries which the Guarantor and Issuer in
good faith believe 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 Guarantor'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
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and materials necessary to enable such Holders to tender Securities pursuant to
the Offer to Purchase. The Offer shall also state:
(a) the Section of this Indenture pursuant to which the Offer to
Purchase is being made;
(b) the Expiration Date and the Purchase Date;
(c) the aggregate principal amount at maturity 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");
(d) 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");
(e) 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 multiple of $1,000 principal
amount at maturity;
(f) the place or places where Securities are to be surrendered for
tender pursuant to the Offer to Purchase;
(g) that interest on any Security not tendered or tendered but not
purchased by the Issuer pursuant to the Offer to Purchase will continue to
accrue;
(h) 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;
(i) 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
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
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executed by, the Holder thereof or his attorney duly authorized in
writing);
(j) 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 Expiration Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount at maturity 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;
(k) that (a) if Securities in an aggregate principal amount at
maturity 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
at maturity 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 at maturity equal to the Purchase
Amount on a 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
(l) 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 at maturity 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, a Vice Chairman of the Board, the President or a Vice President, and by
the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary,
of the Guarantor or the Issuer, as applicable, and delivered to the Trustee and
containing the statements provided for in Section 1.02. One of the officers
signing an Officers' Certificate given pursuant to Section 10.19
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shall be the principal executive, financial or accounting officer of the
Guarantor.
"Opinion of Counsel" means a written opinion of legal counsel, who may be
counsel for the Guarantor or the Issuer, and who shall be acceptable to the
Trustee, and containing the statements provided for in Section 1.02.
"Original Securities" means all Securities that are subject to an Exchange
and Registration Rights Agreement, other than Exchange Securities issued in
exchange therefore.
"Outstanding", when used with respect to Securities, means, as of the date
of determination, all Securities theretofore authenticated and delivered under
this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered to the
Trustee for cancelation;
(ii) 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
(iii) Securities which have been paid pursuant to Section 3.06 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 at maturity of the Outstanding Securities have given any
request, demand, authorization, direction, notice, consent or waiver hereunder,
Securities owned by the Issuer or any other obligor upon the Securities or any
Affiliate of the Issuer
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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.
"Participant" means, with respect to the Depositary, Euroclear or Cedel, a
Person who has an account with the Depositary, Euroclear or Cedel, respectively
(and, with respect to the Depositary, shall include Euroclear and Cedel).
"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 in the ordinary course of business 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) any Investment in the Guarantor or a
Restricted Subsidiary, (ii) any Investment in any Person as a result of which
such Person becomes a Restricted Subsidiary of the Guarantor or upon the making
of which such Person will be merged or consolidated with or into or transfer all
or substantially all of its assets to the Guarantor or a Restricted Subsidiary,
(iii) any Investment in Marketable Securities, (iv) securities or other
Investments received in settlement of debts created in the ordinary course of
business and owing to the Guarantor or any Restricted Subsidiary, or as a result
of foreclosure, perfection or enforcement of any Lien, or in satisfaction of
judgments, including in connection with any bankruptcy proceeding or other
reorganization of another Person, (v) securities or other Investments received
as consideration in sales or other dispositions of property or assets, including
Asset
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Dispositions made in compliance with Section 10.13 and (vi) other Investments
not in excess of $50 million in the aggregate at any time outstanding.
"Permitted Liens" means (a) Liens for taxes, assessments, governmental
charges or claims which are not yet delinquent or which are being contested in
good faith by appropriate proceedings, if a reserve or other appropriate
provision, if any, as shall be required in conformity with generally accepted
accounting principles shall have been made therefor; (b) other Liens incidental
to the conduct of the Guarantor's and its Restricted Subsidiaries' business or
the ownership of its property and assets not securing any Debt, and which do not
in the aggregate materially detract from the value of the Guarantor's and its
Restricted Subsidiaries' property or assets when taken as a whole, or materially
impair the use of such assets and property in the operation of its business; (c)
Liens with respect to assets of a Subsidiary granted by such Subsidiary to the
Guarantor to secure Debt owing to the Guarantor; (d) pledges and deposits made
in the ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of statutory obligations; (e) deposits
made to secure the performance of tenders, bids, leases, and other obligations
of like nature incurred in the ordinary course of business (exclusive of
obligations for the payment of borrowed money); (f) zoning restrictions,
servitudes, easements, rights-of-way, restrictions and other similar charges or
encumbrances incurred in the ordinary course of business which, in the
aggregate, do not materially detract from the value of the property subject
thereto or interfere with the ordinary conduct of the business of the Guarantor
or its Restricted Subsidiaries; (g) Liens on Capital Stock of Restricted
Subsidiaries securing obligations not exceeding $75 million at any time
outstanding of the Guarantor or any Restricted Subsidiary to repurchase or
redeem shares of Capital Stock of such Restricted Subsidiary held by Persons who
are not Affiliates or Related Persons of the Guarantor; (h) Liens arising out of
judgments or awards against the Guarantor or any Restricted Subsidiary with
respect to which the Guarantor or such Restricted Subsidiary is prosecuting an
appeal or proceeding for review and the Guarantor or such Restricted Subsidiary
is maintaining adequate reserves in accordance with generally accepted
accounting principles; and (i) any interest or title of a lessor in the property
subject to any lease other than a Capital Lease.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock
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company, trust, unincorporated organization, government or agency or political
subdivision thereof or any other entity.
"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 3.06 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.
"Purchase Agreement" means the Purchase Agreement, dated as of February 24,
1998, between the Issuer, the Guarantor and the Initial Purchaser named therein,
as such agreement may be amended from time to time.
"Purchase Money Debt" means Debt of the Guarantor (including Acquired Debt
and Debt represented by Capital Lease Obligations, mortgage financings and
purchase money obligations) Incurred for the purpose of financing all or any
part of the cost of construction, acquisition or improvement by the Guarantor or
any Restricted Subsidiary of the Guarantor of any Telecommunications Assets of
the Guarantor or any Restricted Subsidiary of the Guarantor, and including any
related notes, Guarantees, collateral documents, instruments and agreements
executed in connection therewith, as the same may be amended, supplemented,
modified or restated from time to time.
"readily marketable cash equivalents" means (i) marketable securities
issued or directly and unconditionally guaranteed by the United States
Government or issued by any agency thereof and backed by the full faith and
credit of the United States; (ii) marketable direct obligations issued by any
state of the United States of America or any political subdivision of any such
state or any public instrumentality thereof and, at the time of acquisition,
having the highest rating obtainable from either Standard & Poor's Rating
Service or Moody's Investors Service, Inc.; (iii) commercial paper maturing no
more than 180 days from the date of acquisition thereof and, at the time of
acquisition, having a rating of at least A-1 from Standard & Poor's Ratings
Service or at least P-1 from Moody's Investors Service, Inc.; and (iv)
certificates of deposit or bankers' acceptance maturing within one year from the
date of acquisition thereof issued by any commercial bank organized under the
laws of the United States of America or any state thereof or the District of
Columbia having
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unimpaired capital and surplus of not less than $100,000,000.
"Receivables" means receivables, chattel paper, instruments, documents or
intangibles evidencing or relating to the right to payment of money.
"Receivables Sale" of any Person means any sale of Receivables of such
Person (pursuant to a purchase facility or otherwise), other than in connection
with a disposition of the business operations of such Person relating thereto or
a disposition of defaulted Receivables for purpose of collection and not as a
financing arrangement.
"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 Exchange Securities and all other Securities
sold or otherwise disposed of pursuant to an effective registration statement
under the Securities Act, together with any respective Successor Securities.
"Regular Record Date" for the interest payable on any Interest Payment Date
means February 15 or August 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 (or any
successor provision), as it may be amended from time to time.
"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 2.01.
"Regulation S Legend" means a legend substantially in the form of the
legend required in the form of Security set forth in Section 2.02 to be placed
upon each Regulation S Security.
"Regulation S Securities" means all Securities sold pursuant to Regulation
S, which are required pursuant
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to Section 3.05(c) to bear a Regulation S Legend. Such term includes the
Regulation S Global Security.
"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
outstanding equity interest in such Person) or (b) 5% or more of the combined
outstanding voting power of the Voting Stock of such Person, except that, for
purposes of Section 10.12, Related Person means any other Person directly or
indirectly owning 10% or more of the combined outstanding voting power of the
Voting Stock of such Person (or, in the case of a Person that is not a
corporation, 10% or more of the outstanding equity interest in such Person).
"Resale Registration Statement" has the meaning set forth in the Form of
the Securities contained in Section 2.02.
"Responsible Officer", when used with respect to the Trustee, means the
chairman or any vice-chairman of the board of directors, the chairman or any
vice-chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any vice president, the secretary, any
assistant secretary, the treasurer, any assistant treasurer, the cashier, any
assistant cashier, 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 specified in Section 2.01.
"Restricted Period" means the period of 41 consecutive days beginning on
and including the later of (i) the day on which Securities are first offered to
persons other than distributors (as defined in Regulation S) in reliance on
Regulation S and (ii) the original issuance date of the Securities.
"Restricted Securities" means all Securities required pursuant to Section
3.05(c) to bear any Restricted Securities Legend. Such term includes any
Restricted Global Security.
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"Restricted Securities Certificate" means a certificate substantially in
the form set forth in Annex B.
"Restricted Securities Legend" means, collectively, the legends
substantially in the forms of the legends required in the form of Security set
forth in Section 2.02 to be placed upon each Restricted Security.
"Restricted Subsidiary" means any Subsidiary of the Guarantor other than an
Unrestricted Subsidiary.
"RSLNA" has the meaning specified in Section 1.14.
"Rule 144A" means Rule 144A under the Securities Act (or any successor
provision), as it may be amended from time to time.
"Rule 144A Securities" means all Securities sold pursuant to Rule 144A,
which are required pursuant to Section 3.05(c) to bear a Restricted Securities
Legend. Such term includes the Restricted Global Security.
"Securities" has the meaning specified in the first paragraph of the
recitals to this instrument.
"Securities Act" means the Securities Act of 1933 and any statute successor
thereto, in each case as amended from time to time.
"Securities Act Legend" means a Restricted Securities Legend or a
Regulation S Legend.
"Securities Guarantee" means the Securities Guarantee issued by the
Guarantor in accordance with Article IV hereunder.
"Security Register" and "Security Registrar" have the respective meanings
specified in Section 3.05.
"Significant Subsidiary" means, at any date of determination, any
Restricted Subsidiary that, together with its Subsidiaries, (i) for the most
recent fiscal year of the Guarantor, accounted for more than 10% of the
consolidated revenues of the Guarantor and its Restricted Subsidiaries or (ii)
as of the end of such fiscal year, was the owner of more than 10% of the
consolidated assets of the Guarantor and its Restricted Subsidiaries, all as set
forth on the most recently available consolidated financial statements of the
Guarantor for such fiscal year.
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"Special Interest" has the meaning set forth in the form of Security
contained in Section 2.02. Unless the context otherwise requires, references
herein to "interest" on the Securities shall include Special Interest.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 3.07.
"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.
"Step-Down Date" has the meaning set forth in the form of the Security
contained in Section 2.02.
"Step-Up" has the meaning set forth in the form of the Security contained
in Section 2.02.
"Strategic Investor" means a corporation, partnership or other entity
engaged in the Telecommunications Business that has, or 80% or more of the
Voting Stock of which is owned by a Person that has, an equity market
capitalization or paid in capital, at the time of any Investment by such
corporation, partnership or other entity in a Restricted Subsidiary pursuant to
clause (iv)(2) of Section 10.14, in excess of $100 million.
"Subordinated Debt" means Debt of the Guarantor or any Restricted
Subsidiary 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 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 exists with respect to the Securities, upon written notice by 25% or
more in principal amount at maturity of the Securities to the Trustee, the
Trustee shall have the right to give notice to the Guarantor or such Restricted
Subsidiary 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
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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 stated
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
Guarantor or such Restricted Subsidiary (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 Stated Maturity of the
Securities or (y) permit redemption or other retirement (including pursuant to
an offer to purchase made by the Guarantor or such Restricted Subsidiary) of
such other Debt at the option of the holder thereof prior to the final Stated
Maturity 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 Guarantor or such Restricted Subsidiary) which is conditioned upon a
change of control of the Guarantor pursuant to provisions substantially similar
to those described under Section 10.17 (and which shall provide that such Debt
will not be repurchased pursuant to such provisions prior to the Guarantor's or
such Restricted Subsidiary's repurchase of the Securities required to be
repurchased pursuant to the provisions described under Section 10.17).
"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 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. An 80% or more
owned Subsidiary of the Guarantor is (i) a corporation 80% or more of the
combined voting power of the outstanding Voting Stock, and more than 80% of the
Capital Stock or other ownership interests, of which is owned, directly or
indirectly, by the Guarantor or by one or more other Subsidiaries of the
Guarantor or by the Guarantor and one or more Subsidiaries thereof or (ii) any
other Person (other than a corporation) in which the Guarantor, or one or more
other Subsidiaries of the Guarantor or the Guarantor and one or more other
Subsidiaries of the Guarantor, directly or indirectly, has at least an 80%
ownership interest and power to direct the policies, management and affairs
thereof.
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"Subsidiary Guarantor" means a Subsidiary of the Guarantor that has
unconditionally guaranteed, by supplemental indenture substantially similar in
form to Article IV hereof and otherwise satisfactory to the Trustee, the payment
in full of the principal of (and premium, if any) and interest on the
Securities.
"Substitute Securities" has the meaning specified in Section 3.01.
"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 purposes of this definition, any Security
authenticated and delivered under Section 3.06 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.
"Tax" means any tax, duty, levy, impost, assessment or other governmental
charge (including penalties, interest and any other liabilities related
thereto).
"Taxing Authority" means any government or political subdivision or
territory or possession of any government or any authority or agency therein or
thereof having power to tax.
"Telecommunications Assets" means all assets, rights (contractual or
otherwise) and properties, whether tangible or intangible, used or intended for
use in connection with a Telecommunications Business, including a majority of
the Voting Stock of a Person engaged in the Telecommunications Business.
"Telecommunications Business" means the business of (i) transmitting, or
providing services relating to the transmission of, voice, video or data through
owned or leased transmission facilities, (ii) creating, developing or marketing
communications related network equipment, software and other devices for use in
a Telecommunications Business or (iii) evaluating, participating or pursuing any
other activity or opportunity that is primarily related to those identified in
(i) or (ii) above; provided that the determination of what constitutes a
Telecommunications Business shall be made in good faith by the Board of
Directors of the Guarantor.
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"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.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at
the date as of which this instrument was executed; 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.
"Unrestricted Securities Certificate" means a certificate substantially in
the form set forth in Annex C.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Guarantor that at
the time of determination shall be designated an Unrestricted Subsidiary of the
Guarantor by the Board of Directors in the manner provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate
any Restricted Subsidiary (including any newly acquired or newly formed
Subsidiary of the Guarantor) to be an Unrestricted Subsidiary unless such
Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property
of, the Guarantor or any Restricted Subsidiary; provided that (A) any Guarantee
by the Guarantor or any Restricted Subsidiary of any Debt of the Subsidiary
being so designated shall be deemed an "Incurrence" of such Debt and an
"Investment" by the Guarantor or such Restricted Subsidiary (or both, if
applicable) at the time of such designation, in each case, to the extent such
Debt is so Guaranteed by the Guarantor or such Restricted Subsidiary; (B) either
(I) the Subsidiary to be so designated has total assets of $1,000 or less or
(II) if such Subsidiary has assets greater than $1,000, such designation would
be permitted under Section 10.10 and (C) if applicable, the Incurrence of Debt
and the Investment referred to in clause (A) of this proviso would be permitted
under Sections 10.08 and 10.10. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that immediately
after giving effect to such designation (x) the Guarantor could Incur $1.00 of
additional Debt under the first paragraph of Section 10.08 and (y) no Default or
Event of Default shall have occurred and be continuing. Any such designation by
the Board of Directors shall be evidenced to the Trustee by promptly filing with
the Trustee a copy of the Board Resolution giving effect to such designation and
an Officers'
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Certificate certifying that such designation complied with the foregoing
provisions.
"Vice President", when used with respect to the Issuer, the Guarantor or
the Trustee, 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) of 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 Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Voting Stock or other ownership interests (other than
directors' qualifying shares) of which shall at the time be owned by such Person
or by one or more Wholly Owned Subsidiaries of such Person or by such Person and
one or more Wholly Owned Subsidiaries of such Person.
SECTION 1.02. 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 and Guarantor shall furnish to the Trustee such
certificates and opinions as may be required under the Trust Indenture Act and
under this Indenture. 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
the Guarantor, 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:
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(b) 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;
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(c) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 1.03. 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 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 of an officer of the Issuer or Guarantor may be based,
insofar as it relates to legal matters, upon an opinion of counsel submitted
therewith, unless such officer knows, or in the exercise of reasonable care
should know, that the opinion with respect to the matters upon which his
certificate is based is erroneous. Any opinion of counsel may be based, insofar
as it relates to factual matters, upon a certificate of an officer or officers
of the Issuer or Guarantor submitted therewith stating the information on which
counsel is relying, unless such counsel knows, or in the exercise of reasonable
care should know, that the certificate with respect to such matters is
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 1.04. Acts of Holders; Record Dates.
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 agent duly appointed in writing;
and, except as herein otherwise
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expressly provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee and, where it is hereby expressly
required, to the Issuer or the Guarantor. 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 6.01)
conclusive in favor of the Trustee and the Issuer and Guarantor, 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 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, the Issuer or the
Guarantor 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
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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 7.01) 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 at maturity 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 canceled
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 at
maturity 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 1.06.
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 5.02, (iii) any request to institute proceedings referred to in
Section 5.07(2) or (iv) any direction referred to in Section 5.12. 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 principal amount at maturity 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
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the record date previously set shall automatically and with no action by any
Person be canceled 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 at maturity 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 1.06.
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 1.06, 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 1.05. Notices, Etc., to Trustee, Issuer and Guarantor. 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 or the Guarantor shall
be sufficient for every purpose hereunder if delivered in writing to a
Responsible Officer of the Trustee at its Corporate Trust Office,
Attention: Corporate Trust Administration, or
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(2) the Issuer or the Guarantor 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,
to the Issuer or the Guarantor as applicable, addressed to it, if prior to
receipt by the Trustee of written notice pursuant to this Section 1.05 of a
change of address, at the address of its principal office specified in the
first paragraph of this instrument, or, if after receipt by the Trustee of
written notice pursuant to this Section 1.05 of a change of address, at
such other address as may be previously furnished in writing to the Trustee
by the Issuer or the Guarantor, as applicable.
SECTION 1.06. 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 earlier than the earliest date (if any), prescribed for the giving of such
notice. 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 1.07. Application of Trust Indenture Act. The Trust Indenture Act
shall apply as a matter of contract to this Indenture for purposes of
interpretation, construction and defining the rights and obligations hereunder.
If any provision hereof limits, qualifies or conflicts with a provision of the
Trust Indenture Act that is required under such Act to be a part of and govern
this
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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.
SECTION 1.08. 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 1.09. Successors and Assigns. All covenants and agreements in this
Indenture by the Issuer shall bind its successors and assigns, whether so
expressed or not.
SECTION 1.10. 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 1.11. 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 their successors hereunder and the Holders of Securities, any benefit
or any legal or equitable right, remedy or claim under this Indenture.
SECTION 1.12. Governing Law. This Indenture, the Securities and the
Securities Guarantee shall be governed by and construed in accordance with the
laws of the State of New York.
SECTION 1.13. 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, 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, Purchase Date or Stated Maturity, as the case may be.
SECTION 1.14. Agent for Service; Submission to Jurisdiction; Waiver of
Immunities. By the execution and
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delivery of this Indenture, each of the Issuer and the Guarantor (i) represents
that it has designated and appointed RSL Communications N. America, Inc.
("RSLNA"), as its authorized agent upon which process may be served in any suit,
action or proceeding arising out of or relating to the Securities, the
Securities Guarantee or this Indenture that may be instituted in any Federal or
state court in the State of New York, Borough of Manhattan, or brought under
Federal or state securities laws or brought by the Trustee (whether in its
individual capacity or in its capacity as Trustee hereunder), and that RSLNA has
accepted such designation, (ii) submits to the non-exclusive jurisdiction of any
such court in any such suit, action or proceeding, (iii) agrees that service of
process upon RSLNA and written notice of said service to the Issuer or the
Guarantor, as applicable, (mailed or delivered to its President at its principal
office as specified in Section 1.05) shall be deemed in every respect effective
service of process upon it in any such suit or proceeding, and (iv) 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 RSLNA in full force and effect so long as any of the Securities
shall be outstanding.
To the extent that the Issuer or the Guarantor has or hereafter may acquire
any immunity from jurisdiction of any court 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, each
of the Issuer and the Guarantor hereby irrevocably waives such immunity in
respect of its obligations under this Indenture, the Securities Guarantee and
the Securities, to the extent permitted by law.
ARTICLE II
Security Forms
SECTION 2.01. Forms Generally. The Securities and the Trustee's
certificates of authentication thereof shall be in substantially the forms set
forth in this Article, with such appropriate legends, 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
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executing such Securities, as evidenced by their execution of the Securities.
Upon their original issuance, Rule 144A Securities shall be issued in the
form of a Global Security in bearer form without interest coupons, which shall
be deposited on behalf of the Initial Purchasers with the Book-Entry Depositary
at its New York corporate trust office, duly executed by the Issuer and
authenticated by the Trustee as hereinafter provided. Such Global Security,
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 shall be
issued in the form of a Global Security in bearer form without interest coupons,
which shall be deposited on behalf of the Initial Purchasers with the Book-Entry
Depositary at its New York corporate trust office, duly executed by the Issuer
and authenticated by the Trustee as hereinafter provided. Such Global Security,
together with its Successor Securities which are Global Securities other than
the Restricted Global Security, are collectively herein called the "Regulation S
Global Security".
Upon receipt of the Restricted Global Security and the Regulation S Global
Security authenticated and delivered by the Trustee, the Book-Entry Depositary
shall issue to the Depositary a Depositary Interest in each such Global Security
by recording the Depository Interest in the register of the Book-Entry
Depositary in the name of Cede & Co., as nominee of the Depositary. Ownership of
beneficial interests shall be limited to Participants, including Euroclear and
Cedel, and Indirect Participants. Upon the issuance of the Depositary Interest
in such Global Security to the Depositary, the Depositary shall credit, on its
internal book-entry registration and transfer system, its Participant's accounts
with respective interests owned by such Participants.
Neither the Depositary nor its Participants shall have any rights either
under this Indenture or under any Global Security with respect to such Global
Security held on their behalf by the Book-Entry Depositary, and the Book-Entry
Depositary may be treated by the Issuer, the Trustee and any agent of the Issuer
or the Trustee as the absolute owner of such Global Security for the purpose of
receiving payment of or on account of the principal of (premium, if any) and,
subject to the provisions of this Indenture, interest on the Global Security and
for all other purposes. Notwithstanding the foregoing, nothing herein shall
prevent
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the Issuer, the Trustee or any agent of the Issuer or the Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Book-Entry Depositary or impair, as between the Book-Entry Depositary and
the Depositary and its Participants, the operation of customary practices of
such Depositary governing the exercise of the rights of an owner of a beneficial
interest in any Global Security.
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 all as determined by the officers executing such
Securities, as evidenced by their execution of such Securities.
SECTION 2.02. Form of Face of Security. [If a Global Security issued in
bearer form, then insert -- THIS SECURITY IS A GLOBAL SECURITY WITHIN THE
MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS HELD BY THE BOOK-ENTRY
DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS SECURITY) IN CUSTODY FOR
THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF. THIS SECURITY IS NOT EXCHANGEABLE
IN WHOLE OR IN PART OR TRANSFERABLE IN WHOLE OR IN PART EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.]
[If Restricted Securities, then insert -- THE SECURITIES EVIDENCED HEREBY
HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT (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 THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE
TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S
UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (4) TO AN
INSTITUTION THAT IS AN ACCREDITED INVESTOR WITHIN THE MEANING OF 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 (IF AVAILABLE), OR (5)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN
EACH CASE IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS.]
[If a Regulation S Security, then insert -- THIS SECURITY HAS NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES
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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 THIS SECURITY IS REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS THEREOF IS AVAILABLE.]
FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED, AND THE RULES AND REGULATIONS THEREUNDER, AS OF THE ISSUE
DATE, THIS SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT. FOR
INFORMATION REGARDING THE ISSUE PRICE OF THIS SECURITY, THE AMOUNT OF ORIGINAL
ISSUE DISCOUNT, THE ISSUE DATE OF THIS SECURITY AND THE YIELD TO MATURITY,
PLEASE CONTACT THE GLOBAL CONTROLLER, CARE OF RSL COMMUNICATIONS N. AMERICA, 767
FIFTH AVENUE, SUITE 4300, NEW YORK, NEW YORK 10153.
10 1/8% SENIOR DISCOUNT NOTES DUE 2008
[IF RESTRICTED GLOBAL SECURITY - CUSIP NO. 74972E AB 4]
[IF REGULATION S SECURITY - CUSIP NO. G7703A AB 1]
[IF REGULATION S GLOBAL SECURITY - ISIN NO. - USGT103A AB 10]
No. __________ $_______________
RSL Communications PLC, a United Kingdom corporation (herein called the
"Issuer", which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to [If this
Security is a Global Security issued in bearer form, then insert: the bearer
hereof] [If this Security is not a Global Security issued in bearer form, then
insert: _____________, or registered assigns], the principal sum of
______________ Dollars [if this Security is a Global Security, then insert:
(which principal amount may from time to time be increased or decreased to such
other principal amounts by adjustments made on the records of the Trustee
hereinafter referred to in accordance with the Indenture)] on March 1, 2008, and
to pay interest thereon from March 1, 20003 or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, semi-annually
on March 1 and September 1 in each year, commencing March 1, 2003 at the rate of
101/8% per annum, until the principal hereof is paid or made available for
payment; provided, however, that no interest shall accrue on the principal
amount of this Security prior to March 1, 2003 and no interest shall be paid on
this Security prior to September 1, 2003; [If Original Securities, then insert:
provided further, however, that if the Issuer has not filed a registration
statement (the "Exchange Offer Registration
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<PAGE>
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
registering a security substantially identical to this Security (except that
such Security will not contain terms with respect to the Special Interest
payments described below or transfer restrictions) pursuant to an exchange offer
(the "Exchange Offer") (or, in lieu thereof, a registration statement
registering this Security for resale (a "Resale Registration Statement")), and
(i) the Exchange Offer has not been completed by 270 days after the date of the
Indenture (if the Exchange Offer is then required to be made pursuant to the
Exchange and Registration Rights Agreement (the "Exchange and Registration
Rights Agreement"), by and between the Issuer, the Guarantor, as defined in the
Indenture, the Purchasers (as defined therein) and the Holders from time to time
of the Securities) or (ii) any Resale Registration Statement required to be
filed by the Exchange and Registration Rights Agreement is filed and declared
effective but shall thereafter cease to be effective (except as specifically
permitted therein) without being succeeded promptly by an additional
registration statement filed and declared effective upon the terms and
conditions set forth in the Exchange and Registration Rights Agreement (each
such event referred to in clauses (i) and (ii), a "Registration Default"), then
interest will accrue (in addition to the stated interest on the Securities) (the
"Step-Up") at a rate of 0.5% per annum, determined daily, on the Accreted Value
of the Securities, from the period from and including the date of occurrence of
the Registration Default to but excluding such date (the "Step-Down Date") as no
Registration Default is in effect (commencing on which date such interest rate
will be restored to its initial rate). Interest accruing as a result of the
Step-Up is referred to herein as "Special Interest." Accrued Special Interest,
if any, shall be paid semi-annually on March 1 and September 1 in each year; and
the amount of accrued Special Interest shall be determined on the basis of the
number of days actually elapsed. Any accrued and unpaid interest (including
Special Interest) on this Security upon the issuance of an Exchange Security (as
defined in the Indenture) in exchange for this Security shall cease to be
payable to the Holder hereof but such accrued and unpaid interest (including
Special Interest) shall be payable on the next March 1 or September 1 to the
Holder thereof [if not a Global Security in bearer form, insert: on the related
Regular Record Date].] The interest so payable, and punctually paid or duly
provided for, on any such interest payment date will, as provided in such
Indenture, be paid to [If this Security is a Global Security issued in bearer
form, then insert: the bearer hereof on the Interest Payment
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<PAGE>
Date] [If this Security is not a Global Security issued in bearer form, then
insert: 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 February 15 or August 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 such Interest Payment Date and may either
be paid to [If this Security is a Global Security issued in bearer form, then
insert: the bearer hereof on the Special Payment Date] [If this Security is not
a Global Security issued in bearer form, then insert: 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, 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 may be listed, and upon such
notice as may be required by such exchange, all as more fully provided in said
Indenture.
Under certain circumstances described in the Indenture, the Issuer (or the
Guarantor) also shall pay Additional Amounts to the Holders of Securities equal
to an amount that the Issuer or Guarantor, as the case may be, may be required
to withhold or deduct for or on account of Taxes imposed by a Taxing Authority
within the United Kingdom or Bermuda, as the case may be, from any payment made
under or with respect to the Securities or the Securities Guarantee.
In the case of a default in payment of principal (or Accreted Value) of and
premium, if any, on this Security upon acceleration or redemption, interest
shall be payable pursuant to the preceding paragraph on such overdue principal
(or Accreted Value) (and premium, if any), such interest shall be payable on
demand and, if not so paid on demand, such interest shall itself bear interest
at the rate of 121/8% per annum (to the extent that the payment of such interest
shall be legally enforceable), and shall accrue from the date of such demand for
payment to the date payment of such interest has been made or duly provided for,
and such interest on unpaid interest shall also be payable on demand.
[If this Security is a Global Security issued in bearer form, then insert:
The Issuer will pay interest, if
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<PAGE>
any, on this Security to the bearer of this Security. The Holder of this
Security must surrender this Security to the Trustee to collect principal
payments.] Payment of the principal of (and premium, if any) and interest on
this Security will be made at the corporate trust office of the Trustee and at
the office or agency of the Issuer maintained for that purpose in the Borough of
Manhattan, The City of New York, New York, 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 [If this Security is a Global Security in
bearer form, then insert: is specified by the bearer hereof] [If this Security
is a Definitive Security, then insert: shall appear in the Security Register].
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.
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<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated:
The Common Seal of
RSL COMMUNICATIONS PLC
was hereto affixed in
the presence of:
[SEAL]
RSL COMMUNICATIONS PLC,
by
--------------------------
Name:
Title:
by
--------------------------
Name:
Title:
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<PAGE>
SECTION 2.03. Form of Reverse of Security. This Security is one of a duly
authorized issue of Securities of the Issuer designated as its 101/8% Senior
Discount Notes due 2008 (the "Securities") issued under an Indenture, dated as
of February 27, 1998 (herein called the "Indenture"), between the Issuer, RSL
Communications, Ltd., as the guarantor (the "Guarantor") and The Chase Manhattan
Bank, as trustee (herein called the "Trustee", which term includes any successor
trustee under the Indenture). Reference is hereby made to the Indenture and all
indentures supplemental thereto for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the Issuer, the
Guarantor, the Trustee and the Holders of the Securities and of the terms upon
which the Securities are, and are to be, authenticated and delivered.
The Securities are subject to redemption upon not less than 30 nor more
than 60 days' notice by mail 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 any time on or after March 1, 2003 and prior to
maturity, as a whole or in part, at the election of the Issuer, at the following
Redemption Prices (expressed as percentages of the principal amount) plus
accrued interest to but excluding the Redemption Date (subject to the right of
Holders [If this Security is not a Global Security issued in bearer form,
insert: on the relevant Regular 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 March 1, of each of the years indicated
below:
Redemption
Year Price
---- ----------
2003 105.062%
2004 103.375%
2005 101.687%
2006 and 100.000%
thereafter
and thereafter at a Redemption Price equal to 100% of the principal amount,
together in the case of any such redemption with accrued interest to but
excluding the Redemption Date, but interest installments whose Stated Maturity
is on or prior to such Redemption Date will be
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<PAGE>
payable to the Holders of such Securities, or one or more Predecessor Securities
[If this Security is not a Global Security issued in bearer form, insert:, of
record at the close of business on the relevant Record Dates referred to on the
face hereof,] all as provided in the Indenture.
In addition, at any time prior to March 1, 2001, in the event that the
Guarantor receives net cash proceeds from the public or private sale of its
Common Stock (other than Disqualified Stock), the Issuer (to the extent it
receives such proceeds and has not used such proceeds, directly or indirectly,
to redeem or repurchase other securities pursuant to optional redemption
provisions) may, at its option, apply an amount equal to any such net cash
proceeds or any portion thereof to redeem, from time to time, Securities in a
principal amount of up to an aggregate amount equal to 33 1/3% of the aggregate
principal amount at maturity of the Securities; provided, however, that
Securities in an amount equal to at least 66 2/3% of the aggregate principal
amount at maturity of the Securities remain outstanding after each redemption.
Each redemption must occur on a Redemption Date within 180 days of the related
sale and upon not less than 30 nor more than 60 days' notice by mail 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 a
Redemption Price of 110.125% of the Accreted Value of the Securities plus
accrued interest to but excluding the Redemption Date.
Furthermore, in the event that (i) the Guarantor or the Issuer has become
or would become obligated to pay any Additional Amounts as a result of (x)
changes affecting withholding tax laws or (y) a Listing Failure provided that
the Issuer has used reasonable best efforts to list and maintain a listing of
the Securities on a "recognized stock exchange" (within the meaning of Section
841 of the U.K. Income and Corporation Taxes Act 1988) (as provided for in
Section 10.09), and (ii) the Guarantor and the Issuer are unable to avoid the
requirement to pay such Additional Amounts by taking reasonable measures
available to them (including, without limitation, the Guarantor making payments
directly to holders under the Securities Guarantee, unless such payment is
likely to result in adverse consequences to the Issuer or the Guarantor), then
the Issuer may redeem all, but not less than all, of the Securities at any time
at 100% of the Accreted Value thereof on the Redemption Date, together with
accrued interest thereon, if any, to but excluding the Redemption Date. Prior to
the publication of the notice of redemption in
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<PAGE>
accordance with the foregoing, the Issuer shall deliver to the Trustee an
officer's certificate stating that the Issuer is entitled to effect such
redemption based on a written opinion of independent tax counsel or accounting
firm reasonably satisfactory to the Trustee.
The Securities do not have the benefit of any sinking fund obligations.
The Indenture provides that, subject to certain conditions, if (i) a Change
of Control occurs or (ii) certain Net Available Proceeds are available to the
Issuer as a result of any Asset Disposition, the Issuer shall be required to
make an Offer to Purchase for all or a specified portion of the Securities.
[If not a Global Security: In the event of redemption or purchase pursuant
to an Offer to Purchase of this Security in part only, a new Security or
Securities of like tenor for the unredeemed or unpurchased portion hereof will
be issued in the name of the Holder hereof upon the cancelation hereof.]
[If a Global Security insert: In the event of a deposit or withdrawal of a
beneficial interest in this Security (including upon an exchange, transfer,
redemption or repurchase of this Security in part only) effected in accordance
with the Applicable Procedures, the Security Registrar, upon receipt of notice
of such event from the Depositary's custodian for this Security, shall make an
adjustment on its records to reflect an increase or decrease of the Outstanding
principal amount at maturity of this Security resulting from such deposit or
withdrawal, as the case may be, and shall instruct the Book-Entry Depositary to
make a similar notation in its book-entry system to the corresponding Depositary
Interest.]
If an Event of Default shall occur and be continuing, the principal of all
the Securities may be declared due and payable in the manner and with the effect
provided in the Indenture.
The Indenture contains provisions for defeasance at any time of (i) the
entire indebtedness of this Security, or (ii) certain restrictive covenants and
Events of Default with respect to this Security, in each case upon compliance
with certain conditions set forth therein.
Unless the context otherwise requires, the Original Securities and the
Exchange Securities shall
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<PAGE>
constitute one series for all purposes under the Indenture, including without
limitation, amendments, waivers, redemptions and Offers to Purchase.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer, the Guarantor and the rights of the Holders of the Securities under the
Indenture at any time by the Issuer, the Guarantor and the Trustee with the
consent of the Holders of a majority in aggregate principal amount at maturity
of the Securities at the time Outstanding. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate
principal amount at maturity of the Securities at the time Outstanding, on
behalf of the Holders of all the Securities, to waive compliance by the Issuer
or the Guarantor with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or waiver
by the Holder of this Security shall be conclusive and binding upon such Holder
and upon all future Holders of this Security and of any Security issued upon 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.
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.
[If this Security is not a Global Security issued in bearer form, then
insert: 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, 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 like tenor
and for the same aggregate principal amount at maturity, will be issued to the
designated transferee or transferees.]
The Global Securities are issuable only in bearer form without coupons in
denominations of $1,000 and any
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<PAGE>
integral multiple thereof. Definitive Securities shall be issuable in registered
form without interest 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 tenor and
aggregate principal amount at maturity of Securities of a different authorized
denomination, as requested by the Holder surrendering the same.
[If this Security is a Global Security issued in bearer form, then insert:
The bearer of this Security shall be treated as the owner of this Security for
all purposes.]
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.
[If this Security is not a Global Security issued in bearer form, insert:
Prior to due presentment of this Security for registration of transfer, the
Issuer, the Guarantor, the Trustee and any agent of the Issuer, the Guarantor,
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 Guarantor, 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 [If Original Securities, then insert: ; provided,
however, that Special Interest shall be computed on the basis of a 365- or
366-day year, as the case may be, and the number of days actually elapsed].
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Issuer pursuant
to Section 10.13 or 10.17 of the Indenture, check the box:
|_|
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<PAGE>
If you want to elect to have only a part of this Security purchased by the
Issuer pursuant to Section 10.13 or 10.17 of the Indenture, state the amount:
$___________
Dated:________________ Your Signature:________________________________
(Sign exactly as name appears
on the other side of this Security)
Signature Guarantee:____________________________________________________________
Notice: Signature(s) must be guaranteed by an "eligible
guarantor institution" meeting the requirements of the
Security Registrar which requirements will include
membership or participation in STAMP or such other
"signature guarantee program" as may be determined by the
Trustee in addition to, or in substitution for STAMP, all in
accordance with the Securities Exchange Act of 1934, as
amended.
SECTION 2.04. Form of Trustee's Certificate of Authentication. This is one
of the Securities referred to in the within-mentioned Indenture.
Dated:
THE CHASE MANHATTAN BANK,
as Trustee
by ___________________________
Authorized Signatory
ARTICLE III
The Securities
SECTION 3.01. Title and Terms. The aggregate principal amount at maturity
of Securities which may be authenticated and delivered under this Indenture is
limited to $328,084,000 issued on the date hereof, except for Securities
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Securities pursuant to Section 3.04, 3.05, 3.06, 9.06
or 11.08 or in connection with an Offer to Purchase pursuant to Section 10.13 or
10.17 (all Securities referred to in this exception being deemed "Substitute
Securities"). The Issuer
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<PAGE>
may issue Exchange Securities from time to time pursuant to an Exchange Offer or
otherwise, in each case pursuant to a Board Resolution, subject to Section 3.03,
included in an Officers' Certificate delivered to the Trustee, in authorized
denominations in exchange for a like principal amount at maturity of Original
Securities. Upon any such exchange the Original Securities shall be canceled in
accordance with Section 3.09 and shall no longer be deemed Outstanding for any
purpose. In no event shall the aggregate principal amount at maturity of
Original Securities and Exchange Securities Outstanding exceed $328,084,000.
The Securities shall be known and designated as the "10 1/8% Senior
Discount Notes due 2008" of the Issuer. The Stated Maturity of the Securities
shall be March 1, 2008. The Securities shall bear interest at the rate of
10 1/8% per annum, from March 1, 2003 or from the most recent Interest
Payment Date thereafter to which interest has been paid or duly provided for, as
the case may be, payable semi-annually on March 1 and September 1, commencing
September 1, 2003, until the principal thereof is paid or made available for
payment; provided, however, with respect to Original Securities, if there has
been a Registration Default, a Step-Up will occur and the Original Securities
will from then bear Special Interest to but excluding the Step-Down Date.
Accrued Special Interest, if any, shall be paid in cash in arrears semi-annually
on March 1 and September 1 in each year, and the amount of accrued Special
Interest shall be determined on the basis of the number of days actually
elapsed.
With respect to Global Securities, the Issuer will pay interest, if any, on
such Securities to the bearers of such Securities. Holders of such Global
Securities must surrender such Securities to the Trustee to collect principal
payments. The principal of and premium, if any, and interest on the Securities
shall be payable at the corporate trust office of the Trustee 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; 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 10.13 and 10.17 of the Indenture.
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<PAGE>
The Securities shall be redeemable as provided in Article Eleven.
The Securities shall not have the benefit of any sinking fund obligations.
The Securities shall be subject to defeasance at the option of the Issuer
as provided in Article Twelve.
The Securities are guaranteed by the Guarantor as set forth in Article IV
of this Indenture.
A copy of an appropriate record of such action shall be certified by the
Secretary or any Assistant Secretary of the Issuer and delivered to the Trustee
at or prior to the delivery of the Officers' Certificate or the trust indenture
supplemental hereto setting forth the terms of such Securities.
Unless the context otherwise requires, the Original Securities and the
Exchange Securities shall constitute one series for all purposes under the
Indenture, including without limitation, amendments, waivers, redemptions and
Offers to Purchase.
SECTION 3.02. Denominations. The Global Securities shall be issuable in
bearer form without coupons and only in denominations of $1,000 and any integral
multiple of $1,000 in excess thereof. Definitive Registered Securities shall be
issuable in registered form without interest coupons in denominations of $1,000
and any integral multiple thereof.
SECTION 3.03. Execution, Authentication, Delivery and Dating. The
Securities shall be executed on behalf of the Issuer by its Chairman of the
Board, its Vice Chairman of the Board, its President or one of its Vice
Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. 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 the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
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<PAGE>
At any time and from time to time after the execution and delivery of this
Indenture, the Issuer may deliver Securities executed by the Issuer to the
Trustee for authentication, together with a Issuer Order for the authentication
and delivery of such Securities; and the Trustee in accordance with such Issuer
Order shall authenticate and deliver such Securities as in this Indenture
provided and not otherwise.
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 thereto, 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 at maturity of Original Securities for cancelation in
accordance with Section 3.09 of this Indenture, and the Trustee in accordance
with the Issuer Order shall authenticate and deliver such Securities. In
authenticating such Exchange Securities, and accepting the additional
responsibilities under this Indenture in relation to such Securities, the
Trustee shall be entitled to receive, and (subject to Section 6.01) shall be
fully protected in relying upon, an Opinion of Counsel stating,
(a) that such Exchange Securities have been duly and validly issued in
accordance with the terms of the Indenture, and are entitled to all the
rights and benefits set forth herein; and
(b) that the issuance of the Exchange Securities in exchange for the
Original Securities has been effected in compliance with the Securities Act
of 1933, as amended.
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 3.04. Temporary Securities. Pending the preparation of definitive
Securities, the Issuer may
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<PAGE>
execute, and upon Issuer Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise 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 of such Securities.
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 10.02, without charge to
the Holder. Upon surrender for cancelation of any one or more temporary
Securities, the Issuer shall execute and the Trustee shall authenticate and
deliver in exchange therefor a like tenor and principal amount of definitive
Securities of authorized denominations. Until so exchanged, the temporary
Securities shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities.
SECTION 3.05. Registration, Registration of Transfer and Exchange. (a) 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 designated pursuant to Section 10.02 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 Definitive Securities and of transfers of such Securities. The Trustee is
hereby appointed "Security Registrar" for the purpose of registering such
Securities and transfers of such Securities as herein provided. Such Security
Register shall distinguish between Original Securities and Exchange Securities.
Subject to the other provisions of this Indenture regarding restrictions on
transfer, upon surrender for registration of transfer of any Definitive Security
at an office or agency of the Issuer designated pursuant to Section 10.02 for
such purpose in accordance with the terms hereof, 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 and of a like tenor and aggregate
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<PAGE>
principal amount and bearing such restrictive legends as may be required by this
Indenture.
At the option of the Holder, and subject to the other provisions of this
Section 3.05, Securities may be exchanged for other Securities of any authorized
denominations and of a like tenor and aggregate principal amount, upon surrender
of such Securities to be exchanged at such office or agency. Whenever any
Securities are so surrendered for exchange, the Issuer shall execute, and the
Trustee shall authenticate and deliver, 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 (subject to the provisions in the Original Securities regarding the
payment of Special Interest) 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 Trustee) 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 to the Holder 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 Section 3.04, 3.05(d), 9.06 or 11.08 or in accordance
with any Offer to Purchase pursuant to Section 10.13 or 10.17 not involving any
transfer.
The Issuer 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 11.04 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.
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(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
3.05(b) shall be made only in accordance with this Section 3.05(b).
(i) 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 wishes to acquire the
same in the form of a beneficial interest in the Regulation S Global
Security, such transfer may be effected only in accordance with the
provisions of this Clause (b)(i) and Clause (b)(v) below 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 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)(v) below, shall
reduce or cause to be reduced 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 3.05(e).
(ii) 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 wishes 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)(ii) 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
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amount be debited from another specified Agent Member's account and (B) if
such transfer is to occur during the Restricted 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 or cause to be reduced 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 3.05(e).
(iii) Definitive Security to Definitive Security. A Security that is a
Definitive Security may be transferred, in whole or in part, to a Person
who takes delivery in the form of another Security that is a Definitive
Security as provided in Section 3.05(a), provided that, if the Security to
be transferred in whole or in part is a Restricted Security, or is a
Regulation S Security and the transfer is to occur during the Restricted
Period, then the Trustee shall have received (A) a Restricted Securities
Certificate, satisfactory to the Trustee and duly executed by the
transferor Holder or his attorney duly authorized in writing, in which case
the transferee Holder shall take delivery in the form of a Restricted
Security, or (B) a Regulation S Certificate, satisfactory to the Trustee
and duly executed by the transferor Holder or his attorney duly authorized
in writing, in which case the transferee Holder shall take delivery in the
form of a Regulation S Security (subject in every case to Section 3.05(c)).
(iv) Exchanges between Global Security and Definitive Security. A
beneficial interest in a Global Security may be exchanged for a Security
that is a Definitive Security as provided in Section 3.05(d), provided
that, if such interest is a beneficial interest in the Restricted Global
Security, or if such interest is a beneficial interest in the Regulation S
Global Security and such exchange is to occur during the Restricted Period,
then such interest shall be exchanged for a Restricted Security (subject in
each case to Section 3.05(c)).
(v) Regulation S Global Security to be Held Through Euroclear or Cedel
during Restricted Period. The Issuer shall use its best efforts to cause
the Depositary to ensure that, until the expiration of the
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Restricted Period, 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),
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; provided that this Clause (b)(v) shall not prohibit any
transfer or exchange of such an interest in accordance with Clause (b)(ii)
above.
(c) Securities Act Legends. Rule 144A Securities and their Successor
Securities shall bear a Restricted Securities Legend, and the Regulation S
Securities and their Successor Securities shall bear a Regulation S Legend,
subject to the following:
(i) subject to the following Clauses of this Section 3.05(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;
(ii) subject to the following Clauses of this Section 3.05(c), a new
Security which is a Definitive Security and is issued in exchange for 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 3.05(b)(iii) or (iv)
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;
(iii) Registered Securities shall not bear a Securities Act Legend;
(iv) 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
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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 deliver such a new
Security in exchange for or in lieu of such other Security as provided in
this Article III;
(v) 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
III; and
(vi) notwithstanding the foregoing provisions of this Section 3.05(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 deliver a
new Security bearing a Restricted Securities Legend in exchange for such
Successor Security as provided in this Article III.
(d) Exchanges of Global Security for Definitive Security. Transfers of
Global Securities shall be by delivery. The Book-Entry Depositary and the Issuer
have agreed that the Global Securities shall only be delivered in the
circumstances described in the Deposit Agreement. Notwithstanding any other
provision in this Indenture, no Global Security may be exchanged in whole or in
part for Definitive Securities unless (i) the Depositary notifies the Issuer or
the Book-Entry Depositary in writing that it (or its nominee) is unwilling or
unable to continue to act as depositary or ceases to be a clearing agency
registered under the Exchange Act, and, in either case, a successor depositary
registered as a clearing agency under the Exchange Act is not appointed by the
Issuer within 90 days, (ii) at any time if the Issuer determines that the Global
Securities (in whole but not in part) should be exchanged for Definitive
Securities; provided, that (x) such exchange is required by (A) any applicable
law or (B) any event beyond the Issuer's control or (y) payments of interest on
any Global Security, Depositary Interest or beneficial
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interest are, or would become, subject to any deduction or withholding for
taxes, (iii) at any time after the consummation of the Exchange Offer, if the
owner of a beneficial interest requests such exchange in writing delivered to
the Depositary and through the Depositary to the Book-Entry Depositary and the
Trustee, or (iv) if the Book-Entry Depositary is at any time unwilling or unable
to continue as Book-Entry Depositary and a successor Book-Entry Depositary is
not appointed by the Issuer within 90 days. Upon the occurrence of any of the
preceding events, Definitive Securities shall be issued in such names as the
Book-Entry Depositary shall instruct the Trustee based on the instructions of
the Depositary.
(e) If any Global Security is to be exchanged for other Securities or
canceled in whole, it shall be surrendered by or on behalf of the Book-Entry
Depositary or its nominee to the Trustee, as Security Registrar, for exchange or
cancelation as provided in this Article III. If any Global Security is to be
exchanged for other Securities or canceled 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 cancelation as provided in this Article III or (ii) the principal
amount thereof shall be reduced or increased by an amount equal to the portion
thereof to be so exchanged or canceled, 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 by the Book-Entry Depositary
as directed by the Trustee in such Book-Entry Depositary's book-entry system to
the corresponding Depositary Interest, whereupon the Trustee, in accordance with
the Applicable Procedures, shall instruct the Depositary or its authorized
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 3.05(b) and as otherwise provided in this Article III, authenticate and
deliver any Securities issuable in exchange for such Global Security (or any
portion thereof) to or upon the order of, and registered (if applicable) in such
names as may be directed by, the Book-Entry 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 Book-Entry Depositary or the
Depositary or any of their authorized
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representatives which is given or made pursuant to this Article III if such
order, direction or request is given or made in accordance with the Depositary
Agreement with respect to the Book-Entry Depositary and the Applicable
Procedures with respect to the Depositary.
SECTION 3.06. 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 deliver 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
their satisfaction of the destruction, loss or theft of any Security and (ii)
such security or indemnity as may be required by them to save each of them and
any agent of either of them harmless, then, in the absence of written notice to
the Issuer or the Trustee that such Security has been acquired by a bona fide
purchaser, the Issuer shall execute and the Trustee shall authenticate and
deliver, 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 may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
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
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remedies with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Securities.
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SECTION 3.07. 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 bearer thereof on the Interest
Payment Date in the case of a Global Security in bearer form and, in the case of
a Definitive Security, 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.
Any interest (including Special 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 (a) bear interest at the rate per
annum stated in the form of Security included herein (to the extent that the
payment of such interest shall be legally enforceable), and (b) forthwith cease
to be payable to the bearer thereof on such Interest Payment Date with respect
to a Global Security in bearer form and, with respect to a Definitive Security,
to the Holder on the relevant Regular Record Date by virtue of having been such
Holder, and, in each case, such Defaulted Interest may be paid by the Issuer, at
its election in each case, as provided in Clause (a) or (b) below:
(a) The Issuer may elect to make payment of any Defaulted Interest to
the bearer of such Security on any Special Payment Date (as defined below)
with respect to any Global Security in bearer form and, with respect to a
Definitive Security, to the Persons in whose names the Securities (or their
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
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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 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, 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, with respect to any Definitive Security,
to the Persons in whose names the Securities (or their 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 (b). As used in this Clause (a), "Special Payment Date"
means the date on which Defaulted Interest is paid to the Holder.
(b) 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 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.
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 3.08. Persons Deemed Owners. Prior to due presentment of a Security
for registration of transfer, the Issuer, the Guarantor, the Trustee and any
agent of the Issuer, the Guarantor or the Trustee may treat the Person in whose
name a Definitive Security is registered as the owner of such Security and may
treat the bearer of a Global Security as the owner of such Security, in each
case, for the purpose of receiving payment of principal of and premium, if any,
and (subject to Section 3.07) interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Issuer, the Guarantor, the Trustee nor any agent of the Issuer, the Guarantor or
the Trustee shall be affected by notice to the contrary.
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SECTION 3.09. Cancelation. All Securities surrendered for payment,
redemption, registration of transfer, exchange or pursuant to any Offer to
Purchase pursuant to Section 10.13 or 10.17 shall, if surrendered to any Person
other than the Trustee, be delivered to the Trustee and shall be promptly
canceled by it. The Issuer may at any time deliver to the Trustee for
cancelation 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 in accordance with its
standard procedures or as directed by an Issuer Order; provided, however, that
the Trustee shall not be required to destroy such Securities.
SECTION 3.10. Computation of Interest. Interest on the Securities shall be
computed on the basis of a 360-day year of twelve 30-day months, provided,
however, that Special Interest on Original Securities shall be computed on the
basis of a 365- or 366-day year, as the case may be, and the number of days
actually elapsed.
SECTION 3.11. CUSIP and ISIN Numbers. The Issuer in issuing Securities may
use "CUSIP" and "ISIN" numbers (if then generally in use) in addition to serial
numbers; if so, the Trustee shall use such "CUSIP" and "ISIN" numbers in
addition to serial numbers in notices of redemption and repurchase as a
convenience to Holders; provided that any such notice may state that no
representation is made as to the correctness of such CUSIP and ISIN numbers
either as printed on the Securities or as contained in any notice of a
redemption or repurchase and that reliance may be placed only on the serial or
other identification numbers printed on the Securities, and any such redemption
or repurchase shall not be affected by any defect in or omission of such CUSIP
and ISIN numbers.
ARTICLE IV
Guarantee Of Securities
SECTION 4.01. Guarantee. Subject to the provisions of this Article Four,
the Guarantor hereby fully, unconditionally and irrevocably guarantees to each
Holder and to the Trustee on behalf of the Holders: (i) the due
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and punctual payment of the principal of, premium, if any, on and interest
(including Special Interest) on each Security, when and as the same shall become
due and payable, whether at maturity, by acceleration or otherwise, the due and
punctual payment of interest on the overdue principal of and interest, if any,
on the Securities, to the extent lawful, and the due and punctual performance of
all other obligations of the Issuer to the Holders or the Trustee, all in
accordance with the terms of such Security and this Indenture and (ii) in the
case of any extension of time of payment or renewal of any Securities or any of
such other obligations, that the same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, at Stated
Maturity, by acceleration or otherwise. The Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
merger or bankruptcy of the Issuer, any right to require a proceeding first
against the Issuer, the benefit of discussion, protest or notice with respect to
any such Security or the debt evidenced thereby and all demands whatsoever, and
covenants that this Securities Guarantee will not be discharged as to any such
Security except by payment in full of the principal thereof and interest thereon
and as provided in Section 12.01 and Section 12.02 (subject to Section 12.06).
The maturity of the obligations guaranteed hereby may be accelerated as provided
in Article Five for the purposes of this Article Four. In the event of any
declaration of acceleration of such obligations as provided in Article Five,
such obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantor for the purpose of this Article Four. In addition,
without limiting the foregoing provisions, upon the effectiveness of an
acceleration under Article Five, the Trustee shall promptly make a demand for
payment on the Securities under the Guarantee provided for in this Article Four.
If the Trustee or the Holder of any Security is required by any court or
otherwise to return to the Issuer or the Guarantor, or any custodian, receiver,
liquidator, trustee, sequestrator or other similar official acting in relation
to the Issuer or the Guarantor, any amount paid to the Trustee or such Holder in
respect of a Security, this Securities Guarantee, to the extent theretofore
discharged, shall be reinstated in full force and effect. The Guarantor further
agrees, to the fullest extent that it may lawfully do so, that, as between it,
on the one hand, and the Holders and the Trustee, on the other hand, the
maturity of the obligations guaranteed hereby may be accelerated as provided in
Article Five hereof for the purposes of this Securities
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Guarantee, notwithstanding any stay, injunction or other prohibition extant
under any applicable bankruptcy law preventing such acceleration in respect of
the obligations guaranteed hereby.
Until such time as the Securities are fully and finally paid, including all
interest, premium, principal and liquidated damages with respect thereto, the
Guarantor hereby irrevocably waives any claim or other rights which it may now
or hereafter acquire against the Issuer that arise from the existence, payment,
performance or enforcement of its obligations under this Securities Guarantee
and this Indenture, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution, indemnification, any right to
participate in any claim or remedy of the Holders against the Issuer or any
collateral which any such Holder or the Trustee on behalf of such Holder
hereafter acquires, whether or not such claim, remedy or right arises in equity,
or under contract, statute or common law, including, without limitation, the
right to take or receive from the Issuer, directly or indirectly, in cash or
other property or by setoff or in any other manner, payment or security on
account of such claim or other rights. If any amount shall be paid to the
Guarantor in violation of the preceding sentence and the principal of, premium,
if any, and accrued interest on the Securities shall not have been paid in full,
such amount shall be deemed to have been paid to the Guarantor for the benefit
of, and held in trust for the benefit of, the Holders, and shall forthwith be
paid to the Trustee for the benefit of the Holders to be credited and applied
upon the principal of, premium, if any, and accrued interest on the Securities.
The Guarantor acknowledges that it will receive direct and indirect benefits
from the issuance of the Securities pursuant to this Indenture and that the
waivers set forth in this Section 4.01 are knowingly made in contemplation of
such benefits.
The Guarantee set forth in this Section 4.01 shall not be valid or become
obligatory for any purpose with respect to a Security until the certificate of
authentication on such Security shall have been signed by or on behalf of the
Trustee.
SECTION 4.02. Obligations Unconditional. Subject to Section 4.05, nothing
contained in this Article Four or elsewhere in this Indenture or in the
Securities is intended to or shall impair, as among the Guarantor and the
holders of the Securities, the obligation of the Guarantor, which is absolute
and unconditional, upon failure by the Issuer, to
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pay to the holders of the Securities the principal of, premium, if any, and
interest on the Securities as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the holders of the Securities and creditors of the Guarantor, nor
shall anything herein or therein prevent the holder of any Securities or the
Trustee on their behalf from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture.
Without limiting the foregoing, nothing contained in this Article Four will
restrict the right of the Trustee or the holders of the Securities to take any
action to declare the Guarantee to be due and payable prior to the Stated
Maturity of the Securities pursuant to Section 5.02 or to pursue any rights or
remedies hereunder.
SECTION 4.03. Notice to Trustee. The Guarantor shall give prompt written
notice to the Trustee of any fact known to the Guarantor which would prohibit
the making of any payment to or by the Trustee in respect of the Securities
Guarantee pursuant to the provisions of this Article Four.
ARTICLE V
Remedies
SECTION 5.01. 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 in the payment of any interest upon any Security when it
becomes due and payable, and continuance of such default for a period of 30
days; or
(b) default in the payment of the principal of (or premium, if any,
on) any Security when due; or
(c) default in the payment of principal and interest upon any Security
required to be purchased pursuant to an Offer to Purchase pursuant to
Sections 10.13 or 10.17; or
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(d) default in the performance, or breach, of Section 8.01, 10.13 or
10.17; or
(e) default in the performance, or breach, of any covenant or warranty
of the Issuer or Guarantor in this Indenture or in any Security (other than
a covenant or warranty a default in whose performance or whose breach is
elsewhere in this Section specifically dealt with), and continuance of such
default or breach for a period of 60 days after there has been given, by
registered or certified mail, to the Issuer by the Trustee or to the Issuer
and the Trustee by the Holders of at least 25% in aggregate principal
amount at maturity of the Outstanding Securities a written notice
specifying such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder; or
(f) a default or defaults under any bond(s), debenture(s), note(s) or
other evidence(s) of indebtedness by the Guarantor, the Issuer or any
Subsidiary of the Guarantor or under any mortgage(s), indenture(s) or
instrument(s) under which there may be issued or by which there may be
secured or evidenced any indebtedness of such type by the Guarantor, the
Issuer or any Subsidiary of the Guarantor with a principal amount then
outstanding, individually or in the aggregate, in excess of $10 million,
whether such indebtedness now exists or shall hereafter be created, which
default or defaults shall constitute a failure to pay in excess of $10
million of the principal of such indebtedness when due at the final
maturity thereof, or shall have resulted in excess of $10 million of
indebtedness becoming or being declared due and payable prior to the date
on which it would otherwise have become due and payable; or
(g) a final judgment or final judgments for the payment of money are
entered against the Guarantor, the Issuer or any Subsidiary of the
Guarantor in an aggregate amount in excess of $10 million (net of
indemnities and funds actually received or to be received within 90 days of
such judgment) by a court or courts of competent jurisdiction, which
judgments remain undischarged or unbonded for a period (during which
execution shall not be effectively stayed) of 60 days after the right to
appeal all such judgments has expired; or
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(h) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Guarantor, the Issuer or any
Significant Subsidiaries in an involuntary case or proceeding under any
applicable bankruptcy, insolvency, reorganization or other similar law or
(B) a decree or order adjudging the Guarantor, the Issuer or any
Significant Subsidiaries a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Guarantor, the Issuer or any
Significant Subsidiaries under any applicable law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Guarantor, the Issuer or any Significant
Subsidiaries or of any substantial part of its property, or ordering the
winding up or liquidation of its affairs, 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
(i) the commencement by the Guarantor, the Issuer or any Significant
Subsidiaries of a voluntary case or proceeding under any 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 it to the entry of a decree or order for relief in respect of
the Guarantor, the Issuer or any Significant Subsidiaries in an involuntary
case or proceeding under any applicable bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the filing by it
of a petition or answer or consent seeking reorganization or relief under
any applicable law, or the consent by it to the filing of such petition or
to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of
the Guarantor, the Issuer or any Significant Subsidiaries or of any
substantial part of its property, or the making by it of an assignment for
the benefit of creditors, or the admission by it in writing of its
inability to pay its debts generally as they become due, or the taking of
corporate action by the Guarantor, the Issuer or any Significant
Subsidiaries in furtherance of any such action.
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment. If an
Event of Default (other
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than an Event of Default specified in Section 5.01(h) or (i)) occurs and is
continuing, then and in every such case the Trustee or the Holders of not less
than 25% in principal amount at maturity of the Outstanding Securities may
declare the principal amount at maturity of all 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 such Accreted Value and any
accrued interest shall become immediately due and payable. If an Event of
Default specified in Section 5.01(h) or (i) occurs, the Accreted Value 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 based on acceleration
has been obtained by the Trustee as hereinafter in this Article provided, the
Holders of a majority in principal amount at maturity 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) all overdue interest on all Securities,
(B) the Accreted Value 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 interest thereon at the rate borne by the Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Securities,
and
(D) 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 Accreted
Value of Securities which have
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become due solely by such declaration of acceleration, have been cured or
waived as provided in Section 5.13.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 5.03. 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 principal (and premium, if any) and on any overdue interest, at the rate
provided by 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.
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
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most effective 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 5.04. Trustee May File Proofs of Claim. In case of any judicial
proceeding relative to the Issuer (or any other obligor upon the Securities),
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 and receive any moneys, securities or other property
payable or deliverable upon the exchange of the Securities or upon 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 6.07.
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; provided, however,
that the Trustee may, on behalf of the Holders, vote for the election of a
trustee in bankruptcy or similar official and be a member of a creditors or
other similar committee.
SECTION 5.05. 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 counsel, be for the ratable benefit of
the
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Holders of the Securities in respect of which such judgment has been recovered.
SECTION 5.06. Application of Money Collected. Any money collected by the
Trustee pursuant to this Article shall be applied in the following order, at the
date or dates fixed by the Trustee and, in case of the distribution of such
money on account of principal (or premium, if any) or interest, 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 due the Trustee under Section
6.07; and
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Securities 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 5.07. 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 aggregate principal amount at
maturity of the Outstanding Securities shall have made written request to
the Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(3) such Holder or Holders have offered and, if requested, provided to
the Trustee reasonable indemnity 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 and, if requested, provision of indemnity has failed to institute
any such proceeding; and
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(5) no direction 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 at maturity 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 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 5.08. 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 3.07) 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
without the consent of such Holder.
SECTION 5.09. 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 5.10. 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 3.06, 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
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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 5.11. 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 5.12. Control by Holders. The Holders of a majority in principal
amount at maturity 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) such direction shall not be in conflict with any rule of law or
with this Indenture or expose the Trustee to personal liability (as
determined in the sole discretion of the Trustee), and
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
SECTION 5.13. Waiver of Past Defaults. The Holders of not less than a
majority in aggregate principal amount at maturity 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 or
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(3) arising from failure to purchase any Security tendered pursuant to
Sections 10.13 and 10.17 of this Indenture.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.
SECTION 5.14. Undertaking for Costs. In any suit for the enforcement of any
right or remedy under this Indenture, or in any suit against the Trustee for any
action taken or omitted by it as Trustee, a court may require any party litigant
in such suit to file an undertaking to pay the costs of such suit, and may
assess costs against any such party litigant, in the manner and to the extent
provided in the Trust Indenture Act; provided that neither this Section nor the
Trust Indenture Act shall be deemed to authorize any court to require such an
undertaking or to make such an assessment in any suit instituted by the Issuer
or the Guarantor; further provided, that the provisions of this Section 5.14
shall not apply to any suit instituted by the Trustee, to any suit instituted by
any Holder or group of Holders holding more than 10% in aggregate principal
amount at maturity of the Outstanding Securities, or to any suit instituted by
any Holder for the enforcement of the payment of the principal of, or premium,
if any, or interest on any Security on or after the respective due dates
expressed in such Security.
SECTION 5.15. Waiver of Stay or Extension Laws.
Each of the Issuer and the Guarantor covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, or plead, or in any
manner whatsoever claim 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 each of the
Issuer and the Guarantor (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
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ARTICLE VI
The Trustee
SECTION 6.01. Certain Duties and Responsibilities. (a) Except during the
continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture, and no implied covenants,
duties 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; but in
the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee shall
be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture.
(b) In case 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 their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own wilful misconduct, except that
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) 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 shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction
of the Holders of a majority in principal amount at maturity
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of the Outstanding Securities relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this
Indenture; 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 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 relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.
SECTION 6.02. Notice of Defaults. The Trustee shall give the Holders notice
of any default hereunder known to the Trustee as and to the extent provided by
the Trust Indenture Act; provided, however, that in the case of any default of
the character specified in Section 5.01(e), no such notice to Holders shall be
given until at least 30 days after the occurrence thereof. 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.
SECTION 6.03. Certain Rights of Trustee. Subject to the provisions of
Section 6.01:
(a) the Trustee may conclusively rely and shall be completely
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;
(b) any request or direction of the Issuer mentioned herein shall be
sufficiently evidenced by a Issuer Request or Issuer Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
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(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 from the Issuer and be completely protected in
relying upon an Officers' Certificate received in response to such request;
(d) the Trustee may consult with counsel of its selection and the
written 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 against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction reasonably satisfactory to the Trustee;
(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 may (but shall have no obligation to) 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 or the Guarantor, personally or by agent or
attorney;
(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 with respect to any action taken,
suffered or omitted to be taken by
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it in accordance with the direction of Holders of Outstanding Securities as
provided in Sections 5.02, 5.12 and 5.13 hereof; and
(i) for all purposes under this Indenture, the Trustee shall not be
deemed to have notice of any Event of Default unless a Responsible Officer
of the Trustee has actual knowledge thereof or unless written notice of any
event which is in fact such a default is received by the Trustee at the
Corporate Trust Office of the Trustee, and such notice references the
Securities and this Indenture.
SECTION 6.04. Not Responsible for Recitals or Issuance of Securities. The
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 their correctness. The Trustee
makes no representations as to the validity or sufficiency of this Indenture or
of the Securities or the Securities Guarantee. The Trustee shall not be
accountable for the use or application by the Issuer of Securities or the
proceeds thereof.
SECTION 6.05. May Hold Securities. The Trustee, 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 6.08 and 6.13, may otherwise deal with the Issuer or the Guarantor with
the same rights it would have if it were not Trustee, Paying Agent, Security
Registrar or such other agent.
SECTION 6.06. 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 with the Issuer.
SECTION 6.07. Compensation and Reimbursement. The Issuer and the Guarantor
jointly and severally agree
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (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 expenses
and disbursements of its agents 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 for, and to hold it harmless against, any
loss, liability or expense 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 enforcing this Indenture
against the Issuer or the Guarantor (including, without limitation, this
Section 6.07) and of defending itself against any claim (whether asserted
by any Holder or the Issuer or the Guarantor) or liability in connection
with the exercise or performance of any of its powers or duties hereunder.
The provisions of this Section 6.07 shall survive any termination of this
Indenture and the resignation or removal of the Trustee.
As security for the performance of the obligations of the Issuer under this
Section 6.07, the Trustee shall have a lien prior to the Securities upon all
property and funds held or collected by the Trustee, except funds held in trust
for the payment of principal of (and premium, if any) or interest on particular
Securities. The Trustee's right to receive payment of any amounts due under this
Section 6.07 shall not be subordinate to any other liability or indebtedness of
the Issuer (even though the Securities may be so subordinated).
When the Trustee incurs expenses or renders services in connection with an
Event of Default specified in Section 5.01(h) or Section 5.01(i), the expenses
(including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable Federal or State bankruptcy, insolvency or
other similar law.
The provisions of this Section shall survive the termination of this
Indenture or the earlier resignation or termination of the Trustee.
SECTION 6.08. Disqualification; Conflicting Interests. If the Trustee has
or shall acquire a
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conflicting interest within the meaning of the Trust Indenture Act, the Trustee
shall either eliminate such interest 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 6.09. 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 and has a combined capital and surplus
of at least $50,000,000 and its Corporate Trust Office in the Borough of
Manhattan, the City of New York, New York. If such Person publishes reports of
condition at least annually, pursuant to law or to the requirements of a
Federal, State, Territorial or District of Columbia supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such Person 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 6.10. 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 6.11, at which time the
retiring Trustee shall be fully discharged from its obligations hereunder.
(b) The Trustee may resign at any time by giving written notice thereof to
the Issuer. If an instrument of acceptance by a successor Trustee shall not have
been delivered to the Trustee within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount at maturity 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 6.08 after written
request therefor by the
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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 6.09 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 a Board Resolution may remove the
Trustee, or (ii) subject to Section 5.14, 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 a Board Resolution, 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 at maturity of the Outstanding Securities delivered
to the Issuer and 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 no
successor Trustee shall have been so appointed by the Issuer or the Holders and
accepted appointment in the manner hereinafter provided, 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 1.06. Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.
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SECTION 6.11. Acceptance of Appointment by Successor. Every successor
Trustee appointed hereunder shall execute, acknowledge and deliver to the Issuer
and to the retiring Trustee an 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 Trustee under
Section 6.07, 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.
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 6.12. 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, without the execution
or filing of any paper or any further act on the part of any of the parties
hereto; provided that such corporation shall be otherwise qualified and eligible
under this Article. 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 may adopt such
authentication and deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such Securities.
SECTION 6.13. Preferential Collection of Claims Against Issuer or
Guarantor. If and when the Trustee shall be or become a creditor of the Issuer
or Guarantor (or any other obligor upon the Securities), the Trustee shall be
subject to the provisions of the Trust Indenture Act
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regarding the collection of claims against the Issuer or Guarantor (or any such
other obligor).
SECTION 6.14. Appointment of Authenticating Agent. The Trustee may appoint
an Authenticating Agent or Agents with respect to the Securities which shall be
authorized to act on behalf of the Trustee to authenticate Securities issued
upon original issue and upon exchange, registration of transfer or partial
redemption thereof or pursuant to Section 3.06, 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 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 a combined capital and surplus of
not less than $50,000,000 and subject to supervision or examination by Federal
or State authority. If such Authenticating Agent 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 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, without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent; provided,
such corporation shall be otherwise eligible under this Section.
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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 acceptable to the Issuer and shall give notice of such
appointment in the manner provided in Section 1.06 to all Holders of Securities.
Any successor Authenticating 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, subject to the provisions
of Section 6.07.
If an appointment is made pursuant to this Section, the Securities may have
endorsed thereon, in lieu of the Trustee's certificate of authentication, an
alternative certificate of authentication in the following form:
This is one of the Securities referred to in the within-mentioned
Indenture.
Dated:
THE CHASE MANHATTAN BANK, as
Trustee,
by
--------------------------,
as Authenticating Agent
by
---------------------------
Authorized Signatory
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SECTION 6.15. Withholding Taxes. Notwithstanding any other provision of
this Agreement, the Trustee, as agent for the Issuer and the Guarantor, shall
exclude and withhold from each payment of principal and interest and other
amounts due hereunder or under the Securities or the Securities Guarantee any
and all withholding taxes applicable thereto as required by law. The Trustee
agrees to act as such withholding agent and, in connection therewith, whenever
any present or future taxes or similar charges are required to be withheld with
respect to any amounts payable in respect of the Securities or the Securities
Guarantee, to withhold such amounts and timely pay the same to the appropriate
authority in the name of and on behalf of the Holders of the Securities, that it
will furnish to the Holders of the Securities such forms or certificates as are
necessary or appropriate to provide the information described in Section
10.09(c)(i) hereof or make the declaration or claim described in Section
10.09(c)(ii) hereof, that it will file any necessary withholding tax returns or
statements when due, and that, as promptly as possible after the payment
thereof, it will deliver to each Holder of a Security appropriate documentation
showing the payment thereof, together with such additional documentary evidence
as such Holders may reasonably request from time to time.
In the event that the Trustee is also acting as Paying Agent,
Authenticating Agent, transfer agent, or Registrar hereunder, the rights and
protections afforded to the Trustee pursuant to this Article Six shall also be
afforded to such Paying Agent, Authenticating Agent, transfer agent, or
Registrar.
ARTICLE VII
Holders' Lists and Reports by Trustee and Issuer
SECTION 7.01. Issuer to Furnish Trustee Names and Addresses of Holder. The
Issuer will furnish or cause to be furnished to the Trustee (a) semi-annually,
not more than 15 days after each Regular Record Date, 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;
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excluding from any such list names and addresses received by the Trustee in
its capacity as Security Registrar.
SECTION 7.02. Preservation of Information; Communications to Holders. (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 7.01 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 7.01 upon
receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with respect to
their rights under this Indenture or under the Securities, and the corresponding
rights and duties of the Trustee, shall be as 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 names and addresses of Holders made pursuant to the Trust
Indenture Act.
SECTION 7.03. Reports by Trustee. (a) Within 30 days after January 1 of
each year, commencing with the first January 1 following the first issuance of
Securities pursuant to Section 3.01, if required by Section 3.13(a) of the Trust
Indenture Act, the Trustee shall transmit, pursuant to Section 3.13(c) of the
Trust Indenture Act, a brief report dated as of such January 1 with respect to
any of the events specified in said Section 3.13(a) which may have occurred
since the later of the immediately preceding January 1 and the date of this
Indenture.
(b) The Trustee shall transmit the reports required by Section 3.13(b) of
the Trust Indenture Act and Section 6.02 hereof at the times specified therein.
(c) Reports pursuant to this Section shall be transmitted in the manner and
to the persons required by Sections 3.13(c) and 3.13(d) of the Trust Indenture
Act.
(d) A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange upon which the
Securities are listed, with the Commission and with the Issuer. The Issuer
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will promptly notify the Trustee when the Securities are listed on any stock
exchange.
SECTION 7.04. Reports by Issuer and Guarantor. Each of the Guarantor and
the Issuer shall file with the Trustee and the Commission, and 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 such Act and in the manner set forth in
Section 10.18.
SECTION 7.05. Officers' Certificate with Respect to Change in Interest
Rates. Within five days after any Step-Up or Step-Down Date, the Issuer shall
deliver an Officers' Certificate to the Trustee stating the new interest rate
and the date on which it became effective.
ARTICLE VIII
Merger, Consolidation, Etc.
