SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to ___________________
Commission File No. 000-29284
TELEGROUP, INC.
(Exact name of Registrant as Specified in Its Charter)
Iowa 42-1344121
- ------------------------------ ----------------------------
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
2098 Nutmeg Avenue, Fairfield, IA 52556
- --------------------------------- -----------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: 515-472-5000
------------------------
- -----------------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securites under a plan
confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of Common Stock, as of the latest practicable date: There are 30,768,542
----------------------
shares of Common stock outstanding as of September 30, 1997 and 30,880,522 as
- ---------------------------------------------------------------------------
of the date of filing this report.
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<PAGE>02
TELEGROUP, INC.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
- ------------------------------ ----
Item 1. Financial Statements
Consolidated Balance Sheets as of December 31, 1996
and September 30, 1997 (unaudited).................................3
Consolidated Statements of Operations for the Three
and Nine Months Ended September 30, 1996 (unaudited) and
September 30, 1997 (unaudited).....................................5
Consolidated Statement of Shareholders' Equity for the
Nine Months Ended September 30,1997 (unaudited)....................6
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 1996 (unaudited) and September 30, 1997 (unaudited)..7
Notes to Consolidated Financial Statements (unaudited).............8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................11
PART II - OTHER INFORMATION
- --------------------------
Item 1. Legal Proceedings.................................................20
Item 2. Changes in Securities and Use of Proceeds.........................20
Item 3. Defaults Upon Senior Securities...................................20
Item 4. Submission of Matters to a Vote of Security Holders...............20
Item 5. Other Information.................................................21
Item 6. Exhibits and Reports on Form 8-K..................................23
Exhibit Index.............................................................24
Signatures................................................................25
<PAGE>03
PART I - FINANCIAL INFORMATION
- ------------------------------
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
TELEGROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND SEPTEMBER 30, 1997 (UNAUDITED)
December September
ASSETS 1996 1997
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 14,155,013 58,215,248
Accounts receivable and unbilled services, less
allowance for credit losses of $3,321,119 and
$4,639,183 at December 31, 1996 and September 30,
1997, respectively 32,288,507 48,007,389
Income tax recoverable 1,796,792 2,924,478
Deferred taxes 1,392,058 1,639,066
Prepaid expenses and other assets 245,271 757,508
Receivables from shareholders 14,974 45,880
Receivables from employees 85,539 189,070
----------- ----------
Total current assets 49,978,154 111,778,639
----------- ----------
Net property and equipment 11,256,139 21,596,980
----------- ----------
Other assets:
Deposits and other assets 376,614 688,665
Goodwill, net of amortization of $22,768 and
$96,520 at December 31, 1996 and
September 30, 1997, respectively 1,001,841 2,969,347
Capitalized software, net of amortization 1,906,655 1,873,946
Debt issuance costs, net of amortization 1,437,004 750,000
----------- ----------
4,722,114 6,281,958
----------- ----------
Total assets $ 65,956,407 139,657,577
----------- ----------
----------- ----------
</TABLE>
<TABLE>
<CAPTION>
December September
31, 30,
LIABILITIES AND SHAREHOLDERS' EQUITY 1996 1997
<S> <C> <C>
Current liabilities:
Accounts payable 30,719,562 44,413,669
Accrued expenses 8,561,041 12,233,538
Note payable - 15,000,000
Unearned revenue 64,276 160,222
Customer deposits 602,940 717,224
Current portion of long-term debt (note 2) 232,596 92,194
Current portion of capital lease obligations 138,309 127,099
----------- ----------
Total current liabilities 40,318,724 72,743,946
----------- ----------
Deferred taxes 756,891 730,847
Capital lease obligations 301,393 218,320
Long-term debt (note 2) 11,216,896 25,042,057
Minority interest (note 3) - -
Commitments and contingencies (note 5) - -
Shareholders' equity:
Common stock, no par or stated value;
150,000,000 shares authorized, 26,211,578
and 30,768,542 shares issued and outstanding
at December 31, 1996 and September 30, 1997,
respectively - -
Additional paid-in capital 10,765,176 51,405,027
Retained earnings 2,599,530 (10,220,143)
Foreign currency translation adjustment (2,203) ( 262,477)
----------- -----------
Total shareholders' equity 13,362,503 40,922,407
----------- -----------
Total liabilities and
shareholders' equity $ 65,956,407 139,657,577
----------- -----------
----------- -----------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>04
<TABLE>
<CAPTION>
TELEGROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations (unaudited)
Three Months Ended September 30, 1996 and 1997
and Nine Months Ended September 30, 1996 and 1997
Three months Nine months
ended September 30, ended September 30
1996 1997 1996 1997
<S> <C> <C> <C> <C>
Revenues:
Retail $ 44,463,875 56,192,571 128,827,926 169,720,131
Wholesale 12,687,810 28,128,733 18,950,715 68,757,955
---------- ---------- ---------- -----------
Total revenues 57,151,685 84,321,304 147,778,641 238,478,086
Cost of revenues 40,853,396 61,876,405 100,794,086 174,273,208
---------- ---------- ---------- -----------
Gross profit 16,298,289 22,444,899 46,984,555 64,204,878
---------- ---------- ---------- -----------
Operating expenses:
Selling, general and
administrative
expenses 15,246,635 23,114,929 42,648,269 63,174,487
Depreciation and
amortization 513,167 1,264,523 1,158,124 3,208,063
Stock option based
compensation - 85,595 - 256,785
---------- ---------- ---------- -----------
Total operating
expenses 15,759,802 24,465,047 43,806,393 66,639,335
---------- ---------- ---------- -----------
Operating income
(loss) 538,487 (2,020,148) 3,178,162 (2,434,457)
Other income (expense):
Interest expense (151,383) (645,311) (200,209) (2,134,691)
Interest income 84,209 427,677 210,859 782,299
Foreign currency trans-
action gain(loss) 33,958 (130,522) (56,688) (587,291)
Other (18,821) 79,556 60,966 159,228
---------- ---------- ---------- ----------
Earnings (loss) before
income taxes and
extraordinary item 486,450 (2,288,748) 3,193,090 (4,214,912)
Income tax benefit
(expense) (183,076) 727,588 (1,143,538) 1,366,054
Minority interest in share
of earnings (loss) - - - -
--------- --------- --------- ---------
Earnings (loss) before
extraordinary item 303,374 (1,561,160) 2,049,552 (2,848,858)
Extraordinary item, loss on
extinguishment of debt,
net of income taxes of
$1,469,486 (note 2) - (9,970,815) - (9,970,815)
-------- --------- --------- ---------
Net earnings (loss) $ 303,374 (11,531,975) 2,049,552 (12,819,673)
--------- --------- --------- ---------
--------- --------- --------- ---------
Per share amounts (note 4):
Earnings (loss) before
extraordinary loss $ 0.01 (0.05) 0.07 (0.10)
----- ---- ---- ----
Net earnings (loss) $ 0.01 (0.39) 0.07 (0.47)
----- ---- ---- ----
Weighted-average
shares 28,784,635 29,923,051 28,784,635 27,462,331
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>05
<TABLE>
<CAPTION>
TELEGROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 1997
Foreign Total
Additional Retained currency share-
paid-in earnings translation holders'
Shares Amount capital (deficit) adjustment equity
<S> <C> <C> <C> <C> <C> <C>
Balances at
December 31,
1996 26,211,578 $ - 10,765,176 2,599,530 (2,203) 13,362,503
Net loss - - - (12,819,673) - (12,819,673)
Issuance of
shares, net
of offering
expenses
(note 3) 4,450,000 - 39,825,343 - - 39,825,343
Shares issued
in connection
with business
combination
(note 3) 40,000 - 470,000 - - 470,000
Compensation
expense in
connection
with stock
option plan - - 256,785 - - 256,785
Issuance of shares
for options
exercised 66,964 - 87,723 - - 87,723
Change in
foreign
currency
translation - - - - (260,274) (260,274)
--------- ----- ---------- --------- -------- ----------
Balances at
September 30,
1997 30,768,542 $ - 51,405,027 (10,220,143) (262,477) 40,922,407
--------- ----- ---------- ---------- --------- ----------
--------- ----- ---------- ---------- --------- ----------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>06
<TABLE>
<CAPTION>
TELEGROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
Nine months
ended September 30,
-------------------------
1996 1997
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 2,049,552 (12,819,673)
Adjustments to reconcile net earnings
(loss) to net cash provided by
operating activities:
Depreciation and amortization 1,158,124 3,208,063
Deferred income taxes 362,790 (273,052)
Loss on extinguishment of debt - 10,040,301
Provision for credit losses on
accounts receivable 3,730,892 6,384,001
Accretion of debt discount - 364 455
Stock option based compensation expense,
excluding the effects of
business combinations: - 256,785
Changes in operating assets and liabilities:
Accounts receivable (9,753,315) (21,791,926)
Prepaid expenses and other assets (86,267) (462,267)
Deposits and other assets 187,565 (1,650,196)
Accounts payable and accrued expenses 10,510,992 16,826,408
Income taxes (4,202,227) (1,295,174)
Unearned revenue 41,986 95,946
Customer deposits 82,978 114,284
----------- ----------
Net cash provided by (used in)
operating activities 4,083,070 (1,002,045)
----------- ----------
Cash flows from investing activities:
Purchases of equipment (6,263,952) (12,463,348)
Capitalization of software (1,326,858) (306,373)
Cash paid in business combinations,
net of cash acquired
Net change in receivables from (468,187) (420,956)
shareholders and employees (202,003) (134,437)
------------ -----------
Net cash used in investing
activities (8,261,000) (13,325,114)
------------ -----------
Cash flows from financing activities:
Net payments on notes payable (2,000,000) -
Net proceeds from line of credit 4,800,000 15,000,000
Net proceeds from
long-term borrowings 1,254,596 24,578,885
Debt issuance costs - (750,000)
Prepayment of senior subordinated notes - (20,000,000)
Net proceeds from issuance of stock - 39,825,343
Net proceeds from options exercised 87,723
Payments on capital lease obligations (151,948) (94,283)
Net change in due to shareholders (25,881) -
----------- -----------
Net cash provided by
financing activities 3,876,767 58,647,668
----------- -----------
Effect of exchange rate changes on cash (730) (260,274)
----------- -----------
Net increase (decrease) in cash and
cash equivalents (301,893) 44,060,235
Cash and cash equivalents at beginning
of period 4,591,399 14,155,013
------------ -----------
Cash and cash equivalents at end of period $ 4,289,506 58,215,248
------------ -----------
------------ -----------
Supplemental cash flow disclosures:
Dividends declared $ 425,000 -
------------ -----------
------------ -----------
Common stock issued in connection
with business combinations 573,984 470,000
------------ -----------
------------ -----------
Common stock issued in consideration
for notes receivable 52,366 -
------------ -----------
------------ -----------
Interest paid 200,209 2,356,921
------------ -----------
------------ -----------
Taxes paid 5,040,634 2,622
------------ -----------
------------ -----------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>07
TELEGROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) PREPARATION OF INTERIM FINANCIAL STATEMENTS
The consolidated financial statements of Telegroup, Inc. and subsidiaries
(the Company or Telegroup) have been prepared in accordance with the
rules and regulations of the Securities and Exchange Commission (SEC).
These consolidated financial statements include estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities and the amounts of revenues and
expenses. Actual results could differ from those estimates. The
consolidated balance sheet at December 31, 1996, was derived from the
Company's audited consolidated balance sheet as of that date. The
consolidated financial statements as of September 30, 1997 and for the
three month and nine month periods then ended are unaudited. In the
opinion of the Company, such interim financial statements include all
adjustments necessary for a fair presentation of the results of all
interim periods reported herein. All adjustments are of a normal
recurring nature unless otherwise disclosed. Certain information and
footnote disclosures prepared in accordance with generally accepted
accounting principles have been either condensed or omitted pursuant to
SEC rules and regulations. However, the Company believes that the
disclosures made are adequate for a fair presentation of results of
operations, financial position and cash flows. These consolidated
financial statements should be read in conjunction with the consolidated
financial statements and accompanying notes included in the Company's
Registration Statement on Form S-1.
(2) Debt
Long-term debt at December 31, 1996 and September 30, 1997 is shown
below:
<TABLE>
<CAPTION>
December 31, September 30,
1996 1997
<S> <C> <C>
12% senior subordinated notes,
net of discount, paid in
September 1997 $ 10,894,126 -
8.0% convertible subordinated
notes, due April 15, 2005,
unsecured - 25,000,000
8.5% note payable, due monthly
through fiscal 2000, secured by
vehicle 19,003 12,493
10.8% note payable, due monthly
through fiscal 1998, secured by
equipment financed 160,628 108,327
12.0% note payable, paid in
February 1997 74,319 -
12.0% note payable, paid in
February 1997 276,853 -
6.85% note payable, due monthly
through fiscal 1999, unsecured 14,138 9,291
8.00% note payable, due monthly
through fiscal 1998, unsecured 10,425 4,140
------------- ------------
11,449,492 25,134,251
Less current portion (232,596) (92,194)
------------- ------------
$ 11,216,896 25,042,057
------------- ------------
------------- ------------
</TABLE>
<PAGE>08
(2) DEBT (CONTINUED)
On September 5, 1997, the Company prepaid in full all of its
outstanding senior subordinated notes. The Company paid $21,400,000,
which included $20,000,000 in principal and $1,400,000 for a prepayment
penalty. In addition, the Company recognized a loss of $8,741,419 and
$1,298,882 for the write-off of the unamortized original issue discount
and debt issuance costs, respectively. The early extinguishment of the
senior subordinated notes is reflected on the statement of operations
as an extraordinary item, net of income taxes.
On September 30, 1997, the Company issued $25 million in aggregate
principal amount of convertible subordinated notes due April 15, 2005.
The net proceeds from the issuance of the convertible notes were
approximately $24.3 million.
The convertible notes are unsecured obligations of the Company and are
subordinated to all existing and future senior indebtedness of the
Company. The convertible notes bear interest at 8% per annum, payable
in cash, on each April 15 and October 15, commencing April 15, 1998;
provided that, until the earlier of (x) April 15, 1999 or (y) the
Final Note Interest Time (as defined in the Convertible Note Indenture),
at the option of the Company, interest may be paid by the issuance of
additional convertible notes. The convertible notes are convertible into
shares of common stock of the Company at any time on or before the
business day next preceding April 15, 2005, unless previously
redeemed, at a conversion price of $12.00 per share, subject to
adjustment upon the occurrence of certain events.
The convertible notes are redeemable, in whole or in part, at the
option of the Company, at any time on or after October 15, 2000 at
redemption prices (expressed as a percentage of the principal amount)
declining annually from 104.0% beginning October 15, 2000 to 100.0%
beginning on October 15, 2003 and thereafter, together with accrued
interest to the redemption date and subject to certain conditions.
The convertible note Indenture places certain restrictions on the
ability of the Company and its subsidiaries to (i) incur additional
indebtedness, (ii) make restricted payments (dividends, redemptions
and certain other payments), (iii) incur liens, (iv) enter into
mergers, consolidations or acquisitions, (v) sell or otherwise dispose
of property, business or assets, (vi) issue and sell preferred stock
of a subsidiary and (vii) engage in transactions with affiliates. For
details, see the convertible note Indenture attached as Exhibit 4.1 to
this report.
The Company had a credit agreement with a bank which provided for up to
$5,000,000 in committed credit at December 31, 1996. On September 12,
1997, the Company entered into a $15 million revolving credit facility
(the Facility) which replaced the previous credit facility. The
Facility expires October 31, 1997 and is secured by the Company's
accounts receivable and other assets. Amounts outstanding under the
Facility bear interest at a fluctuating rate which was 8.75% at
September 30, 1997. There were no borrowings under the credit at
December 31, 1996 and $15,000,000 borrowed under the Facility at
September 30, 1997.
On October 23, 1997, the Company issued $97 million in aggregate
principal amount of 10.5% senior discount notes. The notes will mature
on November 1, 2004, and each note will have a principal amount at
maturity of $1,000 and an accreted value of $772.50. The notes are
unsecured obligations of the Company and are subordinated to all
existing and future Senior Indebtedness, as defined in the indenture
governing the notes.
Cash interest on the senior discount notes will neither accrue nor be
payable prior to May 1, 2000. The notes bear interest at 10.5% per
annum, payable in cash, on each May 1 and November 1. The notes are
redeemable, in whole or in part, at the option of the Company, at any
time on or after November 1, 2001 at redemption prices (expressed as a
percentage of the principal amount) declining annually from 105.25%
beginning November 1, 2001 to 100.0% beginning on November 1, 2004 and
thereafter, together with accrued interest to the redemption date and
subject to certain conditions.
The senior discount Indenture places certain restrictions on the ability
of the Company and its subsidiaries to (i) incur additional indebtedness,
(ii) make restricted payments (dividends, redemptions and certain other
payments), (iii) incur liens, (iv) enter into mergers, consolidations or
acquisitions, (v) sell or otherwise dispose of property, business or
assets, (vi) issue and sell preferred stock of a subsidiary and (vii)
engage in transactions with affiliates. (For details, see the Senior
Discount Note Indenture attached as Exhibit 4.2 to this report.)
(3) SHAREHOLDERS' EQUITY
IPO
On July 14, 1997, the Company consummated an IPO. The Company sold
4,000,000 shares of common stock at a price to public of $10 per share
for net proceeds of approximately $35.6 million. On August 12, 1997,
the underwriters exercised their over-allotment option and purchased an
additional 450,000 shares at $10 per share which yielded net proceeds
to the Company of approximately $4.2 million.
ACQUISITIONS
On August 14, 1997, the Company acquired 60 percent of the common stock
of, and a controlling interest in, PCS Telecom, Inc. (PCS Telecom) for
$1,340,000 in cash and 40,000 shares of unregistered common stock
valued at $470,000, for total consideration of $1,810,000. PCS Telecom
is a developer and manufacturer of state of the art, feature-rich,
calling card platforms used by Telegroup and numerous other companies.