SECTION 8.01. Mergers, Consolidations and Certain Sales of Assets. Neither
the Guarantor nor the Issuer may, in a single transaction or a series of related
transactions, (i) consolidate with or merge into any other Person or permit any
other Person to consolidate with or merge into the Guarantor or the Issuer, or
(ii) directly or indirectly, transfer, sell, lease or otherwise dispose of all
or substantially all of its assets to any other Person, unless:
(1) in a transaction in which the Guarantor or the Issuer, as
applicable, does not survive or in which the Guarantor or the Issuer sells,
leases or otherwise disposes of all or substantially all of its assets to
any other Person (other than, in any such case, the Guarantor or the
Issuer), the successor entity to the Guarantor or the Issuer is organized
under the laws of the United States of America or any State thereof or the
District of Columbia, the British Virgin Islands, Cayman Islands, The
Netherlands, Ireland or Jersey and shall expressly assume, by a
supplemental indenture executed and delivered to the Trustee in form
satisfactory to the Trustee, all of the Guarantor's or the Issuer's
obligations under the Indentures;
(2) immediately before and after giving effect to such transaction and
treating any Debt which becomes an obligation of the Guarantor or a
Subsidiary as a result of such transaction as having been Incurred by the
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Guarantor or such 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) immediately after giving effect to such transaction, the
Consolidated Net Worth of the Guarantor (or other successor entity to the
Guarantor) is equal to or greater than that of the Guarantor immediately
prior to the transaction;
(4) if, as a result of any such transaction, property or assets of the
Guarantor or any Subsidiary would become subject to a Lien prohibited by
Section 10.15, the Guarantor or the successor entity to the Guarantor shall
have secured the Securities as required by said covenant; and
(5) in the event that the continuing Person is incorporated in a
jurisdiction other than the United States or the jurisdiction in which such
Person was incorporated immediately prior to such transaction, (A) the
Issuer delivers to the Trustee an Opinion of Counsel stating that the
obligations of the continuing Person under the Indenture are enforceable
under the laws of the new jurisdiction of its incorporation to the same
extent as the obligations of the Issuer or the Guarantor, as the case may
be, under the Indenture immediately prior to such transaction; (B) the
continuing Person agrees in writing to submit to jurisdiction and appoints
an agent for the service of process, each under terms substantially similar
to the terms contained in the Indenture with respect to the Issuer or the
Guarantor, as the case may be; (C) the continuing Person agrees in writing
to pay Additional Amounts as provided under this Indenture under Section
10.09 with respect to the Issuer or the Guarantor, as the case may be,
except that such Additional Amount shall relate to any withholding tax
whatsoever regardless of any change of law (subject to exceptions
substantially similar to those contained in Section 10.09); (D) the Board
of Directors of the Guarantor determines in good faith that such
transaction will have no material adverse effect on any Holder and a Board
Resolution to that effect is delivered to the Trustee; and (E) the
principal purpose of the continuing Person being incorporated in such
jurisdiction is to obtain tax benefits for the
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Guarantor, the Issuer, their direct and indirect stockholders or the
Holders.
SECTION 8.02. Successor Substituted. Upon any consolidation of the Issuer
with, or merger of the Issuer with or into, any other Person or any conveyance,
transfer or lease of the properties and assets of the Issuer substantially as an
entirety in accordance with Section 8.01, the successor Person formed by such
consolidation or into which the Issuer is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Issuer under this Indenture with the same
effect as if such successor Person had been named 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 IX
Supplemental Indentures
SECTION 9.01. Supplemental Indentures Without Consent of Holders. Without
the consent of any Holders, the Issuer and the Guarantor, each 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 the Issuer or the
Guarantor and the assumption by any such successor of the covenants of the
Issuer or the Guarantor herein and in the Securities; or
(2) to add to the covenants of the Issuer or the Guarantor for the
benefit of the Holders, or to surrender any right or power herein conferred
upon the Issuer or the Guarantor; or
(3) to secure the Securities pursuant to the requirements of Section
10.15 or otherwise; or
(4) to modify, eliminate or add to the provisions of this Indenture to
such extent as shall be necessary to comply with any requirement of the
Commission in order to effect qualification of this Indenture under the
Trust Indenture Act in connection with the issuance of Exchange Securities
or Registered Securities or
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thereafter to 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 provide for uncertificated Securities in addition to or in
place of certified Securities.
SECTION 9.02. Supplemental Indentures with Consent of Holders. With the
written consent of the Holders of not less than a majority in aggregate
principal amount at maturity of the Outstanding Securities, by Act of said
Holders delivered to the Issuer and the Trustee, and consistent with Section
5.13, the Issuer and the Guarantor, each when authorized by a Board Resolution,
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; provided, however, that
no such supplemental indenture shall, without the written 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 Accreted Value thereof or the
rate of interest thereon or any premium payable thereon, or change the coin
or currency in which, any Security or any premium or 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 at maturity 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
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of this Indenture or certain defaults hereunder and their consequences)
provided for in this Indenture, or
(3) modify any of the provisions of this Section, Section 5.13 or
Section 10.20, 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 making of an Offer with respect to an Offer to
Purchase pursuant to Sections 10.13 or 10.17, modify the provisions of this
Indenture with respect to such Offer to Purchase in a manner materially
adverse to such Holder, or
(5) release the Guarantor from its Securities Guarantee.
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 9.03. 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
6.01) 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 9.04. 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 9.05. 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 9.06. 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 X
Covenants
SECTION 10.01. 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 10.02. Maintenance of Office or Agency. The Issuer will maintain in
the Borough of Manhattan, the City of New York, 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, 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, New York for such purposes.
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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 10.03. 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 in writing
of its action or failure so to act. As provided in Section 5.04, upon any
bankruptcy or reorganization proceeding relative to the Issuer, the Trustee
shall serve as the Paying Agent for the Securities.
Whenever the Issuer shall have one or more Paying Agents, it will, prior to
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 in trust
for the benefit of the Persons entitled to such principal, premium or interest,
and (unless such Paying Agent is the Trustee) the Issuer will promptly notify
the Trustee in writing of its action or failure so to act. Upon any bankruptcy
or reorganization proceeding relative to the Issuer, the Trustee shall serve as
the Paying Agent for the Securities.
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:
(1) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest on Securities in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(2) give the Trustee written notice of any default by the Issuer (or
any other obligor upon the Securities) in the making of any payment of
principal (and premium, if any) or interest;
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(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent; and
(4) acknowledge, accept and agree to comply in all respects with the
provisions of this Indenture relating to the duties, rights and obligations
of such Paying Agent.
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 as 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 Borough of
Manhattan, the City of New York, 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 10.04. Existence. Subject to Article Eight, the Guarantor will do
or cause to be done all things necessary to preserve and keep in full force and
effect the existence, rights (charter and statutory) and franchises of the
Guarantor, the Issuer and each of the Restricted
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Subsidiaries; provided, however, that the Guarantor shall not be required to
preserve any such right or franchise if the Guarantor shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Guarantor, the Issuer or the Restricted Subsidiaries and that the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 10.05. Maintenance of Properties. The Guarantor will cause all
properties used or useful in the conduct of its business or the business of the
Issuer or any Restricted Subsidiary to be maintained and kept in good condition,
repair and working order and supplied with all necessary equipment and will
cause to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Guarantor may be necessary
so that the business carried on in connection therewith may be properly and
advantageously conducted at all times; provided, however, that nothing in this
Section shall prevent the Guarantor from discontinuing the operation or
maintenance of any of such properties if such discontinuance is, in the
reasonable judgment of the Guarantor, desirable in the conduct of its business
or the business of the Issuer or any Restricted Subsidiary and not
disadvantageous in any material respect to the Holders.
SECTION 10.06. Payment of Taxes and Other Claims. The Guarantor 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 Guarantor or the Issuer or any Restricted Subsidiaries or
upon the income, profits or property of the Guarantor or the Issuer or any
Restricted Subsidiaries, and (2) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien upon the property of the
Guarantor or the Issuer or any Restricted Subsidiaries; provided, however, that
the Guarantor shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings.
SECTION 10.07. Maintenance of Insurance. The Guarantor shall, and shall
cause the Issuer and the Restricted Subsidiaries to, keep at all times all of
their properties which are of an insurable nature insured against loss or damage
with insurers believed by the Guarantor to be responsible to the extent that
property of similar character is usually so insured by corporations similarly
situated and
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owning like properties in accordance with good business practice.
SECTION 10.08. Limitation on Consolidated Debt. The Guarantor may not, and
may not permit any Restricted Subsidiary of the Guarantor to, Incur any Debt
(other than the Non-Discount Securities and the related guarantee by the
Guarantor, and the Securities and the Securities Guarantee) unless the ratio of
(i) the aggregate consolidated principal amount of Debt (which is defined to
include the accreted value of any Debt issued at a discount) of the Guarantor
outstanding as of the most recent available quarterly or annual balance sheet,
after giving pro forma effect to the Incurrence of such Debt and any other Debt
Incurred since such balance sheet date and the receipt and application of the
proceeds thereof, to (ii) four (4) times the Consolidated Cash Flow Available
for Fixed Charges for the most recent fiscal quarter next preceding the
Incurrence of such Debt for which consolidated financial statements are
available, determined on a pro forma basis as if any such Debt had been Incurred
and the proceeds thereof had been applied at the beginning of such recent fiscal
quarter, would be less than 7.0 to 1.0 for such period.
Notwithstanding the foregoing limitation, the Guarantor and any Restricted
Subsidiary may Incur the following:
(i) Debt under Credit Facilities in an aggregate principal amount at
any one time not to exceed $200 million, and any renewal, extension,
refinancing or refunding thereof in an amount which, together with any
principal amount remaining outstanding under all Credit Facilities, does
not exceed the aggregate principal amount outstanding under all Credit
Facilities immediately prior to such renewal, extension, refinancing or
refunding;
(ii) Debt owed by the Guarantor to any Restricted Subsidiary of the
Guarantor or Debt owed by a Restricted Subsidiary of the Guarantor to the
Guarantor or a Restricted Subsidiary of the Guarantor; provided, however,
that upon either (x) the transfer or other disposition by such Restricted
Subsidiary or the Guarantor of any Debt so permitted to a Person other than
the Guarantor or another Restricted Subsidiary of the Guarantor or (y) such
Restricted Subsidiary ceasing to be a Restricted Subsidiary, the provisions
of this clause (ii) shall no longer be applicable to such Debt
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and such Debt shall be deemed to have been Incurred at the time of such
transfer or other disposition;
(iii) Debt Incurred to renew, extend, refinance or refund (each, a
"refinancing") (x) Debt outstanding at the date hereof (after giving effect
to the Equity Clawback) or (y) Incurred pursuant to the first paragraph of
this Section, or clause (vi) or (vii) of this paragraph or (z) the
Securities or the Non-Discount Securities, in each case, in an aggregate
principal amount not to exceed the aggregate principal amount of and
accrued interest on the Debt so refinanced plus the amount of any premium
required to be paid in connection with such refinancing pursuant to the
terms of the Debt so refinanced or the amount of any premium reasonably
determined by the Guarantor as necessary to accomplish such refinancing by
means of a tender offer or privately negotiated repurchase, plus the
expenses of the Guarantor or the Restricted Subsidiary effecting such
refinancing incurred in connection with such refinancing; provided,
however, that Debt the proceeds of which are used to refinance the
Securities or Debt which is pari passu to the Securities and the Security
Guarantee or Debt which is subordinate in right of payment to the
Securities and the Security Guarantee shall only be permitted if (A) in the
case of any refinancing of the Securities or Debt which is pari passu to
the Securities and the Security Guarantee, the refinancing Debt is made
pari passu or subordinated to the Securities and the Security Guarantee,
and, in the case of any refinancing of Subordinated Debt, the refinancing
Debt constitutes Subordinated Debt and (B) in any case, 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 stated maturity prior
to the final stated maturity of the Debt being refinanced, and the Average
Life of such new Debt is at least equal to the remaining Average Life of
the Debt being refinanced (assuming that such Debt being refinanced had a
final stated maturity three months later than its actual final stated
maturity);
(iv) Debt in an aggregate principal amount not in excess of (A) two
(2) times the aggregate amount of the Guarantor's Incremental Paid-in
Capital minus (B) $165 million;
(v) Debt in an aggregate principal amount not in excess of 80% of the
aggregate amount of accounts
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receivable set forth on the most recent unaudited quarterly or audited
annual financial statements of the Guarantor and its consolidated
subsidiaries filed with the Commission;
(vi) Purchase Money Debt, which is incurred for the construction,
acquisition and improvement of Telecommunications Assets, provided that the
amount of such Purchase Money Debt does not exceed the cost of the
construction, acquisition or improvement of the applicable
Telecommunications Assets;
(vii) Debt consisting of Permitted Interest Rate and Currency
Protection Agreements; and
(viii) Debt not otherwise permitted to be Incurred pursuant to clauses
(i) through (vii) above, which, together with any other outstanding Debt
Incurred pursuant to this clause (viii), has an aggregate principal amount
not in excess of $50 million at any time outstanding.
For purposes of determining compliance with this Section, with respect to
any item of Debt, (x) in the event that such item of Debt meets the criteria of
more than one of the types of Debt the Guarantor or a Restricted Subsidiary is
permitted to Incur pursuant to the foregoing clauses (i) through (viii), the
Guarantor shall have the right, in its sole discretion, to classify such item of
Debt and shall only be required to include the amount and type of such Debt
under the clause permitting the Debt as so classified and (y) any other
obligation of the obligor on such Debt (or of any other Person who could have
Incurred such Debt under this Section) arising under any Guarantee, Lien or
letter of credit supporting such Debt shall be disregarded to the extent that
such Guarantee, Lien or letter of credit secures the principal amount of such
Debt.
For purposes of determining compliance with any Dollar-denominated
restriction on the Incurrence of Debt denominated in a foreign currency, the
Dollar-equivalent principal amount of such foreign-currency-denominated Debt
Incurred pursuant thereto shall be calculated based on the relevant currency
exchange rate in effect on the date that such foreign-currency-denominated Debt
was Incurred, in the case of term debt, or first committed, in the case of
revolving credit debt; provided that (x) the Dollar-equivalent principal amount
of any such Debt outstanding on the date hereof shall be calculated based on the
relevant currency exchange rate in effect on the date hereof and
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(y) if such Debt is Incurred to refinance other Debt denominated in a foreign
currency, and such refinancing would cause the applicable Dollar-denominated
restriction to be exceeded if calculated at the relevant currency exchange rate
in effect on the date of such refinancing, such Dollar denominated restriction
shall be deemed not to have been exceeded so long as the principal amount of
such refinancing Debt does not exceed the principal amount of such Debt being
refinanced. The principal amount of any Debt Incurred to refinance other Debt,
if Incurred in a different currency from the Debt being refinanced, shall be
calculated based on the currency exchange rate applicable to the currency in
which such respective Debt is denominated that is in effect on the date of such
refinancing.
SECTION 10.09. Additional Amounts. Payments made by the Issuer or the
Guarantor pursuant to the Securities or the Securities Guarantee will be made
without withholding or deduction for taxes unless required by law. In the event
of (i) any change that becomes effective after the date hereof in the laws of
the U.K. or Bermuda or of any political subdivision or taxing authority thereof
or therein or any change in the interpretation or administration thereof or (ii)
a failure by the Issuer to list and maintain a listing of the Securities on a
"recognized stock exchange" (within the meaning of Section 841 of the U.K.
Income and Corporation Taxes Act 1988) prior to the first date upon which
interest is required to be paid hereunder (a "Listing Failure"), the effect of
which is to require the withholding or deduction by the Issuer or the Guarantor
pursuant to the Securities or the Securities Guarantee, respectively, of any
amount for taxes that would not have been required to be withheld or deducted
absent such change or Listing Failure, as the case may be, the Issuer or the
Guarantor will pay, to the extent it may then lawfully do so, such additional
amounts ("Additional Amounts") as may be necessary in order that every net
payment of the principal of and interest on the Securities, after deduction for
withholding for or on account of any future tax, assessment or other
governmental charge will not be less than the amount provided for in the
Securities to be then due and payable; provided, however, that the foregoing
obligation to pay Additional Amounts shall not apply in respect of:
(a) any tax, withholding, assessment or other governmental charge
which would not have been imposed but for (i) the existence of any present
or former connection between such holder (or between a fiduciary, settlor,
beneficiary, member or shareholder of, or possessor of a power over, such
holder, if such holder
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is an estate, trust, partnership or corporation) and the U.K. or Bermuda or
any political subdivision or taxing authority thereof including, without
limitation, such holder (or such fiduciary, settlor, beneficiary, member,
shareholder or possessor) being or having been a citizen or resident
thereof or being or having been present or engaged in trade or business
therein or having or having had a permanent establishment therein or (ii)
the presentation of a Security or a Securities Guarantee (where
presentation is required) for payment on a date more than 30 days after the
date on which such payment became due and payable or the date on which
payment thereof is duly provided for, whichever occurs later, except for
Additional Amounts with respect to Taxes that would have been imposed had
the holder presented the Security for payment within such 30-day period;
(b) any estate, inheritance, gift, sale, transfer or personal property
tax;
(c) any tax, assessment or other governmental charge that is withheld
by reason of the failure to timely comply by the holder or the beneficial
owner of the Security with a request in writing of the Issuer or the
Guarantor (which request shall be furnished to the Trustee) (i) to provide
information concerning the nationality, residence or identity of the holder
or such beneficial owner or (ii) to make any declaration or other similar
claim or satisfy any information or reporting requirement, which, in the
case of (i) or (ii), is required or imposed by a statute, treaty,
regulation or administrative practice of the taxing or domicile
jurisdiction as a precondition to exemption from or reduction of all or
part of such tax, assessment or other governmental charge; provided,
however, that this clause (c) shall not apply to limit the Issuer's or
Guarantor's obligation to pay Additional Amounts if the completing and
filing of the information described in subclause (i) or the declaration or
other claim described in subclause (ii) would be materially more onerous in
form, in procedure or in substance of information disclosed, in comparison
to the information reporting requirements imposed under U.S. tax law with
respect to Forms 1001, W-8 and W-9; or
(d) any tax, withholding, assessment or other governmental charge
resulting from a Listing Failure with respect to any Security issued in the
form of a
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Definitive Security pursuant to the terms of the Deposit Agreement and this
Indenture; or
(e) any combination of items (a), (b), (c) and (d) above; nor shall
Additional Amounts be paid with respect to any payment of the principal of,
or any interest on, any Security or Securities Guarantee to any holder who
is not the sole beneficial owner of such Security or Securities Guarantee
or is a fiduciary or partnership, but only to the extent that a beneficial
owner, a beneficiary or a settlor with respect to a fiduciary or a member
of the partnership would not have been entitled to the payment of the
Additional Amount had the beneficial owner, beneficiary, settlor or member
of such partnership received directly its beneficial or distributive share
of the payment.
At least 30 days prior to each date on which any payment under or with
respect to the Securities is due and payable, if the Issuer or the Guarantor
will be obligated to pay Additional Amounts with respect to such payment, the
Issuer or the Guarantor will deliver to the Trustee an Officer's Certificate
stating the fact that such Additional Amounts will be payable and the amounts so
payable and will set forth such other information necessary to enable the
Trustee to pay such Additional Amounts to Holders on the payment date. Whenever
in this Indenture there is mentioned, in any context, the payment of principal
(and premium, if any), Redemption Price, interest or any other amount payable
under or with respect to any Security, such mention shall be deemed to include
mention of the payment of Additional Amounts to the extent that, in such
context, Additional Amounts are, were or would be payable in respect thereof.
SECTION 10.10. Limitation on Restricted Payments. The Guarantor (i) may
not, and will not permit any Restricted Subsidiary, directly or indirectly, to
declare or pay any dividend, or make any distribution, in respect of its Capital
Stock or to the holders thereof, excluding (x) any dividends or distributions
payable solely in shares of its Capital Stock (other than Disqualified Stock) or
in options, warrants or other rights to acquire its Capital Stock (other than
Disqualified Stock), (y) any dividends paid to the Guarantor or a Restricted
Subsidiary, or (z) pro rata dividends paid on shares of Common Stock of
Restricted Subsidiaries, (ii) may not, and may not permit any Restricted
Subsidiary to, purchase, redeem, or otherwise retire or acquire for value (a)
any Capital Stock of the Guarantor or any Related Person of the Guarantor (other
than
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a permitted refinancing) or (b) any options, warrants or rights to purchase or
acquire shares of Capital Stock of the Guarantor or any Related Person of the
Guarantor or any securities convertible or exchangeable into shares of Capital
Stock of the Guarantor or any Related Person of the Guarantor (other than a
permitted refinancing), (iii) may not make, or permit any Restricted Subsidiary
to make, any Investment, except for Permitted Investments, and (iv) may not, and
may not permit any Restricted Subsidiary to, redeem, defease, repurchase, retire
or otherwise acquire or retire for value, prior to any scheduled maturity,
repayment or sinking fund payment, Debt of the Guarantor or the Issuer which is
subordinate in right of payment to the Securities or the Securities Guarantee
(each of clauses (i) through (iv) being a "Restricted Payment") if: (1) 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, shall have occurred and be
continuing, or (2) except with respect to Investments, upon giving effect to
such Restricted Payment, the Guarantor could not Incur at least $1.00 of
additional Debt pursuant to the first paragraph of Section 10.08, or (3) upon
giving effect to such Restricted Payment, the aggregate of all Restricted
Payments from the date hereof exceeds the sum of: (a)(x) Consolidated Cash Flow
Available for Fixed Charges since the end of the last full fiscal quarter prior
to the date hereof through the last day of the last full fiscal quarter ending
immediately preceding the date of such Restricted Payment (the "Calculation
Period") minus (y) 1.5 times Consolidated Interest Expense for the Calculation
Period plus (b) 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 Guarantor 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 Cash Flow Available for Fixed Charges for the Calculation
Period), or from redesignations of Unrestricted Subsidiaries as Restricted
Subsidiaries (valued in each case as provided in the definition of Investment),
not to exceed, in each case, the amount of Investments previously made by the
Guarantor or any Restricted Subsidiary in such Person or Unrestricted Subsidiary
plus (c) an amount equal to the aggregate net proceeds received after the date
hereof, including the fair market value of property other than cash (determined
in good faith by the Board of Directors as evidenced by a resolution of the
Board of Directors filed with the Trustee), as
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capital contributions to the Guarantor or from the issuance (other than to a
Subsidiary) of Capital Stock (other than Disqualified Stock) of the Guarantor
and warrants, rights or options on Capital Stock (other than Disqualified Stock)
of the Guarantor and the principal amount of Debt of the Guarantor or any
Restricted Subsidiary that has been converted into Capital Stock (other than
Disqualified Stock and other than by a Subsidiary) of the Guarantor after the
date hereof plus (d) $30 million.
Notwithstanding the foregoing, (i) the Guarantor may pay any dividend on
Capital Stock of any class of the Guarantor within 60 days after the declaration
thereof if, on the date when the dividend was declared, the Guarantor could have
paid such dividend in accordance with the foregoing provisions, (ii) the
Guarantor may make acquisitions of a minority equity interest in entities
engaged in the Telecommunications Business; provided that (A) the acquisition of
a majority equity interest in such entities is not then permitted or practicable
under applicable law without regulatory consent or change of law, (B) the Board
of Directors of the Guarantor determines in good faith that there is a
substantial probability that such approval or change of law will be obtained,
(C) the Guarantor or one of its Restricted Subsidiaries has the right to acquire
Capital Stock representing a majority of the voting power of the Voting Stock of
such entity upon receipt of regulatory consent or change of law and does acquire
such Voting Stock reasonably promptly upon receipt of such consent or change of
law and (D) in the event that such consent or change of law has not been
obtained within 18 months of funding such Investment, the Guarantor or one of
its Restricted Subsidiaries has the right to sell such minority equity interest
to the Person from whom it acquired such interest, for consideration consisting
of the consideration originally paid by the Guarantor and its Restricted
Subsidiaries for such minority equity interest; (iii) the Guarantor may
repurchase any shares of its Common Stock or options to acquire its Common Stock
from Persons who were formerly directors, officers or employees of the Guarantor
or any of its Subsidiaries, provided that the aggregate amount of all such
repurchases made pursuant to this clause (iii) shall not exceed $6 million, plus
the aggregate cash proceeds received by the Guarantor since the date hereof from
issuances of its Common Stock or options to acquire its Common Stock to
directors, officers and employees of the Guarantor or any of its Subsidiaries,
(v) the Guarantor or a Restricted Subsidiary may redeem, defease, repurchase,
retire or otherwise acquire or retire for value Debt of the Guarantor or the
Issuer which is
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subordinated in right of payment to the Securities or the Security Guarantees,
as the case may be, in exchange for, or out of the proceeds of a substantially
concurrent sale (other than to a Subsidiary) of, Capital Stock (other than
Disqualified Stock of the Guarantor) or in a refinancing that satisfies the
requirements of clause (iii) of the second paragraph of Section 10.08 and (vi)
the Guarantor and its Subsidiaries may retire or repurchase any Capital Stock of
the Guarantor or of any Subsidiary of the Guarantor in exchange for, or out of
the proceeds of the substantially concurrent sale (other than to a Subsidiary of
the Guarantor) of, Capital Stock (other than Disqualified Stock) of the
Guarantor or any Subsidiary.
SECTION 10.11. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries. The Guarantor may not, and may not permit any
Restricted Subsidiary to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or restriction on
the ability of any Restricted Subsidiary of the Guarantor (i) to pay dividends
(in cash or otherwise) or make any other distributions in respect of its Capital
Stock owned by the Guarantor or any other Restricted Subsidiary of the Guarantor
or pay any Debt or other obligation owed to the Guarantor or any other
Restricted Subsidiary; (ii) to make loans or advances to the Guarantor or any
other Restricted Subsidiary; or (iii) to transfer any of its property or assets
to the Guarantor or any other Restricted Subsidiary.
Notwithstanding the foregoing, the Guarantor may, and may permit any
Restricted Subsidiary to, suffer to exist any such encumbrance or restriction
(a) pursuant to any agreement in effect on the date hereof; (b) pursuant to an
agreement relating to any Acquired Debt, which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person so acquired and was not Incurred in anticipation of such Person being
acquired; (c) pursuant to an agreement effecting a renewal, refunding or
extension of Debt Incurred pursuant to an agreement referred to in clause (a) or
(b) above; provided, however, that the provisions contained in such renewal,
refunding or extension agreement relating to such encumbrance or restriction are
no more restrictive in any material respect than the provisions contained in the
agreement the subject thereof; (d) in the case of clause (iii) in the above
paragraph, contained in any security agreement (including a Capital Lease
Obligation) securing Debt of the Guarantor or a Restricted Subsidiary otherwise
permitted hereunder, but only to the extent such
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restrictions restrict the transfer of the property subject to such security
agreement; (e) in the case of clause (iii) in the above paragraph, with respect
to customary nonassignment provisions entered into in the ordinary course of
business in leases and other agreements; (f) with respect to a Restricted
Subsidiary of the Guarantor 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 (x) the
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, (y) such restriction terminates if such
transaction is not consummated and (z) the consummation or abandonment of such
transaction occurs within one year of the date such agreement was entered into;
(g) pursuant to applicable law or required by any regulatory authority having
jurisdiction over the Guarantor or any Subsidiary; (h) pursuant to this
Indenture and the Securities or the Non-Discount Securities Indenture and the
Non-Discount Securities; (i) constituting a Lien otherwise permitted pursuant to
Section 10.15; and (j) other encumbrances or restrictions that are not
materially more restrictive than customary provisions in comparable financings
provided that each of the Issuer and the Guarantor provides an Officer's
Certificate to the Trustee to the effect that in the opinion of the signers of
such certificate such encumbrances or restrictions will not materially impact
the Issuers' and the Guarantors' ability to make scheduled payments of interest
and principal under the Securities.
SECTION 10.12. Limitation on Transactions with Affiliates and Related
Persons. The Guarantor will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, enter into, renew or extend any transaction
(including, without limitation, the purchase, sale, lease or exchange of
property or assets, or the rendering of any service) with any Related Person or
with any Affiliate of the Guarantor or any Restricted Subsidiary, except upon
fair and reasonable terms no less favorable to the Guarantor or such Restricted
Subsidiary than could be obtained, at the time of such transaction or, if such
transaction is pursuant to a written agreement, at the time of the execution of
the agreement providing therefor, in a comparable arm's-length transaction with
a Person that is not a Related Person or an Affiliate.
The foregoing limitation does not limit, and shall not apply to (i)
transactions (A) approved by a majority of the disinterested members of the
Board of Directors or
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(B) for which the Guarantor or a Restricted Subsidiary delivers to the Trustee a
written opinion of a nationally recognized investment banking firm (or a
subsidiary or affiliate thereof) in the United States stating that the
transaction is fair to the Guarantor or such Restricted Subsidiary from a
financial point of view; (ii) any transaction solely between the Guarantor and
any of its Wholly Owned Restricted Subsidiaries or solely between Wholly Owned
Restricted Subsidiaries; and (iii) any payments or other transactions pursuant
to any tax-sharing agreement between the Guarantor and any other Person with
which the Guarantor files a consolidated tax return or with which the Guarantor
is part of a consolidated group for tax purposes. Notwithstanding the foregoing,
any transaction covered by the first paragraph of this Section and not covered
by clauses (ii) through (iii) of this paragraph must be approved or determined
to be fair in the manner provided for in clause (i)(A) or (B) above unless the
aggregate amount of such transaction is less than $5 million in value.
SECTION 10.13. Limitation on Asset Dispositions. (a) The Guarantor may not,
and may not permit any Restricted Subsidiary of the Guarantor to, make any Asset
Disposition in one or more related transactions unless: (i) the Guarantor or the
Restricted Subsidiary, as the case may be, receives consideration for such
disposition at least equal to the fair market value for the assets sold or
disposed of as determined by the Board of Directors in good faith and, in the
case of an Asset Disposition in an amount greater than $5 million, evidenced by
a resolution of the Board of Directors filed with the Trustee; and (ii) at least
75% of the consideration for such disposition consists of (1) cash or readily
marketable cash equivalents or the assumption of Debt of the Guarantor (other
than Debt that is subordinated to the Securities) or of a Restricted Subsidiary
and release from all liability on the Debt assumed, or (2) Telecommunications
Assets. In the event and to the extent that the Net Available Proceeds received
by the Guarantor or any of its Restricted Subsidiaries from one or more Asset
Dispositions occurring on or after the date hereof in any period of 12
consecutive months exceed 10% of Consolidated Tangible Assets (determined as of
the date closest to the commencement of such 12-month period for which a
consolidated balance sheet of the Guarantor and its subsidiaries have been filed
with the Commission), then the Guarantor or the Issuer shall or shall cause the
relevant Restricted Subsidiary to (i) within 12 months after the date Net
Available Proceeds so received exceed 10% of Consolidated Tangible Assets (A)
apply an amount equal to such excess Net Available Proceeds to permanently repay
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unsubordinated Debt of the Guarantor or any Restricted Subsidiary providing a
Subsidiary Guarantee pursuant to Section 10.14 or Debt of any other Restricted
Subsidiary, in each case owing to a Person other than the Guarantor or any of
its Restricted Subsidiaries or (B) invest an equal amount, or the amount not so
applied pursuant to clause (A) (or enter into a definitive agreement committing
to so invest within 12 months after the date of such agreement), in
Telecommunications Assets and (ii) apply (no later than the end of the 12-month
period referred to in clause (i)) such excess Net Available Proceeds (to the
extent not applied pursuant to clause (i)) as provided in the paragraph (b)
below. The amount of such excess Net Available Proceeds required to be applied
(or to be committed to be applied) during such 12-month period as set forth in
clause (i) of the preceding sentence and not applied as so required by the end
of such period shall constitute "Excess Proceeds".
(b) If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this
Section totals at least $10 million, the Issuer shall repay any Debt of the
Guarantor or any Restricted Subsidiary to the extent the terms of such Debt
require repayment prior to an Offer to Purchase being made hereunder (including
by way of an offer to purchase to the holders of such Debt, if so required). To
the extent there are Excess Proceeds after such repayment (or offer to
purchase), the Issuer must commence, not later than the fifteenth Business Day
of such month (or if later, the fifteenth Business Day after the expiration of
any such required offer to purchase), and consummate an Offer to Purchase from
the holders of the Securities on a pro rata basis an aggregate principal amount
of Securities on the relevant Payment Date equal to the Excess Proceeds on such
date not applied or to be applied pursuant to the first sentence of this
paragraph (b), at a purchase price equal to 100% of the Accreted Value of the
Securities, plus, in each case, accrued interest (if any) to but excluding the
Payment Date and, to the extent required by the terms thereof, any other Debt of
the Guarantor that is pari passu with the Securities (including the Non-Discount
Securities to the extent of the Accreted Value thereof) at a price no greater
than 100% of the principal amount thereof plus accrued interest to but excluding
the date of purchase (or 100% of the accreted value in the case of other
original issue discount Debt). To the extent there are any remaining Excess
Proceeds following the completion of the Offer to Purchase, the Issuer must
repay such other Debt of the Guarantor or Debt of a Restricted Subsidiary of
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the Guarantor, to the extent permitted under the terms thereof and, to the
extent there are any remaining Excess Proceeds after such repayment, the Issuer
shall apply such amount to any other use as determined by the Issuer which is
not otherwise prohibited by this Indenture.
SECTION 10.14. Limitation on Issuances and Sales of Capital Stock of
Restricted Subsidiaries. The Guarantor may not, and may not permit any
Restricted Subsidiary of the Guarantor to, issue, transfer, convey, sell or
otherwise dispose of any shares of Capital Stock of a Restricted Subsidiary of
the Guarantor or securities convertible or exchangeable into, or options,
warrants, rights or any other interest with respect to, Capital Stock of a
Restricted Subsidiary of the Guarantor to any Person other than the Guarantor or
a Wholly Owned Restricted Subsidiary of the Guarantor except (i) a sale of all
of the Capital Stock of such Restricted Subsidiary owned by the Guarantor and
any Restricted Subsidiary of the Guarantor that complies with Section 10.13
above to the extent such Section applies, (ii) if required, the issuance,
transfer, conveyance, sale or other disposition of directors' qualifying shares,
(iii) Disqualified Stock issued in exchange for, or upon conversion of, or the
proceeds of the issuance of which are used to redeem, refinance, replace or
refund shares of Disqualified Stock of such Restricted Subsidiary; provided that
the amounts of the redemption obligations of such Disqualified Stock shall not
exceed the amounts of the redemption obligations of, and such Disqualified Stock
shall have redemption obligations no earlier than those required by, the
Disqualified Stock being exchanged, converted, redeemed, refinanced, replaced or
refunded and (iv) issuances of not more than 49% of the voting stock and equity
interest in a Restricted Subsidiary engaged in the Telecommunications Business
(1) in connection with the acquisition of such Restricted Subsidiary or
Telecommunications Assets acquired by such Restricted Subsidiary or (2) to a
Strategic Investor; provided, that the Guarantor complies with Section 10.13
above to the extent such Section applies.
SECTION 10.15. Limitation on Liens. The Guarantor may not, and may not
permit any Restricted Subsidiary of the Guarantor to, Incur or suffer to exist
any Lien on or with respect to any property or assets now 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 for so long as such Debt will be
so secured or (y) in the event such Debt
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is Debt of the Guarantor which is subordinate in right of payment to the
Securities, prior to such Debt as to such property for so long as such Debt will
be so secured.
The foregoing restrictions shall not apply to: (i) Liens existing on the
date hereof and securing Debt outstanding on the date hereof; (ii) Liens
securing Debt outstanding or available under all Credit Facilities to the extent
such Debt is permitted under clause (i) of the second paragraph of Section
10.08; (iii) Liens in favor of the Guarantor or any Restricted Subsidiary of the
Guarantor; (iv) Liens on real or personal property of the Guarantor or a
Restricted Subsidiary of the Guarantor acquired, constructed or constituting
improvements made after the date of original issuance of the Securities to
secure Purchase Money Debt which is Incurred for the construction, acquisition
and improvement of Telecommunications Assets and is otherwise permitted under
this Indenture; provided, however, that (a) the principal amount of any Debt
secured by such a Lien does not exceed 100% of such purchase price or cost of
construction or improvement of the property subject to such Liens, (b) such Lien
attaches to such property prior to, at the time of or within 180 days after the
acquisition, completion of construction or commencement of operation of such
property and (c) such Lien does not extend to or cover any property other than
the specific item of property (or portion thereof) acquired, constructed or
constituting the improvements made with the proceeds of such Purchase Money
Debt; (v) Liens to secure Acquired Debt; provided, however, that (a) such Lien
attaches to the acquired asset prior to the time of the acquisition of such
asset and (b) such Lien does not extend to or cover any other asset; (vi) Liens
to secure Debt Incurred to extend, renew, refinance or refund (or successive
extensions, renewals, refinancings or refundings), in whole or in part, Debt
secured by any Lien referred to in the foregoing clauses (i), (ii), (iv) and (v)
so long as the principal amount of Debt so secured is not increased except as
otherwise permitted under clause (iii) of the second paragraph of Section 10.08
and, in the case of Liens to secure Debt incurred to extend, renew, refinance or
refund Debt secured by a Lien referred to in the foregoing clause (i), (iv) or
(v), such Liens do not extend to any other property; and (vii) Permitted Liens.
SECTION 10.16. Limitation on Issuance of Guarantees of Debt by Restricted
Subsidiaries. The Guarantor will not permit any Restricted Subsidiary, directly
or indirectly, to incur any Guarantee of any Debt of the Guarantor or the Issuer
unless such Restricted
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Subsidiary simultaneously executes and delivers a supplemental indenture
providing for a Guarantee by such Subsidiary of the Securities; any Subsidiary
Guarantee by such Subsidiary of the Securities (x) will be senior in right of
payment to any Guarantee of Subordinated Debt of the Guarantor or the Issuer and
(y) will be pari passu with or senior to any Guarantee of any other Debt of the
Guarantor or the Issuer.
Notwithstanding the foregoing, any Subsidiary Guarantee 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
Guarantor, of all of the Guarantor's and each Restricted Subsidiary's Capital
Stock in, or all or substantially all 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
Subsidiary Guarantee, except a discharge or release by or as a result of payment
under such Guarantee.
SECTION 10.17. Change of Control. (a) Unless the Issuer has heretofore
exercised its right to redeem all of the Securities in accordance with the terms
of this Indenture and the Securities, upon the occurrence of a Change of Control
(as defined below), each Holder of a Security shall have the right to have such
Security repurchased by the Issuer on the terms and conditions precedent set
forth in this Section 10.17 and otherwise in this Indenture. The Issuer shall,
within 30 days following the date of the consummation of a transaction resulting
in a Change of Control, mail an Offer with respect to an Offer to Purchase all
Outstanding Securities at a purchase price equal to 101% of their Accreted Value
plus accrued interest to but excluding the date of purchase. Installments of
interest (including Special Interest) whose Stated Maturity is on or prior to
the Purchase 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 their terms and the provisions of Section
3.07. Each Holder shall be entitled to tender all or any portion of the
Securities owned by such Holder pursuant to the Offer to Purchase, subject to
the requirement that any portion of a Security tendered must be tendered in an
integral multiple of $1,000 principal amount at maturity.
(b) The Issuer and Trustee shall perform their respective obligations
specified in the Offer for the Offer
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to Purchase. 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 10.03) 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.
(c) A "Change of Control" shall be deemed to have occurred in the event
that, after the date of this Indenture, either (i) a "person" or "group" (within
the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) becomes the
ultimate "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of
more than 35% of the total voting power of the Voting Stock of the Guarantor, on
a fully diluted basis, and such ownership is greater than the amount of voting
power of the Voting Stock of the Guarantor, on a fully diluted basis, held by
the Existing Stockholders and their Affiliates on such date; (ii) individuals
who on the date of this Indenture constitute the Board of Directors (together
with any new directors whose election by the Board of Directors or whose
nomination for election by the Guarantor's stockholders was approved by a vote
of at least two-thirds of the members of the Board of Directors then in office
who either were members of the Board of Directors on the date of this Indenture
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the members of the Board of Directors
then in office; or (iii) all of the Common Stock of the Issuer is not
beneficially owned by the Guarantor (other than directors' qualifying shares).
(d) In the event that the Issuer makes an Offer to Purchase the Securities,
the Issuer and the Guarantor shall comply with any applicable securities laws
and regulations, including any applicable requirements of
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Section 14(e) of, and Rule 14e-1 under, the Securities Exchange Act.
SECTION 10.18. Provision of Financial Information. The Guarantor and the
Issuer have agreed that, for so long as any Securities remain outstanding, each
will furnish to the holders of the Securities and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act. In addition, the
Guarantor and the Issuer will file with the Trustee within 15 days after it
files them with the Commission copies of the annual and quarterly reports and
the information, documents, and other reports that the Guarantor or the Issuer
is required to file with the Commission pursuant to Section 13(a) or 15(d) of
the Exchange Act ("SEC Reports"). In the event the Guarantor or the Issuer shall
cease to be required to file SEC Reports pursuant to the Exchange Act, the
Guarantor and the Issuer will nevertheless continue to file such reports with
the Commission (unless the Commission will not accept such a filing) and the
Trustee. The Guarantor and the Issuer will furnish copies of the SEC Reports to
the holders of Securities at the time the Guarantor or the Issuer is required to
file the same with the Trustee and will make such information available to
investors who request it in writing.
SECTION 10.19. Statement by Officers as to Default. (a) The Issuer and the
Guarantor will deliver to the Trustee, within 120 days after the end of each
fiscal year of the Guarantor ending after the date hereof, an Officers'
Certificate, stating whether or not to the best knowledge of the signers thereof
the Guarantor or the Issuer is in default in the performance and observance of
any of the terms, provisions and conditions of Sections 10.04 to 10.18,
inclusive, and if the Guarantor or the Issuer shall be in default, specifying
all such defaults and the nature and status thereof of which they may have
knowledge.
(b) The Issuer and the Guarantor shall deliver to the Trustee, as soon as
possible and in any event within 10 days after the Issuer or the Guarantor
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 setting forth the details of such Event of Default or
default and the action which the Issuer or the Guarantor proposes to take with
respect thereto.
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SECTION 10.20. Waiver of Certain Covenants. The Issuer or the Guarantor, as
applicable, may omit in any particular instance to comply with any covenant or
condition set forth in Sections 10.04 to 10.17, inclusive, if before or after
the time for such compliance the Holders of at least a majority in aggregate
principal amount at maturity 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 Guarantor and the duties of the Trustee in respect of any such covenant or
condition shall remain in full force and effect.
SECTION 10.21. Paying Agent. The Issuer shall not authorize or designate
any Person (including the Trustee) as a Paying Agent hereunder unless such
Person is located outside of the United Kingdom.
SECTION 10.22. Internal Revenue Service Filing. The Issuer shall file
Internal Revenue Service Form 8281, Information Return for Publicly Offered
Original Issue Discount Instruments, with the Internal Revenue Service within 30
days of the date of this Indenture and shall mail a copy of such filing to the
Trustee within 15 days after such filing with the Internal Revenue Service.
ARTICLE XI
Redemption of Securities
SECTION 11.01. Right of Redemption. (a) At any time prior to March 1,
20001, in the event that the Guarantor receives net cash proceeds from the
public or private sale of its Common Stock (other than Disqualified Stock), the
Issuer (to the extent it receives such proceeds and has not used such proceeds,
directly or indirectly, to redeem or repurchase other securities pursuant to
optional redemption provisions) may, at its option, apply an amount equal to any
such net cash proceeds to redeem, from time to time, Securities in a principal
amount of up to an aggregate amount equal to 33 1/3% of the aggregate principal
amount at maturity of the Securities; provided, however, that Securities in an
amount equal to at least 66 2/3% of the aggregate principal amount at maturity
of the Securities remain outstanding after each redemption. Each redemption must
occur on a Redemption Date within 180 days of the
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related sale and upon not less than 30 nor more than 60 days' notice by mail 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
a Redemption Price of 110.125% of the Accreted Value of the Securities plus
accrued interest to but excluding the Redemption Date (subject to, in the case
of a Global Security in bearer form, the right of the Holder thereof and, in the
case of Definitive Securities, the right of Holders of record on the relevant
Regular Record Date, to receive Interest due on an Interest Payment Date that is
on or prior to the Redemption Date).
(b) In the event that (i) the Guarantor or the Issuer has become or would
become obligated to pay any Additional Amounts as a result of (x) changes
affecting withholding tax laws or (y) a Listing Failure (as defined herein)
provided that the Issuer has used reasonable best efforts to list and maintain
the listing of the Securities on a "recognized stock exchange" (within the
meaning of Section 841 of the U.K. Income and Corporation Taxes Act 1988) (as
provided for in Section 10.09), and (ii) the Guarantor and the Issuer are unable
to avoid the requirement to pay such Additional Amounts by taking reasonable
measures available to them (including, without limitation, the Guarantor making
payments directly to holders under the Securities Guarantee, unless such payment
is likely to result in adverse consequences to the Issuer or the Guarantor),
then the Issuer may redeem all, but not less than all, of the Securities at any
time at 100% of the Accreted Value thereof on the Redemption Date, together with
accrued interest thereon, if any, to but excluding the Redemption Date (subject
to, in the case of a Global Security in bearer form, the right of the Holder
thereof and, in the case of Definitive Securities, the right of Holders of
record on the relevant Regular Record Date, to receive Interest due on an
Interest Payment Date that is on or prior to the Redemption Date). Prior to the
publication of the notice of redemption in accordance with the foregoing, the
Issuer shall deliver to the Trustee an officer's certificate stating that the
Issuer is entitled to effect such redemption based on a written opinion of
independent tax counsel or accounting firm reasonably satisfactory to the
Trustee.
(c) The Securities further may be redeemed, as a whole or in part, at the
election of the Issuer, at any time on or after March 1, 2003 and prior to
maturity, upon not less than 30 nor more than 60 days' notice by mail to each
Holder of Securities to be redeemed at such Holder's address
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appearing in the Security Register, in amounts of $1,000 or an integral multiple
of $1,000, at the Redemption Prices specified in the form of Security
hereinbefore set forth, together with accrued interest to but excluding the
Redemption Date (subject to, in the case of a Global Security in bearer form,
the right of the Holder thereof and, in the case of Definitive Securities, the
right of Holders of record on the relevant Regular Record Date, to receive
Interest due on an Interest Payment Date that is on or prior to the Redemption
Date).
SECTION 11.02. Applicability of Article. Redemption of Securities at the
election of the Issuer, as permitted or required by any provision of this
Indenture, shall be made in accordance with such provision and this Article.
SECTION 11.03. Election To Redeem; Notice to Trustee. The election of the
Issuer to redeem any Securities pursuant to Section 11.01 shall be evidenced by
a Board Resolution. In case of any redemption at the election of the Issuer of
less than all the Securities, the Issuer shall, at least 5 days prior to giving
notice of such redemption pursuant to Section 11.05 (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. In the
case of any redemption of Securities prior to the expiration of any restriction
on such redemption provided in the terms of such Securities or elsewhere in this
Indenture, the Issuer shall furnish the Trustee with an Officers' Certificate
evidencing compliance with such restriction.
SECTION 11.04. Securities To Be Redeemed Pro Rata. If less than all the
Securities are to be redeemed in any redemption, the Securities to be redeemed
shall be selected by the Trustee by prorating, as nearly as may be practicable,
the principal amount at maturity of Securities to be redeemed. In any proration
pursuant to this Section, the Trustee shall make such adjustments, reallocations
and eliminations as it shall deem proper to the end that the principal amount at
maturity of Securities so prorated shall be $1,000 or a multiple thereof, by
increasing or decreasing or eliminating the amount which would be allocable to
any Holder on the basis of exact proportion by an amount not exceeding $1,000.
The Trustee in its discretion may determine the particular Securities (if there
are more than one) registered in the name of any Holder which are to be
redeemed, in whole or in part. The Trustee shall incur no
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liabilities for any selection made pursuant to this Section 11.04.
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 at maturity
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 at maturity of such Securities which has been or is to
be redeemed.
SECTION 11.05. 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, to each Holder of Securities to be redeemed, at
such Holder's address appearing in the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) whether the redemption is being made pursuant to Section 11.01(a),
(b) or (c) and, if being made pursuant to Section 11.01(a) or (b), 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 of any
Securities, the principal amounts at maturity) 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,
(6) the place or places where such Securities are to be surrendered
for payment of the Redemption Price, and
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(7) that in the case that a Security is only redeemed 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 in an aggregate amount equal to the unredeemed portion of the
Security.
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 expense of the Issuer. If so requested by the Issuer, the
Trustee shall mail any such notice not later than the date specified for mailing
by the Issuer, which shall not be sooner than 5 days after receipt by the
Trustee of such request (unless a shorter period shall be satisfactory to the
Trustee).
SECTION 11.06. Deposit of Redemption Price. 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 10.03) 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 11.07. 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 after such date (unless the Issuer shall default in the
payment of the Redemption Price and 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 accrued interest to but excluding 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 bearer of such
Security, in the case of a Global Security in bearer form, and, in the case of a
Definitive Security, to 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 their terms and the provisions of Section 3.07.
If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal
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(and premium, if any) shall, until paid, bear interest from the Redemption Date
at the rate provided by the Security.
SECTION 11.08. 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 Section 10.02 (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 like tenor, 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 XII
Discharge of Indenture
SECTION 12.01. Termination of Issuer's Obligations. Except as otherwise
provided in this Section 12.01, each of the Issuer and the Guarantor may
terminate its obligations under the Securities and this Indenture if:
(a) all Securities previously authenticated and delivered (other than
destroyed, lost or stolen Securities that have been replaced or Securities
for whose payment money or securities have theretofore been held in trust
and thereafter repaid to the Issuer, as provided in Section 12.05) have
been delivered to the Trustee for cancelation and the Issuer has paid all
sums payable by it hereunder; or
(b)(i) all such Securities mature within one year or all of them are
to be called for redemption within one year under arrangements satisfactory
to the Trustee for giving the notice of redemption, (ii) the Issuer
irrevocably deposits in trust with the Trustee during such one-year period,
under the terms of an irrevocable trust agreement in form satisfactory to
the Trustee, as trust funds solely for the benefit of the Holders of such
Securities for that purpose, money or U.S. Government Obligations
sufficient (in the opinion of a nationally recognized firm of independent
public
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accountants expressed in a written certification thereof delivered to the
Trustee), without consideration of any reinvestment of any interest
thereon, to pay principal, premium, if any, and interest on such Securities
to maturity or redemption, as the case may be, and to pay all other sums
payable by it hereunder, (iii) no Default or Event of Default with respect
to the Securities shall have occurred and be continuing on the date of such
deposit, (iv) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Guarantor or the Issuer is a party or by which it
is bound, (v) if at such time the Securities are listed on a national
securities exchange, the Securities will not be delisted as a result of
such deposit, defeasance and discharge, and (vi) the Issuer has delivered
to the Trustee an Officers' Certificate and an Opinion of Counsel, in each
case stating that all conditions precedent provided for herein relating to
the satisfaction and discharge of this Indenture have been complied with.
With respect to the foregoing clause (a), the Issuer's obligations under
Section 6.07 shall survive. With respect to the foregoing clause (b), the
Issuer's obligations in Sections 3.03, 3.04, 3.05, 3.06, 3.07, 10.01, 10.09,
6.07, 6.10, 6.11, 12.04, 12.05 and 12.06 shall survive until the Securities have
matured or have been redeemed. Thereafter, only the Issuer's obligations in
Sections 6.07, 12.05 and 12.06 shall survive. After any such irrevocable
deposit, the Trustee upon written request shall acknowledge in writing the
discharge of the Issuer's obligations under the Securities and this Indenture,
and the Guarantor's obligations under the Guarantee and this Indenture, except
for those surviving obligations specified above.
SECTION 12.02. Defeasance and Discharge of Indenture. The Issuer will be
deemed to have paid and will be discharged from any and all obligations in
respect of the Securities on the 123rd day after the date of the deposit
referred to in clause (a) of this Section 12.02 if:
(a) with reference to this Section 12.02, the Issuer has irrevocably
deposited or caused to be irrevocably deposited with the Trustee and has
conveyed all right, title and interest for the benefit of the Holders,
under the terms of an irrevocable trust agreement in form satisfactory to
the Trustee as trust
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funds in trust, specifically pledged to the Trustee for the benefit of the
Holders as security for payment of the principal of, premium, if any, and
interest, if any, on the Securities, and dedicated solely to, the benefit
of the Holders, in and to (i) money in an amount, (ii) U.S. Government
Obligations that, through the payment of interest, premium, if any, and
principal in respect thereof in accordance with their terms, will provide,
not later than one day before the due date of any payment referred to in
this clause (a), money in an amount or (iii) a combination thereof in an
amount 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, without consideration of
the reinvestment of such interest and after payment of all federal, state
and local taxes or other charges and assessments in respect thereof payable
by the Trustee, the principal of, premium, if any, and accrued interest on
the outstanding Securities at the Stated Maturity of such principal or
interest or upon earlier redemption; provided that the Trustee shall have
been irrevocably instructed to apply such money or the proceeds of such
U.S. Government Obligations to the payment of such principal, premium, if
any, and interest with respect to the Securities and to give any related
notice of redemption;
(b) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Guarantor, the Issuer or any of their Subsidiaries
is a party or by which the Guarantor, the Issuer or any of their
Subsidiaries is bound;
(c) immediately after giving effect to such deposit on a pro forma
basis, no Default or Event of Default, or event that after the giving of
notice or lapse of time or both could become a Default or Event of Default,
shall have occurred and be continuing on the date of such deposit or during
the period ending on the 123rd day after the date of such deposit;
(d) the Issuer shall have delivered to the Trustee either (i) a ruling
based on relevant law and practice at the time directed to the Trustee from
the Inland Revenue or other relevant tax authority to the effect that the
Holders will not recognize income, gain or loss for U.K. income tax or
other tax purposes as a result of the Issuer's exercise of its option under
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this Section 12.02, disregarding income tax on any amounts that would have
been received but for such exercise of its option under this Section 12.02,
and will be subject to U.K. income tax on the same amount and in the same
manner and at the same time as would have been the case if such option had
not been exercised or (ii) an Opinion of Counsel to the same effect as the
ruling described in clause (i) above;
(e) the Issuer shall have delivered to the Trustee (i) either (A) a
ruling directed to the Trustee received from the Internal Revenue Service
to the effect that the Holders will not recognize additional income, gain
or loss for U.S. federal income tax purposes as a result of the Issuer's
exercise of its option under this Section 12.02 and will be subject to U.S.
federal income tax on the same amount and in the same manner and at the
same times as would have been the case if such option had not been
exercised or (B) an Opinion of Counsel to the same effect as the ruling
described in clause (A) above accompanied by a ruling to that effect
published by the Internal Revenue Service, unless there has been a change
in the relevant U.S. federal income tax law since the date of this
Indenture and (ii) an Opinion of Counsel to the effect that (A) the
creation of the defeasance trust does not violate the Investment Company
Act of 1940 and (B) after the passage of 123 days following the deposit
(except, with respect to any trust funds for the account of any Holder who
may be deemed to be "connected" with the Issuer for purposes of the
Insolvency Act 1986 after two years following the deposit), the trust funds
will not be subject to the effect of Section 547 of the United States
Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law and
either (I) the trust funds will no longer remain the property of the Issuer
(and therefore will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally) or (II) if a court were to rule under any such law in any
case or proceeding that the trust funds remained property of the Issuer (1)
assuming such trust funds remained in the possession of the Trustee prior
to such court ruling to the extent not paid to the Holders, the Trustee
will hold, for the benefit of the Holders, a valid and perfected security
interest in such trust funds that is not avoidable in bankruptcy or
otherwise and (2) no property, rights in property or other interests
granted to the Trustee or the Holders in
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exchange for, or with respect to, such trust funds will be subject to any
prior rights of holders of other Debt of the Issuer or any of its
Securities;
(f) if at such time the Securities are listed on a national securities
exchange, the Issuer shall have delivered to the Trustee an Opinion of
Counsel to the effect that the Securities will not be delisted as a result
of the Issuer's exercise of its opinion under this Section 12.02; and
(g) the Issuer shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 12.02 have been complied with.
Notwithstanding the foregoing, prior to the end of the post deposit period
referred to in clause (e)(ii)(B) of this Section 12.02, none of the Issuer's
obligations under this Indenture shall be discharged. Subsequent to the end of
such period with respect to this Section 12.02, the Issuer's obligations in
Sections 3.03, 3.04, 3.05, 3.06, 3.07, 10.01, 10.09, 6.07, 6.10, 6.11, 12.04,
12.05 and 12.06 shall survive until the Securities mature or are redeemed.
Thereafter, only the Issuer's obligations in Sections 6.07, 12.05 and 12.06
shall survive. If and when a ruling from the Internal Revenue Service or an
Opinion of Counsel referred to in clause (e)(i) of this Section 12.02 may be
provided specifically without regard to, and not in reliance upon, the
continuance of the Issuer's obligations under Section 10.01, then the Issuer's
obligations under such sentence shall cease upon delivery to the Trustee of such
ruling or Opinion of Counsel and compliance with the other conditions precedent
provided for herein relating to the defeasance contemplated by this Section
12.02.
After any such irrevocable deposit, the Trustee upon request shall
acknowledge in writing the discharge of the Issuer's obligations under the
Securities, any Subsidiary Guarantee, if any, and this Indenture except for
those surviving obligations in the immediately preceding paragraph.
SECTION 12.03. Defeasance of Certain Obligations. The Issuer may omit to
comply with any term, provision or condition set forth in clauses (3) and (4) of
Section 8.01 and Sections 10.05 through 10.18 (except for Section 10.09 and any
covenant otherwise required by the TIA), and
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clause (d) of Section 5.01 with respect to clauses (3) and (4) of Section 8.01,
clauses (d) and (e) of Section 5.01 with respect to Sections 10.05 through
10.18, except as aforesaid, and clauses (c), (f) and (g) of Section 5.01 shall
be deemed not to be Events of Default, in each case with respect to the
outstanding Securities if:
(a) with reference to this Section 12.03, the Issuer has irrevocably
deposited or caused to be irrevocably deposited with the Trustee and
conveyed all right, title and interest to the Trustee for the benefit of
the Holders, under the terms of an irrevocable trust agreement in form and
substance satisfactory to the Trustee as trust funds in trust, specifically
pledged to the Trustee for the benefit of the Holders as security for
payment of the principal of, premium, if any, and interest, if any, on the
Securities, and dedicated solely to, the benefit of the Holders, in and to
(i) money in an amount, (ii) U.S. Government Obligations that, through the
payment of interest and principal in respect thereof in accordance with
their terms, will provide, not later than one day before the due date of
any payment referred to in this clause (a), money in an amount or (iii) a
combination thereof in an amount 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,
without consideration of the reinvestment of such interest and after
payment of all federal, state and local taxes or other charges and
assessments in respect thereof payable by the Trustee, the principal of,
premium, if any, and interest on the outstanding Securities on the Stated
Maturity or upon earlier redemption of such principal or interest; provided
that the Trustee shall have been irrevocably instructed to apply such money
or the proceeds of such U.S. Government Obligations to the payment of such
principal, premium, if any, and interest with respect to the Securities and
to give any related notice of redemption;
(b) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Guarantor, the Issuer or any of their Subsidiaries
is a party or by which the Guarantor, the Issuer or any of their
Subsidiaries is bound;
-127-
<PAGE>
(c) immediately after giving effect to such deposit or a pro forma
basis, no Default or Event of Default, or event that after the giving of
notice or lapse of time or both would become a Default or Event of Default,
shall have occurred and be continuing on the date of such deposit or during
the period ending on the 123rd day after the day of such deposit;
(d) the Issuer has delivered to the Trustee an Opinion of Counsel to
the effect that (i) the creation of the defeasance trust does not violate
the Investment Company Act of 1940, (ii) the Holders will not recognize
income, gain or loss for U.S. federal income tax purposes as a result of
such deposit and the defeasance of the obligations referred to in the first
paragraph of this Section 12.03 and will be subject to U.S. federal income
tax on the same amount and in the same manner and at the same times as
would have been the case if such deposit and defeasance had not occurred
and (iii) after the passage of 123 days following the deposit (except with
respect to any trust funds for the account of any Holder who may be deemed
to be "connected" with the Issuer for purposes of the Insolvency Act 1986
after two years following the deposit), the trust funds will not be subject
to the effect of Section 547 of the United States Bankruptcy Code or
Section 15 of the New York Debtor and Creditor Law, and either (A) the
trust funds will no longer remain the property of the Issuer (and therefore
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditor's rights generally) or
(B) if a court were to rule under any such law in any case or proceeding
that the trust funds remained property of the Issuer (1) assuming such
trust funds remained in the possession of the Trustee prior to such court
ruling to the extent not paid to the Holders, the Trustee will hold, for
the benefit of the Holders, a valid and perfected security interest in such
trust funds that is not avoidable in bankruptcy or otherwise and (2) no
property, rights in property or other interests granted to the Trustee or
the Holders in exchange for, or with respect to, such trust funds will be
subject to any prior rights or holders of other Indebtedness of the Issuer
or any of its Securities;
(e) if at such time the Securities are listed on a national securities
exchange, the Issuer has delivered to the Trustee an Opinion of Counsel to
the effect that the Securities will not be delisted as a result of the
-128-
<PAGE>
Issuer's exercise of its option under Section 12.03; and
(f) the Issuer has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, in each case stating that all conditions
precedent provided for herein relating to the defeasance contemplated by
this Section 12.03 have been complied with.
SECTION 12.04. Application of Trust Money. Subject to Section 12.06, the
Trustee or Paying Agent shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Section 12.01, 12.02 or 12.03, as the case may be,
and shall apply the deposited money and the money from U.S. Government
Obligations in accordance with the Securities and this Indenture to the payment
of principal of, premium, if any, and interest on the Securities; but such money
need not be segregated from other funds except to the extent required by law.
SECTION 12.05. Repayment to Issuer. Subject to Sections 6.07, 12.01, 12.02
and 12.03, the Trustee and the Paying Agent shall promptly pay to the Issuer
upon request set forth in an Officers' Certificate any excess money held by them
at any time and thereupon shall be relieved from all liability with respect to
such money. The Trustee and the Paying Agent shall pay to the Issuer any money
held by them for the payment of principal, premium, if any, or interest that
remains unclaimed in accordance with Section 10.02.
SECTION 12.06. Reinstatement. If the Trustee or Paying Agent is unable to
apply any money or U.S. Government Obligations in accordance with Section 12.01,
12.02 or 12.03, as the case may be, by reason of any legal proceeding or by
reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, the Issuer's
obligations under this Indenture, the Securities Guarantee, and the Securities
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 12.01, 12.02 or 12.03, as the case may be, until such time as the
Trustee or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with Section 12.01, 12.02 or 12.03, as the case may
be; provided that, if the Issuer has made any payment of principal of, premium,
if any, or interest on any Securities because of the reinstatement of its
obligations, the Issuer shall be subrogated to the rights of the Holders of such
Securities to receive such
-129-
<PAGE>
payment from the money or U.S. Government Obligations held by the Trustee or
Paying Agent.
SECTION 12.07. Insiders. With respect to the determination of the Persons
constituting beneficial owners of Securities and whether any such Person is
"connected" with the Issuer for purposes of Sections 12.02(e)(ii)(B) and
12.03(d)(iii), the Trustee may rely on an Officers' Certificate.
-130-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the day and year first above written.
Dated:
The Common Seal of
RSL COMMUNICATIONS PLC
was hereto affixed in
the presence of:
[SEAL]
RSL COMMUNICATIONS PLC,
by
--------------------------
Name:
Title:
by
--------------------------
Name:
Title:
THE CHASE MANHATTAN BANK,
by
--------------------------
Name:
Title:
RSL COMMUNICATIONS, LTD.,
by
--------------------------
Name:
Title:
<PAGE>
ANNEX A -- Form of
Regulation S Certificate
REGULATION S CERTIFICATE
(For transfers pursuant to ss. 3.05(b)(i) and (iii)
of the Indenture)
The Chase Manhattan Bank,
as Trustee
450 West 33rd Street, 15th Floor
New York, NY 10001
Attention: Global Trust Services
Re: 10 1/8% Senior Notes due 2008 of
RSL Communications PLC (the "Securities")
Reference is made to the Indenture, dated as of February 27, 1998 (the
"Indenture"), between RSL Communications PLC (the "Issuer"), RSL Communications,
Ltd. (the "Guarantor") and The Chase Manhattan Bank, 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, as amended (the "Securities Act") are used herein
as so defined.
This certificate relates to U.S. $____________ principal amount at maturity
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 Book-Entry Depositary who issued a Depositary Interest to the
Depositary (or its nominee) who holds such interest in the name of the
Undersigned. 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 Regulation S
Security.
A-1
<PAGE>
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 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 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
Restricted Period, then the requirements of Rule 904(c)(1) have been
satisfied; and
A-2
<PAGE>
(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 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 the
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
(B) the transfer 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 the
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.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuer and the 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.)
A-3
<PAGE>
ANNEX B -- Form of Restricted
Securities Certificate
RESTRICTED SECURITIES CERTIFICATE
(For transfers pursuant to ss. 3.05(b)(ii) and (iii)
of the Indenture)
The Chase Manhattan Bank,
as Trustee
450 West 33rd Street, 15th Floor
New York, NY 10001
Attention: Global Trust Services
Re: 10 1/8% Senior Notes due 2008 of
RSL Communications PLC (the "Securities")
Reference is made to the Indenture, dated as of February 27, 1998 (the
"Indenture"), between RSL Communications PLC (the "Issuer"), RSL Communications,
Ltd. (the "Guarantor") and The Chase Manhattan Bank, 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, as amended (the "Securities Act") are used herein
as so defined.
This certificate relates to U.S. $_____________ principal amount at
maturity 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 Book-Entry Depositary who issued a Depositary Interest to the
Depositary (or its nominee) who holds such interest in the name of the
Undersigned. 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.
B-1
<PAGE>
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. 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
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
(2) Rule 144 Transfers. If the transfer is being effected pursuant to
Rule 144:
(A) the transfer is occurring 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 the
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
(B) the transfer 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 the
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.
B-2
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuer and the 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.)
B-3
<PAGE>
ANNEX C -- Form of Unrestricted
Securities Certificate
UNRESTRICTED SECURITIES CERTIFICATE
(For removal of Securities Act Legends pursuant to ss. 3.05(c))
The Chase Manhattan Bank,
as Trustee
450 West 33rd Street, 15th Floor
New York, NY 10001
Attention: Global Trust Services
Re: 10 1/8% Senior Notes due 2008 of
RSL Communications PLC (the "Securities")
Reference is made to the Indenture, dated as of February 27, 1998 (the
"Indenture"), between RSL Communications PLC (the "Issuer"), RSL Communications,
Ltd. (the "Guarantor") and The Chase Manhattan Bank, 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, as amended (the "Securities Act") are used herein
as so defined.
This certificate relates to U.S. $_____________ principal amount at
maturity 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 Book-Entry Depositary who issued a Depositary Interest to the
Depositary (or its nominee) who holds such interest 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.
C-1
<PAGE>
The Owner has requested that the Specified Securities be exchanged for
Securities bearing no Securities Act Legend pursuant to Section 305(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 the 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. 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 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.)
C-2
<PAGE>
EXECUTION COPY
================================================================================
RSL COMMUNICATIONS PLC
As Issuer
RSL COMMUNICATIONS, LTD.
As Guarantor
TO
THE CHASE MANHATTAN BANK
As Trustee
------------------------------------
Indenture
Dated as of February 27, 1998
------------------------------------
9 1/8% SENIOR NOTES DUE 2008
================================================================================
<PAGE>
Certain Sections of this Indenture relating to
Sections 3.10 through 3.18 of the
Trust Indenture Act of 1939:
Trust Indenture Indenture
Act Section Section
----------- -------
ss.3.10(a)(1) .......................................... 609
(a)(2) .......................................... 609
(a)(3) .......................................... Not
Applicable
(a)(4) .......................................... Not
Applicable
(b) .......................................... 6.08
6.10
ss. 3.11(a) .......................................... 6.13
(b) .......................................... 6.13
ss. 3.12(a) .......................................... 7.01
7.02(a)
(b) .......................................... 7.02(b)
(c) .......................................... 7.02(c)
ss. 3.13(a) .......................................... 7.03(a)
(a)(4) .......................................... 7.03(a)
(b) .......................................... 7.03(a)
(c) .......................................... 7.03(a)
(d) .......................................... 7.03(b)
ss. 3.14(a) .......................................... 7.04
10.18
(b) .......................................... Not
Applicable
(c)(1) .......................................... 1.02
(c)(2) .......................................... 1.02
(c)(3) .......................................... Not
Applicable
(d) .......................................... Not
Applicable
(e) .......................................... 1.02
ss. 3.15(a) .......................................... 6.01
(b) .......................................... 6.02
(c) .......................................... 6.01
(d) .......................................... 6.01
(e) .......................................... 5.14
- ---------------
Note: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of the Indenture.
-i-
<PAGE>
Trust Indenture Indenture
Act Section Section
----------- -------
ss. 3.16(a)(1)(A) ...........................................
5.02
5.12
(a)(1)(B) ........................................... 5.13
(a)(2) ........................................... Not
Applicable
(b) ........................................... 5.08
(c) ........................................... 1.04
ss. 3.17(a)(1) ........................................... 5.03
(a)(2) ........................................... 5.04
(b) ........................................... 10.03
ss. 3.18(a) ........................................... 1.07
- ---------------
Note: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of the Indenture.
-ii-
<PAGE>
TABLE OF CONTENTS
Page
----
Parties........................................................................1
Recitals of the Issuer ........................................................1
ARTICLE I
Definitions and Other Provisions
of General Application
SECTION 1.01. Definitions ....................................................2
Act...................................................................2
Acquired Debt.........................................................2
Additional Amounts....................................................3
Additional Securities.................................................3
Affiliate.............................................................3
Agent Member..........................................................3
Applicable Procedures.................................................3
Asset Disposition.....................................................3
Average Life..........................................................4
beneficial interest...................................................4
Board of Directors....................................................4
Board Resolution......................................................4
Book-Entry Depositary.................................................4
Business Day..........................................................4
Capital Lease Obligation..............................................4
Capital Stock.........................................................5
Cedel.................................................................5
Change of Control.....................................................5
Commission............................................................5
Common Stock..........................................................5
Consolidated Cash Flow Available for Fixed Charges....................5
Consolidated Income Tax Expense.......................................6
Consolidated Interest Expense.........................................6
Consolidated Net Income...............................................7
Consolidated Net Worth................................................7
Consolidated Tangible Assets..........................................7
Corporate Trust Office................................................7
corporation...........................................................7
Credit Facility.......................................................8
- ---------------
Note: This table of contents shall not, for any purpose, be deemed to be
part of the Indenture.
-iii-
<PAGE>
Page
----
Debt..................................................................8
Defaulted Interest....................................................9
Definitive Security...................................................9
Deposit Agreement.....................................................9
Depositary............................................................9
Depositary Interest...................................................9
Disqualified Stock....................................................9
Eligible Institution.................................................10
Equity Clawback......................................................10
Euroclear............................................................10
Event of Default.....................................................10
Exchange Act.........................................................10
Exchange and Registration Rights Agreement...........................10
Exchange Offer.......................................................10
Exchange Offer Registration Statement................................10
Exchange Security....................................................11
Existing Stockholders................................................11
Expiration Date......................................................11
Global Security......................................................11
Government Securities................................................11
Guarantee............................................................11
Guarantor............................................................12
Holder...............................................................12
Incremental Paid-in Capital..........................................12
Incur................................................................12
Indenture............................................................12
Indirect Participant.................................................13
Initial Purchasers...................................................13
Interest Payment Date................................................13
Interest Rate or Currency Protection Agreement.......................13
Investment...........................................................13
Issuer...............................................................14
Issuer Request or Issuer Order.......................................14
Lien.................................................................14
Listing Failure......................................................14
Marketable Securities................................................14
Maturity.............................................................15
Net Available Proceeds...............................................15
Offer to Purchase....................................................16
Officers' Certificate................................................18
Opinion of Counsel...................................................18
- ---------------
Note: This table of contents shall not, for any purpose, be deemed to be
part of the Indenture.
-iv-
<PAGE>
Page
----
Original Securities..................................................19
Outstanding..........................................................19
Participant..........................................................20
Paying Agent.........................................................20
Permitted Interest Rate or Currency Protection
Agreement............................................................20
Permitted Investment.................................................20
Permitted Liens......................................................21
Person...............................................................21
Predecessor Security.................................................22
Purchase Agreement...................................................22
Purchase Money Debt..................................................22
readily marketable cash equivalents..................................22
Receivables..........................................................23
Receivables Sale.....................................................23
Redemption Date......................................................23
Redemption Price.....................................................23
Registered Securities................................................23
Regular Record Date..................................................23
Regulation S.........................................................23
Regulation S Certificate.............................................23
Regulation S Global Security.........................................23
Regulation S Legend..................................................23
Regulation S Securities..............................................24
Related Person.......................................................24
Resale Registration Statement........................................24
Responsible Officer..................................................24
Restricted Global Security...........................................24
Restricted Period....................................................24
Restricted Securities................................................25
Restricted Securities Certificate....................................25
Restricted Securities Legend.........................................25
Restricted Subsidiary................................................25
RSLNA................................................................25
Rule 144A............................................................25
Rule 144A Securities.................................................25
Securities...........................................................25
Securities Act.......................................................25
Securities Act Legend................................................25
Securities Guarantee.................................................25
Security Register and Security Registrar.............................25
- ---------------
Note: This table of contents shall not, for any purpose, be deemed to be
part of the Indenture.
-v-
<PAGE>
Page
----
Senior Discount Securities...........................................25
Senior Discount Securities Indenture.................................25
Significant Subsidiary...............................................26
Special Interest.....................................................26
Special Record Date..................................................26
Stated Maturity......................................................26
Step-Down Date.......................................................26
Step-Up..............................................................26
Strategic Investor...................................................26
Subordinated Debt....................................................26
Subsidiary...........................................................27
Subsidiary Guarantor.................................................28
Substitute Securities................................................28
Successor Security...................................................28
Tax..................................................................28
Taxing Authority.....................................................28
Telecommunications Assets............................................28
Telecommunications Business..........................................29
Trustee..............................................................29
Trust Indenture Act..................................................29
Unrestricted Securities Certificate..................................29
Unrestricted Subsidiary..............................................29
Vice President.......................................................30
Voting Stock.........................................................30
Wholly Owned Subsidiary..............................................30
SECTION 1.02. Compliance Certificates and Opinions...........................30
SECTION 1.03. Form of Documents Delivered to Trustee.........................31
SECTION 1.04. Acts of Holders; Record Dates..................................32
SECTION 1.05. Notices, Etc., to Trustee, Issuer and
Guarantor......................................................35
SECTION 1.06. Notice to Holders; Waiver......................................35
SECTION 1.07. Application of Trust Indenture Act.............................36
SECTION 1.08. Effect of Headings and Table of Contents.......................36
SECTION 1.09. Successors and Assigns.........................................36
SECTION 1.10. Separability Clause............................................36
SECTION 1.11. Benefits of Indenture..........................................36
SECTION 1.12. Governing Law..................................................36
SECTION 1.13. Legal Holidays.................................................37
SECTION 1.14. Agent for Service; Submission to
Jurisdiction; Waiver of Immunities.............................37
- ---------------
Note: This table of contents shall not, for any purpose, be deemed to be
part of the Indenture.
-vi-
<PAGE>
Page
----
ARTICLE II
Security Forms
SECTION 2.01. Forms Generally................................................38
SECTION 2.02. Form of Face of Security.......................................39
SECTION 2.03. Form of Reverse of Security....................................45
SECTION 2.04. Form of Trustee's Certificate of
Authentication ................................................50
ARTICLE III
The Securities
SECTION 3.01. Title and Terms................................................50
SECTION 3.02. Denominations..................................................52
SECTION 3.03. Execution, Authentication, Delivery and
Dating.........................................................53
SECTION 3.04. Temporary Securities...........................................54
SECTION 3.05. Registration, Registration of Transfer and
Exchange.......................................................55
SECTION 3.06. Mutilated, Destroyed, Lost and Stolen
Securities.....................................................61
SECTION 3.07. Payment of Interest; Interest
Rights Preserved...............................................62
SECTION 3.08. Persons Deemed Owners..........................................64
SECTION 3.09. Cancelation ...................................................64
SECTION 3.10. Computation of Interest........................................64
SECTION 3.11. CUSIP and ISIN Numbers.........................................65
SECTION 3.12. Additional Securities..........................................65
ARTICLE IV
Guarantee Of Securities
SECTION 4.01. Guarantee ...................................................65
SECTION 4.02. Obligations Unconditional......................................67
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Note: This table of contents shall not, for any purpose, be deemed to be
part of the Indenture.
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SECTION 4.03. Notice to Trustee..............................................68
ARTICLE V
Remedies
SECTION 5.01. Events of Default..............................................68
SECTION 5.02. Acceleration of Maturity; Rescission and
Annulment......................................................70
SECTION 5.03. Collection of Indebtedness and Suits for
Enforcement by Trustee.........................................71
SECTION 5.04. Trustee May File Proofs of Claim...............................72
SECTION 5.05. Trustee May Enforce Claims Without
Possession of Securities.......................................73
SECTION 5.06. Application of Money Collected.................................73
SECTION 5.07. Limitation on Suits............................................74
SECTION 5.08. Unconditional Right of Holders To Receive
Principal, Premium and Interest................................74
SECTION 5.09. Restoration of Rights and Remedies.............................75
SECTION 5.10. Rights and Remedies Cumulative.................................75
SECTION 5.11. Delay or Omission Not Waiver...................................75
SECTION 5.12. Control by Holders.............................................76
SECTION 5.13. Waiver of Past Defaults........................................76
SECTION 5.14. Undertaking for Costs..........................................76
SECTION 5.15. Waiver of Stay or Extension Laws...............................77
ARTICLE VI
The Trustee
SECTION 6.01. Certain Duties and Responsibilities............................77
SECTION 6.02. Notice of Defaults.............................................79
SECTION 6.03. Certain Rights of Trustee......................................79
SECTION 6.04. Not Responsible for Recitals
or Issuance of Securities......................................80
SECTION 6.05. May Hold Securities............................................81
SECTION 6.06. Money Held in Trust............................................81
SECTION 6.07. Compensation and Reimbursement.................................81
SECTION 6.08. Disqualification; Conflicting Interests........................82
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Note: This table of contents shall not, for any purpose, be deemed to be
part of the Indenture.
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SECTION 6.09. Corporate Trustee Required; Eligibility........................82
SECTION 6.10. Resignation and Removal; Appointment of
Successor......................................................83
SECTION 6.11. Acceptance of Appointment by Successor.........................84
SECTION 6.12. Merger, Conversion, Consolidation or
Succession to Business.........................................85
SECTION 6.13. Preferential Collection of Claims Against
Issuer or Guarantor............................................85
SECTION 6.14. Appointment of Authenticating Agent............................85
SECTION 6.15. Withholding Taxes..............................................87
ARTICLE VII
Holders' Lists and Reports by Trustee and Issuer
SECTION 7.01. Issuer to Furnish Trustee Names and
Addresses of Holder............................................88
SECTION 7.02. Preservation of Information;
Communications to Holders......................................88
SECTION 7.03. Reports by Trustee.............................................89
SECTION 7.04. Reports by Issuer and Guarantor................................89
SECTION 7.05. Officers' Certificate with Respect to
Change in Interest Rates.......................................89
ARTICLE VIII
Merger, Consolidation, Etc.
SECTION 8.01. Mergers, Consolidations and Certain
Sales of Assets................................................90
SECTION 8.02. Successor Substituted..........................................91
ARTICLE IX
Supplemental Indentures
SECTION 9.01. Supplemental Indentures Without Consent
of Holders.....................................................92
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Note: This table of contents shall not, for any purpose, be deemed to be
part of the Indenture.
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SECTION 9.02. Supplemental Indentures with Consent of
Holders........................................................93
SECTION 9.03. Execution of Supplemental Indentures...........................94
SECTION 9.04. Effect of Supplemental Indentures..............................94
SECTION 9.05. Conformity with Trust Indenture Act............................94
SECTION 9.06. Reference in Securities to Supplemental
Indentures.....................................................94
ARTICLE X
Covenants
SECTION 10.01. Payment of Principal, Premium and
Interest......................................................95
SECTION 10.02. Maintenance of Office or Agency...............................95
SECTION 10.03. Money for Security Payments To Be Held
in Trust......................................................95
SECTION 10.04. Existence ...................................................97
SECTION 10.05. Maintenance of Properties.....................................97
SECTION 10.06. Payment of Taxes and Other Claims.............................98
SECTION 10.07. Maintenance of Insurance......................................98
SECTION 10.08. Limitation on Consolidated Debt...............................98
SECTION 10.09. Additional Amounts...........................................101
SECTION 10.10. Limitation on Restricted Payments............................104
SECTION 10.11. Limitation on Dividend and Other
Payment Restrictions Affecting
Restricted Subsidiaries......................................106
SECTION 10.12. Limitation on Transactions with
Affiliates and Related Persons...............................108
SECTION 10.13. Limitation on Asset Dispositions.............................109
SECTION 10.14. Limitation on Issuances and Sales of
Capital Stock of Restricted
Subsidiaries.................................................110
SECTION 10.15. Limitation on Liens..........................................111
SECTION 10.16. Limitation on Issuance of Guarantees
of Debt by Restricted Subsidiaries...........................112
SECTION 10.17. Change of Control............................................113
SECTION 10.18. Provision of Financial Information...........................114
SECTION 10.19. Statement by Officers as to Default..........................115
SECTION 10.20. Waiver of Certain Covenants..................................115
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Note: This table of contents shall not, for any purpose, be deemed to be
part of the Indenture.
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SECTION 10.21. Paying Agent.................................................115
ARTICLE XI
Redemption of Securities
SECTION 11.01. Right of Redemption..........................................116
SECTION 11.02. Applicability of Article.....................................117
SECTION 11.03. Election To Redeem; Notice to Trustee........................117
SECTION 11.04. Securities To Be Redeemed Pro Rata...........................118
SECTION 11.05. Notice of Redemption.........................................118
SECTION 11.06. Deposit of Redemption Price..................................119
SECTION 11.07. Securities Payable on Redemption Date........................120
SECTION 11.08. Securities Redeemed in Part..................................120
ARTICLE XII
Discharge of Indenture
SECTION 12.01. Termination of Issuer's Obligations..........................120
SECTION 12.02. Defeasance and Discharge of Indenture........................122
SECTION 12.03. Defeasance of Certain Obligations............................125
SECTION 12.04. Application of Trust Money...................................127
SECTION 12.05. Repayment to Issuer..........................................127
SECTION 12.06. Reinstatement................................................128
SECTION 12.07. Insiders ..................................................128
TESTIMONIUM..................................................................129
SIGNATURES AND SEALS.........................................................129
ACKNOWLEDGMENTS...............................................................
ANNEX A -- Form of Regulation S Certificate
ANNEX B -- Form of Restricted Securities Certificate
ANNEX C -- Form of Unrestricted Securities Certificate
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Note: This table of contents shall not, for any purpose, be deemed to be
part of the Indenture.
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INDENTURE, dated as of February 27, 1998, between RSL COMMUNICATIONS PLC, a
United Kingdom corporation, as issuer (the "Issuer"), having its principal
office at Victoria House, London Square, Guilford, Surrey, England GU1 1UJ, RSL
COMMUNICATIONS, LTD., a Bermuda corporation, as guarantor (the "Guarantor"),
having its principal office at Clarendon House, Church Street, Hamilton HM CX,
Bermuda, and THE CHASE MANHATTAN BANK, a corporation duly organized and existing
under the laws of the State of New York, as Trustee (herein called the
"Trustee").
RECITALS OF THE ISSUER
The Issuer has duly authorized the creation of its 9 1/8% 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. An aggregate principal amount of $200,000,000 of
Securities will be initially issued on the date hereof and, subject to the
conditions set forth herein, including Section 3.12, the Issuer may issue
subsequent to the date hereof Additional Securities, which may be issued in the
form of Registered Securities. The Securities may consist of Original
Securities, Registered Securities and/or Exchange Securities, each as defined
herein. The Original Securities, the Registered Securities and the Exchange
Securities shall rank pari passu with one another and shall together constitute
a single class of securities.
All things necessary (i) 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, (ii) to make the Securities Guarantee, when
executed and delivered by the Guarantor hereunder, the valid obligation of the
Guarantor, and (iii) to make this Indenture a valid agreement of the Issuer and
the Guarantor, in accordance with 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
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proportionate benefit of all Holders of the Securities, as follows:
ARTICLE I
Definitions and Other Provisions
of General Application
SECTION 1.01. Definitions. For all purposes of this Indenture, except as
otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(b) 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;
(c) 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 accepted
accounting principles" with respect to any computation required or
permitted hereunder shall mean such accounting principles as are generally
accepted as consistently applied by the Issuer or the Guarantor, as
applicable, at the date hereof; and
(d) 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.
Certain terms, used principally in Article Six, are defined in that
Article.
"Act", when used with respect to any Holder, has the meaning specified in
Section 1.04.
"Acquired Debt" means, with respect to any specified Person, (i) Debt of
any other Person existing at the time such Person merges with or into or
consolidates with or becomes a Subsidiary of such specified Person and (ii) Debt
secured by a Lien encumbering any asset acquired by such specified Person, which
Debt was not Incurred in
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anticipation of, and was outstanding prior to, such merger,
consolidation or acquisition.
"Additional Amounts" has the meaning specified in Section 10.09.
"Additional Securities" means Securities issued subsequent to the date
hereof pursuant to Section 3.12 (exclusive of (x) any Exchange Securities issued
pursuant to Section 3.03 hereof in exchange for Original Securities issued on
the date hereof, or (y) any Substitute Securities).
"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.
"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 from time to
time.
"Asset Disposition" by any Person means any transfer, conveyance, sale,
lease or other disposition by such Person or any of its Subsidiaries (including
a consolidation or merger or other sale of any such Subsidiary with, into or to
another Person in a transaction in which such Subsidiary ceases to be a
Subsidiary of the specified Person, but excluding a disposition by a Subsidiary
of such Person to such Person or a Wholly Owned Subsidiary of such Person or by
such Person to a Wholly Owned Subsidiary of such Person or by a Restricted
Subsidiary to the Guarantor or a Restricted Subsidiary or by the Guarantor to a
Restricted Subsidiary) of (i) shares of Capital Stock or other ownership
interests of a Subsidiary of such Person; (ii) substantially all of the assets
of such Person or any of its Subsidiaries representing a division or line of
business (other than as part of a Permitted Investment); or
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(iii) other assets or rights of such Person or any of its Subsidiaries outside
of the ordinary course of business, provided in the case of each of the
preceding clauses (i), (ii) and (iii) that the aggregate consideration for such
transfer, conveyance, sale, lease or other disposition is equal to $2.0 million
or more in any 12-month period.
"Average Life" means, at any date of determination with respect to any
Debt, the quotient obtained by dividing (i) the sum of the products of (a) the
number of years from such date of determination to the dates of each successive
scheduled principal payment of such Debt and (b) the amount of such principal
payment by (ii) the sum of all such principal payments.
"beneficial interest" means an indirect beneficial interest in a Global
Security held through a corresponding Depositary Interest and shown on, and
transferred only through, records maintained in book-entry form by the
Depositary (with respect to the Participants) and its Participants.
"Board of Directors" means either the board of directors of the Guarantor
or the Issuer, as applicable, or any duly authorized committee of that board
duly authorized to act with respect to this Indenture from time to time.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Guarantor or the Issuer, as applicable, 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.
"Book-Entry Depositary" means The Chase Manhattan Bank in its capacity as
book-entry depositary pursuant to the terms of the Deposit Agreement, until a
successor Book-Entry Depositary shall have become such pursuant to the terms of
the Deposit Agreement, and thereafter "Book-Entry Depositary" shall mean such
successor Book-Entry Depositary.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in the Borough of Manhattan,
the City of New York, New York 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
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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 generally accepted accounting principles
(a "Capital Lease"). The stated maturity of such obligation shall be the date of
the last payment of rent or any other amount due under such lease prior to the
first date upon which such lease may be terminated by the lessee without payment
of a penalty. 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 generally accepted accounting principles.
"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.
"Cedel" means Cedel Bank, S.A. (or any successor securities clearing
agency).
"Change of Control" has the meaning specified in Section 10.17.
"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 or not 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 Cash Flow Available for Fixed Charges" for any period means
the Consolidated Net Income of the Guarantor and its Restricted Subsidiaries for
such period increased by the sum of (i) Consolidated Interest Expense of the
Guarantor and its Restricted Subsidiaries for such period, plus (ii)
Consolidated Income Tax Expense of the Guarantor and its Restricted Subsidiaries
for such period, plus (iii) the consolidated depreciation and amortization
expense included in the income statement of the Guarantor and its Restricted
Subsidiaries for such period,
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plus (iv) any noncash expense related to the issuance to employees of the
Guarantor or any Restricted Subsidiary of the Guarantor of options to purchase
Capital Stock of the Guarantor or such Restricted Subsidiary, plus (v) any
charge related to any premium or penalty paid in connection with redeeming or
retiring any Debt prior to its stated maturity; provided, however, that there
shall be excluded therefrom the Consolidated Cash Flow Available for Fixed
Charges (if positive) of any Restricted Subsidiary of the Guarantor (calculated
separately for such Restricted Subsidiary in the same manner as provided above
for the Guarantor) that is subject to a restriction which prevents the payment
of dividends or the making of distributions to the Guarantor or another
Restricted Subsidiary of the Guarantor to the extent of such restriction.
"Consolidated Income Tax Expense" for any period means the aggregate
amounts of the provisions for income taxes of the Guarantor and its Restricted
Subsidiaries for such period calculated on a consolidated basis in accordance
with generally accepted accounting principles.
"Consolidated Interest Expense" means for any period the interest expense
included in a consolidated income statement (excluding interest income) of the
Guarantor and its Restricted Subsidiaries for such period in accordance with
generally accepted accounting principles, 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 with
respect to interest rate swap or similar agreements or foreign currency hedge,
exchange or similar agreements; (iv) Preferred Stock dividends of the Guarantor
and its Restricted Subsidiaries (other than dividends paid in shares of
Preferred Stock that is not Disqualified Stock) declared and paid or payable;
(v) accrued Disqualified Stock dividends of the Guarantor and its Restricted
Subsidiaries, whether or not declared or paid; (vi) interest on Debt guaranteed
by the Guarantor and its Restricted Subsidiaries (but only to the extent such
interest is actually paid by the Guarantor or a Restricted Subsidiary); and
(vii) the portion of any Capital Lease Obligation paid during such period that
is allocable to interest expense; excluding, however, any premiums, fees and
expenses (and any amortization thereof) payable in connection with the offerings
of the Securities; all of the foregoing as determined on a consolidated basis
(without taking into account Unrestricted Subsidiaries) in conformity with
generally accepted accounting principles.
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"Consolidated Net Income" for any period means the net income (or loss) of
the Guarantor and its Restricted Subsidiaries for such period determined on a
consolidated basis in accordance with generally accepted accounting principles;
provided that there shall be excluded therefrom (a) the net income (or loss) of
any Person acquired by the Guarantor or a Restricted Subsidiary of the Guarantor
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 Guarantor except to the extent of the amount of dividends or
other distributions actually paid to the Guarantor or a Restricted Subsidiary of
the Guarantor by such Person during such period, (c) gains or losses on Asset
Dispositions by the Guarantor or its Restricted Subsidiaries, (d) all
extraordinary gains and extraordinary losses, determined in accordance with
generally accepted accounting principles, (e) the cumulative effect of changes
in accounting principles, (f) noncash gains or losses resulting from
fluctuations in currency exchange rates and (g) the tax effect of any of the
items described in clauses (a) through (f) above.
"Consolidated Net Worth" of any Person means the stockholders' equity of
such Person, determined on a consolidated basis in accordance with generally
accepted accounting principles, less amounts attributable to Disqualified Stock
of such Person.
"Consolidated Tangible Assets" of any Person means the total amount of
assets (less applicable reserves and other properly deductible items) which
under generally accepted accounting principles would be included on a
consolidated balance sheet of such Person and its Subsidiaries after deducting
therefrom all goodwill, trade names, trademarks, patents, unamortized debt
discount and expense and other like intangibles, which in each case under
generally accepted accounting principles would be included on such consolidated
balance sheet.
"Corporate Trust Office" means the principal office of the Trustee in the
Borough of Manhattan, The City of New York, New York, at which at any particular
time its corporate trust business shall be administered, which at the date
hereof is located at 450 West 33rd Street, New York, NY 10001-2697.
"corporation" means a corporation, association, company, limited liability
company, joint-stock company or business trust.
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"Credit Facility" means credit agreements, vendor financings or other
facilities or arrangements made available from time to time to the Guarantor and
its Restricted Subsidiaries by banks, other financial institutions and/or
equipment manufacturers for the Incurrence of Debt, including the private or
public issuance of debt securities or the provision of letters of credit and any
related notes, Guarantees, collateral documents, instruments and agreements
executed in connection therewith, as the same may be amended, supplemented,
modified or restated from time to time.
"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, the amount of (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, (iv) every obligation of such Person issued or assumed as the deferred
purchase price of property or services (including securities repurchase
agreements but excluding trade accounts payable or accrued liabilities arising
in the ordinary course of business which are not overdue or which are being
contested in good faith), (v) every Capital Lease Obligation of such Person,
(vi) all Receivables Sales of such Person, together with any obligation of such
Person to pay any discount, interest, fees, indemnities, penalties, recourse,
expenses or other amounts in connection therewith, (vii) all obligations to
redeem Disqualified Stock issued by such Person, (viii) every obligation under
Interest Rate and Currency Protection Agreements of such Person and (ix) every
obligation of the type referred to in clauses (i) through (viii) of another
Person and all dividends of another Person the payment of which, in either case,
such Person has Guaranteed to the extent the same is Guaranteed by such Person.
The "amount" or "principal amount" of Debt at any time of determination as used
herein represented by (a) 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 generally accepted accounting
principles, (b) any Receivables Sale shall be the amount of the unrecovered
capital or principal investment of the purchaser (other than the Guarantor or a
Wholly Owned Restricted Subsidiary of the Guarantor) thereof to the extent such
Person is liable
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therefor, excluding amounts representative of yield or interest earned on such
investment or (c) any Disqualified Stock shall be the maximum fixed redemption
or repurchase price in respect thereof.
"Defaulted Interest" has the meaning specified in Section 3.07.
"Definitive Security" means a certificated Security registered in the name
of the Holder thereof and issued in accordance with Section 3.05(d) hereof.
"Deposit Agreement" means the Note Deposit Agreement, dated as of the date
hereof, between the Issuer and The Chase Manhattan Bank, as Book-Entry
Depositary, with respect to the Global Securities, as amended from time to time
in accordance with the terms thereof.
"Depositary" means, with respect to the Securities issuable or issued in
whole or in part in the form of one or more Global Securities, The Depository
Trust Company for so long as it shall be a clearing agency registered under the
Exchange Act, or such successor as the Issuer shall designate from time to time
in an Officers' Certificate delivered to the Trustee.
"Depositary Interest" means a certificateless depositary interest
representing a 100% beneficial interest in a Global Security.
"Disqualified Stock" of any Person means any Capital Stock of such Person
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of such Person, any
Subsidiary of such Person or the holder thereof, in whole or in part, on or
prior to the final Stated Maturity of the Securities; provided, however, that
any Preferred Stock which would not constitute Disqualified Stock but for
provisions thereof giving holders thereof the right to require such Person to
repurchase or redeem such Preferred Stock upon the occurrence of a Change of
Control occurring prior to the final maturity of the Securities shall not
constitute Disqualified Stock if the change of control provisions applicable to
such Preferred Stock are no more favorable to the holders of such Preferred
Stock than the provisions applicable to the Securities contained in Section
10.17 and such Preferred Stock specifically provides that such Person will not
repurchase
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or redeem any such stock pursuant to such provisions prior to such Person's
repurchase of such Securities as are required to be repurchased pursuant to
Section 10.17.
"Eligible Institution" means a commercial banking institution that has
combined capital and surplus of not less than $500 million or its equivalent in
foreign currency, whose debt is rated "A" (or higher) according to Standard &
Poor's Ratings Service or Moody's Investors Service, Inc. at the time as of
which any investment or rollover therein is made.
"Equity Clawback" means the planned redemption by the Issuer of a portion
of its outstanding 12-1/4% Senior Notes due 2006 (the "Existing Notes") with a
portion of the proceeds of the Guarantor's initial public offering of Common
Stock, which closed in October, 1997. The Issuer intends to apply approximately
$101.25 million of the initial public offering proceeds to the redemption of the
Existing Notes.
"Euroclear" means the Euroclear Clearance System (or any successor
securities clearing agency).
"Event of Default" has the meaning set forth in Section 5.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended (or
any successor act), and the rules and regulations thereunder.
"Exchange and Registration Rights Agreement" means (i) with respect to the
Securities issued on the date hereof, the Exchange and Registration Rights
Agreement, dated as of February 27, 1998 among the Issuer, the Guarantor and the
Initial Purchasers, as purchasers, and the Holders from time to time as provided
therein, as such agreement may be amended from time to time and (ii) with
respect to any Additional Securities, any Exchange and Registration Rights
Agreement entered into among the Issuer, the Guarantor and the relevant initial
purchasers, as purchasers, and the Holders from time to time provided therein,
as the same may be amended from time to time.
"Exchange Offer" has the meaning set forth in the form of the Securities
contained in Section 2.02.
"Exchange Offer Registration Statement" has the meaning set forth in the
form of the Securities contained in Section 2.02.
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"Exchange Security" means any Security issued in exchange for an Original
Security or Original Securities pursuant to the Exchange Offer or otherwise
registered under the Securities Act and any Security with respect to which the
next preceding Predecessor Security of such Security was an Exchange Security.
"Existing Stockholders" means (A) R.S. Lauder, Gaspar & Co., L.P., ("LGC"),
(B) partners in LGC and Lauder Gaspar Ventures LLC and their Affiliates, in each
case as of the Closing Date, (C) Itzhak Fisher, Ronald S. Lauder, Leonard
Lauder, Jacob Z. Schuster, Nir Tarlovsky, Nesim N. Bildirici, Andrew Gaspar and
Eugene Sekulow, (D) family members of any of the foregoing, (E) trusts, the only
beneficiaries of which are persons or entities described in clauses (A) through
(D) above and (F) partnerships which are controlled by the persons or entities
described in clauses (A) through (D) above.
"Expiration Date" has the meaning specified in the definition of "Offer to
Purchase".
"Global Security" means the security or securities issued initially in
bearer form that evidences all or part of the Securities and bears the legend
set forth in Section 2.02.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged and
which have a remaining weighted average life to maturity of not less than one
year from the date of Investment therein.
"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" and "Guaranteeing"
shall
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have meanings correlative to the foregoing); provided, however, that the
Guarantee by any Person shall not include endorsements by such Person for
collection or deposit, in either case, in the ordinary course of business.
"Guarantor" means the Person named as the "Guarantor" in the first
paragraph of this instrument until a successor Person shall have become such
Person pursuant to the applicable provisions of this Indenture and thereafter
"Guarantor" shall mean such successor Person.
"Holder" means a Person (i) who is the bearer of a Global Security (which
shall initially be the Book-Entry Depositary) or (ii) in whose name a Definitive
Security is registered in the Security Register.
"Incremental Paid-in Capital" means as of any date the cumulative aggregate
amount of the increase in paid-in capital (determined in accordance with
generally accepted accounting principles applied on a consistent basis) since
September 30, 1997, as determined based on the most recent unaudited quarterly
or audited annual financial statements of the Guarantor and its consolidated
subsidiaries filed with the Commission, as compared with the Guarantor's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1997.
"Incur" means, with respect to any Debt or other obligation of any Person,
to create, issue, incur (by conversion, exchange or otherwise), assume, enter
into a Guarantee in respect of or otherwise become liable in respect of such
Debt or other obligation including by acquisition of Subsidiaries or the
recording, as required pursuant to generally accepted accounting principles 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
generally accepted accounting principles that results in an obligation of such
Person that exists at such time becoming Debt shall not be deemed an Incurrence
of such Debt and that neither the accrual of interest nor the accretion of
original issue discount shall be deemed an Incurrence of 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.
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"Indirect Participant" means a Person who holds an interest through a
Participant in a Depositary Interest issued by the Book-Entry Depositary to the
Depositary.
"Initial Purchasers" means Goldman, Sachs & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Chase Securities Inc., J.P. Morgan Securities Inc.
and SBC Warburg Dillon Read Inc.
"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.
"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, but excluding any loan, advance or extension of credit to an
employee of the Guarantor or any of its Subsidiaries in the ordinary course of
business and commercially reasonable extensions of trade credit. Without
limiting the foregoing, the term "Investment" shall include (i) the designation
of a Restricted Subsidiary as an Unrestricted Subsidiary and (ii) the fair
market value of the Capital Stock (or any other Investment), held by the
Guarantor or any of its Restricted Subsidiaries, of (or in) any Person that has
ceased to be a Restricted Subsidiary. For purposes of the definition of
"Unrestricted Subsidiary" and Section 10.10, (i) "Investment" shall include the
fair market value of the assets (net of liabilities (other than liabilities to
the Guarantor or any of its Restricted Subsidiaries)) of any Restricted
Subsidiary at the time that such Restricted Subsidiary is designated an
Unrestricted Subsidiary, (ii) the fair market value of the assets (net of
liabilities (other than liabilities to the Guarantor or any of its Restricted
Subsidiaries)) of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary shall be considered a reduction
in
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outstanding Investments and (iii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the time of
such transfer. Notwithstanding the foregoing, an acquisition of assets
(including, without limitation, Capital Stock or rights to acquire Capital
Stock) by the Guarantor or any of its Restricted Subsidiaries shall be deemed
not to be an Investment to the extent that the consideration therefor consists
of Common Stock of the Guarantor.
"Issuer" means the Person named as the "Issuer" in the first paragraph of
this instrument until a successor Person shall have become such pursuant to the
applicable provisions of this Indenture and thereafter "Issuer" shall mean such
successor Person.
"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 Vice
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, Receivables Sale, deposit
arrangement, security interest, lien, charge, easement (other than any easement
not materially impairing usefulness), 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).
"Listing Failure" has the meaning specified in Section 10.09.
"Marketable Securities" means: (i) Government Securities; (ii) any
certificate of deposit maturing not more than 270 days after the date of
acquisition issued by, or time deposit of, an Eligible Institution; (iii)
commercial paper maturing not more than 270 days after the date of acquisition
issued by a corporation (other than an Affiliate of the Guarantor) with a
rating, at the time as of which any investment therein is made, of "A-1" (or
higher) according to Standard & Poor's Ratings Service or "P-1" (or higher)
according to Moody's Investor Service, Inc.; (iv) any banker's acceptances or
money market deposit accounts issued or offered by an Eligible Institution;
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(v) time deposits, certificates of deposit, bank promissory notes and bankers'
acceptances maturing not more than 180 days after the acquisition thereof and
guaranteed or issued by any of the ten largest banks (based on assets as of the
immediately preceding December 31), organized under the laws of any jurisdiction
in which one of the Restricted Subsidiaries does business or any foreign country
recognized by the United States and which are not under intervention, bankruptcy
or similar proceeding, not to exceed $10 million outstanding at any one term;
and (vi) any fund investing exclusively in investments of the types described in
clauses (i) through (iv) above.
"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 Available Proceeds" from any Asset Disposition by any Person means
cash or readily marketable cash equivalents received (including amounts received
by way of sale or discounting of any note, installment receivable or other
receivable, but excluding any other consideration received in the form of
assumption by the acquiror of Debt or other obligations relating to such
properties or assets) therefrom by such Person, net of (i) all legal, title and
recording tax expenses, commissions and other fees and expenses Incurred and all
Federal, state, provincial, foreign and local taxes required to be accrued as a
liability as a consequence of such Asset Disposition, (ii) all payments made by
such Person or its 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 Disposition or by applicable law, be repaid out of the proceeds
from such Asset Disposition, (iii) all distributions and other payments made to
minority interest holders in Subsidiaries of such Person as a result of such
Asset Disposition and (iv) appropriate amounts to be provided by such Person or
any Subsidiary thereof, as the case may be, as a reserve in accordance with
generally accepted accounting principles against any liabilities associated with
such assets and retained by such Person or any Subsidiary thereof, as the case
may be, after such Asset Disposition, including, without limitation, liabilities
under any indemnification obligations and severance and other employee
termination costs associated with such Asset Disposition, in each case as
determined by the board of directors of such Person, in
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its reasonable good faith judgment; provided, however, that any reduction in
such reserve within 12 months following the consummation of such Asset
Disposition will be treated for all purposes of the Indenture and the Securities
as a new Asset Disposition at the time of such reduction with Net Available
Proceeds equal to the amount of such reduction.
"Offer to Purchase" means a written offer (the "Offer") sent by or on
behalf of the Issuer by first class mail, postage prepaid, to each Holder of
Securities at his address appearing in the related Security 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 "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 Expiration Date. The Issuer shall
notify in writing 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 Guarantor and its Subsidiaries which the Guarantor and Issuer in
good faith believe 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 Guarantor'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
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Securities pursuant to the Offer to Purchase. The Offer shall also state:
(a) the Section of this Indenture pursuant to which the Offer to
Purchase is being made;
(b) the Expiration Date and the Purchase Date;
(c) 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");
(d) 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");
(e) 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 multiple of $1,000 principal
amount;
(f) the place or places where Securities are to be surrendered for
tender pursuant to the Offer to Purchase;
(g) that interest on any Security not tendered or tendered but not
purchased by the Issuer pursuant to the Offer to Purchase will continue to
accrue;
(h) 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;
(i) 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
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);
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(j) 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 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;
(k) 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 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
(l) 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, a Vice Chairman of the Board, the President or a Vice President, and by
the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary,
of the Guarantor or the Issuer, as applicable, and delivered to the Trustee and
containing the statements provided for in Section 1.02. One of the officers
signing an Officers' Certificate given pursuant to Section 10.19 shall be the
principal executive, financial or accounting officer of the Guarantor.
"Opinion of Counsel" means a written opinion of legal counsel, who may be
counsel for the Guarantor or the
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Issuer, and who shall be acceptable to the Trustee, and containing the
statements provided for in Section 1.02.
"Original Securities" means all Securities that are subject to an Exchange
and Registration Rights Agreement, other than Exchange Securities issued in
exchange therefore.
"Outstanding", when used with respect to Securities, means, as of the date
of determination, all Securities theretofore authenticated and delivered under
this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered to the
Trustee for cancelation;
(ii) 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
(iii) Securities which have been paid pursuant to Section 3.06 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, 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
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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.
"Participant" means, with respect to the Depositary, Euroclear or Cedel, a
Person who has an account with the Depositary, Euroclear or Cedel, respectively
(and, with respect to the Depositary, shall include Euroclear and Cedel).
"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 in the ordinary course of business 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) any Investment in the Guarantor or a
Restricted Subsidiary, (ii) any Investment in any Person as a result of which
such Person becomes a Restricted Subsidiary of the Guarantor or upon the making
of which such Person will be merged or consolidated with or into or transfer all
or substantially all of its assets to the Guarantor or a Restricted Subsidiary,
(iii) any Investment in Marketable Securities, (iv) securities or other
Investments received in settlement of debts created in the ordinary course of
business and owing to the Guarantor or any Restricted Subsidiary, or as a result
of foreclosure, perfection or enforcement of any Lien, or in satisfaction of
judgments, including in connection with any bankruptcy proceeding or other
reorganization of another Person, (v) securities or other Investments received
as consideration in sales or other dispositions of property or assets, including
Asset Dispositions made in compliance with Section 10.13 and (vi) other
Investments not in excess of $50 million in the aggregate at any time
outstanding.
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"Permitted Liens" means (a) Liens for taxes, assessments, governmental
charges or claims which are not yet delinquent or which are being contested in
good faith by appropriate proceedings, if a reserve or other appropriate
provision, if any, as shall be required in conformity with generally accepted
accounting principles shall have been made therefor; (b) other Liens incidental
to the conduct of the Guarantor's and its Restricted Subsidiaries' business or
the ownership of its property and assets not securing any Debt, and which do not
in the aggregate materially detract from the value of the Guarantor's and its
Restricted Subsidiaries' property or assets when taken as a whole, or materially
impair the use of such assets and property in the operation of its business; (c)
Liens with respect to assets of a Subsidiary granted by such Subsidiary to the
Guarantor to secure Debt owing to the Guarantor; (d) pledges and deposits made
in the ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of statutory obligations; (e) deposits
made to secure the performance of tenders, bids, leases, and other obligations
of like nature incurred in the ordinary course of business (exclusive of
obligations for the payment of borrowed money); (f) zoning restrictions,
servitudes, easements, rights-of-way, restrictions and other similar charges or
encumbrances incurred in the ordinary course of business which, in the
aggregate, do not materially detract from the value of the property subject
thereto or interfere with the ordinary conduct of the business of the Guarantor
or its Restricted Subsidiaries; (g) Liens on Capital Stock of Restricted
Subsidiaries securing obligations not exceeding $75 million at any time
outstanding of the Guarantor or any Restricted Subsidiary to repurchase or
redeem shares of Capital Stock of such Restricted Subsidiary held by Persons who
are not Affiliates or Related Persons of the Guarantor; (h) Liens arising out of
judgments or awards against the Guarantor or any Restricted Subsidiary with
respect to which the Guarantor or such Restricted Subsidiary is prosecuting an
appeal or proceeding for review and the Guarantor or such Restricted Subsidiary
is maintaining adequate reserves in accordance with generally accepted
accounting principles; and (i) any interest or title of a lessor in the property
subject to any lease other than a Capital Lease.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization, government
or agency or political subdivision thereof or any other entity.
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"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 3.06 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.
"Purchase Agreement" means (i) with respect to the Securities initially
issued on the date hereof, the Purchase Agreement, dated as of February 24,
1998, between the Issuer, the Guarantor and the Initial Purchaser named therein,
as such agreement may be amended from time to time, and (ii) with respect to any
Additional Securities, any purchase or underwriting agreement entered into by
the Issuer, the Guarantor and the initial purchasers or underwriters with
respect thereto.
"Purchase Money Debt" means Debt of the Guarantor (including Acquired Debt
and Debt represented by Capital Lease Obligations, mortgage financings and
purchase money obligations) Incurred for the purpose of financing all or any
part of the cost of construction, acquisition or improvement by the Guarantor or
any Restricted Subsidiary of the Guarantor of any Telecommunications Assets of
the Guarantor or any Restricted Subsidiary of the Guarantor, and including any
related notes, Guarantees, collateral documents, instruments and agreements
executed in connection therewith, as the same may be amended, supplemented,
modified or restated from time to time.
"readily marketable cash equivalents" means (i) marketable securities
issued or directly and unconditionally guaranteed by the United States
Government or issued by any agency thereof and backed by the full faith and
credit of the United States; (ii) marketable direct obligations issued by any
state of the United States of America or any political subdivision of any such
state or any public instrumentality thereof and, at the time of acquisition,
having the highest rating obtainable from either Standard & Poor's Rating
Service or Moody's Investors Service, Inc.; (iii) commercial paper maturing no
more than 180 days from the date of acquisition thereof and, at the time of
acquisition, having a rating of at least A-1 from Standard & Poor's Ratings
Service or at least P-1 from Moody's Investors Service, Inc.; and (iv)
certificates of deposit or bankers' acceptance maturing within one year from the
date of acquisition thereof issued by any commercial bank organized under the
laws of the United States of America or
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any state thereof or the District of Columbia having unimpaired capital and
surplus of not less than $100,000,000.
"Receivables" means receivables, chattel paper, instruments, documents or
intangibles evidencing or relating to the right to payment of money.
"Receivables Sale" of any Person means any sale of Receivables of such
Person (pursuant to a purchase facility or otherwise), other than in connection
with a disposition of the business operations of such Person relating thereto or
a disposition of defaulted Receivables for purpose of collection and not as a
financing arrangement.
"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 Exchange Securities and all other Securities
sold or otherwise disposed of pursuant to an effective registration statement
under the Securities Act, including, as applicable, (i) all Original Securities
sold pursuant to a Resale Registration Statement, (ii) all Exchange Securities,
and (iii) all Additional Securities initially offered and sold pursuant to a
registration statement under the Securities Act, together with any respective
Successor Securities.
"Regular Record Date" for the interest payable on any Interest Payment Date
means February 15 or August 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 (or any
successor provision), as it may be amended from time to time.
"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 2.01.
"Regulation S Legend" means a legend substantially in the form of the
legend required in the form of Security
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set forth in Section 2.02 to be placed upon each Regulation S Security.
"Regulation S Securities" means all Securities sold pursuant to Regulation
S, which are required pursuant to Section 3.05(c) to bear a Regulation S Legend.
Such term includes the Regulation S Global Security.
"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
outstanding equity interest in such Person) or (b) 5% or more of the combined
outstanding voting power of the Voting Stock of such Person, except that, for
purposes of Section 10.12, Related Person means any other Person directly or
indirectly owning 10% or more of the combined outstanding voting power of the
Voting Stock of such Person (or, in the case of a Person that is not a
corporation, 10% or more of the outstanding equity interest in such Person).
"Resale Registration Statement" has the meaning set forth in the Form of
the Securities contained in Section 2.02.
"Responsible Officer", when used with respect to the Trustee, means the
chairman or any vice-chairman of the board of directors, the chairman or any
vice-chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any vice president, the secretary, any
assistant secretary, the treasurer, any assistant treasurer, the cashier, any
assistant cashier, 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 specified in Section 2.01.
"Restricted Period" means the period of 41 consecutive days beginning on
and including the later of (i) the day on which Securities are first offered to
persons other than distributors (as defined in Regulation S) in reliance on
Regulation S and (ii) the original issuance date of the Securities.
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"Restricted Securities" means all Securities required pursuant to Section
3.05(c) to bear any Restricted Securities Legend. Such term includes any
Restricted Global Security.
"Restricted Securities Certificate" means a certificate substantially in
the form set forth in Annex B.
"Restricted Securities Legend" means, collectively, the legends
substantially in the forms of the legends required in the form of Security set
forth in Section 2.02 to be placed upon each Restricted Security.
"Restricted Subsidiary" means any Subsidiary of the Guarantor other than an
Unrestricted Subsidiary.
"RSLNA" has the meaning specified in Section 1.14.
"Rule 144A" means Rule 144A under the Securities Act (or any successor
provision), as it may be amended from time to time.
"Rule 144A Securities" means all Securities sold pursuant to Rule 144A,
which are required pursuant to Section 3.05(c) to bear a Restricted Securities
Legend. Such term includes the Restricted Global Security.
"Securities" has the meaning specified in the first paragraph of the
recitals to this instrument.
"Securities Act" means the Securities Act of 1933 and any statute successor
thereto, in each case as amended from time to time.
"Securities Act Legend" means a Restricted Securities Legend or a
Regulation S Legend.
"Securities Guarantee" means the Securities Guarantee issued by the
Guarantor in accordance with Article IV hereunder.
"Security Register" and "Security Registrar" have the respective meanings
specified in Section 3.05.
"Senior Discount Securities" means the 101/8% Senior Discount Notes due
2008 issued pursuant to the Senior Discount Securities Indenture.
"Senior Discount Securities Indenture" means the indenture dated as of the
date hereof with respect to the
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10 1/8% Senior Discount Securities due 2008 among the Issuer, the Guarantor and
The Chase Manhattan Bank, as trustee.
"Significant Subsidiary" means, at any date of determination, any
Restricted Subsidiary that, together with its Subsidiaries, (i) for the most
recent fiscal year of the Guarantor, accounted for more than 10% of the
consolidated revenues of the Guarantor and its Restricted Subsidiaries or (ii)
as of the end of such fiscal year, was the owner of more than 10% of the
consolidated assets of the Guarantor and its Restricted Subsidiaries, all as set
forth on the most recently available consolidated financial statements of the
Guarantor for such fiscal year.
"Special Interest" has the meaning set forth in the form of Security
contained in Section 2.02. Unless the context otherwise requires, references
herein to "interest" on the Securities shall include Special Interest.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 3.07.
"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.
"Step-Down Date" has the meaning set forth in the form of the Security
contained in Section 2.02.
"Step-Up" has the meaning set forth in the form of the Security contained
in Section 2.02.
"Strategic Investor" means a corporation, partnership or other entity
engaged in the Telecommunications Business that has, or 80% or more of the
Voting Stock of which is owned by a Person that has, an equity market
capitalization or paid in capital, at the time of any Investment by such
corporation, partnership or other entity in a Restricted Subsidiary pursuant to
clause (iv)(2) of Section 10.14, in excess of $100 million.
"Subordinated Debt" means Debt of the Guarantor or any Restricted
Subsidiary 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
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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 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 exists with respect to the
Securities, upon written notice by 25% or more in principal amount of the
Securities to the Trustee, the Trustee shall have the right to give notice to
the Guarantor or such Restricted Subsidiary 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 stated 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 Guarantor or such Restricted Subsidiary (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 Stated Maturity of
the Securities or (y) permit redemption or other retirement (including pursuant
to an offer to purchase made by the Guarantor or such Restricted Subsidiary) of
such other Debt at the option of the holder thereof prior to the final Stated
Maturity 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 Guarantor or such Restricted Subsidiary) which is conditioned upon a
change of control of the Guarantor pursuant to provisions substantially similar
to those described under Section 10.17 (and which shall provide that such Debt
will not be repurchased pursuant to such provisions prior to the Guarantor's or
such Restricted Subsidiary's repurchase of the Securities required to be
repurchased pursuant to the provisions described under Section 10.17).
"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 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
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at least a majority ownership and power to direct the policies, management and
affairs thereof. An 80% or more owned Subsidiary of the Guarantor is (i) a
corporation 80% or more of the combined voting power of the outstanding Voting
Stock, and more than 80% of the Capital Stock or other ownership interests, of
which is owned, directly or indirectly, by the Guarantor or by one or more other
Subsidiaries of the Guarantor or by the Guarantor and one or more Subsidiaries
thereof or (ii) any other Person (other than a corporation) in which the
Guarantor, or one or more other Subsidiaries of the Guarantor or the Guarantor
and one or more other Subsidiaries of the Guarantor, directly or indirectly, has
at least an 80% ownership interest and power to direct the policies, management
and affairs thereof.
"Subsidiary Guarantor" means a Subsidiary of the Guarantor that has
unconditionally guaranteed, by supplemental indenture substantially similar in
form to Article IV hereof and otherwise satisfactory to the Trustee, the payment
in full of the principal of (and premium, if any) and interest on the
Securities.
"Substitute Securities" has the meaning specified in Section 3.01.
"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 purposes of this definition, any Security
authenticated and delivered under Section 3.06 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.
"Tax" means any tax, duty, levy, impost, assessment or other governmental
charge (including penalties, interest and any other liabilities related
thereto).
"Taxing Authority" means any government or political subdivision or
territory or possession of any government or any authority or agency therein or
thereof having power to tax.
"Telecommunications Assets" means all assets, rights (contractual or
otherwise) and properties, whether tangible or intangible, used or intended for
use in connection with a Telecommunications Business, including a
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majority of the Voting Stock of a Person engaged in the Telecommunications
Business.
"Telecommunications Business" means the business of (i) transmitting, or
providing services relating to the transmission of, voice, video or data through
owned or leased transmission facilities, (ii) creating, developing or marketing
communications related network equipment, software and other devices for use in
a Telecommunications Business or (iii) evaluating, participating or pursuing any
other activity or opportunity that is primarily related to those identified in
(i) or (ii) above; provided that the determination of what constitutes a
Telecommunications Business shall be made in good faith by the Board of
Directors of the Guarantor.
"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.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at
the date as of which this instrument was executed; 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.
"Unrestricted Securities Certificate" means a certificate substantially in
the form set forth in Annex C.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Guarantor that at
the time of determination shall be designated an Unrestricted Subsidiary of the
Guarantor by the Board of Directors in the manner provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate
any Restricted Subsidiary (including any newly acquired or newly formed
Subsidiary of the Guarantor) to be an Unrestricted Subsidiary unless such
Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property
of, the Guarantor or any Restricted Subsidiary; provided that (A) any Guarantee
by the Guarantor or any Restricted Subsidiary of any Debt of the Subsidiary
being so designated shall be deemed an "Incurrence" of such Debt and an
"Investment" by the Guarantor or such Restricted Subsidiary (or both, if
applicable) at the time of such designation, in each case, to the extent such
Debt is so Guaranteed by the Guarantor or such Restricted Subsidiary;
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(B) either (I) the Subsidiary to be so designated has total assets of $1,000 or
less or (II) if such Subsidiary has assets greater than $1,000, such designation
would be permitted under Section 10.10 and (C) if applicable, the Incurrence of
Debt and the Investment referred to in clause (A) of this proviso would be
permitted under Sections 10.08 and 10.10. The Board of Directors may designate
any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that
immediately after giving effect to such designation (x) the Guarantor could
Incur $1.00 of additional Debt under the first paragraph of Section 10.08 and
(y) no Default or Event of Default shall have occurred and be continuing. Any
such designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the Board Resolution giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
"Vice President", when used with respect to the Issuer, the Guarantor or
the Trustee, 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) of 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 Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Voting Stock or other ownership interests (other than
directors' qualifying shares) of which shall at the time be owned by such Person
or by one or more Wholly Owned Subsidiaries of such Person or by such Person and
one or more Wholly Owned Subsidiaries of such Person.
SECTION 1.02. 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 and Guarantor shall furnish to the Trustee such
certificates and opinions as may be required under the Trust Indenture Act and
under this Indenture. 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
the Guarantor, or an Opinion of Counsel, if to be given by counsel, and shall
comply with the requirements
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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:
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(b) 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;
(c) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 1.03. 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 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 of an officer of the Issuer or Guarantor may be based,
insofar as it relates to legal matters, upon an opinion of counsel submitted
therewith, unless such officer knows, or in the exercise of reasonable care
should know, that the opinion with respect to the matters upon which his
certificate is based is erroneous. Any opinion of counsel may be based, insofar
as it relates to factual matters, upon a certificate of an officer or officers
of the Issuer or Guarantor submitted therewith stating the information on which
counsel is relying, unless such counsel knows, or in the exercise of reasonable
care
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should know, that the certificate with respect to such matters is 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 1.04. Acts of Holders; Record Dates. 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 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 and, where it is hereby expressly
required, to the Issuer or the Guarantor. 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 6.01)
conclusive in favor of the Trustee and the Issuer and Guarantor, 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 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
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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, the Issuer or the Guarantor 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 7.01) 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 canceled 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 1.06.
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
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(i) any Notice of Default, (ii) any declaration of acceleration referred to in
Section 5.02, (iii) any request to institute proceedings referred to in Section
5.07(2) or (iv) any direction referred to in Section 5.12. 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 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 canceled 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 1.06.
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 1.06, 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
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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 1.05. Notices, Etc., to Trustee, Issuer and Guarantor. 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 or the Guarantor shall
be sufficient for every purpose hereunder if delivered in writing to a
Responsible Officer of the Trustee at its Corporate Trust Office,
Attention: Corporate Trust Administration, or
(2) the Issuer or the Guarantor 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,
to the Issuer or the Guarantor as applicable, addressed to it, if prior to
receipt by the Trustee of written notice pursuant to this Section 1.05 of a
change of address, at the address of its principal office specified in the
first paragraph of this instrument, or, if after receipt by the Trustee of
written notice pursuant to this Section 1.05 of a change of address, at
such other address as may be previously furnished in writing to the Trustee
by the Issuer or the Guarantor, as applicable.
SECTION 1.06. 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 earlier than the earliest date (if any), prescribed for the giving of such
notice. 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
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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 1.07. Application of Trust Indenture Act. The Trust Indenture Act
shall apply as a matter of contract to this Indenture for purposes of
interpretation, construction and defining the rights and obligations hereunder.
If any provision hereof limits, qualifies or conflicts with a provision of the
Trust Indenture Act that is required under such Act to be a 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.
SECTION 1.08. 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 1.09. Successors and Assigns. All covenants and agreements in this
Indenture by the Issuer shall bind its successors and assigns, whether so
expressed or not.
SECTION 1.10. 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 1.11. 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 their successors hereunder and the Holders of Securities, any benefit
or any legal or equitable right, remedy or claim under this Indenture.
SECTION 1.12. Governing Law. This Indenture, the Securities and the
Securities Guarantee shall be governed by
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and construed in accordance with the laws of the State of New York.
SECTION 1.13. 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, 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, Purchase Date or Stated Maturity, as the case may be.
SECTION 1.14. Agent for Service; Submission to Jurisdiction; Waiver of
Immunities. By the execution and delivery of this Indenture, each of the Issuer
and the Guarantor (i) represents that it has designated and appointed RSL
Communications N. America, Inc. ("RSLNA"), as its authorized agent upon which
process may be served in any suit, action or proceeding arising out of or
relating to the Securities, the Securities Guarantee or this Indenture that may
be instituted in any Federal or state court in the State of New York, Borough of
Manhattan, or brought under Federal or state securities laws or brought by the
Trustee (whether in its individual capacity or in its capacity as Trustee
hereunder), and that RSLNA has accepted such designation, (ii) submits to the
non-exclusive jurisdiction of any such court in any such suit, action or
proceeding, (iii) agrees that service of process upon RSLNA and written notice
of said service to the Issuer or the Guarantor, as applicable, (mailed or
delivered to its President at its principal office as specified in Section 1.05)
shall be deemed in every respect effective service of process upon it in any
such suit or proceeding, and (iv) 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 RSLNA in full force
and effect so long as any of the Securities shall be outstanding.
To the extent that the Issuer or the Guarantor has or hereafter may acquire
any immunity from jurisdiction of any court 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, each
of the Issuer and the Guarantor hereby irrevocably waives such immunity in
respect of its
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obligations under this Indenture, the Securities Guarantee and the Securities,
to the extent permitted by law.
ARTICLE II
Security Forms
SECTION 2.01. Forms Generally. The Securities and the Trustee's
certificates of authentication thereof shall be in substantially the forms set
forth in this Article, with such appropriate legends, 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 their
execution of the Securities.
Upon their original issuance, Rule 144A Securities shall be issued in the
form of a Global Security in bearer form without interest coupons, which shall
be deposited on behalf of the Initial Purchasers with the Book-Entry Depositary
at its New York corporate trust office, duly executed by the Issuer and
authenticated by the Trustee as hereinafter provided. Such Global Security,
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 shall be
issued in the form of a Global Security in bearer form without interest coupons,
which shall be deposited on behalf of the Initial Purchasers with the Book-Entry
Depositary at its New York corporate trust office, duly executed by the Issuer
and authenticated by the Trustee as hereinafter provided. Such Global Security,
together with its Successor Securities which are Global Securities other than
the Restricted Global Security, are collectively herein called the "Regulation S
Global Security".
Upon receipt of the Restricted Global Security and the Regulation S Global
Security authenticated and delivered by the Trustee, the Book-Entry Depositary
shall issue to the Depositary a Depositary Interest in each such Global Security
by recording the Depository Interest in the register of the Book-Entry
Depositary in the name of Cede & Co., as nominee of the Depositary. Ownership of
beneficial interests shall be limited to Participants, including
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Euroclear and Cedel, and Indirect Participants. Upon the issuance of the
Depositary Interest in such Global Security to the Depositary, the Depositary
shall credit, on its internal book-entry registration and transfer system, its
Participant's accounts with respective interests owned by such Participants.
Neither the Depositary nor its Participants shall have any rights either
under this Indenture or under any Global Security with respect to such Global
Security held on their behalf by the Book-Entry Depositary, and the Book-Entry
Depositary may be treated by the Issuer, the Trustee and any agent of the Issuer
or the Trustee as the absolute owner of such Global Security for the purpose of
receiving payment of or on account of the principal of (premium, if any) and,
subject to the provisions of this Indenture, interest on the Global Security and
for all other purposes. Notwithstanding the foregoing, nothing herein shall
prevent the Issuer, the Trustee or any agent of the Issuer or the Trustee from
giving effect to any written certification, proxy or other authorization
furnished by the Book-Entry Depositary or impair, as between the Book-Entry
Depositary and the Depositary and its Participants, the operation of customary
practices of such Depositary governing the exercise of the rights of an owner of
a beneficial interest in any Global Security.
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 all as determined by the officers executing such
Securities, as evidenced by their execution of such Securities.
SECTION 2.02. Form of Face of Security. [If a Global Security issued in
bearer form, then insert -- THIS SECURITY IS A GLOBAL SECURITY WITHIN THE
MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS HELD BY THE BOOK-ENTRY
DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS SECURITY) IN CUSTODY FOR
THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF. THIS SECURITY IS NOT EXCHANGEABLE
IN WHOLE OR IN PART OR TRANSFERABLE IN WHOLE OR IN PART EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.]
[If Restricted Securities, then insert -- THE SECURITIES EVIDENCED HEREBY
HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT (1) TO A PERSON WHOM THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER
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<PAGE>
WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT ACQUIRING FOR ITS OWN
ACCOUNT OR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION MEETING
THE REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES
ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (4) TO AN INSTITUTION THAT IS AN
ACCREDITED INVESTOR WITHIN THE MEANING OF 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 (IF AVAILABLE), OR (5) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN
ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS.]
[If a Regulation S Security, then insert -- THIS SECURITY HAS NOT BEEN
REGISTERED UNDER THE U.S. 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 THIS SECURITY IS REGISTERED UNDER THE
SECURITIES ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF IS
AVAILABLE.]
9 1/8% SENIOR NOTES DUE 2008
[IF RESTRICTED GLOBAL SECURITY - CUSIP NO. 74972E AA 6]
[IF REGULATION S SECURITY - CUSIP NO. G7703A AA 3]
[IF REGULATION S GLOBAL SECURITY - ISIN NO. - USG7703A AA 37]
No. __________ $_______________
RSL Communications PLC, a United Kingdom corporation (herein called the
"Issuer", which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to [If this
Security is a Global Security issued in bearer form, then insert: the bearer
hereof] [If this Security is not a Global Security issued in bearer form, then
insert: _____________, or registered assigns], the principal sum of
______________ Dollars [if this Security is a Global Security, then insert:
(which principal amount may from time to time be increased or decreased to such
other principal amounts by adjustments made on the records of the Trustee
hereinafter referred to in accordance with the Indenture)] on March 1, 2008, and
to pay interest thereon from February 27, 1998 or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, semi-annually
on March 1 and September 1 in each year, commencing September 1, 1998 at the
rate of 9 1/8%
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<PAGE>
per annum, until the principal hereof is paid or made available for payment [If
Original Securities, then insert: provided, however, that if the Issuer has not
filed a registration statement (the "Exchange Offer Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"), registering
a security substantially identical to this Security (except that such Security
will not contain terms with respect to the Special Interest payments described
below or transfer restrictions) pursuant to an exchange offer (the "Exchange
Offer") (or, in lieu thereof, a registration statement registering this Security
for resale (a "Resale Registration Statement")), and (i) the Exchange Offer has
not been completed by 270 days after the date of the Indenture (if the Exchange
Offer is then required to be made pursuant to the Exchange and Registration
Rights Agreement (the "Exchange and Registration Rights Agreement"), by and
between the Issuer, the Guarantor, as defined in the Indenture, the Purchasers
(as defined therein) and the Holders from time to time of the Securities) or
(ii) any Resale Registration Statement required to be filed by the Exchange and
Registration Rights Agreement is filed and declared effective but shall
thereafter cease to be effective (except as specifically permitted therein)
without being succeeded promptly by an additional registration statement filed
and declared effective upon the terms and conditions set forth in the Exchange
and Registration Rights Agreement (each such event referred to in clauses (i)
and (ii), a "Registration Default"), then interest will accrue (in addition to
the stated interest on the Securities) (the "Step-Up") at a rate of 0.5% per
annum, determined daily, on the principal amount of the Securities, from the
period from and including the date of occurrence of the Registration Default to
but excluding such date (the "Step-Down Date") as no Registration Default is in
effect (commencing on which date such interest rate will be restored to its
initial rate). Interest accruing as a result of the Step-Up is referred to
herein as "Special Interest." Accrued Special Interest, if any, shall be paid
semi-annually on March 1 and September 1 in each year; and the amount of accrued
Special Interest shall be determined on the basis of the number of days actually
elapsed. Any accrued and unpaid interest (including Special Interest) on this
Security upon the issuance of an Exchange Security (as defined in the Indenture)
in exchange for this Security shall cease to be payable to the Holder hereof but
such accrued and unpaid interest (including Special Interest) shall be payable
on the next Interest Payment Date for such Exchange Security to the Holder
thereof [if not a Global Security in bearer form, insert: on the related Regular
Record Date].] The interest
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<PAGE>
so payable, and punctually paid or duly provided for, on any Interest Payment
Date will, as provided in such Indenture, be paid to [If this Security is a
Global Security issued in bearer form, then insert: the bearer hereof on the
Interest Payment Date] [If this Security is not a Global Security issued in
bearer form, then insert: 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 February 15 or August 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 such Interest Payment Date and
may either be paid to [If this Security is a Global Security issued in bearer
form, then insert: the bearer hereof on the Special Payment Date] [If this
Security is not a Global Security issued in bearer form, then insert: 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, 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 may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided in said Indenture.
Under certain circumstances described in the Indenture, the Issuer (or the
Guarantor) also shall pay Additional Amounts to the Holders of Securities equal
to an amount that the Issuer or Guarantor, as the case may be, may be required
to withhold or deduct for or on account of Taxes imposed by a Taxing Authority
within the United Kingdom or Bermuda, as the case may be, from any payment made
under or with respect to the Securities or the Securities Guarantee.
In the case of a default in payment of principal of and premium, if any, on
this Security upon acceleration or redemption, interest shall be payable
pursuant to the preceding paragraph on such overdue principal (and premium, if
any), such interest shall be payable on demand and, if not so paid on demand,
such interest shall itself bear interest at the rate of 111/8% per annum (to the
extent that the payment of such interest shall be legally enforceable), and
shall accrue from the date of such demand for payment to the date payment of
such interest has been made or duly provided for, and such interest on unpaid
interest shall also be payable on demand.
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<PAGE>
[If this Security is a Global Security issued in bearer form, then insert:
The Issuer will pay interest, if any, on this Security to the bearer of this
Security. The Holder of this Security must surrender this Security to the
Trustee to collect principal payments.] Payment of the principal of (and
premium, if any) and interest on this Security will be made at the corporate
trust office of the Trustee and at the office or agency of the Issuer maintained
for that purpose in the Borough of Manhattan, The City of New York, New York,
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 [If this Security is
a Global Security in bearer form, then insert: is specified by the bearer
hereof] [If this Security is a Definitive Security, then insert: shall appear in
the Security Register].
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.
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<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated:
The Common Seal of
RSL COMMUNICATIONS PLC
was hereto affixed in
the presence of:
[SEAL]
RSL COMMUNICATIONS PLC,
by
----------------------
Name:
Title:
by
----------------------
Name:
Title:
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<PAGE>
SECTION 2.03. Form of Reverse of Security. This Security is one of a duly
authorized issue of Securities of the Issuer designated as its 9 1/8% Senior
Notes due 2008 (the "Securities") issued under an Indenture, dated as of
February 27, 1998 (herein called the "Indenture"), between the Issuer, RSL
Communications, Ltd., as the guarantor (the "Guarantor") and The Chase Manhattan
Bank, as trustee (herein called the "Trustee", which term includes any successor
trustee under the Indenture). Reference is hereby made to the Indenture and all
indentures supplemental thereto for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the Issuer, the
Guarantor, the Trustee and the Holders of the Securities and of the terms upon
which the Securities are, and are to be, authenticated and delivered.
The Securities are subject to redemption upon not less than 30 nor more
than 60 days' notice by mail 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 any time on or after March 1, 2003 and prior to
maturity, as a whole or in part, at the election of the Issuer, at the following
Redemption Prices (expressed as percentages of the principal amount) plus
accrued interest to but excluding the Redemption Date (subject to the right of
Holders [If this Security is not a Global Security issued in bearer form,
insert: on the relevant Regular 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 March 1, of each of the years indicated
below:
Redemption
Year Price
---- -----
2003 104.562%
2004 103.042%
2005 101.521%
2006 and 100.000%
thereafter
and thereafter at a Redemption Price equal to 100% of the principal amount,
together in the case of any such redemption with accrued interest to but
excluding the Redemption Date, but interest installments whose Stated Maturity
is on or prior to such Redemption Date will be
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<PAGE>
payable to the Holders of such Securities, or one or more Predecessor Securities
[If this Security is not a Global Security issued in bearer form, insert:, of
record at the close of business on the relevant Record Dates referred to on the
face hereof,] all as provided in the Indenture.
In addition, at any time prior to March 1, 2001, in the event that the
Guarantor receives net cash proceeds from the public or private sale of its
Common Stock (other than Disqualified Stock), the Issuer (to the extent it
receives such proceeds and has not used such proceeds, directly or indirectly,
to redeem or repurchase other securities pursuant to optional redemption
provisions) may, at its option, apply an amount equal to any such net cash
proceeds or any portion thereof to redeem, from time to time, Securities in a
principal amount of up to an aggregate amount equal to 33 1/3% of the original
principal amount of the Securities; provided, however, that Securities in an
amount equal to at least 66 2/3% of the original principal amount of the
Securities remain outstanding after each redemption. Each redemption must occur
on a Redemption Date within 180 days of the related sale and upon not less than
30 nor more than 60 days' notice by mail 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 a Redemption Price of 109.125% of
the principal amount of the Securities plus accrued interest to but excluding
the Redemption Date.
Furthermore, in the event that (i) the Guarantor or the Issuer has become
or would become obligated to pay any Additional Amounts as a result of (x)
changes affecting withholding tax laws or (y) a Listing Failure provided that
the Issuer has used reasonable best efforts to list and maintain a listing of
the Securities on a "recognized stock exchange" (within the meaning of Section
841 of the U.K. Income and Corporation Taxes Act 1988) (as provided for in
Section 10.09), and (ii) the Guarantor and the Issuer are unable to avoid the
requirement to pay such Additional Amounts by taking reasonable measures
available to them (including, without limitation, the Guarantor making payments
directly to holders under the Securities Guarantee, unless such payment is
likely to result in adverse consequences to the Issuer or the Guarantor), then
the Issuer may redeem all, but not less than all, of the Securities at any time
at 100% of the principal amount thereof on the Redemption Date, together with
accrued interest thereon, if any, to but excluding the Redemption Date. Prior to
the publication of the notice of redemption in accordance with the foregoing,
the Issuer shall deliver
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<PAGE>
to the Trustee an officer's certificate stating that the Issuer is entitled to
effect such redemption based on a written opinion of independent tax counsel or
accounting firm reasonably satisfactory to the Trustee.
The Securities do not have the benefit of any sinking fund obligations.
The Indenture provides that, subject to certain conditions, if (i) a Change
of Control occurs or (ii) certain Net Available Proceeds are available to the
Issuer as a result of any Asset Disposition, the Issuer shall be required to
make an Offer to Purchase for all or a specified portion of the Securities.
[If not a Global Security: In the event of redemption or purchase pursuant
to an Offer to Purchase of this Security in part only, a new Security or
Securities of like tenor for the unredeemed or unpurchased portion hereof will
be issued in the name of the Holder hereof upon the cancelation hereof.]
[If a Global Security insert: In the event of a deposit or withdrawal of a
beneficial interest in this Security (including upon an exchange, transfer,
redemption or repurchase of this Security in part only) effected in accordance
with the Applicable Procedures, the Security Registrar, upon receipt of notice
of such event from the Depositary's custodian for this Security, shall make an
adjustment on its records to reflect an increase or decrease of the Outstanding
principal amount of this Security resulting from such deposit or withdrawal, as
the case may be, and shall instruct the Book-Entry Depositary to make a similar
notation in its book-entry system to the corresponding Depositary Interest.]
If an Event of Default shall occur and be continuing, the principal of all
the Securities may be declared due and payable in the manner and with the effect
provided in the Indenture.
The Indenture contains provisions for defeasance at any time of (i) the
entire indebtedness of this Security, or (ii) certain restrictive covenants and
Events of Default with respect to this Security, in each case upon compliance
with certain conditions set forth therein.
Unless the context otherwise requires, the Original Securities, the
Registered Securities and the Exchange Securities shall constitute one series
for all
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<PAGE>
purposes under the Indenture, including without limitation, amendments, waivers,
redemptions and Offers to Purchase.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer, the Guarantor and the rights of the Holders of the Securities under the
Indenture at any time by the Issuer, the Guarantor and the Trustee with the
consent of the 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 or the Guarantor with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future Holders of
this Security and of any Security issued upon 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.
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.
[If this Security is not a Global Security issued in bearer form, then
insert: 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, 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 like tenor
and for the same aggregate principal amount, will be issued to the designated
transferee or transferees.]
The Global Securities are issuable only in bearer form without coupons in
denominations of $1,000 and any integral multiple thereof. Definitive Securities
shall be issuable in registered form without interest coupons in
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<PAGE>
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 tenor and aggregate principal amount of Securities of a
different authorized denomination, as requested by the Holder surrendering the
same.
[If this Security is a Global Security issued in bearer form, then insert:
The bearer of this Security shall be treated as the owner of this Security for
all purposes.]
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.
[If this Security is not a Global Security issued in bearer form, insert:
Prior to due presentment of this Security for registration of transfer, the
Issuer, the Guarantor, the Trustee and any agent of the Issuer, the Guarantor,
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 Guarantor, 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 [If Original Securities, then insert: ; provided,
however, that Special Interest shall be computed on the basis of a 365- or
366-day year, as the case may be, and the number of days actually elapsed].
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Issuer pursuant
to Section 10.13 or 10.17 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 10.13 or 10.17 of the Indenture, state the amount:
$___________
Dated:________________ Your Signature:____________________
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<PAGE>
(Sign exactly as name appears
on the other side of this Security)
Signature Guarantee: ________________________________________
Notice: Signature(s) must be guaranteed by
an "eligible guarantor institution" meeting
the requirements of the Security Registrar
which requirements will include membership
or participation in STAMP or such other
"signature guarantee program" as may be
determined by the Trustee in addition to, or
in substitution for STAMP, all in accordance
with the Securities Exchange Act of 1934, as
amended.
SECTION 2.04. Form of Trustee's Certificate of Authentication. This is one
of the Securities referred to in the within-mentioned Indenture.
Dated:
THE CHASE MANHATTAN BANK,
as Trustee
by ___________________________
Authorized Signatory
ARTICLE III
The Securities
SECTION 3.01. Title and Terms. (a) The aggregate principal amount of
Securities which may be authenticated and delivered under this Indenture is
limited to $200,000,000 issued on the date hereof and any Additional Securities
that may be issued from time to time pursuant to Section 3.12, except for
Securities authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Securities pursuant to Section 3.04, 3.05,
3.06, 9.06 or 11.08 or in connection with an Offer to Purchase pursuant to
Section 10.13 or 10.17 (all Securities referred to in this exception being
deemed "Substitute Securities"). The Issuer may issue Exchange Securities from
time to time pursuant to an Exchange Offer or otherwise, in each case pursuant
to a Board Resolution, subject to Section 3.03, included in an Officers'
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Certificate delivered to the Trustee, in authorized denominations in exchange
for a like principal amount of Original Securities (including, if applicable,
Additional Securities). Upon any such exchange the Original Securities shall be
canceled in accordance with Section 3.09 and shall no longer be deemed
Outstanding for any purpose.
The Securities shall be known and designated as the "9 1/8% Senior Notes
due 2008" of the Issuer. The Stated Maturity of the Securities shall be March 1,
2008. The Securities shall bear interest at the rate of 9 1/8% per annum, from
February 27, 1998 or from the most recent Interest Payment Date thereafter to
which interest has been paid or duly provided for, as the case may be, payable
semi-annually on March 1 and September 1, commencing September 1, 1998, until
the principal thereof is paid or made available for payment; provided, however,
with respect to Original Securities, if there has been a Registration Default, a
Step-Up will occur and the Original Securities will from then bear Special
Interest to but excluding the Step-Down Date. Accrued Special Interest, if any,
shall be paid in cash in arrears semi-annually on March 1 and September 1 in
each year, and the amount of accrued Special Interest shall be determined on the
basis of the number of days actually elapsed.
With respect to Global Securities, the Issuer will pay interest, if any, on
such Securities to the bearers of such Securities. Holders of such Global
Securities must surrender such Securities to the Trustee to collect principal
payments. The principal of and premium, if any, and interest on the Securities
shall be payable at the corporate trust office of the Trustee 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; 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 10.13 and 10.17 of the Indenture.
The Securities shall be redeemable as provided in Article Eleven.
The Securities shall not have the benefit of any sinking fund obligations.
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<PAGE>
The Securities shall be subject to defeasance at the option of the Issuer
as provided in Article Twelve.
The Securities are guaranteed by the Guarantor as set forth in Article IV
of this Indenture.
(b) With respect to any Securities issued after the date hereof (except for
Exchange Securities or Substitute Securities) there shall be established in or
pursuant to a Board Resolution, and subject to Section 3.03, set forth, or
determined in a manner provided in an Officers' Certificate, prior to the
issuance of such Securities:
(i) the aggregate principal amount of such Securities which may be
authenticated and delivered under this Indenture at such time;
(ii) the date from which interest on such Securities shall accrue;
(iii) whether such Securities shall be initially issued as Original
Securities (in the form of Restricted Securities and/or Regulation S
Securities) that are subject to an Exchange and Registration Rights
Agreement, or instead shall be issued in the form of Registered Securities
pursuant to a registration statement under the Securities Act; and
(iv) the price at which such Additional Securities will initially be
sold to the public (exclusive of any underwriter).
A copy of an appropriate record of such action shall be certified by the
Secretary or any Assistant Secretary of the Issuer and delivered to the Trustee
at or prior to the delivery of the Officers' Certificate or the trust indenture
supplemental hereto setting forth the terms of such Securities.
Unless the context otherwise requires, the Original Securities, the
Additional Securities and the Exchange Securities shall constitute one series
for all purposes under the Indenture, including without limitation, amendments,
waivers, redemptions and Offers to Purchase.
SECTION 3.02. Denominations. The Global Securities shall be issuable in
bearer form without coupons and only in denominations of $1,000 and any integral
multiple of $1,000 in excess thereof. Definitive Registered
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Securities shall be issuable in registered form without interest coupons in
denominations of $1,000 and any integral multiple thereof.
SECTION 3.03. Execution, Authentication, Delivery and Dating. The
Securities shall be executed on behalf of the Issuer by its Chairman of the
Board, its Vice Chairman of the Board, its President or one of its Vice
Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. 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 the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to 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 Securities executed by the Issuer to the
Trustee for authentication, together with a Issuer Order for the authentication
and delivery of such Securities; and the Trustee in accordance with such Issuer
Order shall authenticate and deliver such Securities as in this Indenture
provided and not otherwise. In addition, in the case of the original issuance of
any Additional Securities, the Company shall deliver the Officers' Certificate
referred to in Section 3.01(b).
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 thereto, 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 cancelation in accordance
with Section 3.09 of this Indenture, and the Trustee in accordance with the
Issuer Order shall authenticate and deliver such Securities. In authenticating
such Exchange Securities, and accepting the additional responsibilities under
this Indenture in relation to such Securities, the Trustee shall be entitled to
receive, and (subject to Section 6.01) shall be fully protected in relying upon,
an Opinion of Counsel stating,
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<PAGE>
(a) that such Exchange Securities have been duly and validly issued in
accordance with the terms of the Indenture, and are entitled to all the
rights and benefits set forth herein; and
(b) that the issuance of the Exchange Securities in exchange for the
Original Securities has been effected in compliance with the Securities Act
of 1933, as amended.
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 3.04. 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 are printed, lithographed,
typewritten, mimeographed or otherwise 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 of such Securities.
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 10.02, without charge to
the Holder. Upon surrender for cancelation of any one or more temporary
Securities, the Issuer shall execute and the Trustee shall authenticate and
deliver in exchange therefor a like tenor and principal amount of definitive
Securities of authorized denominations. Until so exchanged, the temporary
Securities shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities.
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SECTION 3.05. Registration, Registration of Transfer and Exchange. (a) 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 designated pursuant to Section 10.02 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 Definitive Securities and of transfers of such Securities. The Trustee is
hereby appointed "Security Registrar" for the purpose of registering such
Securities and transfers of such Securities as herein provided. Such Security
Register shall distinguish between Original Securities and Exchange Securities.
Subject to the other provisions of this Indenture regarding restrictions on
transfer, upon surrender for registration of transfer of any Definitive Security
at an office or agency of the Issuer designated pursuant to Section 10.02 for
such purpose in accordance with the terms hereof, 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 and of a like tenor and aggregate principal amount and bearing
such restrictive legends as may be required by this Indenture.
At the option of the Holder, and subject to the other provisions of this
Section 3.05, Securities may be exchanged for other Securities of any authorized
denominations and of a like tenor and aggregate principal amount, upon surrender
of such Securities to be exchanged at such office or agency. Whenever any
Securities are so surrendered for exchange, the Issuer shall execute, and the
Trustee shall authenticate and deliver, 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 (subject to the provisions in the Original Securities regarding the
payment of Special Interest) 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 Trustee) be duly endorsed,
or be accompanied by a written instrument of transfer in form satisfactory to
the Issuer and the Security Registrar duly
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executed, by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made to the Holder 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 Section 3.04, 3.05(d), 9.06 or 11.08 or in accordance
with any Offer to Purchase pursuant to Section 10.13 or 10.17 not involving any
transfer.
The Issuer 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 11.04 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
3.05(b) shall be made only in accordance with this Section 3.05(b).
(i) 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 wishes to acquire the
same in the form of a beneficial interest in the Regulation S Global
Security, such transfer may be effected only in accordance with the
provisions of this Clause (b)(i) and Clause (b)(v) below 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 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
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Global Security or his attorney duly authorized in writing, then the
Trustee, as Security Registrar but subject to Clause (b)(v) below, shall
reduce or cause to be reduced 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 3.05(e).
(ii) 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 wishes 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)(ii) 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 Restricted 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 or cause to be reduced 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 3.05(e).
(iii) Definitive Security to Definitive Security. A Security that is a
Definitive Security may be transferred, in whole or in part, to a Person
who takes delivery in the form of another Security that is a Definitive
Security as provided in Section 3.05(a), provided that, if the Security to
be transferred in whole or in part is a Restricted Security, or is a
Regulation S Security and the transfer is to occur during the Restricted
Period, then the Trustee shall have received (A) a Restricted Securities
Certificate, satisfactory to the Trustee and duly executed by the
transferor Holder or his attorney duly authorized in writing, in which case
the transferee Holder shall take delivery in the form of a Restricted
Security, or (B) a
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Regulation S Certificate, satisfactory to the Trustee and duly executed by
the transferor Holder or his attorney duly authorized in writing, in which
case the transferee Holder shall take delivery in the form of a Regulation
S Security (subject in every case to Section 3.05(c)).
(iv) Exchanges between Global Security and Definitive Security. A
beneficial interest in a Global Security may be exchanged for a Security
that is a Definitive Security as provided in Section 3.05(d), provided
that, if such interest is a beneficial interest in the Restricted Global
Security, or if such interest is a beneficial interest in the Regulation S
Global Security and such exchange is to occur during the Restricted Period,
then such interest shall be exchanged for a Restricted Security (subject in
each case to Section 3.05(c)).
(v) Regulation S Global Security to be Held Through Euroclear or Cedel
during Restricted Period. The Issuer shall use its best efforts to cause
the Depositary to ensure that, until the expiration of the Restricted
Period, 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), 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; provided that this Clause (b)(v) shall not prohibit any transfer
or exchange of such an interest in accordance with Clause (b)(ii) above.
(c) Securities Act Legends. Rule 144A Securities and their Successor
Securities shall bear a Restricted Securities Legend, and the Regulation S
Securities and their Successor Securities shall bear a Regulation S Legend,
subject to the following:
(i) subject to the following Clauses of this Section 3.05(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;
(ii) subject to the following Clauses of this Section 3.05(c), a new
Security which is a Definitive
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Security and is issued in exchange for 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 3.05(b)(iii) or (iv) 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;
(iii) Registered Securities shall not bear a Securities Act Legend;
(iv) 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 deliver such a new Security in exchange for or in
lieu of such other Security as provided in this Article III;
(v) 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
III; and
(vi) notwithstanding the foregoing provisions of this Section 3.05(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 deliver a
new Security bearing a
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Restricted Securities Legend in exchange for such Successor Security as
provided in this Article III.
(d) Exchanges of Global Security for Definitive Security. Transfers of
Global Securities shall be by delivery. The Book-Entry Depositary and the Issuer
have agreed that the Global Securities shall only be delivered in the
circumstances described in the Deposit Agreement. Notwithstanding any other
provision in this Indenture, no Global Security may be exchanged in whole or in
part for Definitive Securities unless (i) the Depositary notifies the Issuer or
the Book-Entry Depositary in writing that it (or its nominee) is unwilling or
unable to continue to act as depositary or ceases to be a clearing agency
registered under the Exchange Act, and, in either case, a successor depositary
registered as a clearing agency under the Exchange Act is not appointed by the
Issuer within 90 days, (ii) at any time if the Issuer determines that the Global
Securities (in whole but not in part) should be exchanged for Definitive
Securities; provided, that (x) such exchange is required by (A) any applicable
law or (B) any event beyond the Issuer's control or (y) payments of interest on
any Global Security, Depositary Interest or beneficial interest are, or would
become, subject to any deduction or withholding for taxes, (iii) at any time
after the consummation of the Exchange Offer, if the owner of a beneficial
interest requests such exchange in writing delivered to the Depositary and
through the Depositary to the Book-Entry Depositary and the Trustee, or (iv) if
the Book-Entry Depositary is at any time unwilling or unable to continue as
Book-Entry Depositary and a successor Book-Entry Depositary is not appointed by
the Issuer within 90 days. Upon the occurrence of any of the preceding events,
Definitive Securities shall be issued in such names as the Book-Entry Depositary
shall instruct the Trustee based on the instructions of the Depositary.