The acquisition has been accounted for using the purchase method of
accounting and, accordingly, the net assets and results of operations
are included in the consolidated financial statements from the date of
acquisition. The aggregate purchase price of the acquisition was
allocated based on fair values as follows:
<TABLE>
<CAPTION>
<S> <C>
Current assets $ 1,281,826
Property and equipment 534,600
Goodwill 2,041,258
Current liabilities (2,047,684)
-----------
Total $ 1,810,000
-----------
-----------
</TABLE>
<PAGE>09
TELEGROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(4) EARNINGS PER SHARE
For the three month and nine month periods ended September 30, 1996,
earnings per common and common equivalent share have been computed
using the weighted-average number of shares of common stock outstanding
during each period as adjusted for the effects of Securities and
Exchange Commission Staff Accounting Bulletin No. 83. Accordingly,
options and warrants to purchase common stock granted within one year
of the Company's initial public offering, which had exercise prices
below the initial public offering price per share, have been included
in the calculation of common equivalent shares, using the treasury
stock method, as if they were outstanding for all periods presented.
For the three and nine month periods ended September 30, 1997, earnings
per common share have been computed under the provisions of Accounting
Principles Board Opinion No. 15, "Earnings Per Share."
(5) COMMITMENTS AND CONTINGENCIES
COMMITMENTS WITH TELECOMMUNICATIONS COMPANIES
The Company has an agreement with Sprint Communications Company L.P.
(Sprint) with net monthly usage commitments of $1,500,000. In the
event such monthly commitments are not met, the Company is required to
remit to Sprint 25 percent of the difference between the $1,500,000
monthly commitment and actual usage. Such amount, if necessary, would
be recorded as cost of revenue in the period incurred. The Company has
exceeded the monthly usage commitments since the inception of this
agreement. This agreement extends through December 1997.
The Company has a one year $3,000,000 usage commitment with
MFS/WorldCom in Frankfurt, Germany, which began on September 5, 1997.
The Company is obligated to remit any shortfall under this agreement to
MFS/WorldCom in October, 1998. Such remittance, if necessary, will be
recorded as cost of revenue in the period incurred.
LITIGATION
The Company is a party to certain litigation which has arisen in
the ordinary course of business. In the opinion of management, the
ultimate resolution of this matter will not have a significant effect
on the financial statements of the Company.
NETWORK
At September 30, 1997, the Company had $4.5 million in commitments for
capital expenditures. The Company has identified a total of $60.1
million of capital expenditures which the Company intends to undertake
in 1997 and 1998 and approximately $75.0 million of additional
capital expenditures during the period from 1999 through 2001.
<PAGE>10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, INCLUDING STATEMENTS
REGARDING THE COMPANY'S ABILITY TO SEIZE OPPORTUNITIES FROM CONTINUING
DEREGULATION OF THE TELECOMMUNICATIONS MARKETS, THE NUMBER OF SWITCHES/NODES
AND FACILITIES THE COMPANY PLANS TO INSTALL, THE ANTICIPATED EXPANSION OF
REGIONAL CARRIER SALES, THE PREPAYMENT OF EXISTING NOTES, AND THE INCREASE IN
THE COMPANY'S INTERNAL AND EXTERNAL SALES FORCES. THE COMPANY'S REVENUES AND
ABILITY TO CONTINUE ITS EXPANSION ARE DIFFICULT TO FORECAST AND COULD DIFFER
MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT
OF NUMEROUS FACTORS, INCLUDING WITHOUT LIMITATION, OPERATING AND TECHNICAL
PROBLEMS, REGULATORY UNCERTAINTIES, POSSIBLE DELAYS IN THE FULL IMPLEMENTATION
OF LIBERALIZATION INITIATIVES, COMPETITION, AVAILABILITY OF CAPITAL, FOREIGN
CURRENCY FLUCTUATIONS, AND CHANGES IN THE US AND FOREIGN TAX LAWS.
The following discussion of the financial condition and performance of
the Company should be read in conjunction with the consolidated financial
statements and related notes and other detailed information regarding the
Company included in the Prospectus filed with the SEC on July 8, 1997 and other
reports filed by the Company with the SEC.
OVERVIEW
Telegroup is a leading global alternative provider of international
telecommunications services. The Company offers a broad range of discounted
international and enhanced telecommunications services to 268,000 small and
medium-sized business and residential customers in over 180 countries
worldwide. Telegroup has achieved its significant international market
penetration by developing what it believes to be one of the most comprehensive
global sales, marketing and customer service organizations in the
international telecommunications industry. The Company operates a digital,
switched-based telecommunications network, the Telegroup Intelligent Global
Network or the TIGN, to deliver its services in a reliable, flexible and
cost-effective manner. According to FCC statistics, Telegroup was the
thirteenth largest US carrier of long distance traffic in 1996. Telegroup's
revenues have increased from $29.8 million in fiscal 1993 to $303.9 million
for the 12 months ended September 30,1997.
As of September 30, 1997, the Company had 44,190 active retail customers
within the United States and 167,444 active retail customers outside the
United States. This only includes retail customers who were sent an invoice
in September and excludes active international customers with an outstanding
balance of less than $50. The Company's network currently includes switches
located in Australia, Denmark, France, Germany, Hong Kong, Japan, the
Netherlands, Switzerland, the UK, and the US and leased and owned
transmission facilities, enabling the Company to offer a variety of enhanced
telecommunications services. In August 1997, the Company installed a switch
in Frankfurt, Germany that has been tested and is in service as of the date
of this report. The Company also installed switches in Copenhagen, Denmark
and Zurich, Switzerland during the third quarter of 1997.
In the fourth quarter of 1997, the Company intends to install two
switches in New York and one additional switch in Hong Kong. Also in the
fourth quarter of 1997 or the first quarter of 1998, the Company plans to
sign interconnect agreements in the Netherlands, Denmark and Sweden, and
contracts for IPLS between Rome and Milan, and between Tokyo and Osaka.
The Company plans to have 30 switches installed worldwide by the end of 1998.
<PAGE> 11
The Company has attained positive net earnings in only two of the last
five years--1992 and 1995, and positive EBITDA in 1992, 1995 and 1996. EBITDA
represents net earnings (loss) plus net interest expense (income), income
taxes, depreciation and amortization and non-cash stock option based
compensation. The Company expects to incur lower gross margins, negative
EBITDA and significant operating losses and net losses for the near term as it
incurs additional costs associated with the development and expansion of the
TIGN, the expansion of its marketing and sales organization, and the
introduction of new telecommunications services. As the development and
expansion of the TIGN continues and the Company's customers migrate from
Global Access CallBack to Global Access Direct service, the Company expects
that its gross margins, EBITDA, and operating and net income will improve.
However, there can be no assurance that this will be the case.
Telegroup's revenues are derived from the sale of telecommunications
services to retail customers, typically residential users and small to
medium-sized businesses in over 180 countries worldwide and to wholesale
customers, typically other US and non-US telecommunications carriers. The
Company's revenues from retail and wholesale customers represented 84% and
16%, respectively, of the Company's total revenues for the year ended December
31, 1996 and 71% and 29%, respectively, for the nine months ended September
30, 1997. The Company's retail customer base is diversified both
geographically and by customer type. No single retail customer accounted for
more than 1% of the Company's total revenues for the year ended December 31,
1996 nor for the nine months ended September 30, 1997. For the nine months
ended September 30, 1997, one wholesale customer accounted for approximately
12% of the Company's total revenues. The Company expects that wholesale
revenues will continue to grow as a percentage of total telecommunications
revenue in the near term.
During the nine months ended September 30, 1997, the geographic origin of
the Company's revenues was as follows: United States-34.2%; Europe-29.4%;
Pacific Rim--24.5%; Other-11.9%, compared to fiscal year 1996 in which such
geographic origin was as follows: United States--28.3%; Europe--38.1%; Pacific
Rim--19.8%; Other--13.8%. The most significant shift in composition of revenue
was the increase in revenue derived from carrier services both in the US and
internationally. The Company continues to increase its wholesale carrier
business, which accounted for 29% of revenues for the nine months ended
September 30, 1997 compared to 10% for the nine months ended September 30,
1996, primarily by serving wholesale customers in the US and the Pacific Rim.
The Company has expanded its Country Coordinator offices and retail marketing
activities primarily in its core markets, six of which are located in Western
Europe, and three in the Pacific Rim. The Company believes that, because its
core markets comprise approximately 64% of the total global long distance
telecommunications market, according to TeleGeography, the US, Europe, and
Pacific Rim regions will continue to comprise the bulk of the Company's
revenues.
<PAGE>12
The Company believes that, typically, its retail services are
competitively priced below those of the Incumbent Telecommunications Operators
(ITOs) in each country in which the Company offers its services. Prices for
telecommunications services in many of the Company's core markets have
declined in recent years as a result of deregulation and increased
competition. The Company believes that worldwide deregulation and increased
competition are likely to continue to reduce the Company's retail revenues per
billable minute. The Company believes, however, that any decrease in retail
revenues per minute will be at least partially offset by an increase in
billable minutes by the Company's customers, and by a decreased cost per
billable minute as a result of the expansion of the TIGN and the Company's
ability to use least cost routing in additional markets.
For the year ended December 31, 1996, and the nine months ended September
30, 1997, 83.8% and 75.5%, respectively, of the Company's retail revenues were
derived from Telegroup's Global Access CallBack services. For the year ended
December 31, 1996 and the nine months ended September 30, 1997, 68.9% and
53.7%, respectively, of the Company's total revenues were derived from
Telegroup's Global Access CallBack services. As the Company's Global Access
Direct service is provided to customers currently using traditional call-
reorigination services, the Company anticipates that revenue derived from
Global Access Direct will increase as a percentage of retail revenues.
However, the Company expects to continue to aggressively market its Global
Access CallBack service in markets not served by the TIGN and to use
transparent call-reorigination as a possible routing methodology for its
Global Access Direct customers where appropriate. Accordingly, the Company
believes that call-reorigination will continue to be a significant source of
revenue.
Historically, the Company has not been required to collect Value Added
Tax (VAT), which is typically 15% to 25% of the sales price, on call-
reorigination services provided to customers in the EU because prior laws
deemed such services to be provided from the US. However, Germany and France
have adopted rules whereby, as of January 1, 1997, telecommunications services
provided by non-EU based firms are deemed to be provided where the customer is
located. Since April 1, 1997, Austria, Belgium, Denmark, Finland, Greece,
Ireland, Italy, Luxembourg, Spain, Norway, Portugal, Sweden and the United
Kingdom have begun to impose VAT on telecommunications services provided by
non-EU companies. The Company is currently analyzing the effect of this
legislation on its service offerings. The Company may have no alternative but
to reduce prices of particular services offered to certain customer segments
in order to remain competitive in light of the imposition of VAT on its
services in certain EU member states. Such price reduction could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company believes that whatever negative impact the
imposition of VAT will have on its operations, such impact will be partially
mitigated by the migration of customers to, and the higher gross margins
associated with, call-through services.
<PAGE>13
Cost of retail and wholesale revenues is comprised of (i) variable costs
associated with the origination, transmission and termination of voice and
data telecommunications services by other carriers, and (ii) costs associated
with owning or leasing and maintaining switching facilities and circuits.
The Company also includes as a cost of revenues payments resulting from
traffic imbalances under its operating agreement with AT&T Canada. Currently,
a significant portion of the Company's cost of revenues is variable, based on
the number of minutes of use transmitted and terminated over other carriers'
facilities. The Company's gross profitability is driven mainly by the
difference between revenues and the cost of transmission and termination
capacity.
The Company seeks to lower the variable portion of its cost of services
by originating, transporting and terminating a higher portion of its traffic
over the TIGN. However, in the near term, the Company expects that its cost of
revenues as a percentage of revenues will increase as the Company continues
the development and expansion of the TIGN and introduces new
telecommunications services. Subsequently, as the Company increases the volume
and percentage of traffic transmitted over the TIGN, cost of revenues will
increasingly consist of fixed costs associated with leased and owned lines and
the ownership and maintenance of the TIGN, and the Company expects that the
cost of revenues as a percentage of revenues will decline. The Company seeks
to lower its cost of revenues by: (i) expanding and upgrading the TIGN by
acquiring owned and leased facilities and increasing volume on these
facilities, thereby replacing a variable cost with a fixed cost and spreading
fixed costs over a larger number of minutes; (ii) negotiating lower cost of
transmission over the facilities owned by other national and international
carriers; and (iii) expanding the Company's least cost routing choices and
capabilities.
The Company generally realizes higher gross margins from its retail
services than from its wholesale services. Wholesale services, however,
provide a source of additional revenue and add significant minutes originating
and terminating on the TIGN, thus enhancing the Company's purchasing power for
leased lines and switched minutes and enabling it to take advantage of volume
discounts. The Company also generally realizes higher gross margins from
direct access services than from call-reorigination. The Company expects its
gross margins to continue to decline in the near term as a result of increased
wholesale revenues as a percentage of total revenues. In addition, the Company
intends to reduce prices in advance of corresponding reductions in
transmission costs in order to maintain market share while migrating customers
from traditional call-reorigination to Global Access Direct. The Company then
expects gross margins to improve as the volume and percentage of traffic
originated, transmitted and terminated on the TIGN increases and cost of
revenues is reduced. The Company's overall gross margins may fluctuate in the
future based on its mix of wholesale and retail long distance services and the
percentage of calls using direct access as compared to call-reorigination, any
significant long distance rate reductions imposed by ITOs to counter external
competition, and any risks associated with the Company agreeing to minimum
volume contracts and not achieving the volume necessary to meet the
commitments.
<PAGE>14
The Company's general and administrative expenses include salaries and
benefits, other corporate overhead costs and costs associated with the
operation and maintenance of the TIGN. These costs have increased due to the
development and expansion of the TIGN and corporate infrastructure. The
Company expects that general and administrative expenses may increase as a
percentage of revenues in the near term as the Company incurs additional costs
associated with the development and expansion of the TIGN, the expansion of
its marketing and sales organization, and the introduction of new
telecommunications services.
The Company spends considerable resources to collect receivables from
customers who fail to make payment in a timely manner. While the Company
continually seeks to minimize bad debt, the Company's experience indicates
that a certain portion of past due receivables will never be collected, and
that such bad debt is a necessary cost of conducting business in the
telecommunications industry. In addition to uncollectible receivables, the
telecommunications industry historically has been exposed to a variety of
forms of customer fraud. The TIGN and the Company's billing systems are
designed to detect and minimize fraud, where practicable, and the Company
continuously seeks to enhance and upgrade its systems in an effort to minimize
losses as it expands into new markets.
As the Company begins to integrate its distribution network in selected
strategic locations by acquiring Country Coordinators and independent agents
or by establishing internal sales organizations, it may incur added selling,
general and administrative expenses associated with the transition which may
result, initially, in an increase in selling, general and administrative
expenses as a percentage of revenues. The Company anticipates, however, that
as sales networks become fully integrated, new service offerings are
implemented, and economies of scale are realized, selling, general and
administrative expenses will decline as a percentage of revenue.
<PAGE>15
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1996
Revenues. Revenues increased 47.4%, or $27.1 million, from $57.2 million
in the three months ended September 30, 1996 to $84.3 million in the three
months ended September 30, 1997. This increase was primarily due to growth in
international and domestic retail sales and international and domestic
wholesale revenues. Wholesale revenues increased from $12.7 million, or 22.2%
of total revenues in the three months ended September 30, 1996, to $28.1
million, or 33.3% of revenues for the three months ended September 30, 1997.
Cost of Revenues. Cost of revenues increased 51.3%, or $21.0 million,
from approximately $40.9 million to approximately $61.9 million. As a
percentage of revenues, cost of revenues increased from 71.5% to 73.4%,
primarily as a result of a larger percentage of lower margin wholesale
revenues.
Operating Expenses. Operating expenses increased 55.1%, or $8.7 million,
from $15.8 million in the three months ended September 30, 1996 to $24.5
million in the three months ended September 30, 1997, primarily as a result of
increased sales commissions related to revenue growth, as well as an increase
in the number of employees necessary to provide customer service, billing and
collection and accounting support. Other contributing factors were bad debt,
depreciation, and amortization, as discussed below. As a percentage of
revenues, operating expenses increased 1.4% from 27.6% in the three months
ended September 30, 1996 to 29.0% in the three months ended September 30,
1997. The number of full and part-time employees grew from 402 in the three
months ended September 30, 1996, to 586 in the three months ended September
30, 1997, representing a 45.8% increase.
Bad Debt. Bad debt expense increased from $1.4 million, or 2.4% of
revenues in the three months ended September 30, 1996 to $1.9 million, or 2.3%
of revenues, in the three months ended September 30, 1997. The decrease in bad
debt expense as a percentage of revenues in the three months ended September
30, 1997 was due to continued vigilance in assessing the credit worthiness of
new subscribers to Company services.
Depreciation and Amortization. Depreciation and amortization increased
from $0.5 million in the three months ended September 30, 1996, to $1.3
million in the three months ended September 30, 1997, primarily due to
increased capital expenditures incurred in connection with the development and
expansion of the TIGN, as well as amortization expenses associated with
intangible assets.
Operating Income. Operating income decreased by $2.5 million, from $0.5
million in the three months ended September 30, 1996, to $(2.0) million in the
three months ended September 30, 1997, as a result of the foregoing factors.
Net Earnings (Loss). Net earnings (loss) decreased approximately $11.8
million, from $0.3 million in the three months ended September 30, 1996, to
$(11.5) million in the three months ended September 30, 1997. The decrease is
attributable to lower operating income, a $0.2 million increase in net
interest expense, a $0.1 million increase in foreign currency transaction
losses, and extraordinary charge of $10.0 million for loss on early
extinguishment of debt. The foreign currency transaction losses resulted
primarily from a strengthening of the US Dollar in such period versus foreign
currencies in which the Company had unhedged positions.
<PAGE>16
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1996
Revenues. Revenues increased 61.4%, or $90.7 million, from $147.8 million
in the nine months ended September 30, 1996, to $238.5 million in the nine
months ended September 30, 1997. This increase was primarily due to growth in
international and domestic retail sales and international and domestic
wholesale revenues. Wholesale revenues increased from $19.0 million, or 12.9%
of total revenues in the nine months ended September 30, 1996, to $68.8
million or 28.8% of revenues for the nine months ended September 30, 1997.
Cost of Revenues. Cost of revenues increased 72.9%, or $73.5 million,
from approximately $100.8 million to approximately $174.3 million. As a
percentage of revenues, cost of revenues increased from 68.2% to 73.1%,
primarily as a result of a larger percentage of lower margin wholesale
revenues.
Operating Expenses. Operating expenses increased 52.1%, or $22.8 million,
from $43.8 million in the nine months ended September 30, 1996, to $66.6
million in the nine months ended September 30, 1997, primarily as a result of
increased sales commissions related to revenue growth, as well as an increase
in the number of employees necessary to provide network and systems
development and support, customer service, billing and collection and
accounting support. Other contributing factors were bad debt, depreciation,
and amortization, as discussed below. As a percentage of revenues,
operating expenses decreased 1.7% from 29.6% in the nine months ended
September 30, 1996, to 27.9% in the nine months ended September 30, 1997.
Bad Debt. Bad debt expense increased from $3.8 million, or 2.6% of
revenues in the nine months ended September 30, 1996, to $6.4 million, or 2.7%
of revenues, in the nine months ended September 30, 1997. The increase in bad
debt expense as a percentage of revenues in the nine months ended September 30,
1997, was due primarily to the write-off of accounts receivable for services
rendered to a single domestic customer during the first third of the period.
Services to this customer have been discontinued.
Depreciation and Amortization. Depreciation and amortization increased
from $1.2 million in the nine months ended September 30, 1996, to $3.2 million
in the nine months ended September 30, 1997, primarily due to increased
capital expenditures incurred in connection with the development and expansion
of the TIGN during the nine months ended September 30, 1997, as well as
amortization expenses associated with intangible assets.
Operating Income. Operating income decreased by $5.6 million, from $3.2
million in the nine months ended September 30, 1996, to $(2.4) million in the
nine months ended September 30, 1997, primarily as a result of the foregoing
factors.
Net Earnings (Loss). Net earnings (loss) decreased approximately $14.8
million, from $2.0 million in the nine months ended September 30, 1996, to
$(12.8) million in the nine months ended September 30, 1997. The decrease
was attributable to lower operating income, a $1.4 million increase in net
interest expense, a $0.5 million increase in foreign currency transaction
losses, and an extraordinary charge of $10.0 million for loss on early
extinguishment of debt. The foreign currency transaction losses resulted
primarily from a strengthening of the US Dollar in such period versus foreign
currencies in which the Company had unhedged positions.
<PAGE>17
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's capital requirements have consisted of
capital expenditures in connection with the acquisition and maintenance of
switching capacity and funding of accounts receivable and other working
capital requirements. The Company's capital requirements have been funded
primarily by funds provided by operations, term loans and revolving credit
facilities from commercial banks, and by capital leases. Due to the recent
funding described below, the Company is fully funded but may require
additional capital to develop and expand the TIGN, open new offices,
introduce new telecommunications services, upgrade and/or replace its
management information systems, fund its acquisition plans, and fund its
anticipated operating losses and net cash outflows in the near term.
In July, the Company completed an IPO, issuing 4 million shares at a
price to public of $10 per share, yielding $40 million of gross proceeds. In
August, an additional 450,000 shares were issued pursuant to the exercise of
the underwriters' over-allotment option, yielding an additional $4.5 million
of gross proceeds. The net proceeds to the Company from the IPO (including
the over-allotment issue), after fees and other expenses, were approximately
$39.8 million. Approximately $4.1 million has been used as of September 30,
1997 to expand the TIGN, including the purchase of 60% of the stock of PCS
Telecom, Inc; approximately $9.8 million was used for prepayment of the
outstanding $20 million in Senior Subordinated Notes, and $1.5 million for
working capital. The Company expects that an additional $21.7 million will be
used to further expand the TIGN and the balance will be used for working
capital.
The Company had a credit agreement with a bank which provided for up to
$5,000,000 in committed credit at December 31, 1996. The credit line was
amended to provide up to $7,500,000 effective March 28, 1997, and
terminating June 30, 1998. On September 5, 1997, the Company entered into a
$15 million Revolving Credit Facility to replace the $7.5 million credit
facility. The Revolving Credit Facility, secured by the Company's accounts
receivable and other assets, expired on October 31, 1997. There were no
borrowings under the credit at December 31, 1996, $15,000,00 borrowings under
the Revolving Credit Facility on September 30, 1997, and there were no
borrowings under the Revolving Credit Facility at October 31, 1997.
The Company currently anticipates entering into a New Credit Facility with a
bank or other financial institution for available borrowings in an amount not
expected to exceed $20 million. There can be no assurance that the Company
will enter into the New Credit Facility.
On September 5, 1997, the Company prepaid in full all of its outstanding
Senior Subordinated Notes. The Company paid $21,400,000, which included
$20,000,000 in principal and $1,400,000 for a prepayment penalty. In
addition, the Company recognized a loss of $8,741,419 and $1,298,882 for the
write-off of the unamortized original issue discount and debt issuance costs,
respectively. The early extinguishment of the Senior Subordinated Notes is
reflected on the statement of operations as an extraordinary item, net of
income taxes. The Company financed the prepayment of the Senior Subordinated
Notes with $12.9 million of the net proceeds from the IPO and $8.5 million of
borrowings under the Revolving Credit Facility.
On September 30, 1997, the Company issued $25 million aggregate principal
amount of Convertible Notes. The net proceeds from the issuance of the
Convertible Notes were approximately $24.3 million and approximately $15.0
million of such net proceeds were used to repay all amounts outstanding under
the Revolving Credit Facility. Unless redeemed by the Company previously, the
Notes are convertible into common stock of the Company at the conversion price
of $12 per share.
On October 23, 1997, the Company sold $97,000,000 aggregate principal
amount at maturity of its 10.5% Senior Discount Notes due 2004 ("Sr. Notes"),
with net proceeds of approximately $72,300,000. The Sr. Notes will accrete
in value from the date of issuance to May 1, 2000, at a rate of 10.5% per
annum, compounded semi-annually. Cash interest on the Sr. Notes will neither
accrue nor be payable prior to May 1, 2000. Commencing May 1, 2000, interest
will be payable in cash on the Sr. Notes semi-annually in arrears on each May
1, and November 1, at a rate of 10.5% per annum. The Sr. Notes will mature on
November 1, 2004.
Net cash provided by (used in) operating activities was $4.1 million in
the nine months ended September 30, 1996 and $(1.0) million in the nine
months ended September 30, 1997. The net cash provided by operating
activities in the nine months ended September 30, 1996 was primarily due to
net earnings and an increase in the provision for credit losses on accounts
receivable. The net cash used in operating activities in the nine months
ended September 30, 1997 was due to the increase in depreciation and
amortization expense, an increase in the provision for credit losses on
accounts receivable, and an increase in accounts payable. These increases
<PAGE>18
were partially offset by an increase in accounts receivable. The $1.8
million increase in deposits and other assets in the nine months ended
September 30, 1997, was due primarily to a deposit to one vendor for card
platform switch equipment.
Net cash used in investing activities was $(8.3) million in the nine
months ended September 30, 1996, and $(13.3) million in the nine months ended
September 30, 1997. The net cash used in the nine months ended September
30, 1996, and September 30, 1997, was primarily due to increases in
equipment purchases.
Net cash provided by financing activities was $3.9 million in the nine
months ended September 30, 1996, and $58.6 million in the nine months ended
September 30, 1997. The net cash provided in the nine months ended September
30, 1996, was primarily due to proceeds from long-term borrowings and the
operating line of credit. The net cash provided in the nine months ended
September 30, 1997, was primarily due to proceeds from the IPO and long-term
borrowings.
The development and expansion of the TIGN, the upgrade and/or replacement
of the Company's management information systems, the opening of new offices,
the introduction of new telecommunications services, funding future
acquisitions, as well as the funding of anticipated losses and net cash
outflows, may require additional capital. At September 30, 1997, the
Company had $4.5 million in commitments for capital expenditures. The
Company has identified a total of $60.1 million of capital expenditures which
the Company intends to undertake in 1997 and 1998.
The Company expects that the net proceeds from the IPO, the Convertible
Notes, and the Sr. Notes will provide the Company with sufficient capital to
fund planned capital expenditures and anticipated operating losses through
December 1998. The net proceeds from the IPO, the Convertible Notes,
and the Sr. Notes are expected to provide sufficient funds for the Company to
expand its business as planned and to fund anticipated operating losses and
net cash outflows for the next 18 to 24 months. There can be no assurance
that the Company will be able to obtain the New Credit Facility or,
if obtained, that it will be able to do so on a timely basis or on terms
favorable to the Company. The amount of the Company's actual future capital
requirements will depend upon many factors, including the performance of the
Company's business, the rate and manner in which it expands the TIGN,
increases in staffing levels and customer growth, upgrades or replacements to
management information systems and opening of new offices, as well as other
factors that are not within the Company's control, including competitive
conditions, general economic conditions, and regulatory or other government
actions. In the event that the Company's plans or assumptions change or prove
to be inaccurate or internally generated funds and funds from other
financings, if obtained, prove to be insufficient to fund the Company's
growth and operations, then some or all of the Company's development and
expansion plans could be delayed or abandoned.
FOREIGN CURRENCY
Although the Company's functional currency is the US Dollar, the Company
derives a substantial percentage of its telecommunications revenues from
international sales. In countries where the local currency is freely
exchangeable and the Company is able to hedge its exposure, the Company bills
for its services in the local currency. In cases where the Company bills in a
local currency, the Company is exposed to the risk that the local currency
will depreciate between the date of billing and the date payment is received.
In certain countries in Europe, the Company purchases foreign exchange
<PAGE>19
contracts through its fiscal agent to hedge against this foreign exchange
risk. For the nine months ended September 30, 1997, approximately $56.3 million
(US Dollar equivalent) or 23.6% of the Company's billings for
telecommunications services were billed in currencies other than the US
dollar with a significant percentage of these billings covered by foreign
forward exchange contracts or similar hedging strategies.
The Company's financial position and results of operations for the year
ended September 30, 1997, were not significantly affected by foreign currency
exchange rate fluctuation. As the Company continues to expand the TIGN and
increase its customer base in its targeted markets, an increasing proportion of
costs associated with operating and maintaining the TIGN, as well as local
selling expenses, will be billed in foreign currencies. Although the Company
attempts to match costs and revenues and borrowings and repayments in terms of
local currencies, there will be many instances in which costs and revenues and
borrowings and repayments will not be matched with respect to currency
denominations. The Company may choose to limit any additional exposure to
foreign exchange rate fluctuations by the purchase of foreign forward exchange
contracts or similar hedging strategies. There can be no assurance that any
currency hedging strategy would be successful in avoiding exchange-related
losses.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard (SFAS) 128, "Earnings Per Share"
which revises the calculation and presentation provisions of Accounting
Principles Board Opinion 15 and related interpretations. SFAS 128 is effective
for the Company's fiscal year ending December 31, 1997. Retroactive
application will be required. The Company believes the adoption of SFAS 128
will not have a significant effect on its reported earnings per share.
SFAS 130, "Reporting Comprehensive Income", was issued in June 1997. It
establishes standards for reporting and display of comprehensive income and
its components in a full set of general-purpose financial statements. SFAS
131, "Disclosures about Segments of an Enterprise and Related Information",
was issued in June 1997. It establishes standards for the way that public
business enterprises report information about operating segments in annual
financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. The Company
does not believe that adoption of any of these standards will have a
significant effect on its consolidated financial statements.
EFFECTS OF INFLATION
Inflation is not a material factor affecting the Company's business and
has not had a significant effect on the Company's operations to date.
SEASONAL FLUCTUATIONS
The Company has historically experienced, and expects to continue to
experience, reduced growth rates in revenues in the months of August and
December due to extended vacation time typically taken by Americans and
Europeans during these months.
<PAGE>20
PART II. OTHER INFORMATION
TELEGROUP, INC.
Item 1. Legal Proceedings.
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The Company makes routine filings and is a party to customary
regulatory proceedings with the FCC relating to its operations. The Company is
not a party to any lawsuit or proceeding which, in the opinion of management,
is likely to have a material adverse effect on the Company's business,
financial condition, and results of operations.
In June 1996, Macrophone Worldwide (PTY) Ltd. (the "Plaintiff"), a
former Country Coordinator for South Africa, filed a complaint (the
"Complaint") against the Company in the United States District Court for the
Southern District of Iowa (the "Action") alleging, among other things, breach
of contract, wrongful termination and intentional interference with
contractual relations. The Complaint requests unspecified damages. On
September 2, 1997, the United States District Court granted summary judgment
for the Company on all seven tort-based claims. The only remaining claim is
a contract claim in which there is no pending claim for exemplary damages.
The Company is vigorously defending the Action.
Item 2. Changes in Securities and Use of Proceeds.
- ------ -----------------------------------------
Amended and Restated 1996 Stock Option Plan. On August 20, 1997, the
Company's Board of Directors authorized the filing of an S-8 with the
Securities and Exchange Commission (SEC), registering stock issued pursuant to
the Company's Amended and Restated 1996 Stock Option Plan (Stock Option Plan).
The S-8 was filed with the SEC on August 28, 1997. During the first nine months
of 1997, options for a total of 361,925 shares were issued under the Amended
Stock Option Plan to Company employees. The options have an exercise price of
$10.00 per share (the IPO price to public), vest from April 10, 1997 through
September 1, 2000, depending on date of grant, and have expiration dates of
April 1, 2007.
As of September 30, 1997, the Company has used $18.5 million of
net proceeds from the IPO. Of those expenditures, $4.1 million was used for
expansion of the TIGN, including $1.3 million for the cash portion of the
acquisition cost of PCS Telecom, Inc., $12.9 million for the prepayment of the
$20 million Senior Subordinated Notes issued to Greenwich Partners, Ltd., and
$1.5 million for general corporate purposes, including upgrading of internal
billing and accounting systems.
Each issuance of securities described above was made in reliance on the
exemption from registration provided by Section 4(2) of the Securities Act as
a transaction by an issuer not involving any public offering. The recipients
of securities in each such transaction represented their intention to acquire
the securities for investment only and not with a view to or for sale in
connection with any distribution thereof and appropriate legends were affixed
to the share certificates in such transactions. All recipients had adequate
access, through their relationships with the Company, to information about the
Company.
Item 3. Defaults Upon Senior Securities.
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None.
Item 4. Submission of Matters to a Vote of Security Holders.
- ------ ---------------------------------------------------
None.
<PAGE>21
Item 5. Other Information.
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On September 27, 1997, Telegroup's existing Board of Directors
increased the number of directorships from six to seven and appointed three
outside directors who joined its seven-member Board of Directors on October
1, 1997, filling all Board vacancies. The new outside directors are: Steve J.
Baumgartner, Executive Vice President and Sector President Global Commercial
Print, for R.R. Donnelley & Sons Company; J. Sherman Henderson III, President
and CEO of Louisville-based UniDial Communications; and, Rashi Glazer,
currently on the faculty of the Walter A. Haas School of Business, University
of California, Berkeley and Co-Director of the Berkeley Center for Marketing
and Technology. Messrs. Baumgartner and Henderson will serve on the
Compensation and Audit Committees, and Mr. Glazer will serve as a marketing
consultant to Telegroup.
On October 28, 1997, the Company entered into a contract
with PeopleSoft, Inc. to provide the Company an integrated accounting system.
Additionally, the Company has contracted with KPMG to implement the new
software. The implementation of the software is expected to be completed by
the second quarter of 1998.
On November 10, 1997, the Company entered into a contract with
Saville Systems Inc. to provide the Company a complete billing and customer
support system. Although the Company believes that its current system is
adequate through 1998, the Company anticipates that the new system by Saville
will enhance the Company's billing and customer support capabilities.
Forward-Looking Statements. Item 2 of Part I of this report
--------------------------
includes, and future oral or written statements of the Company and its
management may include, certain forward-looking statements, including without
limitation statements with respect to the Company's anticipated future
operating and financial performance, financial position and liquidity, growth
opportunities and growth rates, business and competitive outlook, investment
and expenditure plans, pricing plans, strategic alternatives, business
strategies, and other similar statements of expectations or objectives that
are highlighted by words such as "expects," "anticipates," "intends," "plans,"
"believes," "projects," "seeks," "estimates," "should" or "may," and
variations thereof and similar expressions. Such forward-looking statements
are subject to uncertainties that could cause the Company's actual results to
differ materially from such statements. These uncertainties include but are
not limited to those set forth below:
(i) the effects of ongoing deregulation in the telecommunications industry
as a result of the World Trade Organization agreement on basic
telecomunications services and the Telecommunications Act of 1996
(the "1996 Act") and other similar federal and state legislation and
federal and state regulations enacted thereunder, including without
limitation (a) greater than anticipated competition in the Company's
telephone markets resulting therefrom, (b) the final outcome of the FCC
rulemakings with respect to interconnection agreements and access
charge reforms, and of foreign regulatory proceedings affecting the
Company's ability to compete in foreign markets, and (c) future state
regulatory actions taken in response to the 1996 Act.
(ii) the effects of greater than anticipated competition from other
telecommunications companies, including without limitation competition
requiring new pricing or marketing strategies or new product
offerings, and the attendant risk that the Company will not be able to
respond on a timely or profitable basis.
(iii) possible changes in the demand for the Company's products and
services, including without limitation lower than anticipated demand
for premium telephone services.
(iv) the Company's ability to successfully introduce new offerings on a
timely and cost-effective basis, including without limitation the
Company's ability to (a) expand successfully its long distance and
enhanced service offerings to new markets, and (b) offer bundled
service packages on terms attractive to its customers.
<PAGE>22
(v) the risks inherent in rapid technological change, including without
limitation (a) the lack of assurance that the Company's ongoing TIGN
improvements will be sufficient to meet or exceed the capabilities and
quality of competing networks, and (b) the risk that technologies
will not be developed on a timely or cost-effective basis or perform
according to expectations.
(vi) regulatory limits on the Company's ability to change its prices for
telephone services in response to competitive pressures.
(vii) the Company's ability to effectively manage its growth, including
without limitation the Company's ability to (a) achieve projected
economies of scale and cost savings, (b) meet pro forma cash flow
projections developed by management in valuing newly-acquired
businesses, and (c) implement necessary internal controls, and
retain and attract key personnel.