(e) If any Global Security is to be exchanged for other Securities or
canceled in whole, it shall be surrendered by or on behalf of the Book-Entry
Depositary or its nominee to the Trustee, as Security Registrar, for exchange or
cancelation as provided in this Article III. If any Global Security is to be
exchanged for other Securities or canceled 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 cancelation as provided in this Article III or (ii) the principal
amount thereof shall be reduced or increased by an amount equal to the portion
thereof to be so exchanged or canceled, or equal
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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 by the Book-Entry Depositary as directed by the Trustee in such
Book-Entry Depositary's book-entry system to the corresponding Depositary
Interest, whereupon the Trustee, in accordance with the Applicable Procedures,
shall instruct the Depositary or its authorized 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 3.05(b) and as
otherwise provided in this Article III, authenticate and deliver any Securities
issuable in exchange for such Global Security (or any portion thereof) to or
upon the order of, and registered (if applicable) in such names as may be
directed by, the Book-Entry 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 Book-Entry Depositary or the Depositary or any of
their authorized representatives which is given or made pursuant to this Article
III if such order, direction or request is given or made in accordance with the
Depositary Agreement with respect to the Book-Entry Depositary and the
Applicable Procedures with respect to the Depositary.
SECTION 3.06. 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 deliver 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
their satisfaction of the destruction, loss or theft of any Security and (ii)
such security or indemnity as may be required by them to save each of them and
any agent of either of them harmless, then, in the absence of written notice to
the Issuer or the Trustee that such Security has been acquired by a bona fide
purchaser, the Issuer shall execute and the Trustee shall authenticate and
deliver, 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.
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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 may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
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 3.07. 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 bearer thereof on the Interest
Payment Date in the case of a Global Security in bearer form and, in the case of
a Definitive Security, 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.
Any interest (including Special 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 (a) bear interest at the rate per
annum stated in the form of Security included herein (to the extent that the
payment of such interest shall be legally enforceable), and (b) forthwith cease
to be payable to the bearer thereof on such Interest Payment Date with respect
to a Global Security in bearer form and, with respect to a Definitive Security,
to the Holder on the relevant Regular Record Date by virtue of having been such
Holder, and, in each case, such Defaulted Interest may be paid by the Issuer, at
its election in each case, as provided in Clause (a) or (b) below:
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(a) The Issuer may elect to make payment of any Defaulted Interest to
the bearer of such Security on any Special Payment Date (as defined below)
with respect to any Global Security in bearer form and, with respect to a
Definitive Security, to the Persons in whose names the Securities (or their
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 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, 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, with respect to any Definitive Security,
to the Persons in whose names the Securities (or their 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 (b). As used in this Clause (a), "Special Payment Date"
means the date on which Defaulted Interest is paid to the Holder.
(b) 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 notice given by the Issuer to the
Trustee of the
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proposed payment pursuant to this Clause, such manner of payment shall be
deemed practicable by the Trustee.
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 3.08. Persons Deemed Owners. Prior to due presentment of a Security
for registration of transfer, the Issuer, the Guarantor, the Trustee and any
agent of the Issuer, the Guarantor or the Trustee may treat the Person in whose
name a Definitive Security is registered as the owner of such Security and may
treat the bearer of a Global Security as the owner of such Security, in each
case, for the purpose of receiving payment of principal of and premium, if any,
and (subject to Section 3.07) interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Issuer, the Guarantor, the Trustee nor any agent of the Issuer, the Guarantor or
the Trustee shall be affected by notice to the contrary.
SECTION 3.09. Cancelation. All Securities surrendered for payment,
redemption, registration of transfer, exchange or pursuant to any Offer to
Purchase pursuant to Section 10.13 or 10.17 shall, if surrendered to any Person
other than the Trustee, be delivered to the Trustee and shall be promptly
canceled by it. The Issuer may at any time deliver to the Trustee for
cancelation 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 in accordance with its
standard procedures or as directed by an Issuer Order; provided, however, that
the Trustee shall not be required to destroy such Securities.
SECTION 3.10. Computation of Interest. Interest on the Securities shall be
computed on the basis of a 360-day year of twelve 30-day months, provided,
however, that Special Interest on Original Securities shall be computed on the
basis of a 365- or 366-day year, as the case may be, and the number of days
actually elapsed.
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SECTION 3.11. CUSIP and ISIN Numbers. The Issuer in issuing Securities may
use "CUSIP" and "ISIN" numbers (if then generally in use) in addition to serial
numbers; if so, the Trustee shall use such "CUSIP" and "ISIN" numbers in
addition to serial numbers in notices of redemption and repurchase as a
convenience to Holders; provided that any such notice may state that no
representation is made as to the correctness of such CUSIP and ISIN numbers
either as printed on the Securities or as contained in any notice of a
redemption or repurchase and that reliance may be placed only on the serial or
other identification numbers printed on the Securities, and any such redemption
or repurchase shall not be affected by any defect in or omission of such CUSIP
and ISIN numbers.
SECTION 3.12. Additional Securities. The Issuer may issue Additional
Securities under this Indenture in accordance with Section 3.01(b) and the terms
of this Indenture; provided, however, that (i) no Additional Securities may be
issued at a price that would cause such Security to have "original issue
discount" within the meaning of Section 1273 of the Internal Revenue Code of
1986, as amended and (ii) the Issuer and Guarantor are not in default under this
Indenture both before and after giving effect to the proposed issuance of
Additional Securities.
ARTICLE IV
Guarantee Of Securities
SECTION 4.01. Guarantee. Subject to the provisions of this Article Four,
the Guarantor hereby fully, unconditionally and irrevocably guarantees to each
Holder and to the Trustee on behalf of the Holders: (i) the due and punctual
payment of the principal of, premium, if any, on and interest (including Special
Interest) on each Security, when and as the same shall become due and payable,
whether at maturity, by acceleration or otherwise, the due and punctual payment
of interest on the overdue principal of and interest, if any, on the Securities,
to the extent lawful, and the due and punctual performance of all other
obligations of the Issuer to the Holders or the Trustee, all in accordance with
the terms of such Security and this Indenture and (ii) in the case of any
extension of time of payment or renewal of any Securities or any of such other
obligations, that the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, at Stated Maturity, by
acceleration or otherwise. The Guarantor hereby waives diligence,
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presentment, demand of payment, filing of claims with a court in the event of
merger or bankruptcy of the Issuer, any right to require a proceeding first
against the Issuer, the benefit of discussion, protest or notice with respect to
any such Security or the debt evidenced thereby and all demands whatsoever, and
covenants that this Securities Guarantee will not be discharged as to any such
Security except by payment in full of the principal thereof and interest thereon
and as provided in Section 12.01 and Section 12.02 (subject to Section 12.06).
The maturity of the obligations guaranteed hereby may be accelerated as provided
in Article Five for the purposes of this Article Four. In the event of any
declaration of acceleration of such obligations as provided in Article Five,
such obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantor for the purpose of this Article Four. In addition,
without limiting the foregoing provisions, upon the effectiveness of an
acceleration under Article Five, the Trustee shall promptly make a demand for
payment on the Securities under the Guarantee provided for in this Article Four.
If the Trustee or the Holder of any Security is required by any court or
otherwise to return to the Issuer or the Guarantor, or any custodian, receiver,
liquidator, trustee, sequestrator or other similar official acting in relation
to the Issuer or the Guarantor, any amount paid to the Trustee or such Holder in
respect of a Security, this Securities Guarantee, to the extent theretofore
discharged, shall be reinstated in full force and effect. The Guarantor further
agrees, to the fullest extent that it may lawfully do so, that, as between it,
on the one hand, and the Holders and the Trustee, on the other hand, the
maturity of the obligations guaranteed hereby may be accelerated as provided in
Article Five hereof for the purposes of this Securities Guarantee,
notwithstanding any stay, injunction or other prohibition extant under any
applicable bankruptcy law preventing such acceleration in respect of the
obligations guaranteed hereby.
Until such time as the Securities are fully and finally paid, including all
interest, premium, principal and liquidated damages with respect thereto, the
Guarantor hereby irrevocably waives any claim or other rights which it may now
or hereafter acquire against the Issuer that arise from the existence, payment,
performance or enforcement of its obligations under this Securities Guarantee
and this Indenture, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution, indemnification, any right to
participate in any claim or
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remedy of the Holders against the Issuer or any collateral which any such Holder
or the Trustee on behalf of such Holder hereafter acquires, whether or not such
claim, remedy or right arises in equity, or under contract, statute or common
law, including, without limitation, the right to take or receive from the
Issuer, directly or indirectly, in cash or other property or by setoff or in any
other manner, payment or security on account of such claim or other rights. If
any amount shall be paid to the Guarantor in violation of the preceding sentence
and the principal of, premium, if any, and accrued interest on the Securities
shall not have been paid in full, such amount shall be deemed to have been paid
to the Guarantor for the benefit of, and held in trust for the benefit of, the
Holders, and shall forthwith be paid to the Trustee for the benefit of the
Holders to be credited and applied upon the principal of, premium, if any, and
accrued interest on the Securities. The Guarantor acknowledges that it will
receive direct and indirect benefits from the issuance of the Securities
pursuant to this Indenture and that the waivers set forth in this Section 4.01
are knowingly made in contemplation of such benefits.
The Guarantee set forth in this Section 4.01 shall not be valid or become
obligatory for any purpose with respect to a Security until the certificate of
authentication on such Security shall have been signed by or on behalf of the
Trustee.
SECTION 4.02. Obligations Unconditional. Subject to Section 4.05, nothing
contained in this Article Four or elsewhere in this Indenture or in the
Securities is intended to or shall impair, as among the Guarantor and the
holders of the Securities, the obligation of the Guarantor, which is absolute
and unconditional, upon failure by the Issuer, to pay to the holders of the
Securities the principal of, premium, if any, and interest on the Securities as
and when the same shall become due and payable in accordance with their terms,
or is intended to or shall affect the relative rights of the holders of the
Securities and creditors of the Guarantor, nor shall anything herein or therein
prevent the holder of any Securities or the Trustee on their behalf from
exercising all remedies otherwise permitted by applicable law upon default under
this Indenture.
Without limiting the foregoing, nothing contained in this Article Four will
restrict the right of the Trustee or the holders of the Securities to take any
action to declare the Guarantee to be due and payable prior to the
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Stated Maturity of the Securities pursuant to Section 5.02 or to pursue any
rights or remedies hereunder.
SECTION 4.03. Notice to Trustee. The Guarantor shall give prompt written
notice to the Trustee of any fact known to the Guarantor which would prohibit
the making of any payment to or by the Trustee in respect of the Securities
Guarantee pursuant to the provisions of this Article Four.
ARTICLE V
Remedies
SECTION 5.01. 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 in the payment of any interest upon any Security when it
becomes due and payable, and continuance of such default for a period of 30
days; or
(b) default in the payment of the principal of (or premium, if any,
on) any Security when due; or
(c) default in the payment of principal and interest upon any Security
required to be purchased pursuant to an Offer to Purchase pursuant to
Sections 10.13 or 10.17; or
(d) default in the performance, or breach, of Section 8.01, 10.13 or
10.17; or
(e) default in the performance, or breach, of any covenant or warranty
of the Issuer or Guarantor in this Indenture or in any Security (other than
a covenant or warranty a default in whose performance or whose breach is
elsewhere in this Section specifically dealt with), and continuance of such
default or breach for a period of 60 days after there has been given, by
registered or certified mail, to the Issuer by the Trustee or to the Issuer
and the Trustee by the Holders of at least 25% in aggregate principal
amount of the Outstanding Securities a written notice specifying such
default or
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breach and requiring it to be remedied and stating that such notice is a
"Notice of Default" hereunder; or
(f) a default or defaults under any bond(s), debenture(s), note(s) or
other evidence(s) of indebtedness by the Guarantor, the Issuer or any
Subsidiary of the Guarantor or under any mortgage(s), indenture(s) or
instrument(s) under which there may be issued or by which there may be
secured or evidenced any indebtedness of such type by the Guarantor, the
Issuer or any Subsidiary of the Guarantor with a principal amount then
outstanding, individually or in the aggregate, in excess of $10 million,
whether such indebtedness now exists or shall hereafter be created, which
default or defaults shall constitute a failure to pay in excess of $10
million of the principal of such indebtedness when due at the final
maturity thereof, or shall have resulted in excess of $10 million of
indebtedness becoming or being declared due and payable prior to the date
on which it would otherwise have become due and payable; or
(g) a final judgment or final judgments for the payment of money are
entered against the Guarantor, the Issuer or any Subsidiary of the
Guarantor in an aggregate amount in excess of $10 million (net of
indemnities and funds actually received or to be received within 90 days of
such judgment) by a court or courts of competent jurisdiction, which
judgments remain undischarged or unbonded for a period (during which
execution shall not be effectively stayed) of 60 days after the right to
appeal all such judgments has expired; or
(h) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Guarantor, the Issuer or any
Significant Subsidiaries in an involuntary case or proceeding under any
applicable bankruptcy, insolvency, reorganization or other similar law or
(B) a decree or order adjudging the Guarantor, the Issuer or any
Significant Subsidiaries a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Guarantor, the Issuer or any
Significant Subsidiaries under any applicable law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Guarantor, the Issuer or any Significant
Subsidiaries or of any substantial part of its property, or ordering
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the winding up or liquidation of its affairs, 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
(i) the commencement by the Guarantor, the Issuer or any Significant
Subsidiaries of a voluntary case or proceeding under any 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 it to the entry of a decree or order for relief in respect of
the Guarantor, the Issuer or any Significant Subsidiaries in an involuntary
case or proceeding under any applicable bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the filing by it
of a petition or answer or consent seeking reorganization or relief under
any applicable law, or the consent by it to the filing of such petition or
to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of
the Guarantor, the Issuer or any Significant Subsidiaries or of any
substantial part of its property, or the making by it of an assignment for
the benefit of creditors, or the admission by it in writing of its
inability to pay its debts generally as they become due, or the taking of
corporate action by the Guarantor, the Issuer or any Significant
Subsidiaries in furtherance of any such action.
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment. If an
Event of Default (other than an Event of Default specified in Section 5.01(h) or
(i)) 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 Outstanding Securities
may declare the principal amount of all 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 such principal amount and any accrued
interest shall become immediately due and payable. If an Event of Default
specified in Section 5.01(h) or (i) occurs, the principal amount 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.
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At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due based on acceleration
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) all overdue interest on all Securities,
(B) 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 interest thereon at the rate borne by the Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Securities,
and
(D) 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 Securities which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 5.13.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 5.03. 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
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(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 principal (and premium, if any) and on any overdue interest, at the rate
provided by 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.
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
effective 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 5.04. Trustee May File Proofs of Claim. In case of any judicial
proceeding relative to the Issuer (or any other obligor upon the Securities),
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 and receive any moneys, securities or other property
payable or deliverable
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upon the exchange of the Securities or upon 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 6.07.
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; provided, however,
that the Trustee may, on behalf of the Holders, vote for the election of a
trustee in bankruptcy or similar official and be a member of a creditors or
other similar committee.
SECTION 5.05. 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 counsel, be for the ratable benefit of
the Holders of the Securities in respect of which such judgment has been
recovered.
SECTION 5.06. Application of Money Collected. Any money collected by the
Trustee pursuant to this Article shall be applied in the following order, at the
date or dates fixed by the Trustee and, in case of the distribution of such
money on account of principal (or premium, if any) or interest, 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 due the Trustee under Section
6.07; and
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SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Securities 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 5.07. 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 aggregate principal amount of
the Outstanding Securities shall have made written request to the Trustee
to institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;
(3) such Holder or Holders have offered and, if requested, provided to
the Trustee reasonable indemnity 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 and, if requested, provision of indemnity has failed to institute
any such proceeding; and
(5) no direction 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 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 5.08. Unconditional Right of Holders To Receive Principal, Premium
and Interest. Notwithstanding
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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 3.07) 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 without the consent of such Holder.
SECTION 5.09. 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 5.10. 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 3.06, 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 5.11. 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.
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SECTION 5.12. 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) such direction shall not be in conflict with any rule of law or
with this Indenture or expose the Trustee to personal liability (as
determined in the sole discretion of the Trustee), and
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
SECTION 5.13. Waiver of Past Defaults. The Holders of not less than a
majority in aggregate 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 or
(3) arising from failure to purchase any Security tendered pursuant to
Sections 10.13 and 10.17 of this Indenture.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.
SECTION 5.14. Undertaking for Costs. In any suit for the enforcement of any
right or remedy under this Indenture, or in any suit against the Trustee for any
action taken or omitted by it as Trustee, a court may require any party litigant
in such suit to file an undertaking to pay the costs of such suit, and may
assess costs against any
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such party litigant, in the manner and to the extent provided in the Trust
Indenture Act; provided that neither this Section nor the Trust Indenture Act
shall be deemed to authorize any court to require such an undertaking or to make
such an assessment in any suit instituted by the Issuer or the Guarantor;
further provided, that the provisions of this Section 5.14 shall not apply to
any suit instituted by the Trustee, to any suit instituted by any Holder or
group of Holders holding more than 10% in aggregate principal amount of the
Outstanding Securities, or to any suit instituted by any Holder for the
enforcement of the payment of the principal of, or premium, if any, or interest
on any Security on or after the respective due dates expressed in such Security.
SECTION 5.15. Waiver of Stay or Extension Laws.
Each of the Issuer and the Guarantor covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, or plead, or in any
manner whatsoever claim 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 each of the
Issuer and the Guarantor (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
ARTICLE VI
The Trustee
SECTION 6.01. Certain Duties and Responsibilities. (a) Except during the
continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture, and no implied covenants,
duties 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
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furnished to the Trustee and conforming to the requirements of this
Indenture; but in the case of any such certificates or opinions which by
any provision hereof are specifically required to be furnished to the
Trustee, the Trustee shall be under a duty to examine the same to determine
whether or not they conform to the requirements of this Indenture.
(b) In case 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 their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own wilful misconduct, except that
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) 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 shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction
of the Holders of a majority in principal amount of the Outstanding
Securities relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred upon the Trustee, under this Indenture; 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 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 relating to the conduct or
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affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.
SECTION 6.02. Notice of Defaults. The Trustee shall give the Holders notice
of any default hereunder known to the Trustee as and to the extent provided by
the Trust Indenture Act; provided, however, that in the case of any default of
the character specified in Section 5.01(e), no such notice to Holders shall be
given until at least 30 days after the occurrence thereof. 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.
SECTION 6.03. Certain Rights of Trustee. Subject to the provisions of
Section 6.01:
(a) the Trustee may conclusively rely and shall be completely
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;
(b) any request or direction of the Issuer mentioned herein shall be
sufficiently evidenced by a 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 from the Issuer and be completely protected in
relying upon an Officers' Certificate received in response to such request;
(d) the Trustee may consult with counsel of its selection and the
written 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;
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(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 against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction reasonably satisfactory to the Trustee;
(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 may (but shall have no obligation to) 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 or the Guarantor, personally or by agent or
attorney;
(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 with respect to any action taken,
suffered or omitted to be taken by it in accordance with the direction of
Holders of Outstanding Securities as provided in Sections 5.02, 5.12 and
5.13 hereof; and
(i) for all purposes under this Indenture, the Trustee shall not be
deemed to have notice of any Event of Default unless a Responsible Officer
of the Trustee has actual knowledge thereof or unless written notice of any
event which is in fact such a default is received by the Trustee at the
Corporate Trust Office of the Trustee, and such notice references the
Securities and this Indenture.
SECTION 6.04. Not Responsible for Recitals or Issuance of Securities. The
recitals contained herein and in the Securities, except the Trustee's
certificates of authentication, shall be taken as the statements of the
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Issuer, and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities or the Securities Guarantee. The Trustee shall
not be accountable for the use or application by the Issuer of Securities or the
proceeds thereof.
SECTION 6.05. May Hold Securities. The Trustee, 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 6.08 and 6.13, may otherwise deal with the Issuer or the Guarantor with
the same rights it would have if it were not Trustee, Paying Agent, Security
Registrar or such other agent.
SECTION 6.06. 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 with the Issuer.
SECTION 6.07. Compensation and Reimbursement. The Issuer and the Guarantor
jointly and severally agree
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);
(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 expenses
and disbursements of its agents 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 for, and to hold it harmless against, any
loss, liability or expense 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 enforcing this Indenture
against the Issuer or the Guarantor (including, without limitation, this
Section 6.07) and of defending itself against any claim
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(whether asserted by any Holder or the Issuer or the Guarantor) or
liability in connection with the exercise or performance of any of its
powers or duties hereunder. The provisions of this Section 6.07 shall
survive any termination of this Indenture and the resignation or removal of
the Trustee.
As security for the performance of the obligations of the Issuer under this
Section 6.07, the Trustee shall have a lien prior to the Securities upon all
property and funds held or collected by the Trustee, except funds held in trust
for the payment of principal of (and premium, if any) or interest on particular
Securities. The Trustee's right to receive payment of any amounts due under this
Section 6.07 shall not be subordinate to any other liability or indebtedness of
the Issuer (even though the Securities may be so subordinated).
When the Trustee incurs expenses or renders services in connection with an
Event of Default specified in Section 5.01(h) or Section 5.01(i), the expenses
(including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable Federal or State bankruptcy, insolvency or
other similar law.
The provisions of this Section shall survive the termination of this
Indenture or the earlier resignation or termination of the Trustee.
SECTION 6.08. 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 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 6.09. 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 and has a combined capital and surplus
of at least $50,000,000 and its Corporate Trust Office in the Borough of
Manhattan, the City of New York, New York. If such Person publishes reports of
condition at least annually, pursuant to law or to the requirements of a
Federal, State, Territorial or District of Columbia supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such Person shall be deemed to be its combined capital
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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 6.10. 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 6.11, at which time the
retiring Trustee shall be fully discharged from its obligations hereunder.
(b) The Trustee may resign at any time by giving written notice thereof to
the Issuer. If an instrument of acceptance by a successor Trustee shall not have
been delivered to the Trustee within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(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 6.08 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 6.09 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 a Board Resolution may remove the
Trustee, or (ii) subject to Section 5.14, any Holder who has been a bona fide
Holder of a Security for at
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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 a Board Resolution, 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 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 no successor
Trustee shall have been so appointed by the Issuer or the Holders and accepted
appointment in the manner hereinafter provided, 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 1.06. Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.
SECTION 6.11. Acceptance of Appointment by Successor. Every successor
Trustee appointed hereunder shall execute, acknowledge and deliver to the Issuer
and to the retiring Trustee an 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 Trustee under
Section 6.07, 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
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confirming to such successor Trustee all such rights, powers and trusts.
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 6.12. 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, without the execution
or filing of any paper or any further act on the part of any of the parties
hereto; provided that such corporation shall be otherwise qualified and eligible
under this Article. 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 may adopt such
authentication and deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such Securities.
SECTION 6.13. Preferential Collection of Claims Against Issuer or
Guarantor. If and when the Trustee shall be or become a creditor of the Issuer
or Guarantor (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 Guarantor (or any such other obligor).
SECTION 6.14. Appointment of Authenticating Agent. The Trustee may appoint
an Authenticating Agent or Agents with respect to the Securities which shall be
authorized to act on behalf of the Trustee to authenticate Securities issued
upon original issue and upon exchange, registration of transfer or partial
redemption thereof or pursuant to Section 3.06, 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
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Agent. Each Authenticating Agent shall be 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 a combined
capital and surplus of not less than $50,000,000 and subject to supervision or
examination by Federal or State authority. If such Authenticating Agent
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
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, without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent; provided,
such corporation shall be otherwise eligible under this Section.
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 acceptable to the Issuer and shall give notice of such
appointment in the manner provided in Section 1.06 to all Holders of Securities.
Any successor Authenticating 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.
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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, subject to the provisions
of Section 6.07.
If an appointment is made pursuant to this Section, the Securities may have
endorsed thereon, in lieu of the Trustee's certificate of authentication, an
alternative certificate of authentication in the following form:
This is one of the Securities referred to in the within-mentioned
Indenture.
Dated:
THE CHASE MANHATTAN BANK, as
Trustee,
by
________________________________,
as Authenticating Agent
by
________________________________
Authorized Signatory
SECTION 6.15. Withholding Taxes. Notwithstanding any other provision of
this Agreement, the Trustee, as agent for the Issuer and the Guarantor, shall
exclude and withhold from each payment of principal and interest and other
amounts due hereunder or under the Securities or the Securities Guarantee any
and all withholding taxes applicable thereto as required by law. The Trustee
agrees to act as such withholding agent and, in connection therewith, whenever
any present or future taxes or similar charges are required to be withheld with
respect to any amounts payable in respect of the Securities or the Securities
Guarantee, to withhold such amounts and timely pay the same to the appropriate
authority in the name of and on behalf of the Holders of the Securities, that it
will furnish to the Holders of the Securities such forms or certificates as are
necessary or appropriate to provide the information described in Section
10.09(c)(i) hereof or make the declaration or claim described in Section
10.09(c)(ii) hereof, that it will file any necessary withholding tax returns or
statements when due, and that, as promptly as
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possible after the payment thereof, it will deliver to each Holder of a Security
appropriate documentation showing the payment thereof, together with such
additional documentary evidence as such Holders may reasonably request from time
to time.
In the event that the Trustee is also acting as Paying Agent,
Authenticating Agent, transfer agent, or Registrar hereunder, the rights and
protections afforded to the Trustee pursuant to this Article Six shall also be
afforded to such Paying Agent, Authenticating Agent, transfer agent, or
Registrar.
ARTICLE VII
Holders' Lists and Reports by Trustee and Issuer
SECTION 7.01. Issuer to Furnish Trustee Names and Addresses of Holder. The
Issuer will furnish or cause to be furnished to the Trustee (a) semi-annually,
not more than 15 days after each Regular Record Date, 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 7.02. Preservation of Information; Communications to Holders. (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 7.01 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 7.01 upon
receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with respect to
their rights under this Indenture or under the Securities, and the corresponding
rights and duties of the Trustee, shall be as provided by the Trust Indenture
Act.
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(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 names and addresses of Holders made pursuant to the Trust
Indenture Act.
SECTION 7.03. Reports by Trustee. (a) Within 30 days after January 1 of
each year, commencing with the first January 1 following the first issuance of
Securities pursuant to Section 3.01, if required by Section 3.13(a) of the Trust
Indenture Act, the Trustee shall transmit, pursuant to Section 3.13(c) of the
Trust Indenture Act, a brief report dated as of such January 1 with respect to
any of the events specified in said Section 3.13(a) which may have occurred
since the later of the immediately preceding January 1 and the date of this
Indenture.
(b) The Trustee shall transmit the reports required by Section 3.13(b) of
the Trust Indenture Act and Section 6.02 hereof at the times specified therein.
(c) Reports pursuant to this Section shall be transmitted in the manner and
to the persons required by Sections 3.13(c) and 3.13(d) of the Trust Indenture
Act.
(d) A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange upon which the
Securities are listed, with the Commission and with the Issuer. The Issuer will
promptly notify the Trustee when the Securities are listed on any stock
exchange.
SECTION 7.04. Reports by Issuer and Guarantor. Each of the Guarantor and
the Issuer shall file with the Trustee and the Commission, and 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 such Act and in the manner set forth in
Section 10.18.
SECTION 7.05. Officers' Certificate with Respect to Change in Interest
Rates. Within five days after any Step-Up or Step-Down Date, the Issuer shall
deliver an Officers' Certificate to the Trustee stating the new interest rate
and the date on which it became effective.
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ARTICLE VIII
Merger, Consolidation, Etc.
SECTION 8.01. Mergers, Consolidations and Certain Sales of Assets. Neither
the Guarantor nor the Issuer may, in a single transaction or a series of related
transactions, (i) consolidate with or merge into any other Person or permit any
other Person to consolidate with or merge into the Guarantor or the Issuer, or
(ii) directly or indirectly, transfer, sell, lease or otherwise dispose of all
or substantially all of its assets to any other Person, unless:
(1) in a transaction in which the Guarantor or the Issuer, as
applicable, does not survive or in which the Guarantor or the Issuer sells,
leases or otherwise disposes of all or substantially all of its assets to
any other Person (other than, in any such case, the Guarantor or the
Issuer), the successor entity to the Guarantor or the Issuer is organized
under the laws of the United States of America or any State thereof or the
District of Columbia, the British Virgin Islands, Cayman Islands, The
Netherlands, Ireland or Jersey and shall expressly assume, by a
supplemental indenture executed and delivered to the Trustee in form
satisfactory to the Trustee, all of the Guarantor's or the Issuer's
obligations under the Indentures;
(2) immediately before and after giving effect to such transaction and
treating any Debt which becomes an obligation of the Guarantor or a
Subsidiary as a result of such transaction as having been Incurred by the
Guarantor or such 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) immediately after giving effect to such transaction, the
Consolidated Net Worth of the Guarantor (or other successor entity to the
Guarantor) is equal to or greater than that of the Guarantor immediately
prior to the transaction;
(4) if, as a result of any such transaction, property or assets of the
Guarantor or any Subsidiary would become subject to a Lien prohibited by
Section 10.15, the Guarantor or the successor entity to the Guarantor shall
have secured the Securities as required by said covenant; and
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(5) in the event that the continuing Person is incorporated in a
jurisdiction other than the United States or the jurisdiction in which such
Person was incorporated immediately prior to such transaction, (A) the
Issuer delivers to the Trustee an Opinion of Counsel stating that the
obligations of the continuing Person under the Indenture are enforceable
under the laws of the new jurisdiction of its incorporation to the same
extent as the obligations of the Issuer or the Guarantor, as the case may
be, under the Indenture immediately prior to such transaction; (B) the
continuing Person agrees in writing to submit to jurisdiction and appoints
an agent for the service of process, each under terms substantially similar
to the terms contained in the Indenture with respect to the Issuer or the
Guarantor, as the case may be; (C) the continuing Person agrees in writing
to pay Additional Amounts as provided under this Indenture under Section
10.09 with respect to the Issuer or the Guarantor, as the case may be,
except that such Additional Amount shall relate to any withholding tax
whatsoever regardless of any change of law (subject to exceptions
substantially similar to those contained in Section 10.09); (D) the Board
of Directors of the Guarantor determines in good faith that such
transaction will have no material adverse effect on any Holder and a Board
Resolution to that effect is delivered to the Trustee; and (E) the
principal purpose of the continuing Person being incorporated in such
jurisdiction is to obtain tax benefits for the Guarantor, the Issuer, their
direct and indirect stockholders or the Holders.
SECTION 8.02. Successor Substituted. Upon any consolidation of the Issuer
with, or merger of the Issuer with or into, any other Person or any conveyance,
transfer or lease of the properties and assets of the Issuer substantially as an
entirety in accordance with Section 8.01, the successor Person formed by such
consolidation or into which the Issuer is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Issuer under this Indenture with the same
effect as if such successor Person had been named 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.
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ARTICLE IX
Supplemental Indentures
SECTION 9.01. Supplemental Indentures Without Consent of Holders. Without
the consent of any Holders, the Issuer and the Guarantor, each 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 the Issuer or the
Guarantor and the assumption by any such successor of the covenants of the
Issuer or the Guarantor herein and in the Securities; or
(2) to add to the covenants of the Issuer or the Guarantor for the
benefit of the Holders, or to surrender any right or power herein conferred
upon the Issuer or the Guarantor; or
(3) to secure the Securities pursuant to the requirements of Section
10.15 or otherwise; or
(4) to modify, eliminate or add to the provisions of this Indenture to
such extent as shall be necessary to comply with any requirement of the
Commission in order to effect qualification of this Indenture under the
Trust Indenture Act in connection with the issuance of Exchange Securities
or Registered Securities or thereafter to 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 provide for uncertificated Securities in addition to or in
place of certified Securities; or
(7) to provide for the issuance of Additional Securities in accordance
with Section 3.12.
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SECTION 9.02. Supplemental Indentures with Consent of Holders. With the
written consent of the Holders of not less than a majority in aggregate
principal amount of the Outstanding Securities, by Act of said Holders delivered
to the Issuer and the Trustee, and consistent with Section 5.13, the Issuer and
the Guarantor, each when authorized by a Board Resolution, 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; provided, however, that no such supplemental
indenture shall, without the written 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 coin
or currency in which, any Security or any premium or 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 their consequences) provided for in this Indenture,
or
(3) modify any of the provisions of this Section, Section 5.13 or
Section 10.20, 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 making of an Offer with respect to an Offer to
Purchase pursuant to Sections 10.13 or 10.17, modify the provisions of this
Indenture with respect to such Offer to Purchase in a manner materially
adverse to such Holder, or
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(5) release the Guarantor from its Securities Guarantee.
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 9.03. 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
6.01) 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 9.04. 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 9.05. Conformity with Trust Indenture Act. Every supplemental
indenture executed pursuant to this Article shall conform to the requirements of
the Trust Indenture Act.
SECTION 9.06. 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.
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ARTICLE X
Covenants
SECTION 10.01. 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 10.02. Maintenance of Office or Agency. The Issuer will maintain in
the Borough of Manhattan, the City of New York, 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, 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, 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 10.03. 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 in writing
of its action or failure so to act. As provided in Section 5.04, upon any
bankruptcy or
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reorganization proceeding relative to the Issuer, the Trustee shall serve as the
Paying Agent for the Securities.
Whenever the Issuer shall have one or more Paying Agents, it will, prior to
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 in trust
for the benefit of the Persons entitled to such principal, premium or interest,
and (unless such Paying Agent is the Trustee) the Issuer will promptly notify
the Trustee in writing of its action or failure so to act. Upon any bankruptcy
or reorganization proceeding relative to the Issuer, the Trustee shall serve as
the Paying Agent for the Securities.
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:
(1) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest on Securities in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(2) give the Trustee written notice of any default by the Issuer (or
any other obligor upon the Securities) in the making of any payment of
principal (and premium, if any) or interest;
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent; and
(4) acknowledge, accept and agree to comply in all respects with the
provisions of this Indenture relating to the duties, rights and obligations
of such Paying Agent.
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
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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 as 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 Borough of
Manhattan, the City of New York, 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 10.04. Existence. Subject to Article Eight, the Guarantor will do
or cause to be done all things necessary to preserve and keep in full force and
effect the existence, rights (charter and statutory) and franchises of the
Guarantor, the Issuer and each of the Restricted Subsidiaries; provided,
however, that the Guarantor shall not be required to preserve any such right or
franchise if the Guarantor shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Guarantor, the Issuer or
the Restricted Subsidiaries and that the loss thereof is not disadvantageous in
any material respect to the Holders.
SECTION 10.05. Maintenance of Properties. The Guarantor will cause all
properties used or useful in the conduct of its business or the business of the
Issuer or any Restricted Subsidiary to be maintained and kept in good condition,
repair and working order and supplied with all necessary equipment and will
cause to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the
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Guarantor may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section shall prevent the Guarantor from
discontinuing the operation or maintenance of any of such properties if such
discontinuance is, in the reasonable judgment of the Guarantor, desirable in the
conduct of its business or the business of the Issuer or any Restricted
Subsidiary and not disadvantageous in any material respect to the Holders.
SECTION 10.06. Payment of Taxes and Other Claims. The Guarantor 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 Guarantor or the Issuer or any Restricted Subsidiaries or
upon the income, profits or property of the Guarantor or the Issuer or any
Restricted Subsidiaries, and (2) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien upon the property of the
Guarantor or the Issuer or any Restricted Subsidiaries; provided, however, that
the Guarantor shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings.
SECTION 10.07. Maintenance of Insurance. The Guarantor shall, and shall
cause the Issuer and the Restricted Subsidiaries to, keep at all times all of
their properties which are of an insurable nature insured against loss or damage
with insurers believed by the Guarantor 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 10.08. Limitation on Consolidated Debt. The Guarantor may not, and
may not permit any Restricted Subsidiary of the Guarantor to, Incur any Debt
(other than the Senior Discount Securities and the related guarantee by the
Guarantor, and the Securities issued on the date hereof and the Securities
Guarantee) unless the ratio of (i) the aggregate consolidated principal amount
of Debt (which is defined to include the accreted value of any Debt issued at a
discount) of the Guarantor outstanding as of the most recent available quarterly
or annual balance sheet, after giving pro forma effect to the Incurrence of such
Debt and any other Debt Incurred since such balance sheet date and the receipt
and application of the proceeds thereof, to (ii) four (4) times the Consolidated
Cash Flow Available for
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Fixed Charges for the most recent fiscal quarter next preceding the Incurrence
of such Debt for which consolidated financial statements are available,
determined on a pro forma basis as if any such Debt had been Incurred and the
proceeds thereof had been applied at the beginning of such recent fiscal
quarter, would be less than 7.0 to 1.0 for such period.
Notwithstanding the foregoing limitation, the Guarantor and any Restricted
Subsidiary may Incur the following:
(i) Debt under Credit Facilities in an aggregate principal amount at
any one time not to exceed $200 million, and any renewal, extension,
refinancing or refunding thereof in an amount which, together with any
principal amount remaining outstanding under all Credit Facilities, does
not exceed the aggregate principal amount outstanding under all Credit
Facilities immediately prior to such renewal, extension, refinancing or
refunding;
(ii) Debt owed by the Guarantor to any Restricted Subsidiary of the
Guarantor or Debt owed by a Restricted Subsidiary of the Guarantor to the
Guarantor or a Restricted Subsidiary of the Guarantor; provided, however,
that upon either (x) the transfer or other disposition by such Restricted
Subsidiary or the Guarantor of any Debt so permitted to a Person other than
the Guarantor or another Restricted Subsidiary of the Guarantor or (y) such
Restricted Subsidiary ceasing to be a Restricted Subsidiary, the provisions
of this clause (ii) shall no longer be applicable to such Debt and such
Debt shall be deemed to have been Incurred at the time of such transfer or
other disposition;
(iii) Debt Incurred to renew, extend, refinance or refund (each, a
"refinancing") (x) Debt outstanding at the date hereof (after giving effect
to the Equity Clawback) or (y) Incurred pursuant to the first paragraph of
this Section, or clause (vi) or (vii) of this paragraph or (z) the
Securities or the Senior Discount Securities, in each case, in an aggregate
principal amount not to exceed the aggregate principal amount of and
accrued interest on the Debt so refinanced plus the amount of any premium
required to be paid in connection with such refinancing pursuant to the
terms of the Debt so refinanced or the amount of any premium reasonably
determined by the Guarantor as necessary to accomplish such refinancing by
means of a
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tender offer or privately negotiated repurchase, plus the expenses of the
Guarantor or the Restricted Subsidiary effecting such refinancing incurred
in connection with such refinancing; provided, however, that Debt the
proceeds of which are used to refinance the Securities or Debt which is
pari passu to the Securities and the Security Guarantee or Debt which is
subordinate in right of payment to the Securities and the Security
Guarantee shall only be permitted if (A) in the case of any refinancing of
the Securities or Debt which is pari passu to the Securities and the
Security Guarantee, the refinancing Debt is made pari passu or subordinated
to the Securities and the Security Guarantee, and, in the case of any
refinancing of Subordinated Debt, the refinancing Debt constitutes
Subordinated Debt and (B) in any case, 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 stated maturity prior to the final stated
maturity of the Debt being refinanced, and the Average Life of such new
Debt is at least equal to the remaining Average Life of the Debt being
refinanced (assuming that such Debt being refinanced had a final stated
maturity three months later than its actual final stated maturity);
(iv) Debt in an aggregate principal amount not in excess of (A) two
(2) times the aggregate amount of the Guarantor's Incremental Paid-in
Capital minus (B) $165 million;
(v) Debt in an aggregate principal amount not in excess of 80% of the
aggregate amount of accounts receivable set forth on the most recent
unaudited quarterly or audited annual financial statements of the Guarantor
and its consolidated subsidiaries filed with the Commission;
(vi) Purchase Money Debt, which is incurred for the construction,
acquisition and improvement of Telecommunications Assets, provided that the
amount of such Purchase Money Debt does not exceed the cost of the
construction, acquisition or improvement of the applicable
Telecommunications Assets;
(vii) Debt consisting of Permitted Interest Rate and Currency
Protection Agreements; and
(viii) Debt not otherwise permitted to be Incurred pursuant to clauses
(i) through (vii) above, which,
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together with any other outstanding Debt Incurred pursuant to this clause
(viii), has an aggregate principal amount not in excess of $50 million at
any time outstanding.
For purposes of determining compliance with this Section, with respect to
any item of Debt, (x) in the event that such item of Debt meets the criteria of
more than one of the types of Debt the Guarantor or a Restricted Subsidiary is
permitted to Incur pursuant to the foregoing clauses (i) through (viii), the
Guarantor shall have the right, in its sole discretion, to classify such item of
Debt and shall only be required to include the amount and type of such Debt
under the clause permitting the Debt as so classified and (y) any other
obligation of the obligor on such Debt (or of any other Person who could have
Incurred such Debt under this Section) arising under any Guarantee, Lien or
letter of credit supporting such Debt shall be disregarded to the extent that
such Guarantee, Lien or letter of credit secures the principal amount of such
Debt.
For purposes of determining compliance with any Dollar-denominated
restriction on the Incurrence of Debt denominated in a foreign currency, the
Dollar-equivalent principal amount of such foreign-currency-denominated Debt
Incurred pursuant thereto shall be calculated based on the relevant currency
exchange rate in effect on the date that such foreign-currency-denominated Debt
was Incurred, in the case of term debt, or first committed, in the case of
revolving credit debt; provided that (x) the Dollar-equivalent principal amount
of any such Debt outstanding on the date hereof shall be calculated based on the
relevant currency exchange rate in effect on the date hereof and (y) if such
Debt is Incurred to refinance other Debt denominated in a foreign currency, and
such refinancing would cause the applicable Dollar-denominated restriction to be
exceeded if calculated at the relevant currency exchange rate in effect on the
date of such refinancing, such Dollar denominated restriction shall be deemed
not to have been exceeded so long as the principal amount of such refinancing
Debt does not exceed the principal amount of such Debt being refinanced. The
principal amount of any Debt Incurred to refinance other Debt, if Incurred in a
different currency from the Debt being refinanced, shall be calculated based on
the currency exchange rate applicable to the currency in which such respective
Debt is denominated that is in effect on the date of such refinancing.
SECTION 10.09. Additional Amounts. Payments made by the Issuer or the
Guarantor pursuant to the Securities or
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the Securities Guarantee will be made without withholding or deduction for taxes
unless required by law. In the event of (i) any change that becomes effective
after the date hereof in the laws of the U.K. or Bermuda or of any political
subdivision or taxing authority thereof or therein or any change in the
interpretation or administration thereof or (ii) a failure by the Issuer to list
and maintain a listing of the Securities on a "recognized stock exchange"
(within the meaning of Section 841 of the U.K. Income and Corporation Taxes Act
1988) prior to the first date upon which interest is required to be paid
hereunder (a "Listing Failure"), the effect of which is to require the
withholding or deduction by the Issuer or the Guarantor pursuant to the
Securities or the Securities Guarantee, respectively, of any amount for taxes
that would not have been required to be withheld or deducted absent such change
or Listing Failure, as the case may be, the Issuer or the Guarantor will pay, to
the extent it may then lawfully do so, such additional amounts ("Additional
Amounts") as may be necessary in order that every net payment of the principal
of and interest on the Securities, after deduction for withholding for or on
account of any future tax, assessment or other governmental charge will not be
less than the amount provided for in the Securities to be then due and payable;
provided, however, that the foregoing obligation to pay Additional Amounts shall
not apply in respect of:
(a) any tax, withholding, assessment or other governmental charge
which would not have been imposed but for (i) the existence of any present
or former connection between such holder (or between a fiduciary, settlor,
beneficiary, member or shareholder of, or possessor of a power over, such
holder, if such holder is an estate, trust, partnership or corporation) and
the U.K. or Bermuda or any political subdivision or taxing authority
thereof including, without limitation, such holder (or such fiduciary,
settlor, beneficiary, member, shareholder or possessor) being or having
been a citizen or resident thereof or being or having been present or
engaged in trade or business therein or having or having had a permanent
establishment therein or (ii) the presentation of a Security or a
Securities Guarantee (where presentation is required) for payment on a date
more than 30 days after the date on which such payment became due and
payable or the date on which payment thereof is duly provided for,
whichever occurs later, except for Additional Amounts with respect to Taxes
that would have been imposed had the holder presented the Security for
payment within such 30-day period;
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(b) any estate, inheritance, gift, sale, transfer or personal property
tax;
(c) any tax, assessment or other governmental charge that is withheld
by reason of the failure to timely comply by the holder or the beneficial
owner of the Security with a request in writing of the Issuer or the
Guarantor (which request shall be furnished to the Trustee) (i) to provide
information concerning the nationality, residence or identity of the holder
or such beneficial owner or (ii) to make any declaration or other similar
claim or satisfy any information or reporting requirement, which, in the
case of (i) or (ii), is required or imposed by a statute, treaty,
regulation or administrative practice of the taxing or domicile
jurisdiction as a precondition to exemption from or reduction of all or
part of such tax, assessment or other governmental charge; provided,
however, that this clause (c) shall not apply to limit the Issuer's or
Guarantor's obligation to pay Additional Amounts if the completing and
filing of the information described in subclause (i) or the declaration or
other claim described in subclause (ii) would be materially more onerous in
form, in procedure or in substance of information disclosed, in comparison
to the information reporting requirements imposed under U.S. tax law with
respect to Forms 1001, W-8 and W-9; or
(d) any tax, withholding, assessment or other governmental charge
resulting from a Listing Failure with respect to any Security issued in the
form of a Definitive Security pursuant to the terms of the Deposit
Agreement and this Indenture; or
(e) any combination of items (a), (b), (c) and (d) above; nor shall
Additional Amounts be paid with respect to any payment of the principal of,
or any interest on, any Security or Securities Guarantee to any holder who
is not the sole beneficial owner of such Security or Securities Guarantee
or is a fiduciary or partnership, but only to the extent that a beneficial
owner, a beneficiary or a settlor with respect to a fiduciary or a member
of the partnership would not have been entitled to the payment of the
Additional Amount had the beneficial owner, beneficiary, settlor or member
of such partnership received directly its beneficial or distributive share
of the payment.
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At least 30 days prior to each date on which any payment under or with
respect to the Securities is due and payable, if the Issuer or the Guarantor
will be obligated to pay Additional Amounts with respect to such payment, the
Issuer or the Guarantor will deliver to the Trustee an Officer's Certificate
stating the fact that such Additional Amounts will be payable and the amounts so
payable and will set forth such other information necessary to enable the
Trustee to pay such Additional Amounts to Holders on the payment date. Whenever
in this Indenture there is mentioned, in any context, the payment of principal
(and premium, if any), Redemption Price, interest or any other amount payable
under or with respect to any Security, such mention shall be deemed to include
mention of the payment of Additional Amounts to the extent that, in such
context, Additional Amounts are, were or would be payable in respect thereof.
SECTION 10.10. Limitation on Restricted Payments. The Guarantor (i) may
not, and will not permit any Restricted Subsidiary, directly or indirectly, to
declare or pay any dividend, or make any distribution, in respect of its Capital
Stock or to the holders thereof, excluding (x) any dividends or distributions
payable solely in shares of its Capital Stock (other than Disqualified Stock) or
in options, warrants or other rights to acquire its Capital Stock (other than
Disqualified Stock), (y) any dividends paid to the Guarantor or a Restricted
Subsidiary, or (z) pro rata dividends paid on shares of Common Stock of
Restricted Subsidiaries, (ii) may not, and may not permit any Restricted
Subsidiary to, purchase, redeem, or otherwise retire or acquire for value (a)
any Capital Stock of the Guarantor or any Related Person of the Guarantor (other
than a permitted refinancing) or (b) any options, warrants or rights to purchase
or acquire shares of Capital Stock of the Guarantor or any Related Person of the
Guarantor or any securities convertible or exchangeable into shares of Capital
Stock of the Guarantor or any Related Person of the Guarantor (other than a
permitted refinancing), (iii) may not make, or permit any Restricted Subsidiary
to make, any Investment, except for Permitted Investments, and (iv) may not, and
may not permit any Restricted Subsidiary to, redeem, defease, repurchase, retire
or otherwise acquire or retire for value, prior to any scheduled maturity,
repayment or sinking fund payment, Debt of the Guarantor or the Issuer which is
subordinate in right of payment to the Securities or the Securities Guarantee
(each of clauses (i) through (iv) being a "Restricted Payment") if: (1) 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
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Default, shall have occurred and be continuing, or (2) except with respect to
Investments, upon giving effect to such Restricted Payment, the Guarantor could
not Incur at least $1.00 of additional Debt pursuant to the first paragraph of
Section 10.08, or (3) upon giving effect to such Restricted Payment, the
aggregate of all Restricted Payments from the date hereof exceeds the sum of:
(a)(x) Consolidated Cash Flow Available for Fixed Charges since the end of the
last full fiscal quarter prior to the date hereof through the last day of the
last full fiscal quarter ending immediately preceding the date of such
Restricted Payment (the "Calculation Period") minus (y) 1.5 times Consolidated
Interest Expense for the Calculation Period plus (b) 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 Guarantor
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 Cash Flow Available for
Fixed Charges for the Calculation Period), or from redesignations of
Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as
provided in the definition of Investment), not to exceed, in each case, the
amount of Investments previously made by the Guarantor or any Restricted
Subsidiary in such Person or Unrestricted Subsidiary plus (c) an amount equal to
the aggregate net proceeds received after the date hereof, including the fair
market value of property other than cash (determined in good faith by the Board
of Directors as evidenced by a resolution of the Board of Directors filed with
the Trustee), as capital contributions to the Guarantor or from the issuance
(other than to a Subsidiary) of Capital Stock (other than Disqualified Stock) of
the Guarantor and warrants, rights or options on Capital Stock (other than
Disqualified Stock) of the Guarantor and the principal amount of Debt of the
Guarantor or any Restricted Subsidiary that has been converted into Capital
Stock (other than Disqualified Stock and other than by a Subsidiary) of the
Guarantor after the date hereof plus (d) $30 million.
Notwithstanding the foregoing, (i) the Guarantor may pay any dividend on
Capital Stock of any class of the Guarantor within 60 days after the declaration
thereof if, on the date when the dividend was declared, the Guarantor could have
paid such dividend in accordance with the foregoing provisions, (ii) the
Guarantor may make acquisitions of a minority equity interest in entities
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engaged in the Telecommunications Business; provided that (A) the acquisition of
a majority equity interest in such entities is not then permitted or practicable
under applicable law without regulatory consent or change of law, (B) the Board
of Directors of the Guarantor determines in good faith that there is a
substantial probability that such approval or change of law will be obtained,
(C) the Guarantor or one of its Restricted Subsidiaries has the right to acquire
Capital Stock representing a majority of the voting power of the Voting Stock of
such entity upon receipt of regulatory consent or change of law and does acquire
such Voting Stock reasonably promptly upon receipt of such consent or change of
law and (D) in the event that such consent or change of law has not been
obtained within 18 months of funding such Investment, the Guarantor or one of
its Restricted Subsidiaries has the right to sell such minority equity interest
to the Person from whom it acquired such interest, for consideration consisting
of the consideration originally paid by the Guarantor and its Restricted
Subsidiaries for such minority equity interest; (iii) the Guarantor may
repurchase any shares of its Common Stock or options to acquire its Common Stock
from Persons who were formerly directors, officers or employees of the Guarantor
or any of its Subsidiaries, provided that the aggregate amount of all such
repurchases made pursuant to this clause (iii) shall not exceed $6 million, plus
the aggregate cash proceeds received by the Guarantor since the date hereof from
issuances of its Common Stock or options to acquire its Common Stock to
directors, officers and employees of the Guarantor or any of its Subsidiaries,
(v) the Guarantor or a Restricted Subsidiary may redeem, defease, repurchase,
retire or otherwise acquire or retire for value Debt of the Guarantor or the
Issuer which is subordinated in right of payment to the Securities or the
Security Guarantees, as the case may be, in exchange for, or out of the proceeds
of a substantially concurrent sale (other than to a Subsidiary) of, Capital
Stock (other than Disqualified Stock of the Guarantor) or in a refinancing that
satisfies the requirements of clause (iii) of the second paragraph of Section
10.08 and (vi) the Guarantor and its Subsidiaries may retire or repurchase any
Capital Stock of the Guarantor or of any Subsidiary of the Guarantor in exchange
for, or out of the proceeds of the substantially concurrent sale (other than to
a Subsidiary of the Guarantor) of, Capital Stock (other than Disqualified Stock)
of the Guarantor or any Subsidiary.
SECTION 10.11. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries. The Guarantor may not, and may not permit any
Restricted
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Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary of the Guarantor (i) to pay dividends (in
cash or otherwise) or make any other distributions in respect of its Capital
Stock owned by the Guarantor or any other Restricted Subsidiary of the Guarantor
or pay any Debt or other obligation owed to the Guarantor or any other
Restricted Subsidiary; (ii) to make loans or advances to the Guarantor or any
other Restricted Subsidiary; or (iii) to transfer any of its property or assets
to the Guarantor or any other Restricted Subsidiary.
Notwithstanding the foregoing, the Guarantor may, and may permit any
Restricted Subsidiary to, suffer to exist any such encumbrance or restriction
(a) pursuant to any agreement in effect on the date hereof; (b) pursuant to an
agreement relating to any Acquired Debt, which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person so acquired and was not Incurred in anticipation of such Person being
acquired; (c) pursuant to an agreement effecting a renewal, refunding or
extension of Debt Incurred pursuant to an agreement referred to in clause (a) or
(b) above; provided, however, that the provisions contained in such renewal,
refunding or extension agreement relating to such encumbrance or restriction are
no more restrictive in any material respect than the provisions contained in the
agreement the subject thereof; (d) in the case of clause (iii) in the above
paragraph, contained in any security agreement (including a Capital Lease
Obligation) securing Debt of the Guarantor or a Restricted Subsidiary otherwise
permitted hereunder, but only to the extent such restrictions restrict the
transfer of the property subject to such security agreement; (e) in the case of
clause (iii) in the above paragraph, with respect to customary nonassignment
provisions entered into in the ordinary course of business in leases and other
agreements; (f) with respect to a Restricted Subsidiary of the Guarantor 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 (x) the 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, (y) such
restriction terminates if such transaction is not consummated and (z) the
consummation or abandonment of such transaction occurs within one year of the
date such agreement was entered into; (g) pursuant to applicable law or required
by any regulatory authority
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having jurisdiction over the Guarantor or any Subsidiary; (h) pursuant to this
Indenture and the Securities or the Senior Discount Securities Indenture and the
Senior Discount Securities; (i) constituting a Lien otherwise permitted pursuant
to Section 10.15; and (j) other encumbrances or restrictions that are not
materially more restrictive than customary provisions in comparable financings
provided that each of the Issuer and the Guarantor provides an Officer's
Certificate to the Trustee to the effect that in the opinion of the signers of
such certificate such encumbrances or restrictions will not materially impact
the Issuers' and the Guarantors' ability to make scheduled payments of interest
and principal under the Securities.
SECTION 10.12. Limitation on Transactions with Affiliates and Related
Persons. The Guarantor will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, enter into, renew or extend any transaction
(including, without limitation, the purchase, sale, lease or exchange of
property or assets, or the rendering of any service) with any Related Person or
with any Affiliate of the Guarantor or any Restricted Subsidiary, except upon
fair and reasonable terms no less favorable to the Guarantor or such Restricted
Subsidiary than could be obtained, at the time of such transaction or, if such
transaction is pursuant to a written agreement, at the time of the execution of
the agreement providing therefor, in a comparable arm's-length transaction with
a Person that is not a Related Person or an Affiliate.
The foregoing limitation does not limit, and shall not apply to (i)
transactions (A) approved by a majority of the disinterested members of the
Board of Directors or (B) for which the Guarantor or a Restricted Subsidiary
delivers to the Trustee a written opinion of a nationally recognized investment
banking firm (or a subsidiary or affiliate thereof) in the United States stating
that the transaction is fair to the Guarantor or such Restricted Subsidiary from
a financial point of view; (ii) any transaction solely between the Guarantor and
any of its Wholly Owned Restricted Subsidiaries or solely between Wholly Owned
Restricted Subsidiaries; and (iii) any payments or other transactions pursuant
to any tax-sharing agreement between the Guarantor and any other Person with
which the Guarantor files a consolidated tax return or with which the Guarantor
is part of a consolidated group for tax purposes. Notwithstanding the foregoing,
any transaction covered by the first paragraph of this Section and not covered
by clauses (ii) through (iii) of this paragraph must be approved or determined
to be fair in the manner provided for
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in clause (i)(A) or (B) above unless the aggregate amount of such transaction is
less than $5 million in value.
SECTION 10.13. Limitation on Asset Dispositions. (a) The Guarantor may not,
and may not permit any Restricted Subsidiary of the Guarantor to, make any Asset
Disposition in one or more related transactions unless: (i) the Guarantor or the
Restricted Subsidiary, as the case may be, receives consideration for such
disposition at least equal to the fair market value for the assets sold or
disposed of as determined by the Board of Directors in good faith and, in the
case of an Asset Disposition in an amount greater than $5 million, evidenced by
a resolution of the Board of Directors filed with the Trustee; and (ii) at least
75% of the consideration for such disposition consists of (1) cash or readily
marketable cash equivalents or the assumption of Debt of the Guarantor (other
than Debt that is subordinated to the Securities) or of a Restricted Subsidiary
and release from all liability on the Debt assumed, or (2) Telecommunications
Assets. In the event and to the extent that the Net Available Proceeds received
by the Guarantor or any of its Restricted Subsidiaries from one or more Asset
Dispositions occurring on or after the date hereof in any period of 12
consecutive months exceed 10% of Consolidated Tangible Assets (determined as of
the date closest to the commencement of such 12-month period for which a
consolidated balance sheet of the Guarantor and its subsidiaries have been filed
with the Commission), then the Guarantor or the Issuer shall or shall cause the
relevant Restricted Subsidiary to (i) within 12 months after the date Net
Available Proceeds so received exceed 10% of Consolidated Tangible Assets (A)
apply an amount equal to such excess Net Available Proceeds to permanently repay
unsubordinated Debt of the Guarantor or any Restricted Subsidiary providing a
Subsidiary Guarantee pursuant to Section 10.14 or Debt of any other Restricted
Subsidiary, in each case owing to a Person other than the Guarantor or any of
its Restricted Subsidiaries or (B) invest an equal amount, or the amount not so
applied pursuant to clause (A) (or enter into a definitive agreement committing
to so invest within 12 months after the date of such agreement), in
Telecommunications Assets and (ii) apply (no later than the end of the 12-month
period referred to in clause (i)) such excess Net Available Proceeds (to the
extent not applied pursuant to clause (i)) as provided in the paragraph (b)
below. The amount of such excess Net Available Proceeds required to be applied
(or to be committed to be applied) during such 12-month period as set forth in
clause (i) of the preceding sentence and not
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applied as so required by the end of such period shall constitute "Excess
Proceeds".
(b) If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this
Section totals at least $10 million, the Issuer shall repay any Debt of the
Guarantor or any Restricted Subsidiary to the extent the terms of such Debt
require repayment prior to an Offer to Purchase being made hereunder (including
by way of an offer to purchase to the holders of such Debt, if so required). To
the extent there are Excess Proceeds after such repayment (or offer to
purchase), the Issuer must commence, not later than the fifteenth Business Day
of such month (or if later, the fifteenth Business Day after the expiration of
any such required offer to purchase), and consummate an Offer to Purchase from
the holders of the Securities on a pro rata basis an aggregate principal amount
of Securities on the relevant Payment Date equal to the Excess Proceeds on such
date not applied or to be applied pursuant to the first sentence of this
paragraph (b), at a purchase price equal to 100% of the principal amount of the
Securities, plus, in each case, accrued interest (if any) to but excluding the
Payment Date and, to the extent required by the terms thereof, any other Debt of
the Guarantor that is pari passu with the Securities (including the Senior
Discount Securities) at a price no greater than 100% of the principal amount
thereof plus accrued interest to but excluding the date of purchase (or 100% of
the accreted value in the case of the Senior Discount Securities and other
original issue discount Debt). To the extent there are any remaining Excess
Proceeds following the completion of the Offer to Purchase, the Issuer must
repay such other Debt of the Guarantor or Debt of a Restricted Subsidiary of the
Guarantor, to the extent permitted under the terms thereof and, to the extent
there are any remaining Excess Proceeds after such repayment, the Issuer shall
apply such amount to any other use as determined by the Issuer which is not
otherwise prohibited by this Indenture.
SECTION 10.14. Limitation on Issuances and Sales of Capital Stock of
Restricted Subsidiaries. The Guarantor may not, and may not permit any
Restricted Subsidiary of the Guarantor to, issue, transfer, convey, sell or
otherwise dispose of any shares of Capital Stock of a Restricted Subsidiary of
the Guarantor or securities convertible or exchangeable into, or options,
warrants, rights or any other interest with respect to, Capital Stock of a
Restricted Subsidiary of the Guarantor to any Person other than the Guarantor or
a Wholly Owned Restricted Subsidiary of the
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Guarantor except (i) a sale of all of the Capital Stock of such Restricted
Subsidiary owned by the Guarantor and any Restricted Subsidiary of the Guarantor
that complies with Section 10.13 above to the extent such Section applies, (ii)
if required, the issuance, transfer, conveyance, sale or other disposition of
directors' qualifying shares, (iii) Disqualified Stock issued in exchange for,
or upon conversion of, or the proceeds of the issuance of which are used to
redeem, refinance, replace or refund shares of Disqualified Stock of such
Restricted Subsidiary; provided that the amounts of the redemption obligations
of such Disqualified Stock shall not exceed the amounts of the redemption
obligations of, and such Disqualified Stock shall have redemption obligations no
earlier than those required by, the Disqualified Stock being exchanged,
converted, redeemed, refinanced, replaced or refunded and (iv) issuances of not
more than 49% of the voting stock and equity interest in a Restricted Subsidiary
engaged in the Telecommunications Business (1) in connection with the
acquisition of such Restricted Subsidiary or Telecommunications Assets acquired
by such Restricted Subsidiary or (2) to a Strategic Investor; provided, that the
Guarantor complies with Section 10.13 above to the extent such Section applies.
SECTION 10.15. Limitation on Liens. The Guarantor may not, and may not
permit any Restricted Subsidiary of the Guarantor to, Incur or suffer to exist
any Lien on or with respect to any property or assets now 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 for so long as such Debt will be
so secured or (y) in the event such Debt is Debt of the Guarantor which is
subordinate in right of payment to the Securities, prior to such Debt as to such
property for so long as such Debt will be so secured.
The foregoing restrictions shall not apply to: (i) Liens existing on the
date hereof and securing Debt outstanding on the date hereof; (ii) Liens
securing Debt outstanding or available under all Credit Facilities to the extent
such Debt is permitted under clause (i) of the second paragraph of Section
10.08; (iii) Liens in favor of the Guarantor or any Restricted Subsidiary of the
Guarantor; (iv) Liens on real or personal property of the Guarantor or a
Restricted Subsidiary of the Guarantor acquired, constructed or constituting
improvements made after the date of original issuance of the Securities to
secure Purchase Money Debt which is Incurred for the construction,
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acquisition and improvement of Telecommunications Assets and is otherwise
permitted under this Indenture; provided, however, that (a) the principal amount
of any Debt secured by such a Lien does not exceed 100% of such purchase price
or cost of construction or improvement of the property subject to such Liens,
(b) such Lien attaches to such property prior to, at the time of or within 180
days after the acquisition, completion of construction or commencement of
operation of such property and (c) such Lien does not extend to or cover any
property other than the specific item of property (or portion thereof) acquired,
constructed or constituting the improvements made with the proceeds of such
Purchase Money Debt; (v) Liens to secure Acquired Debt; provided, however, that
(a) such Lien attaches to the acquired asset prior to the time of the
acquisition of such asset and (b) such Lien does not extend to or cover any
other asset; (vi) Liens to secure Debt Incurred to extend, renew, refinance or
refund (or successive extensions, renewals, refinancings or refundings), in
whole or in part, Debt secured by any Lien referred to in the foregoing clauses
(i), (ii), (iv) and (v) so long as the principal amount of Debt so secured is
not increased except as otherwise permitted under clause (iii) of the second
paragraph of Section 10.08 and, in the case of Liens to secure Debt incurred to
extend, renew, refinance or refund Debt secured by a Lien referred to in the
foregoing clause (i), (iv) or (v), such Liens do not extend to any other
property; and (vii) Permitted Liens.
SECTION 10.16. Limitation on Issuance of Guarantees of Debt by Restricted
Subsidiaries. The Guarantor will not permit any Restricted Subsidiary, directly
or indirectly, to incur any Guarantee of any Debt of the Guarantor or the Issuer
unless such Restricted Subsidiary simultaneously executes and delivers a
supplemental indenture providing for a Guarantee by such Subsidiary of the
Securities; any Subsidiary Guarantee by such Subsidiary of the Securities (x)
will be senior in right of payment to any Guarantee of Subordinated Debt of the
Guarantor or the Issuer and (y) will be pari passu with or senior to any
Guarantee of any other Debt of the Guarantor or the Issuer.
Notwithstanding the foregoing, any Subsidiary Guarantee 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
Guarantor, of all of the Guarantor's and each Restricted Subsidiary's Capital
Stock in, or all or substantially all the assets of, such Restricted Subsidiary
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(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
Subsidiary Guarantee, except a discharge or release by or as a result of payment
under such Guarantee.
SECTION 10.17. Change of Control. (a) Unless the Issuer has heretofore
exercised its right to redeem all of the Securities in accordance with the terms
of this Indenture and the Securities, upon the occurrence of a Change of Control
(as defined below), each Holder of a Security shall have the right to have such
Security repurchased by the Issuer on the terms and conditions precedent set
forth in this Section 10.17 and otherwise in this Indenture. The Issuer shall,
within 30 days following the date of the consummation of a transaction resulting
in a Change of Control, mail an Offer with respect to an Offer to Purchase all
Outstanding Securities at a purchase price equal to 101% of their principal
amount plus accrued interest to but excluding the date of purchase. Installments
of interest (including Special Interest) whose Stated Maturity is on or prior to
the Purchase 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 their terms and the provisions of Section
3.07. Each Holder shall be entitled to tender all or any portion of the
Securities owned by such Holder pursuant to the Offer to Purchase, subject to
the requirement that any portion of a Security tendered must be tendered in an
integral multiple of $1,000 principal amount.
(b) The Issuer and Trustee shall perform their respective obligations
specified in the Offer for the Offer to Purchase. 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 10.03) 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
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by the Holder. Any Security not accepted for payment shall be promptly mailed or
delivered by the Issuer to the Holder thereof.
(c) A "Change of Control" shall be deemed to have occurred in the event
that, after the date of this Indenture, either (i) a "person" or "group" (within
the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) becomes the
ultimate "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of
more than 35% of the total voting power of the Voting Stock of the Guarantor, on
a fully diluted basis, and such ownership is greater than the amount of voting
power of the Voting Stock of the Guarantor, on a fully diluted basis, held by
the Existing Stockholders and their Affiliates on such date; (ii) individuals
who on the date of this Indenture constitute the Board of Directors (together
with any new directors whose election by the Board of Directors or whose
nomination for election by the Guarantor's stockholders was approved by a vote
of at least two-thirds of the members of the Board of Directors then in office
who either were members of the Board of Directors on the date of this Indenture
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the members of the Board of Directors
then in office; or (iii) all of the Common Stock of the Issuer is not
beneficially owned by the Guarantor (other than directors' qualifying shares).
(d) In the event that the Issuer makes an Offer to Purchase the Securities,
the Issuer and the Guarantor shall comply with any applicable securities laws
and regulations, including any applicable requirements of Section 14(e) of, and
Rule 14e-1 under, the Securities Exchange Act.
SECTION 10.18. Provision of Financial Information. The Guarantor and the
Issuer have agreed that, for so long as any Securities remain outstanding, each
will furnish to the holders of the Securities and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act. In addition, the
Guarantor and the Issuer will file with the Trustee within 15 days after it
files them with the Commission copies of the annual and quarterly reports and
the information, documents, and other reports that the Guarantor or the Issuer
is required to file with the Commission pursuant to Section 13(a) or 15(d) of
the Exchange Act ("SEC Reports"). In the event the Guarantor or the Issuer shall
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cease to be required to file SEC Reports pursuant to the Exchange Act, the
Guarantor and the Issuer will nevertheless continue to file such reports with
the Commission (unless the Commission will not accept such a filing) and the
Trustee. The Guarantor and the Issuer will furnish copies of the SEC Reports to
the holders of Securities at the time the Guarantor or the Issuer is required to
file the same with the Trustee and will make such information available to
investors who request it in writing.
SECTION 10.19. Statement by Officers as to Default. (a) The Issuer and the
Guarantor will deliver to the Trustee, within 120 days after the end of each
fiscal year of the Guarantor ending after the date hereof, an Officers'
Certificate, stating whether or not to the best knowledge of the signers thereof
the Guarantor or the Issuer is in default in the performance and observance of
any of the terms, provisions and conditions of Sections 10.04 to 10.18,
inclusive, and if the Guarantor or the Issuer shall be in default, specifying
all such defaults and the nature and status thereof of which they may have
knowledge.
(b) The Issuer and the Guarantor shall deliver to the Trustee, as soon as
possible and in any event within 10 days after the Issuer or the Guarantor
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 setting forth the details of such Event of Default or
default and the action which the Issuer or the Guarantor proposes to take with
respect thereto.
SECTION 10.20. Waiver of Certain Covenants. The Issuer or the Guarantor, as
applicable, may omit in any particular instance to comply with any covenant or
condition set forth in Sections 10.04 to 10.17, inclusive, if before or after
the time for such compliance the Holders of at least a majority in aggregate
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 Guarantor
and the duties of the Trustee in respect of any such covenant or condition shall
remain in full force and effect.
SECTION 10.21. Paying Agent. The Issuer shall not authorize or designate
any Person (including the
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Trustee) as a Paying Agent hereunder unless such Person is located outside of
the United Kingdom.
ARTICLE XI
Redemption of Securities
SECTION 11.01. Right of Redemption. (a) At any time prior to March 1,
20001, in the event that the Guarantor receives net cash proceeds from the
public or private sale of its Common Stock (other than Disqualified Stock), the
Issuer (to the extent it receives such proceeds and has not used such proceeds,
directly or indirectly, to redeem or repurchase other securities pursuant to
optional redemption provisions) may, at its option, apply an amount equal to any
such net cash proceeds to redeem, from time to time, Securities in a principal
amount of up to an aggregate amount equal to 33 1/3% of the original principal
amount of the Securities; provided, however, that Securities in an amount equal
to at least 66 2/3% of the original principal amount of the Securities remain
outstanding after each redemption. Each redemption must occur on a Redemption
Date within 180 days of the related sale and upon not less than 30 nor more than
60 days' notice by mail 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 a Redemption Price of 109.125% of the principal
amount of the Securities plus accrued interest to but excluding the Redemption
Date (subject to, in the case of a Global Security in bearer form, the right of
the Holder thereof and, in the case of Definitive Securities, the right of
Holders of record on the relevant Regular Record Date, to receive Interest due
on an Interest Payment Date that is on or prior to the Redemption Date).
(b) In the event that (i) the Guarantor or the Issuer has become or would
become obligated to pay any Additional Amounts as a result of (x) changes
affecting withholding tax laws or (y) a Listing Failure (as defined herein)
provided that the Issuer has used reasonable best efforts to list and maintain
the listing of the Securities on a "recognized stock exchange" (within the
meaning of Section 841 of the U.K. Income and Corporation Taxes Act 1988) (as
provided for in Section 10.09), and (ii) the Guarantor and the Issuer are unable
to avoid the requirement to pay such Additional Amounts by taking reasonable
measures available to them (including, without limitation, the Guarantor making
payments directly to holders under the
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Securities Guarantee, unless such payment is likely to result in adverse
consequences to the Issuer or the Guarantor), then the Issuer may redeem all,
but not less than all, of the Securities at any time at 100% of the principal
amount thereof on the Redemption Date, together with accrued interest thereon,
if any, to but excluding the Redemption Date (subject to, in the case of a
Global Security in bearer form, the right of the Holder thereof and, in the case
of Definitive Securities, the right of Holders of record on the relevant Regular
Record Date, to receive Interest due on an Interest Payment Date that is on or
prior to the Redemption Date). Prior to the publication of the notice of
redemption in accordance with the foregoing, the Issuer shall deliver to the
Trustee an officer's certificate stating that the Issuer is entitled to effect
such redemption based on a written opinion of independent tax counsel or
accounting firm reasonably satisfactory to the Trustee.
(c) The Securities further may be redeemed, as a whole or in part, at the
election of the Issuer, at any time on or after March 1, 2003 and prior to
maturity, upon not less than 30 nor more than 60 days' notice by mail 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 Redemption Prices specified in the form of Security hereinbefore set forth,
together with accrued interest to but excluding the Redemption Date (subject to,
in the case of a Global Security in bearer form, the right of the Holder thereof
and, in the case of Definitive Securities, the right of Holders of record on the
relevant Regular Record Date, to receive Interest due on an Interest Payment
Date that is on or prior to the Redemption Date).
SECTION 11.02. Applicability of Article. Redemption of Securities at the
election of the Issuer, as permitted or required by any provision of this
Indenture, shall be made in accordance with such provision and this Article.
SECTION 11.03. Election To Redeem; Notice to Trustee. The election of the
Issuer to redeem any Securities pursuant to Section 11.01 shall be evidenced by
a Board Resolution. In case of any redemption at the election of the Issuer of
less than all the Securities, the Issuer shall, at least 5 days prior to giving
notice of such redemption pursuant to Section 11.05 (unless a shorter notice
shall be satisfactory to the Trustee), notify the Trustee in writing of such
Redemption Date and of the
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principal amount of Securities to be redeemed. In the case of any redemption of
Securities prior to the expiration of any restriction on such redemption
provided in the terms of such Securities or elsewhere in this Indenture, the
Issuer shall furnish the Trustee with an Officers' Certificate evidencing
compliance with such restriction.
SECTION 11.04. Securities To Be Redeemed Pro Rata. If less than all the
Securities are to be redeemed in any redemption, the Securities to be redeemed
shall be selected by the Trustee by prorating, as nearly as may be practicable,
the principal amount of Securities to be redeemed. In any proration pursuant to
this Section, the Trustee shall make such adjustments, reallocations and
eliminations as it shall deem proper to the end that the principal amount of
Securities so prorated shall be $1,000 or a multiple thereof, by increasing or
decreasing or eliminating the amount which would be allocable to any Holder on
the basis of exact proportion by an amount not exceeding $1,000. The Trustee in
its discretion may determine the particular Securities (if there are more than
one) registered in the name of any Holder which are to be redeemed, in whole or
in part. The Trustee shall incur no liabilities for any selection made pursuant
to this Section 11.04.
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 11.05. 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, to each Holder of Securities to be redeemed, at
such Holder's address appearing in the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
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(2) the Redemption Price,
(3) whether the redemption is being made pursuant to Section 11.01(a),
(b) or (c) and, if being made pursuant to Section 11.01(a) or (b), 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 of any
Securities, 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,
(6) the place or places where such Securities are to be surrendered
for payment of the Redemption Price, and
(7) that in the case that a Security is only redeemed 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 in an aggregate amount equal to the unredeemed portion of the
Security.
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 expense of the Issuer. If so requested by the Issuer, the
Trustee shall mail any such notice not later than the date specified for mailing
by the Issuer, which shall not be sooner than 5 days after receipt by the
Trustee of such request (unless a shorter period shall be satisfactory to the
Trustee).
SECTION 11.06. Deposit of Redemption Price. 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 10.03) 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.
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SECTION 11.07. 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 after such date (unless the Issuer shall default in the
payment of the Redemption Price and 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 accrued interest to but excluding 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 bearer of such
Security, in the case of a Global Security in bearer form, and, in the case of a
Definitive Security, to 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 their terms and the provisions of Section 3.07.
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 11.08. 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 Section 10.02 (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 like tenor, 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 XII
Discharge of Indenture
SECTION 12.01. Termination of Issuer's Obligations. Except as otherwise
provided in this Section 12.01, each of the Issuer and the Guarantor may
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terminate its obligations under the Securities and this Indenture if:
(a) all Securities previously authenticated and delivered (other than
destroyed, lost or stolen Securities that have been replaced or Securities
for whose payment money or securities have theretofore been held in trust
and thereafter repaid to the Issuer, as provided in Section 12.05) have
been delivered to the Trustee for cancelation and the Issuer has paid all
sums payable by it hereunder; or
(b)(i) all such Securities mature within one year or all of them are
to be called for redemption within one year under arrangements satisfactory
to the Trustee for giving the notice of redemption, (ii) the Issuer
irrevocably deposits in trust with the Trustee during such one-year period,
under the terms of an irrevocable trust agreement in form satisfactory to
the Trustee, as trust funds solely for the benefit of the Holders of such
Securities for that purpose, money or U.S. Government Obligations
sufficient (in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered
to the Trustee), without consideration of any reinvestment of any interest
thereon, to pay principal, premium, if any, and interest on such Securities
to maturity or redemption, as the case may be, and to pay all other sums
payable by it hereunder, (iii) no Default or Event of Default with respect
to the Securities shall have occurred and be continuing on the date of such
deposit, (iv) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Guarantor or the Issuer is a party or by which it
is bound, (v) if at such time the Securities are listed on a national
securities exchange, the Securities will not be delisted as a result of
such deposit, defeasance and discharge, and (vi) the Issuer has delivered
to the Trustee an Officers' Certificate and an Opinion of Counsel, in each
case stating that all conditions precedent provided for herein relating to
the satisfaction and discharge of this Indenture have been complied with.