(viii) any difficulties in the Company's ability to expand through additional
acquisitions, whether caused by financing constraints, regulatory
limitations, a decrease in the pool of attractive target companies,
or competition for acquisitions from other interested buyers.
(ix) higher than anticipated operating costs due to churn or fraudulent
uses of the Company's networks.
(x) the lack of assurance that the Company can compete effectively
against better capitalized competitors.
(xi) the effects of more general factors, including without limitation:
(a) changes in general industry and market conditions and growth
rates
(b) changes in interest rates or other general national, regional
or local economic conditions
(c) changes in legislation, regulation or public policy
(d) unanticipated increases in capital, operating or
administrative costs, or the impact of new business
opportunities requiring significant up-front investments
(e) the continued availability of financing in amounts, and on
terms and conditions, necessary to support the Company's
operations
(f) changes in the Company's relationships with vendors
(g) changes in accounting systems, policies or practices adopted
voluntarily or as required by generally accepted accounting
principles
(h) changes in VAT policies of the EU.
For a more detailed description of these and other uncertainties, see
Risk Factors in the Company's Prospectus dated July 8, 1997. Due to these
uncertainties, you are cautioned not to place undue reliance upon the
Company's forward-looking statements, which speak only as of the date hereof.
The Company undertakes no obligation to update or revise any of its forward-
looking statements for any reason.
<PAGE>23
Item 6. Exhibits and Reports on Form 8-K.
- ------ --------------------------------
A. Exhibits
The exhibits filed as part of this report are set forth in the
Exhibit Index on page 24 of this report.
B. Reports on Form 8-K
None
<PAGE>24
TELEGROUP, INC.
EXHIBIT INDEX
The following exhibits are included in this Quarterly Report on Form 10-Q:
Exhibit Number Exhibit Description
- -------------- -------------------
3.1 Form of Second Restated Articles of Incorporation of
Telegroup, Inc. (incorporated by reference to Exhibit 3.2
to the Company's Registration Statement on Form S-1,
File No. 333-25065)
3.2 Form of Amended and Restated Bylaws of Telegroup, Inc.
(incorporated by reference to Exhibit 3.4 to the
Company's Registration Statement on Form S-1, File No.
333-25065)
4.1 Indenture for 8.0% Convertible Notes dated September 30,
1997
4.2 Indenture for 10.5% Senior Discount Notes dated October
23, 1997
27 Financial Data Schedule
<PAGE>25
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Telegroup, Inc.
Date: November 14, 1997 By: /s/ Douglas Neish
-----------------------
Douglas Neish
Vice President and
Chief Financial Officer
Date: November 14, 1997 By: /s/ Gary Korf
-----------------------
Gary Korf
Controller
Telegroup, Inc., as Issuer
and
State Street Bank and Trust Company, as Trustee
INDENTURE
Dated as of September 30, 1997
$ 25,000,000
8 % Convertible Subordinated Notes due 2005
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION 1
1.01 Definitions 1
1.02 Incorporation by Reference of Trust Indenture Act 23
1.03 Rules of Construction 24
ARTICLE TWO THE NOTES 25
2.01 Forms and Dating 25
2.02 Execution and Authentication 25
2.03 Registrar and Paying Agent 26
2.04 Paying Agent To Hold Money in Trust 27
2.05 Noteholder Lists 27
2.06 Transfer and Exchange 28
2.07 Replacement Notes 28
2.08 Outstanding Notes 29
2.09 Treasury Notes 29
2.10 Temporary Notes 30
2.11 Cancellation 30
2.12 Defaulted Interest 30
2.13 CUSIP Number 31
2.14 Deposit of Moneys 31
2.15 Secondary Notes 31
ARTICLE THREE REDEMPTION OF NOTES 32
3.01 Notices to the Trustee 32
3.02 Selection of Notes To Be Redeemed 32
3.03 Notice of Redemption 33
3.04 Effect of Notice of Redemption 34
3.05 Deposit of Redemption Price 34
3.06 Notes Redeemed or Purchased in Part 35
ARTICLE FOUR COVENANTS 35
4.01 Payment of Notes 35
4.02 Maintenance of Office or Agency 36
4.03 Corporate Existence 37
4.04 Payment of Taxes and Other Claims 37
4.05 Maintenance of Properties; Insurance; Books and Records;
Compliance with Law 38
4.06 Compliance Certificate 39
4.07 Limitation on Indebtedness 40
4.08 Limitation on Other Subordinated Indebtedness 41
4.09 Limitation on Restricted Payments 41
4.10 Limitation on Issuances and Sale of Preferred Stock by
Subsidiaries 44
4.11 Limitation on Liens 44
4.12 Change of Control 45
4.13 Disposition of Proceeds of Asset Sales 47
4.14 Limitation on Transactions with Interested Persons 50
4.15 Limitation on Dividends and Other Payment Restrictions
Affecting Subsidiaries 51
4.16 [Intentionally Left Blank] 52
4.17 Waiver of Stay, Extension or Usury Laws 52
4.18 Termination of Trading 52
4.19 Reporting Requirements 53
<PAGE>
ARTICLE FIVE SUCCESSOR CORPORATION 54
5.01 When Company May Merge, etc. 54
5.02 Successor Substituted 55
ARTICLE SIX REMEDIES 56
6.01 Events of Default 56
6.02 Acceleration 58
6.03 Other Remedies 59
6.04 Waiver of Past Defaults 59
6.05 Control by Majority 59
6.06 Limitation on Suits 60
6.07 Right of Holders To Receive Payment 60
6.08 Collection Suit by Trustee 61
6.09 Trustee May File Proofs of Claims 61
6.10 Priorities 62
6.11 Undertaking for Costs 62
6.12 Restoration of Rights and Remedies 63
ARTICLE SEVEN TRUSTEE 63
7.01 Duties 63
7.02 Rights of Trustee 64
7.03 Individual Rights of Trustee 65
7.04 Trustee's Disclaimer 66
7.05 Notice of Default 66
7.06 Money Held in Trust 66
7.07 Reports by Trustee to Holders 66
7.08 Compensation and Indemnity 67
7.09 Replacement of Trustee 68
7.10 Successor Trustee by Merger, etc 69
7.11 Eligibility; Disqualification 69
7.12 Preferential Collection of Claims
Against Company 70
ARTICLE EIGHT SATISFACTION AND DISCHARGE OF INDENTURE 70
8.01 Termination of the Company's Obligations 70
8.02 Legal Defeasance and Covenant Defeasance 71
8.03 Application of Trust Money 77
8.04 Repayment to Company 77
8.05 Reinstatement 77
ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS 78
9.01 Without Consent of Holders 78
9.02 With Consent of Holders 79
9.03 Compliance with Trust Indenture Act 80
9.04 Revocation and Effect of Consents 80
9.05 Notation on or Exchange of Notes 81
9.06 Trustee May Sign Amendments, etc 81
ARTICLE TEN SUBORDINATION OF NOTES 82
10.01 Notes Subordinate to Senior Indebtedness 82
10.02 Payment Over of Proceeds upon Dissolution, etc 82
10.03 Suspension of Payment When Senior Indebtedness in Default 84
10.04 Trustee's Relation to Senior Indebtedness 86
10.05 Subrogation to Rights of Holders of Senior Indebtedness 87
10.06 Provisions Solely To Define Relative Rights 87
10.07 Trustee To Effectuate Subordination 88
10.08 No Waiver of Subordination Provisions 88
10.09 Notice to Trustee 89
<PAGE>
10.10 Reliance on Judicial Order or Certificate of Liquidating Agent 91
10.11 Rights of Trustee as a Holder of Senior Indebtedness;
Preservation of Trustee's Rights 91
10.12 Article Applicable to Paying Agents 91
10.13 No Suspension of Remedies 92
10.14 Certain Conversions Deemed Payment 92
ARTICLE ELEVEN CONVERSION OF NOTES 92
11.01 Conversion Privilege and Conversion Price 92
11.02 Exercise of Conversion Privilege 93
11.03 Fractions of Shares 94
11.04 Adjustment of Conversion Price 94
11.05 Notice of Adjustments of Conversion Price 103
11.06 Notice of Certain Corporate Action 103
11.07 Company to Reserve Common Stock 105
11.08 Taxes on Conversions 105
11.09 Covenant as to Common Stock 105
11.10 Cancellation of Converted Notes 105
11.11 Provisions as to Consolidation, Merger or Sale of Assets 105
11.12. Trustee and Conversion Agents Not Liable 106
ARTICLE TWELVE MISCELLANEOUS 107
12.01 Trust Indenture Act of 1939 107
12.02 Notices 107
12.03 Communication by Holders with Other Holders 108
12.04 Certificate and Opinion as to Conditions Precedent 109
12.05 Statements Required in Certificate or Opinion 109
12.06 Rules by Trustee, Paying Agent, Registrar 110
12.07 Governing Law 110
12.08 No Interpretation of Other Agreements 110
12.09 No Recourse Against Others 110
12.10 Successors 110
12.11 Duplicate Originals 110
12.12 Separability 111
11.13 Table of Contents, Headings, etc 111
12.14 Benefits of Indenture 111
<PAGE>
Reconciliation and tie between Trust Indenture Act of 1939 and Indenture,
dated as of September 30, 1997.
Trust Indenture Act Section Indenture Section
310(a)(1)..................................7.11
(a)(2)..................................7.11
(a)(3).................................. N.A.
(a)(4)...................................N.A.
(a)(5)...................................7.11
(b)......................................7.09; 7.11; 12.02
(c)......................................N.A.
311(a)......................................7.12
(b)......................................7.12
(c)......................................N.A.
312(a)......................................2.05
(b).....................................12.03
(c).....................................12.03
313(a)......................................7.07
(b)......................................7.07
(c)......................................7.07; 12.02
(d)......................................7.07
314(a)......................................4.07; 12.02
(b)......................................N.A.
(c)(1)...................................12.04
(c)(2)...................................12.04
(c)(3)...................................N.A.
(d)......................................N.A.
(e)......................................12.05
315(a).......................................7.01(b)
(b).......................................7.05; 11.02
(c).......................................7.01(a)
(d).......................................7.01(c)
(e).......................................6.11
316(a) (last sentence).......................2.09
(a)(1)(A).................................6.05
(a)(1)(B).................................6.04
(a)(2)....................................N.A.
(b).......................................6.07
317(a)(1)....................................6.08
(a)(2)....................................6.09
(b).......................................2.04
318(a)......................................12.01
(c)......................................12.01
__________________
Note: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of the indenture.
<PAGE>
INDENTURE, dated as of September 30, 1997, between TELEGROUP, INC., a
corporation incorporated under the laws of the State of Iowa ("the Company"),
and State Street Bank and Trust Company, a Massachusetts trust company, as
trustee (the "Trustee").
Each party hereto agrees as follows for the benefit of each other party and
for the equal and ratable benefit of the Holders of the Company's 8%
Convertible Subordinated Notes due 2005 (the "Notes").
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
1.01 Definitions.
"Acquired Indebtedness" means Indebtedness of a person (a) assumed in
connection with an Asset Acquisition from such person or (b) existing at the
time such person becomes a Subsidiary of any other person.
"Affiliate" means, with respect to any specified person, any other person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified person.
"Asset Acquisition" means (a) an Investment by the Company or any
Subsidiary of the Company in any other person pursuant to which such person
shall become a Subsidiary of the Company, or shall be merged with or into the
Company or any Subsidiary of the Company, (b) the acquisition by the Company
or any Subsidiary of the Company of the assets of any person (other than a
Subsidiary of the Company) which constitute all or substantially all of the
assets of such person or (c) the acquisition by the Company or any Subsidiary
of the Company of any division or line of business of any person (other than
a Subsidiary of the Company).
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease or other disposition to any person other than the Company or
a Wholly-Owned Subsidiary of the Company, in one or a series of related
transactions, of (a) any Capital Stock of any Subsidiary of the Company
(other than in respect of director's qualifying shares or investments by
foreign nationals mandated by applicable law); (b) all or substantially all
of the properties and assets of any division or line of business of the
Company or any Subsidiary of the Company; or (c) any other properties or
assets of the Company or any Subsidiary of the Company other than in the
ordinary course of business. For the purposes of this definition, the term
"Asset Sale" shall not include (i) any sale, transfer or other disposition of
equipment, tools or other assets (including Capital Stock of any Subsidiary
of the Company) by the Company or any of its Subsidiaries in one or a series
of related transactions in respect of which the Company or such Subsidiary
receives cash or property with an aggregate Fair Market Value of $1,000,000
or less or (ii) any sale, issuance, conveyance, transfer, lease or other
disposition of properties or assets that is governed by the provisions of
Article V.
"Asset Sale Offer" shall have the meaning set forth in Section 4.13.
"Asset Sale Offer Price" shall have the meaning set forth in Section
4.13.
<PAGE>
"Asset Sale Purchase Date" shall have the meaning set forth in Section
4.13.
"Average Life to Stated Maturity" means, with respect to any
Indebtedness, as at any date of determination, the quotient obtained by
dividing (a) the sum of the products of (i) the number of years (or any
fraction thereof) from such date to the date or dates of each successive
scheduled principal payment (including, without limitation, any sinking fund
requirements) of such Indebtedness multiplied by (ii) the amount of each such
principal payment by (b) the sum of all such principal payments.
"Bankruptcy Law" means Title 11 United States Code or any similar law
for the relief of debtors.
"Board of Directors" means the board of directors of the Company or any
duly authorized committee of such board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors of the Company and to be in full force and effect
on the date of such certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in The City of New
York, State of New York or the city in which the Corporate Trust Office is
located, are authorized or obligated by law, regulation or executive order to
close.
"Capital Stock" means, with respect to any person, any and all shares,
interests, participations, rights in or other equivalents (however
designated) of such person's capital stock, and any rights (other than debt
securities convertible into capital stock), warrants or options exchangeable
for or convertible into such capital stock.
"Capitalized Lease Obligation" means any obligation under a lease of (or
other agreement conveying the right to use) any property (whether real,
personal or mixed) that is required to be classified and accounted for as a
capital lease obligation under GAAP, and the amount of any such obligation at
any date shall be the capitalized amount thereof at such date, determined in
accordance with GAAP.
"Cash Equivalents" means, at any time, (i) any evidence of Indebtedness
with a maturity of 180 days or less issued or directly and fully guaranteed
or insured by the United States of America or any agency or instrumentality
thereof (provided that the full faith and credit of the United States of
America is pledged in support thereof); (ii) certificates of deposit or
acceptances with a maturity of 180 days or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $500,000,000; (iii) Eurodollar
time deposits that are rated at least A-1 by S&P or at least P-1 by Moody's
or at least an equivalent rating category of another nationally recognized
securities rating agency; (iv) commercial paper with a maturity of 180 days
or less that are rated at least A-1 by S&P, or at least P-1 by Moody's or at
least an equivalent rating category of another nationally recognized
<PAGE>
securities rating agency; (v) tax-exempt investments that are rated at least
SP1/A1 by S&P and/or P1/VMIG1/MIG1 by Moody's; (vi) money market accounts of
any financial institution that is a member of the Federal Reserve System
having combined capital and surplus and undivided profits of not less that
$500,000,000; and (vii) repurchase agreements and reverse repurchase
agreements relating to marketable direct obligations issued or
unconditionally
guaranteed by the government of the United States of America or issued by any
agency thereof and backed by the full faith and credit of the United States
of America, in each case maturing within 180 days from the date of
acquisition; provided that the terms of such agreements comply with the
guidelines set forth in the Federal Financial Agreements of Depository
Institutions With Securities Dealers and Others, as adopted by the
Comptroller of the Currency on October 31, 1985.
"Change of Control" means the occurrence of any of the following events:
(a) any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act), excluding Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of
all securities that such person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time, upon the
happening of an event or otherwise), directly or indirectly, of more than 35%
of the voting power of the total Voting Stock of the Company; provided,
however, that the Permitted Holders in the aggregate (i) "beneficially own"
(as so defined) a lower percentage of the voting power of the total Voting
Stock than such other person or "group" and (ii) do not have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors of the Company; or (b)
individuals who on the Issue Date constitute the Board of Directors of the
Company (together with any new directors whose election by the Board of
Directors of the Company or whose nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the members of
the Board of Directors of the Company then in office who either were members
of the Board of Directors of the Company on the Issue Date of 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 of the
Company then in office.
"Change of Control Offer" shall have the meaning set forth in Section
4.12.
"Change of Control Purchase Date" shall have the meaning set forth in
Section 4.12.
"Change of Control Purchase Price" shall have the meaning set forth in
Section 4.12.
"Closing Price" shall have the meaning set forth in Section 11.04.
"Commencement Date" shall have the meaning set forth in Section 11.01.
"Common Stock" means, with respect to any person, any and all shares,
interests or other participations in, and other equivalents (however
<PAGE>
designated and whether voting or nonvoting) of, such person's common stock,
whether outstanding at the Issue Date or issued after the Issue Date, and
includes, without limitation, all series and classes of such common stock.
"Company" means the party named as such in this Indenture until a
successor replaces it (or any previous successor) pursuant to this Indenture,
and thereafter means such successor.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by any one of its Chairman of the Board,
its Vice-Chairman, its President, an Executive Vice President or a Vice
President, and by any one of its Treasurer, an Assistant Treasurer, its
Secretary or an Assistant Secretary, and delivered to the Trustee.
"Consolidated Cash Flow" means, for any period, the sum of the amounts
for such period, without duplication, of (i) Consolidated Net Income, (ii)
Consolidated Interest Expense, to the extent deducted in calculating
Consolidated Net Income, (iii) income taxes, to the extent such amount was
deducted in calculating Consolidated Net Income (other than income taxes
(either positive or negative) attributable to extraordinary and non-recurring
gains or losses or sales of assets), (iv) depreciation expense, to the extent
such amount was deducted in calculating Consolidated Net Income, (v)
amortization expense, to the extent such amount was deducted in calculating
Consolidated Net Income, and (vi) all other non-cash items reducing
Consolidated Net Income (excluding any non-cash charge to the extent that it
represents an accrual of or reserve for cash charges in any future period),
less all non-cash items increasing Consolidated Net Income, all as determined
on a consolidated basis for the Company and its Subsidiaries in conformity
with GAAP.