With respect to the foregoing clause (a), the Issuer's obligations under
Section 6.07 shall survive. With respect to the foregoing clause (b), the
Issuer's obligations in Sections 3.03, 3.04, 3.05, 3.06, 3.07, 10.01,
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10.09, 6.07, 6.10, 6.11, 12.04, 12.05 and 12.06 shall survive until the
Securities have matured or have been redeemed. Thereafter, only the Issuer's
obligations in Sections 6.07, 12.05 and 12.06 shall survive. After any such
irrevocable deposit, the Trustee upon written request shall acknowledge in
writing the discharge of the Issuer's obligations under the Securities and this
Indenture, and the Guarantor's obligations under the Guarantee and this
Indenture, except for those surviving obligations specified above.
SECTION 12.02. Defeasance and Discharge of Indenture. The Issuer will be
deemed to have paid and will be discharged from any and all obligations in
respect of the Securities on the 123rd day after the date of the deposit
referred to in clause (a) of this Section 12.02 if:
(a) with reference to this Section 12.02, the Issuer has irrevocably
deposited or caused to be irrevocably deposited with the Trustee and has
conveyed all right, title and interest for the benefit of the Holders,
under the terms of an irrevocable trust agreement in form satisfactory to
the Trustee as trust funds in trust, specifically pledged to the Trustee
for the benefit of the Holders as security for payment of the principal of,
premium, if any, and interest, if any, on the Securities, and dedicated
solely to, the benefit of the Holders, in and to (i) money in an amount,
(ii) U.S. Government Obligations that, through the payment of interest,
premium, if any, and principal in respect thereof in accordance with their
terms, will provide, not later than one day before the due date of any
payment referred to in this clause (a), money in an amount or (iii) a
combination thereof in an amount 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,
without consideration of the reinvestment of such interest and after
payment of all federal, state and local taxes or other charges and
assessments in respect thereof payable by the Trustee, the principal of,
premium, if any, and accrued interest on the outstanding Securities at the
Stated Maturity of such principal or interest or upon earlier redemption;
provided that the Trustee shall have been irrevocably instructed to apply
such money or the proceeds of such U.S. Government Obligations to the
payment of such principal, premium, if any, and interest with respect to
the Securities and to give any related notice of redemption;
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(b) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Guarantor, the Issuer or any of their Subsidiaries
is a party or by which the Guarantor, the Issuer or any of their
Subsidiaries is bound;
(c) immediately after giving effect to such deposit on a pro forma
basis, no Default or Event of Default, or event that after the giving of
notice or lapse of time or both could become a Default or Event of Default,
shall have occurred and be continuing on the date of such deposit or during
the period ending on the 123rd day after the date of such deposit;
(d) the Issuer shall have delivered to the Trustee either (i) a ruling
based on relevant law and practice at the time directed to the Trustee from
the Inland Revenue or other relevant tax authority to the effect that the
Holders will not recognize income, gain or loss for U.K. income tax or
other tax purposes as a result of the Issuer's exercise of its option under
this Section 12.02, disregarding income tax on any amounts that would have
been received but for such exercise of its option under this Section 12.02,
and will be subject to U.K. income tax on the same amount and in the same
manner and at the same time as would have been the case if such option had
not been exercised or (ii) an Opinion of Counsel to the same effect as the
ruling described in clause (i) above;
(e) the Issuer shall have delivered to the Trustee (i) either (A) a
ruling directed to the Trustee received from the Internal Revenue Service
to the effect that the Holders will not recognize additional income, gain
or loss for U.S. federal income tax purposes as a result of the Issuer's
exercise of its option under this Section 12.02 and will be subject to U.S.
federal income tax on the same amount and in the same manner and at the
same times as would have been the case if such option had not been
exercised or (B) an Opinion of Counsel to the same effect as the ruling
described in clause (A) above accompanied by a ruling to that effect
published by the Internal Revenue Service, unless there has been a change
in the relevant U.S. federal income tax law since the date of this
Indenture and (ii) an Opinion of Counsel to the effect that (A) the
creation of the defeasance trust does not violate the Investment Company
Act of 1940 and (B) after the passage of 123 days following the deposit
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(except, with respect to any trust funds for the account of any Holder who
may be deemed to be "connected" with the Issuer for purposes of the
Insolvency Act 1986 after two years following the deposit), the trust funds
will not be subject to the effect of Section 547 of the United States
Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law and
either (I) the trust funds will no longer remain the property of the Issuer
(and therefore will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally) or (II) if a court were to rule under any such law in any
case or proceeding that the trust funds remained property of the Issuer (1)
assuming such trust funds remained in the possession of the Trustee prior
to such court ruling to the extent not paid to the Holders, the Trustee
will hold, for the benefit of the Holders, a valid and perfected security
interest in such trust funds that is not avoidable in bankruptcy or
otherwise and (2) no property, rights in property or other interests
granted to the Trustee or the Holders in exchange for, or with respect to,
such trust funds will be subject to any prior rights of holders of other
Debt of the Issuer or any of its Securities;
(f) if at such time the Securities are listed on a national securities
exchange, the Issuer shall have delivered to the Trustee an Opinion of
Counsel to the effect that the Securities will not be delisted as a result
of the Issuer's exercise of its opinion under this Section 12.02; and
(g) the Issuer shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 12.02 have been complied with.
Notwithstanding the foregoing, prior to the end of the post deposit period
referred to in clause (e)(ii)(B) of this Section 12.02, none of the Issuer's
obligations under this Indenture shall be discharged. Subsequent to the end of
such period with respect to this Section 12.02, the Issuer's obligations in
Sections 3.03, 3.04, 3.05, 3.06, 3.07, 10.01, 10.09, 6.07, 6.10, 6.11, 12.04,
12.05 and 12.06 shall survive until the Securities mature or are redeemed.
Thereafter, only the Issuer's obligations in Sections 6.07, 12.05 and 12.06
shall survive. If and when a ruling from
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the Internal Revenue Service or an Opinion of Counsel referred to in clause
(e)(i) of this Section 12.02 may be provided specifically without regard to, and
not in reliance upon, the continuance of the Issuer's obligations under Section
10.01, then the Issuer's obligations under such sentence shall cease upon
delivery to the Trustee of such ruling or Opinion of Counsel and compliance with
the other conditions precedent provided for herein relating to the defeasance
contemplated by this Section 12.02.
After any such irrevocable deposit, the Trustee upon request shall
acknowledge in writing the discharge of the Issuer's obligations under the
Securities, any Subsidiary Guarantee, if any, and this Indenture except for
those surviving obligations in the immediately preceding paragraph.
SECTION 12.03. Defeasance of Certain Obligations. The Issuer may omit to
comply with any term, provision or condition set forth in clauses (3) and (4) of
Section 8.01 and Sections 10.05 through 10.18 (except for Secton 10.09 and any
covenant otherwise required by the TIA), and clause (d) of Section 5.01 with
respect to clauses (3) and (4) of Section 8.01, clauses (d) and (e) of Section
5.01 with respect to Sections 10.05 through 10.18, except as aforesaid, and
clauses (c), (f) and (g) of Section 5.01 shall be deemed not to be Events of
Default, in each case with respect to the outstanding Securities if:
(a) with reference to this Section 12.03, the Issuer has irrevocably
deposited or caused to be irrevocably deposited with the Trustee and
conveyed all right, title and interest to the Trustee for the benefit of
the Holders, under the terms of an irrevocable trust agreement in form and
substance satisfactory to the Trustee as trust funds in trust, specifically
pledged to the Trustee for the benefit of the Holders as security for
payment of the principal of, premium, if any, and interest, if any, on the
Securities, and dedicated solely to, the benefit of the Holders, in and to
(i) money in an amount, (ii) U.S. Government Obligations that, through the
payment of interest and principal in respect thereof in accordance with
their terms, will provide, not later than one day before the due date of
any payment referred to in this clause (a), money in an amount or (iii) a
combination thereof in an amount 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,
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without consideration of the reinvestment of such interest and after
payment of all federal, state and local taxes or other charges and
assessments in respect thereof payable by the Trustee, the principal of,
premium, if any, and interest on the outstanding Securities on the Stated
Maturity or upon earlier redemption of such principal or interest; provided
that the Trustee shall have been irrevocably instructed to apply such money
or the proceeds of such U.S. Government Obligations to the payment of such
principal, premium, if any, and interest with respect to the Securities and
to give any related notice of redemption;
(b) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Guarantor, the Issuer or any of their Subsidiaries
is a party or by which the Guarantor, the Issuer or any of their
Subsidiaries is bound;
(c) immediately after giving effect to such deposit or a pro forma
basis, no Default or Event of Default, or event that after the giving of
notice or lapse of time or both would become a Default or Event of Default,
shall have occurred and be continuing on the date of such deposit or during
the period ending on the 123rd day after the day of such deposit;
(d) the Issuer has delivered to the Trustee an Opinion of Counsel to
the effect that (i) the creation of the defeasance trust does not violate
the Investment Company Act of 1940, (ii) the Holders will not recognize
income, gain or loss for U.S. federal income tax purposes as a result of
such deposit and the defeasance of the obligations referred to in the first
paragraph of this Section 12.03 and will be subject to U.S. federal income
tax on the same amount and in the same manner and at the same times as
would have been the case if such deposit and defeasance had not occurred
and (iii) after the passage of 123 days following the deposit (except with
respect to any trust funds for the account of any Holder who may be deemed
to be "connected" with the Issuer for purposes of the Insolvency Act 1986
after two years following the deposit), the trust funds will not be subject
to the effect of Section 547 of the United States Bankruptcy Code or
Section 15 of the New York Debtor and Creditor Law, and either (A) the
trust funds will no longer remain the property of the Issuer (and therefore
will
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not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditor's rights generally) or
(B) if a court were to rule under any such law in any case or proceeding
that the trust funds remained property of the Issuer (1) assuming such
trust funds remained in the possession of the Trustee prior to such court
ruling to the extent not paid to the Holders, the Trustee will hold, for
the benefit of the Holders, a valid and perfected security interest in such
trust funds that is not avoidable in bankruptcy or otherwise and (2) no
property, rights in property or other interests granted to the Trustee or
the Holders in exchange for, or with respect to, such trust funds will be
subject to any prior rights or holders of other Indebtedness of the Issuer
or any of its Securities;
(e) if at such time the Securities are listed on a national securities
exchange, the Issuer has delivered to the Trustee an Opinion of Counsel to
the effect that the Securities will not be delisted as a result of the
Issuer's exercise of its option under Section 12.03; and
(f) the Issuer has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, in each case stating that all conditions
precedent provided for herein relating to the defeasance contemplated by
this Section 12.03 have been complied with.
SECTION 12.04. Application of Trust Money. Subject to Section 12.06, the
Trustee or Paying Agent shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Section 12.01, 12.02 or 12.03, as the case may be,
and shall apply the deposited money and the money from U.S. Government
Obligations in accordance with the Securities and this Indenture to the payment
of principal of, premium, if any, and interest on the Securities; but such money
need not be segregated from other funds except to the extent required by law.
SECTION 12.05. Repayment to Issuer. Subject to Sections 6.07, 12.01, 12.02
and 12.03, the Trustee and the Paying Agent shall promptly pay to the Issuer
upon request set forth in an Officers' Certificate any excess money held by them
at any time and thereupon shall be relieved from all liability with respect to
such money. The Trustee and the Paying Agent shall pay to the Issuer any money
held by them
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for the payment of principal, premium, if any, or interest that remains
unclaimed in accordance with Section 10.02.
SECTION 12.06. Reinstatement. If the Trustee or Paying Agent is unable to
apply any money or U.S. Government Obligations in accordance with Section 12.01,
12.02 or 12.03, as the case may be, by reason of any legal proceeding or by
reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, the Issuer's
obligations under this Indenture, the Securities Guarantee, and the Securities
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 12.01, 12.02 or 12.03, as the case may be, until such time as the
Trustee or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with Section 12.01, 12.02 or 12.03, as the case may
be; provided that, if the Issuer has made any payment of principal of, premium,
if any, or interest on any Securities because of 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 or U.S. Government Obligations
held by the Trustee or Paying Agent.
SECTION 12.07. Insiders. With respect to the determination of the Persons
constituting beneficial owners of Securities and whether any such Person is
"connected" with the Issuer for purposes of Sections 12.02(e)(ii)(B) and
12.03(d)(iii), the Trustee may rely on an Officers' Certificate.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the day and year first above written.
Dated:
The Common Seal of
RSL COMMUNICATIONS PLC
was hereto affixed in
the presence of:
[SEAL]
RSL COMMUNICATIONS PLC,
by
_________________________
Name:
Title:
by
_________________________
Name:
Title:
THE CHASE MANHATTAN BANK,
by
_________________________
Name:
Title:
RSL COMMUNICATIONS, LTD.,
by
_________________________
Name:
Title:
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<PAGE>
ANNEX A -- Form of
Regulation S Certificate
REGULATION S CERTIFICATE
(For transfers pursuant to ss. 3.05(b)(i) and (iii)
of the Indenture)
The Chase Manhattan Bank,
as Trustee
450 West 33rd Street, 15th Floor
New York, NY 10001
Attention: Global Trust Services
Re: 9 1/8% Senior Notes due 2008 of
RSL Communications PLC (the "Securities")
Reference is made to the Indenture, dated as of February 27, 1998 (the
"Indenture"), between RSL Communications PLC (the "Issuer"), RSL Communications,
Ltd. (the "Guarantor") and The Chase Manhattan Bank, 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, as amended (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 Book-Entry Depositary who issued a Depositary Interest to the
Depositary (or its nominee) who holds such interest in the name of the
Undersigned. 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 Regulation S
Security. In connection with such transfer, the Owner hereby certifies
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<PAGE>
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 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 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
Restricted Period, then the requirements of Rule 904(c)(1) have been
satisfied; and
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<PAGE>
(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 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 the
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
(B) the transfer 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 the
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.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuer and the 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.)
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<PAGE>
ANNEX B -- Form of Restricted
Securities Certificate
RESTRICTED SECURITIES CERTIFICATE
(For transfers pursuant to ss. 3.05(b)(ii) and (iii)
of the Indenture)
The Chase Manhattan Bank,
as Trustee
450 West 33rd Street, 15th Floor
New York, NY 10001
Attention: Global Trust Services
Re: 9 1/8% Senior Notes due 2008 of
RSL Communications PLC (the "Securities")
Reference is made to the Indenture, dated as of February 27, 1998 (the
"Indenture"), between RSL Communications PLC (the "Issuer"), RSL Communications,
Ltd. (the "Guarantor") and The Chase Manhattan Bank, 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, as amended (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 Book-Entry Depositary who issued a Depositary Interest to the
Depositary (or its nominee) who holds such interest in the name of the
Undersigned. 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
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<PAGE>
will take delivery in the form of a Restricted 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, it 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
(2) Rule 144 Transfers. If the transfer is being effected pursuant to
Rule 144:
(A) the transfer is occurring 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 the
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
(B) the transfer 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 the
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.
B-2
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuer and the 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.)
B-3
<PAGE>
ANNEX C -- Form of Unrestricted
Securities Certificate
UNRESTRICTED SECURITIES CERTIFICATE
(For removal of Securities Act Legends pursuant to ss. 3.05(c))
The Chase Manhattan Bank,
as Trustee
450 West 33rd Street, 15th Floor
New York, NY 10001
Attention: Global Trust Services
Re: 9 1/8% Senior Notes due 2008 of
RSL Communications PLC (the "Securities")
Reference is made to the Indenture, dated as of February 27, 1998 (the
"Indenture"), between RSL Communications PLC (the "Issuer"), RSL Communications,
Ltd. (the "Guarantor") and The Chase Manhattan Bank, 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, as amended (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 Book-Entry Depositary who issued a Depositary Interest to the
Depositary (or its nominee) who holds such interest 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 exchanged for
Securities bearing no Securities
C-1
<PAGE>
Act Legend pursuant to Section 305(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
the 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. 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 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.)
C-2
<PAGE>
EXECUTION COPY
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT, dated as of March 16, 1998,
among RSL Communications PLC, a United Kingdom corporation (the "Issuer"), RSL
Communications, Ltd. (the "Guarantor") and Goldman, Sachs & Co. oHG and Merrill
Lynch International (together, the "Purchasers"), identified on Schedule I to
the Purchase Agreement (as defined herein) as the purchasers of the 10% Senior
Discount Notes due 2008 (the "Notes") of the Issuer.
The Issuer proposes to issue and sell to the Purchasers upon the terms set
forth in the Purchase Agreement the Securities (as defined herein). As an
inducement to the Purchasers to enter into the Purchase Agreement and in
satisfaction of a condition to the obligations of the Purchasers thereunder, the
Issuer agrees with the Purchasers for the benefit of holders (as defined herein)
from time to time of the Registrable Securities (as defined herein) as follows:
1. Certain Definitions.
For purposes of this Exchange and Registration Rights Agreement, the
following terms shall have the following respective meanings:
"Base Interest" shall mean the interest that would otherwise accrue on
the Securities under the terms thereof and the Indenture, without giving
effect to the provisions of this Agreement.
The term "broker-dealer" shall mean any broker or dealer registered
with the Commission under the Exchange Act.
"Closing Date" shall mean March 16, 1998.
"Commission" shall mean the 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," in the case of (i) an Exchange Registration, shall
mean the time and date as of which the Commission declares the Exchange
Registration Statement effective or as of which the Exchange Registration
Statement otherwise becomes effective and (ii) a Shelf Registration, shall
mean the time and date as of which the Commission declares the Shelf
Registration Statement effective or as of which the Shelf Registration
Statement otherwise becomes effective.
"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 Registration" shall have the meaning assigned thereto in
Section 3(d) hereof.
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<PAGE>
"Exchange Registration Statement" shall have the meaning assigned
thereto in Section 2(a) hereof.
"Exchange Securities" shall have the meaning assigned thereto in
Section 2(a) hereof.
The term "holder" shall mean each of the Purchasers and other persons
who acquire Registrable Securities from time to time (including any
successors or assigns), in each case for so long as such person owns any
Registrable Securities.
"Indenture" shall mean the Indenture, dated as of March 16, 1998 (the
"Indenture"), between the Issuer, the Guarantor and The Chase Manhattan
Bank, as Trustee (the "Trustee"), as the same shall be amended from time to
time.
The term "person" shall mean a corporation, association, partnership,
organization, business, limited liability company, individual, government
or political subdivision thereof or governmental agency.
"Purchase Agreement" shall mean the Purchase Agreement, dated as of
March 11, 1998, between the Purchasers, the Issuer and the Guarantor
relating to the Securities.
"Registrable Securities" shall mean the Securities; provided, however,
that a Security shall cease to be a Registrable Security when (i) in the
circumstances contemplated by Section 2(a) hereof, the Security has been
exchanged for an Exchange Security in an Exchange Offer as contemplated in
Section 2(a) (provided that any Exchange Security received by a
broker-dealer in an Exchange Offer in exchange for a Registrable Security
that was not acquired by the broker-dealer directly from the Issuer will
also be a Registrable Security through and including the earlier of the
90th day after the Exchange Offer is completed or such time as such
broker-dealer no longer owns such Security); (ii) in the circumstances
contemplated by Section 2(b) hereof, a Shelf Registration Statement
registering such Security under the Securities Act has been declared or
becomes effective and such Security has been sold or otherwise transferred
by the holder thereof pursuant to and in a manner contemplated by such
effective Shelf Registration Statement; (iii) such Security is sold
pursuant to Rule 144 (or any successor provision) under circumstances in
which any legend borne by such Security relating to restrictions on
transferability thereof, under the Securities Act or otherwise, is removed
by the Issuer or pursuant to the Indenture; (iv) such Security is eligible
to be sold pursuant to paragraph (k) of Rule 144; or (v) such Security
shall cease to be outstanding.
"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 Issuer 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 Securities Act) of the 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 Registrable Securities acquired by the broker-dealer directly
from the Issuer.
"Rule 144," "Rule 405" and "Rule 415" shall mean, in each case, such
rule promulgated under the Securities Act (or any successor provision), as
the same shall be amended from time to time.
"Securities" shall mean the Notes to be issued and sold to the
Purchasers, and securities issued in exchange therefor or in lieu thereof
pursuant to the Indenture. Each security will be unconditionally guaranteed
as to payment of principal, interest and any other amounts due thereon by
the Guarantor, as provided by the Indenture, under which the Notes will be
issued (the "Notes Guarantee"). Unless the context otherwise requires, any
reference herein to "Security," or "Exchange Security" or a "Registrable
Security" shall include a reference to the related Notes Guarantee.
"Securities Act" shall mean the Securities Act of 1933, or any
successor thereto, as the same shall be amended from time to time.
"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.
"Special Interest" shall have the meaning assigned thereto in Section
2(c) hereof.
"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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<PAGE>
2. Registration Under the Securities Act.
(a) Except as set forth in Section 2(b) below, the Issuer agrees to file
under the Securities Act and use its reasonable best efforts to cause to be
declared effective, a registration statement relating to an offer to exchange
(such registration statement, the "Exchange 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 Issuer and guaranteed by the
Guarantor, which debt securities and guarantees 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 it has been registered
pursuant to an effective registration statement under the Securities Act and
does not contain registration rights, transfer restrictions and provisions for
the additional interest contemplated in Section 2(c) below (such new debt
securities hereinafter called "Exchange Securities"). The Issuer agrees to use
its reasonable best efforts to cause the Exchange Registration Statement to
become effective under the Securities Act and to consummate the Exchange Offer
as soon as practicable, but no later than 270 days after the Closing Date. The
Exchange Offer will be registered under the Securities Act on the appropriate
form required by the Commission and will comply with all applicable tender offer
rules and regulations under the Exchange Act and all applicable federal and
state securities laws. The Issuer further agrees to use its reasonable best
efforts to hold the Exchange Offer open for at least 30 days and issue Exchange
Securities for all Registrable 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 and
related guarantees received by holders other than Restricted Holders in the
Exchange Offer for Registrable Securities are, upon receipt, transferable by
each such holder without need for further compliance with Section 5 of the
Securities Act (except for the requirement to deliver a prospectus included in
the Exchange Registration Statement applicable to resales by broker-dealers of
Exchange Securities received by such broker-dealer pursuant to an Exchange Offer
in exchange for Registrable Securities other than those acquired by the
broker-dealer directly from the Issuer) 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 Issuer having exchanged the
Exchange Securities for all outstanding Registrable Securities pursuant to the
Exchange Offer and (ii) the Issuer having exchanged, pursuant to the Exchange
Offer, Exchange Securities for all Registrable Securities that have been
properly tendered and not withdrawn before the expiration of the Exchange Offer,
which shall be on a date that is at least 30 days following the commencement of
the Exchange Offer. The Issuer agrees (x) to include in the Exchange
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 Registrable Securities acquired by the broker-dealer directly from the
Issuer, and (y) to keep such Exchange Registration Statement effective for a
period (the "Resale Period") beginning when Exchange Securities are first issued
in the Exchange Offer and
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ending upon the earlier of (x) the expiration of the 90th day after the Exchange
Offer has been completed and (y) such time as such broker-dealers no longer own
any Registrable Securities. With respect to such Exchange Registration
Statement, each broker-dealer that holds Exchange Securities received in an
Exchange Offer in exchange for Registerable Securities not acquired by it
directly from the Issuer shall have the benefit of the rights of indemnification
and contribution set forth in Sections 6(a), (c), (d) and (e) hereof.
(b) If prior to the time the Exchange Offer is completed existing
Commission interpretations are changed such that the debt securities or any
related guarantees received by holders other than Restricted Holders in the
Exchange Offer for Registrable Securities are not or would not be, upon receipt,
transferable by each such holder without need for further compliance with
Section 5 of the Securities Act (except for the requirement to deliver a
prospectus included in the Exchange Registration Statement applicable to resales
by broker-dealers of Exchange Securities received by such broker-dealer pursuant
to an Exchange Offer in exchange for Registrable Securities other than those
acquired by the broker-dealer directly from the Issuer) in lieu of conducting
the Exchange Offer contemplated by Section 2(a), the Issuer shall file under the
Securities Act and use its reasonable best efforts to cause to be declared
effective 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
Registrable Securities, pursuant to Rule 415 or any similar rule that may be
adopted by the Commission (such filing, the "Shelf Registration" and such
registration statement, the "Shelf Registration Statement"). In addition, in the
event that the Purchasers shall not have resold all of the Securities initially
purchased by them from the Issuer pursuant to the Purchase Agreement, prior to
the consummation of the Exchange Offer, the Issuer shall file under the
Securities Act as soon as practicable a Shelf Registration Statement, which if
permitted by the Commission may be by way of a post-effective amendment to the
Exchange Registration Statement. The Issuer agrees to use its best efforts to
cause the Shelf Registration Statement to become or be declared effective no
later than 270 days after the Closing Date and to keep such Shelf Registration
Statement continuously effective for a period ending on the earlier of (x) the
second anniversary of the Closing Date and (y) such time as there are no longer
any Registrable Securities outstanding. The Issuer further 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 Issuer for such Shelf Registration Statement or by the Securities Act or
rules and regulations promulgated thereunder for a shelf registration, and the
Issuer agrees to furnish to the holders of the Registrable Securities copies of
any such supplement or amendment to such registration statement prior to its
being used or promptly following its filing with the Commission. Attached as
Exhibit A hereto is a form of Notice of Registration Statement and Selling
Securityholder Questionnaire to be completed by holders in connection with a
Shelf Registration pursuant to this Section 2(b).
(c) In the event that (i) the Exchange Offer has not been completed, or a
Shelf Registration Statement has not been declared effective, within 270 days
after the Closing Date or (ii) any Exchange Registration Statement or Shelf
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Registration Statement required by Section 2(a) or 2(b) hereof is filed and
declared effective but shall thereafter, prior to the time such Exchange
Registration Statement or Shelf Registration Statement is no longer required to
be effective pursuant to Section 2(a) or 2(b) hereof, as the case may be, either
be withdrawn by the Issuer or shall become subject to an effective stop order
issued pursuant to Section 8(d) of the Securities Act suspending the
effectiveness of such registration statement (except as specifically permitted
herein) without being succeeded immediately by an additional registration
statement filed and declared effective (each such event referred to in clauses
(i) and (ii), a "Registration Default" and each period during which a
Registration Default has occurred and is continuing, a "Registration Default
Period"), then, as liquidated damages for such Registration Default, subject to
the provisions of Section 9(b), special interest ("Special Interest"), in
addition to the Base Interest, shall accrue at a per annum rate of 0.50% for the
Registration Default Period. The Special Interest shall be payable in cash
semi-annually in arrears on each March 15 and September 15. Special Interest, if
any, shall be computed on the basis of a 360 day year of twelve 30-day months
and the number of days actually elapsed.
(d) The Issuer and the Guarantor shall take all actions reasonably
necessary or advisable to be taken by them to ensure that the transactions
contemplated herein are effected as so contemplated.
(e) 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 be
deemed to include any document incorporated, or deemed to be incorporated,
therein by reference as of such time.
3. Registration Procedures.
(a) (i) In connection with the Exchange Offer, the Issuer shall comply with
all of the provisions of Section 3(d) and Section 3(e) below, shall use its
reasonable best efforts to effect such exchange to permit the sale of
Registrable Securities being sold in accordance with the intended method or
methods of distribution thereof, and, prior to effectiveness of the Exchange
Offer Registration Statement, shall, if required by the Commission, provide a
supplemental letter to the Commission (A) stating that the Issuer is registering
the Exchange Offer in reliance on the position of the Commission enunciated in
Exxon Capital Holdings Corporation (available May 13, 1988) and Morgan Stanley
and Co., Inc. (available June 5, 1991) and (B) including a representation that
the Issuer has not entered into any arrangement or understanding with any person
to distribute the Exchange Securities to be received in the Exchange Offer and
that, to the best of the Issuer's information and belief, each holder
participating in the Exchange Offer is acquiring the Exchange Securities in its
ordinary course of business and has no arrangement or understanding with any
person to participate in the distribution of the Exchange Securities received in
the Exchange Offer.
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<PAGE>
(ii)As a condition to its participation in the Exchange Offer pursuant
to the terms of this Agreement, each holder of Registrable Securities shall
furnish, upon the request of the Issuer, prior to the consummation thereof,
a written representation to the Issuer (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 Issuer or
the Guarantor, (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. In addition, all such holders of Registrable Securities
shall otherwise cooperate in the Issuer's and the Guarantor's preparations
for the Exchange Offer. Each holder hereby acknowledges and agrees that any
broker-dealer and any such holder, in either case, exchanging Registrable
Securities in the Exchange Offer, in connection with the resale of Exchange
Securities 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 Securities Act in
connection with a secondary resale transaction and that such a secondary
resale transaction should be covered by an effective 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 Registrable Securities
acquired by such holder directly from the Issuer.
If the Issuer files a registration statement pursuant to Section 2(a) or
Section 2(b), the following provisions shall apply:
(b) At or before the Effective Time of the Exchange Offer or the Shelf
Registration, as the case may be, the Issuer shall qualify the Indenture under
the Trust Indenture Act.
(c) In the event that such qualification would require the appointment of a
new trustee under the Indenture, the Issuer shall appoint a new trustee
thereunder pursuant to the applicable provisions of such Indenture.
(d) In connection with the Issuer's obligations with respect to the
registration of Exchange Securities as contemplated by Section 2(a) (the
"Exchange Registration"), if applicable, the Issuer shall, as soon as reasonably
possible (or as otherwise specified):
(i) prepare and file with the Commission an Exchange Registration
Statement on any form which may be utilized by the Issuer and which shall
permit the Exchange Offer and resales of Exchange Securities by
broker-dealers during the Resale Period to be effected as contemplated by
Section 2(a), and use its reasonable best efforts to cause such Exchange
Registration Statement to become effective and to consummate the
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Exchange Offer, as soon as practicable thereafter, but no later than 270
days after the Closing Date;
(ii) as soon as practicable prepare and file with the Commission such
amendments and supplements to such Exchange Registration Statement and the
prospectus included therein as may be necessary to effect and maintain the
effectiveness of such Exchange 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 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 Securities 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;
(iii) promptly notify the Purchasers and their counsel and (with
respect to clause C, E and F below only), any broker-dealer that has
advised the Issuer or the Guarantor that it is entitled to a resale
prospectus during the Resale Period, and confirm such advice in writing,
(A) when such Exchange 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 Registration
Statement or any post-effective amendment, when the same has become
effective, (B) of any comments by the Commission and by the Blue Sky or
securities commissioner or regulator of any state with respect thereto or
any request by the Commission for amendments or supplements to such
Exchange Registration Statement or prospectus or for additional
information, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of such Exchange Registration Statement or the
initiation or threatening of any proceedings for that purpose, (D) if at
any time the representations and warranties of the Issuer and the Guarantor
contemplated by Section 5 hereof cease to be true and correct in all
material respects, (E) of the receipt by the Issuer or the Guarantor 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 (F) at any time during
the Resale Period when a prospectus is required to be delivered under the
Securities Act, that such Exchange Registration Statement, prospectus,
prospectus amendment or supplement or post-effective amendment thereto does
not conform in all material respects to the applicable requirements of the
Securities 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;
(iv) in the event that the Issuer would be required, pursuant to
Section 3(d)(iii)(F) above, to notify any broker-dealer entitled to a
resale
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prospectus during the Resale Period, prepare and furnish without delay 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 Securities 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) use its reasonable best efforts to obtain the withdrawal of any
order suspending the effectiveness of such Exchange Registration Statement
or any post-effective amendment thereto at the earliest practicable date;
(vi) use its reasonable best efforts to (A) register or qualify the
Exchange Securities under the securities laws or blue sky laws of such
jurisdictions in the United States as are contemplated by Section 2(a) no
later than the commencement of the Exchange Offer, (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 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 neither
the Issuer nor the Guarantor shall 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)(vi), (2) consent to general service of process in any such
jurisdiction, (3) become subject to any tax or (4) make any changes to its
certificate of incorporation or by-laws or any agreement between it and its
stockholders;
(vii) use its reasonable 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 security holders as soon as
practicable but no later than eighteen months after the effective date of
such Exchange Registration Statement, an earning statement of the Issuer,
the Guarantor and their subsidiaries complying with Section 11(a) of the
Securities Act (including, at the option of the Issuer, Rule 158
thereunder).
(e) In connection with the Issuer's obligations with respect to the Shelf
Registration, if applicable, the Issuer shall use its reasonable best efforts to
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cause the Shelf Registration to permit the disposition of the Registrable
Securities by the holders thereof in accordance with the intended method or
methods of disposition thereof provided for in the Shelf Registration Statement.
In connection therewith, the Issuer shall, as soon as reasonably possible (or as
otherwise specified):
(i) prepare and file with the Commission, as soon as practicable, a
Shelf Registration Statement on any form which may be utilized by the
Issuer and which shall permit the disposition of the Registrable Securities
in accordance with the intended method or methods thereof, as specified in
writing by the holders of the Registrable Securities, and use its
reasonable best efforts to cause such Shelf Registration Statement to
become or be declared effective as soon as practicable thereafter, but no
later than 270 days after the Closing Date;
(ii) as soon as practicable prepare and file with the Commission such
amendments and supplements to such Shelf Registration Statement and the
prospectus included therein 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 holders of the
Registrable Securities copies of any such supplement or amendment
simultaneously with or prior to its being used or filed with the
Commission;
(iii) comply with the provisions of the Securities Act with respect to
the disposition of all of the Registrable Securities covered by such Shelf
Registration Statement in accordance with the intended methods of
disposition by the holders thereof provided for in such Shelf Registration
Statement;
(iv) provide (A) the holders of the Registrable Securities to be
included in such Shelf Registration Statement, (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 Securities Act), if any, thereof, (C) any sales or
placement agent therefor, (D) counsel for any such underwriter or agent and
(E) not more than one counsel for all the holders of such Registrable
Securities 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;
(v) 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 Issuer's principal place of
business or such other reasonable place for inspection by the persons
referred to in Section 3(e)(iv) who shall certify to the Issuer that they
have a current intention to sell the Registrable Securities pursuant to the
Shelf Registration such financial and other information and books and
records of the Issuer as reasonably requested, and cause the officers,
employees, counsel and
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independent certified public accountants of the Issuer 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 Securities Act;
provided, however, that each such party shall be required to maintain in
confidence and not disclose to any other person any information or records
reasonably desig nated by the Issuer 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 body
having jurisdiction over the matter (subject to the requirements of such
order, and only after such person shall have given the Issuer prompt prior
written notice of such requirement), or (C) after the Effective Time and
after having requested, without compliance, that the Issuer include such
information in such Shelf Registration Statement or an amendment or
supplement thereto, such information 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 thereto, 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;
(vi) promptly notify the selling holders of Registrable Securities,
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) and confirm such
advice in writing, (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 any comments by the Commission and by the Blue Sky
or securities commissioner or regulator of any state with respect thereto
or any request by the Commission for amendments or supplements to such
Shelf Registration Statement or prospectus or for additional information,
(C) 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, (D) if at any time the
representations and warranties of the Issuer and the Guarantor contemplated
by Section 3(e)(xv) or Section 5 hereof cease to be true and correct in all
material respects, (E) of the receipt by the Issuer and the Guarantor of
any notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, or (F) if at any time when
a prospectus is required to be delivered under the Securities Act, such
Shelf Registration Statement, prospectus, prospectus amendment or
supplement or post-effective amendment does not conform in
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all material respects to the applicable requirements of the Securities 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;
(vii) use its reasonable 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;
(viii) if requested by any managing underwriter or underwriters, any
placement or sales agent or any holder of Registrable Securities, 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 holder specifies should be included therein relating to the terms of
the sale of such Registrable Securities, including information with respect
to the principal amount of Registrable Securities being sold by such holder
or agent or to any underwriters, the name and description of such holder,
agent or underwriter, the offering price of such Registrable 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 Registrable Securities to
be sold by such 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;
(ix) upon request, furnish to each holder of Registrable Securities,
each placement or sales agent, if any, therefor, each underwriter, if any,
thereof and the respective counsel referred to in Section 3(e)(iv) an
executed copy (or, in the case of a holder of Registrable Securities, 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 a holder of Registrable 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
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 Securities Act and the
Trust Indenture Act and the rules and regulations of the Commission
thereunder, and such other documents, as such holder, agent, if any, and
underwriter, if any, may reasonably request in order to facilitate the
offering and disposition of the Registrable Securities owned by such
holder, offered or sold by such agent or underwritten by such underwriter
and to permit such holder, agent and underwriter to satisfy the prospectus
delivery requirements of the Securities Act; and, subject to Sections 2(a)
and (b) and 3(e)(vi)(C), (E) and (F), the Issuer hereby consents to the use
of such prospectus (including such
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preliminary and summary prospectus) and any amendment or supplement thereto
by each such holder and by any such agent and underwriter, in each case in
the form most recently provided to such person by the Issuer, in connection
with the offering and sale of the Registrable Securities covered by the
prospectus (including such preliminary and summary prospectus) or any
supplement or amendment thereto;
(x) use its reasonable best efforts to (A) register or qualify the
Registrable Securities to be included in such Shelf Registration Statement
under such securities laws or blue sky laws of such jurisdictions as any
holder of such Registrable Securities 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 or, if a shorter
period, for so long as may be necessary to enable any such holder, agent or
underwriter to complete its distribution of Securities pursuant to such
Shelf Registration Statement and (C) take any and all other actions as may
be reasonably necessary or advisable to enable each such holder, agent, if
any, and underwriter, if any, to consummate the disposition in such
jurisdictions of such Registrable Securities; provided, however, that
neither the Issuer nor the Guarantor shall 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(e)(x), (2) consent to general service of process in any such
jurisdiction, (3) become subject to any tax or (4) make any changes to its
certificate of incorporation or by-laws or any agreement between it and its
stockholders;
(xi) use its reasonable 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 Registrable Securities;
(xii) cooperate with the holders of the Registrable Securities and the
managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable 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 Registrable Securities to be in such denominations and in such names
as the managing underwriters may request at least two business days prior
to any sale of the Registrable Securities;
(xiii) provide a CUSIP number for all Registrable Securities, not
later than the applicable Effective Time;
(xiv) enter into one or more underwriting agreements, engagement
letters, agency agreements, "best efforts" underwriting agreements or
similar
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agreements, as appropriate, including customary provisions relating to
indemnification and contribution, and take such other actions in connection
therewith as any holders of Registrable Securities aggregating at least 20%
aggregate principal amount of the Registrable Securities at the time
outstanding shall reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities; provided, that the Issuer shall
not be required to enter into any such agreement more than once with
respect to all of the Registrable Securities and may delay entering into
such agreement until the consummation of any underwritten public offering
which the Issuer shall have then engaged;
(xv) whether or not an agreement of the type referred to in Section
3(e)(xiv) 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 holders of the Registrable
Securities covered by such Shelf Registration 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 Issuer and the
Guarantor 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 holders of at least 20% in aggregate principal amount of the
Registrable Securities at the time outstanding may reasonably request,
addressed to such holder or 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
Registrable 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 of the
Issuer, the Guarantor and their material subsidiaries; the qualification of
the Issuer, the Guarantor and their material U.S. subsidiaries to transact
business as foreign corporations; the due authorization, execution and
delivery of the relevant agreement of the type referred to in Section
3(d)(xiv) hereof; the due authorization, execution, authentication and
issuance, and the validity and enforceability, of the Registrable
Securities; the absence of material legal or governmental proceedings
involving the Issuer; the absence of a breach by the Issuer or any of its
subsidiaries of, or a default under, material agreements binding upon the
Issuer or any subsidiary of the Issuer; the absence of governmental
approvals required to be obtained in connection with the Shelf
Registration, the offering and sale of the Registrable Securities, this
Exchange and Registration Rights Agreement or any agreement of the type
referred to in Section 3(e)(xiv) hereof, except such approvals 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 Securities Act and the Trust Indenture Act and the
rules and regulations of the Commission thereunder, respectively; and,
subject to
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reasonable and customary limitations and exceptions; and, such counsel
shall also state that, 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, the absence from such Shelf Registration Statement and the
prospectus included therein, as then amended or supplemented, and from the
documents incorporated by reference therein (in each case other than the
financial statements and related footnotes and schedules and other
financial information contained therein) of an untrue statement of a
material fact or the omission to state therein a material fact necessary to
make the statements therein not misleading (in the case of such documents,
in the light of the circumstances existing at the time that such documents
were filed with the Commission under the Exchange Act)); (C) obtain a "cold
comfort" letter or letters from the independent certified public
accountants of the Issuer addressed to the selling holders of Registrable
Securities, 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 state ments 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 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 holders of at least a 20% in aggregate
principal amount of the Registrable 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 Issuer or the Guarantor; and (E)
undertake such obligations relating to expense reimbursement,
indemnification and contribution as are provided in Section 6 hereof;
(xvi) notify in writing each holder of Registrable Securities of any
proposal by the Issuer 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;
(xvii) in the event that any broker-dealer registered under the
Exchange Act shall underwrite any Registrable Securities or participate as
a member of
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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
Registrable 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 comply ing 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 the schedules
thereto (or any successor thereto)) to participate in the preparation of
the Shelf Registration Statement relating to such Registrable 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 Registrable Securities, (B) indemnifying any
such qualified independent underwriter to the extent of the indemnification
of underwriters provided in Section 6 hereof, 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
(xviii) comply with all applicable rules and regulations of the
Commission, and make generally available to its security holders 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 Issuer, the Guarantor and their subsidiaries complying with Section
11(a) of the Securities Act (including, at the option of the Issuer, Rule
158 thereunder).
(f) In the event that the Issuer would be required, pursuant to Section
3(e)(vi)(F) above, to notify the selling holders of Registrable Securities, the
placement or sales agent, if any, therefor and the managing underwriters, if
any, thereof, as applicable, the Issuer shall without delay prepare and furnish
to each such holder, to each placement or sales agent, if any, and to each such
under writer, if any, a reasonable number of copies of a prospectus supplemented
or amended so that, as thereafter delivered to purchasers of Registrable
Securities, such prospectus shall conform in all material respects to the
applicable requirements of the Securities 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 holder of Registrable Securities
agrees that upon receipt of any notice from the Issuer pursuant to Section
3(e)(vi)(F) hereof, such holder shall forthwith discontinue the disposition of
Registrable Securities pursuant to the Shelf Registration Statement applicable
to such Registrable Securities until such holder shall have received copies of
such amended or supplemented prospectus, and if so directed by the Issuer, such
holder shall deliver to the Issuer, (at the Issuer's expense) all copies, other
than permanent file copies, then in such holder's possession of the prospectus
covering such Registrable Securities at the time of receipt of such notice.
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<PAGE>
(g) The Issuer may require each holder of Registrable Securities as to
which any Shelf Registration pursuant to Section 2(b) is being effected to
furnish to the Issuer such information regarding such holder and such holder's
intended method of distribution of such Registrable Securities as the Issuer may
from time to time reasonably request in writing, but only to the extent that
such information is required in order to comply with the Securities Act. Each
such holder agrees to notify the Issuer as promptly as practicable of any
inaccuracy or change in information previously furnished by such holder to the
Issuer 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 holder or such holder's
intended method of disposition of such Registrable Securities or omits to state
any material fact regarding such holder or such holder's intended method of
disposition of such Registrable 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 Issuer 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 holder or the disposition of such Registrable 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.
(h) Until the expiration of two years after the Closing Date, the Issuer
will not, and will not permit any of its "affiliates" (as defined in Rule 144)
to, resell any of the Securities that have been reacquired by any of them except
pursuant to an effective registration statement under the Securities Act.
4. Registration Expenses.
The Issuer and the Guarantor, jointly and severally, agree to bear and to
pay or cause to be paid promptly, upon request, all expenses incident to the
Issuer's and the Guarantor'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, (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(e)(x) hereof and
determination of their eligibility for investment under the laws of such
jurisdictions as any managing underwriters or the holders of such Registrable
Securities may designate, including any reasonable fees and disbursements of
counsel for the selling holders 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 reproducing and distributing 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 of the Issuer
and the Guarantor relating to the
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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 Issuer's and the Guarantor's officers and employees performing
legal or accounting duties), (g) fees, disbursements and expenses of counsel and
independent certified public accountants of the Issuer and the Guarantor
(including the expenses of any opinions or "cold comfort" letters required by or
incident to such performance and compliance), (h) reasonable fees, disbursements
and expenses of any "qualified independent underwriter" engaged pursuant to
Section 3(e)(xvii) hereof (i) reasonable fees, disbursements and expenses of one
counsel for the holders of Registrable Securities retained in connection with an
Exchange Registration and a Shelf Registration, as selected by the holders of at
least a majority in aggregate principal amount of the Registrable Securities
being registered (which counsel shall be reasonably satisfactory to the Issuer),
(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 Issuer or the Guarantor 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 Registrable
Securities or any placement or sales agent therefor or underwriter thereof, the
Issuer and the Guarantor, jointly and severally, shall reimburse such person for
the full amount of the Registration Expenses so incurred, assumed or paid
promptly after receipt of a request therefor. It is understood, however, that
except as provided in this Section and in Section 6, the holders of the
Registrable Securities being registered shall pay all of their own costs and
expenses, including, but not limited to, all agency fees and commissions and
underwriting discounts and commissions attributable to the sale of such
Registrable 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 refereed to above).
5. Representations and Warranties.
The Issuer and the Guarantor, jointly and severally, represents and
warrants to, and agrees with, each Purchaser and each of the holders from time
to time of Registrable Securities that:
(a) Each registration statement covering Registrable Securities and
each prospectus (including any preliminary or summary prospectus) contained
therein or furnished pursuant to Section 3(e) or Section 3(d) 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
Registrable 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 Securities 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
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<PAGE>
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 Securities Act, other than from (i)
such time as a notice has been given to holders of Registrable Securities
pursuant to Section 3(e)(vi)(F) or Section 3(d)(iii)(F) hereof until (ii)
such time as the Issuer furnishes an amended or supplemented prospectus
pursuant to Section 3(f) or Section 3(d)(iv) hereof, each such registration
statement, and each prospectus (including any summary prospectus) contained
therein or furnished pursuant to Section 3(e) or Section 3(d) hereof, as
then amended or supplemented, will conform in all material respects to the
applicable requirements of the Securities 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;
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 Issuer by or on behalf of a holder
of Registrable 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 Securities
Act or the Exchange Act, as applicable, and none of such documents will
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 Issuer by or on behalf of a holder of Registrable Securities
expressly for use therein.
(c) The compliance by the Issuer and the Guarantor with all of the
provisions of this Exchange and Registration Rights Agreement and the
consummation of the transactions herein contemplated will not (i) result in
any violation of the provisions of the Memorandum and Articles of
Association of the Issuer, the Memorandum of Association or Bye-laws of the
Guarantor, (ii) 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
Issuer or the Guarantor or any of their subsidiaries is a party or by which
the Issuer or the Guarantor or any of their subsidiaries is bound or to
which any of the property or assets of the Issuer or the Guarantor or any
of their subsidiaries is subject, nor (iii) will such action result in any
violation of any existing statute, order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Issuer, the
Guarantor or any of their subsidiaries or any of their properties except,
in the case of clauses (ii) and (iii) above, such breaches or violations
which would not, individually or in the aggregate, be reasonably likely to
have a material adverse change, in or affecting the
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general affairs, management, financial position, shareholders' equity or
results of operations of the Issuer, the Guarantor and their subsidiaries
taken as a whole; and no consent, approval, authorization, order,
registration or qualification of or with any such governmental agency is
required for the issue and sale of the Securities or the consummation by
the Issuer or the Guarantor of the transactions contemplated by this
Registration Rights Agreement, except the registration under the Securities
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 Issuer and the Guarantor .
6. Indemnification.
(a) Indemnification by the Issuer and the Guarantor. The Issuer and the
Guarantor, jointly and severally, will indemnify and hold harmless each of the
holders of Registrable Securities included in a registration statement filed
pursuant to Section 2(a) or 2(b) hereof, and each person who participates as a
placement or sales agent or as an underwriter in any offering or sale of such
Registrable Securities against any losses, claims, damages or liabilities, joint
or several, to which such holder, agent or underwriter 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
registration statement under which such Registrable Securities were registered
under the Securities Act, or any preliminary, final or summary prospectus
contained therein or furnished by the Issuer or the Guarantor to any such
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 necessary to make the statements therein not misleading, and will
reimburse such 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 Issuer and the Guarantor 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 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 Issuer or the Guarantor by
or on behalf of holders of Registrable Securities expressly for use therein;
(b) Indemnification by the Holders and any Agents and Underwriters. The
Issuer may require, as a condition to including any Registrable Securities in
any registration statement filed pursuant to Section 2(b) hereof and to entering
into any underwriting agreement with respect thereto, that the Issuer shall have
received an undertaking reasonably satisfactory to it from the holder of such
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Registrable Securities and from each underwriter named in any such underwriting
agreement, severally and not jointly, to (i) indemnify and hold harmless the
Issuer and the Guarantor, and all other holders of Registrable Securities,
against any losses, claims, damages or liabilities to which the Issuer or the
Guarantor or such other holders of Registrable Securities 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
such registration statement, or any preliminary, final or summary prospectus
contained therein or furnished by the Issuer to any such 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
Issuer or the Guarantor by or on behalf of such holder or underwriter expressly
for use therein, and (ii) reimburse the Issuer or the Guarantor for any legal or
other expenses reasonably incurred by the Issuer or the Guarantor in connection
with investigating or defending any such action or claim as such expenses are
incurred; provided, however, that no such 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 holder from the sale of
such holder's Registrable Securities pursuant to such registration.
(c) Notices of Claims, Etc. 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 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, and 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
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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 holder from the sale of any Registrable 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 Registrable
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 Securities 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 Registrable Securities registered or underwritten, as the case may be,
by them and not joint.
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(e) The obligations of the Issuer and the Guarantor under this Section 6
shall be in addition to any liability which the Issuer or the Guarantor 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 Securities 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 Issuer and the Guarantor (including any person who, with his
consent, is named in any registration statement as about to become a director of
the Issuer or the Guarantor) and to each person, if any, who controls the Issuer
or the Guarantor within the meaning of the Securities Act.
7. Underwritten Offerings.
(a) Selection of Underwriters. If any of the Registrable 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 the
holders of at least a majority in aggregate principal amount of the Registrable
Securities to be included in such offering, provided that such designated
managing underwriter or underwriters is or are reasonably acceptable to the
Issuer.
(b) Participation by Holders. Each holder of Registrable 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 Registrable 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.
Each of the Issuer and the Guarantor covenants to the holders of
Registrable Securities that to the extent it shall be required to do so under
the Exchange Act, it shall timely file the reports required to be filed by it
under the Exchange Act or the Securities 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 Securities Act) and the rules and
regulations adopted by the Commission thereunder, and shall take such further
action as any holder of Registrable Securities may reasonably request, all to
the extent required from time to time to enable such holder to sell Registrable
Securities without registration under the Securities Act within the limitations
of the exemption provided by Rule 144 under the Securities 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
Registrable Securities in connection with that holder's sale pursuant to Rule
144, the Issuer or the Guarantor, as applicable, shall deliver to such holder a
written statement as to whether it has complied with such requirements.
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9. Miscellaneous.
(a) No Inconsistent Agreements. The Issuer represents, warrants, covenants
and agrees that it has not granted, and shall not grant, registration rights
with respect to Registrable 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 any party fails to perform any of their
respective obligations hereunder and that each party may be irreparably harmed
by any such failure, and accordingly agree that each party, 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 any
other party 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: If to the Issuer or the
Guarantor, to it at 767 Fifth Avenue, Suite 4300, New York, New York 10153, c/o
RSL Communications, N. America, Inc., Attention: Avery Fischer, Esq. with a copy
to Debevoise & Plimpton, 875 Third Avenue, New York, New York 10022, Attention:
George Maguire, Esq., and if to a holder, to the address of such holder set
forth in the security register or other records of the Issuer, or to such other
address as the Issuer 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 Registrable Securities and the respective successors and assigns of
the parties hereto and such holders. In the event that any transferee of any
holder of Registrable Securities shall acquire Registrable 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 Registrable Securities shall be
held subject to all of the terms of this Exchange and Registration Rights
Agreement, and by taking and holding such Registrable 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 Issuer shall so request, any
such successor, assign or transferee shall acknowledge in writing that such
successor, assign, or transferee will acquire and hold the Registrable
Securities subject to all of the applicable terms hereof.
-24-
<PAGE>
(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 the Purchasers or any holder of Registrable 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 Registrable
Securities pursuant to the Purchase Agreement and the transfer and registration
of Registrable Securities by such holder and the consummation of an Exchange
Offer.
(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 Issuer and the
holders of at least a majority in aggregate principal amount of the Registrable
Securities at the time outstanding. Each holder of any Registrable 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 Registrable
Securities or is delivered to such holder. Notwithstanding the foregoing, a
waiver or consent to departure from the provisions hereof that relates
exclusively to the rights of holders whose Registrable Securities are being
tendered pursuant to the Exchange Offer and that does not affect directly or
indirectly the rights of other holders whose Registrable Securities are not
being tendered pursuant to such Exchange Offer may be given by the holders of at
least a majority of the outstanding principal amount of Registrable Securities
being tendered or registered.
(i) Inspection. For so long as this Exchange and Registration Rights
Agreement shall be in effect, this Exchange and Registration Rights Agreement
and a complete list of the names and addresses of all the holders of Registrable
Securities shall be made available for inspection and copying on any business
-25-
<PAGE>
day by any holder of Registrable Securities for proper purposes only (which
shall include any purpose related to the rights of the holders of Registrable
Securities under the Securities, the Indenture and this Agreement) at the
offices of the Issuer at the address thereof set forth in Section 9(c) above and
at the office of the Trustee under the Indenture.
(j) 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.
Agreed to and accepted as of the date referred to above.
RSL COMMUNICATIONS PLC
By:_____________________________
Name:
Title:
RSL COMMUNICATIONS, LTD.
By:______________________________
Name:
Title:
GOLDMAN, SACHS & CO. oHG and
MERRILL LYNCH INTERNATIONAL
On behalf of each of the Purchasers,
By:____________________________
(Goldman, Sachs & Co. oHG)
-26-
<PAGE>
Exhibit A
RSL COMMUNICATIONS PLC
RSL COMMUNICATIONS LTD.
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 RSL Communications PLC's (the
"Issuer") DM296,000,000 aggregate principal amount at maturity 10% Senior
Discount Notes due 2008 (the "Notes") are held. The Notes are unconditionally
guaranteed as to payment of principal, interest and any other amounts due
thereon (the "Notes Guarantee") by RSL Communications, Ltd. (the "Guarantor").
The Notes and the Notes Guarantee, collectively, are the "Securities".
The Issuer 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
[________________________________________________] , Attention:
[______________________________]. .
- --------
(1) Not less than 28 calendar days from date of mailing.
-27-
<PAGE>
RSL Communications PLC
RSL Communications, Ltd.
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 RSL Communications
PLC (the "Issuer"), RSL Communications, Ltd. (the "Guarantor") and the
Purchasers named therein. Pursuant to the Exchange and Registration Rights
Agreement, the Issuer 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 "Securities Act"), of the Issuer's
DM296,000,000 aggregate principal amount at maturity 10% Notes due 2008 (the
"Notes"). The Notes are unconditionally guaranteed as to payment of principal,
interest and any other amounts due thereon (the "Notes Guarantee") by RSL
Communications, Ltd. (the "Guarantor"). The Notes Guarantee together with the
Notes are 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 Registrable Securities (as defined below) is
entitled to have the Registrable Securities beneficially owned by it included in
the Shelf Registration Statement. In order to have Registrable 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 Issuer's counsel at the address
set forth herein for receipt ON OR BEFORE [DEADLINE FOR RESPONSE]. Beneficial
owners of Registrable 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 Registrable Securities.
Certain legal consequences arise from being named as a selling
securityholder in the Shelf Registration Statement and related Prospectus.
Furthermore, pursuant to the Exchange and Registration Rights Agreement, you may
be liable to the Issuer, the Guarantor and other selling securityholders for any
losses that result from inaccuracies or omissions in the information you are
requested to provide herein. Accordingly, holders and beneficial owners of
Registrable 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.
-28-
<PAGE>
The term "Registrable Securities" is defined in the Exchange and
Registration Rights Agreement.
-29-
<PAGE>
ELECTION
The undersigned holder (the "Selling Securityholder") of Registrable
Securities hereby elects to include in the Shelf Registration Statement the
Registrable Securities beneficially owned by it and listed below in Item (3).
The undersigned, by signing and returning this Notice and Questionnaire, agrees
to be bound with respect to such Registrable 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 Registration
Rights Agreement, as if the undersigned Selling Securityholder were an original
party thereto.
Upon any sale of Registrable Securities pursuant to the Shelf Registration
Statement, the Selling Securityholder will be required to deliver to the Issuer
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
Issuer and represents and warrants that such information is accurate and
complete:
-30-
<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 Registrable Securities Listed in Item (3)
below:
(ii) Full Legal Name of DTC Participant (if applicable and if not
the same as (i) above) Through Which Registrable Securities
Listed in Item (3) 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 (3), the undersigned does not
beneficially own any Securities.
(i) Principal amount of Registrable Securities beneficially
owned:
CUSIP No(s). of such Registrable Securities:
(ii). Principal amount of Securities other than Registrable
Securities beneficially owned:
CUSIP No(s). of such other Securities:
<PAGE>
(iii) Principal amount of Registrable Securities which the
undersigned wishes to be included in the Shelf Registration
Statement:
CUSIP No(s). of such Registrable Securities to be included in the Shelf
Registration Statement:
(d) Beneficial Ownership of Other Securities of the Issuer and the
Guarantor:
Except as set forth below in this Item (4), the undersigned Selling
Securityholder is not the beneficial or registered owner of any other securities
of the Issuer or the Guarantor, other than the Securities listed above in Item
(3).
State any exceptions here:
(e) Relationships with the Issuer and the Guarantor:
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
Issuer or the Guarantor (or their 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 Registrable Securities listed above in Item (3) only as
follows (if at all): Such Registrable Securities may be sold from time to time
directly by the undersigned Selling Securityholder or, alternatively, through
underwriters, broker-dealers or agents. Such Registrable 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 Registered 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 writing of options. In connection with sales of the Registrable Securities
or otherwise, the Selling Securityholder may enter into hedging transactions
with broker-dealers, which may in turn engage in short sales of the Registrable
Securities in the course of hedging the positions they assume. The Selling
-2-
<PAGE>
Securityholder may also sell Registrable Securities short and deliver
Registrable Securities to close out such short positions, or loan or pledge
Registrable 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 Exchange Act and the rules and regulations thereunder,
particularly Regulation M.
In the event that the Selling Securityholder transfers all or any portion
of the Registrable Securities listed in Item (3) above after the date on which
such information is provided to the Issuer, 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 (1) through (6) 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 Issuer and the Guarantor 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) 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 promptly notify the Issuer 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
Registration Rights
-3-
<PAGE>
Agreement shall be made in writing, by hand-delivery, first-class mail, or air
courier guaranteeing overnight delivery as follows:
(i) To the Issuer and the Guarantor:
(c/o RSL Communications, N. America, Inc.)
RSL Communications PLC
RSL Communications, Ltd.
[_________________________________]
[_________________________________]
Attention:
(ii) With a copy to:
[_________________________________]
[_________________________________]
[_________________________________]
Attention:
Once this Notice and Questionnaire is executed by the Selling
Securityholder and received by the Issuer '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
Issuer, the Guarantor and the Selling Securityholder (with respect to the
Registrable Securities beneficially owned by such Selling Securityholder and
listed
-4-
<PAGE>
in Item (3) above. This Agreement shall be governed in all respects by the laws
of the State of New York.
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 Registrable Securities)
By:
Name:
Title:
PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT ON
OR BEFORE [DEADLINE FOR RESPONSE] TO THE ISSUER'S COUNSEL AT:
[_________________________________]
[_________________________________]
[_________________________________]
[_________________________________]
-5-
<PAGE>
Exhibit B
NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT
RSL Communications PLC
c/o Trustee
[_________________________________]
[_________________________________]
[_________________________________]
Attention: Trust Officer
Re: RSL Communications PLC (the "Issuer")
10% Senior Discount Notes due 2008
Dear Sirs:
Please be advised that _____________________ has transferred
DM___________ aggregate principal amount at maturity of the above-referenced
Notes pursuant to an effective Registration Statement on Form [___] (File No.
333-____) filed by the Issuer.
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>
EXECUTION COPY
================================================================================
RSL COMMUNICATIONS PLC
as Issuer, with RSL Communications, Ltd., of
DM296,000,000 10% Senior Discount Notes Due 2008
of RSL Communications PLC
and
THE CHASE MANHATTAN BANK
as Book-Entry Depositary
NOTE DEPOSIT AGREEMENT
Dated as of March 16, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND OTHER GENERAL PROVISIONS..................................... 1
SECTION 1.1 Definitions................................................ 1
SECTION 1.2 Rules of Construction...................................... 4
ARTICLE II
GLOBAL NOTES, DEPOSITARY INTERESTS........................................... 4
SECTION 2.1 Deposit of the Global Notes................................ 4
SECTION 2.2 Book-Entry System.......................................... 5
SECTION 2.3 Registration of Transfer of
Depositary Interests..................................... 5
SECTION 2.4 Transfer of Global Notes and
Depositary Interests; Termination........................ 6
SECTION 2.5 Cancelation................................................ 8
SECTION 2.6 Payments in Respect of the
Global Notes............................................. 8
SECTION 2.7 Changes in Principal Amount of the
Global Notes............................................. 9
SECTION 2.8 Record Date................................................ 9
SECTION 2.9 Action in Respect of the
Depositary Interests..................................... 10
SECTION 2.10 Changes Affecting the Global Notes......................... 11
SECTION 2.11 Surrender of the Global Notes.............................. 12
SECTION 2.12 Reports.................................................... 12
ARTICLE III
THE BOOK-ENTRY DEPOSITARY.................................................... 12
SECTION 3.1 Certain Duties and Responsibilities........................ 12
SECTION 3.2 Notice of Default.......................................... 13
SECTION 3.3 Certain Rights of Book-Entry
Depositary............................................... 14
SECTION 3.4 Not Responsible for Recitals or
Issuance of Notes........................................ 15
SECTION 3.5 Money Held in Trust........................................ 16
SECTION 3.6 Compensation and Reimbursement............................. 16
SECTION 3.7 Book-Entry Depositary Required:
Eligibility.............................................. 17
SECTION 3.8 Resignation and Removal,
Appointment of Successor................................. 17
SECTION 3.9 Acceptance of Appointment by
Successor................................................ 19
<PAGE>
ii
SECTION 3.10 Merger, Conversion, Consolidation
or Succession to Business................................ 20
ARTICLE IV
MISCELLANEOUS PROVISIONS..................................................... 20
SECTION 4.1 Notices to Book-Entry Depositary
or Issuer................................................ 20
SECTION 4.2 Notice to the Depositary; Waiver........................... 21
SECTION 4.3 Effect of Headings and Table of
Contents................................................. 22
SECTION 4.4 Successors and Assigns..................................... 22
SECTION 4.5 Separability Clause........................................ 22
SECTION 4.6 Benefits of Agreement...................................... 22
SECTION 4.7 GOVERNING LAW.............................................. 22
SECTION 4.8 Jurisdiction............................................... 22
SECTION 4.9 Counterparts............................................... 23
SECTION 4.10 Inspection of Agreement.................................... 23
SECTION 4.11 Satisfaction and Discharge................................. 23
SECTION 4.12 Amendments................................................. 24
SECTION 4.13 Book-Entry Depositary
To Sign Amendments....................................... 24
<PAGE>
THIS NOTE DEPOSIT AGREEMENT is made as of this 16th day of March, 1998 by
and between RSL Communications PLC, a United Kingdom corporation (the "Issuer"),
and The Chase Manhattan Bank, a New York banking corporation, as book-entry
depositary (the "Book-Entry Depositary").
ARTICLE I
DEFINITIONS AND OTHER GENERAL PROVISIONS
SECTION 1.1 Definitions. The following terms, as used herein, have the
following meanings:
"144A Depositary Interest" means the certificated book-entry interest
representing a 100% beneficial interest in the principal of, premium, if any,
and interest on the underlying 144A Global Note, and issued by the Book-Entry
Depositary to the Common Depositary, registered in the name of the Common
Depositary.
"144A Global Note" means one or more global bearer bonds issued by the
Issuer to the Book-Entry Depositary and bearing the Restricted Legend
representing the total aggregate principal amount of the Notes sold in reliance
on Rule 144A under the Securities Act.
"Asset Disposition" has the meaning set forth in the Indenture.
"Board Resolution" means a duly adopted resolution of the Board of
Directors of the Issuer in full force and effect on the date of certification,
certified by any Director, Secretary or Assistant Secretary of the Issuer.
"Book-Entry Depositary" means The Chase Manhattan Bank or, in the event
that The Chase Manhattan Bank is succeeded as Book-Entry Depositary hereunder,
the Person designated as its successor pursuant to Section 3.8 hereof.
"Book-Entry Notes" means an indirect certificateless beneficial interest in
a Global Note held through a corresponding Depositary Interest.
"Book-Entry Register" has the meaning set forth in Section 2.3 hereof.
"Cedel" means Cedel Bank, societe anonyme, or any successor.
"Change of Control" has the meaning set forth in the Indenture.
<PAGE>
2
"Common Depositary" means The Chase Manhattan Bank, or its nominee, as
common depositary for Euroclear and Cedel, or in the event The Chase Manhattan
Bank is succeeded as Common Depositary, the Person designated as its successor.
"Corporate Trust Office" means the office of the Book-Entry Depositary in
the Borough of Manhattan, The City of New York, from which at any particular
time its corporate trust business shall be principally administered, which at
the date hereof is located at 450 West 33rd Street, New York, New York
10001-2697, Attention: Global Trust Services.
"Depositary Interests" means each of the 144A Depositary Interests and the
Regulation S Depositary Interests.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system, or any successor.
"Event of Default" shall have the meaning set forth in the Indenture.
"Exchange Act" means the United States Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Global Notes" means each of the 144A Global Note and the Regulation S
Global Note.
"Holdings" means RSL Communications, Ltd., guarantor of the Notes pursuant
to the Indenture until a successor replaces it pursuant to the applicable
provisions of the Indenture and, thereafter, means such successor.
"Indenture" means the indenture dated as of March 16, 1998 among the
Issuer, Holdings and the Trustee relating to the Notes, as originally executed
or as it may be supplemented, modified or amended from time to time.
"Issuer" means RSL Communications PLC until a successor replaces it
pursuant to the applicable provisions of the Indenture and, thereafter, means
such successor.
"Issuer Order" or "Issuer Request" means a written order or request signed
in the name of the Issuer by two Officers thereof.
"Notes" means the DM296,000,000 aggregate principal amount at maturity of
the Issuer's 10% Senior Discount Notes due 2008 issued under the Indenture.
<PAGE>
3
"Offer to Purchase" has the meaning set forth in the Indenture.
"Officer" means, with respect to the Issuer, (i) the Chairman of the Board,
the Chief Executive Officer and other Directors and (ii) the Treasurer or any
Assistant Treasurer, or the Secretary or any Assistant Secretary.
"Officers' Certificate" means a certificate signed by two Officers, at
least one of which must be an Officer listed in clause (i) of the definition
thereof.
"Opinion of Counsel" means a written opinion from legal counsel, who may be
an employee of or counsel to the Issuer, and who shall be reasonably acceptable
to the Book-Entry Depositary.
"Participant" means, with respect to Euroclear or Cedel, any Person who has
an account with Euroclear or Cedel, respectively.
"Paying Agent" means The Chase Manhattan Bank and any successor paying
agent hereunder.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Registered Notes" means certificated Notes registered in the name of the
holder thereof issued pursuant to the Indenture in substantially the form set
forth in Section 2.02 of the Indenture.
"Regulation S Depositary Interest" means the certificated book-entry
interest representing a 100% beneficial interest in the principal of, premium,
if any, and interest on the underlying Regulation S Global Note, and issued by
the Book-Entry Depositary to the Common Depositary, registered in the name of
the Common Depositary.
"Regulation S Global Note" means one or more global bearer bonds issued by
the Issuer to the Book-Entry Depositary and bearing the Regulation S Legend
representing the total aggregate principal amount of the Notes sold in reliance
on Regulation S under the Securities Act.
"Regulation S Legend" has the meaning set forth in the Indenture.
"Responsible Officer", with respect to the Book- Entry Depositary, means
any Vice President, Assistant Vice
<PAGE>
4
President, the Secretary, any Assistant Secretary, the Treasurer, any Assistant
Treasurer, or any Trust Officer or any other officer of the Book-Entry
Depositary customarily performing functions similar to those performed by any of
the above-designated officers and also means, with respect to a particular
corporate trust or agency matter, any other officer to whom such matter is
referred because of his or her knowledge and familiarity with the particular
subject.
"Restricted Legend" has the meaning set forth in the Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Trustee" means The Chase Manhattan Bank acting as trustee under the
Indenture or, in the event The Chase Manhattan Bank is succeeded as trustee
under the Indenture, such Person who shall be appointed to succeed as trustee
pursuant to the applicable provisions of the Indenture.
SECTION 1.2 Rules of Construction. Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) "or" is not exclusive;
(3) "including" means including without limitation;
(4) words in the singular include the plural and words in the plural
include the singular; and
(5) references herein to holders of Depositary Interests shall mean
references to Euroclear and Cedel.
ARTICLE II
GLOBAL NOTES, DEPOSITARY INTERESTS
SECTION 2.1 Deposit of the Global Notes. The Book-Entry Depositary hereby
accepts custody of the Global Notes from the Trustee and shall act as Book-Entry
Depositary in accordance with the terms of this Agreement. The Book-Entry
Depositary shall hold each such Global Note at its Corporate Trust Office or at
such place or places as it shall determine with the prior written consent of the
Issuer and shall issue the Depositary Interests in accordance with the rules and
procedures of Euroclear and Cedel. In the event that the Issuer shall issue and
<PAGE>
5
execute, and the Trustee, upon the order of the Issuer, shall authenticate
additional Global Notes, the Book-Entry Depositary shall hold each such Global
Note at its Corporate Trust Office or at such place or places as it shall
determine with the prior written consent of the Issuer and shall issue the
Depositary Interests in such Global Notes to the Common Depositary in accordance
with the rules and procedures of Euroclear and Cedel.
SECTION 2.2 Book-Entry System. (a) Upon acceptance by Euroclear and Cedel
of the Depositary Interests for entry into their book-entry settlement system in
accordance with the rules and procedures of Euroclear and Cedel, Book-Entry
Notes shall be issued by Euroclear and Cedel and traded through their book-entry
system, and ownership of such Book-Entry Notes shall be shown in, and the
transfer of such ownership shall be effected only through, the book-entry system
maintained by (i) Euroclear or Cedel or their respective successors or (ii) Par
ticipants. Euroclear and Cedel shall treat the holders of Book-Entry Notes and
their successors as the absolute owners of the Depositary Interests for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent
the Issuer, the Trustee, the Book-Entry Depositary or any agent of the Issuer,
the Trustee or the Book-Entry Depositary from giving effect to any written
certification, proxy or other authorization furnished by Euroclear or Cedel or
impair, as between the Book-Entry Depositary, Euroclear and Cedel and their
respective Participants, the operation of customary practices of Euroclear and
Cedel governing the exercise of the rights of an owner of a beneficial interest
in any Global Note or Depositary Interest.
(b) The Depositary Interests shall be issuable only to the Common
Depositary, for the benefit of Euroclear and Cedel or their successors or
nominees. Except as provided in Section 2.4 hereof and Section 3.05(d) of the
Indenture, no owner of beneficial interests in such De positary Interests shall
be entitled to receive a Registered Note on account of such beneficial interest,
and such beneficial owner's interest therein shall be shown only in accordance
with the procedures of Euroclear and Cedel.
SECTION 2.3 Registration of Transfer of Depositary Interests. (a) The
Issuer appoints the Book-Entry Depositary as its agent to maintain at the
Book-Entry Depositary's Corporate Trust Office a register (the "Book-Entry
Register") in which the Book-Entry Depositary shall (i) record the Common
Depositary as the initial owner of each Depositary Interest (on behalf of
Euroclear and Cedel) and the right of Euroclear and Cedel, collectively, to
receive payment of principal of, premium, if any, and
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6
interest on the Global Notes and (ii) record the registration and transfer of
the Depositary Interests. No Depositary Interest can be transferred unless such
transfer is recorded on the Book-Entry Register.
(b) With respect to any Global Note, clause (a) of this Section 2.3 shall
not (i) impose an obligation on the Book-Entry Depositary to record the
interests in or transfers of Book-Entry Notes held by institutions that have
accounts with Euroclear or Cedel or their successors or Persons that may hold
Book-Entry Notes through such institutions and (ii) restrict transfers of such
Book-Entry Notes held by such institutions or Persons. The Book-Entry Depositary
shall treat the Common Depositary (on behalf of Euroclear and Cedel) as the
absolute owner of the Depositary Interests for all purposes whatsoever and shall
not be bound or affected by any notice to the contrary, other than an order of a
court having jurisdiction over the Book-Entry Depositary.
SECTION 2.4 Transfer of Global Notes and Depositary Interests; Termination.
The Book-Entry Depositary shall hold the Global Notes in custody for the benefit
of the Common Depositary (on behalf of Euroclear and Cedel). The Book-Entry
Depositary shall not transfer or lend any Global Note or any interest therein
except that (i) the Book-Entry Depositary shall deliver Global Notes to the
Trustee if required in accordance with Section 3.05(e) of the Indenture so that
the Trustee may make such notations on the Global Notes as may be required to
evidence transfers and exchanges of Book-Entry Notes, (ii) a Global Note may be
exchanged in whole or in part pursuant to Section 3.05(d) of the Indenture,
(iii) a Global Note may be exchanged or replaced pursuant to Sections 3.04 and
3.06 of the Indenture, (iv) any Global Note may be delivered to the Trustee for
cancelation pursuant to Section 3.09 of the Indenture and (v) the Global Notes
may be transferred to a successor Book-Entry Depositary with the prior written
consent of the Issuer. Notwithstanding the foregoing, neither the Common
Depositary nor Euroclear or Cedel may under any circumstances request the
Book-Entry Depositary to surrender or deliver the Global Notes.
If the Book-Entry Depositary notifies the Issuer and the Trustee in writing
under Section 3.8 hereof that it is unwilling or unable to continue as
Book-Entry Depositary and no successor Book-Entry Depositary has been appointed
by the Issuer within 90 days of such notification, then (x) the Book-Entry
Depositary shall promptly notify the Trustee and request the Trustee to issue
Registered Notes with respect to the Global Notes in such names and
denominations as Euroclear and Cedel shall specify in writing in accordance
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7
with Section 3.05 of the Indenture, (y) the Book-Entry Depositary shall cause
the Common Depositary to deliver to the Book-Entry Depositary for cancelation
the applicable Depositary Interests and (z) the Book-Entry Depositary agrees
that in such event it shall promptly surrender the Global Notes held by it to
the Trustee in connection with such exchange and that such Global Notes shall be
canceled upon issuance of such Registered Notes.
If each of Euroclear and Cedel notifies the Issuer or the Book-Entry
Depositary in writing that it or its nominee is unwilling or unable to continue
to act as, or ceases to be, a clearing agency under the Exchange Act and, in
either case, a successor registered as a clearing agency under the Exchange Act
is not appointed by the Issuer within 90 days, then (x) the Book-Entry
Depositary shall promptly notify the Trustee and request the Trustee to issue
Registered Notes with respect to the Global Notes in such names and
denominations as Euroclear and Cedel shall specify in writing in accordance with
Section 3.05 of the Indenture, (y) the Book-Entry Depositary shall cause the
Common Depositary to deliver to the Book-Entry Depositary for cancelation the
applicable Depositary Interests and (z) the Book-Entry Depositary agrees that in
such event it shall promptly surrender the applicable Global Notes held by it to
the Trustee in connection with such exchange and that such Global Notes shall be
canceled upon issuance of such Registered Notes.
If at any time the Issuer, subject to and in compliance with Section
3.05(d) of the Indenture, determines that the Global Notes should be exchanged,
in whole but not in part, for Registered Notes, then (x) the Issuer shall
promptly notify the Trustee and the Book-Entry Depositary and request the
Trustee to issue Registered Notes with respect to the Global Notes in such names
and denominations as Euroclear and Cedel shall specify in writing in accordance
with Section 3.05 of the Indenture, (y) the Book-Entry Depositary shall cause
the Common Depositary to deliver to the Book-Entry Depositary for cancelation
the applicable Depositary Interests and (z) the Book-Entry Depositary agrees
that in such event it shall promptly surrender the applicable Global Notes held
by it to the Trustee in connection with such exchange and that such Global Notes
shall be canceled upon issuance of such Registered Notes.