"Consolidated Fixed Charges" means, for any period, Consolidated
Interest Expense plus dividends declared and payable on Preferred Stock.
"Consolidated Interest Expense" means, for any period, the aggregate
amount of interest in respect of Indebtedness (including capitalized
interest, amortization of original issue discount on any Indebtedness and the
interest portion of any deferred payment obligation, calculated in accordance
with the effective interest method of accounting; all commissions, discounts
and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing; the net costs associated with Interest Rate
Protection Agreements; and interest on Indebtedness that is guaranteed or
secured by the Company or any of its Subsidiaries) and all but the principal
component of rentals in respect of Capitalized Lease Obligations paid,
accrued or scheduled to be paid or to be accrued by the Company and its
Subsidiaries during such period.
"Consolidated Leverage Ratio" means, on any Transaction Date, the ratio
of (i) the aggregate amount of Indebtedness of the Company and its
Subsidiaries on a consolidated basis outstanding on such Transaction Date to
(ii) the aggregate amount of Consolidated Cash Flow for the then most recent
four fiscal quarters for which financial statements are available (such four
fiscal quarter period being the "Four Quarter Period"); provided that (A) pro
forma effect shall be given to (x) any Indebtedness incurred from the
<PAGE>
beginning of the Four Quarter Period through the Transaction Date (the
"Reference Period"), to the extent such Indebtedness is outstanding on the
Transaction Date and (y) any Indebtedness that was outstanding during such
Reference Period but that is not outstanding or is to be repaid on the
Transaction Date; (B) pro forma effect shall be given to Asset Sales and
Asset Acquisitions (including giving pro forma effect to the application of
proceeds of any Asset Sales) that occur during such Reference Period, as if
they had occurred and such proceeds had been applied on the first day of such
Reference Period; and (C) pro forma effect shall be given to asset
dispositions and asset acquisitions (including giving pro forma effect to
the application of proceeds of any asset disposition) that have been made by
any person that has become a Subsidiary of the Company or has been merged
with or into the Company or any Subsidiary of the Company during such
Reference Period and that would have constituted Asset Sales or Asset
Acquisitions had such transactions occurred when such person was a Subsidiary
of the Company as if such asset dispositions or asset acquisitions were Asset
Sales or Asset Acquisitions that occurred on the first day of such Reference
Period; provided that to the extent that clause (B) or (C) of this sentence
requires that pro forma effect be given to an Asset Sale or Asset
Disposition, such pro forma calculation shall be based upon the four full
fiscal quarters immediately preceding the Transaction Date of the person, or
division or line of business of the person, that is acquired or disposed of
for which financial information is, in the good faith opinion of the Board of
Directors of the Company, available.
"Consolidated Net Income" means, for any period, the aggregate net
income (or loss) of the Company and its Subsidiaries for such period
determined in conformity with GAAP; provided that the following items shall
be excluded in computing Consolidated Net Income (without duplication): (i)
solely for the purposes of calculating the amount of Restricted Payments that
may be made pursuant to clause (C) of the first paragraph of Section 4.09,
the net income (or loss) of any person accrued prior to the date it becomes a
Subsidiary or is merged into or consolidated with the Company or any of its
Subsidiaries or all or substantially all of the property and assets of such
Person are acquired by the Company or any of its Subsidiaries; (ii) any gains
or losses (on an after-tax basis) attributable to Asset Sales; (iii) except
for purposes of calculating the amount of Restricted Payments that may be
pursuant to clause (C) of the first paragraph of Section 4.09, any amount
paid or accrued as dividends on Preferred Stock of the Company or Preferred
Stock of any Subsidiary owned by Persons other than the Company and any of
its Subsidiaries; (iv) all extraordinary gains and extraordinary losses; and
(v) the net income (or loss) of any Person (other than net income (or loss)
attributable to a Subsidiary) in which any Person (other than the Company or
any of its Subsidiaries) has a joint interest, except to the extent of the
amount of dividends or other distributions actually paid to the Company or
any of its Subsidiaries by such other Person during such period.
"Consolidated Net Worth" means, with respect to any person at any date,
the consolidated stockholders' equity of such person less the amount of such
stockholders' equity attributable to Redeemable Capital Stock of such person
and its Subsidiaries, as determined in accordance with GAAP.
"consolidation" means, with respect to any person, the consolidation of the
accounts of such person and each of its Subsidiaries if and to the extent the
<PAGE>
accounts of such person and each of its Subsidiaries would normally be
consolidated with those of such person, all in accordance with GAAP. The
term "consolidated" shall have a meaning correlative to the foregoing.
"Constituent Person" shall have the meaning set forth in Section 11.11.
"control" means, with respect to any specified person, the power to direct
the management and policies of such person, directly or indirectly, whether
through the ownership of Voting Stock, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"conversion price" shall have the meaning set forth in Section 11.01.
"Corporate Trust Office" means the corporate trust office of the Trustee
at which at any particular time this Indenture shall be principally
administered, which on the date hereof is located in Hartford, Connecticut.
"covenant defeasance" shall have the meaning set forth in Section 8.02.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any of its Subsidiaries against fluctuations in currency values.
"Current Market Price" shall have the meaning set forth in Section
11.04.
"Custodian" means any receiver, trustee, assignee, liquidator, sequestrator
or similar official under any Bankruptcy Law.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" means any Senior Indebtedness which
(a) at the time of the determination exceeds $25,000,000 in aggregate
principal amount and (b) is specifically designated in the instrument
evidencing such Senior Indebtedness as "Designated Senior Indebtedness" by
the Company.
"Event of Default" shall have the meaning set forth in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expiration Time" shall have the meaning set forth in Section 11.04.
"Fair Market Value" means, with respect to any asset, the price, as
determined by the Board of Directors of the Company, acting in good faith,
which could be negotiated in an arm's-length free market transaction, for
cash, between a willing seller and a willing buyer, neither of which is under
pressure or compulsion to complete the transaction; provided, however, that
with respect to any transaction which involves an asset or assets in excess
of $2,000,000, such determination shall be evidenced by a Board Resolution
delivered to the Trustee.
"Final Maturity Date" means April 15, 2005.
<PAGE>
"Final Note Interest Time" means such time as the Company and its
Subsidiaries have issued, after the Issue Date, Indebtedness (excluding the
Notes) in an aggregate principal amount of $50 million or more.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment
of the accounting profession of the United States of America, which are
applicable from time to time and are consistently applied.
"guarantee" means, as applied to any obligation, (i) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment
or performance (or payment of damages in the event of non-performance) of all
or any part of such obligation, including, without limiting the foregoing,
the payment of amounts drawn down by letters of credit.
"Holder" or "Noteholder" means the person in whose name a Note is
registered on the Registrar's books.
"Indebtedness" means, with respect to any person, without duplication,
(a) all liabilities of such person for borrowed money or for the deferred
purchase price of property or services, excluding any trade payables and
other accrued current liabilities incurred in the ordinary course of business
and which are not outstanding more than 90 days, but including, without
limitation, all obligations, contingent or otherwise, of such person in
connection with any letters of credit, banker's acceptance or other similar
credit transaction, (b) all obligations of such person evidenced by bonds,
notes, debentures or other similar instruments, (c) all indebtedness created
or arising under any conditional sale or other title retention agreement with
respect to property acquired by such person (even if the rights and remedies
of the seller or lender under such agreement in the event of default are
limited to repossession or sale of such property), but excluding trade
accounts payable arising in the ordinary course of business, (d) all
Capitalized Lease Obligations of such person, (e) all Indebtedness referred
to in the preceding clauses of other persons and all dividends of other
persons, the payment of which is secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien upon property (including, without limitation, accounts and
contract rights) owned by such person, even though such person has not
assumed or become liable for the payment of such Indebtedness (the amount of
such obligation being deemed to be the lesser of the value of such property
or asset or the amount of the obligation so secured), (f) all guarantees of
Indebtedness referred to in this definition by such person, (g) all
Redeemable Capital Stock of such person valued at the greater of its
voluntary or involuntary maximum fixed repurchase price plus accrued
dividends, (h) all obligations under or in respect of Currency Agreements and
Interest Rate Protection Obligations of such person, and (i) any amendment,
supplement, modification, deferral, renewal, extension or refunding of any
liability of
<PAGE>
the types referred to in clauses (a) through (i) above. For purposes of
Section 4.07, (x) the "maximum fixed repurchase price" of any Redeemable
Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Redeemable Capital Stock as
if such Redeemable Capital Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to this Indenture,
and if such price is based upon, or measured by, the fair market value of
such Redeemable Capital Stock, such fair market value shall be determined in
good faith by the board of directors of the issuer of such Redeemable Capital
Stock, (y) the amount outstanding at any time of any Indebtedness issued with
original issue discount is the face amount of such Indebtedness less the
unamortized portion of the original issue discount of such Indebtedness at
the time of its issuance as determined in conformity with GAAP and (z)
neither the accrual of interest nor the accretion of original issue discount
shall be considered an incurrence of Indebtedness.
"Indenture" means this Indenture, as amended, modified or supplemented
from time to time.
"Independent Financial Advisor" means a firm (i) which does not, and
whose directors, officers and employees or Affiliates do not, have a direct
or indirect financial interest in the Company and (ii) which, in the judgment
of the Board of Directors of the Company, is otherwise independent and
qualified to perform the task for which it is to be engaged.
"Interest" means, with respect to any Note, the amount of all interest
accruing on such Note, including all interest accruing subsequent to the
occurrence of any events specified in Sections 6.01(f) and (g) or which would
have accrued but for any such event, whether or not such claims are allowable
under applicable law.
"Interested Persons" shall have the meaning set forth in Section 4.14.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Notes, as set forth therein.
"Interest Rate Protection Agreement" means any arrangement with any
other person whereby, directly or indirectly, such person is entitled to
receive from time to time periodic payments calculated by applying either a
floating or a fixed rate of interest on a stated notional amount in exchange
for periodic payments made by such person calculated by applying a fixed or a
floating rate of interest on the same notional amount and shall include
without limitation, interest rate swaps, caps, floors, collars and similar
agreements.
"Interest Rate Protection Obligations" means the obligations of any
person pursuant to an Interest Rate Protection Agreement.
"Investment" means, with respect to any person, any direct or indirect,
loan, guarantee, or other extension of credit or capital contribution to (by
means of any transfer of cash or other property to others or any payment for
property or services for the account or use of others), or any purchase or
acquisition by such person of any Capital Stock, bonds, notes, debentures or
<PAGE>
other securities or evidences of Indebtedness issued by, any other person.
In addition, the Fair Market Value of the assets of any Subsidiary of the
Company at the time that such Subsidiary is designated as an Unrestricted
Subsidiary shall be deemed to be an Investment made by the Company in such
Unrestricted Subsidiary at such time. "Investments" shall exclude extensions
of trade credit by the Company and its Subsidiaries in the ordinary course of
business in accordance with normal trade practices of the Company or such
Subsidiary, as the case may be.
"Issue Date" means September 30, 1997.
"junior securities" shall have the meaning set forth in Section 10.14.
"legal defeasance" shall have the meaning set forth in Section 8.02.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim, or
preference or priority or other encumbrance upon or with respect to any
property of any kind. A person shall be deemed to own subject to a Lien any
property which such person has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement.
"Maturity Date" means, with respect to any Note, the date on which any
principal of such Note becomes due and payable as therein or herein provided,
whether at the Stated Maturity with respect to such principal or by
declaration of acceleration, call for redemption or purchase or otherwise.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in
respect of deferred payment obligations when received in the form of cash or
Cash Equivalents (except to the extent that such obligations are financed or
sold with recourse to the Company or any Subsidiary of the Company) net of
(i) brokerage commissions and other fees and expenses (including, without
limitation, fees and expenses of legal counsel and investment bankers)
related to such Asset Sale, (ii) provisions for all taxes payable as a result
of such Asset Sale, (iii) amounts required to be paid to any person (other
than the Company or any Subsidiary of the Company) owning a beneficial
interest in the assets subject to the Asset Sale and (iv) appropriate amounts
to be provided by the Company or any Subsidiary of the Company, as the case
may be, as a reserve required in accordance with GAAP against any liabilities
associated with such Asset Sale and retained by the Company or any Subsidiary
of the Company, as the case may be, after such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale, all as reflected
in an Officers' Certificate delivered to the Trustee.
"non-electing share" shall have the meaning set forth in Section 11.11.
<PAGE>
Non-payment Default" means any event (other than a Payment Default) the
occurrence of which entitles one or more persons to act to accelerate the
maturity of any Designated Senior Indebtedness.
"Notes" means the securities that are issued under this Indenture, as
amended or supplemented from time to time pursuant to this Indenture.
"Officer" means the Chairman of the Board, the President, any Executive
Vice President, any Vice President, the Chief Financial Officer, the
Treasurer, the Secretary or the Controller of the Company.
"Officers' Certificate" means a certificate signed by two Officers or by
an Officer and an Assistant Treasurer or Assistant Secretary of the Company
and delivered to the Trustee.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company.
"Pari Passu Indebtedness" means Indebtedness of the Company which ranks
pari passu in right of payment with the Notes.
"Paying Agent" has the meaning set forth in Section 2.03, except that,
for the purposes of Section 4.12 and Section 4.13 and Articles Three and
Eight, the Paying Agent shall not be the Company or a Subsidiary of the
Company or any of their respective Affiliates.
"Payment Blockage Period" shall have the meaning set forth in Section
10.03.
"Payment Default" means any default in the payment of principal,
premium, if any, or interest on any Senior Indebtedness beyond any applicable
grace period with respect thereto.
"Permitted Holder" means any of (x) Fred Gratzon, Shelley Levin-Gratzon
or Clifford Rees or (y) any Affiliate of any Person named in the foregoing
clause or (x) any trust for the benefit of any such Person or any of such
Person's family members or descendants.
"Permitted Indebtedness" means the following Indebtedness (each of which
shall be given independent effort):
(a) Indebtedness of the Company evidenced by the Notes (including any
Notes issued to pay interest prior to the Final Note Interest Time);
(b) Indebtedness of the Company in an aggregate principal amount at any
one time outstanding not to exceed $75 million;
(c) (i) Interest Rate Protection Obligations of the Company covering
Indebtedness of the Company or a Subsidiary of the Company and (ii) Interest
Rate Protection Obligations of any Subsidiary of the Company covering
Indebtedness of such Subsidiary; provided, however, that, in the case of
either clause (i) or (ii), (x) any Indebtedness to which any such Interest
Rate Protection Obligations relate is otherwise permitted to be incurred
under this covenant and (y) the notional principal amount of any such
Interest Rate Protection Obligations does not exceed the principal amount of
the Indebtedness to which such Interest Rate Protection Obligations relate;
(d) Indebtedness of a Wholly-Owned Subsidiary owed to and held by the
Company or another Wholly-Owned Subsidiary, in each case which is not
subordinated in right of payment to any Indebtedness of such Wholly-Owned
Subsidiary, except that any transfer of such Indebtedness by the Company
or a Wholly-Owned Subsidiary (other than to the Company or to a Wholly-Owned
Subsidiary) or any event which results in any such Wholly-owned Subsidiary
ceasing to be a Wholly-Owned Subsidiary shall, in each case, be an incurrence
of Indebtedness by such Wholly-Owned Subsidiary subject to the other
provisions of Section 4.07;
<PAGE>
(e) Indebtedness of the Company owed to and held by a Wholly-Owned
Subsidiary of the Company which is unsecured and subordinated in right of
payment to the payment and performance of the Company's obligations under the
Indenture and the Notes except that any transfer of such Indebtedness by
a Wholly-Owned Subsidiary of the Company (other than to another
Wholly-Owned Subsidiary of the Company) or any event which results in any
such Wholly-Owned Subsidiary ceasing to be a Wholly-Owned Subsidiary
shall, in each case, be an incurrence of Indebtedness by the Company
subject to the other provisions of Section 4.07;
(f) Indebtedness of the Company and its Subsidiaries under Currency
Agreements; provided that such Currency Agreements do not increase the
Indebtedness of the Company and its Subsidiaries outstanding other than
as a result of fluctuations in foreign currency exchange rates or by
reason of fees, indemnities and compensation payable thereunder;
(g) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently (except
in the case of daylight overdrafts) drawn against insufficient funds in
the ordinary course of business; provided, however, that such Indebtedness is
extinguished within two business days of incurrence; Indebtedness of the
Company or any of its Subsidiaries represented by letters of credit for the
account of the Company or such Subsidiary, as the case may be, in order to
provide security for workers' compensation claims, payment obligations in
connection with self-insurance or similar requirements in the ordinary course
of business;
(i) Indebtedness of the Company or any Subsidiary to the extent such
Indebtedness is in the nature of bank debt financing or a similar credit
facility, letters of credit, vendor financing, mortgage financing or any
similar facility; provided that not more than $20 million aggregate
principal amount of such Indebtedness is outstanding at any time, not
more than $15 million aggregate principal amount of such Indebtedness is
in the nature of bank debt financing or a similar credit facility and not
more than $5 million aggregate principal amount of such Indebtedness is
incurred by the Company's subsidiaries;
(j) Indebtedness of the Company not to exceed, at any one time
outstanding, 1.5 times the net cash proceeds (less the amount of such
proceeds applied as provided in clause (ii) or (iii) of the second paragraph
of Section
4.09) received by the Company after the Issue Date from the issuance and
sale of its Capital Stock (other than Redeemable Capital Stock), to a
Person that is not a Subsidiary of the Company; provided that such
Indebtedness matures after the Stated Maturity of the Notes and has an
Average Life to Stated Maturity longer than the Notes;
(k) Indebtedness of the Company in an aggregate principal amount at any
one time outstanding not to exceed $25 million; provided that such
Indebtedness is subordinated to the Notes in the same manner and to the
same extent as the Notes are subordinated to Senior Indebtedness;
(l) At any time after the last reported sales price of the Common Stock
in each of 30 Trading Days in any 45 Trading Day period shall be equal to or
<PAGE>
greater than 200% of the conversion price on each such Trading Date,
Indebtedness of the Company in an aggregate principal amount at any one
time outstanding not to exceed $100 million; and
(m) (i) Indebtedness of the Company the proceeds of which are used
solely to refinance (whether by amendment, renewal, extension or refunding)
Indebtedness of the Company or any of its Subsidiaries and (ii) Indebtedness
of any Subsidiary of the Company the proceeds of which are used solely to
refinance (whether by amendment, renewal, extension or refunding)
Indebtedness of such Subsidiary, in each case other than the Indebtedness
incurred under clause (b) through (l) of this Section 4.07; provided,
however, that (x) the principal amount of Indebtedness incurred pursuant to
this clause (m) (or, if such Indebtedness provides for an amount less than
the principal amount thereof to be due and payable upon a declaration of
acceleration of the maturity thereof, the original issue price of such
Indebtedness) shall not exceed the sum of the principal amount of
Indebtedness so refinanced, plus the amount of any premium required to be
paid in connection with such refinancing pursuant to the terms of such
Indebtedness or the amount of any premium reasonably determined by the Board
of Directors of the Company as necessary to
accomplish such refinancing by means of a tender offer or privately
negotiated purchase, plus the amount of expenses in connection therewith,
(y) in the case of Indebtedness incurred by the Company pursuant to this
clause (m) to refinance Subordinated Indebtedness, such Indebtedness (A)
has an Average Life to Stated Maturity greater than the remaining Average
Life to Stated Maturity of the Indebtedness being refinanced and (B) is
subordinated to the Notes in the same manner and to the same extent that
the Subordinated Indebtedness being refinanced is subordinated to the
Notes and (z) in the case of Indebtedness incurred by the Company
pursuant to this clause (m) to refinance Pari Passu Indebtedness, such
Indebtedness (A) has an Average Life to Stated Maturity greater than the
remaining Average Life to Stated Maturity of the Indebtedness being
refinanced and (B) constitutes Pari Passu Indebtedness or Subordinated
Indebtedness.
"Permitted Investments" means any of the following: (i) Investments in
any Subsidiary of the Company (including any person that pursuant to such
Investment becomes a Subsidiary of the Company) and any person that is merged
or consolidated with or into, or transfers or conveys all or substantially
all of its assets to, the Company or any Subsidiary of the Company at the
time such Investment is made; (ii) Investments in Cash Equivalents;
(iii) Investments in deposits with respect to leases or utilities provided to
third parties in the ordinary course of business; (iv) Investments in
Currency Agreements on commercially reasonable terms entered into by the
Company or any of its Subsidiaries in the ordinary course of business in
connection with the operations of the business of the Company or its
Subsidiaries to hedge against fluctuations in foreign exchange rates;
(v) loans or advances to officers, employees or consultants of the Company
and its Subsidiaries in the ordinary course of business for bona fide
business purposes of the Company and its Subsidiaries (including travel and
moving expenses) not in excess of $2,000,000 in the aggregate at any one time
outstanding; (vi) Investments in evidences of Indebtedness, securities or
other property received from another person by the Company or any of its
Subsidiaries in connection with any bankruptcy proceeding or by reason of a
composition or readjustment of debt or a reorganization of such person or as
a result of foreclosure, perfection or
<PAGE>
enforcement of any Lien in exchange for evidences of Indebtedness, securities
or other property of such person held by the Company or any of its
Subsidiaries, or for other liabilities or obligations of such other person to
the Company or any of its Subsidiaries that were created in accordance with
the terms of this Indenture; and (vii) Investments in Interest Rate
Protection Agreements on commercially reasonably terms entered into by the
Company or any of its Subsidiaries in the ordinary course of business in
connection with the operations of the business of the Company or its
Subsidiaries to hedge against fluctuations in interest rates.
"Permitted Junior Securities" shall have the meaning set forth in
Section 10.02.
"Permitted Liens" means the following types of Liens:
(a) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or any of its Subsidiaries shall have
set aside on its books such reserves as may be required pursuant to GAAP;
(b) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by
law incurred in the ordinary course of business for sums not yet delinquent
or being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(c) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, governmental
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
(d) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings which
may
have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may
be initiated shall not have expired;
(e) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company
or any of its Subsidiaries;
(f) any interest or title of a lessor under any Capitalized Lease
Obligation or operating lease;
(g) purchase money Liens to finance the acquisition or construction of
property or assets of the Company or any Subsidiary of the Company acquired
or constructed in the ordinary course of business; provided, however, that
(i) the related purchase money Indebtedness shall not be secured by any
property or assets of the Company or any Subsidiary of the Company other than
the property and assets so acquired or constructed and (ii) the Lien securing
such Indebtedness either (x) exists at the time of such acquisition or
<PAGE>
construction or (y) shall be created within 90 days of such acquisition or
construction; and
(h) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods.
"person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
charitable foundation, unincorporated organization, government or any agency
or political subdivision thereof or any other entity.
"Predecessor Note" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced
by such particular Note; and, for the purposes of this definition, any Note
authenticated and delivered under Section 2.07 hereof in exchange for a
mutilated Note or in lieu of a lost, destroyed or stolen Note shall be deemed
to evidence the same debt as the mutilated, lost, destroyed or stolen Note.
"Preferred Stock" means, with respect to any person, any and all shares,
interests, participations or other equivalents, however designated, whether
voting or nonvoting, of such persons preferred or preferred stock, whether
new outstanding or issued after the Issue Date, including without limitation,
all series and classes of such preferred or preferred stock.
"principal" means, with respect to any debt security, the principal of the
security plus, when appropriate, the premium, if any, on the security and any
interest on overdue principal.
"Purchased Shares" shall have the meaning set forth in Section 11.04.
"Redeemable Capital Stock" means any shares of any class or series of
Capital Stock that, either by the terms thereof, by the terms of any security
into which it is convertible or exchangeable or by contract or otherwise, is
or upon the happening of an event or passage of time would be, required to be
redeemed prior to the final Stated Maturity with respect to the principal of
any Note or is redeemable at the option of the Holder thereof at any time
prior to any such Stated Maturity, or is convertible into or exchangeable for
debt securities at any time prior to any such Stated Maturity.
"Redemption Date" means, with respect to any Note to be redeemed, the
date fixed by the Company for such redemption pursuant to this Indenture and
the Notes.
"Redemption Price" means, with respect to any Notes to be redeemed, the
price fixed for such redemption pursuant to the terms of this Indenture and
the Notes.
"Registrar" has the meaning set forth in Section 2.03.
"Regular Record Date" means, with respect to any Interest payable on any
Interest Payment Date, the April 1 and October 1 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date.
<PAGE>
"Replacement Assets" has the meaning set forth in Section 4.13.
"Repurchase Date" has the meaning set forth in Section 4.18.
"Repurchase Price" has the meaning set forth in Section 4.18.
"Restricted Payment" has the meaning set forth in Section 4.09.
"SEC" means the Securities and Exchange Commission, as from time to time
constituted, or if at any time after the execution of the Indenture such
Commission is not existing and performing the applicable duties now assigned
to it, then the body or bodies performing such duties at such time.
"Secondary Notes" has the meaning set forth in Section 2.15.
"Securities Act" means the Securities Act of 1933, as amended from time
to time.
"Senior Indebtedness" means the principal of, premium, if any, and
interest on any Indebtedness of the Company, outstanding on the Issue Date or
thereafter created, incurred or assumed, unless, in the case of any
particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Notes.
Notwithstanding anything to the contrary in the foregoing, Senior
Indebtedness will not include (i) Indebtedness of the Company to any of its
Subsidiaries or Indebtedness of any Subsidiary of the Company to the Company
or any other Subsidiary of the Company, (ii) Indebtedness represented by the
Notes, (iii) to the extent it constitutes Indebtedness, any trade payable
arising from the purchase of goods or materials or for services obtained in
the ordinary course of business, (iv) Indebtedness represented by Redeemable
Capital Stock or (v) that portion of any Indebtedness which is incurred in
violation of this Indenture.
"Senior Representative" means any representative designated in writing to the
Trustee of the holders of any class or issue of Designated Senior
Indebtedness.
"Significant Subsidiary" shall have the same meaning ascribed to it in
Rule 1.02(v) of Regulation S-X under the Securities Act.
"S&P" means Standard & Poor's Corporation, and its successors.
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is
due and payable, and when used with respect to any other Indebtedness, means
the date specified in the instrument governing such Indebtedness as the fixed
date on which the principal of such Indebtedness, or any installment of
interest thereon, is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company which is
expressly subordinated in right of payment to the Notes.
<PAGE>
"Subsidiary" means, with respect to any person, (i) a corporation a
majority of whose Voting Stock is at the time, directly or indirectly, owned
by such person, by one or more Subsidiaries of such person or by such person
and one or more Subsidiaries thereof and (ii) any other person (other than a
corporation), including, without limitation, a joint venture, in which such
person, one or more Subsidiaries thereof or such person and one or more
Subsidiaries thereof, directly or indirectly, at the date of determination
thereof, has at least majority ownership interest entitled to vote in the
election of directors, managers or trustees thereof (or other person
performing similar functions). For purposes of this definition, any
directors' qualifying shares or investments by foreign nationals mandated by
applicable law shall be disregarded in determining the ownership of a
Subsidiary. Notwithstanding the foregoing, an Unrestricted Subsidiary shall
not be deemed a Subsidiary of the Company under this Indenture, other than
for purposes of the definition of an Unrestricted Subsidiary, unless the
Company shall have designated an Unrestricted Subsidiary as a "Subsidiary" by
written notice to the Trustee under this Indenture, accompanied by an
Officers' Certificate as to compliance with the Indenture; provided, however,
that the Company shall not be permitted to designate any Unrestricted
Subsidiary as a Subsidiary unless, after giving pro forma effect to such
designation, (i) the Company would be permitted to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under Section 4.07 (assuming
a market rate of interest with respect to such Indebtedness) and (ii) all
Indebtedness and Liens of such Unrestricted Subsidiary would be permitted to
be incurred by a Subsidiary of the Company under this Indenture. A
designation of an Unrestricted Subsidiary as a Subsidiary may not thereafter
be rescinded.
"Surviving Entity" shall have the meaning set forth in Section 5.01.
"Termination of Trading Event" means any event which occurs whereby the
Common Stock (or other common stock into which the Notes are then
convertible) is neither listed for trading on a national securities exchange
in the United States nor approved for trading on an established automated
over-the-counter trading market in the United States.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code
Sec. 77aaa-77bbbb) as in effect on the Issue Date.
"Trading Day" shall have the meaning set forth in Section 11.04.
"Trigger Event" shall have the meaning set forth in Section 11.04.
"Transaction Date" means, with respect to the incurrence of any
Indebtedness by the Company or any of its Subsidiaries, the date such
Indebtedness is to be incurred.
"Trust Officer" means any officer in the Corporate Trust Administration
of the Trustee 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.
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"Trustee" means the party named as such in this Indenture until a
successor replaces such party (or any previous successor) in accordance with
the provisions of this Indenture, and thereafter means such successor.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that
shall be designated an Unrestricted Subsidiary by the Board of Directors of
the Company in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary
(including any newly acquired or newly formed Subsidiary of the Company) to
be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock
of, or owns or holds any Lien on any property of, the Company or any
Subsidiary; provided that (A) any guarantee by the Company or any Subsidiary
of any Indebtedness of the Subsidiary being so designated shall be deemed an
"incurrence" of such Indebtedness and an "Investment" by the Company or such
Subsidiary (or both, if applicable) at the time of such designation; (B) such
designation would be permitted under Section 4.09 and (C) if applicable, the
Incurrence of Indebtedness and the Investment referred to in clause (A) of
this proviso would be permitted under the Section 4.07 and Section 4.09.
"U.S. Government Obligations" shall have the meaning set forth in
Section 8.02.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors,
managers or trustees of any person (irrespective of whether or not, at the
time, Capital Stock of any other class or classes shall have, or might have,
voting power by reason of the happening of any contingency).
"Wholly-Owned Subsidiary" means any Subsidiary of the Company of which
100% of the outstanding Capital Stock is owned by one or more Wholly-Owned
Subsidiaries of the Company, by the Company and one or more Wholly-Owned
Subsidiaries of the Company or by the Company. For purposes of this
definition, any directors' qualifying shares or investments by foreign
nationals mandated by applicable law shall be disregarded in determining the
ownership of a Subsidiary.
1.02 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC;
"indenture securities" means the Notes;
"indenture security holder" means a Noteholder or Holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
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"obligor" on the indenture securities means the Company or any other obligor
on the Notes.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
1.03 Rules of Construction.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
1. a term has the meaning assigned to it
2. words in the singular include the plural, and words in the plural
include the singular.
3. "or" is not exclusive;
4. provisions apply to successive events and transactions;
5. all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with GAAP;
6. 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; and
7. all references to $ or dollars shall refer to the lawful currency of
the United States of America.
ARTICLE TWO
THE NOTES
2.01 Forms and Dating.
The Notes and the Trustee's certificate of authentication thereon shall
be in substantially the form of Exhibit A hereto, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply with any applicable law or with the rules of any
securities exchange or as may, consistently herewith, be determined by the
Officers executing such Notes, as evidenced by their execution thereof. The
Notes shall be issuable only in registered form without coupons and only in
denominations of $1,000 and integral multiples thereof.
The definitive Notes shall be printed, typewritten, lithographed or
engraved or produced by any combination of these methods or may be produced
in any other manner permitted by the rules of any securities exchange on
which the Notes may be listed, all as determined by the officers executing
such Notes, as evidenced by their execution of such Notes. Each Note shall
be dated the date of its authentication.
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The terms and provisions contained in the form of the Notes, annexed
hereto as Exhibit A shall constitute, and are hereby expressly made, a part
of this Indenture and, to the extent applicable, the Company and the Trustee,
by their execution and delivery of this Indenture, expressly agree to such
terms and provisions and to be bound thereby.
2.02 Execution and Authentication.
Two Officers shall execute the Notes on behalf of the Company by either
manual or facsimile signature. The Company's seal shall be impressed,
affixed, imprinted or reproduced on the Notes.
If an Officer whose signature is on a Note no longer holds that office
at the time the Trustee authenticates the Note or at any time thereafter, the
Note shall be valid nevertheless.
A Note shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Note. Such signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture.
The Trustee shall authenticate Notes for original issue in an aggregate
principal amount not to exceed $25,000,000 (excluding Secondary Notes, as
defined in Section 2.15) upon receipt of an Officers' Certificate signed by
two Officers of the Company directing the Trustee to authenticate the Notes
and certifying that all conditions precedent to the issuance of the Notes
contained herein have been complied with. The aggregate principal amount of
Notes outstanding at any time may not exceed $25,000,000, except as provided
in Sections 2.07 and 2.15.
With the prior written approval of the Company, the Trustee may appoint
an authenticating agent acceptable to the Company to authenticate Notes.
Unless limited by the terms of such appointment, an authenticating agent may
authenticate Notes whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
agent. Such authenticating agent shall have the same rights as the Trustee
in any dealings hereunder with the Company or with any of the Company's
Affiliates.
2.03 Registrar and Paying Agent.
The Company shall maintain an office or agency (which shall be located
in the Borough of Manhattan, The City of New York, State of New York) where
Notes may be presented for registration of transfer, for exchange or for
conversion (the "Registrar"), an office or agency (which shall be located in
the Borough of Manhattan, The City of New York, State of New York) where
Notes may be presented for payment of principal, premium, if any, and
interest (the "Paying Agent") and an office or agency where notices and
demands to or upon the Company in respect of the Notes and this Indenture may
be served. The Registrar shall keep a register of the Notes and of their
transfer and exchange. The Company may have one or more co-Registrars and
one or more additional paying agents. The term "Paying Agent" includes any
additional
<PAGE>
paying agent. Except as otherwise expressly provided in this Indenture, the
Company or any Affiliate thereof may act as Paying Agent.
The Company shall enter into an appropriate agency agreement with any
Registrar or Paying Agent not a party to this Indenture, which shall
incorporate the provisions of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such Registrar or Paying Agent.
The Company shall notify the Trustee of the name and address of any such
Registrar or Paying Agent. If the Company fails to maintain a Registrar,
Paying Agent or agent for service of notices and demands, or fails to give
the foregoing notice, the Trustee shall act as such and shall be entitled to
appropriate compensation in accordance with Section 7.08.
The Company initially appoints the Trustee as Registrar, Paying Agent
and agent for service of notices and demands in connection with the Notes.
2.04 Paying Agent To Hold Money in Trust.
Each Paying Agent shall hold in trust for the benefit of Holders or the
Trustee all money held by the Paying Agent for the payment of principal of,
or interest on, the Notes (whether such money has been distributed to it by
the Company or any other obligor on the Notes), and the Company (or any other
obligor on the Notes) and the Paying Agent shall notify the Trustee of any
default by the Company (or any other obligor on the Notes) in making any such
payment. If the Company or an Affiliate of the Company acts as Paying Agent,
it shall segregate the money and hold it as a separate trust fund. The
Company at any time may require a Paying Agent to distribute all money held
by it to the Trustee and account for any funds disbursed and the Trustee may
at any time during the continuance of any payment default with respect to the
Notes, upon written request to a Paying Agent, require such Paying Agent to
pay all money held by it to the Trustee and to account for any funds
distributed. Upon doing so, the Paying Agent (other than an obligor on the
Notes) shall have no further liability for the money so paid over to the
Trustee.
<PAGE>
2.05 Noteholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses
of Holders and shall otherwise comply with TIA Sec. 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least ten
Business Days before each Interest Payment Date and at such other times as
the Trustee may request in writing a list in such form and as of such date as
the Trustee may reasonably require of the names and addresses of Holders,
which list may be conclusively relied upon by the Trustee.
2.06 Transfer and Exchange.
When Notes are presented to the Registrar or a co-Registrar with a
request to register the transfer of such Notes or to exchange such Notes for
an equal principal amount of Notes of other authorized denominations, the
Registrar or co-Registrar shall register the transfer or make the exchange as
requested if its requirements for such transaction are met; provided,
however, that the Notes surrendered for transfer or exchange shall be duly
endorsed or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Registrar or co-Registrar, duly executed
by the Holder thereof or his attorney duly authorized in writing. To permit
registrations of transfers and exchanges, the Company shall execute and the
Trustee shall authenticate Notes at the Registrar's or co-Registrar's
request. No service charge shall be made for any transfer, exchange or
redemption, but the Company may require payment of a sum sufficient to cover
any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or similar governmental charge
payable upon exchanges or transfers pursuant to Sections 2.02, 2.07, 2.10,
3.06, 4.12, 4.13 or 9.05).