Upon the issuance of Registered Notes in exchange for Global Notes
representing the entire principal amount of Notes, this Agreement will
terminate.
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8
SECTION 2.5 Cancelation. If any Global Note is surrendered for payment, or
for redemption or purchase of Notes evidenced thereby or in exchange for
Registered Notes, then such Global Note shall, if surrendered to any Person
other than the Trustee notwithstanding the first paragraph of Section 2.4
hereof, be delivered to the Trustee for cancelation.
SECTION 2.6 Payments in Respect of the Global Notes. (a) Except for
payments made pursuant to an Offer to Purchase with respect to any Asset
Disposition or Change of Control, whenever the Book-Entry Depositary shall
receive from the Trustee (or other paying agent under the Indenture) any payment
of the principal of, premium, if any, and interest on the Global Notes, such
payments shall be distributed promptly to Euroclear and Cedel on the payment
date for the Global Notes.
(b) Whenever the Book-Entry Depositary shall receive from the Trustee (or
other paying agent under the Indenture) any payment of the principal of,
premium, if any, and interest on the Global Notes pursuant to an Offer to
Purchase by the Issuer with respect to any Asset Disposition or Change of
Control, the Book-Entry Depositary shall distribute such payment to Euroclear
and Cedel for the accounts of holders of Book-Entry Notes who elected to have
Book-Entry Notes repurchased pursuant to such Offer to Purchase.
(c) So long as Euroclear and Cedel or their respective nominees own the
Depositary Interests (through the Common Depositary), payments pursuant to
Section 2.6(a) and 2.6(b) hereof with respect to the Global Notes shall be made
in accordance with the applicable rules and procedures of Euroclear and Cedel.
In the event that Euroclear and Cedel or their respective nominees shall cease
to own the Depositary Interests (through the Common Depositary), such payments
shall be made according to procedures agreed upon between the Book-Entry
Depositary and the successor to Euroclear and Cedel, which shall be reasonably
satisfactory to the Issuer.
(d) The Book-Entry Depositary shall forward to the Issuer or its agents at
the Issuer's cost and expense such information from its records as the Issuer
may reasonably request to enable the Issuer or its agents to file necessary
reports with governmental agencies, and the Book-Entry Depositary, the Issuer or
its agents may (but shall not be required to) file any such reports necessary to
obtain benefits under any applicable tax treaties for Euroclear or Cedel or the
holders of Book-Entry Notes.
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9
SECTION 2.7 Changes in Principal Amount of the Global Notes. (a) In the
event that the Issuer exercises any right of redemption in respect of any Notes
constituting a part of the Global Notes or purchases any Notes constituting a
part of the Global Notes pursuant to an Offer to Purchase under Section 10.13 or
10.17 of the Indenture, the Book-Entry Depositary shall, promptly upon receipt
of the redemption price or purchase price, deliver such Global Notes to the
Trustee (i) and request the Trustee to endorse on such Global Note to reflect
the reduction in the principal amount of such Global Note as a result of such
redemption or purchase or (ii) in exchange for a Global Note with a principal
amount that represents only the portion of such Global Note not so redeemed or
purchased. The redemption price or purchase price in connection with the
redemption of a portion of such Global Note shall be equal to the amount
received by the Book-Entry Depositary in respect of the aggregate principal
amount at maturity of the Notes so redeemed or repurchased.
(b) Pursuant to Section 3.05 of the Indenture, upon written notice from the
Trustee to the Book-Entry Depositary of an increase or decrease in the aggregate
principal amount of any Global Note, the Book-Entry Depositary shall (i) enter
or cause to be entered in the Book-Entry Register a corresponding increase or
decrease in the aggregate principal amount of the Depositary Interest
corresponding to such Global Note and (ii) instruct the Common Depositary in
writing to deliver the applicable Depositary Interest to the Book-Entry
Depositary and, upon receipt thereof, make an adjustment on such Depositary
Interest to reflect such corresponding increase or decrease in the aggregate
principal amount of such Depositary Interest in accordance with procedures
established between the Book-Entry Depositary and the Common Depositary.
SECTION 2.8 Record Date. Whenever any payment is to be made in respect of
the Global Notes or the Book-Entry Depositary shall receive written notice of
any action to be taken by Euroclear or Cedel, or whenever the Book-Entry
Depositary otherwise deems it appropriate in respect of any other matter, the
Book-Entry Depositary shall fix a record date for the determination of the
holders of the Depositary Interests who shall be entitled to receive payment in
respect of the Depositary Interests or to take any such action or to act in
respect of any such matter and such record date shall be unless otherwise
impracticable the record date as would be set under the Indenture if such
securities were Registered Notes. Subject to the provisions of this Agreement,
only Euroclear and Cedel, or their successors which are registered on the
Book-Entry Register at the close of business on such record date shall be
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10
entitled to receive any such payment, to give instructions as to such action or
to act in respect of any such matter.
Euroclear and Cedel shall be entitled to rely on such record date as the
date of determination for purposes of further distribution of the payments
disbursed.
SECTION 2.9 Action in Respect of the Depositary Interests. (a) As soon as
practicable after receipt by the Book-Entry Depositary of written notice from
the Issuer of any solicitation of consents or request for a waiver or other
action by the holder of a Global Note under this Agreement or the Indenture, the
Book-Entry Depositary shall mail to Euroclear and Cedel a notice containing (i)
such information as is contained in such notice, (ii) a statement that the
holders of Depositary Interests at the close of business on a specified record
date (established in accordance with Section 2.8 hereof) will be entitled,
subject to the provisions of or governing the Depositary Interests, to instruct
the Book-Entry Depositary as to the consent, waiver or other action, if any,
pertaining to the Global Notes and (iii) a statement as to the manner in which
such instructions may be given. Upon the written request of Euroclear or Cedel
received on or before the date established by the Book-Entry Depositary for such
purpose, the Book-Entry Depositary shall endeavor insofar as practicable and
permitted under the provisions of or governing the Depositary Interests to take
such action regarding the requested consent, waiver or other action in respect
of the Global Notes in accordance with any instructions set forth in such
request. The Book-Entry Depositary shall not itself exercise any discretion in
the granting of consents or waivers or the taking of any other action in respect
of the Global Notes and, as holder of the Global Notes, the Book-Entry
Depositary promptly shall cause such consents or waivers to be granted and such
action to be taken with respect to the Global Notes as Euroclear or Cedel had
given or had taken.
(b) As soon as practicable after receipt by the Book-Entry Depositary of an
Offer to Purchase with respect to the Global Notes, the Book-Entry Depositary
shall mail to Euroclear and Cedel a notice containing (i) such information as is
contained in such notice, (ii) a statement that the holders of Depositary
Interests at the close of business on a specified record date (established in
accordance with Section 2.8 hereof) will be entitled, subject to the provisions
of or governing the Depositary Interests, to elect to have all or any portion of
their interest in the Global Notes repurchased in accordance with such Offer to
Purchase and (iii) such documentation provided by the Issuer as is necessary for
Euroclear and Cedel to elect to have all
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11
or any portion of the Depositary Interests repurchased pursuant to such Offer to
Purchase. So long as Euroclear and Cedel own the Depositary Interests (through
the Common Depositary), such notice shall also comply with the applicable rules
and procedures of Euroclear and Cedel. Upon receipt of elections relating to
such Offer to Purchase from Euroclear and Cedel received on or before the date
established by the Issuer for such purpose, the Book-Entry Depositary shall
endeavor insofar as practicable and permitted under the provisions of or
governing the Depositary Interests and the Global Notes to tender the Global
Notes or portions thereof requested to be tendered by Euroclear or Cedel for
repurchase in accordance with such Offer to Purchase. The Book-Entry Depositary
shall not itself exercise any discretion in the tender of any Global Notes
pursuant to an Offer to Purchase.
(c) As soon as practicable after receipt by the Book-Entry Depositary of
any notice of redemption with respect to the Global Notes pursuant to Section
11.01 of the Indenture, the Book-Entry Depositary shall mail to Euroclear and
Cedel a notice containing (i) such information as is contained in such notice
and (ii) a statement that Notes called for redemption must be surrendered to the
Paying Agent in order to collect the Redemption Price. So long as Euroclear and
Cedel own the Depositary Interests (through the Common Depositary), such notice
shall also comply with the applicable rules and procedures of Euroclear and
Cedel.
(d) Euroclear and Cedel may direct in writing the time, method and place of
conducting any proceeding for any remedy available to the Book-Entry Depositary
with respect to the Global Notes or exercising any power conferred on the
Book-Entry Depositary. However, the Book-Entry Depositary may refuse to follow
any direction that conflicts with law, the Indenture or this Agreement, that may
involve the Book-Entry Depositary in personal liability, or that the Book-Entry
Depositary determines in good faith may be unduly prejudicial to the rights of
the holders of Book-Entry Notes not joining in the giving of such direction and
may take any other action it deems proper that is not inconsistent with any
directions received from Euroclear or Cedel pursuant to this Section 2.9(d).
SECTION 2.10 Changes Affecting the Global Notes. Upon any reclassification
of the Global Notes, or upon any recapitalization, reorganization, merger or
consolidation or sale of assets affecting the Issuer or to which the Issuer is a
party, any securities that shall be received by the Book-Entry Depositary in
exchange for or in respect of a Global Note shall be treated as a new Global
Note under this Agreement and any corresponding Depositary Interests shall
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12
thenceforth represent such new securities so received; provided, however, that
any security issued in exchange for or in respect of a Global Note under such
circumstances shall not be deemed to be a new security if the Issuer delivers to
the Book-Entry Depositary an Opinion of Counsel, to the effect that the
recapitalization, reorganization, merger or consolidation or sale of assets, as
appropriate, did not result in the creation of a security materially different
from that represented by such Global Note.
SECTION 2.11 Surrender of the Global Notes. In the event of the redemption,
payment or purchase in full of all the Notes represented by any of the Global
Notes, then the applicable Depositary Interest and the applicable Global Note
shall become void, the Book-Entry Depositary shall cause the Common Depositary
to surrender such Depositary Interest to the Book-Entry Depositary for
cancelation and the Book-Entry Depositary shall surrender such Global Note to
the Trustee for cancelation. In the event of a partial redemption of the Notes
represented by a Global Note, the Book-Entry Depositary shall comply with the
requirements of Section 2.7 hereof.
SECTION 2.12 Reports. The Book-Entry Depositary shall promptly send to
Euroclear and Cedel any notices, reports and other communications received from
the Issuer that are received by the Book-Entry Depositary as holder of the
Global Notes.
ARTICLE III
THE BOOK-ENTRY DEPOSITARY
SECTION 3.1 Certain Duties and Responsibilities. (a) The Book-Entry
Depositary undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement.
(b) No provision of this Agreement shall be construed to relieve the
Book-Entry Depositary from liability for its own negligent action, its own
negligent failure to act, or its own bad faith or willful misconduct, except
that:
(1) the duties and obligations of the Book-Entry Depositary with
respect to the Global Notes and the Depositary Interests shall be
determined solely by the express provisions of this Agreement and neither
the Book-Entry Depositary, nor its officers, directors, employees and
agents shall be liable except for the performance of such duties and
obligations as are specifically set forth in this Agreement, and no
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13
implied covenants or obligations shall be read into this Agreement against
the Book-Entry Depositary; and
(2) in the absence of bad faith on its part, the Book-Entry Depositary
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any certificates or
opinions furnished to the Book-Entry Depositary and conforming to the
requirements of this Agreement, but in the case of any such certificates or
opinions that by any provision hereof are specifically required to be
furnished to the Book-Entry Depositary, the Book-Entry Depositary shall be
under a duty to examine the same to determine whether or not they conform
to the requirements of this Agreement.
(c) The Book-Entry Depositary shall not be liable for any error of judgment
made in good faith by a Responsible Officer of the Book-Entry Depositary, unless
it shall be proved that the Book-Entry Depositary was grossly negligent in
ascertaining the pertinent facts.
(d) The Book-Entry Depositary shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with the
written direction of Euroclear or Cedel pursuant to Section 2.9 hereof relating
to the time, method and place of conducting any proceeding for any remedy
available to the Book-Entry Depositary, or exercising any power conferred upon
the Book-Entry Depositary, under this Agreement.
(e) No provision of this Agreement will require the Book-Entry Depositary
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
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(f) Whether or not therein expressly so provided, every provision of this
Agreement relating to the conduct or affecting the liability of or affording
protection to the Book-Entry Depositary shall be subject to the provisions of
this Section.
(g) The Book-Entry Depositary owes no fiduciary duties to any person by
virtue of this Agreement except as expressly set forth herein.
SECTION 3.2 Notice of Default. The Book-Entry Depositary shall (x) within
90 days after the occurrence of
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14
any Event of Default in respect of the Global Notes of which a Responsible
Officer of the Book-Entry Depositary assigned to its Global Trust Services
department has actual knowledge or (y) promptly after being notified of an Event
of Default by the Trustee, transmit by mail to Euroclear and Cedel in the manner
provided in Section 4.2, notice of such Event of Default, unless such Event of
Default shall have been cured or waived.
SECTION 3.3 Certain Rights of Book-Entry Depositary. Subject to the
provisions of Section 3.1 hereof:
(a) the Book-Entry Depositary 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, coupon, security, or other paper or document delivered to it in
accordance with the terms of this Agreement and believed by it to be genuine and
to have been signed or presented by the proper party or parties;
(b) any request, direction, order or demand of the Issuer mentioned herein
shall be sufficiently evidenced by an Officers' Certificate, Issuer Order or
Issuer Request, and any resolution of the Board of Directors of the Issuer may
be sufficiently evidenced by a Board Resolution;
(c) the Book-Entry Depositary may consult with counsel and the advice of
such counsel confirmed in writing or any Opinion of Counsel shall be full and
complete authorization and protection with respect to any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon in accordance
with such advice or Opinion of Counsel;
(d) the Book-Entry Depositary shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
appraisal, bond, debenture, note, coupon, security or other paper or document,
but the Book-Entry Depositary, may (but shall have no obligation to) make
reasonable further inquiry or investigation into such facts or matters related
to the issuance of the Global Notes and, if the Book-Entry Depositary shall
determine to make such further inquiry or investigation, it shall be entitled to
examine the books, records and premises of the Issuer, at the Issuer's expense,
at reasonable times during normal business hours, personally or by agent or
attorney;
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15
(e) the Book-Entry Depositary may execute any of the powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Book-Entry Depositary shall not be responsible for any
misconduct or negligence on the part of any such agent or attorney appointed
with due care;
(f) the Book-Entry Depositary shall be under no obligation to exercise any
of the rights or powers vested in it by this Agreement at the request, order or
direction of Euroclear or Cedel pursuant to this Agreement, unless Euroclear or
Cedel, as applicable, shall have offered or caused to be offered to the
Book-Entry Depositary security or indemnity reasonably satisfactory to it
against the costs, expenses and liabilities that might be incurred by it in
compliance with such request or direction, provided that such request, order or
direction shall not expose the Book-Entry Depositary to personal liability;
(g) the Book-Entry Depositary shall not be liable for any action taken or
omitted by it in good faith and reasonably believed by it to be authorized or
within the discretion, rights or powers conferred upon it by this Agreement; and
(h) whenever in the administration of its duties under this Agreement the
Book-Entry Depositary shall deem it necessary or desirable that a matter be
proved or established prior to taking or suffering or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence or bad faith on the
part of the Book-Entry Depositary, be deemed to be conclusively proved and
established by an Officers' Certificate delivered to the Book-Entry Depositary,
and such certificate, in the absence of negligence or bad faith on the part of
the Book-Entry Depositary, shall be full warrant to the Book-Entry Depositary
for any action taken, suffered or omitted by it under the provisions of the
Agreement, upon the faith thereof.
SECTION 3.4 Not Responsible for Recitals or Issuance of Notes. The recitals
contained in the Indenture and in the Notes, except the Trustee's certificates
of authentication, shall be taken as the statements of the Issuer, and the
Book-Entry Depositary assumes no responsibility for their correctness. The
Book-Entry Depositary makes no representation as to (i) the validity or
sufficiency of the Indenture or of the Notes, (ii) the sufficiency of this
Agreement or (iii) the validity, with respect to the Issuer, of this Agreement.
The Book-Entry Depositary shall not be accountable for the use or
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16
application by the Issuer of the proceeds with respect to the Notes.
SECTION 3.5 Money Held in Trust. Money held by the Book-Entry Depositary in
trust hereunder need not be segregated from other funds held by the Book-Entry
Depositary, except to the extent required by law. The Book-Entry Depositary
shall be under no obligation to invest or pay interest on any money received by
it hereunder, except as otherwise agreed in writing with the Issuer. Any
interest accrued on funds deposited with the Book-Entry Depositary under this
Agreement shall be paid to the Issuer from time to time and the Depositary shall
have no claim to any such interest.
SECTION 3.6 Compensation and Reimbursement. The Issuer and Holdings,
jointly and severally agree:
(a) to pay to the Book-Entry Depositary from time to time reasonable
compensation agreed in writing for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law with regard to the
compensation of a trustee of an express trust);
(b) except as otherwise expressly provided herein, to reimburse the
Book-Entry Depositary upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Book-Entry Depositary in
accordance with any provision of this Agreement (including the reasonable
compensation, expenses and disbursements of its agents and counsel), except any
such expense, disbursement or advance as may be attributable to its negligence,
bad faith or willful misconduct; and
(c) to indemnify the Book-Entry Depositary and its directors, officers,
agents and employees for, and to hold it harmless against, any loss, liability
or expense incurred without negligence, bad faith on its part, arising out of or
in connection with the acceptance or administration of this Agreement and its
duties hereunder, including the costs and expenses of defending itself against
or investigating any claim of liability in connection with the exercise or
performance of any of its powers or duties hereunder.
The obligations of the Issuer under this Section to compensate and
indemnify the Book-Entry Depositary and to pay or reimburse the Book-Entry
Depositary for reasonable expenses, disbursements and advances shall survive the
satisfaction and discharge of this Agreement or the earlier of the resignation
or the removal of the Book-Entry Depositary. Such obligations shall be a senior
claim to that of the Notes upon all property and funds held or
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17
collected by the Book-Entry Depositary as such, except funds held in trust for
the benefit of the holders of the Notes.
SECTION 3.7 Book-Entry Depositary Required: Eligibility. At all times when
there is a Book-Entry Depositary hereunder, such Book-Entry Depositary shall be
a corporation organized and doing business under the laws of the United States
of America, any State thereof or the District of Columbia, having, together with
its parent, a combined capital and surplus of at least $50,000,000, subject to
supervision or examination by federal, state or District of Columbia authority,
willing to act on reasonable terms. Such corporation shall have its principal
place of business in the Borough of Manhattan, The City of New York, if there be
such a corporation in such location willing to act upon reasonable and customary
terms and conditions. If such corporation, or its parent, publishes reports of
condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such corporation shall be deemed to
be its combined capital and surplus as set forth in its most recent report of
condition so published. The Book-Entry Depositary hereunder shall at all times
be the Trustee under the Indenture, subject to receipt by the Issuer of an
Opinion of Counsel that the same Person is precluded by law from acting in such
capacities. If at any time the Book-Entry Depositary 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 3.8 Resignation and Removal, Appointment of Successor. (a) No
resignation or removal of the Book-Entry Depositary and no appointment of a
successor Book-Entry Depositary pursuant to this Article shall become effective
until (i) the approval in writing of a successor Book-Entry Depositary by the
Issuer and the acceptance of the appointment by such successor Book-Entry
Depositary in accordance with the applicable requirements of Section 3.9 hereof
or (ii) the issuance of Registered Notes in accordance with Section 2.4 hereof
and the Indenture.
(b) The Book-Entry Depositary may resign all of its rights and duties with
respect to the Global Notes and the Depositary Interests by giving written
notice thereof to the Issuer and Euroclear and Cedel in accordance with Sections
4.1 and 4.2 hereof. The Book-Entry Depositary may be removed at any time upon 30
days' notice by the filing with it of an instrument in writing signed on behalf
of the Issuer and specifying such removal and the date when it is intended to
become effective. If the instrument of
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acceptance by a successor Book-Entry Depositary or the approval by the Issuer
required by Section 3.9 hereof shall not have been delivered to the Book-Entry
Depositary, within 30 days after the giving of such notice of resignation, the
resigning Book-Entry Depositary may petition any court of competent jurisdiction
for the appointment of a successor Book-Entry Depositary.
(c) If at any time:
(1) the Book-Entry Depositary shall cease to be eligible under Section
3.7 hereof or shall cease to be eligible as Trustee under the Indenture,
and shall fail to resign after written request therefor by the Issuer or
Euroclear and Cedel, or
(2) the Book-Entry Depositary shall become incapable of acting with
respect to the Global Notes and the Depositary Interests, or shall be
adjudged bankrupt or insolvent, or a receiver or liquidator of the
Book-Entry Depositary or its property shall be appointed or any public
officer shall take charge or control of the Book-Entry Depositary or its
property or affairs for the purpose of rehabilitation, conservation or
liquidation,
then, in any such case, (i) the Issuer, by Board Resolution, may remove the
Book-Entry Depositary and appoint a successor Book-Entry Depositary and (ii) if
the Issuer does not remove the Book-Entry Depositary and appoint a successor
pursuant to clause (i), Euroclear and Cedel upon the direction of holders of at
least a majority of the total aggregate principal amount of the Book-Entry Notes
outstanding, may petition any court of competent jurisdiction for the removal of
the Book-Entry Depositary with respect to the Global Notes and the Depositary
Interests and the appointment of a successor Book-Entry Depositary or Book-Entry
Depositaries unless Registered Notes have been issued in accordance with the
Indenture. Such court may thereupon, after such notice, if any, as it may deem
proper and prescribe, remove the Book-Entry Depositary with respect to the
Global Notes and the Depositary Interests and appoint a successor Book-Entry
Depositary for the Global Notes and the Depositary Interests.
(d) If the Book-Entry Depositary shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Book-Entry
Depositary for any cause, the Issuer, by Board Resolution, shall promptly
appoint a successor Book-Entry Depositary (other than the Issuer) and shall
comply with the applicable requirements of Section 3.9 hereof. If no successor
Book-Entry Depositary with respect
<PAGE>
19
to the Notes shall have been so appointed by the Issuer and accepted appointment
in the manner required by Section 3.9, Euroclear and Cedel, upon direction of
holders of at least a majority of the total aggregate principal amount of
Book-Entry Notes outstanding, may petition any court of competent jurisdiction
for the appointment of a successor Book-Entry Depositary unless Registered Notes
have been issued in accordance with the Indenture and Section 2.4 hereof.
(e) The Issuer shall give, or shall cause such successor Book-Entry
Depositary to give, notice of each resignation and each removal of a Book-Entry
Depositary and each appointment of a successor Book-Entry Depositary to
Euroclear and Cedel in accordance with Section 4.2 hereof. Each notice shall
include the name of the successor Book-Entry Depositary and the address of its
Corporate Trust Office.
(f) If a Book-Entry Depositary hereunder shall resign, it shall not be
relieved of any responsibility for its actions or omissions hereunder solely by
virtue of such resignation.
SECTION 3.9 Acceptance of Appointment by Successor. (a) In case of the
appointment hereunder of a successor Book-Entry Depositary, every such successor
Book-Entry Depositary so appointed shall execute, acknowledge and deliver to the
Issuer and to the retiring Book-Entry Depositary an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Book-Entry
Depositary shall become effective and such successor Book-Entry Depositary,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, agencies and duties of the retiring Book-Entry Depositary, with
like effect as if originally named as Book-Entry Depositary hereunder; but, on
the request of the Issuer or the successor Book-Entry Depositary, such retiring
Book-Entry Depositary shall, upon payment of all amounts due and payable to it
pursuant to Section 3.6 hereof, execute and deliver an instrument transferring
to such successor Book-Entry Depositary all the rights and powers of the
retiring Book-Entry Depositary and shall duly assign, transfer and deliver to
such successor Book Entry Depositary all property and money held by such
retiring Book-Entry Depositary hereunder. Any retiring Book-Entry Depositary
shall, nonetheless, retain a prior claim upon all property or funds held or
collected by such Book-Entry Depositary to secure any amounts then due it
pursuant to Section 3.6 hereof. The Book-Entry Depositary will not be liable for
any acts or omissions of any successor Book-Entry Depositary appointed pursuant
to Section 3.8 hereof.
<PAGE>
20
(b) Upon request of any such successor Book-Entry Depositary, the Issuer
shall execute any and all instruments for more fully and certainly vesting in
and confirming to such successor Book-Entry Depositary all such rights, powers
and agencies referred to in paragraph (a) of this Section.
(c) No successor Book-Entry Depositary shall accept its appointment unless
at the time of such acceptance such successor Book Entry Depositary shall be
eligible to serve as such under this Article.
(d) Upon acceptance of appointment by any successor Book-Entry Depositary
as provided in this Section, the Issuer shall give notice thereof to Euroclear
and Cedel in accordance with Section 4.02 hereof. If the acceptance of
appointment is substantially contemporaneous with the resignation of the
Book-Entry Depositary, then the notice called for by the preceding sentence may
be combined with the notice called for by Section 3.8 hereof. If the Issuer
fails to give such notice within ten days after acceptance of appointment by the
successor Book-Entry Depositary, the successor Book-Entry Depositary shall cause
such notice to be given at the expense of the Issuer.
SECTION 3.10 Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Book-Entry Depositary 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 Book-Entry Depositary shall be
a party, or any corporation succeeding to all or substantially all the agency
business of the Book-Entry Depositary, shall be the successor of the Book-Entry
Depositary hereunder, without the execution or filing of any paper or any
further act on the part of any of the parties hereto; provided that such
corporation shall be otherwise eligible to serve as Book-Entry Depositary under
this Article.
ARTICLE IV
MISCELLANEOUS PROVISIONS
SECTION 4.1 Notices to Book-Entry Depositary or Issuer. Any request,
demand, authorization, direction, notice, consent, or waiver or other document
provided or permitted by this Agreement to be made upon, given or furnished to,
or filed with:
(a) the Book-Entry Depositary by Euroclear, Cedel, the Trustee or by the
Issuer shall be sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if made, given, furnished or filed in writing and
<PAGE>
21
personally delivered or mailed, by overnight delivery or certified mail, postage
prepaid, to the Book-Entry Depositary at the following address:
The Chase Manhattan Bank
450 West 33rd Street
New York, NY 10001
Attention: Global Trust Services
Facsimile: 1-212-946-7799
or at any other address furnished in writing by the Book- Entry Depositary to
Euroclear, Cedel, the Trustee and the Issuer; or
(b) the Issuer by the Book-Entry Depositary, Euroclear or Cedel shall be
sufficient for every purpose hereunder (unless otherwise herein expressly
provided) if made, given, furnished or filed in writing and personally delivered
or mailed, by overnight delivery or first-class postage prepaid, to the
following address:
RSL Communications PLC
767 Fifth Avenue
Suite 4300
New York, New York 10153
with a copy to:
George E.B. Maguire
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Facsimile: (212) 909-6836
or at any other addresses furnished in writing to the Book-Entry Depositary by
the Issuer. Any communication sent pursuant to this Section 4.1 shall be deemed
given when delivered, if personally delivered or sent by overnight delivery and
three days after deposit in the U.S. mail, if sent by certified mail.
SECTION 4.2 Notice to the Depositary; Waiver. Where this Agreement provides
for notice to Euroclear and Cedel of any event, such notice shall be
sufficiently given if in writing and mailed, first-class postage prepaid, to
Euroclear and Cedel at the addresses that Euroclear and Cedel have provided in
writing to the Book-Entry Depositary, in each case not later than the latest
date, and not earlier than the earliest date, prescribed for the giving of such
notice. Where this Agreement 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
<PAGE>
22
event, and such waiver shall be the equivalent of such notice. Waivers of notice
by Euroclear and Cedel shall be filed with the Book-Entry Depositary, 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 Book-Entry Depositary
shall constitute a sufficient notification for every purpose hereunder.
SECTION 4.3 Effect of Headings and Table of Contents. The Article and
Section headings herein are for convenience only and shall not affect the
construction hereof.
SECTION 4.4 Successors and Assigns. All covenants and agreements in this
Agreement and the Notes by the Issuer shall bind its successors and assigns,
whether so expressed or not.
SECTION 4.5 Separability Clause. In case any provision in this Agreement or
in the Notes shall be invalid, illegal or unenforceable, the validity. legality
and enforceability of the remaining provisions hereof and thereof shall not in
any way be affected or impaired thereby.
SECTION 4.6 Benefits of Agreement. Nothing in this Agreement, the Notes, or
the Indenture, express or implied, shall give to any Person, other than the
parties hereto, Euroclear and Cedel and their successors hereunder, any benefits
or any legal or equitable right, remedy or claim under this Agreement. By the
acceptance of the Book-Entry Notes, Euroclear and Cedel and the holders of the
Book-Entry Notes shall be party to this Agreement and shall be bound by all of
the terms and conditions hereof and of the Indenture and the Notes.
SECTION 4.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, BUT WITHOUT
GIVING EFFECT TO AP PLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 4.8 Jurisdiction. The Issuer agrees that any legal suit, action or
proceeding against the Issuer brought by Euroclear, Cedel or the Book-Entry
Depositary arising out of or based upon this Agreement may be
<PAGE>
23
instituted in any state or federal court in the Borough of Manhattan, The City
of New York, and waives any objection which it may now or hereafter have to the
laying of venue of any such proceeding and irrevocably submits to the
non-exclusive jurisdiction of such courts in any suit, action or proceeding. The
Issuer has appointed RSL Communications N. America, Inc., 767 Fifth Avenue,
Suite 4300, New York, New York 10153, as its authorized agent (together with any
successor, the "Authorized Agent") upon whom process may be served in any legal
suit, action or proceeding arising out of or based upon this Agreement which may
be instituted in any state or federal court in the Borough of Manhattan, The
City of New York, by Euroclear, Cedel or the Book-Entry Depositary and expressly
accepts the nonexclusive jurisdiction of any such court in respect of any such
action. The Issuer represents and warrants that the Authorized Agent has agreed
to act as said agent for service of process, and the Issuer agrees to take any
and all action, including the filing of any and all documents and instruments,
that may be necessary to continue such appointment in full force and effect as
aforesaid. Service of process upon the Authorized Agent shall be deemed, in
every respect, effective service of process upon the Issuer. Notwithstanding the
foregoing, any action based on this Agreement may be instituted by the
Book-Entry Depositary in any competent court in England.
SECTION 4.9 Counterparts. This Agreement may be executed in any number of
counterparts by the parties hereto on separate counterparts, each of which, when
so executed and delivered, shall be deemed an original, but all of which shall
together constitute one and the same instrument.
SECTION 4.10 Inspection of Agreement. A copy of this Agreement shall be
available at all reasonable times during normal business hours at the Corporate
Trust Office of the Book-Entry Depositary for inspection by the beneficial
owners of the Book-Entry Notes.
SECTION 4.11 Satisfaction and Discharge. Upon Issuer Request to terminate
this Agreement, this Agreement shall cease to be of further effect and the
Book-Entry Depositary shall execute proper instruments acknowledging
satisfaction and discharge of this Agreement, when (i) the Indenture has been
satisfied and discharged pursuant to the provisions thereof or Registered Notes
have been issued and all Global Notes have been canceled in accordance with the
provisions of the Indenture and Sections 3.05 and 3.09 thereof, (ii) the Issuer
has paid or caused to be paid all sums payable hereunder by the Issuer and (iii)
the Issuer has delivered to the Book-Entry Depositary an Officers' Certificate,
stating that all conditions precedent provided
<PAGE>
24
herein relating to the satisfaction and discharge of this Agreement have been
complied with.
SECTION 4.12 Amendments. The Issuer and the Book-Entry Depositary may amend
this Agreement without the consent of Euroclear and Cedel:
(a) to cure any ambiguity, defect or inconsistency, provided that such
amendment or supplement does not adversely affect the rights of Euroclear and
Cedel or any holder of Book-Entry Notes;
(b) to evidence the succession of another person to the Issuer (when a
similar amendment with respect to the Indenture is being executed) and the
assumption by any such successor of the covenants of the Issuer herein;
(c) to evidence or provide for a successor Book-Entry Depositary,
(d) to make any amendment, change or supplement that does not adversely
affect Euroclear and Cedel or holders of Book-Entry Notes;
(e) to add to the covenants of the Issuer or the Book-Entry Depositary; or
(f) to comply with the United States federal and United Kingdom. securities
laws.
No amendment may be made to this Agreement that adversely affects Euroclear
and Cedel without the consent of Euroclear and Cedel and no amendment may be
made to this Agreement that adversely affects the holders of Book-Entry Notes
without the consent of a majority of the aggregate principal amount of
Book-Entry Notes outstanding.
SECTION 4.13 Book-Entry Depositary To Sign Amendments. The Book-Entry
Depositary shall sign any amendment authorized pursuant to Section 4.12 hereof
if the amendment does not adversely affect the rights, duties, liabilities or
immunities of the Book-Entry Depositary. If it does, the Book-Entry Depositary
may but need not sign it. In signing such amendment the Book-Entry Depositary
shall be entitled to receive indemnity satisfactory to it and to receive, and
shall be fully protected in reasonably relying upon. an Officers' Certificate
(which need only cover the matters set forth in clause (a) below) and an Opinion
of Counsel to the effect that:
(a) such amendment is authorized or permitted by this Agreement;
<PAGE>
25
(b) the Issuer has all necessary corporate power and authority to execute
and deliver the amendment and that the execution, delivery and performance of
such amendment has been duly authorized by all necessary corporate action;
(c) the execution, delivery and performance of the amendment do not
conflict with, or result in the breach of or constitute a default under any of
the terms, conditions or provisions of (i) this Agreement, (ii) the Memorandum
and Articles of Association of the Issuer, (iii) any law or regulation
applicable to the Issuer, (iv) any material order, writ, injunction or decree of
any court or governmental instrumentality applicable to the Issuer or (v) any
material agreement or instrument to which the Issuer is subject; and
(d) such amendment has been duly and validly executed and delivered by the
Issuer, and this Agreement together with such amendment constitutes a legal,
valid and binding obligation of the Issuer enforceable against the Issuer in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally and general equitable principles.
[signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
RSL COMMUNICATIONS PLC
By:
-----------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK
as Book-Entry Depositary
By:
-----------------------------------
Name:
Title:
With respect to the provisions
of Section 3.6 only
RSL COMMUNICATIONS, LTD.
By:
-------------------------
Name:
Title:
<PAGE>
EXECUTION COPY
================================================================================
RSL COMMUNICATIONS PLC
As Issuer
RSL COMMUNICATIONS, LTD.
As Guarantor
TO
THE CHASE MANHATTAN BANK
As Trustee
-------------------
Indenture
Dated as of March 16, 1998
-------------------
10% SENIOR DISCOUNT NOTES DUE 2008
================================================================================
<PAGE>
Certain Sections of this Indenture relating to
Sections 3.10 through 3.18 of the
Trust Indenture Act of 1939:
Trust Indenture Indenture
Act Section Section
- --------------- ---------
ss. 3.10(a)(1) ................................................. 609
(a)(2) ................................................. 609
(a)(3) ................................................. Not
Applicable
(a)(4) ................................................. Not
Applicable
(b) ................................................. 6.08
6.10
ss. 3.11(a) ................................................. 6.13
(b) ................................................. 6.13
ss. 3.12(a) ................................................. 7.01
7.02(a)
(b) ................................................. 7.02(b)
(c) ................................................. 7.02(c)
ss. 3.13(a) ................................................. 7.03(a)
(a)(4) ................................................. 7.03(a)
(b) ................................................. 7.03(a)
(c) ................................................. 7.03(a)
(d) ................................................. 7.03(b)
ss. 3.14(a) ................................................. 7.04
10.18
(b) ................................................. Not
Applicable
(c)(1) ................................................. 1.02
(c)(2) ................................................. 1.02
(c)(3) ................................................. Not
Applicable
(d) ................................................. Not
Applicable
(e) ................................................. 1.02
ss. 3.15(a) ................................................. 6.01
(b) ................................................. 6.02
(c) ................................................. 6.01
(d) ................................................. 6.01
(e) ................................................. 5.14
- ---------------
Note: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of the Indenture.
-i-
<PAGE>
Trust Indenture Indenture
Act Section Section
- --------------- ---------
ss. 3.16(a)(1)(A) ................................................. 5.02
5.12
(a)(1)(B) ................................................. 5.13
(a)(2) ................................................. Not
Applicable
(b) ................................................. 5.08
(c) ................................................. 1.04
ss. 3.17(a)(1) ................................................. 5.03
(a)(2) ................................................. 5.04
(b) ................................................. 10.03
ss. 3.18(a) ................................................. 1.07
- ---------------
Note: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of the Indenture.
-ii-
<PAGE>
TABLE OF CONTENTS
Page
----
Parties........................................................................1
Recitals of the Issuer ........................................................1
ARTICLE I
Definitions and Other Provisions
of General Application
SECTION 1.01. Definitions ....................................................2
Act...................................................................2
Accreted Value........................................................2
Acquired Debt.........................................................4
Additional Amounts....................................................4
Affiliate.............................................................4
Applicable Procedures.................................................4
Asset Disposition.....................................................4
Average Life..........................................................5
beneficial interest...................................................5
Board of Directors....................................................5
Board Resolution......................................................5
Book-Entry Depositary.................................................5
Business Day..........................................................5
Capital Lease Obligation..............................................5
Capital Stock.........................................................6
Cedel.................................................................6
Change of Control.....................................................6
Commission............................................................6
Common Depositary.....................................................6
Common Stock..........................................................6
Consolidated Cash Flow Available for Fixed Charges....................6
Consolidated Income Tax Expense.......................................7
Consolidated Interest Expense.........................................7
Consolidated Net Income...............................................8
Consolidated Net Worth................................................8
Consolidated Tangible Assets..........................................8
Corporate Trust Office................................................8
corporation...........................................................9
Credit Facility.......................................................9
- ---------------
Note: This table of contents shall not, for any purpose, be deemed to be
part of the Indenture.
-iii-
<PAGE>
Page
----
Debt..................................................................9
Defaulted Interest...................................................10
Definitive Security..................................................10
Deposit Agreement....................................................10
Depositary Interest..................................................10
Deutsche mark........................................................10
Disqualified Stock...................................................10
Dollar and the Symbol "$"............................................11
Eligible Institution.................................................11
Equity Clawback......................................................11
Euroclear............................................................11
Event of Default.....................................................11
Exchange Act.........................................................11
Exchange and Registration Rights Agreement...........................11
Exchange Offer.......................................................11
Exchange Offer Registration Statement................................11
Exchange Security....................................................11
Existing Stockholders................................................12
Expiration Date......................................................12
Global Security......................................................12
Government Securities................................................12
Guarantee............................................................12
Guarantor............................................................13
Holder...............................................................13
Incremental Paid-in Capital..........................................13
Incur................................................................13
Indenture............................................................13
Indirect Participant.................................................13
Initial Purchasers...................................................14
Interest Payment Date................................................14
Interest Rate or Currency Protection Agreement.......................14
Investment...........................................................14
Issuer...............................................................15
Issuer Request or Issuer Order.......................................15
Lien.................................................................15
Listing Failure......................................................15
Marketable Securities................................................15
Maturity.............................................................16
Net Available Proceeds...............................................16
Offer to Purchase....................................................17
Officers' Certificate................................................19
- ---------------
Note: This table of contents shall not, for any purpose, be deemed to be
part of the Indenture.
-iv-
<PAGE>
Page
----
Opinion of Counsel...................................................20
Original Securities..................................................20
Outstanding..........................................................20
Participant..........................................................21
Paying Agent.........................................................21
Permitted Interest Rate or Currency Protection
Agreement............................................................21
Permitted Investment.................................................21
Permitted Liens......................................................22
Person...............................................................23
Predecessor Security.................................................23
Purchase Agreement...................................................23
Purchase Money Debt..................................................23
readily marketable cash equivalents..................................23
Receivables..........................................................24
Receivables Sale.....................................................24
Redemption Date......................................................24
Redemption Price.....................................................24
Registered Securities................................................24
Regular Record Date..................................................24
Regulation S.........................................................24
Regulation S Certificate.............................................24
Regulation S Global Security.........................................24
Regulation S Legend..................................................24
Regulation S Securities..............................................25
Related Person.......................................................25
Resale Registration Statement........................................25
Responsible Officer..................................................25
Restricted Global Security...........................................25
Restricted Period....................................................25
Restricted Securities................................................26
Restricted Securities Certificate....................................26
Restricted Securities Legend.........................................26
Restricted Subsidiary................................................26
RSLNA................................................................26
Rule 144A............................................................26
Rule 144A Securities.................................................26
Securities...........................................................26
Securities Act.......................................................26
Securities Act Legend................................................26
Securities Guarantee.................................................26
- ---------------
Note: This table of contents shall not, for any purpose, be deemed to be
part of the Indenture.
-v-
<PAGE>
Page
----
Security Register and Security Registrar.............................26
Significant Subsidiary...............................................26
Special Interest.....................................................27
Special Record Date..................................................27
Stated Maturity......................................................27
Step-Down Date.......................................................27
Step-Up..............................................................27
Strategic Investor...................................................27
Subordinated Debt....................................................27
Subsidiary...........................................................28
Subsidiary Guarantor.................................................29
Substitute Securities................................................29
Successor Security...................................................29
Tax..................................................................29
Taxing Authority.....................................................29
Telecommunications Assets............................................29
Telecommunications Business..........................................29
Treaty...............................................................30
Trustee..............................................................30
Trust Indenture Act..................................................30
Unrestricted Securities Certificate..................................30
Unrestricted Subsidiary..............................................30
Vice President.......................................................31
Voting Stock.........................................................31
Wholly Owned Subsidiary..............................................31
SECTION 1.02. Compliance Certificates and Opinions...........................31
SECTION 1.03. Form of Documents Delivered to Trustee.........................32
SECTION 1.04. Acts of Holders; Record Dates..................................33
SECTION 1.05. Notices, Etc., to Trustee, Issuer and
Guarantor....................................................35
SECTION 1.06. Notice to Holders; Waiver......................................36
SECTION 1.07. Application of Trust Indenture Act.............................37
SECTION 1.08. Effect of Headings and Table of Contents.......................37
SECTION 1.09. Successors and Assigns.........................................37
SECTION 1.10. Separability Clause............................................37
SECTION 1.11. Benefits of Indenture..........................................37
SECTION 1.12. Governing Law..................................................37
SECTION 1.13. Legal Holidays.................................................37
SECTION 1.14. Agent for Service; Submission to
Jurisdiction; Waiver of Immunities...........................38
- ---------------
Note: This table of contents shall not, for any purpose, be deemed to be
part of the Indenture.
-vi-
<PAGE>
Page
----
SECTION 1.15. Currency Indemnity.............................................38
SECTION 1.16. Substitution of Currency.......................................39
ARTICLE II
Security Forms
SECTION 2.01. Forms Generally................................................40
SECTION 2.02. Form of Face of Security.......................................41
SECTION 2.03. Form of Reverse of Security....................................47
SECTION 2.04. Form of Trustee's Certificate of Authentication ...............52
ARTICLE III
The Securities
SECTION 3.01. Title and Terms................................................52
SECTION 3.02. Denominations..................................................54
SECTION 3.03. Execution, Authentication, Delivery and Dating.................54
SECTION 3.04. Temporary Securities...........................................56
SECTION 3.05. Registration, Registration of Transfer and Exchange............56
SECTION 3.06. Mutilated, Destroyed, Lost and Stolen Securities...............63
SECTION 3.07. Payment of Interest; Interest Rights Preserved.................64
SECTION 3.08. Persons Deemed Owners..........................................65
SECTION 3.09. Cancelation ...................................................66
SECTION 3.10. Computation of Interest........................................66
SECTION 3.11. ISIN Numbers and Common Code Numbers...........................66
- ---------------
Note: This table of contents shall not, for any purpose, be deemed to be
part of the Indenture.
-vii-
<PAGE>
Page
----
ARTICLE IV
Guarantee Of Securities
SECTION 4.01. Guarantee ...................................................67
SECTION 4.02. Obligations Unconditional......................................69
SECTION 4.03. Notice to Trustee..............................................69
ARTICLE V
Remedies
SECTION 5.01. Events of Default..............................................69
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment.............72
SECTION 5.03. Collection of Indebtedness and Suits for
Enforcement by Trustee.......................................73
SECTION 5.04. Trustee May File Proofs of Claim...............................74
SECTION 5.05. Trustee May Enforce Claims Without
Possession of Securities.....................................75
SECTION 5.06. Application of Money Collected.................................75
SECTION 5.07. Limitation on Suits............................................75
SECTION 5.08. Unconditional Right of Holders To Receive
Principal, Premium and Interest..............................76
SECTION 5.09. Restoration of Rights and Remedies.............................76
SECTION 5.10. Rights and Remedies Cumulative.................................77
SECTION 5.11. Delay or Omission Not Waiver...................................77
SECTION 5.12. Control by Holders.............................................77
SECTION 5.13. Waiver of Past Defaults........................................78
SECTION 5.14. Undertaking for Costs..........................................78
SECTION 5.15. Waiver of Stay or Extension Laws...............................79
ARTICLE VI
The Trustee
SECTION 6.01. Certain Duties and Responsibilities............................79
SECTION 6.02. Notice of Defaults.............................................80
SECTION 6.03. Certain Rights of Trustee......................................81
- ---------------
Note: This table of contents shall not, for any purpose, be deemed to be
part of the Indenture.
-viii-
<PAGE>
Page
----
SECTION 6.04. Not Responsible for Recitals
or Issuance of Securities....................................82
SECTION 6.05. May Hold Securities............................................82
SECTION 6.06. Money Held in Trust............................................83
SECTION 6.07. Compensation and Reimbursement.................................83
SECTION 6.08. Disqualification; Conflicting Interests........................84
SECTION 6.09. Corporate Trustee Required; Eligibility........................84
SECTION 6.10. Resignation and Removal; Appointment of Successor..............85
SECTION 6.11. Acceptance of Appointment by Successor.........................86
SECTION 6.12. Merger, Conversion, Consolidation or
Succession to Business.......................................87
SECTION 6.13. Preferential Collection of Claims Against
Issuer or Guarantor..........................................87
SECTION 6.14. Appointment of Authenticating Agent............................87
SECTION 6.15. Withholding Taxes..............................................89
ARTICLE VII
Holders' Lists and Reports by Trustee and Issuer
SECTION 7.01. Issuer to Furnish Trustee Names and
Addresses of Holder..........................................90
SECTION 7.02. Preservation of Information;
Communications to Holders....................................90
SECTION 7.03. Reports by Trustee.............................................91
SECTION 7.04. Reports by Issuer and Guarantor................................91
SECTION 7.05. Officers' Certificate with Respect to
Change in Interest Rates.....................................91
ARTICLE VIII
Merger, Consolidation, Etc.
SECTION 8.01. Mergers, Consolidations and Certain
Sales of Assets..............................................92
SECTION 8.02. Successor Substituted..........................................93
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Note: This table of contents shall not, for any purpose, be deemed to be
part of the Indenture.
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ARTICLE IX
Supplemental Indentures
SECTION 9.01. Supplemental Indentures Without Consent of Holders.............94
SECTION 9.02. Supplemental Indentures with Consent of Holders................95
SECTION 9.03. Execution of Supplemental Indentures...........................96
SECTION 9.04. Effect of Supplemental Indentures..............................96
SECTION 9.05. Conformity with Trust Indenture Act............................96
SECTION 9.06. Reference in Securities to Supplemental Indentures.............96
ARTICLE X
Covenants
SECTION 10.01. Payment of Principal, Premium and Interest....................97
SECTION 10.02. Maintenance of Office or Agency...............................97
SECTION 10.03. Money for Security Payments To Be Held in Trust...............97
SECTION 10.04. Existence ...................................................99
SECTION 10.05. Maintenance of Properties.....................................99
SECTION 10.06. Payment of Taxes and Other Claims............................100
SECTION 10.07. Maintenance of Insurance.....................................100
SECTION 10.08. Limitation on Consolidated Debt..............................100
SECTION 10.09. Additional Amounts...........................................104
SECTION 10.10. Limitation on Restricted Payments............................106
SECTION 10.11. Limitation on Dividend and Other
Payment Restrictions Affecting
Restricted Subsidiaries....................................109
SECTION 10.12. Limitation on Transactions with
Affiliates and Related Persons.............................110
SECTION 10.13. Limitation on Asset Dispositions.............................111
SECTION 10.14. Limitation on Issuances and Sales of
Capital Stock of Restricted Subsidiaries...................113
SECTION 10.15. Limitation on Liens..........................................113
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Note: This table of contents shall not, for any purpose, be deemed to be
part of the Indenture.
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SECTION 10.16. Limitation on Issuance of Guarantees
of Debt by Restricted Subsidiaries.........................114
SECTION 10.17. Change of Control............................................115
SECTION 10.18. Provision of Financial Information...........................116
SECTION 10.19. Statement by Officers as to Default..........................117
SECTION 10.20. Waiver of Certain Covenants..................................117
SECTION 10.21. Paying Agent.................................................118
SECTION 10.22. Internal Revenue Service Filing..............................118
ARTICLE XI
Redemption of Securities
SECTION 11.01. Right of Redemption..........................................118
SECTION 11.02. Applicability of Article.....................................120
SECTION 11.03. Election To Redeem; Notice to Trustee........................120
SECTION 11.04. Securities To Be Redeemed Pro Rata...........................120
SECTION 11.05. Notice of Redemption.........................................121
SECTION 11.06. Deposit of Redemption Price..................................122
SECTION 11.07. Securities Payable on Redemption Date........................122
SECTION 11.08. Securities Redeemed in Part..................................122
ARTICLE XII
Discharge of Indenture
SECTION 12.01. Termination of Issuer's Obligations..........................123
SECTION 12.02. Defeasance and Discharge of Indenture........................124
SECTION 12.03. Defeasance of Certain Obligations............................127
SECTION 12.04. Application of Trust Money...................................130
SECTION 12.05. Repayment to Issuer..........................................130
SECTION 12.06. Reinstatement................................................130
SECTION 12.07. Insiders ..................................................131
TESTIMONIUM..................................................................132
SIGNATURES AND SEALS.........................................................132
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Note: This table of contents shall not, for any purpose, be deemed to be
part of the Indenture.
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ANNEX A -- Form of Regulation S Certificate
ANNEX B -- Form of Restricted Securities Certificate
ANNEX C -- Form of Unrestricted Securities Certificate
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Note: This table of contents shall not, for any purpose, be deemed to be
part of the Indenture.
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INDENTURE, dated as of March 16, 1998, between RSL COMMUNICATIONS PLC, a
United Kingdom corporation, as issuer (the "Issuer"), having its principal
office at Victoria House, London Square, Guilford, Surrey, England GU1 1UJ, RSL
COMMUNICATIONS, LTD., a Bermuda corporation, as guarantor (the "Guarantor"),
having its principal office at Clarendon House, Church Street, Hamilton HM CX,
Bermuda, and THE CHASE MANHATTAN BANK, a corporation duly organized and existing
under the laws of the State of New York, as Trustee (herein called the
"Trustee").
RECITALS OF THE ISSUER
The Issuer has duly authorized the creation of DM296,000,000 aggregate
principal amount at maturity of the Issuer's 10% Senior Discount Notes due 2008
denominated in Deutsche marks (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 and/or Exchange Securities, each as defined
herein. The Original Securities and the Exchange Securities shall rank pari
passu with one another and shall together constitute a single class of
securities.
All things necessary (i) 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, (ii) to make the Securities Guarantee, when
executed and delivered by the Guarantor hereunder, the valid obligation of the
Guarantor, and (iii) to make this Indenture a valid agreement of the Issuer and
the Guarantor, in accordance with 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
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proportionate benefit of all Holders of the Securities, as follows:
ARTICLE I
Definitions and Other Provisions
of General Application
SECTION 1.01. Definitions. For all purposes of this Indenture, except as
otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(b) 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;
(c) 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 accepted
accounting principles" with respect to any computation required or
permitted hereunder shall mean such accounting principles as are generally
accepted as consistently applied by the Issuer or the Guarantor, as
applicable, at the date hereof; and
(d) 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.
Certain terms, used principally in Article Six, are defined in that
Article.
"Act", when used with respect to any Holder, has the meaning specified in
Section 1.04.
"Accreted Value" is defined to mean, for any "Specified Date", the amount
calculated pursuant to clauses (i), (ii), (iii) or (iv) below for each DM1,000
principal amount at maturity of Securities:
(i) if the Specified Date occurs on one or more of the following dates
(each a "Semiannual Accrual Date"),
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the Accreted Value will equal the amount set forth below for such
Semiannual Accrual Date:
Semiannual Accreted
Accrual Date Value
September 15, 1998 DM644.61
March 15, 1999 DM676.84
September 15, 1999 DM710.68
March 15, 2000 DM746.21
September 15, 2000 DM783.53
March 15, 2001 DM822.70
September 15, 2001 DM863.84
March 15, 2002 DM907.03
September 15, 2002 DM952.38
March 15, 2003 DM1,000.00
(i) if the Specified Date occurs before the first Semiannual Accrual
Date, the Accreted Value will equal the sum of (a) DM614.08; and (b) an
amount equal to the product of (x) the Accreted Value for the first
Semiannual Accrual Date less DM614.08 multiplied by (y) a fraction, the
numerator of which is the number of days from the issue date of the
Securities to the Specified Date, using a 360-day year of twelve 30-day
months, and the denominator of which is the number of days elapsed from the
issue date of the Securities to the first Semiannual Accrual Date, using a
360-day year of twelve 30-day months;
(ii) if the Specified Date occurs between two Semiannual Accrual
Dates, the Accreted Value will equal the sum of (a) the Accreted Value for
the Semiannual Accrual Date immediately preceding such Specified Date and
(b) an amount equal to the product of (x) the Accreted Value for the
immediately following Semiannual Accrual Date less the Accreted Value for
the immediately preceding Semiannual Accrual Date multiplied by (y) a
fraction, the numerator of which is the number of days from the immediately
preceding Semiannual Accrual Date to the Specified Date, using a 360-day
year of twelve 30-day months, and the denominator of which is 180; or
(iv) if the Specified Date occurs after the last Semiannual Accrual
Date, the Accreted Value will equal DM1,000.
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"Acquired Debt" means, with respect to any specified Person, (i) Debt of
any other Person existing at the time such Person merges with or into or
consolidates with or becomes a Subsidiary of such specified Person and (ii) Debt
secured by a Lien encumbering any asset acquired by such specified Person, which
Debt was not Incurred in anticipation of, and was outstanding prior to, such
merger, consolidation or acquisition.
"Additional Amounts" has the meaning specified in Section 10.09.
"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.
"Applicable Procedures" means, with respect to any transfer or transaction
involving a Global Security or beneficial interest therein, the rules and
procedures of Euroclear and Cedel, in each case to the extent applicable to such
transaction and as in effect from time to time.
"Asset Disposition" by any Person means any transfer, conveyance, sale,
lease or other disposition by such Person or any of its Subsidiaries (including
a consolidation or merger or other sale of any such Subsidiary with, into or to
another Person in a transaction in which such Subsidiary ceases to be a
Subsidiary of the specified Person, but excluding a disposition by a Subsidiary
of such Person to such Person or a Wholly Owned Subsidiary of such Person or by
such Person to a Wholly Owned Subsidiary of such Person or by a Restricted
Subsidiary to the Guarantor or a Restricted Subsidiary or by the Guarantor to a
Restricted Subsidiary) of (i) shares of Capital Stock or other ownership
interests of a Subsidiary of such Person; (ii) substantially all of the assets
of such Person or any of its Subsidiaries representing a division or line of
business (other than as part of a Permitted Investment); or (iii) other assets
or rights of such Person or any of its Subsidiaries outside of the ordinary
course of business, provided in the case of each of the preceding clauses (i),
(ii) and (iii) that the aggregate consideration for such
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transfer, conveyance, sale, lease or other disposition is equal to $2.0 million
or more in any 12-month period.
"Average Life" means, at any date of determination with respect to any
Debt, the quotient obtained by dividing (i) the sum of the products of (a) the
number of years from such date of determination to the dates of each successive
scheduled principal payment of such Debt and (b) the amount of such principal
payment by (ii) the sum of all such principal payments.
"beneficial interest" means an indirect beneficial interest in a Global
Security held through a corresponding Depositary Interest and shown on, and
transferred only through, records maintained in book-entry form by Euroclear or
Cedel (with respect to the Participants) and their Participants.
"Board of Directors" means either the board of directors of the Guarantor
or the Issuer, as applicable, or any duly authorized committee of that board
duly authorized to act with respect to this Indenture from time to time.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Guarantor or the Issuer, as applicable, 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.
"Book-Entry Depositary" means The Chase Manhattan Bank in its capacity as
book-entry depositary pursuant to the terms of the Deposit Agreement, until a
successor Book-Entry Depositary shall have become such pursuant to the terms of
the Deposit Agreement, and thereafter "Book-Entry Depositary" shall mean such
successor Book-Entry Depositary.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in Frankfurt, Germany,
Luxembourg or the Borough of Manhattan, the City of New York, New York 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 generally accepted accounting
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principles (a "Capital Lease"). The stated maturity of such obligation shall be
the date of the last payment of rent or any other amount due under such lease
prior to the first date upon which such lease may be terminated by the lessee
without payment of a penalty. 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 generally accepted accounting principles.
"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.
"Cedel" means Cedel Bank, S.A. (or any successor securities clearing
agency).
"Change of Control" has the meaning specified in Section 10.17.
"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 or not performing
the duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Common Depositary" means The Chase Manhattan Bank in its capacity as
common depositary pursuant to the terms of the Deposit Agreement, until a
successor Common Depositary shall have become such pursuant to the terms of the
Deposit Agreement, and thereafter "Common Depositary" shall mean such successor
Common Depositary.
"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 Cash Flow Available for Fixed Charges" for any period means
the Consolidated Net Income of the Guarantor and its Restricted Subsidiaries for
such period increased by the sum of (i) Consolidated Interest Expense of the
Guarantor and its Restricted Subsidiaries for such period, plus (ii)
Consolidated Income Tax Expense of the Guarantor and its Restricted Subsidiaries
for such
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period, plus (iii) the consolidated depreciation and amortization expense
included in the income statement of the Guarantor and its Restricted
Subsidiaries for such period, plus (iv) any noncash expense related to the
issuance to employees of the Guarantor or any Restricted Subsidiary of the
Guarantor of options to purchase Capital Stock of the Guarantor or such
Restricted Subsidiary, plus (v) any charge related to any premium or penalty
paid in connection with redeeming or retiring any Debt prior to its stated
maturity; provided, however, that there shall be excluded therefrom the
Consolidated Cash Flow Available for Fixed Charges (if positive) of any
Restricted Subsidiary of the Guarantor (calculated separately for such
Restricted Subsidiary in the same manner as provided above for the Guarantor)
that is subject to a restriction which prevents the payment of dividends or the
making of distributions to the Guarantor or another Restricted Subsidiary of the
Guarantor to the extent of such restriction.
"Consolidated Income Tax Expense" for any period means the aggregate
amounts of the provisions for income taxes of the Guarantor and its Restricted
Subsidiaries for such period calculated on a consolidated basis in accordance
with generally accepted accounting principles.
"Consolidated Interest Expense" means for any period the interest expense
included in a consolidated income statement (excluding interest income) of the
Guarantor and its Restricted Subsidiaries for such period in accordance with
generally accepted accounting principles, 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 with
respect to interest rate swap or similar agreements or foreign currency hedge,
exchange or similar agreements; (iv) Preferred Stock dividends of the Guarantor
and its Restricted Subsidiaries (other than dividends paid in shares of
Preferred Stock that is not Disqualified Stock) declared and paid or payable;
(v) accrued Disqualified Stock dividends of the Guarantor and its Restricted
Subsidiaries, whether or not declared or paid; (vi) interest on Debt guaranteed
by the Guarantor and its Restricted Subsidiaries (but only to the extent such
interest is actually paid by the Guarantor or a Restricted Subsidiary); and
(vii) the portion of any Capital Lease Obligation paid during such period that
is allocable to interest expense; excluding, however, any premiums, fees and
expenses (and any amortization thereof) payable in connection with the offerings
of the Securities; all of the
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foregoing as determined on a consolidated basis (without taking into account
Unrestricted Subsidiaries) in conformity with generally accepted accounting
principles.
"Consolidated Net Income" for any period means the net income (or loss) of
the Guarantor and its Restricted Subsidiaries for such period determined on a
consolidated basis in accordance with generally accepted accounting principles;
provided that there shall be excluded therefrom (a) the net income (or loss) of
any Person acquired by the Guarantor or a Restricted Subsidiary of the Guarantor
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 Guarantor except to the extent of the amount of dividends or
other distributions actually paid to the Guarantor or a Restricted Subsidiary of
the Guarantor by such Person during such period, (c) gains or losses on Asset
Dispositions by the Guarantor or its Restricted Subsidiaries, (d) all
extraordinary gains and extraordinary losses, determined in accordance with
generally accepted accounting principles, (e) the cumulative effect of changes
in accounting principles, (f) noncash gains or losses resulting from
fluctuations in currency exchange rates and (g) the tax effect of any of the
items described in clauses (a) through (f) above.
"Consolidated Net Worth" of any Person means the stockholders' equity of
such Person, determined on a consolidated basis in accordance with generally
accepted accounting principles, less amounts attributable to Disqualified Stock
of such Person.
"Consolidated Tangible Assets" of any Person means the total amount of
assets (less applicable reserves and other properly deductible items) which
under generally accepted accounting principles would be included on a
consolidated balance sheet of such Person and its Subsidiaries after deducting
therefrom all goodwill, trade names, trademarks, patents, unamortized debt
discount and expense and other like intangibles, which in each case under
generally accepted accounting principles would be included on such consolidated
balance sheet.
"Corporate Trust Office" means the principal office of the Trustee in the
Borough of Manhattan, The City of New York, New York, at which at any particular
time its corporate trust business shall be administered, which at the date
hereof is located at 450 West 33rd Street, New York, NY 10001-2697.
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"corporation" means a corporation, association, company, limited liability
company, joint-stock company or business trust.
"Credit Facility" means credit agreements, vendor financings or other
facilities or arrangements made available from time to time to the Guarantor and
its Restricted Subsidiaries by banks, other financial institutions and/or
equipment manufacturers for the Incurrence of Debt, including the private or
public issuance of debt securities or the provision of letters of credit and any
related notes, Guarantees, collateral documents, instruments and agreements
executed in connection therewith, as the same may be amended, supplemented,
modified or restated from time to time.
"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, the amount of (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, (iv) every obligation of such Person issued or assumed as the deferred
purchase price of property or services (including securities repurchase
agreements but excluding trade accounts payable or accrued liabilities arising
in the ordinary course of business which are not overdue or which are being
contested in good faith), (v) every Capital Lease Obligation of such Person,
(vi) all Receivables Sales of such Person, together with any obligation of such
Person to pay any discount, interest, fees, indemnities, penalties, recourse,
expenses or other amounts in connection therewith, (vii) all obligations to
redeem Disqualified Stock issued by such Person, (viii) every obligation under
Interest Rate and Currency Protection Agreements of such Person and (ix) every
obligation of the type referred to in clauses (i) through (viii) of another
Person and all dividends of another Person the payment of which, in either case,
such Person has Guaranteed to the extent the same is Guaranteed by such Person.
The "amount" or "principal amount" of Debt at any time of determination as used
herein represented by (a) 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 generally accepted accounting
principles, (b) any
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Receivables Sale shall be the amount of the unrecovered capital or principal
investment of the purchaser (other than the Guarantor or a Wholly Owned
Restricted Subsidiary of the Guarantor) thereof to the extent such Person is
liable therefor, excluding amounts representative of yield or interest earned on
such investment or (c) any Disqualified Stock shall be the maximum fixed
redemption or repurchase price in respect thereof.
"Defaulted Interest" has the meaning specified in Section 3.07.
"Definitive Security" means a certificated Security registered in the name
of the Holder thereof and issued in accordance with Section 3.05(d) hereof.
"Deposit Agreement" means the Note Deposit Agreement, dated as of the date
hereof, between the Issuer and The Chase Manhattan Bank, as Book-Entry
Depositary with respect to the Global Securities, as amended from time to time
in accordance with the terms thereof.
"Depositary Interest" means a certificated depositary interest representing
a 100% beneficial interest in a Global Security.
"Deutsche mark" or "DM" means the lawful currency of Germany.
"Disqualified Stock" of any Person means any Capital Stock of such Person
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of such Person, any
Subsidiary of such Person or the holder thereof, in whole or in part, on or
prior to the final Stated Maturity of the Securities; provided, however, that
any Preferred Stock which would not constitute Disqualified Stock but for
provisions thereof giving holders thereof the right to require such Person to
repurchase or redeem such Preferred Stock upon the occurrence of a Change of
Control occurring prior to the final maturity of the Securities shall not
constitute Disqualified Stock if the change of control provisions applicable to
such Preferred Stock are no more favorable to the holders of such Preferred
Stock than the provisions applicable to the Securities contained in Section
10.17 and such Preferred Stock specifically provides that such Person will not
repurchase or redeem any such stock pursuant to such provisions prior
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to such Person's repurchase of such Securities as are required to be repurchased
pursuant to Section 10.17.
"Dollar" and the symbol "$" each mean currency of the United States of
America.
"Eligible Institution" means a commercial banking institution that has
combined capital and surplus of not less than $500 million or its equivalent in
foreign currency, whose debt is rated "A" (or higher) according to Standard &
Poor's Ratings Service or Moody's Investors Service, Inc. at the time as of
which any investment or rollover therein is made.
"Equity Clawback" means the planned redemption by the Issuer of a portion
of its outstanding 12-1/4% Senior Notes due 2006 (the "Existing Notes") with a
portion of the proceeds of the Guarantor's initial public offering of Common
Stock, which closed in October, 1997. The Issuer intends to apply approximately
$101.25 million of the initial public offering proceeds to the redemption of the
Existing Notes.
"Euroclear" means the Euroclear Clearance System (or any successor
securities clearing agency).
"Event of Default" has the meaning set forth in Section 5.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended (or
any successor act), and the rules and regulations thereunder.
"Exchange and Registration Rights Agreement" means the Exchange and
Registration Rights Agreement, dated as of March 16, 1998 among the Issuer, the
Guarantor and the Initial Purchasers, as purchasers, and the Holders from time
to time as provided therein, as such agreement may be amended from time to time.
"Exchange Offer" has the meaning set forth in the form of the Securities
contained in Section 2.02.
"Exchange Offer Registration Statement" has the meaning set forth in the
form of the Securities contained in Section 2.02.
"Exchange Security" means any Security issued in exchange for an Original
Security or Original Securities pursuant to the Exchange Offer or otherwise
registered under
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the Securities Act and any Security with respect to which the next preceding
Predecessor Security of such Security was an Exchange Security.
"Existing Stockholders" means (A) R.S. Lauder, Gaspar & Co., L.P., ("LGC"),
(B) partners in LGC and Lauder Gaspar Ventures LLC and their Affiliates, in each
case as of the Closing Date, (C) Itzhak Fisher, Ronald S. Lauder, Leonard
Lauder, Jacob Z. Schuster, Nir Tarlovsky, Nesim N. Bildirici, Andrew Gaspar and
Eugene Sekulow, (D) family members of any of the foregoing, (E) trusts, the only
beneficiaries of which are persons or entities described in clauses (A) through
(D) above and (F) partnerships which are controlled by the persons or entities
described in clauses (A) through (D) above.
"Expiration Date" has the meaning specified in the definition of "Offer to
Purchase".
"Global Security" means the security or securities issued initially in
bearer form that evidences all or part of the Securities and bears the legend
set forth in Section 2.02.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged and
which have a remaining weighted average life to maturity of not less than one
year from the date of Investment therein.
"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" and "Guaranteeing"
shall have meanings correlative to the foregoing); provided, however, that the
Guarantee by any Person shall not include
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endorsements by such Person for collection or deposit, in either case, in the
ordinary course of business.
"Guarantor" means the Person named as the "Guarantor" in the first
paragraph of this instrument until a successor Person shall have become such
Person pursuant to the applicable provisions of this Indenture and thereafter
"Guarantor" shall mean such successor Person.
"Holder" means a Person (i) who is the bearer of a Global Security (which
shall initially be the Book-Entry Depositary) or (ii) in whose name a Definitive
Security is registered in the Security Register.
"Incremental Paid-in Capital" means as of any date the cumulative aggregate
amount of the increase in paid-in capital (determined in accordance with
generally accepted accounting principles applied on a consistent basis) since
September 30, 1997, as determined based on the most recent unaudited quarterly
or audited annual financial statements of the Guarantor and its consolidated
subsidiaries filed with the Commission, as compared with the Guarantor's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1997.
"Incur" means, with respect to any Debt or other obligation of any Person,
to create, issue, incur (by conversion, exchange or otherwise), assume, enter
into a Guarantee in respect of or otherwise become liable in respect of such
Debt or other obligation including by acquisition of Subsidiaries or the
recording, as required pursuant to generally accepted accounting principles 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
generally accepted accounting principles that results in an obligation of such
Person that exists at such time becoming Debt shall not be deemed an Incurrence
of such Debt and that neither the accrual of interest nor the accretion of
original issue discount shall be deemed an Incurrence of 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.
"Indirect Participant" means a Person who holds an interest through a
Participant in a Depositary Interest
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issued by the Book-Entry Depositary to the Common Depositary.
"Initial Purchasers" means Goldman, Sachs & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Chase Securities Inc., J.P. Morgan Securities Inc.
and SBC Warburg Dillon Read Inc.
"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.
"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, but excluding any loan, advance or extension of credit to an
employee of the Guarantor or any of its Subsidiaries in the ordinary course of
business and commercially reasonable extensions of trade credit. Without
limiting the foregoing, the term "Investment" shall include (i) the designation
of a Restricted Subsidiary as an Unrestricted Subsidiary and (ii) the fair
market value of the Capital Stock (or any other Investment), held by the
Guarantor or any of its Restricted Subsidiaries, of (or in) any Person that has
ceased to be a Restricted Subsidiary. For purposes of the definition of
"Unrestricted Subsidiary" and Section 10.10, (i) "Investment" shall include the
fair market value of the assets (net of liabilities (other than liabilities to
the Guarantor or any of its Restricted Subsidiaries)) of any Restricted
Subsidiary at the time that such Restricted Subsidiary is designated an
Unrestricted Subsidiary, (ii) the fair market value of the assets (net of
liabilities (other than liabilities to the Guarantor or any of its Restricted
Subsidiaries)) of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary shall be considered a reduction
in outstanding Investments and (iii) any property transferred
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to or from an Unrestricted Subsidiary shall be valued at its fair market value
at the time of such transfer. Notwithstanding the foregoing, an acquisition of
assets (including, without limitation, Capital Stock or rights to acquire
Capital Stock) by the Guarantor or any of its Restricted Subsidiaries shall be
deemed not to be an Investment to the extent that the consideration therefor
consists of Common Stock of the Guarantor.
"Issuer" means the Person named as the "Issuer" in the first paragraph of
this instrument until a successor Person shall have become such pursuant to the
applicable provisions of this Indenture and thereafter "Issuer" shall mean such
successor Person.
"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 Vice
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, Receivables Sale, deposit
arrangement, security interest, lien, charge, easement (other than any easement
not materially impairing usefulness), 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).
"Listing Failure" has the meaning specified in Section 10.09.
"Marketable Securities" means: (i) Government Securities; (ii) any
certificate of deposit maturing not more than 270 days after the date of
acquisition issued by, or time deposit of, an Eligible Institution; (iii)
commercial paper maturing not more than 270 days after the date of acquisition
issued by a corporation (other than an Affiliate of the Guarantor) with a
rating, at the time as of which any investment therein is made, of "A-1" (or
higher) according to Standard & Poor's Ratings Service or "P-1" (or higher)
according to Moody's Investor Service, Inc.; (iv) any banker's acceptances or
money market deposit accounts issued or offered by an Eligible Institution; (v)
time deposits, certificates of deposit, bank promissory
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notes and bankers' acceptances maturing not more than 180 days after the
acquisition thereof and guaranteed or issued by any of the ten largest banks
(based on assets as of the immediately preceding December 31), organized under
the laws of any jurisdiction in which one of the Restricted Subsidiaries does
business or any foreign country recognized by the United States and which are
not under intervention, bankruptcy or similar proceeding, not to exceed $10
million outstanding at any one term; and (vi) any fund investing exclusively in
investments of the types described in clauses (i) through (iv) above.
"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 Available Proceeds" from any Asset Disposition by any Person means
cash or readily marketable cash equivalents received (including amounts received
by way of sale or discounting of any note, installment receivable or other
receivable, but excluding any other consideration received in the form of
assumption by the acquiror of Debt or other obligations relating to such
properties or assets) therefrom by such Person, net of (i) all legal, title and
recording tax expenses, commissions and other fees and expenses Incurred and all
Federal, state, provincial, foreign and local taxes required to be accrued as a
liability as a consequence of such Asset Disposition, (ii) all payments made by
such Person or its 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 Disposition or by applicable law, be repaid out of the proceeds
from such Asset Disposition, (iii) all distributions and other payments made to
minority interest holders in Subsidiaries of such Person as a result of such
Asset Disposition and (iv) appropriate amounts to be provided by such Person or
any Subsidiary thereof, as the case may be, as a reserve in accordance with
generally accepted accounting principles against any liabilities associated with
such assets and retained by such Person or any Subsidiary thereof, as the case
may be, after such Asset Disposition, including, without limitation, liabilities
under any indemnification obligations and severance and other employee
termination costs associated with such Asset Disposition, in each case as
determined by the board of directors of such Person, in its reasonable good
faith judgment; provided, however, that
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any reduction in such reserve within 12 months following the consummation of
such Asset Disposition will be treated for all purposes of the Indenture and the
Securities as a new Asset Disposition at the time of such reduction with Net
Available Proceeds equal to the amount of such reduction.
"Offer to Purchase" means a written offer (the "Offer") sent by or on
behalf of the Issuer by first class mail, postage prepaid, to each Holder of
Securities at his address appearing in the related Security Register on the date
of the Offer offering to purchase up to the Accreted Value 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 "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 Expiration Date. The Issuer shall
notify in writing 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 Guarantor and its Subsidiaries which the Guarantor and Issuer in
good faith believe 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 Guarantor'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
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Securities pursuant to the Offer to Purchase. The Offer shall also state:
(a) the Section of this Indenture pursuant to which the Offer to
Purchase is being made;
(b) the Expiration Date and the Purchase Date;
(c) the aggregate principal amount at maturity 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");
(d) the purchase price to be paid by the Issuer for each DM1,000
aggregate principal amount at maturity of Securities accepted for payment
(as specified pursuant to the Indenture) (the "Purchase Price");
(e) 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 multiple of DM1,000 principal
amount at maturity;
(f) the place or places where Securities are to be surrendered for
tender pursuant to the Offer to Purchase;
(g) that interest on any Security not tendered or tendered but not
purchased by the Issuer pursuant to the Offer to Purchase will continue to
accrue;
(h) 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;
(i) 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
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
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the Trustee duly executed by, the Holder thereof or his attorney duly
authorized in writing);
(j) 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 Expiration Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount at maturity 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;
(k) that (a) if Securities in an aggregate principal amount at
maturity 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
at maturity 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 at maturity equal to the Purchase
Amount on a pro rata basis (with such adjustments as may be deemed
appropriate so that only Securities in denominations of DM1,000 or integral
multiples thereof shall be purchased); and
(l) 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 at maturity 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, a Vice Chairman of the Board, the President or a Vice President, and by
the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary,
of the Guarantor or the Issuer, as applicable, and delivered to the Trustee and
containing the statements provided for in Section 1.02. One of the officers
signing an Officers' Certificate given pursuant to
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Section 10.19 shall be the principal executive, financial or accounting officer
of the Guarantor.
"Opinion of Counsel" means a written opinion of legal counsel, who may be
counsel for the Guarantor or the Issuer, and who shall be acceptable to the
Trustee, and containing the statements provided for in Section 1.02.
"Original Securities" means all Securities that are subject to an Exchange
and Registration Rights Agreement, other than Exchange Securities issued in
exchange therefore.
"Outstanding", when used with respect to Securities, means, as of the date
of determination, all Securities theretofore authenticated and delivered under
this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered to the
Trustee for cancelation;
(ii) 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;
(iii) Securities which have been paid pursuant to Section 3.06 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; and
(iv) Securities held by the Issuer, the Guarantor or any of their
respective Affiliates for purposes of determining the amount of Securities
that remain Outstanding after a redemption pursuant to Section 11.01(a) and
the related provision in such Securities;
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provided, however, that in determining whether the Holders of the requisite
principal amount at maturity of the Outstanding Securities have given any
request, demand, authorization, 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.
"Participant" means, with respect to the Euroclear or Cedel, a Person who
has an account with Euroclear or Cedel, respectively.