The Registrar or co-Registrar shall not be required to register the
transfer of or exchange of any Note (i) during a period beginning at the
opening of business 15 days before the mailing of a notice of redemption of
Notes and ending at the close of business on the day of such mailing and
(ii) selected for redemption in whole or in part pursuant to Article Three,
except the unredeemed portion of any Note being redeemed in part.
The Registrar shall not be required to register the transfer of a Note
until the Trustee has been directed to do so by the Company and has been
advised in writing by the Company that an opinion of counsel acceptable to
the Company has been received by the Company (which counsel may be an
employee of the Noteholder) to the effect that the transfer of such Note is
exempt from registration under the Securities Act or such registration is not
required.
2.07 Replacement Notes.
If a mutilated Note is surrendered to the Trustee or if the Holder of a
Note claims that the Note has been lost, destroyed or wrongfully taken, the
Company shall issue and the Trustee shall authenticate a replacement Note if
the Trustee's requirements are met. If required by the Trustee or the
Company, such Holder must provide an indemnity bond or other indemnity,
sufficient in the judgment of both the Company and the Trustee, to protect
the
<PAGE>
Company, the Trustee or any Paying Agent or Registrar from any loss which
any of them may suffer if a Note is replaced. The Company may charge such
Holder for its reasonable, out-of-pocket expenses in replacing a Note,
including reasonable fees and expenses of counsel. Every replacement Note is
an additional obligation of the Company.
2.08 Outstanding Notes.
Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee except those canceled by it, those delivered to
it for cancellation and those described in this Section as not outstanding.
A Note does not cease to be outstanding because the Company or any of its
Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.07 (other than a mutilated
Note surrendered for replacement), it ceases to be outstanding unless the
Trustee receives proof satisfactory to it that the replaced Note is held by a
bona fide purchaser. A mutilated Note ceases to be outstanding upon
surrender of such Note and replacement thereof pursuant to Section 2.07.
If on a Redemption Date or a Maturity Date the Paying Agent (other than the
Company or an Affiliate of the Company) holds cash or U.S. Government
Obligations sufficient to pay all of the principal and interest due on the
Notes payable on that date, and is not prohibited from paying such cash or
U.S. Government Obligations to the Holders of such Notes pursuant to the
terms of this Indenture, then on and after that date such Notes cease to be
outstanding and interest on them shall cease to accrue.
2.09 Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company or any of its Affiliates shall be disregarded, except that, for the
purposes of determining whether the Trustee shall be protected in relying on
any such direction, waiver or consent, only Notes that a Trust Officer of the
Trustee knows are so owned shall be disregarded.
2.10 Temporary Notes.
Until definitive Notes are prepared and ready for delivery, the Company
may prepare and the Trustee shall authenticate temporary Notes. Temporary
Notes shall be substantially in the form of definitive Notes but may have
variations that the Company considers appropriate for temporary Notes.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate definitive Notes in exchange for temporary Notes. Until such
exchange, temporary Notes shall be entitled to the same rights, benefits and
privileges as definitive Notes.
<PAGE>
2.11 Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the
Trustee any Notes surrendered to them for transfer, redemption, conversion,
exchange or payment. The Trustee, or at the direction of the Trustee, the
Registrar or the Paying Agent (other than the Company or an Affiliate of the
Company), and no one else, shall promptly cancel and, at the written
direction of the Company, shall dispose of all Notes surrendered for
transfer, redemption, conversion, exchange, payment or cancellation. Subject
to Section 2.07, the Company may not issue new Notes to replace Notes that it
has paid or delivered to the Trustee for cancellation. If the Company shall
acquire any of the Notes, such acquisition shall not operate as a redemption
or satisfaction of the Indebtedness represented by such Notes unless and
until the same are surrendered to the Trustee for cancellation pursuant to
this Section 2.11.
2.12 Defaulted Interest.
If the Company defaults on a payment of interest on the Notes, it shall
pay the defaulted interest, plus (to the extent permitted by law) any
interest payable on the defaulted interest, in accordance with the terms
hereof and the Notes, to the persons who are Holders on a subsequent special
record date, which date shall be at least five Business Days prior to the
payment date. The Company shall fix such special record date and payment
date in a manner satisfactory to the Trustee. At least 15 days before such
special record date, the Company shall mail to each Holder a notice that
states the special record date, the payment date and the amount of defaulted
interest, and interest payable on such defaulted interest, if any, to be
paid.
2.13 CUSIP Number.
The Company in issuing the Notes may use a "CUSIP" number (if then
generally in use), and if so, the Trustee may use the CUSIP numbers in
notices of redemption or exchange as a convenience to Holders; provided,
however, that any such notice may state that no representation is made as to
the correctness or accuracy of the CUSIP number printed in the notice or on
the Notes, and that reliance may be placed only on the other identification
numbers printed on the Notes. The Company will promptly notify the Trustee
of any change in the CUSIP number.
<PAGE>
2.14 Deposit of Moneys.
On or before each Interest Payment Date and Maturity Date, the Company
shall deposit with the Trustee or Paying Agent in immediately available funds
money sufficient to make cash payments, if any, due on such Interest Payment
Date or Maturity Date, as the case may be, in a timely manner which permits
the Paying Agent to remit payment to the Holders on such Interest Payment
Date or Maturity Date, as the case may be.
2.15 Secondary Notes.
Through and including the earlier of (x) April 15, 1999 or (y) the Final
Note Interest Time, on each Interest Payment Date, the Company may, at its
option and in its sole discretion, in lieu of the payment in whole or in part
of interest in cash on the Notes, pay interest on the Notes through the
issuance of additional Notes ("Secondary Notes") in an aggregate principal
amount equal to the amount of interest that would be payable with respect to
the Notes, if such interest were paid in cash; provided, however, that the
Company shall only be permitted to issue Secondary Notes pursuant to this
Section 2.15 if there is, as of the date of such issuance, an effective
registration statement under the Securities Act covering such issuance or
such issuance is exempt from registration under the Securities Act.
Thereafter, the Company shall pay interest on the Notes in cash. The Company
shall notify the Trustee in writing of such election not less than ten nor
more than 45 days prior to the Regular Record Date for an Interest Payment
Date on which Secondary Notes will be issued. On each such Interest Payment
Date, the Trustee shall authenticate Secondary Notes for original issuance to
each Holder on the relevant Regular Record Date in the aggregate principal
amount required to pay the amount of interest on the Notes that the Company
has elected to pay through its issuance of Secondary Notes in lieu of cash.
Any Secondary Notes so issued shall be dated the applicable Interest Payment
Date, shall bear interest from and after such date, shall mature on April 15,
2005, and shall be governed by, and subject to the terms, provisions and
conditions of, this Indenture and shall have the same rights and benefits as
Notes previously issued.
Notwithstanding any other provision of this Section 2.15 to the
contrary, the Company shall pay cash in lieu of issuing Secondary Notes in
any denomination of less than $1,000 (which shall be determined with respect
to the aggregate amount of Notes held by each Holder as shown by the records
of the Trustee). Notwithstanding anything contained in this Indenture to the
contrary, interest on any Secondary Notes shall be payable only in cash.
<PAGE>
ARTICLE THREE
REDEMPTION OF NOTES
3.01 Notices to the Trustee.
If the Company elects to redeem Notes pursuant to Paragraph 3(a) of the
Notes, it shall notify the Trustee of the Redemption Date and principal
amount of Notes to be redeemed.
The Company shall notify the Trustee by an Officers' Certificate,
stating that such redemption will comply with the provisions hereof and of
the Notes, of any redemption at least 35 days before the Redemption Date.
3.02 Selection of Notes To Be Redeemed.
If less than all the Notes are to be redeemed, the particular Notes or
portions thereof to be redeemed shall be selected from the outstanding Notes
not previously called for redemption either (x) pro rata, by lot or by such
other method as the Trustee considers to be fair and appropriate or (y) in
such manner as complies with the requirements of the principal national
securities exchange, if any, on which the Notes being redeemed are listed.
The amounts to be redeemed shall be equal to $1,000 or any integral
multiple thereof.
If any Note selected for partial redemption is converted in part before
termination of the conversion right with respect to the portion of the Note
so selected, the converted portion of such Note shall be deemed (so far as
may be) to be the portion selected for redemption. Notes which have been
converted during a selection of Notes to be redeemed shall be treated by the
Trustee as outstanding for the purpose of such selection. In any case where
more than one Note is registered in the same name, the Trustee in its
discretion may treat the aggregate principal amount so registered as if it
were represented by one Note.
The Trustee shall promptly notify the Company and the Registrar in
writing of the Notes selected for redemption and, in the case of any Notes
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 redemption of Notes shall relate, in the case of
any Note redeemed or to be redeemed only in part, to the portion of the
principal amount of such Note which has been or is to be redeemed.
3.03 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 Notes to be redeemed, at the address of
such Holder appearing in the Note register maintained by the Registrar.
<PAGE>
All notices of redemption shall identify the Notes to be redeemed and shall
state:
(a) the Redemption Date;
(b) the Redemption Price and the amount of accrued interest, if any, to
be
paid;
(c) that, unless the Company defaults in making the redemption payment,
interest on Notes called for redemption ceases to accrue on and after
the Redemption Date, and the only remaining right of the Holders of
such Notes is to receive payment of the Redemption Price upon
surrender to the Paying Agent of the Notes redeemed;
(d) if any Note is to be redeemed in part, the portion of the principal
amount (equal to $1,000 or any integral multiple thereof) of such
Note
to be redeemed and that on and after the Redemption Date, upon
surrender for cancellation of such original Note to the Paying Agent,
a new Note or Notes in the aggregate principal amount equal to the
unredeemed portion thereof will be issued without charge to the
Holder;
(e) the conversion price, the date on which the right to convert the
Notes
to be redeemed will terminate and the place or places where such
Notes
may be surrendered for conversion;
(f) that Notes called for redemption must be surrendered to the Paying
Agent to collect the Redemption Price and the name and address of the
Paying Agent;
(g) the CUSIP number, if any, relating to such Notes, but no
representation is made as to the correctness or accuracy of any such
CUSIP numbers; and
(h) the paragraph of the Notes pursuant to which the Notes are being
redeemed.
Notice of redemption of Notes to be redeemed at the election of the
Company shall be given by the Company or, at the Company's written request,
by the Trustee in the name and at the expense of the Company.
3.04 Effect of Notice of Redemption.
Once notice of redemption is mailed, Notes called for redemption become
due and payable on the Redemption Date and at the Redemption Price. Upon
surrender to the Paying Agent, such Notes called for redemption shall be paid
at the Redemption Price plus accrued interest to the Redemption Date, but
interest installments whose maturity is on or prior to such Redemption Date
will be payable on the relevant Interest Payment Dates to the Holders of
record at the close of business on the relevant record dates referred to in
the Notes.
3.05 Deposit of Redemption Price.
On or prior to 12:00 p.m. New York time on any Redemption Date, the
Company shall deposit with the Paying Agent an amount of money in same day
funds sufficient to pay the Redemption Price of, and accrued interest on, all
the Notes or portions thereof which are to be redeemed on that date, other
than Notes or portions thereof called for redemption on that date which have
been delivered by the Company to the Trustee for cancellation.
<PAGE>
If the Company complies with the preceding paragraph, then, unless the
Company defaults in the payment of such Redemption Price, interest on the
Notes to be redeemed will cease to accrue on and after the applicable
Redemption Date, whether or not such Notes are presented for payment. If any
Note called for redemption shall not be so paid upon surrender thereof for
redemption, the principal, premium, if any, and, to the extent lawful,
accrued interest thereon shall, until paid, bear interest from the Redemption
Date at the rate provided in the Notes.
If any Note called for redemption is converted, any money deposited with
the Trustee or with any Paying Agent or so segregated and held in trust for
the redemption of such Note shall (subject to any right of the Holder of such
Note or any Predecessor Note to receive interest as provided in the second
paragraph of Section 4.01) be paid to the Company upon Company Request or, if
then held by the Company, shall be discharged from such trust.
3.06 Notes Redeemed or Purchased in Part.
Upon surrender to the Paying Agent of a Note which is to be redeemed in
part, the Company shall execute and the Trustee shall authenticate and
deliver to the Holder of such Note without service charge, a new Note or
Notes, 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 Note so surrendered that is not redeemed.
<PAGE>
ARTICLE FOUR
COVENANTS
4.01 Payment of Notes.
The Company will pay, or cause to be paid, the principal of and interest
on the Notes on the dates and in the manner provided in the Notes and this
Indenture. An installment of principal or interest shall be considered paid
on the date due if the Trustee or Paying Agent (other than the Company, a
Subsidiary of the Company or any Affiliate thereof) holds at 12:00 p.m. New
York time on that date money designated and set aside for and sufficient to
pay the installment in a timely manner and is not prohibited from paying such
money to the Holders of the Notes pursuant to the terms of this Indenture.
In the case of any Note which is converted after any Regular Record Date and
on or prior to the next succeeding Interest Payment Date (other than any Note
whose Maturity Date is prior to such Interest Payment Date), the Company will
pay interest whose Stated Maturity is on such Interest Payment Date on such
Interest Payment Date notwithstanding such conversion, and such interest
(whether or not punctually paid or duly provided for) shall be paid to the
Person in whose name that Note (or one or more Predecessor Notes) is
registered at the close of business on such Regular Record Date; provided,
however, that Notes so surrendered for conversion shall (except in the case
of Notes or portions thereof which have been called for redemption on a
Redemption Date within such period) be accompanied by payment in New York
Clearing House funds or other funds acceptable to the Company of an amount
equal to the interest payable on such Interest Payment Date on the principal
amount being surrendered for conversion. Except as otherwise expressly
provided in the immediately preceding sentence, in the case of any Note which
is converted, interest whose Stated Maturity is after the date of conversion
of such Note shall not be payable.
The Company will pay interest on overdue principal at the rate and in
the manner provided in the Notes; it shall pay interest on overdue
installments of interest at the same rate and in the same manner, to the
extent lawful.
<PAGE>
4.02 Maintenance of Office or Agency.
The Company will maintain in the Borough of Manhattan, The City of New
York, an office or agency where Notes may be surrendered for registration of
transfer or exchange or for presentation for payment and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may
be served. The Company 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 Company 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
address of State Street Bank and Trust Company, N.A.
The Company may also from time to time designate one or more other
offices or agencies where the Notes 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 Company of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York, for such purposes. The Company
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.
The Company hereby initially designates the office of State Street Bank
and Trust Company, N.A. located at 61 Broadway, 15th floor, in the Borough of
Manhattan, City of New York 10006, as such office of the Company in
accordance with this Section 4.02.
4.03 Corporate Existence.
Subject to Article Five, the Company shall do or cause to be done all
things necessary to and will cause each of its Subsidiaries to, preserve and
keep in full force and effect the corporate or partnership existence and
rights (charter and statutory), licenses and/or franchises of the Company and
each of its Subsidiaries; provided, however, that the Company or any of its
Subsidiaries shall not be required to preserve any such rights, licenses or
franchises if the Board of Directors of the Company shall reasonably
determine that (x) the preservation thereof is no longer desirable in the
conduct of the business of the Company and its Subsidiaries taken as a whole
and (y) the loss thereof is not materially adverse to either the Company and
its Subsidiaries taken as a whole or to the ability of the Company to
otherwise satisfy its obligations hereunder.
<PAGE>
4.04 Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all taxes, assessments and
governmental charges levied or imposed upon the Company or any of its
Subsidiaries or upon the income, profits or property of the Company or any of
its Subsidiaries, and (b) all lawful claims for labor, materials and supplies
which, if unpaid, might by law become a Lien upon the property of the Company
or any Subsidiary of the Company; provided, however, that the Company shall
not be required to pay or discharge or cause to be paid or discharged any
such tax, assessment, charge or claim the amount, applicability or validity
of which is being contested in good faith by appropriate proceedings and for
which adequate provision has been made or where the failure to effect such
payment or discharge is not adverse in any material respect to the Company.
4.05 Maintenance of Properties; Insurance; Books and Records; Compliance
with
Law.
(a) The Company shall, and shall cause each of its Subsidiaries to, cause
all properties and assets to be maintained and kept in good condition,
repair and working order (reasonable wear and tear excepted) and
supplied with all necessary equipment, and shall cause to be made all
necessary repairs, renewals, replacements, additions, betterments and
improvements thereto, as shall be reasonably necessary for the proper
conduct of its business; provided, however, that nothing in this
Section 4.05(a) shall prevent the Company or any of its Subsidiaries
from discontinuing the operation and maintenance of any of its
properties or assets if such discontinuance is, in the judgment of the
Board of Directors of the Company or such Subsidiary, desirable in the
conduct of its business and if such discontinuance is not materially
adverse to either the Company and its Subsidiaries taken as a whole or
the ability of the Company to otherwise satisfy its obligations
hereunder.
(b) The Company shall, and shall cause each of its Subsidiaries to,
maintain with financially sound and reputable insurers such insurance
as may be required by law (other than with respect to any
environmental
impairment liability insurance not commercially available) and such
other insurance to such extent and against such hazards and
liabilities, as is customarily maintained by companies similarly
situated (which may include self-insurance in the same form as is
customarily maintained by companies similarly situated).
(c) The Company shall, and shall cause each of its Subsidiaries to, keep
proper books of record and account, in which full and correct entries
shall be made of all business and financial transactions of the
Company
and each Subsidiary of the Company and reflect on its financial
statements adequate accruals and appropriations to reserves, all in
accordance with GAAP consistently applied to the Company and its
Subsidiaries taken as a whole.
<PAGE>
(d) The Company shall and shall cause each of its Subsidiaries to comply
with all statutes, laws, ordinances, or government rules and
regulations to which it is subject, non-compliance with which would
materially adversely affect the business, earnings, properties, assets
or condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole.