"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 in the ordinary course of business 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) any Investment in the Guarantor or a
Restricted Subsidiary, (ii) any Investment in any Person as a result of which
such Person becomes a Restricted Subsidiary of the Guarantor or upon the making
of which such Person will be merged or consolidated with or into or transfer all
or substantially all of its assets to the Guarantor or a Restricted Subsidiary,
(iii) any Investment in Marketable Securities, (iv) securities or other
Investments received in settlement of debts created in the ordinary course of
business and owing to the Guarantor or any Restricted Subsidiary, or as a result
of foreclosure, perfection or enforcement of any Lien, or in satisfaction of
judgments, including in
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connection with any bankruptcy proceeding or other reorganization of another
Person, (v) securities or other Investments received as consideration in sales
or other dispositions of property or assets, including Asset Dispositions made
in compliance with Section 10.13 and (vi) other Investments not in excess of $50
million in the aggregate at any time outstanding.
"Permitted Liens" means (a) Liens for taxes, assessments, governmental
charges or claims which are not yet delinquent or which are being contested in
good faith by appropriate proceedings, if a reserve or other appropriate
provision, if any, as shall be required in conformity with generally accepted
accounting principles shall have been made therefor; (b) other Liens incidental
to the conduct of the Guarantor's and its Restricted Subsidiaries' business or
the ownership of its property and assets not securing any Debt, and which do not
in the aggregate materially detract from the value of the Guarantor's and its
Restricted Subsidiaries' property or assets when taken as a whole, or materially
impair the use of such assets and property in the operation of its business; (c)
Liens with respect to assets of a Subsidiary granted by such Subsidiary to the
Guarantor to secure Debt owing to the Guarantor; (d) pledges and deposits made
in the ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of statutory obligations; (e) deposits
made to secure the performance of tenders, bids, leases, and other obligations
of like nature incurred in the ordinary course of business (exclusive of
obligations for the payment of borrowed money); (f) zoning restrictions,
servitudes, easements, rights-of-way, restrictions and other similar charges or
encumbrances incurred in the ordinary course of business which, in the
aggregate, do not materially detract from the value of the property subject
thereto or interfere with the ordinary conduct of the business of the Guarantor
or its Restricted Subsidiaries; (g) Liens on Capital Stock of Restricted
Subsidiaries securing obligations not exceeding $75 million at any time
outstanding of the Guarantor or any Restricted Subsidiary to repurchase or
redeem shares of Capital Stock of such Restricted Subsidiary held by Persons who
are not Affiliates or Related Persons of the Guarantor; (h) Liens arising out of
judgments or awards against the Guarantor or any Restricted Subsidiary with
respect to which the Guarantor or such Restricted Subsidiary is prosecuting an
appeal or proceeding for review and the Guarantor or such Restricted Subsidiary
is maintaining adequate reserves in accordance with generally accepted
accounting principles; and (i) any
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interest or title of a lessor in the property subject to any lease other than a
Capital Lease.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization, government
or agency or political subdivision thereof or any other entity.
"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 3.06 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.
"Purchase Agreement" means the Purchase Agreement, dated as of March 11,
1998, between the Issuer, the Guarantor and the Initial Purchaser named therein,
as such agreement may be amended from time to time.
"Purchase Money Debt" means Debt of the Guarantor (including Acquired Debt
and Debt represented by Capital Lease Obligations, mortgage financings and
purchase money obligations) Incurred for the purpose of financing all or any
part of the cost of construction, acquisition or improvement by the Guarantor or
any Restricted Subsidiary of the Guarantor of any Telecommunications Assets of
the Guarantor or any Restricted Subsidiary of the Guarantor, and including any
related notes, Guarantees, collateral documents, instruments and agreements
executed in connection therewith, as the same may be amended, supplemented,
modified or restated from time to time.
"readily marketable cash equivalents" means (i) marketable securities
issued or directly and unconditionally guaranteed by the United States
Government or issued by any agency thereof and backed by the full faith and
credit of the United States; (ii) marketable direct obligations issued by any
state of the United States of America or any political subdivision of any such
state or any public instrumentality thereof and, at the time of acquisition,
having the highest rating obtainable from either Standard & Poor's Rating
Service or Moody's Investors Service, Inc.; (iii) commercial paper maturing no
more than 180 days from the date of acquisition thereof and, at the time of
acquisition, having a rating of at least A-1 from Standard & Poor's Ratings
Service or at least P-1 from Moody's Investors Service, Inc.; and (iv)
certificates of deposit or
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bankers' acceptance maturing within one year from the date of acquisition
thereof issued by any commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia having
unimpaired capital and surplus of not less than $100,000,000.
"Receivables" means receivables, chattel paper, instruments, documents or
intangibles evidencing or relating to the right to payment of money.
"Receivables Sale" of any Person means any sale of Receivables of such
Person (pursuant to a purchase facility or otherwise), other than in connection
with a disposition of the business operations of such Person relating thereto or
a disposition of defaulted Receivables for purpose of collection and not as a
financing arrangement.
"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 Exchange Securities and all other Securities
sold or otherwise disposed of pursuant to an effective registration statement
under the Securities Act, together with any respective Successor Securities.
"Regular Record Date" for the interest payable on any Interest Payment Date
means March 1 or September 1 (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 (or any
successor provision), as it may be amended from time to time.
"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 2.01.
"Regulation S Legend" means a legend substantially in the form of the
legend required in the form
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of Security set forth in Section 2.02 to be placed upon each Regulation S
Security.
"Regulation S Securities" means all Securities sold pursuant to Regulation
S, which are required pursuant to Section 3.05(c) to bear a Regulation S Legend.
Such term includes the Regulation S Global Security.
"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
outstanding equity interest in such Person) or (b) 5% or more of the combined
outstanding voting power of the Voting Stock of such Person, except that, for
purposes of Section 10.12, Related Person means any other Person directly or
indirectly owning 10% or more of the combined outstanding voting power of the
Voting Stock of such Person (or, in the case of a Person that is not a
corporation, 10% or more of the outstanding equity interest in such Person).
"Resale Registration Statement" has the meaning set forth in the Form of
the Securities contained in Section 2.02.
"Responsible Officer", when used with respect to the Trustee, means the
chairman or any vice-chairman of the board of directors, the chairman or any
vice-chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any vice president, the secretary, any
assistant secretary, the treasurer, any assistant treasurer, the cashier, any
assistant cashier, 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 specified in Section 2.01.
"Restricted Period" means the period of 41 consecutive days beginning on
and including the later of (i) the day on which Securities are first offered to
persons other than distributors (as defined in Regulation S) in reliance on
Regulation S and (ii) the original issuance date of the Securities.
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"Restricted Securities" means all Securities required pursuant to Section
3.05(c) to bear any Restricted Securities Legend. Such term includes any
Restricted Global Security.
"Restricted Securities Certificate" means a certificate substantially in
the form set forth in Annex B.
"Restricted Securities Legend" means, collectively, the legends
substantially in the forms of the legends required in the form of Security set
forth in Section 2.02 to be placed upon each Restricted Security.
"Restricted Subsidiary" means any Subsidiary of the Guarantor other than an
Unrestricted Subsidiary.
"RSLNA" has the meaning specified in Section 1.14.
"Rule 144A" means Rule 144A under the Securities Act (or any successor
provision), as it may be amended from time to time.
"Rule 144A Securities" means all Securities sold pursuant to Rule 144A,
which are required pursuant to Section 3.05(c) to bear a Restricted Securities
Legend. Such term includes the Restricted Global Security.
"Securities" has the meaning specified in the first paragraph of the
recitals to this instrument.
"Securities Act" means the Securities Act of 1933 and any statute successor
thereto, in each case as amended from time to time.
"Securities Act Legend" means a Restricted Securities Legend or a
Regulation S Legend.
"Securities Guarantee" means the Securities Guarantee issued by the
Guarantor in accordance with Article IV hereunder.
"Security Register" and "Security Registrar" have the respective meanings
specified in Section 3.05.
"Significant Subsidiary" means, at any date of determination, any
Restricted Subsidiary that, together with its Subsidiaries, (i) for the most
recent fiscal year of the Guarantor, accounted for more than 10% of the
consolidated revenues of the Guarantor and its Restricted Subsidiaries or
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(ii) as of the end of such fiscal year, was the owner of more than 10% of the
consolidated assets of the Guarantor and its Restricted Subsidiaries, all as set
forth on the most recently available consolidated financial statements of the
Guarantor for such fiscal year.
"Special Interest" has the meaning set forth in the form of Security
contained in Section 2.02. Unless the context otherwise requires, references
herein to "interest" on the Securities shall include Special Interest.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 3.07.
"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.
"Step-Down Date" has the meaning set forth in the form of the Security
contained in Section 2.02.
"Step-Up" has the meaning set forth in the form of the Security contained
in Section 2.02.
"Strategic Investor" means a corporation, partnership or other entity
engaged in the Telecommunications Business that has, or 80% or more of the
Voting Stock of which is owned by a Person that has, an equity market
capitalization or paid in capital, at the time of any Investment by such
corporation, partnership or other entity in a Restricted Subsidiary pursuant to
clause (iv)(2) of Section 10.14, in excess of $100 million.
"Subordinated Debt" means Debt of the Guarantor or any Restricted
Subsidiary 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 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 exists with respect to the Securities, upon written notice by 25% or
more in principal
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amount at maturity of the Securities to the Trustee, the Trustee shall have the
right to give notice to the Guarantor or such Restricted Subsidiary 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 stated 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 Guarantor or such Restricted Subsidiary
(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 Stated Maturity of the Securities or (y) permit redemption or
other retirement (including pursuant to an offer to purchase made by the
Guarantor or such Restricted Subsidiary) of such other Debt at the option of the
holder thereof prior to the final Stated Maturity 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 Guarantor or such
Restricted Subsidiary) which is conditioned upon a change of control of the
Guarantor pursuant to provisions substantially similar to those described under
Section 10.17 (and which shall provide that such Debt will not be repurchased
pursuant to such provisions prior to the Guarantor's or such Restricted
Subsidiary's repurchase of the Securities required to be repurchased pursuant to
the provisions described under Section 10.17).
"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 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. An 80% or more
owned Subsidiary of the Guarantor is (i) a corporation 80% or more of the
combined voting power of the outstanding Voting Stock, and more than 80% of the
Capital Stock or other ownership interests, of which is owned, directly or
indirectly, by the Guarantor or by one or more other Subsidiaries of the
Guarantor or by the Guarantor and one or
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more Subsidiaries thereof or (ii) any other Person (other than a corporation) in
which the Guarantor, or one or more other Subsidiaries of the Guarantor or the
Guarantor and one or more other Subsidiaries of the Guarantor, directly or
indirectly, has at least an 80% ownership interest and power to direct the
policies, management and affairs thereof.
"Subsidiary Guarantor" means a Subsidiary of the Guarantor that has
unconditionally guaranteed, by supplemental indenture substantially similar in
form to Article IV hereof and otherwise satisfactory to the Trustee, the payment
in full of the principal of (and premium, if any) and interest on the
Securities.
"Substitute Securities" has the meaning specified in Section 3.01.
"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 purposes of this definition, any Security
authenticated and delivered under Section 3.06 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.
"Tax" means any tax, duty, levy, impost, assessment or other governmental
charge (including penalties, interest and any other liabilities related
thereto).
"Taxing Authority" means any government or political subdivision or
territory or possession of any government or any authority or agency therein or
thereof having power to tax.
"Telecommunications Assets" means all assets, rights (contractual or
otherwise) and properties, whether tangible or intangible, used or intended for
use in connection with a Telecommunications Business, including a majority of
the Voting Stock of a Person engaged in the Telecommunications Business.
"Telecommunications Business" means the business of (i) transmitting, or
providing services relating to the transmission of, voice, video or data through
owned or leased transmission facilities, (ii) creating, developing or marketing
communications related network equipment, software and other devices for use in
a Telecommunications Business
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or (iii) evaluating, participating or pursuing any other activity or opportunity
that is primarily related to those identified in (i) or (ii) above; provided
that the determination of what constitutes a Telecommunications Business shall
be made in good faith by the Board of Directors of the Guarantor.
"Treaty" has the meaning specified in Section 1.16.
"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.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at
the date as of which this instrument was executed; 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.
"Unrestricted Securities Certificate" means a certificate substantially in
the form set forth in Annex C.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Guarantor that at
the time of determination shall be designated an Unrestricted Subsidiary of the
Guarantor by the Board of Directors in the manner provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate
any Restricted Subsidiary (including any newly acquired or newly formed
Subsidiary of the Guarantor) to be an Unrestricted Subsidiary unless such
Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property
of, the Guarantor or any Restricted Subsidiary; provided that (A) any Guarantee
by the Guarantor or any Restricted Subsidiary of any Debt of the Subsidiary
being so designated shall be deemed an "Incurrence" of such Debt and an
"Investment" by the Guarantor or such Restricted Subsidiary (or both, if
applicable) at the time of such designation, in each case, to the extent such
Debt is so Guaranteed by the Guarantor or such Restricted Subsidiary; (B) either
(I) the Subsidiary to be so designated has total assets of $1,000 or less or
(II) if such Subsidiary has assets greater than $1,000, such designation would
be permitted under Section 10.10 and (C) if applicable, the Incurrence of Debt
and the Investment referred to in clause (A) of this proviso would be permitted
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under Sections 10.08 and 10.10. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that immediately
after giving effect to such designation (x) the Guarantor could Incur $1.00 of
additional Debt under the first paragraph of Section 10.08 and (y) no Default or
Event of Default shall have occurred and be continuing. Any such designation by
the Board of Directors shall be evidenced to the Trustee by promptly filing with
the Trustee a copy of the Board Resolution giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"Vice President", when used with respect to the Issuer, the Guarantor or
the Trustee, 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) of 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 Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Voting Stock or other ownership interests (other than
directors' qualifying shares) of which shall at the time be owned by such Person
or by one or more Wholly Owned Subsidiaries of such Person or by such Person and
one or more Wholly Owned Subsidiaries of such Person.
SECTION 1.02. 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 and Guarantor shall furnish to the Trustee such
certificates and opinions as may be required under the Trust Indenture Act and
under this Indenture. 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
the Guarantor, 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:
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(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(b) 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;
(c) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 1.03. 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 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 of an officer of the Issuer or Guarantor may be based,
insofar as it relates to legal matters, upon an opinion of counsel submitted
therewith, unless such officer knows, or in the exercise of reasonable care
should know, that the opinion with respect to the matters upon which his
certificate is based is erroneous. Any opinion of counsel may be based, insofar
as it relates to factual matters, upon a certificate of an officer or officers
of the Issuer or Guarantor submitted therewith stating the information on which
counsel is relying, unless such counsel knows, or in the exercise of reasonable
care should know, that the certificate with respect to such matters is
erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments
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under this Indenture, they may, but need not, be consolidated and form one
instrument.
SECTION 1.04. Acts of Holders; Record Dates. 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 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 and, where it is hereby expressly
required, to the Issuer or the Guarantor. 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 6.01)
conclusive in favor of the Trustee and the Issuer and Guarantor, 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 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, the Issuer or the
Guarantor in reliance thereon, whether or not notation of such action is made
upon such Security.
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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 7.01) 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 at maturity 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 canceled 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 at maturity 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 1.06.
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 5.02, (iii) any request to institute proceedings referred to in
Section 5.07(2) or (iv) any direction referred to in Section 5.12. 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,
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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 principal amount at maturity 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 canceled
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 at
maturity 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 1.06.
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 1.06, 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 1.05. Notices, Etc., to Trustee, Issuer and Guarantor. Any request,
demand, authorization, direction, notice, consent, waiver or Act of Holders or
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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 or the Guarantor shall
be sufficient for every purpose hereunder if delivered in writing to a
Responsible Officer of the Trustee at its Corporate Trust Office,
Attention: Corporate Trust Administration, or
(2) the Issuer or the Guarantor 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,
to the Issuer or the Guarantor as applicable, addressed to it, if prior to
receipt by the Trustee of written notice pursuant to this Section 1.05 of a
change of address, at the address of its principal office specified in the
first paragraph of this instrument, or, if after receipt by the Trustee of
written notice pursuant to this Section 1.05 of a change of address, at
such other address as may be previously furnished in writing to the Trustee
by the Issuer or the Guarantor, as applicable.
SECTION 1.06. 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 earlier than the earliest date (if any), prescribed for the giving of such
notice. 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
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Trustee shall constitute a sufficient notification for every purpose hereunder.
SECTION 1.07. Application of Trust Indenture Act. The Trust Indenture Act
shall apply as a matter of contract to this Indenture for purposes of
interpretation, construction and defining the rights and obligations hereunder.
If any provision hereof limits, qualifies or conflicts with a provision of the
Trust Indenture Act that is required under such Act to be a 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.
SECTION 1.08. 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 1.09. Successors and Assigns. All covenants and agreements in this
Indenture by the Issuer shall bind its successors and assigns, whether so
expressed or not.
SECTION 1.10. 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 1.11. 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 their successors hereunder and the Holders of Securities, any benefit
or any legal or equitable right, remedy or claim under this Indenture.
SECTION 1.12. Governing Law. This Indenture, the Securities and the
Securities Guarantee shall be governed by and construed in accordance with the
laws of the State of New York.
SECTION 1.13. 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
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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, 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, Purchase Date or Stated Maturity, as the
case may be.
SECTION 1.14. Agent for Service; Submission to Jurisdiction; Waiver of
Immunities. By the execution and delivery of this Indenture, each of the Issuer
and the Guarantor (i) represents that it has designated and appointed RSL
Communications N. America, Inc. ("RSLNA"), as its authorized agent upon which
process may be served in any suit, action or proceeding arising out of or
relating to the Securities, the Securities Guarantee or this Indenture that may
be instituted in any Federal or state court in the State of New York, Borough of
Manhattan, or brought under Federal or state securities laws or brought by the
Trustee (whether in its individual capacity or in its capacity as Trustee
hereunder), and that RSLNA has accepted such designation, (ii) submits to the
non-exclusive jurisdiction of any such court in any such suit, action or
proceeding, (iii) agrees that service of process upon RSLNA and written notice
of said service to the Issuer or the Guarantor, as applicable, (mailed or
delivered to its President at its principal office as specified in Section 1.05)
shall be deemed in every respect effective service of process upon it in any
such suit or proceeding, and (iv) 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 RSLNA in full force
and effect so long as any of the Securities shall be Outstanding.
To the extent that the Issuer or the Guarantor has or hereafter may acquire
any immunity from jurisdiction of any court 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, each
of the Issuer and the Guarantor hereby irrevocably waives such immunity in
respect of its obligations under this Indenture, the Securities Guarantee and
the Securities, to the extent permitted by law.
SECTION 1.15. Currency Indemnity. Subject to Section 1.16, Deutsche mark is
the sole currency of account and payment for all sums payable by the Issuer or
the Guarantor under or in connection with the Securities, including damages. Any
amount received or recovered in a
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currency other than Deutsche mark (whether as a result of, or the enforcement
of, a judgment or order of a court of any jurisdiction, in the winding-up or
dissolution of the Issuer or the Guarantor or otherwise) by any Holder of a
Security in respect of any sum expressed to be due to it from the Issuer or the
Guarantor shall only constitute a discharge to the Issuer or the Guarantor, as
applicable, to the extent of the Deutsche mark amount which the recipient is
able to purchase with the amount so received or recovered in that other currency
on the date of that receipt or recovery (or, if it is not practicable to make
that purchase on that date, on the first date on which it is practicable to do
so). If that Deutsche mark amount is less than the Deutsche mark amount
expressed to be due to the recipient under any Security, the Issuer or the
Guarantor, as applicable, shall indemnify it against any loss sustained by it as
a result. In any event, the Issuer or Guarantor shall indemnify the recipient
against the cost of making any such purchase. For the purposes of this Section,
it will be sufficient for the Holder of a Security to certify in a satisfactory
manner (indicating the sources of information used) that it would have suffered
a loss had an actual purchase of Deutsche mark been made with the amount so
received in that other currency on the date of receipt or recovery (or, if a
purchase of Deutsche mark on such date had not been practicable, on the first
date on which it would have been practicable, it being required that the need
for a change of date be certified in the manner mentioned above). These
indemnities constitute a separate and independent obligation from the Issuer's
and the Guarantor's other obligations, shall give rise to a separate and
independent cause of action, shall apply irrespective of any indulgence granted
by any Holder of a Security and shall continue in full force and effect despite
any other judgment, order, claim or proof for a liquidated amount in respect of
any sum due under any Security.
SECTION 1.16. Substitution of Currency. Under the Treaty on the European
Economic and Monetary Union (the "Treaty"), to which Germany is a signatory, on
or before January 1, 1999, and subject to the fulfillment of certain conditions,
the "Euro" may replace all or some of the currencies of the member states of the
European Union, including the Deutsche mark. If, pursuant to the Treaty, the
Deutsche mark is replaced by the Euro, all sums payable by the Issuer or the
Guarantor under or in connection with the Securities (including, without
limitation, principal of, or interest on, the Securities) will be effected in
Euro in conformity with legally applicable measures taken pursuant to, or by
virtue of, the Treaty. In addition, the regulations of the European Commission
relating to the Euro
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will then apply to the Securities and this Indenture. The circumstances and
consequences described in this Section entitle neither the Issuer, the Guarantor
nor any Holder to early redemption, rescission, notice, repudiation, adjustment
or renegotiation of the terms and conditions of Securities or this Indenture or
to raise other defenses or to request any compensation claim, nor will they
affect any of the other obligations of the Issuer or the Guarantor under the
Securities and this Indenture.
ARTICLE II
Security Forms
SECTION 2.01. Forms Generally. The Securities and the Trustee's
certificates of authentication thereof shall be in substantially the forms set
forth in this Article, with such appropriate legends, 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 their
execution of the Securities.
Upon their original issuance, Rule 144A Securities shall be issued in the
form of a Global Security in bearer form without interest coupons, which shall
be deposited on behalf of the Initial Purchasers with the Book-Entry Depositary
at its New York corporate trust office, duly executed by the Issuer and
authenticated by the Trustee as hereinafter provided. Such Global Security,
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 shall be
issued in the form of a Global Security in bearer form without interest coupons,
which shall be deposited on behalf of the Initial Purchasers with the Book-Entry
Depositary at its New York corporate trust office, duly executed by the Issuer
and authenticated by the Trustee as hereinafter provided. Such Global Security,
together with its Successor Securities which are Global Securities other than
the Restricted Global Security, are collectively herein called the "Regulation S
Global Security".
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Upon receipt of the Restricted Global Security and the Regulation S Global
Security authenticated and delivered by the Trustee, the Book-Entry Depositary
shall issue to the Common Depositary a Depositary Interest in each such Global
Security, registered in the name of the Common Depositary. Ownership of
beneficial interests shall be limited to Participants and Indirect Participants.
Upon the issuance of the Depositary Interest in such Global Security to the
Common Depositary, Euroclear and Cedel shall credit, on their respective
internal book-entry registration and transfer systems, their respective
Participant's accounts with interests owned by such Participants.
Neither the Common Depositary, Euroclear, Cedel nor their Participants
shall have any rights either under this Indenture or under any Global Security
with respect to such Global Security held on their behalf by the Book-Entry
Depositary, and the Book-Entry Depositary may be treated by the Issuer, the
Trustee and any agent of the Issuer or the Trustee as the absolute owner of such
Global Security for the purpose of receiving payment of or on account of the
principal of (premium, if any) and, subject to the provisions of this Indenture,
interest on the Global Security and for all other purposes. Notwithstanding the
foregoing, nothing herein shall prevent the Issuer, the Trustee or any agent of
the Issuer or the Trustee from giving effect to any written certification, proxy
or other authorization furnished by the Book-Entry Depositary or impair, as
between the Book-Entry Depositary, the Common Depositary, Euroclear and Cedel,
and their Participants, the operation of customary practices of Euroclear and
Cedel governing the exercise of the rights of an owner of a beneficial interest
in any Global Security.
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 all as determined by the officers executing such
Securities, as evidenced by their execution of such Securities.
SECTION 2.02. Form of Face of Security. [If a Global Security issued in
bearer form, then insert -- THIS SECURITY IS A GLOBAL SECURITY WITHIN THE
MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS HELD BY THE BOOK-ENTRY
DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS SECURITY) IN CUSTODY FOR
THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF. THIS SECURITY IS NOT EXCHANGEABLE
IN WHOLE OR IN PART OR TRANSFERABLE IN WHOLE OR IN PART EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.]
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<PAGE>
[If Restricted Securities, then insert -- THE SECURITIES EVIDENCED HEREBY
HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT (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 THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE
TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S
UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (4) TO AN
INSTITUTION THAT IS AN ACCREDITED INVESTOR WITHIN THE MEANING OF 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 (IF AVAILABLE), OR (5)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN
EACH CASE IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS.]
[If a Regulation S Security, then insert -- THIS SECURITY HAS NOT BEEN
REGISTERED UNDER THE U.S. 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 THIS SECURITY IS REGISTERED UNDER THE
SECURITIES ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF IS
AVAILABLE.]
FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED, AND THE RULES AND REGULATIONS THEREUNDER, AS OF THE ISSUE
DATE, THIS SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT. FOR
INFORMATION REGARDING THE ISSUE PRICE OF THIS SECURITY, THE AMOUNT OF ORIGINAL
ISSUE DISCOUNT, THE ISSUE DATE OF THIS SECURITY AND THE YIELD TO MATURITY,
PLEASE CONTACT THE GLOBAL CONTROLLER, CARE OF RSL COMMUNICATIONS N. AMERICA, 767
FIFTH AVENUE, SUITE 4300, NEW YORK, NEW YORK 10153.
10% SENIOR DISCOUNT NOTES DUE 2008
[IF RESTRICTED GLOBAL SECURITY - Common Code No. 8550913;
ISIN NO. XS008550913-0]
[IF REGULATION S GLOBAL SECURITY - Common Code No. 8550905;
ISIN NO. - XS008550905-6]
No. __________ DM_______________
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<PAGE>
RSL Communications PLC, a United Kingdom corporation (herein called the
"Issuer", which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to [If this
Security is a Global Security issued in bearer form, then insert: the bearer
hereof] [If this Security is not a Global Security issued in bearer form, then
insert: _____________, or registered assigns], the principal sum of ____________
______________ DEUTSCHE MARKS [if this Security is a Global Security, then
insert: (which principal amount may from time to time be increased or decreased
to such other principal amounts by adjustments made on the records of the
Trustee hereinafter referred to in accordance with the Indenture)] on March 15,
2008, and to pay interest thereon from March 15, 2003 or from the most recent
Interest Payment Date to which interest has been paid or duly provided for,
semi-annually on March 15 and September 15 in each year, commencing September
15, 2003 at the rate of 10% per annum, until the principal hereof is paid or
made available for payment; provided, however, that no interest shall accrue on
the principal amount of this Security prior to March 15, 2003 and no interest
shall be paid on this Security prior to September 15, 2003; [If Original
Securities, then insert: provided further, however, that if the Issuer has not
filed a registration statement (the "Exchange Offer Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"), registering
a security substantially identical to this Security (except that such Security
will not contain terms with respect to the Special Interest payments described
below or transfer restrictions) pursuant to an exchange offer (the "Exchange
Offer") (or, in lieu thereof, a registration statement registering this Security
for resale (a "Resale Registration Statement")), and (i) the Exchange Offer has
not been completed by 270 days after the date of the Indenture (if the Exchange
Offer is then required to be made pursuant to the Exchange and Registration
Rights Agreement (the "Exchange and Registration Rights Agreement"), by and
between the Issuer, the Guarantor, as defined in the Indenture, the Purchasers
(as defined therein) and the Holders from time to time of the Securities) or
(ii) any Resale Registration Statement required to be filed by the Exchange and
Registration Rights Agreement is filed and declared effective but shall
thereafter cease to be effective (except as specifically permitted therein)
without being succeeded promptly by an additional registration statement filed
and declared effective upon the terms and conditions set forth in the Exchange
and Registration Rights Agreement (each such event referred to in clauses (i)
and (ii), a "Registration
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<PAGE>
Default"), then interest will accrue (in addition to the stated interest on the
Securities) (the "Step-Up") at a rate of 0.5% per annum, determined daily, on
the Accreted Value of the Securities, from the period from and including the
date of occurrence of the Registration Default to but excluding such date (the
"Step-Down Date") as no Registration Default is in effect (commencing on which
date such interest rate will be restored to its initial rate). Interest accruing
as a result of the Step-Up is referred to herein as "Special Interest." Accrued
Special Interest, if any, shall be paid semi-annually on March 15 and September
15 in each year; and the amount of accrued Special Interest shall be determined
on the basis of the number of days actually elapsed. Any accrued and unpaid
interest (including Special Interest) on this Security upon the issuance of an
Exchange Security (as defined in the Indenture) in exchange for this Security
shall cease to be payable to the Holder hereof but such accrued and unpaid
interest (including Special Interest) shall be payable on the next March 15 or
September 15 to the Holder thereof [if not a Global Security in bearer form,
insert: on the related Regular Record Date].] 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 [If this Security is a Global Security
issued in bearer form, then insert: the bearer hereof on the Interest Payment
Date] [If this Security is not a Global Security issued in bearer form, then
insert: 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 March 1 or September 1 (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 such Interest Payment Date and may either
be paid to [If this Security is a Global Security issued in bearer form, then
insert: the bearer hereof on the Special Payment Date] [If this Security is not
a Global Security issued in bearer form, then insert: 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, 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 may be listed, and upon such
notice as may be required by such exchange, all as more fully provided in said
Indenture.
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<PAGE>
Under certain circumstances described in the Indenture, the Issuer (or the
Guarantor) also shall pay Additional Amounts to the Holders of Securities equal
to an amount that the Issuer or Guarantor, as the case may be, may be required
to withhold or deduct for or on account of Taxes imposed by a Taxing Authority
within the United Kingdom or Bermuda, as the case may be, from any payment made
under or with respect to the Securities or the Securities Guarantee.
In the case of a default in payment of principal (or Accreted Value) of and
premium, if any, on this Security upon acceleration or redemption, interest
shall be payable pursuant to the preceding paragraph on such overdue principal
(or Accreted Value) and premium, if any, such interest shall be payable on
demand and, if not so paid on demand, such interest shall itself bear interest
at the rate of 12% per annum (to the extent that the payment of such interest
shall be legally enforceable), and shall accrue from the date of such demand for
payment to the date payment of such interest has been made or duly provided for,
and such interest on unpaid interest shall also be payable on demand.
[If this Security is a Global Security issued in bearer form, then insert:
The Issuer will pay interest, if any, on this Security to the bearer of this
Security. The Holder of this Security must surrender this Security to the
Trustee to collect principal payments.] Payment of the principal of (and
premium, if any) and interest on this Security will be made at the corporate
trust office of the Trustee and at the office or agency of the Issuer maintained
for that purpose in the Borough of Manhattan, The City of New York, New York,
and in Luxembourg, 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 [If this Security is a Global Security in bearer form, then insert: is
specified by the bearer hereof] [If this Security is a Definitive Security, then
insert: shall appear in the Security Register]. Payments of principal, interest
and premium, if any, will be made by the Issuer in Deutsche marks.
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.
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<PAGE>
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 under its corporate seal.
Dated:
The Common Seal of
RSL COMMUNICATIONS PLC
was hereto affixed in
the presence of:
[SEAL]
RSL COMMUNICATIONS PLC,
by
----------------------
Name:
Title:
by
----------------------
Name:
Title:
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<PAGE>
SECTION 2.03. Form of Reverse of Security. This Security is one of a duly
authorized issue of Securities of the Issuer designated as its 10% Senior
Discount Notes due 2008 (the "Securities") issued under an Indenture, dated as
of March 16, 1998 (herein called the "Indenture"), between the Issuer, RSL
Communications, Ltd., as the guarantor (the "Guarantor") and The Chase Manhattan
Bank, as trustee (herein called the "Trustee", which term includes any successor
trustee under the Indenture). Reference is hereby made to the Indenture and all
indentures supplemental thereto for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the Issuer, the
Guarantor, the Trustee and the Holders of the Securities and of the terms upon
which the Securities are, and are to be, authenticated and delivered.
The Securities are subject to redemption upon not less than 30 nor more
than 60 days' notice by mail to each Holder of Securities to be redeemed at such
Holder's address appearing in the Security Register, in amounts of DM1,000 or an
integral multiple of DM1,000, at any time on or after March 15, 2003 and prior
to maturity, as a whole or in part, at the election of the Issuer, at the
following Redemption Prices (expressed as percentages of the principal amount)
plus accrued interest to but excluding the Redemption Date (subject to the right
of Holders [If this Security is not a Global Security issued in bearer form,
insert: on the relevant Regular 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 March 15, of each of the years indicated
below:
Redemption
Year Price
---- -----
2003 105.000%
2004 103.333%
2005 101.667%
2006 and 100.000%
thereafter
and thereafter at a Redemption Price equal to 100% of the principal amount,
together in the case of any such redemption with accrued interest to but
excluding the Redemption Date, but interest installments whose Stated Maturity
is on or prior to such Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities [If this Security is not a
Global
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<PAGE>
Security issued in bearer form, insert:, of record at the close of business on
the relevant Record Dates referred to on the face hereof,] all as provided in
the Indenture.
In addition, at any time prior to March 15, 2001, in the event that the
Guarantor receives net cash proceeds from the public or private sale of its
Common Stock (other than Disqualified Stock), the Issuer (to the extent it
receives such proceeds and has not used such proceeds, directly or indirectly,
to redeem or repurchase other securities pursuant to optional redemption
provisions) may, at its option, apply an amount equal to any such net cash
proceeds or any portion thereof to redeem, from time to time, Securities in a
principal amount of up to an aggregate amount equal to 33 1/3% of the aggregate
principal amount at maturity of the Securities; provided, however, that
Securities in an amount equal to at least 66 2/3% of the aggregate principal
amount at maturity of the Securities remain Outstanding after each redemption.
Each redemption must occur on a Redemption Date within 180 days of the related
sale and upon not less than 30 nor more than 60 days' notice by mail to each
Holder of Securities to be redeemed at such Holder's address appearing in the
Security Register, in amounts of DM1,000 or an integral multiple of DM1,000 at a
Redemption Price of 110.000% of the Accreted Value of the Securities plus
accrued interest to but excluding the Redemption Date.
Furthermore, in the event that (i) the Guarantor or the Issuer has become
or would become obligated to pay any Additional Amounts as a result of (x)
changes affecting withholding tax laws or (y) a Listing Failure provided that
the Issuer has used reasonable best efforts to list and maintain a listing of
the Securities on a "recognized stock exchange" (within the meaning of Section
841 of the U.K. Income and Corporation Taxes Act 1988) (as provided for in
Section 10.09), and (ii) the Guarantor and the Issuer are unable to avoid the
requirement to pay such Additional Amounts by taking reasonable measures
available to them (including, without limitation, the Guarantor making payments
directly to holders under the Securities Guarantee, unless such payment is
likely to result in adverse consequences to the Issuer or the Guarantor), then
the Issuer may redeem all, but not less than all, of the Securities at any time
at 100% of the Accreted Value thereof on the Redemption Date, together with
accrued interest thereon, if any, to but excluding the Redemption Date. Prior to
the publication of the notice of redemption in accordance with the foregoing,
the Issuer shall deliver to the Trustee an officer's certificate stating that
the Issuer
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<PAGE>
is entitled to effect such redemption based on a written opinion of independent
tax counsel or accounting firm reasonably satisfactory to the Trustee.
The Securities do not have the benefit of any sinking fund obligations.
The Indenture provides that, subject to certain conditions, if (i) a Change
of Control occurs or (ii) certain Net Available Proceeds are available to the
Issuer as a result of any Asset Disposition, the Issuer shall be required to
make an Offer to Purchase for all or a specified portion of the Securities.
[If not a Global Security: In the event of redemption or purchase pursuant
to an Offer to Purchase of this Security in part only, a new Security or
Securities of like tenor for the unredeemed or unpurchased portion hereof will
be issued in the name of the Holder hereof upon the cancelation hereof.]
[If a Global Security insert: In the event of a deposit or withdrawal of a
beneficial interest in this Security (including upon an exchange, transfer,
redemption or repurchase of this Security in part only) effected in accordance
with the Applicable Procedures, the Security Registrar, upon receipt of notice
of such event from Euroclear or Cedel, shall make an adjustment on its records
to reflect an increase or decrease of the Outstanding principal amount at
maturity of this Security resulting from such deposit or withdrawal, as the case
may be, and shall instruct the Book-Entry Depositary to make a similar notation
in its book-entry system to the corresponding Depositary Interest.]
If an Event of Default shall occur and be continuing, the principal of all
the Securities may be declared due and payable in the manner and with the effect
provided in the Indenture.
The Indenture contains provisions for defeasance at any time of (i) the
entire indebtedness of this Security, or (ii) certain restrictive covenants and
Events of Default with respect to this Security, in each case upon compliance
with certain conditions set forth therein.
Unless the context otherwise requires, the Original Securities and the
Exchange Securities shall constitute one series for all purposes under the
Indenture,
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<PAGE>
including without limitation, amendments, waivers, redemptions and Offers to
Purchase.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer, the Guarantor and the rights of the Holders of the Securities under the
Indenture at any time by the Issuer, the Guarantor and the Trustee with the
consent of the Holders of a majority in aggregate principal amount at maturity
of the Securities at the time Outstanding. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate
principal amount at maturity of the Securities at the time Outstanding, on
behalf of the Holders of all the Securities, to waive compliance by the Issuer
or the Guarantor with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or waiver
by the Holder of this Security shall be conclusive and binding upon such Holder
and upon all future Holders of this Security and of any Security issued upon 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.
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.
[If this Security is not a Global Security issued in bearer form, then
insert: 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, 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 like tenor
and for the same aggregate principal amount at maturity, will be issued to the
designated transferee or transferees.]
The Global Securities are issuable only in bearer form without coupons in
denominations of DM1,000 and any integral multiple thereof. Definitive
Securities shall be
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<PAGE>
issuable in registered form without interest coupons in denominations of DM1,000
and any integral multiple thereof. As provided in the Indenture and subject to
certain limitations therein set forth, Securities are exchangeable for a like
tenor and aggregate principal amount at maturity of Securities of a different
authorized denomination, as requested by the Holder surrendering the same.
[If this Security is a Global Security issued in bearer form, then insert:
The bearer of this Security shall be treated as the owner of this Security for
all purposes.]
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.
[If this Security is not a Global Security issued in bearer form, insert:
Prior to due presentment of this Security for registration of transfer, the
Issuer, the Guarantor, the Trustee and any agent of the Issuer, the Guarantor,
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 Guarantor, 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 [If Original Securities, then insert: ; provided,
however, that Special Interest shall be computed on the basis of a 365- or
366-day year, as the case may be, and the number of days actually elapsed].
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Issuer pursuant
to Section 10.13 or 10.17 of the Indenture, check the box:
|_|
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<PAGE>
If you want to elect to have only a part of this Security purchased by the
Issuer pursuant to Section 10.13 or 10.17 of the Indenture, state the amount:
DM___________
Dated:_____________Your Signature:______________________________________________
(Sign exactly as name appears on the other
side of this Security)
Signature Guarantee:____________________________________________________________
Notice: Signature(s) must be guaranteed by an "eligible
guarantor institution" meeting the requirements of the
Security Registrar which requirements will include
membership or participation in STAMP or such other
"signature guarantee program" as may be determined by the
Trustee in addition to, or in substitution for STAMP, all in
accordance with the Securities Exchange Act of 1934, as
amended.
SECTION 2.04. Form of Trustee's Certificate of Authentication. This is one
of the Securities referred to in the within-mentioned Indenture.
Dated:
THE CHASE MANHATTAN BANK,
as Trustee
by___________________________
Authorized Signatory
ARTICLE III
The Securities
SECTION 3.01. Title and Terms. The aggregate principal amount at maturity
at maturity of Securities which may be authenticated and delivered under this
Indenture is limited to DM296,000,000 issued on the date hereof, except for
Securities authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Securities pursuant to Section 3.04, 3.05,
3.06, 9.06 or 11.08 or in connection with an Offer to Purchase pursuant to
Section 10.13 or 10.17 (all Securities referred to in this
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<PAGE>
exception being deemed "Substitute Securities"). The Issuer may issue Exchange
Securities from time to time pursuant to an Exchange Offer or otherwise, in each
case pursuant to a Board Resolution, subject to Section 3.03, included in an
Officers' Certificate delivered to the Trustee, in authorized denominations in
exchange for a like principal amount at maturity of Original Securities. Upon
any such exchange the Original Securities shall be canceled in accordance with
Section 3.09 and shall no longer be deemed Outstanding for any purpose. In no
event shall the aggregate principal amount at maturity of Original Securities
and Exchange Securities Outstanding exceed DM296,000,000.
The Securities shall be known and designated as the "10% Senior Discount
Notes due 2008" of the Issuer. The Stated Maturity of the Securities shall be
March 15, 2008. The Securities shall bear interest at the rate of 10% per annum,
from March 15, 2003 or from the most recent Interest Payment Date thereafter to
which interest has been paid or duly provided for, as the case may be, payable
semi-annually on March 15 and September 15, commencing September 15, 2003 until
the principal thereof is paid or made available for payment; provided, however,
that no interest shall accrue on the principal amount of the Securities prior to
March 15, 2003 and no interest shall be paid on the Securities prior to
September 15, 2003; provided further, however, with respect to Original
Securities, if there has been a Registration Default, a Step-Up will occur and
the Original Securities will from then bear Special Interest to but excluding
the Step-Down Date. Accrued Special Interest, if any, shall be paid in cash in
arrears semi-annually on March 15 and September 15 in each year, and the amount
of accrued Special Interest shall be determined on the basis of the number of
days actually elapsed.
With respect to Global Securities, the Issuer will pay interest, if any, on
such Securities to the bearers of such Securities. Holders of such Global
Securities must surrender such Securities to the Trustee to collect principal
payments. The principal of and premium, if any, and interest on the Securities
shall be payable at the corporate trust office of the Trustee 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; 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.
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<PAGE>
The Securities shall be subject to repurchase by the Issuer pursuant to an
Offer to Purchase as provided in Sections 10.13 and 10.17 of the Indenture.
The Securities shall be redeemable as provided in Article Eleven.
The Securities shall not have the benefit of any sinking fund obligations.
The Securities shall be subject to defeasance at the option of the Issuer
as provided in Article Twelve.
The Securities are guaranteed by the Guarantor as set forth in Article IV
of this Indenture.
A copy of an appropriate record of such action shall be certified by the
Secretary or any Assistant Secretary of the Issuer and delivered to the Trustee
at or prior to the delivery of the Officers' Certificate or the trust indenture
supplemental hereto setting forth the terms of such Securities.
Unless the context otherwise requires, the Original Securities and the
Exchange Securities shall constitute one series for all purposes under the
Indenture, including without limitation, amendments, waivers, redemptions and
Offers to Purchase.
SECTION 3.02. Denominations. The Global Securities shall be issuable in
bearer form without coupons and only in denominations of DM1,000 and any
integral multiple of DM1,000 in excess thereof. Definitive Registered Securities
shall be issuable in registered form without interest coupons in denominations
of DM1,000 and any integral multiple thereof.
SECTION 3.03. Execution, Authentication, Delivery and Dating. The
Securities shall be executed on behalf of the Issuer by its Chairman of the
Board, its Vice Chairman of the Board, its President or one of its Vice
Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. 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 the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have
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<PAGE>
ceased to hold such offices prior to 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 Securities executed by the Issuer to the
Trustee for authentication, together with a Issuer Order for the authentication
and delivery of such Securities; and the Trustee in accordance with such Issuer
Order shall authenticate and deliver such Securities as in this Indenture
provided and not otherwise.
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 thereto, 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 at maturity of Original Securities for cancelation in
accordance with Section 3.09 of this Indenture, and the Trustee in accordance
with the Issuer Order shall authenticate and deliver such Securities. In
authenticating such Exchange Securities, and accepting the additional
responsibilities under this Indenture in relation to such Securities, the
Trustee shall be entitled to receive, and (subject to Section 6.01) shall be
fully protected in relying upon, an Opinion of Counsel stating,
(a) that such Exchange Securities have been duly and validly issued in
accordance with the terms of the Indenture, and are entitled to all the
rights and benefits set forth herein; and
(b) that the issuance of the Exchange Securities in exchange for the
Original Securities has been effected in compliance with the Securities Act
of 1933, as amended.
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,
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<PAGE>
and the only evidence, that such Security has been duly authenticated and
delivered hereunder.
SECTION 3.04. 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 are printed, lithographed,
typewritten, mimeographed or otherwise 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 of such Securities.
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 10.02, without charge to
the Holder. Upon surrender for cancelation of any one or more temporary
Securities, the Issuer shall execute and the Trustee shall authenticate and
deliver in exchange therefor a like tenor and principal amount at maturity of
definitive Securities of authorized denominations. Until so exchanged, the
temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities.
SECTION 3.05. Registration, Registration of Transfer and Exchange. (a) 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 designated pursuant to Section 10.02 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 Definitive Securities and of transfers of such Securities. The Trustee is
hereby appointed "Security Registrar" for the purpose of registering such
Securities and transfers of such Securities as herein provided. Such Security
Register shall distinguish between Original Securities and Exchange Securities.
Subject to the other provisions of this Indenture regarding restrictions on
transfer, upon surrender for registration of transfer of any Definitive Security
at an office or agency of the Issuer designated pursuant to Section 10.02 for
such purpose in accordance with the terms
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hereof, 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 and of a like tenor and aggregate
principal amount at maturity and bearing such restrictive legends as may be
required by this Indenture.
At the option of the Holder, and subject to the other provisions of this
Section 3.05, Securities may be exchanged for other Securities of any authorized
denominations and of a like tenor and aggregate principal amount at maturity,
upon surrender of such Securities to be exchanged at such office or agency.
Whenever any Securities are so surrendered for exchange, the Issuer shall
execute, and the Trustee shall authenticate and deliver, 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 (subject to the provisions in the Original Securities regarding the
payment of Special Interest) 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 Trustee) 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 to the Holder 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 Section 3.04, 3.05(d), 9.06 or 11.08 or in accordance
with any Offer to Purchase pursuant to Section 10.13 or 10.17 not involving any
transfer.
The Issuer 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 11.04 and ending at the close of business
on the day of such mailing,
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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
3.05(b) shall be made only in accordance with this Section 3.05(b) or, if
necessary, in accordance with such other procedures as the Issuer shall develop
which shall comply with applicable securities laws.
(i) 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 wishes to acquire the
same in the form of a beneficial interest in the Regulation S Global
Security, such transfer may be effected only in accordance with the
provisions of this Clause (b)(i) and subject to the Applicable Procedures.
Upon receipt by the Trustee, as Security Registrar, of (A) an order given
by Euroclear or Cedel or an authorized representative of Euroclear or Cedel
directing that a beneficial interest in the Regulation S Global Security in
a specified principal amount at maturity be credited to a specified
Participant's account and that a beneficial interest in the Restricted
Global Security in an equal principal amount at maturity be debited from
another specified Participant'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, shall
reduce or cause to be reduced the principal amount at maturity of the
Restricted Global Security and increase the principal amount at maturity of
the Regulation S Global Security by such specified principal amount at
maturity as provided in Section 3.05(e).
(ii) 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 wishes to
acquire the same in the form of a beneficial interest in the Restricted
Global Security, such transfer may be effected only
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in accordance with this Clause (b)(ii) and subject to the Applicable
Procedures. Upon receipt by the Trustee, as Security Registrar, of (A) an
order given by Euroclear or Cedel or an authorized representative of
Euroclear or Cedel directing that a beneficial interest in the Restricted
Global Security in a specified principal amount at maturity be credited to
a specified Participant's account and that a beneficial interest in the
Regulation S Global Security in an equal principal amount at maturity be
debited from another specified Participant's account and (B) if such
transfer is to occur during the Restricted 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 or cause to be reduced the principal amount at
maturity of the Regulation S Global Security and increase the principal
amount at maturity of the Restricted Global Security by such specified
principal amount at maturity as provided in Section 3.05(e).
(iii) Definitive Security to Definitive Security. A Security that is a
Definitive Security may be transferred, in whole or in part, to a Person
who takes delivery in the form of another Security that is a Definitive
Security as provided in Section 3.05(a), provided that, if the Security to
be transferred in whole or in part is a Restricted Security, or is a
Regulation S Security and the transfer is to occur during the Restricted
Period, then the Trustee shall have received (A) a Restricted Securities
Certificate, satisfactory to the Trustee and duly executed by the
transferor Holder or his attorney duly authorized in writing, in which case
the transferee Holder shall take delivery in the form of a Restricted
Security, or (B) a Regulation S Certificate, satisfactory to the Trustee
and duly executed by the transferor Holder or his attorney duly authorized
in writing, in which case the transferee Holder shall take delivery in the
form of a Regulation S Security (subject in every case to Section 3.05(c)).
(iv) Exchanges between Global Security and Definitive Security. A
beneficial interest in a Global Security may be exchanged for a Security
that is a Definitive Security as provided in
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Section 3.05(d), provided that, if such interest is a beneficial interest
in the Restricted Global Security, or if such interest is a beneficial
interest in the Regulation S Global Security and such exchange is to occur
during the Restricted Period, then such interest shall be exchanged for a
Restricted Security or a Regulation S Security, as the case may be (subject
in each case to Section 3.05(c)).
(c) Securities Act Legends. Rule 144A Securities and their Successor
Securities shall bear a Restricted Securities Legend, and the Regulation S
Securities and their Successor Securities shall bear a Regulation S Legend,
subject to the following:
(i) subject to the following Clauses of this Section 3.05(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;
(ii) subject to the following Clauses of this Section 3.05(c), a new
Security which is a Definitive Security and is issued in exchange for 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 3.05(b)(iii) or (iv)
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;
(iii) Registered Securities shall not bear a Securities Act Legend;
(iv) 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
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his attorney duly authorized in writing, and after such date and receipt of
such certificate, the Trustee shall authenticate and deliver such a new
Security in exchange for or in lieu of such other Security as provided in
this Article III;
(v) 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
III; and
(vi) notwithstanding the foregoing provisions of this Section 3.05(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 deliver a
new Security bearing a Restricted Securities Legend in exchange for such
Successor Security as provided in this Article III.
(d) Exchanges of Global Security for Definitive Security. Transfers of
Global Securities shall be by delivery. The Book-Entry Depositary and the Issuer
have agreed that the Global Securities shall only be delivered in the
circumstances described in the Deposit Agreement. Notwithstanding any other
provision in this Indenture, no Global Security may be exchanged in whole or in
part for Definitive Securities unless (i)Euroclear and Cedel each notifies the
Issuer or the Book-Entry Depositary in writing that it (or its nominee) is
unwilling or unable to continue to act as, or ceases to be, a clearing agency
registered under the Exchange Act, and, in either case, a successor registered
as a clearing agency under the Exchange Act is not appointed by the Issuer
within 90 days, (ii) at any time if the Issuer determines that the Global
Securities (in whole but not in part) should be exchanged for Definitive
Securities; provided, that (x) such exchange is required by (A) any applicable
law or (B) any event beyond the Issuer's control or (y) payments of interest on
any Global Security, Depositary Interest or beneficial interest are, or would
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become, subject to any deduction or withholding for taxes, (iii) at any time
after the consummation of the Exchange Offer, if the owner of a beneficial
interest requests such exchange in writing delivered to Euroclear or Cedel and
through Euroclear or Cedel to the Book-Entry Depositary and the Trustee, or (iv)
if the Book-Entry Depositary is at any time unwilling or unable to continue as
Book-Entry Depositary and a successor Book-Entry Depositary is not appointed by
the Issuer within 90 days. Upon the occurrence of any of the preceding events,
Definitive Securities shall be issued in such names as the Book-Entry Depositary
shall instruct the Trustee based on the instructions of Euroclear or Cedel.
(e) If any Global Security is to be exchanged for other Securities or
canceled in whole, it shall be surrendered by or on behalf of the Book-Entry
Depositary or its nominee to the Trustee, as Security Registrar, for exchange or
cancelation as provided in this Article III. If any Global Security is to be
exchanged for other Securities or canceled 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 cancelation as provided in this Article III or (ii) the principal
amount at maturity thereof shall be reduced or increased by an amount equal to
the portion thereof to be so exchanged or canceled, or equal to the principal
amount at maturity 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
by (x) the Book-Entry Depositary as directed by the Trustee in such Book-Entry
Depositary's book-entry system to the corresponding Depositary Interest and (y)
the Common Depositary as directed by the Book-Entry Depositary in accordance
with the Deposit Agreement to the corresponding Depositary Interest, whereupon
the Trustee, in accordance with the Applicable Procedures, shall instruct
Euroclear or Cedel (as applicable) or their authorized representatives to make a
corresponding adjustment to its records. Upon any such surrender or adjustment
of a Global Security, the Trustee shall, subject to Section 3.05(b) and as
otherwise provided in this Article III, authenticate and deliver any Securities
issuable in exchange for such Global Security (or any portion thereof) to or
upon the order of, and registered (if applicable) in such names as may be
directed by, the Book-Entry 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
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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 Book-Entry
Depositary or Euroclear or Cedel or any of their authorized representatives
which is given or made pursuant to this Article III if such order, direction or
request is given or made in accordance with the Deposit Agreement with respect
to the Book-Entry Depositary and the Applicable Procedures with respect to
Euroclear and Cedel.
SECTION 3.06. 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 deliver in exchange therefor a new Security
of like tenor and principal amount at maturity and bearing a number not
contemporaneously outstanding.
If there shall be delivered to the Issuer and the Trustee (i) evidence to
their satisfaction of the destruction, loss or theft of any Security and (ii)
such security or indemnity as may be required by them to save each of them and
any agent of either of them harmless, then, in the absence of written notice to
the Issuer or the Trustee that such Security has been acquired by a bona fide
purchaser, the Issuer shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of like tenor and principal amount at maturity 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 may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
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.
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The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.07. 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 bearer thereof on the Interest
Payment Date in the case of a Global Security in bearer form and, in the case of
a Definitive Security, 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.
Any interest (including Special 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 (a) bear interest at the rate per
annum stated in the form of Security included herein (to the extent that the
payment of such interest shall be legally enforceable), and (b) forthwith cease
to be payable to the bearer thereof on such Interest Payment Date with respect
to a Global Security in bearer form and, with respect to a Definitive Security,
to the Holder on the relevant Regular Record Date by virtue of having been such
Holder, and, in each case, such Defaulted Interest may be paid by the Issuer, at
its election in each case, as provided in Clause (a) or (b) below:
(a) The Issuer may elect to make payment of any Defaulted Interest to
the bearer of such Security on any Special Payment Date (as defined below)
with respect to any Global Security in bearer form and, with respect to a
Definitive Security, to the Persons in whose names the Securities (or their
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
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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
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, 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, with respect to any Definitive Security,
to the Persons in whose names the Securities (or their 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 (b). As used in this Clause (a), "Special Payment Date"
means the date on which Defaulted Interest is paid to the Holder.
(b) 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 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.
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 3.08. Persons Deemed Owners. Prior to due presentment of a Security
for registration of transfer, the Issuer, the Guarantor, the Trustee and any
agent of the Issuer, the Guarantor or the Trustee may treat the Person in whose
name a Definitive Security is registered as the owner of such Security and may
treat the bearer of a Global Security as the owner of such Security, in each
case, for
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the purpose of receiving payment of principal of and premium, if any, and
(subject to Section 3.07) interest on such Security and for all other purposes
whatsoever, whether or not such Security be overdue, and neither the Issuer, the
Guarantor, the Trustee nor any agent of the Issuer, the Guarantor or the Trustee
shall be affected by notice to the contrary.
SECTION 3.09. Cancelation. All Securities surrendered for payment,
redemption, registration of transfer, exchange or pursuant to any Offer to
Purchase pursuant to Section 10.13 or 10.17 shall, if surrendered to any Person
other than the Trustee, be delivered to the Trustee and shall be promptly
canceled by it. The Issuer may at any time deliver to the Trustee for
cancelation 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 in accordance with its
standard procedures or as directed by an Issuer Order; provided, however, that
the Trustee shall not be required to destroy such Securities.
SECTION 3.10. Computation of Interest. Interest on the Securities shall be
computed on the basis of a 360-day year of twelve 30-day months, provided,
however, that Special Interest on Original Securities shall be computed on the
basis of a 365- or 366-day year, as the case may be, and the number of days
actually elapsed.
SECTION 3.11. ISIN Numbers and Common Code Numbers. The Issuer in issuing
Securities may use "ISIN" and "Common Code" numbers (if then generally in use)
in addition to serial numbers; if so, the Trustee shall use such "ISIN" and
"Common Code" numbers in addition to serial numbers in notices of redemption and
repurchase as a convenience to Holders; provided that any such notice may state
that no representation is made as to the correctness of such "ISIN" and "Common
Code" numbers either as printed on the Securities or as contained in any notice
of a redemption or repurchase and that reliance may be placed only on the serial
or other identification numbers printed on the Securities, and any such
redemption or repurchase shall not be affected by any defect in or omission of
such "ISIN" and "Common Code" numbers.
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ARTICLE IV
Guarantee Of Securities
SECTION 4.01. Guarantee. Subject to the provisions of this Article Four,
the Guarantor hereby fully, unconditionally and irrevocably guarantees to each
Holder and to the Trustee on behalf of the Holders: (i) the due and punctual
payment of the principal of, premium, if any, on and interest (including Special
Interest) on each Security, when and as the same shall become due and payable,
whether at maturity, by acceleration or otherwise, the due and punctual payment
of interest on the overdue principal of and interest, if any, on the Securities,
to the extent lawful, and the due and punctual performance of all other
obligations of the Issuer to the Holders or the Trustee, all in accordance with
the terms of such Security and this Indenture and (ii) in the case of any
extension of time of payment or renewal of any Securities or any of such other
obligations, that the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, at Stated Maturity, by
acceleration or otherwise. The Guarantor hereby waives diligence, presentment,
demand of payment, filing of claims with a court in the event of merger or
bankruptcy of the Issuer, any right to require a proceeding first against the
Issuer, the benefit of discussion, protest or notice with respect to any such
Security or the debt evidenced thereby and all demands whatsoever, and covenants
that this Securities Guarantee will not be discharged as to any such Security
except by payment in full of the principal thereof and interest thereon and as
provided in Section 12.01 and Section 12.02 (subject to Section 12.06). The
maturity of the obligations guaranteed hereby may be accelerated as provided in
Article Five for the purposes of this Article Four. In the event of any
declaration of acceleration of such obligations as provided in Article Five,
such obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantor for the purpose of this Article Four. In addition,
without limiting the foregoing provisions, upon the effectiveness of an
acceleration under Article Five, the Trustee shall promptly make a demand for
payment on the Securities under the Guarantee provided for in this Article Four.
If the Trustee or the Holder of any Security is required by any court or
otherwise to return to the Issuer or the Guarantor, or any custodian, receiver,
liquidator, trustee, sequestrator or other similar official acting in
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relation to the Issuer or the Guarantor, any amount paid to the Trustee or such
Holder in respect of a Security, this Securities Guarantee, to the extent
theretofore discharged, shall be reinstated in full force and effect. The
Guarantor further agrees, to the fullest extent that it may lawfully do so,
that, as between it, on the one hand, and the Holders and the Trustee, on the
other hand, the maturity of the obligations guaranteed hereby may be accelerated
as provided in Article Five hereof for the purposes of this Securities
Guarantee, notwithstanding any stay, injunction or other prohibition extant
under any applicable bankruptcy law preventing such acceleration in respect of
the obligations guaranteed hereby.
Until such time as the Securities are fully and finally paid, including all
interest, premium, principal and liquidated damages with respect thereto, the
Guarantor hereby irrevocably waives any claim or other rights which it may now
or hereafter acquire against the Issuer that arise from the existence, payment,
performance or enforcement of its obligations under this Securities Guarantee
and this Indenture, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution, indemnification, any right to
participate in any claim or remedy of the Holders against the Issuer or any
collateral which any such Holder or the Trustee on behalf of such Holder
hereafter acquires, whether or not such claim, remedy or right arises in equity,
or under contract, statute or common law, including, without limitation, the
right to take or receive from the Issuer, directly or indirectly, in cash or
other property or by setoff or in any other manner, payment or security on
account of such claim or other rights. If any amount shall be paid to the
Guarantor in violation of the preceding sentence and the principal of, premium,
if any, and accrued interest on the Securities shall not have been paid in full,
such amount shall be deemed to have been paid to the Guarantor for the benefit
of, and held in trust for the benefit of, the Holders, and shall forthwith be
paid to the Trustee for the benefit of the Holders to be credited and applied
upon the principal of, premium, if any, and accrued interest on the Securities.
The Guarantor acknowledges that it will receive direct and indirect benefits
from the issuance of the Securities pursuant to this Indenture and that the
waivers set forth in this Section 4.01 are knowingly made in contemplation of
such benefits.
The Guarantee set forth in this Section 4.01 shall not be valid or become
obligatory for any purpose with respect to a Security until the certificate of
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authentication on such Security shall have been signed by or on behalf of the
Trustee.
SECTION 4.02. Obligations Unconditional. Subject to Section 4.05, nothing
contained in this Article Four or elsewhere in this Indenture or in the
Securities is intended to or shall impair, as among the Guarantor and the
holders of the Securities, the obligation of the Guarantor, which is absolute
and unconditional, upon failure by the Issuer, to pay to the holders of the
Securities the principal of, premium, if any, and interest on the Securities as
and when the same shall become due and payable in accordance with their terms,
or is intended to or shall affect the relative rights of the holders of the
Securities and creditors of the Guarantor, nor shall anything herein or therein
prevent the holder of any Securities or the Trustee on their behalf from
exercising all remedies otherwise permitted by applicable law upon default under
this Indenture.
Without limiting the foregoing, nothing contained in this Article Four will
restrict the right of the Trustee or the holders of the Securities to take any
action to declare the Guarantee to be due and payable prior to the Stated
Maturity of the Securities pursuant to Section 5.02 or to pursue any rights or
remedies hereunder.
SECTION 4.03. Notice to Trustee. The Guarantor shall give prompt written
notice to the Trustee of any fact known to the Guarantor which would prohibit
the making of any payment to or by the Trustee in respect of the Securities
Guarantee pursuant to the provisions of this Article Four.
ARTICLE V
Remedies
SECTION 5.01. 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 in the payment of any interest upon any Security when it
becomes due and payable, and
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continuance of such default for a period of 30 days; or
(b) default in the payment of the principal of (or premium, if any,
on) any Security when due; or
(c) default in the payment of principal and interest upon any Security
required to be purchased pursuant to an Offer to Purchase pursuant to
Sections 10.13 or 10.17; or
(d) default in the performance, or breach, of Section 8.01, 10.13 or
10.17; or
(e) default in the performance, or breach, of any covenant or warranty
of the Issuer or Guarantor in this Indenture or in any Security (other than
a covenant or warranty a default in whose performance or whose breach is
elsewhere in this Section specifically dealt with), and continuance of such
default or breach for a period of 60 days after there has been given, by
registered or certified mail, to the Issuer by the Trustee or to the Issuer
and the Trustee by the Holders of at least 25% in aggregate principal
amount at maturity of the Outstanding Securities a written notice
specifying such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder; or
(f) a default or defaults under any bond(s), debenture(s), note(s) or
other evidence(s) of indebtedness by the Guarantor, the Issuer or any
Subsidiary of the Guarantor or under any mortgage(s), indenture(s) or
instrument(s) under which there may be issued or by which there may be
secured or evidenced any indebtedness of such type by the Guarantor, the
Issuer or any Subsidiary of the Guarantor with a principal amount then
outstanding, individually or in the aggregate, in excess of $10 million,
whether such indebtedness now exists or shall hereafter be created, which
default or defaults shall constitute a failure to pay in excess of $10
million of the principal of such indebtedness when due at the final
maturity thereof, or shall have resulted in excess of $10 million of
indebtedness becoming or being declared due and payable prior to the date
on which it would otherwise have become due and payable; or
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(g) a final judgment or final judgments for the payment of money are
entered against the Guarantor, the Issuer or any Subsidiary of the
Guarantor in an aggregate amount in excess of $10 million (net of
indemnities and funds actually received or to be received within 90 days of
such judgment) by a court or courts of competent jurisdiction, which
judgments remain undischarged or unbonded for a period (during which
execution shall not be effectively stayed) of 60 days after the right to
appeal all such judgments has expired; or
(h) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Guarantor, the Issuer or any
Significant Subsidiaries in an involuntary case or proceeding under any
applicable bankruptcy, insolvency, reorganization or other similar law or
(B) a decree or order adjudging the Guarantor, the Issuer or any
Significant Subsidiaries a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Guarantor, the Issuer or any
Significant Subsidiaries under any applicable law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Guarantor, the Issuer or any Significant
Subsidiaries or of any substantial part of its property, or ordering the
winding up or liquidation of its affairs, 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
(i) the commencement by the Guarantor, the Issuer or any Significant
Subsidiaries of a voluntary case or proceeding under any 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 it to the entry of a decree or order for relief in respect of
the Guarantor, the Issuer or any Significant Subsidiaries in an involuntary
case or proceeding under any applicable bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the filing by it
of a petition or answer or consent seeking reorganization or relief under
any applicable law, or the consent by it to the filing of such petition or
to the
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appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of the Guarantor,
the Issuer or any Significant Subsidiaries or of any substantial part of
its property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay its
debts generally as they become due, or the taking of corporate action by
the Guarantor, the Issuer or any Significant Subsidiaries in furtherance of
any such action.
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment. If an
Event of Default (other than an Event of Default specified in Section 5.01(h) or
(i)) occurs and is continuing, then and in every such case the Trustee or the
Holders of not less than 25% in principal amount at maturity of the Outstanding
Securities may declare the principal amount at maturity of all 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 such Accreted Value
and any accrued interest shall become immediately due and payable. If an Event
of Default specified in Section 5.01(h) or (i) occurs, the Accreted Value 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 based on acceleration
has been obtained by the Trustee as hereinafter in this Article provided, the
Holders of a majority in principal amount at maturity 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) all overdue interest on all Securities,
(B) the Accreted Value 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
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Issuer) and interest thereon at the rate borne by the Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Securities,
and
(D) 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 Accreted
Value of Securities which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 5.13.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 5.03. 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 principal (and premium, if any) and on any overdue interest, at the rate
provided by 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,
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disbursements and advances of the Trustee, its agents and counsel.
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
effective 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 5.04. Trustee May File Proofs of Claim. In case of any judicial
proceeding relative to the Issuer (or any other obligor upon the Securities),
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 and receive any moneys, securities or other property
payable or deliverable upon the exchange of the Securities or upon 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 6.07.
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
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authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding; provided, however, that the Trustee may, on behalf of the Holders,
vote for the election of a trustee in bankruptcy or similar official and be a
member of a creditors or other similar committee.
SECTION 5.05. 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 counsel, be for the ratable benefit of
the Holders of the Securities in respect of which such judgment has been
recovered.
SECTION 5.06. Application of Money Collected. Any money collected by the
Trustee pursuant to this Article shall be applied in the following order, at the
date or dates fixed by the Trustee and, in case of the distribution of such
money on account of principal (or premium, if any) or interest, 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 due the Trustee under Section
6.07; and
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Securities 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 5.07. 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;
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(2) the Holders of not less than 25% in aggregate principal amount at
maturity of the Outstanding Securities shall have made written request to
the Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(3) such Holder or Holders have offered and, if requested, provided to
the Trustee reasonable indemnity 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 and, if requested, provision of indemnity has failed to institute
any such proceeding; and
(5) no direction 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 at maturity 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 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 5.08. 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 3.07) 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
without the consent of such Holder.
SECTION 5.09. 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
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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 5.10. 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 3.06, 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 5.11. 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 5.12. Control by Holders. The Holders of a majority in principal
amount at maturity 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) such direction shall not be in conflict with any rule of law or
with this Indenture or expose the Trustee to personal liability (as
determined in the sole discretion of the Trustee), and
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
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SECTION 5.13. Waiver of Past Defaults. The Holders of not less than a
majority in aggregate principal amount at maturity 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 or
(3) arising from failure to purchase any Security tendered pursuant to
Sections 10.13 and 10.17 of this Indenture.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.
SECTION 5.14. Undertaking for Costs. In any suit for the enforcement of any
right or remedy under this Indenture, or in any suit against the Trustee for any
action taken or omitted by it as Trustee, a court may require any party litigant
in such suit to file an undertaking to pay the costs of such suit, and may
assess costs against any such party litigant, in the manner and to the extent
provided in the Trust Indenture Act; provided that neither this Section nor the
Trust Indenture Act shall be deemed to authorize any court to require such an
undertaking or to make such an assessment in any suit instituted by the Issuer
or the Guarantor; further provided, that the provisions of this Section 5.14
shall not apply to any suit instituted by the Trustee, to any suit instituted by
any Holder or group of Holders holding more than 10% in aggregate principal
amount at maturity of the Outstanding Securities, or to any suit instituted by
any Holder for the enforcement of the payment of the principal of, or premium,
if any, or interest on any Security on or after the respective due dates
expressed in such Security.
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SECTION 5.15. Waiver of Stay or Extension Laws. Each of the Issuer and the
Guarantor covenants (to the extent that it may lawfully do so) that it will not
at any time insist upon, or plead, or in any manner whatsoever claim 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 each of the Issuer and the Guarantor (to the extent that
it may lawfully do so) hereby expressly waives all benefit or advantage of any
such law and covenants that it will not hinder, delay or impede the execution of
any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
ARTICLE VI
The Trustee
SECTION 6.01. Certain Duties and Responsibilities. (a) Except during the
continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture, and no implied covenants,
duties 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; but in
the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee shall
be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture.
(b) In case 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 their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
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(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own wilful misconduct, except that
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) 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 shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction
of the Holders of a majority in principal amount at maturity of the
Outstanding Securities relating to the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or exercising any
trust or power conferred upon the Trustee, under this Indenture; 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 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 relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.
SECTION 6.02. Notice of Defaults. The Trustee shall give the Holders notice
of any default hereunder known to the Trustee as and to the extent provided by
the Trust Indenture Act; provided, however, that in the case of any default of
the character specified in Section 5.01(e), no such notice to Holders shall be
given until at least 30 days after the occurrence thereof. 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.
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SECTION 6.03. Certain Rights of Trustee. Subject to the provisions of
Section 6.01:
(a) the Trustee may conclusively rely and shall be completely
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;
(b) any request or direction of the Issuer mentioned herein shall be
sufficiently evidenced by a 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 from the Issuer and be completely protected in
relying upon an Officers' Certificate received in response to such request;
(d) the Trustee may consult with counsel of its selection and the
written 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 against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction reasonably satisfactory to the Trustee;
(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,
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order, bond, debenture, note, other evidence of indebtedness or other paper
or document, but the Trustee may (but shall have no obligation to) 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 or the Guarantor, personally or by agent or
attorney;
(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 with respect to any action taken,
suffered or omitted to be taken by it in accordance with the direction of
Holders of Outstanding Securities as provided in Sections 5.02, 5.12 and
5.13 hereof; and
(i) for all purposes under this Indenture, the Trustee shall not be
deemed to have notice of any Event of Default unless a Responsible Officer
of the Trustee has actual knowledge thereof or unless written notice of any
event which is in fact such a default is received by the Trustee at the
Corporate Trust Office of the Trustee, and such notice references the
Securities and this Indenture.
SECTION 6.04. Not Responsible for Recitals or Issuance of Securities. The
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 their correctness. The Trustee
makes no representations as to the validity or sufficiency of this Indenture or
of the Securities or the Securities Guarantee. The Trustee shall not be
accountable for the use or application by the Issuer of Securities or the
proceeds thereof.
SECTION 6.05. May Hold Securities. The Trustee, 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 6.08 and 6.13, may otherwise deal with the Issuer or the Guarantor with
the same rights it would have if it
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were not Trustee, Paying Agent, Security Registrar or such other agent.
SECTION 6.06. 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 with the Issuer.
SECTION 6.07. Compensation and Reimbursement. The Issuer and the Guarantor
jointly and severally agree
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);
(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 expenses
and disbursements of its agents 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 for, and to hold it harmless against, any
loss, liability or expense 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 enforcing this Indenture
against the Issuer or the Guarantor (including, without limitation, this
Section 6.07) and of defending itself against any claim (whether asserted
by any Holder or the Issuer or the Guarantor) or liability in connection
with the exercise or performance of any of its powers or duties hereunder.
The provisions of this Section 6.07 shall survive any termination of this
Indenture and the resignation or removal of the Trustee.
As security for the performance of the obligations of the Issuer under this
Section 6.07, the Trustee shall have a lien prior to the Securities upon all
property and funds held or collected by the Trustee, except funds held in trust
for the payment of principal of (and
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premium, if any) or interest on particular Securities. The Trustee's right to
receive payment of any amounts due under this Section 6.07 shall not be
subordinate to any other liability or indebtedness of the Issuer (even though
the Securities may be so subordinated).
When the Trustee incurs expenses or renders services in connection with an
Event of Default specified in Section 5.01(h) or Section 5.01(i), the expenses
(including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable Federal or State bankruptcy, insolvency or
other similar law.
It is understood and agreed that amounts paid by the Issuer or the
Guarantor pursuant to this Section 6.07 may be paid in Dollars as the Trustee
and the Issuer and Guarantor shall agree.
Any amount awarded to the Trustee by a court of appropriate jurisdiction
pursuant to a final judgment to be paid by the Issuer or the Guarantor in
respect of any legal action, suit or proceeding relating to this Section 6.07
shall be payable in Dollars.
The provisions of this Section shall survive the termination of this
Indenture or the earlier resignation or termination of the Trustee.
SECTION 6.08. 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 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 6.09. 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 and has a combined capital and surplus
of at least $50,000,000 and its Corporate Trust Office in the Borough of
Manhattan, the City of New York, New York. If such Person publishes reports of
condition at least annually, pursuant to law or to the requirements of a
Federal, State, Territorial or District of Columbia supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such Person shall be deemed to be its combined capital and surplus as
set forth in its most recent report of
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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 6.10. 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 6.11, at which time the
retiring Trustee shall be fully discharged from its obligations hereunder.
(b) The Trustee may resign at any time by giving written notice thereof to
the Issuer. If an instrument of acceptance by a successor Trustee shall not have
been delivered to the Trustee within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount at maturity 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 6.08 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 6.09 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 a Board Resolution may remove the
Trustee, or (ii) subject to Section 5.14, 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
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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 a Board Resolution, 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 at maturity of the Outstanding Securities delivered
to the Issuer and 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 no
successor Trustee shall have been so appointed by the Issuer or the Holders and
accepted appointment in the manner hereinafter provided, 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 1.06. Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.
SECTION 6.11. Acceptance of Appointment by Successor. Every successor
Trustee appointed hereunder shall execute, acknowledge and deliver to the Issuer
and to the retiring Trustee an 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 Trustee under
Section 6.07, 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
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confirming to such successor Trustee all such rights, powers and trusts.
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 6.12. 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, without the execution
or filing of any paper or any further act on the part of any of the parties
hereto; provided that such corporation shall be otherwise qualified and eligible
under this Article. 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 may adopt such
authentication and deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such Securities.
SECTION 6.13. Preferential Collection of Claims Against Issuer or
Guarantor. If and when the Trustee shall be or become a creditor of the Issuer
or Guarantor (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 Guarantor (or any such other obligor).
SECTION 6.14. Appointment of Authenticating Agent. The Trustee may appoint
an Authenticating Agent or Agents with respect to the Securities which shall be
authorized to act on behalf of the Trustee to authenticate Securities issued
upon original issue and upon exchange, registration of transfer or partial
redemption thereof or pursuant to Section 3.06, 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
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Agent. Each Authenticating Agent shall be 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 a combined
capital and surplus of not less than $50,000,000 and subject to supervision or
examination by Federal or State authority. If such Authenticating Agent
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
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, without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent; provided,
such corporation shall be otherwise eligible under this Section.
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 acceptable to the Issuer and shall give notice of such
appointment in the manner provided in Section 1.06 to all Holders of Securities.
Any successor Authenticating 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.
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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, subject to the provisions
of Section 6.07.
If an appointment is made pursuant to this Section, the Securities may have
endorsed thereon, in lieu of the Trustee's certificate of authentication, an
alternative certificate of authentication in the following form:
This is one of the Securities referred to in the within-mentioned
Indenture.
Dated:
THE CHASE MANHATTAN BANK, as
Trustee,
by
------------------------,
as Authenticating Agent
by
-------------------------
Authorized Signatory
SECTION 6.15. Withholding Taxes. Notwithstanding any other provision of
this Agreement, the Trustee, as agent for the Issuer and the Guarantor, shall
exclude and withhold from each payment of principal and interest and other
amounts due hereunder or under the Securities or the Securities Guarantee any
and all withholding taxes applicable thereto as required by law. The Trustee
agrees to act as such withholding agent and, in connection therewith, whenever
any present or future taxes or similar charges are required to be withheld with
respect to any amounts payable in respect of the Securities or the Securities
Guarantee, to withhold such amounts and timely pay the same to the appropriate
authority in the name of and on behalf of the Holders of the Securities, that it
will furnish to the Holders of the Securities such forms or certificates as are
necessary or appropriate to provide the information described in Section
10.09(c)(i) hereof or make the declaration or claim described in Section
10.09(c)(ii) hereof, that it will file any necessary withholding tax returns or
statements when due, and that, as promptly as
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possible after the payment thereof, it will deliver to each Holder of a Security
appropriate documentation showing the payment thereof, together with such
additional documentary evidence as such Holders may reasonably request from time
to time.
In the event that the Trustee is also acting as Paying Agent,
Authenticating Agent, transfer agent, or Registrar hereunder, the rights and
protections afforded to the Trustee pursuant to this Article Six shall also be
afforded to such Paying Agent, Authenticating Agent, transfer agent, or
Registrar.
ARTICLE VII
Holders' Lists and Reports by Trustee and Issuer
SECTION 7.01. Issuer to Furnish Trustee Names and Addresses of Holder. The
Issuer will furnish or cause to be furnished to the Trustee (a) semi-annually,
not more than 15 days after each Regular Record Date, 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 7.02. Preservation of Information; Communications to Holders. (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 7.01 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 7.01 upon
receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with respect to
their rights under this Indenture or under the Securities, and the corresponding
rights and duties of the Trustee, shall be as provided by the Trust Indenture
Act.
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(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 names and addresses of Holders made pursuant to the Trust
Indenture Act.
SECTION 7.03. Reports by Trustee. (a) Within 30 days after January 1 of
each year, commencing with the first January 1 following the first issuance of
Securities pursuant to Section 3.01, if required by Section 3.13(a) of the Trust
Indenture Act, the Trustee shall transmit, pursuant to Section 3.13(c) of the
Trust Indenture Act, a brief report dated as of such January 1 with respect to
any of the events specified in said Section 3.13(a) which may have occurred
since the later of the immediately preceding January 1 and the date of this
Indenture.
(b) The Trustee shall transmit the reports required by Section 3.13(b) of
the Trust Indenture Act and Section 6.02 hereof at the times specified therein.
(c) Reports pursuant to this Section shall be transmitted in the manner and
to the persons required by Sections 3.13(c) and 3.13(d) of the Trust Indenture
Act.
(d) A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange upon which the
Securities are listed, with the Commission and with the Issuer. The Issuer will
promptly notify the Trustee when the Securities are listed on any stock
exchange.
SECTION 7.04. Reports by Issuer and Guarantor. Each of the Guarantor and
the Issuer shall file with the Trustee and the Commission, and 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 such Act and in the manner set forth in
Section 10.18.
SECTION 7.05. Officers' Certificate with Respect to Change in Interest
Rates. Within five days after any Step-Up or Step-Down Date, the Issuer shall
deliver an Officers' Certificate to the Trustee stating the new interest rate
and the date on which it became effective.
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ARTICLE VIII
Merger, Consolidation, Etc.
SECTION 8.01. Mergers, Consolidations and Certain Sales of Assets. Neither
the Guarantor nor the Issuer may, in a single transaction or a series of related
transactions, (i) consolidate with or merge into any other Person or permit any
other Person to consolidate with or merge into the Guarantor or the Issuer, or
(ii) directly or indirectly, transfer, sell, lease or otherwise dispose of all
or substantially all of its assets to any other Person, unless:
(1) in a transaction in which the Guarantor or the Issuer, as
applicable, does not survive or in which the Guarantor or the Issuer sells,
leases or otherwise disposes of all or substantially all of its assets to
any other Person (other than, in any such case, the Guarantor or the
Issuer), the successor entity to the Guarantor or the Issuer is organized
under the laws of the United States of America or any State thereof or the
District of Columbia, the British Virgin Islands, Cayman Islands, The
Netherlands, Ireland or Jersey and shall expressly assume, by a
supplemental indenture executed and delivered to the Trustee in form
satisfactory to the Trustee, all of the Guarantor's or the Issuer's
obligations under the Indentures;
(2) immediately before and after giving effect to such transaction and
treating any Debt which becomes an obligation of the Guarantor or a
Subsidiary as a result of such transaction as having been Incurred by the
Guarantor or such 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) immediately after giving effect to such transaction, the
Consolidated Net Worth of the Guarantor (or other successor entity to the
Guarantor) is equal to or greater than that of the Guarantor immediately
prior to the transaction;
(4) if, as a result of any such transaction, property or assets of the
Guarantor or any Subsidiary would become subject to a Lien prohibited by
Section 10.15, the Guarantor or the successor entity
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to the Guarantor shall have secured the Securities as required by said
covenant; and
(5) in the event that the continuing Person is incorporated in a
jurisdiction other than the United States or the jurisdiction in which such
Person was incorporated immediately prior to such transaction, (A) the
Issuer delivers to the Trustee an Opinion of Counsel stating that the
obligations of the continuing Person under the Indenture are enforceable
under the laws of the new jurisdiction of its incorporation to the same
extent as the obligations of the Issuer or the Guarantor, as the case may
be, under the Indenture immediately prior to such transaction; (B) the
continuing Person agrees in writing to submit to jurisdiction and appoints
an agent for the service of process, each under terms substantially similar
to the terms contained in the Indenture with respect to the Issuer or the
Guarantor, as the case may be; (C) the continuing Person agrees in writing
to pay Additional Amounts as provided under this Indenture under Section
10.09 with respect to the Issuer or the Guarantor, as the case may be,
except that such Additional Amount shall relate to any withholding tax
whatsoever regardless of any change of law (subject to exceptions
substantially similar to those contained in Section 10.09); (D) the Board
of Directors of the Guarantor determines in good faith that such
transaction will have no material adverse effect on any Holder and a Board
Resolution to that effect is delivered to the Trustee; and (E) the
principal purpose of the continuing Person being incorporated in such
jurisdiction is to obtain tax benefits for the Guarantor, the Issuer, their
direct and indirect stockholders or the Holders.
SECTION 8.02. Successor Substituted. Upon any consolidation of the Issuer
with, or merger of the Issuer with or into, any other Person or any conveyance,
transfer or lease of the properties and assets of the Issuer substantially as an
entirety in accordance with Section 8.01, the successor Person formed by such
consolidation or into which the Issuer is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Issuer under this Indenture with the same
effect as if such successor Person had been named as the Issuer herein, and
thereafter, except in the case of a lease, the predecessor Person shall be
relieved of all
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obligations and covenants under this Indenture and the Securities.
ARTICLE IX
Supplemental Indentures
SECTION 9.01. Supplemental Indentures Without Consent of Holders. Without
the consent of any Holders, the Issuer and the Guarantor, each 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 the Issuer or the
Guarantor and the assumption by any such successor of the covenants of the
Issuer or the Guarantor herein and in the Securities; or
(2) to add to the covenants of the Issuer or the Guarantor for the
benefit of the Holders, or to surrender any right or power herein conferred
upon the Issuer or the Guarantor; or
(3) to secure the Securities pursuant to the requirements of Section
10.15 or otherwise; or
(4) to modify, eliminate or add to the provisions of this Indenture to
such extent as shall be necessary to comply with any requirement of the
Commission in order to effect qualification of this Indenture under the
Trust Indenture Act in connection with the issuance of Exchange Securities
or Registered Securities or thereafter to 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 provide for uncertificated Securities in addition to or in
place of certified Securities.
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SECTION 9.02. Supplemental Indentures with Consent of Holders. With the
written consent of the Holders of not less than a majority in aggregate
principal amount at maturity of the Outstanding Securities, by Act of said
Holders delivered to the Issuer and the Trustee, and consistent with Section
5.13, the Issuer and the Guarantor, each when authorized by a Board Resolution,
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; provided, however, that
no such supplemental indenture shall, without the written 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 Accreted Value thereof or the
rate of interest thereon or any premium payable thereon, or change the coin
or currency in which, any Security or any premium or 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 at maturity 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 their consequences) provided for in this
Indenture, or
(3) modify any of the provisions of this Section, Section 5.13 or
Section 10.20, 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 making of an Offer with respect to an Offer to
Purchase pursuant to Sections 10.13 or 10.17, modify the provisions of this
Indenture with respect to such Offer to Purchase in a manner materially
adverse to such Holder, or
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(5) release the Guarantor from its Securities Guarantee.
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 9.03. 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
6.01) 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 9.04. 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 9.05. Conformity with Trust Indenture Act. Every supplemental
indenture executed pursuant to this Article shall conform to the requirements of
the Trust Indenture Act.
SECTION 9.06. 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.
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ARTICLE X
Covenants
SECTION 10.01. 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. Payments of principal, interest and premium, if any, will be made by
the Issuer in Deutsche marks.
SECTION 10.02. Maintenance of Office or Agency. The Issuer will maintain in
the Borough of Manhattan, the City of New York, New York and in Luxembourg, 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, New
York and Luxembourg) 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, New York and in Luxembourg 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 10.03. 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
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Trustee in writing of its action or failure so to act. As provided in Section
5.04, upon any bankruptcy or reorganization proceeding relative to the Issuer,
the Trustee shall serve as the Paying Agent for the Securities.
Whenever the Issuer shall have one or more Paying Agents, it will, at least
one Business Day prior to 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 in trust for the benefit of the Persons entitled to such principal,
premium or interest, and (unless such Paying Agent is the Trustee) the Issuer
will promptly notify the Trustee in writing of its action or failure so to act.
Upon any bankruptcy or reorganization proceeding relative to the Issuer, the
Trustee shall serve as the Paying Agent for the Securities.
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:
(1) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest on Securities in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(2) give the Trustee written notice of any default by the Issuer (or
any other obligor upon the Securities) in the making of any payment of
principal (and premium, if any) or interest;
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent; and
(4) acknowledge, accept and agree to comply in all respects with the
provisions of this Indenture relating to the duties, rights and obligations
of such Paying Agent.
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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 as 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 Borough of
Manhattan, the City of New York, 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 10.04. Existence. Subject to Article Eight, the Guarantor will do
or cause to be done all things necessary to preserve and keep in full force and
effect the existence, rights (charter and statutory) and franchises of the
Guarantor, the Issuer and each of the Restricted Subsidiaries; provided,
however, that the Guarantor shall not be required to preserve any such right or
franchise if the Guarantor shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Guarantor, the Issuer or
the Restricted Subsidiaries and that the loss thereof is not disadvantageous in
any material respect to the Holders.
SECTION 10.05. Maintenance of Properties.
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The Guarantor will cause all properties used or useful in the conduct of its
business or the business of the Issuer or any Restricted Subsidiary to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Guarantor may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section shall prevent the Guarantor from
discontinuing the operation or maintenance of any of such properties if such
discontinuance is, in the reasonable judgment of the Guarantor, desirable in the
conduct of its business or the business of the Issuer or any Restricted
Subsidiary and not disadvantageous in any material respect to the Holders.
SECTION 10.06. Payment of Taxes and Other Claims. The Guarantor 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 Guarantor or the Issuer or any Restricted Subsidiaries or
upon the income, profits or property of the Guarantor or the Issuer or any
Restricted Subsidiaries, and (2) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien upon the property of the
Guarantor or the Issuer or any Restricted Subsidiaries; provided, however, that
the Guarantor shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings.
SECTION 10.07. Maintenance of Insurance. The Guarantor shall, and shall
cause the Issuer and the Restricted Subsidiaries to, keep at all times all of
their properties which are of an insurable nature insured against loss or damage
with insurers believed by the Guarantor 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 10.08. Limitation on Consolidated Debt. The Guarantor may not, and
may not permit any Restricted Subsidiary of the Guarantor to, Incur any Debt
(other than the Securities and the Securities Guarantee) unless the ratio of (i)
the aggregate consolidated principal amount of Debt (which is defined to include
the accreted value of any Debt issued at a discount) of the Guarantor
outstanding as
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of the most recent available quarterly or annual balance sheet, after giving pro
forma effect to the Incurrence of such Debt and any other Debt Incurred since
such balance sheet date and the receipt and application of the proceeds thereof,
to (ii) four (4) times the Consolidated Cash Flow Available for Fixed Charges
for the most recent fiscal quarter next preceding the Incurrence of such Debt
for which consolidated financial statements are available, determined on a pro
forma basis as if any such Debt had been Incurred and the proceeds thereof had
been applied at the beginning of such recent fiscal quarter, would be less than
7.0 to 1.0 for such period.
Notwithstanding the foregoing limitation, the Guarantor and any Restricted
Subsidiary may Incur the following:
(i) Debt under Credit Facilities in an aggregate principal amount at
any one time not to exceed $200 million, and any renewal, extension,
refinancing or refunding thereof in an amount which, together with any
principal amount remaining outstanding under all Credit Facilities, does
not exceed the aggregate principal amount outstanding under all Credit
Facilities immediately prior to such renewal, extension, refinancing or
refunding;
(ii) Debt owed by the Guarantor to any Restricted Subsidiary of the
Guarantor or Debt owed by a Restricted Subsidiary of the Guarantor to the
Guarantor or a Restricted Subsidiary of the Guarantor; provided, however,
that upon either (x) the transfer or other disposition by such Restricted
Subsidiary or the Guarantor of any Debt so permitted to a Person other than
the Guarantor or another Restricted Subsidiary of the Guarantor or (y) such
Restricted Subsidiary ceasing to be a Restricted Subsidiary, the provisions
of this clause (ii) shall no longer be applicable to such Debt and such
Debt shall be deemed to have been Incurred at the time of such transfer or
other disposition;
(iii) Debt Incurred to renew, extend, refinance or refund (each, a
"refinancing") (x) Debt outstanding at the date hereof (after giving effect
to the Equity Clawback) or (y) Incurred pursuant to the first paragraph of
this Section, or clause (vi) or (vii) of this paragraph or (z) the
Securities issued on the date hereof or Securities exchanged therefore, in
each case, in an aggregate principal amount not to
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exceed the aggregate principal amount of and accrued interest on the Debt
so refinanced plus the amount of any premium required to be paid in
connection with such refinancing pursuant to the terms of the Debt so
refinanced or the amount of any premium reasonably determined by the
Guarantor as necessary to accomplish such refinancing by means of a tender
offer or privately negotiated repurchase, plus the expenses of the
Guarantor or the Restricted Subsidiary effecting such refinancing incurred
in connection with such refinancing; provided, however, that Debt the
proceeds of which are used to refinance the Securities or Debt which is
pari passu to the Securities and the Security Guarantee or Debt which is
subordinate in right of payment to the Securities and the Security
Guarantee shall only be permitted if (A) in the case of any refinancing of
the Securities or Debt which is pari passu to the Securities and the
Security Guarantee, the refinancing Debt is made pari passu or subordinated
to the Securities and the Security Guarantee, and, in the case of any
refinancing of Subordinated Debt, the refinancing Debt constitutes
Subordinated Debt and (B) in any case, 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 stated maturity prior to the final stated
maturity of the Debt being refinanced, and the Average Life of such new
Debt is at least equal to the remaining Average Life of the Debt being
refinanced (assuming that such Debt being refinanced had a final stated
maturity three months later than its actual final stated maturity);
(iv) Debt in an aggregate principal amount not in excess of (A) two
(2) times the aggregate amount of the Guarantor's Incremental Paid-in
Capital minus (B) $165 million;
(v) Debt in an aggregate principal amount not in excess of 80% of the
aggregate amount of accounts receivable set forth on the most recent
unaudited quarterly or audited annual financial statements of the Guarantor
and its consolidated subsidiaries filed with the Commission;
(vi) Purchase Money Debt, which is incurred for the construction,
acquisition and improvement of Telecommunications Assets, provided that the
amount of such Purchase Money Debt does not exceed the cost
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of the construction, acquisition or improvement of the applicable
Telecommunications Assets;
(vii) Debt consisting of Permitted Interest Rate and Currency
Protection Agreements; and
(viii) Debt not otherwise permitted to be Incurred pursuant to clauses
(i) through (vii) above, which, together with any other outstanding Debt
Incurred pursuant to this clause (viii), has an aggregate principal amount
not in excess of $50 million at any time outstanding.
For purposes of determining compliance with this Section, with respect to
any item of Debt, (x) in the event that such item of Debt meets the criteria of
more than one of the types of Debt the Guarantor or a Restricted Subsidiary is
permitted to Incur pursuant to the foregoing clauses (i) through (viii), the
Guarantor shall have the right, in its sole discretion, to classify such item of
Debt and shall only be required to include the amount and type of such Debt
under the clause permitting the Debt as so classified and (y) any other
obligation of the obligor on such Debt (or of any other Person who could have
Incurred such Debt under this Section) arising under any Guarantee, Lien or
letter of credit supporting such Debt shall be disregarded to the extent that
such Guarantee, Lien or letter of credit secures the principal amount of such
Debt.
For purposes of determining compliance with any Dollar-denominated
restriction on the Incurrence of Debt denominated in a foreign currency, the
Dollar-equivalent principal amount of such foreign-currency-denominated Debt
Incurred pursuant thereto shall be calculated based on the relevant currency
exchange rate in effect on the date that such foreign-currency-denominated Debt
was Incurred, in the case of term debt, or first committed, in the case of
revolving credit debt; provided that (x) the Dollar-equivalent principal amount
of any such Debt outstanding on the date hereof shall be calculated based on the
relevant currency exchange rate in effect on the date hereof and (y) if such
Debt is Incurred to refinance other Debt denominated in a foreign currency, and
such refinancing would cause the applicable Dollar-denominated restriction to be
exceeded if calculated at the relevant currency exchange rate in effect on the
date of such refinancing, such Dollar denominated restriction shall be deemed
not to have been exceeded so long as the principal amount of such refinancing
Debt does not exceed the principal amount of such Debt being refinanced. The
principal amount of any Debt Incurred to
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refinance other Debt, if Incurred in a different currency from the Debt being
refinanced, shall be calculated based on the currency exchange rate applicable
to the currency in which such respective Debt is denominated that is in effect
on the date of such refinancing.
SECTION 10.09. Additional Amounts. Payments made by the Issuer or the
Guarantor pursuant to the Securities or the Securities Guarantee will be made
without withholding or deduction for taxes unless required by law. In the event
of (i) any change that becomes effective after the date hereof in the laws of
the U.K. or Bermuda or of any political subdivision or taxing authority thereof
or therein or any change in the interpretation or administration thereof or (ii)
a failure by the Issuer to list and maintain a listing of the Securities on a
"recognized stock exchange" (within the meaning of Section 841 of the U.K.
Income and Corporation Taxes Act 1988) prior to the first date upon which
interest is required to be paid hereunder (a "Listing Failure"), the effect of
which is to require the withholding or deduction by the Issuer or the Guarantor
pursuant to the Securities or the Securities Guarantee, respectively, of any
amount for taxes that would not have been required to be withheld or deducted
absent such change or Listing Failure, as the case may be, the Issuer or the
Guarantor will pay, to the extent it may then lawfully do so, such additional
amounts ("Additional Amounts") as may be necessary in order that every net
payment of the principal of and interest on the Securities, after deduction for
withholding for or on account of any future tax, assessment or other
governmental charge will not be less than the amount provided for in the
Securities to be then due and payable; provided, however, that the foregoing
obligation to pay Additional Amounts shall not apply in respect of:
(a) any tax, withholding, assessment or other governmental charge
which would not have been imposed but for (i) the existence of any present
or former connection between such holder (or between a fiduciary, settlor,
beneficiary, member or shareholder of, or possessor of a power over, such
holder, if such holder is an estate, trust, partnership or corporation) and
the U.K. or Bermuda or any political subdivision or taxing authority
thereof including, without limitation, such holder (or such fiduciary,
settlor, beneficiary, member, shareholder or possessor) being or having
been a citizen or resident thereof or being or having been present or
engaged in trade or business therein or having or having had a permanent
establishment
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therein or (ii) the presentation of a Security or a Securities Guarantee
(where presentation is required) for payment on a date more than 30 days
after the date on which such payment became due and payable or the date on
which payment thereof is duly provided for, whichever occurs later, except
for Additional Amounts with respect to Taxes that would have been imposed
had the holder presented the Security for payment within such 30-day
period;
(b) any estate, inheritance, gift, sale, transfer or personal property
tax;
(c) any tax, assessment or other governmental charge that is withheld
by reason of the failure to timely comply by the holder or the beneficial
owner of the Security with a request in writing of the Issuer or the
Guarantor (which request shall be furnished to the Trustee) (i) to provide
information concerning the nationality, residence or identity of the holder
or such beneficial owner or (ii) to make any declaration or other similar
claim or satisfy any information or reporting requirement, which, in the
case of (i) or (ii), is required or imposed by a statute, treaty,
regulation or administrative practice of the taxing or domicile
jurisdiction as a precondition to exemption from or reduction of all or
part of such tax, assessment or other governmental charge; provided,
however, that this clause (c) shall not apply to limit the Issuer's or
Guarantor's obligation to pay Additional Amounts if the completing and
filing of the information described in subclause (i) or the declaration or
other claim described in subclause (ii) would be materially more onerous in
form, in procedure or in substance of information disclosed, in comparison
to the information reporting requirements imposed under U.S. tax law with
respect to Forms 1001, W-8 and W-9; or
(d) any tax, withholding, assessment or other governmental charge
resulting from a Listing Failure with respect to any Security issued in the
form of a Definitive Security pursuant to the terms of the Deposit
Agreement and this Indenture; or
(e) any combination of items (a), (b), (c) and (d) above; nor shall
Additional Amounts be paid with respect to any payment of the principal of,
or any interest on, any Security or Securities Guarantee to any holder who
is not the sole beneficial owner of
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such Security or Securities Guarantee or is a fiduciary or partnership, but
only to the extent that a beneficial owner, a beneficiary or a settlor with
respect to a fiduciary or a member of the partnership would not have been
entitled to the payment of the Additional Amount had the beneficial owner,
beneficiary, settlor or member of such partnership received directly its
beneficial or distributive share of the payment.
At least 30 days prior to each date on which any payment under or with
respect to the Securities is due and payable, if the Issuer or the Guarantor
will be obligated to pay Additional Amounts with respect to such payment, the
Issuer or the Guarantor will deliver to the Trustee an Officer's Certificate
stating the fact that such Additional Amounts will be payable and the amounts so
payable and will set forth such other information necessary to enable the
Trustee to pay such Additional Amounts to Holders on the payment date. Whenever
in this Indenture there is mentioned, in any context, the payment of principal
(and premium, if any), Redemption Price, interest or any other amount payable
under or with respect to any Security, such mention shall be deemed to include
mention of the payment of Additional Amounts to the extent that, in such
context, Additional Amounts are, were or would be payable in respect thereof.
SECTION 10.10. Limitation on Restricted Payments. The Guarantor (i) may
not, and will not permit any Restricted Subsidiary, directly or indirectly, to
declare or pay any dividend, or make any distribution, in respect of its Capital
Stock or to the holders thereof, excluding (x) any dividends or distributions
payable solely in shares of its Capital Stock (other than Disqualified Stock) or
in options, warrants or other rights to acquire its Capital Stock (other than
Disqualified Stock), (y) any dividends paid to the Guarantor or a Restricted
Subsidiary, or (z) pro rata dividends paid on shares of Common Stock of
Restricted Subsidiaries, (ii) may not, and may not permit any Restricted
Subsidiary to, purchase, redeem, or otherwise retire or acquire for value (a)
any Capital Stock of the Guarantor or any Related Person of the Guarantor (other
than a permitted refinancing) or (b) any options, warrants or rights to purchase
or acquire shares of Capital Stock of the Guarantor or any Related Person of the
Guarantor or any securities convertible or exchangeable into shares of Capital
Stock of the Guarantor or any Related Person of the Guarantor (other than a
permitted refinancing), (iii) may not make, or permit any Restricted Subsidiary
to make, any
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Investment, except for Permitted Investments, and (iv) may not, and may not
permit any Restricted Subsidiary to, redeem, defease, repurchase, retire or
otherwise acquire or retire for value, prior to any scheduled maturity,
repayment or sinking fund payment, Debt of the Guarantor or the Issuer which is
subordinate in right of payment to the Securities or the Securities Guarantee
(each of clauses (i) through (iv) being a "Restricted Payment") if: (1) 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, shall have occurred and be
continuing, or (2) except with respect to Investments, upon giving effect to
such Restricted Payment, the Guarantor could not Incur at least $1.00 of
additional Debt pursuant to the first paragraph of Section 10.08, or (3) upon
giving effect to such Restricted Payment, the aggregate of all Restricted
Payments from the date hereof exceeds the sum of: (a)(x) Consolidated Cash Flow
Available for Fixed Charges since the end of the last full fiscal quarter prior
to the date hereof through the last day of the last full fiscal quarter ending
immediately preceding the date of such Restricted Payment (the "Calculation
Period") minus (y) 1.5 times Consolidated Interest Expense for the Calculation
Period plus (b) 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 Guarantor 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 Cash Flow Available for Fixed Charges for the Calculation
Period), or from redesignations of Unrestricted Subsidiaries as Restricted
Subsidiaries (valued in each case as provided in the definition of Investment),
not to exceed, in each case, the amount of Investments previously made by the
Guarantor or any Restricted Subsidiary in such Person or Unrestricted Subsidiary
plus (c) an amount equal to the aggregate net proceeds received after the date
hereof, including the fair market value of property other than cash (determined
in good faith by the Board of Directors as evidenced by a resolution of the
Board of Directors filed with the Trustee), as capital contributions to the
Guarantor or from the issuance (other than to a Subsidiary) of Capital Stock
(other than Disqualified Stock) of the Guarantor and warrants, rights or options
on Capital Stock (other than Disqualified Stock) of the Guarantor and the
principal amount at maturity of Debt of the Guarantor or any Restricted
Subsidiary that has been converted into Capital Stock (other than Disqualified
Stock
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and other than by a Subsidiary) of the Guarantor after the date hereof plus (d)
$30 million.
Notwithstanding the foregoing, (i) the Guarantor may pay any dividend on
Capital Stock of any class of the Guarantor within 60 days after the declaration
thereof if, on the date when the dividend was declared, the Guarantor could have
paid such dividend in accordance with the foregoing provisions, (ii) the
Guarantor may make acquisitions of a minority equity interest in entities
engaged in the Telecommunications Business; provided that (A) the acquisition of
a majority equity interest in such entities is not then permitted or practicable
under applicable law without regulatory consent or change of law, (B) the Board
of Directors of the Guarantor determines in good faith that there is a
substantial probability that such approval or change of law will be obtained,
(C) the Guarantor or one of its Restricted Subsidiaries has the right to acquire
Capital Stock representing a majority of the voting power of the Voting Stock of
such entity upon receipt of regulatory consent or change of law and does acquire
such Voting Stock reasonably promptly upon receipt of such consent or change of
law and (D) in the event that such consent or change of law has not been
obtained within 18 months of funding such Investment, the Guarantor or one of
its Restricted Subsidiaries has the right to sell such minority equity interest
to the Person from whom it acquired such interest, for consideration consisting
of the consideration originally paid by the Guarantor and its Restricted
Subsidiaries for such minority equity interest; (iii) the Guarantor may
repurchase any shares of its Common Stock or options to acquire its Common Stock
from Persons who were formerly directors, officers or employees of the Guarantor
or any of its Subsidiaries, provided that the aggregate amount of all such
repurchases made pursuant to this clause (iii) shall not exceed $6 million, plus
the aggregate cash proceeds received by the Guarantor since the date hereof from
issuances of its Common Stock or options to acquire its Common Stock to
directors, officers and employees of the Guarantor or any of its Subsidiaries,
(v) the Guarantor or a Restricted Subsidiary may redeem, defease, repurchase,
retire or otherwise acquire or retire for value Debt of the Guarantor or the
Issuer which is subordinated in right of payment to the Securities or the
Security Guarantees, as the case may be, in exchange for, or out of the proceeds
of a substantially concurrent sale (other than to a Subsidiary) of, Capital
Stock (other than Disqualified Stock of the Guarantor) or in a refinancing that
satisfies the requirements of clause (iii) of the second paragraph of Section
10.08 and (vi) the Guarantor and
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its Subsidiaries may retire or repurchase any Capital Stock of the Guarantor or
of any Subsidiary of the Guarantor in exchange for, or out of the proceeds of
the substantially concurrent sale (other than to a Subsidiary of the Guarantor)
of, Capital Stock (other than Disqualified Stock) of the Guarantor or any
Subsidiary.
SECTION 10.11. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries. The Guarantor may not, and may not permit any
Restricted Subsidiary to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or restriction on
the ability of any Restricted Subsidiary of the Guarantor (i) to pay dividends
(in cash or otherwise) or make any other distributions in respect of its Capital
Stock owned by the Guarantor or any other Restricted Subsidiary of the Guarantor
or pay any Debt or other obligation owed to the Guarantor or any other
Restricted Subsidiary; (ii) to make loans or advances to the Guarantor or any
other Restricted Subsidiary; or (iii) to transfer any of its property or assets
to the Guarantor or any other Restricted Subsidiary.
Notwithstanding the foregoing, the Guarantor may, and may permit any
Restricted Subsidiary to, suffer to exist any such encumbrance or restriction
(a) pursuant to any agreement in effect on the date hereof; (b) pursuant to an
agreement relating to any Acquired Debt, which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person so acquired and was not Incurred in anticipation of such Person being
acquired; (c) pursuant to an agreement effecting a renewal, refunding or
extension of Debt Incurred pursuant to an agreement referred to in clause (a) or
(b) above; provided, however, that the provisions contained in such renewal,
refunding or extension agreement relating to such encumbrance or restriction are
no more restrictive in any material respect than the provisions contained in the
agreement the subject thereof; (d) in the case of clause (iii) in the above
paragraph, contained in any security agreement (including a Capital Lease
Obligation) securing Debt of the Guarantor or a Restricted Subsidiary otherwise
permitted hereunder, but only to the extent such restrictions restrict the
transfer of the property subject to such security agreement; (e) in the case of
clause (iii) in the above paragraph, with respect to customary nonassignment
provisions entered into in the ordinary course of business in leases and other
agreements; (f) with respect to a Restricted Subsidiary of the Guarantor imposed
pursuant to an agreement which has been entered into for the sale or
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disposition of all or substantially all of the Capital Stock or assets of such
Restricted Subsidiary, provided that (x) the 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, (y)
such restriction terminates if such transaction is not consummated and (z) the
consummation or abandonment of such transaction occurs within one year of the
date such agreement was entered into; (g) pursuant to applicable law or required
by any regulatory authority having jurisdiction over the Guarantor or any
Subsidiary; (h) pursuant to this Indenture and the Securities; (i) constituting
a Lien otherwise permitted pursuant to Section 10.15; and (j) other encumbrances
or restrictions that are not materially more restrictive than customary
provisions in comparable financings provided that each of the Issuer and the
Guarantor provides an Officer's Certificate to the Trustee to the effect that in
the opinion of the signers of such certificate such encumbrances or restrictions
will not materially impact the Issuers' and the Guarantors' ability to make
scheduled payments of interest and principal under the Securities.
SECTION 10.12. Limitation on Transactions with Affiliates and Related
Persons. The Guarantor will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, enter into, renew or extend any transaction
(including, without limitation, the purchase, sale, lease or exchange of
property or assets, or the rendering of any service) with any Related Person or
with any Affiliate of the Guarantor or any Restricted Subsidiary, except upon
fair and reasonable terms no less favorable to the Guarantor or such Restricted
Subsidiary than could be obtained, at the time of such transaction or, if such
transaction is pursuant to a written agreement, at the time of the execution of
the agreement providing therefor, in a comparable arm's-length transaction with
a Person that is not a Related Person or an Affiliate.
The foregoing limitation does not limit, and shall not apply to (i)
transactions (A) approved by a majority of the disinterested members of the
Board of Directors or (B) for which the Guarantor or a Restricted Subsidiary
delivers to the Trustee a written opinion of a nationally recognized investment
banking firm (or a subsidiary or affiliate thereof) in the United States stating
that the transaction is fair to the Guarantor or such Restricted Subsidiary from
a financial point of view; (ii) any transaction solely between the Guarantor and
any of its Wholly Owned Restricted Subsidiaries or solely between
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Wholly Owned Restricted Subsidiaries; and (iii) any payments or other
transactions pursuant to any tax-sharing agreement between the Guarantor and any
other Person with which the Guarantor files a consolidated tax return or with
which the Guarantor is part of a consolidated group for tax purposes.
Notwithstanding the foregoing, any transaction covered by the first paragraph of
this Section and not covered by clauses (ii) through (iii) of this paragraph
must be approved or determined to be fair in the manner provided for in clause
(i)(A) or (B) above unless the aggregate amount of such transaction is less than
$5 million in value.
SECTION 10.13. Limitation on Asset Dispositions. (a) The Guarantor may not,
and may not permit any Restricted Subsidiary of the Guarantor to, make any Asset
Disposition in one or more related transactions unless: (i) the Guarantor or the
Restricted Subsidiary, as the case may be, receives consideration for such
disposition at least equal to the fair market value for the assets sold or
disposed of as determined by the Board of Directors in good faith and, in the
case of an Asset Disposition in an amount greater than $5 million, evidenced by
a resolution of the Board of Directors filed with the Trustee; and (ii) at least
75% of the consideration for such disposition consists of (1) cash or readily
marketable cash equivalents or the assumption of Debt of the Guarantor (other
than Debt that is subordinated to the Securities) or of a Restricted Subsidiary
and release from all liability on the Debt assumed, or (2) Telecommunications
Assets. In the event and to the extent that the Net Available Proceeds received
by the Guarantor or any of its Restricted Subsidiaries from one or more Asset
Dispositions occurring on or after the date hereof in any period of 12
consecutive months exceed 10% of Consolidated Tangible Assets (determined as of
the date closest to the commencement of such 12-month period for which a
consolidated balance sheet of the Guarantor and its subsidiaries have been filed
with the Commission), then the Guarantor or the Issuer shall or shall cause the
relevant Restricted Subsidiary to (i) within 12 months after the date Net
Available Proceeds so received exceed 10% of Consolidated Tangible Assets (A)
apply an amount equal to such excess Net Available Proceeds to permanently repay
unsubordinated Debt of the Guarantor or any Restricted Subsidiary providing a
Subsidiary Guarantee pursuant to Section 10.14 or Debt of any other Restricted
Subsidiary, in each case owing to a Person other than the Guarantor or any of
its Restricted Subsidiaries or (B) invest an equal amount, or the amount not so
applied pursuant to clause (A) (or enter into a definitive agreement committing
to so invest within 12 months after the date of such agreement),
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in Telecommunications Assets and (ii) apply (no later than the end of the
12-month period referred to in clause (i)) such excess Net Available Proceeds
(to the extent not applied pursuant to clause (i)) as provided in the paragraph
(b) below. The amount of such excess Net Available Proceeds required to be
applied (or to be committed to be applied) during such 12-month period as set
forth in clause (i) of the preceding sentence and not applied as so required by
the end of such period shall constitute "Excess Proceeds".
(b) If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this
Section totals at least $10 million, the Issuer shall repay any Debt of the
Guarantor or any Restricted Subsidiary to the extent the terms of such Debt
require repayment prior to an Offer to Purchase being made hereunder (including
by way of an offer to purchase to the holders of such Debt, if so required). To
the extent there are Excess Proceeds after such repayment (or offer to
purchase), the Issuer must commence, not later than the fifteenth Business Day
of such month (or if later, the fifteenth Business Day after the expiration of
any such required offer to purchase), and consummate an Offer to Purchase from
the holders of the Securities on a pro rata basis an aggregate principal amount
at maturity of Securities on the relevant Payment Date equal to the Excess
Proceeds on such date not applied or to be applied pursuant to the first
sentence of this paragraph (b), at a purchase price equal to 100% of the
Accreted Value of the Securities, plus, in each case, accrued interest (if any)
to but excluding the Payment Date and, to the extent required by the terms
thereof, any other Debt of the Guarantor that is pari passu with the Securities
at a price no greater than 100% of the principal amount thereof plus accrued
interest to but excluding the date of purchase (or 100% of the accreted value in
the case of original issue discount Debt). To the extent there are any remaining
Excess Proceeds following the completion of the Offer to Purchase, the Issuer
must repay such other Debt of the Guarantor or Debt of a Restricted Subsidiary
of the Guarantor, to the extent permitted under the terms thereof and, to the
extent there are any remaining Excess Proceeds after such repayment, the Issuer
shall apply such amount to any other use as determined by the Issuer which is
not otherwise prohibited by this Indenture.
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SECTION 10.14. Limitation on Issuances and Sales of Capital Stock of
Restricted Subsidiaries. The Guarantor may not, and may not permit any
Restricted Subsidiary of the Guarantor to, issue, transfer, convey, sell or
otherwise dispose of any shares of Capital Stock of a Restricted Subsidiary of
the Guarantor or securities convertible or exchangeable into, or options,
warrants, rights or any other interest with respect to, Capital Stock of a
Restricted Subsidiary of the Guarantor to any Person other than the Guarantor or
a Wholly Owned Restricted Subsidiary of the Guarantor except (i) a sale of all
of the Capital Stock of such Restricted Subsidiary owned by the Guarantor and
any Restricted Subsidiary of the Guarantor that complies with Section 10.13
above to the extent such Section applies, (ii) if required, the issuance,
transfer, conveyance, sale or other disposition of directors' qualifying shares,
(iii) Disqualified Stock issued in exchange for, or upon conversion of, or the
proceeds of the issuance of which are used to redeem, refinance, replace or
refund shares of Disqualified Stock of such Restricted Subsidiary; provided that
the amounts of the redemption obligations of such Disqualified Stock shall not
exceed the amounts of the redemption obligations of, and such Disqualified Stock
shall have redemption obligations no earlier than those required by, the
Disqualified Stock being exchanged, converted, redeemed, refinanced, replaced or
refunded and (iv) issuances of not more than 49% of the voting stock and equity
interest in a Restricted Subsidiary engaged in the Telecommunications Business
(1) in connection with the acquisition of such Restricted Subsidiary or
Telecommunications Assets acquired by such Restricted Subsidiary or (2) to a
Strategic Investor; provided, that the Guarantor complies with Section 10.13
above to the extent such Section applies.
SECTION 10.15. Limitation on Liens. The Guarantor may not, and may not
permit any Restricted Subsidiary of the Guarantor to, Incur or suffer to exist
any Lien on or with respect to any property or assets now 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 for so long as such Debt will be
so secured or (y) in the event such Debt is Debt of the Guarantor which is
subordinate in right of payment to the Securities, prior to such Debt as to such
property for so long as such Debt will be so secured.
The foregoing restrictions shall not apply to: (i) Liens existing on the
date hereof and securing Debt
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outstanding on the date hereof; (ii) Liens securing Debt outstanding or
available under all Credit Facilities to the extent such Debt is permitted under
clause (i) of the second paragraph of Section 10.08; (iii) Liens in favor of the
Guarantor or any Restricted Subsidiary of the Guarantor; (iv) Liens on real or
personal property of the Guarantor or a Restricted Subsidiary of the Guarantor
acquired, constructed or constituting improvements made after the date of
original issuance of the Securities to secure Purchase Money Debt which is
Incurred for the construction, acquisition and improvement of Telecommunications
Assets and is otherwise permitted under this Indenture; provided, however, that
(a) the principal amount of any Debt secured by such a Lien does not exceed 100%
of such purchase price or cost of construction or improvement of the property
subject to such Liens, (b) such Lien attaches to such property prior to, at the
time of or within 180 days after the acquisition, completion of construction or
commencement of operation of such property and (c) such Lien does not extend to
or cover any property other than the specific item of property (or portion
thereof) acquired, constructed or constituting the improvements made with the
proceeds of such Purchase Money Debt; (v) Liens to secure Acquired Debt;
provided, however, that (a) such Lien attaches to the acquired asset prior to
the time of the acquisition of such asset and (b) such Lien does not extend to
or cover any other asset; (vi) Liens to secure Debt Incurred to extend, renew,
refinance or refund (or successive extensions, renewals, refinancings or
refundings), in whole or in part, Debt secured by any Lien referred to in the
foregoing clauses (i), (ii), (iv) and (v) so long as the principal amount of
Debt so secured is not increased except as otherwise permitted under clause
(iii) of the second paragraph of Section 10.08 and, in the case of Liens to
secure Debt incurred to extend, renew, refinance or refund Debt secured by a
Lien referred to in the foregoing clause (i), (iv) or (v), such Liens do not
extend to any other property; and (vii) Permitted Liens.
SECTION 10.16. Limitation on Issuance of Guarantees of Debt by Restricted
Subsidiaries. The Guarantor will not permit any Restricted Subsidiary, directly
or indirectly, to incur any Guarantee of any Debt of the Guarantor or the Issuer
unless such Restricted Subsidiary simultaneously executes and delivers a
supplemental indenture providing for a Guarantee by such Subsidiary of the
Securities; any Subsidiary Guarantee by such Subsidiary of the Securities (x)
will be senior in right of payment to any Guarantee of Subordinated Debt of the
Guarantor or the Issuer and (y) will be pari passu with
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or senior to any Guarantee of any other Debt of the Guarantor or the Issuer.
Notwithstanding the foregoing, any Subsidiary Guarantee 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
Guarantor, of all of the Guarantor's and each Restricted Subsidiary's Capital
Stock in, or all or substantially all 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
Subsidiary Guarantee, except a discharge or release by or as a result of payment
under such Guarantee.
SECTION 10.17. Change of Control. (a) Unless the Issuer has heretofore
exercised its right to redeem all of the Securities in accordance with the terms
of this Indenture and the Securities, upon the occurrence of a Change of Control
(as defined below), each Holder of a Security shall have the right to have such
Security repurchased by the Issuer on the terms and conditions precedent set
forth in this Section 10.17 and otherwise in this Indenture. The Issuer shall,
within 30 days following the date of the consummation of a transaction resulting
in a Change of Control, mail an Offer with respect to an Offer to Purchase all
Outstanding Securities at a purchase price equal to 101% of their Accreted Value
plus accrued interest to but excluding the date of purchase. Installments of
interest (including Special Interest) whose Stated Maturity is on or prior to
the Purchase 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 their terms and the provisions of Section
3.07. Each Holder shall be entitled to tender all or any portion of the
Securities owned by such Holder pursuant to the Offer to Purchase, subject to
the requirement that any portion of a Security tendered must be tendered in an
integral multiple of DM1,000 principal amount at maturity.
(b) The Issuer and Trustee shall perform their respective obligations
specified in the Offer for the Offer to Purchase. 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 10.03) money sufficient to pay the purchase price of all Securities
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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.
(c) A "Change of Control" shall be deemed to have occurred in the event
that, after the date of this Indenture, either (i) a "person" or "group" (within
the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) becomes the
ultimate "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of
more than 35% of the total voting power of the Voting Stock of the Guarantor, on
a fully diluted basis, and such ownership is greater than the amount of voting
power of the Voting Stock of the Guarantor, on a fully diluted basis, held by
the Existing Stockholders and their Affiliates on such date; (ii) individuals
who on the date of this Indenture constitute the Board of Directors (together
with any new directors whose election by the Board of Directors or whose
nomination for election by the Guarantor's stockholders was approved by a vote
of at least two-thirds of the members of the Board of Directors then in office
who either were members of the Board of Directors on the date of this Indenture
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the members of the Board of Directors
then in office; or (iii) all of the Common Stock of the Issuer is not
beneficially owned by the Guarantor (other than directors' qualifying shares).
(d) In the event that the Issuer makes an Offer to Purchase the Securities,
the Issuer and the Guarantor shall comply with any applicable securities laws
and regulations, including any applicable requirements of Section 14(e) of, and
Rule 14e-1 under, the Securities Exchange Act.
SECTION 10.18. Provision of Financial Information. The Guarantor and the
Issuer have agreed that, for so long as any Securities remain Outstanding, each
will furnish to the holders of the Securities and to
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securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act. In addition, the Guarantor and the Issuer will file with the
Trustee within 15 days after it files them with the Commission copies of the
annual and quarterly reports and the information, documents, and other reports
that the Guarantor or the Issuer is required to file with the Commission
pursuant to Section 13(a) or 15(d) of the Exchange Act ("SEC Reports"). In the
event the Guarantor or the Issuer shall cease to be required to file SEC Reports
pursuant to the Exchange Act, the Guarantor and the Issuer will nevertheless
continue to file such reports with the Commission (unless the Commission will
not accept such a filing) and the Trustee. The Guarantor and the Issuer will
furnish copies of the SEC Reports to the holders of Securities at the time the
Guarantor or the Issuer is required to file the same with the Trustee and will
make such information available to investors who request it in writing.
SECTION 10.19. Statement by Officers as to Default. (a) The Issuer and the
Guarantor will deliver to the Trustee, within 120 days after the end of each
fiscal year of the Guarantor ending after the date hereof, an Officers'
Certificate, stating whether or not to the best knowledge of the signers thereof
the Guarantor or the Issuer is in default in the performance and observance of
any of the terms, provisions and conditions of Sections 10.04 to 10.18,
inclusive, and if the Guarantor or the Issuer shall be in default, specifying
all such defaults and the nature and status thereof of which they may have
knowledge.
(b) The Issuer and the Guarantor shall deliver to the Trustee, as soon as
possible and in any event within 10 days after the Issuer or the Guarantor
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 setting forth the details of such Event of Default or
default and the action which the Issuer or the Guarantor proposes to take with
respect thereto.
SECTION 10.20. Waiver of Certain Covenants. The Issuer or the Guarantor, as
applicable, may omit in any particular instance to comply with any covenant or
condition set forth in Sections 10.04 to 10.17, inclusive, if before or after
the time for such compliance the Holders of at least a majority in aggregate
principal amount at maturity of the Outstanding Securities shall, by Act of such
Holders, either waive such compliance in such instance or generally
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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 Guarantor and the duties of the Trustee in respect of any such
covenant or condition shall remain in full force and effect.
SECTION 10.21. Paying Agent. The Issuer shall not authorize or designate
any Person (including the Trustee) as a Paying Agent hereunder unless such
Person is located outside of the United Kingdom.
SECTION 10.22. Internal Revenue Service Filing. The Issuer shall file
Internal Revenue Service Form 8281, Information Return for Publicly Offered
Original Issue Discount Instruments, with the Internal Revenue Service within 30
days of the date of this Indenture and shall mail a copy of such filing to the
Trustee within 15 days after such filing with the Internal Revenue Service.
ARTICLE XI
Redemption of Securities
SECTION 11.01. Right of Redemption. (a) At any time prior to March 15,
2001, in the event that the Guarantor receives net cash proceeds from the public
or private sale of its Common Stock (other than Disqualified Stock), the Issuer
(to the extent it receives such proceeds and has not used such proceeds,
directly or indirectly, to redeem or repurchase other securities pursuant to
optional redemption provisions) may, at its option, apply an amount equal to any
such net cash proceeds to redeem, from time to time, Securities in a principal
amount of up to an aggregate amount equal to 33 1/3% of the aggregate principal
amount at maturity of the Securities; provided, however, that Securities in an
amount equal to at least 66 2/3% of the aggregate principal amount at maturity
of the Securities remain Outstanding after each redemption. Each redemption must
occur on a Redemption Date within 180 days of the related sale and upon not less
than 30 nor more than 60 days' notice by mail to each Holder of Securities to be
redeemed at such Holder's address appearing in the Security Register, in amounts
of DM1,000 or an integral multiple of DM1,000 at a Redemption Price of 110.000%
of the Accreted Value of the Securities plus accrued interest to but excluding
the Redemption Date (subject to, in the case of a Global Security in bearer
form, the right of the Holder
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thereof and, in the case of Definitive Securities, the right of Holders of
record on the relevant Regular Record Date, to receive Interest due on an
Interest Payment Date that is on or prior to the Redemption Date).
(b) In the event that (i) the Guarantor or the Issuer has become or would
become obligated to pay any Additional Amounts as a result of (x) changes
affecting withholding tax laws or (y) a Listing Failure (as defined herein)
provided that the Issuer has used reasonable best efforts to list and maintain
the listing of the Securities on a "recognized stock exchange" (within the
meaning of Section 841 of the U.K. Income and Corporation Taxes Act 1988) (as
provided for in Section 10.09), and (ii) the Guarantor and the Issuer are unable
to avoid the requirement to pay such Additional Amounts by taking reasonable
measures available to them (including, without limitation, the Guarantor making
payments directly to holders under the Securities Guarantee, unless such payment
is likely to result in adverse consequences to the Issuer or the Guarantor),
then the Issuer may redeem all, but not less than all, of the Securities at any
time at 100% of the Accreted Value thereof on the Redemption Date, together with
accrued interest thereon, if any, to but excluding the Redemption Date (subject
to, in the case of a Global Security in bearer form, the right of the Holder
thereof and, in the case of Definitive Securities, the right of Holders of
record on the relevant Regular Record Date, to receive Interest due on an
Interest Payment Date that is on or prior to the Redemption Date). Prior to the
publication of the notice of redemption in accordance with the foregoing, the
Issuer shall deliver to the Trustee an officer's certificate stating that the
Issuer is entitled to effect such redemption based on a written opinion of
independent tax counsel or accounting firm reasonably satisfactory to the
Trustee.
(c) The Securities further may be redeemed, as a whole or in part, at the
election of the Issuer, at any time on or after March 15, 2003 and prior to
maturity, upon not less than 30 nor more than 60 days' notice by mail to each
Holder of Securities to be redeemed at such Holder's address appearing in the
Security Register, in amounts of DM1,000 or an integral multiple of DM1,000, at
the Redemption Prices specified in the form of Security hereinbefore set forth,
together with accrued interest to but excluding the Redemption Date (subject to,
in the case of a Global Security in bearer form, the right of the Holder thereof
and, in the case of Definitive Securities, the right of Holders of record on the
relevant Regular Record Date, to
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receive Interest due on an Interest Payment Date that is on or prior to the
Redemption Date).
SECTION 11.02. Applicability of Article. Redemption of Securities at the
election of the Issuer, as permitted or required by any provision of this
Indenture, shall be made in accordance with such provision and this Article.
SECTION 11.03. Election To Redeem; Notice to Trustee. The election of the
Issuer to redeem any Securities pursuant to Section 11.01 shall be evidenced by
a Board Resolution. In case of any redemption at the election of the Issuer of
less than all the Securities, the Issuer shall, at least 5 days prior to giving
notice of such redemption pursuant to Section 11.05 (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. In the
case of any redemption of Securities prior to the expiration of any restriction
on such redemption provided in the terms of such Securities or elsewhere in this
Indenture, the Issuer shall furnish the Trustee with an Officers' Certificate
evidencing compliance with such restriction.
SECTION 11.04. Securities To Be Redeemed Pro Rata. If less than all the
Securities are to be redeemed in any redemption, the Securities to be redeemed
shall be selected by the Trustee by prorating, as nearly as may be practicable,
the principal amount at maturity of Securities to be redeemed. In any proration
pursuant to this Section, the Trustee shall make such adjustments, reallocations
and eliminations as it shall deem proper to the end that the principal amount at
maturity of Securities so prorated shall be DM1,000 or a multiple thereof, by
increasing or decreasing or eliminating the amount which would be allocable to
any Holder on the basis of exact proportion by an amount not exceeding DM1,000.
The Trustee in its discretion may determine the particular Securities (if there
are more than one) registered in the name of any Holder which are to be
redeemed, in whole or in part. The Trustee shall incur no liabilities for any
selection made pursuant to this Section 11.04.
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 at maturity
thereof to be redeemed.
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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 at maturity of such Securities which has been or is to
be redeemed.
SECTION 11.05. 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, to each Holder of Securities to be redeemed, at
such Holder's address appearing in the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) whether the redemption is being made pursuant to Section 11.01(a),
(b) or (c) and, if being made pursuant to Section 11.01(a) or (b), 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 of any
Securities, the principal amounts at maturity) 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,
(6) the place or places where such Securities are to be surrendered
for payment of the Redemption Price, and
(7) that in the case that a Security is only redeemed 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 in an aggregate amount equal to the unredeemed portion of the
Security.
Notice of redemption of Securities to be redeemed at the election of the
Issuer shall be given by the Issuer
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or, at the Issuer's request, by the Trustee in the name and at the expense of
the Issuer. If so requested by the Issuer, the Trustee shall mail any such
notice not later than the date specified for mailing by the Issuer, which shall
not be sooner than 5 days after receipt by the Trustee of such request (unless a
shorter period shall be satisfactory to the Trustee).
SECTION 11.06. Deposit of Redemption Price. 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 10.03) 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 11.07. 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 after such date (unless the Issuer shall default in the
payment of the Redemption Price and 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 accrued interest to but excluding 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 bearer of such
Security, in the case of a Global Security in bearer form, and, in the case of a
Definitive Security, to 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 their terms and the provisions of Section 3.07.
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 11.08. 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 Section 10.02 (with, if the Issuer or
the Trustee so requires, due endorsement by, or a
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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 like tenor, 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 XII
Discharge of Indenture
SECTION 12.01. Termination of Issuer's Obligations. Except as otherwise
provided in this Section 12.01, each of the Issuer and the Guarantor may
terminate its obligations under the Securities and this Indenture if:
(a) all Securities previously authenticated and delivered (other than
destroyed, lost or stolen Securities that have been replaced or Securities
for whose payment money or securities have theretofore been held in trust
and thereafter repaid to the Issuer, as provided in Section 12.05) have
been delivered to the Trustee for cancelation and the Issuer has paid all
sums payable by it hereunder; or
(b)(i) all such Securities mature within one year or all of them are
to be called for redemption within one year under arrangements satisfactory
to the Trustee for giving the notice of redemption, (ii) the Issuer
irrevocably deposits in trust with the Trustee during such one-year period,
under the terms of an irrevocable trust agreement in form satisfactory to
the Trustee, as trust funds solely for the benefit of the Holders of such
Securities for that purpose, money or U.S. Government Obligations
sufficient (in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered
to the Trustee), without consideration of any reinvestment of any interest
thereon, to pay principal, premium, if any, and interest on such Securities
to maturity or redemption, as the case may be, and to pay all other sums
payable by it hereunder, (iii) no Default or Event of Default with respect
to the Securities shall
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have occurred and be continuing on the date of such deposit, (iv) such
deposit will not result in a breach or violation of, or constitute a
default under, this Indenture or any other agreement or instrument to which
the Guarantor or the Issuer is a party or by which it is bound, (v) if at
such time the Securities are listed on a national securities exchange, the
Securities will not be delisted as a result of such deposit, defeasance and
discharge, and (vi) the Issuer has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the satisfaction and
discharge of this Indenture have been complied with.
With respect to the foregoing clause (a), the Issuer's obligations under
Section 6.07 shall survive. With respect to the foregoing clause (b), the
Issuer's obligations in Sections 3.03, 3.04, 3.05, 3.06, 3.07, 10.01, 10.09,
6.07, 6.10, 6.11, 12.04, 12.05 and 12.06 shall survive until the Securities have
matured or have been redeemed. Thereafter, only the Issuer's obligations in
Sections 6.07, 12.05 and 12.06 shall survive. After any such irrevocable
deposit, the Trustee upon written request shall acknowledge in writing the
discharge of the Issuer's obligations under the Securities and this Indenture,
and the Guarantor's obligations under the Guarantee and this Indenture, except
for those surviving obligations specified above.
SECTION 12.02. Defeasance and Discharge of Indenture. The Issuer will be
deemed to have paid and will be discharged from any and all obligations in
respect of the Securities on the 123rd day after the date of the deposit
referred to in clause (a) of this Section 12.02 if:
(a) with reference to this Section 12.02, the Issuer has irrevocably
deposited or caused to be irrevocably deposited with the Trustee and has
conveyed all right, title and interest for the benefit of the Holders,
under the terms of an irrevocable trust agreement in form satisfactory to
the Trustee as trust funds in trust, specifically pledged to the Trustee
for the benefit of the Holders as security for payment of the principal of,
premium, if any, and interest, if any, on the Securities, and dedicated
solely to, the benefit of the Holders, in and to (i) money in an amount,
(ii) U.S. Government Obligations that, through the payment of interest,
premium, if any, and principal in respect thereof in
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accordance with their terms, will provide, not later than one day before
the due date of any payment referred to in this clause (a), money in an
amount or (iii) a combination thereof in an amount 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, without consideration of the reinvestment of such
interest and after payment of all federal, state and local taxes or other
charges and assessments in respect thereof payable by the Trustee, the
principal of, premium, if any, and accrued interest on the Outstanding
Securities at the Stated Maturity of such principal or interest or upon
earlier redemption; provided that the Trustee shall have been irrevocably
instructed to apply such money or the proceeds of such U.S. Government
Obligations to the payment of such principal, premium, if any, and interest
with respect to the Securities and to give any related notice of
redemption;
(b) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Guarantor, the Issuer or any of their Subsidiaries
is a party or by which the Guarantor, the Issuer or any of their
Subsidiaries is bound;
(c) immediately after giving effect to such deposit on a pro forma
basis, no Default or Event of Default, or event that after the giving of
notice or lapse of time or both could become a Default or Event of Default,
shall have occurred and be continuing on the date of such deposit or during
the period ending on the 123rd day after the date of such deposit;
(d) the Issuer shall have delivered to the Trustee either (i) a ruling
based on relevant law and practice at the time directed to the Trustee from
the Inland Revenue or other relevant tax authority to the effect that the
Holders will not recognize income, gain or loss for U.K. income tax or
other tax purposes as a result of the Issuer's exercise of its option under
this Section 12.02, disregarding income tax on any amounts that would have
been received but for such exercise of its option under this Section 12.02,
and will be subject to U.K. income tax on the same amount and in the same
manner and at the same time as would have been the case if such option had
not been exercised or (ii) an Opinion of Counsel
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to the same effect as the ruling described in clause (i) above;
(e) the Issuer shall have delivered to the Trustee (i) either (A) a
ruling directed to the Trustee received from the Internal Revenue Service
to the effect that the Holders will not recognize additional income, gain
or loss for U.S. federal income tax purposes as a result of the Issuer's
exercise of its option under this Section 12.02 and will be subject to U.S.
federal income tax on the same amount and in the same manner and at the
same times as would have been the case if such option had not been
exercised or (B) an Opinion of Counsel to the same effect as the ruling
described in clause (A) above accompanied by a ruling to that effect
published by the Internal Revenue Service, unless there has been a change
in the relevant U.S. federal income tax law since the date of this
Indenture and (ii) an Opinion of Counsel to the effect that (A) the
creation of the defeasance trust does not violate the Investment Company
Act of 1940 and (B) after the passage of 123 days following the deposit
(except, with respect to any trust funds for the account of any Holder who
may be deemed to be "connected" with the Issuer for purposes of the
Insolvency Act 1986 after two years following the deposit), the trust funds
will not be subject to the effect of Section 547 of the United States
Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law and
either (I) the trust funds will no longer remain the property of the Issuer
(and therefore will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally) or (II) if a court were to rule under any such law in any
case or proceeding that the trust funds remained property of the Issuer (1)
assuming such trust funds remained in the possession of the Trustee prior
to such court ruling to the extent not paid to the Holders, the Trustee
will hold, for the benefit of the Holders, a valid and perfected security
interest in such trust funds that is not avoidable in bankruptcy or
otherwise and (2) no property, rights in property or other interests
granted to the Trustee or the Holders in exchange for, or with respect to,
such trust funds will be subject to any prior rights of holders of other
Debt of the Issuer or any of its Securities;
-126-
<PAGE>
(f) if at such time the Securities are listed on a national securities
exchange, the Issuer shall have delivered to the Trustee an Opinion of
Counsel to the effect that the Securities will not be delisted as a result
of the Issuer's exercise of its opinion under this Section 12.02; and
(g) the Issuer shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 12.02 have been complied with.
Notwithstanding the foregoing, prior to the end of the post deposit period
referred to in clause (e)(ii)(B) of this Section 12.02, none of the Issuer's
obligations under this Indenture shall be discharged. Subsequent to the end of
such period with respect to this Section 12.02, the Issuer's obligations in
Sections 3.03, 3.04, 3.05, 3.06, 3.07, 10.01, 10.09, 6.07, 6.10, 6.11, 12.04,
12.05 and 12.06 shall survive until the Securities mature or are redeemed.
Thereafter, only the Issuer's obligations in Sections 6.07, 12.05 and 12.06
shall survive. If and when a ruling from the Internal Revenue Service or an
Opinion of Counsel referred to in clause (e)(i) of this Section 12.02 may be
provided specifically without regard to, and not in reliance upon, the
continuance of the Issuer's obligations under Section 10.01, then the Issuer's
obligations under such sentence shall cease upon delivery to the Trustee of such
ruling or Opinion of Counsel and compliance with the other conditions precedent
provided for herein relating to the defeasance contemplated by this Section
12.02.
After any such irrevocable deposit, the Trustee upon request shall
acknowledge in writing the discharge of the Issuer's obligations under the
Securities, any Subsidiary Guarantee, if any, and this Indenture except for
those surviving obligations in the immediately preceding paragraph.
SECTION 12.03. Defeasance of Certain Obligations. The Issuer may omit to
comply with any term, provision or condition set forth in clauses (3) and (4) of
Section 8.01 and Sections 10.05 through 10.18 (except for Section 10.09 and any
covenant otherwise required by the TIA), and clause (d) of Section 5.01 with
respect to clauses (3) and (4) of Section 8.01, clauses (d) and (e) of Section
5.01 with respect to Sections 10.05 through 10.18, except as aforesaid, and
clauses (c), (f) and (g) of
-127-
<PAGE>
Section 5.01 shall be deemed not to be Events of Default, in each case with
respect to the Outstanding Securities if:
(a) with reference to this Section 12.03, the Issuer has irrevocably
deposited or caused to be irrevocably deposited with the Trustee and
conveyed all right, title and interest to the Trustee for the benefit of
the Holders, under the terms of an irrevocable trust agreement in form and
substance satisfactory to the Trustee as trust funds in trust, specifically
pledged to the Trustee for the benefit of the Holders as security for
payment of the principal of, premium, if any, and interest, if any, on the
Securities, and dedicated solely to, the benefit of the Holders, in and to
(i) money in an amount, (ii) U.S. Government Obligations that, through the
payment of interest and principal in respect thereof in accordance with
their terms, will provide, not later than one day before the due date of
any payment referred to in this clause (a), money in an amount or (iii) a
combination thereof in an amount 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,
without consideration of the reinvestment of such interest and after
payment of all federal, state and local taxes or other charges and
assessments in respect thereof payable by the Trustee, the principal of,
premium, if any, and interest on the Outstanding Securities on the Stated
Maturity or upon earlier redemption of such principal or interest; provided
that the Trustee shall have been irrevocably instructed to apply such money
or the proceeds of such U.S. Government Obligations to the payment of such
principal, premium, if any, and interest with respect to the Securities and
to give any related notice of redemption;
(b) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Guarantor, the Issuer or any of their Subsidiaries
is a party or by which the Guarantor, the Issuer or any of their
Subsidiaries is bound;
(c) immediately after giving effect to such deposit or a pro forma
basis, no Default or Event of Default, or event that after the giving of
notice or lapse of time or both would become a Default or Event
-128-
<PAGE>
of Default, shall have occurred and be continuing on the date of such
deposit or during the period ending on the 123rd day after the day of such
deposit;
(d) the Issuer has delivered to the Trustee an Opinion of Counsel to
the effect that (i) the creation of the defeasance trust does not violate
the Investment Company Act of 1940, (ii) the Holders will not recognize
income, gain or loss for U.S. federal income tax purposes as a result of
such deposit and the defeasance of the obligations referred to in the first
paragraph of this Section 12.03 and will be subject to U.S. federal income
tax on the same amount and in the same manner and at the same times as
would have been the case if such deposit and defeasance had not occurred
and (iii) after the passage of 123 days following the deposit (except with
respect to any trust funds for the account of any Holder who may be deemed
to be "connected" with the Issuer for purposes of the Insolvency Act 1986
after two years following the deposit), the trust funds will not be subject
to the effect of Section 547 of the United States Bankruptcy Code or
Section 15 of the New York Debtor and Creditor Law, and either (A) the
trust funds will no longer remain the property of the Issuer (and therefore
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditor's rights generally) or
(B) if a court were to rule under any such law in any case or proceeding
that the trust funds remained property of the Issuer (1) assuming such
trust funds remained in the possession of the Trustee prior to such court
ruling to the extent not paid to the Holders, the Trustee will hold, for
the benefit of the Holders, a valid and perfected security interest in such
trust funds that is not avoidable in bankruptcy or otherwise and (2) no
property, rights in property or other interests granted to the Trustee or
the Holders in exchange for, or with respect to, such trust funds will be
subject to any prior rights or holders of other Indebtedness of the Issuer
or any of its Securities;
(e) if at such time the Securities are listed on a national securities
exchange, the Issuer has delivered to the Trustee an Opinion of Counsel to
the effect that the Securities will not be delisted as a result of the
Issuer's exercise of its option under Section 12.03; and
-129-
<PAGE>
(f) the Issuer has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, in each case stating that all conditions
precedent provided for herein relating to the defeasance contemplated by
this Section 12.03 have been complied with.
SECTION 12.04. Application of Trust Money. Subject to Section 12.06, the
Trustee or Paying Agent shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Section 12.01, 12.02 or 12.03, as the case may be,
and shall apply the deposited money and the money from U.S. Government
Obligations in accordance with the Securities and this Indenture to the payment
of principal of, premium, if any, and interest on the Securities; but such money
need not be segregated from other funds except to the extent required by law.
SECTION 12.05. Repayment to Issuer. Subject to Sections 6.07, 12.01, 12.02
and 12.03, the Trustee and the Paying Agent shall promptly pay to the Issuer
upon request set forth in an Officers' Certificate any excess money held by them
at any time and thereupon shall be relieved from all liability with respect to
such money. The Trustee and the Paying Agent shall pay to the Issuer any money
held by them for the payment of principal, premium, if any, or interest that
remains unclaimed in accordance with Section 10.02.
SECTION 12.06. Reinstatement. If the Trustee or Paying Agent is unable to
apply any money or U.S. Government Obligations in accordance with Section 12.01,
12.02 or 12.03, as the case may be, by reason of any legal proceeding or by
reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, the Issuer's
obligations under this Indenture, the Securities Guarantee, and the Securities
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 12.01, 12.02 or 12.03, as the case may be, until such time as the
Trustee or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with Section 12.01, 12.02 or 12.03, as the case may
be; provided that, if the Issuer has made any payment of principal of, premium,
if any, or interest on any Securities because of 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 or U.S. Government Obligations
held by the Trustee or Paying Agent.
-130-
<PAGE>
SECTION 12.07. Insiders. With respect to the determination of the Persons
constituting beneficial owners of Securities and whether any such Person is
"connected" with the Issuer for purposes of Sections 12.02(e)(ii)(B) and
12.03(d)(iii), the Trustee may rely on an Officers' Certificate.
-131-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the day and year first above written.
Dated:
The Common Seal of
RSL COMMUNICATIONS PLC
was hereto affixed in
the presence of:
[SEAL]
RSL COMMUNICATIONS PLC,
by
----------------------
Name:
Title:
by
---------------------------
Name:
Title:
THE CHASE MANHATTAN BANK,
by
----------------------------
Name:
Title:
RSL COMMUNICATIONS, LTD.,
by
---------------------------
Name:
Title:
<PAGE>
ANNEX A -- Form of
Regulation S Certificate
REGULATION S CERTIFICATE
(For transfers pursuant to ss. 3.05(b)(i) and (iii)
of the Indenture)
The Chase Manhattan Bank,
as Trustee
450 West 33rd Street, 15th Floor
New York, NY 10001
Attention: Global Trust Services
Re: 10% Senior Discount Notes due 2008 of
RSL Communications PLC (the "Securities")
Reference is made to the Indenture, dated as of March 16, 1998 (the
"Indenture"), between RSL Communications PLC (the "Issuer"), RSL Communications,
Ltd. (the "Guarantor") and The Chase Manhattan Bank, 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, as amended (the "Securities Act") are used herein
as so defined.
This certificate relates to DM____________ principal amount at maturity 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 Book-Entry Depositary who issued a Depositary Interest to the Common
Depositary who holds such interest in the name of the Undersigned. 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 Regulation S
Security.
A-1
<PAGE>
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 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 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
Restricted Period, then the requirements of Rule 904(c)(1) have been
satisfied; and
A-2
<PAGE>
(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 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 the
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
(B) the transfer 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 the
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.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuer and the 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.)
A-3
<PAGE>
ANNEX B -- Form of Restricted
Securities Certificate
RESTRICTED SECURITIES CERTIFICATE
(For transfers pursuant to ss. 3.05(b)(ii) and (iii)
of the Indenture)
The Chase Manhattan Bank,
as Trustee
450 West 33rd Street, 15th Floor
New York, NY 10001
Attention: Global Trust Services
Re: 10% Senior Discount Notes due 2008 of
RSL Communications PLC (the "Securities")
Reference is made to the Indenture, dated as of March 16, 1998 (the
"Indenture"), between RSL Communications PLC (the "Issuer"), RSL Communications,
Ltd. (the "Guarantor") and The Chase Manhattan Bank, 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, as amended (the "Securities Act") are used herein
as so defined.
This certificate relates to DM_____________ principal amount at maturity 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 Book-Entry Depositary who issued a Depositary Interest to the Common
Depositary who holds such interest in the name of the Undersigned. 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.
B-1
<PAGE>
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. 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
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
(2) Rule 144 Transfers. If the transfer is being effected pursuant to
Rule 144:
(A) the transfer is occurring 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 the
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
(B) the transfer 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 the
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.
B-2
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuer and the 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.)
B-3
<PAGE>
ANNEX C -- Form of Unrestricted
Securities Certificate
UNRESTRICTED SECURITIES CERTIFICATE
(For removal of Securities Act Legends pursuant to ss. 3.05(c))
The Chase Manhattan Bank,
as Trustee
450 West 33rd Street, 15th Floor
New York, NY 10001
Attention: Global Trust Services
Re: 10% Senior Discount Notes due 2008 of
RSL Communications PLC (the "Securities")
Reference is made to the Indenture, dated as of March 16, 1998 (the
"Indenture"), between RSL Communications PLC (the "Issuer"), RSL Communications,
Ltd. (the "Guarantor") and The Chase Manhattan Bank, 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, as amended (the "Securities Act") are used herein
as so defined.
This certificate relates to DM_____________ principal amount at maturity 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 Book-Entry Depositary who issued a Depositary Interest to the Common
Depositary (or its nominee) who holds such interest 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.
C-1
<PAGE>
The Owner has requested that the Specified Securities be exchanged for
Securities bearing no Securities Act Legend pursuant to Section 305(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 the 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. 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 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.)
C-2
<PAGE>
[Letterhead of Conyers, Dill & Pearman]
Our Ref: Your Ref: Writer's Direct Line/E-mail:
RBX/ss/310615/d.385954 March, 1998
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, NW
Washington, DC 20549
USA
Dear Sirs,
We have been requested by RSL Communications, Ltd. (the "Company"), a
Bermuda company, to furnish our opinion in connection with the
registration statement (the "Registration Statement") with respect to the
registration of 1,152,715 Class A common shares in the Company, par value
$.0.00457 per share (the "Shares") to be issued and sold by the Company
pursuant to the exercise of the 300,000 warrants (the "Warrants") issued
by the Company to investors in October, 1996 and the sale of up to 300,000
of the Shares by a certain selling shareholder.
We have made such examinations as we have deemed necessary for the purpose
of this opinion. Based upon such examinations, it is our opinion that,
upon the payment for and issue of the Shares pursuant to the Warrants, the
Shares will have been validly issued and will be fully paid.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to our name under the caption
"Legal Matters" in the Registration Statement.
Yours faithfully
/s/ Conyers Dill & Pearman
<PAGE>
Exhibit 8.1
March 20, 1998
RSL Communications, Ltd.
Clarendon House
Church Street
Hamilton HM CX Bermuda
Gentlemen:
You have requested our opinion regarding the discussion of United States
federal income tax consequences under the caption "Certain United States
Federal Income Tax Considerations" in the prospectus (the "Prospectus")
that is included in the Registration Statement on Form S- 1 (Reg. No.
333-46125) of RSL Communications, Ltd. originally filed with the Securities
and Exchange Commission on February 11, 1998 and as amended on March 20,
1998. The Prospectus relates to the Company's issuance and sale of 1,152,715
shares of Class A Common Stock upon the exercise of certain warrants and the
sale of up to 300,000 shares of Class A Common Stock by a certain selling
shareholder.
We have reviewed the Prospectus and such other materials as we
have deemed necessary or appropriate as a basis for our opinion described
therein, and have considered the applicable provisions of the Internal
Revenue Code of 1986, as amended, Treasury Regulations, pertinent judicial
authorities, rulings of the Internal Revenue Service, and such other
authorities as we have considered relevant to such opinion.
Based upon the foregoing, it is our opinion that the statements made under
the caption "Certain United States Federal Income Tax Considerations" in
the Prospectus set forth the material United States federal income tax
consequences of the offering described in the
Prospectus as of the date hereof.
We hereby consent to the use of our name under the caption
"Certain United States Federal Income Tax Considerations" in the
Prospectus and to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours
ROSENMAN & COLIN LLP
By: /s/ James A. Guadiana
-------------------------
A Partner
<PAGE>
[Letterhead of Conyers Dill & Pearman]
Our Ref: Your Ref: Writer's Direct Line/E-mail:
RBX/ss/310615/d.385954 March, 1998
RSL Communications, Ltd.
Clarendon House
Church Street
Hamilton HM CX
Bermuda
Gentlemen
RSL Communications, Ltd. (the "Company")
Form S-1 Registration Statement under
The United States Securities Act of 1933
You have requested our opinion with respect to the material set forth
under the heading "Certain Bermuda Tax Considerations" in the registration
statement filed by the Company on 11 February, 1998 and the amendments
thereto (the "Registration Statement") in connection with the registration
of 1,152,715 Class A Common Shares (the "Shares") to be issued and sold
by the Company pursuant to the exercise of the 300,000 Warrants issued by
the Company to investors in October, 1996 and the sale of up to 300,000 of
the Shares by a certain shareholder.
In connection with your request, you have provided us with the
Registration Statement and such other documents as we have deemed
necessary or appropriate to review in rendering this opinion.
It is our opinion that the tax discussion set forth under the heading
"Certain Bermuda Tax Considerations" in the Registration Statement is
accurate as of the date hereof in all material respects.
We hereby consent to the use of our name under the caption "Legal Matters"
in the Registration Statement and to the use of this opinion as an exhibit
to the Registration Statement.
Yours faithfully
/s/ Conyers Dill & Pearman
<PAGE>
MATERIAL SUBSIDIARIES
RSL United States Operating Subsidiaries
- ----------------------------------------
Name State of Incorporation
International Telecommunications Group, Ltd. Delaware
RSL COM U.S.A., Inc. Delaware
RSL COM PrimeCall, Inc. Delaware
Delta Three, Inc. Delaware
LDM Systems, Inc. New York
RSL Foreign Operating Subsidiaries
- ----------------------------------
Name Country of Incorporation
RSL COM Europe Ltd. United Kingdom
RSL COM Sweden AB Sweden
RSL COM Finland OY Finland
Telecenter OY Finland
RSL COM France S.A. France
RSL COM Deutschland GmbH Germany
RSL COM Nederland B.V. Netherlands
RSL Denmark A/S Denmark
RSL COM Japan K.K. Japan
Maxitel Servicos e Gestao de Telecommunicacoes, S.A. Portgual
RSL COM Italia S.r.L Italy
RSL COM Venezuela C.A. Venezuela
Newtelcom Telekom AG Austria
RSL Communications Spain, S.A. Spain
CallCom AG FUR TeleKommunization Switzerland
European Telecom S.A./N.V. Belgium
European Telecom SARL Luxembourg
RSL COM Australia Pty. Ltd Australia
Call Australia Pty Ltd.
Associated Service Providers Pty. Limited
Digiplus Pty. Limited
Power Serve Communications
Consultants Pty. Limited
Talk 2000 Networks Pty. Limited
Telephone Bill Pty. Limited
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 114,894
<SECURITIES> 82,694
<RECEIVABLES> 82,943
<ALLOWANCES> 12,333
<INVENTORY> 0
<CURRENT-ASSETS> 16,073
<PP&E> 85,581
<DEPRECIATION> 13,804
<TOTAL-ASSETS> 605,664
<CURRENT-LIABILITIES> 162,357
<BONDS> 300,000
0
0
<COMMON> 190
<OTHER-SE> 126,509
<TOTAL-LIABILITY-AND-EQUITY> 605,664
<SALES> 300,796
<TOTAL-REVENUES> 300,796
<CGS> 265,321
<TOTAL-COSTS> 265,321
<OTHER-EXPENSES> 109,226
<LOSS-PROVISION> 10,908
<INTEREST-EXPENSE> 39,873
<INCOME-PRETAX> (99,798)
<INCOME-TAX> 401
<INCOME-CONTINUING> (100,199)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (100,199)
<EPS-PRIMARY> (5.27)
<EPS-DILUTED> (5.27)
</TABLE>