4.06 Compliance Certificate.
(a) The Company will deliver to the Trustee within 60 days after the end
of
each of the Company's first three fiscal quarters and within 90 days
after the end of the Company's fiscal year an Officers' Certificate
stating whether or not the signers know of any Default or Event of
Default under this Indenture by the Company or an event which, with
notice or lapse of time or both, would constitute a default by the
Company under any Senior Indebtedness that occurred during such fiscal
period. If they do know of such a Default, Event of Default or
default, the certificate shall describe any such Default, Event of
Default or default and its status. The first certificate to be
delivered pursuant to this Section 4.06(a) shall be for the first
fiscal quarter of the Company beginning after the Issue Date. The
Company shall also deliver a certificate to the Trustee at least
annually from its principal executive, financial or accounting officer
as to his or her knowledge of the Company's compliance with all
conditions and covenants under this Indenture and the Company's Senior
Indebtedness, such compliance to be determined without regard to any
period of grace or requirement of notice provided herein or therein.
(b) The Company shall deliver to the Trustee within 90 days after the end
of each fiscal year a written statement by the Company's independent
certified public accountants stating (A) that their audit examination
has included a review of the terms of this Indenture and the Notes as
they relate to accounting matters, and (B) whether, in connection with
their audit examination, any Default or Event of Default under this
Indenture has come to their attention and, if such a Default or Event
of Default has come to their attention, specifying the nature and
period of existence thereof; provided, however, that, without any
restriction as to the scope of the audit examination, such independent
certified public accountants shall not be liable by reason of any
failure to obtain knowledge of any such Default or Event of Default
that would not be disclosed in the course of an audit examination
conducted in accordance with GAAP.
(c) The Company will deliver to the Trustee as soon as possible, and in
any
event within 10 days after the Company becomes aware or should
reasonably have become aware of the occurrence of any Default, Event
of
Default or an event which, with notice or lapse of time or both, would
constitute a default by the Company under any Senior Indebtedness, an
Officers' Certificate specifying such Default, Event of Default or
default and what action the Company is taking or proposes to take with
respect thereto.
<PAGE>
4.07 Limitation on Indebtedness.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or in any
manner become directly or indirectly liable, contingently or otherwise, for
the payment of (in each case, to "incur") any Indebtedness (including,
without limitation, any Acquired Indebtedness) other than Permitted
Indebtedness; provided, however, that the Company will be permitted to incur
Indebtedness (including, without limitation, Acquired Indebtedness) if (a) at
the time of such incurrence, and after giving pro forma effect thereto, the
Company's Consolidated Leverage Ratio is equal to or less than 5.00 to 1 and
(b) no Default or Event of Default shall have occurred and be continuing at
the time of or as a consequence of the incurrence of such Indebtedness.
For purposes of determining compliance with this Section 4.07, in the
event that Indebtedness meets the criteria of more than one of the clauses
contained in the definition of "Permitted Indebtedness" contained in Section
1.01, the Company, in its sole discretion, shall classify such item of
Indebtendess and only be required to include the amount and type of such
Indebtedness in one of such clauses.
4.08 Limitation on Other Subordinated Indebtedness.
The Company will not, directly or indirectly, incur any Indebtedness
(including Acquired Indebtedness) that is subordinate in right of payment to
any Indebtedness of the Company, unless such Indebtedness (a) is pari passu
with the Notes or (b) is subordinate in right of payment to the Notes in the
same manner and at least to the same extent as the Notes are subordinated to
Senior Indebtedness.
<PAGE>
4.09 Limitation on Restricted Payments.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly:
(a) declare or pay any dividend or make any other distribution or payment on
or in respect of Capital Stock of the Company or any of its Subsidiaries
or any payment made to the direct or indirect holders (in their
capacities as such) of Capital Stock of the Company or any of its
Subsidiaries (other than (x) dividends or distributions payable solely
in
Capital Stock of the Company (other than Redeemable Capital Stock) or in
options, warrants or other rights to purchase Capital Stock of the
Company (other than Redeemable Capital Stock), (y) the declaration or
payment of dividends or other distributions to the extent declared or
paid to the Company or any Subsidiary of the Company and (z) the
declaration or payment of dividends or other distributions by any
Subsidiary of the Company to all holders of Common Stock of such
Subsidiary on a pro rata basis),
(b) purchase, redeem, defease or otherwise acquire or retire for value any
Capital Stock of the Company or any of its Subsidiaries (other than any
such Capital Stock owned by a Wholly-Owned Subsidiary of the Company),
(c) make any principal payment on, or purchase, defease, repurchase, redeem
or otherwise acquire or retire for value, prior to any scheduled
maturity, scheduled repayment, scheduled sinking fund payment or other
Stated Maturity, any Subordinated Indebtedness (other than any such
Indebtedness owned by the Company or a Wholly-Owned Subsidiary of the
Company), or
(d) make any Investment (other than any Permitted Investment) in any person
(such payments or Investments described in the preceding clauses (a),
(b),
(c) and (d) are collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to the proposed
Restricted
Payment (the amount of any such Restricted Payment, if other than cash,
shall be the Fair Market Value on the date of such Restricted Payment of
the asset(s) proposed to be transferred by the Company or such
Subsidiary, as the case may be, pursuant to such Restricted Payment),
(A)
no Default or Event of Default shall have occurred and be continuing,
(B)
immediately prior to and after giving effect to such Restricted Payment,
the Company would be able to incur $1.00 of additional Indebtedness
pursuant to the first paragraph of Section 4.07 (assuming a market rate
of interest with respect to such additional Indebtedness) and (C) the
aggregate amount of all Restricted Payments declared or made from and
after the Issue Date would not exceed the sum of (1) the remainder of
(a)
100% of the aggregate amount of the Consolidated Cash Flow accrued on a
cumulative basis during the period (taken as one accounting period)
beginning on the first day of the last fiscal quarter immediately
preceding the Issue Date and ending on the last day of the last fiscal
quarter preceding the date of such proposed Restricted Payment minus (b)
the product of 2.00 times cumulative Consolidated Fixed Charges accrued
on a cumulative basis during the period (taken as one accounting period)
<PAGE>
beginning on the first day of the last fiscal quarter immediately
preceding the Issue Date and ending on the last day of the last fiscal
quarter preceding the date of such proposed Restricted Payment plus (2)
the aggregate net cash proceeds received by the Company after the Issue
Date from the issuance and sale permitted by this Indenture of its
Capital Stock (other than Redeemable Capital Stock) to a Person who is
not a Subsidiary of the Company (except to the extent such net cash
proceeds are used to incur new Indebtedness outstanding pursuant to
clause (j) of the definition of "Permitted Indebtedness" plus (3) the
aggregate net cash proceeds received after the Issue Date by the Company
from the issuance or sale of debt securities that have been converted
into or exchanged for Capital Stock of the Company (other than
Redeemable
Capital Stock) together with the aggregate cash received by the Company
at the time of such conversion or exchange plus (4) without duplication
of any amount included in the calculation of Consolidated Cash Flow, in
the case of repayment of, or return of capital in respect of, any
Investment constituting a Restricted Payment made after the Issue Date,
an amount equal to the lesser of the return of capital with respect to
such Investment and the cost of such Investment, in either case less the
cost of the disposition of such Investment.
None of the foregoing provisions will prohibit (i) the payment of any
dividend within 60 days after the date of its declaration, if at the date of
declaration such payment would be permitted by the foregoing paragraph; (ii)
so long as no Default or Event of Default shall have occurred and be
continuing, the redemption, repurchase or other acquisition or retirement of
any shares of any class of Capital Stock of the Company or any Subsidiary of
the Company in exchange for, or out of the net cash proceeds of, a
substantially concurrent (x) capital contribution to the Company from any
person (other than a Subsidiary of the Company) or (y) issue and sale of
other shares of Capital Stock (other than Redeemable Capital Stock) of the
Company to any person (other than to a Subsidiary of the Company); provided,
however, that the amount of any such net cash proceeds that are utilized for
any such redemption, repurchase or other acquisition or retirement shall be
excluded from clause (C)(2) and (3) of the preceding paragraph; (iii) so long
as no Default or Event of Default shall have occurred and be continuing, any
redemption, repurchase or other acquisition or retirement of Subordinated
Indebtedness by exchange for, or out of the net cash proceeds of, a
substantially concurrent (x) capital contribution to the Company from any
person (other than a Subsidiary of the Company) or (y) issue and sale of (1)
Capital Stock (other than Redeemable Capital Stock) of the Company to any
person (other than to a Subsidiary of the Company); provided, however, that
the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase or other acquisition or retirement shall be excluded
from clause (C)(2) and (3) of the preceding paragraph; or (2) Indebtedness of
the Company issued to any person (other than a Subsidiary of the Company),
so long as such Indebtedness is Subordinated Indebtedness which (x) has no
Stated Maturity earlier than the 91st day after the Final Maturity Date, (y)
has an Average Life to Stated Maturity equal to or greater than the remaining
Average Life to Stated Maturity of the Notes and (z) is subordinated to the
Notes in the same manner and at least to the same extent as the Subordinated
Indebtedness so purchased, exchanged, redeemed, acquired or retired; (iv)
<PAGE>
Investments constituting Restricted Payments made as a result of the receipt
of non-cash consideration from any Asset Sale made pursuant to and in
compliance with Section 4.13; (v) so long as no Default or Event of Default
has occurred and is continuing, repurchases by the Company of Common Stock of
the Company from employees of the Company or any of its Subsidiaries or their
authorized representatives upon the death, disability or termination of
employment of such employees, in an aggregate amount not exceeding $1,000,000
in any calendar year; (vi) Investments in persons other than Subsidiaries at
any one time outstanding (measured on the date each such Investment was made
without giving effect to subsequent changes in value) not to exceed
$20 million in the aggregate provided that such persons primary business is
voice and/or data communications or the marketing thereof and (vii)
cumulative Investments such that on the date each such Investment is made,
without giving effect to subsequent changes in value of any Investment
previously made pursuant to this clause (vii), the aggregate amount of all
such Investments made pursuant to this clause (vii) shall not exceed 5.0% of
the Company's total consolidated assets at such time. In computing the
amount of Restricted Payments previously made for purposes of clause (C) of
the preceding paragraph, Restricted Payments made under the preceding
clauses (v), (vi) and (vii) shall be included and clauses (i), (ii), (iii)
and (iv) shall not be so included.
4.10 Limitation on Issuances and Sale of Preferred Stock by Subsidiaries.
The Company (a) will not permit any of its Subsidiaries to issue any
Preferred Stock (other than to the Company or a Wholly-Owned Subsidiary of
the Company) and (b) will not permit any person (other than the Company or a
Wholly-Owned Subsidiary of the Company) to own any Preferred Stock of any
Subsidiary of the Company; provided, however, that this covenant shall not
prohibit the issuance and sale of (x) all, but not less than all, of the
issued and outstanding Capital Stock of any Subsidiary of the Company owned
by the Company or any of its Subsidiaries in compliance with the other
provisions of this Indenture or (y) directors' qualifying shares or
investments by foreign nationals mandated by applicable law.
<PAGE>
4.11 Limitation on Liens.
The Company will not, and will not permit any of its Subsidiaries to,
create, incur, assume or suffer to exist any Liens of any kind against or
upon any of its property or assets, or any proceeds therefrom, unless (x) in
the case of Liens securing Subordinated Indebtedness, the Notes are secured
by a Lien on such property, assets or proceeds that is senior in priority to
such Liens and (y) in all other cases, the Notes are equally and ratably
secured, except for (a) Liens existing as of the Issue Date; (b) Liens
securing the Notes; (c) Liens on assets of the Company or any Subsidiary
securing Senior Indebtedness; (d) Liens in favor of the Company; (e) Liens
securing Indebtedness which is incurred to refinance Indebtedness which has
been secured by a Lien permitted under this Indenture and which has been
incurred in accordance with the provisions of this Indenture; provided,
however, that such Liens do not extend to or cover any property or assets of
the Company or any of its Subsidiaries not securing the Indebtedness so
refinanced; and (f) Permitted Liens.
4.12 Change of Control.
Upon the occurrence of a Change of Control, the Company shall be
obligated to make an offer to purchase (a "Change of Control Offer"), and
shall purchase, on a business day (the "Change of Control Purchase Date")
not more than 60 nor less than 30 days following the occurrence of the Change
of Control, all of the then outstanding Notes at a purchase price (the
"Change of Control Purchase Price") equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the Change of Control
Purchase Date.
Notice of a Change of Control Offer shall be mailed by the Company not later
than the 30th day after the Change of Control Date to the Holders of Notes at
their last registered addresses with a copy to the Trustee and the Paying
Agent. The Change of Control Offer shall remain open from the time of
mailing for at least 20 Business Days and until 5:00 p.m., New York City
time, on the Change of Control Purchase Date. The notice, which shall govern
the terms of the Change of Control Offer, shall include such disclosures as
are required by law and shall state:
(a) that the Change of Control Offer is being made pursuant to this Section
4.12 and that all Notes validly tendered into the Change of Control
Offer
and not withdrawn will be accepted for payment;
(b) the Change of Control Purchase Price, the Change of Control Purchase
Date
and the date on which the Change of Control Offer expires;
(c) that any Note not tendered for payment will continue to accrue interest
in accordance with the terms thereof;
(d) that, unless the Company shall default in the payment of the purchase
price, any Note accepted for payment pursuant to the Change of Control
Offer shall cease to accrue interest after the Change of Control
Purchase
Date;
<PAGE>
(e) that Holders electing to have Notes purchased pursuant to a Change of
Control Offer will be required to surrender their Securities to the
Paying Agent at the address specified in the notice prior to 5:00 p.m.,
New York City time, on the Business Day immediately prior to the Change
of Control Purchase Date and must complete any form of letter of
transmittal proposed by the Company and reasonably acceptable to the
Trustee and the Paying Agent;
(f) that Holders of Notes will be entitled to withdraw their election if the
Paying Agent receives, not later than 5:00 p.m., New York City time, on
the Business Day immediately prior to the Change of Control Purchase
Date, a tested telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of Notes the Holder delivered
for purchase, the Note certificate number (if any) and a statement that
such Holder is withdrawing its election to have such Securities
purchased;
(g) that Holders whose Notes are purchased only in part will be issued Notes
equal in principal amount to the unpurchased portion of the Notes
surrendered;
(h) the instructions that Holders must follow in order to tender their
Notes;
and
(i) information concerning the business of the Company, the most recent
annual and quarterly reports of the Company filed with the SEC pursuant
to the Exchange Act (or, if the Company is not then permitted to file
any
such reports with the SEC, the comparable reports prepared pursuant to
Section 4.19), a description of material developments in the Company's
business, information with respect to pro forma historical financial
information after giving effect to such Change of Control and such other
information concerning the circumstances and relevant facts regarding
such Change of Control Offer as would be material to a Holder of Notes
in
connection with the decision of such Holder as to whether or not it
should tender Notes pursuant to the Change of Control Offer.
On the Change of Control Purchase Date, the Company shall (i) accept for
payment Notes or portions thereof validly tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent money, in immediately
available funds, sufficient to pay the purchase price of all Securities or
portions thereof so tendered and accepted and (iii) deliver to the Trustee
the Notes so accepted together with an Officers' Certificate setting forth
the Notes or portions thereof tendered to and accepted for payment by the
Company. The Paying Agent shall promptly mail or deliver to the Holders of
Notes 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
Note equal in principal amount to any unpurchased portion of the Note
surrendered. Any Notes not so accepted shall be promptly mailed or delivered
by the Company to the Holder thereof. The Company will publicly announce the
results of the Change of Control Offer not later than the first Business Day
following the Change of Control Purchase Date.
<PAGE>
The Company shall not be required to make a Change of Control Offer upon
a Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements
applicable to a Change of Control Offer made by the Company and purchases all
Notes validly tendered and not withdrawn under such Change of Control Offer.
The Company will comply with Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that a Change of Control occurs and
the Company is required to purchase Notes as described above.
4.13 Disposition of Proceeds of Asset Sales.
(a) The Company will not, and will not permit any of its Subsidiaries to,
make any Asset Sale unless (a) the Company or such Subsidiary, as the
case may be, receives consideration at the time of such Asset Sale at
least equal to the Fair Market Value of the shares or assets sold or
otherwise disposed of and (b) at least 80% of such consideration
consists
of cash or Cash Equivalents. To the extent the Net Cash Proceeds of any
Asset Sale are not used to repay, and permanently reduce any commitments
under, outstanding Senior Indebtedness, the Company or such Subsidiary,
as the case may be, may, within 180 days of such Asset Sale, apply such
Net Cash Proceeds to an investment in properties and assets that replace
the properties and assets that were the subject of such Asset Sale or in
properties and assets that will be used in the business of the Company
and its Subsidiaries existing on the Issue Date or in businesses
reasonably related thereto ("Replacement Assets"). Any Net Cash
Proceeds
from any Asset Sale that are neither used to repay, and permanently
reduce any commitments under, Senior Indebtedness nor invested in
Replacement Assets within the 180 period described above constitute
"Excess Proceeds" subject to disposition as provided below.
(b) When the aggregate amount of Excess Proceeds equals or exceeds
$5,000,000, the Company shall make an offer to purchase (an "Asset Sale
Offer"), from all Holders, on a day not more than 40 Business Days
thereafter (the "Asset Sale Purchase Date"), the maximum principal
amount
(expressed as a multiple of $1,000) of Notes that may be purchased with
such Excess Proceeds, at a price in cash equal to 100% of the
outstanding
principal amount of the Notes plus accrued and unpaid interest, if any,
to the purchase date (the "Asset Sale Offer Price").
(c) Notice of an Asset Sale Offer shall be mailed by the Company to all
Holders of Notes not less than 20 Business Days nor more than 40
Business
Days before the Asset Sale Purchase Date at their last registered
address
with a copy to the Trustee and the Paying Agent. The Asset Sale Offer
shall remain open from the time of mailing for at least 20 Business Days
and until at least 5:00 p.m., New York City time, on the Asset Sale
Purchase Date. The notice, which shall govern the terms of the Asset
Sale Offer, shall include such disclosures as are required by law and
shall state:
(1) that the Asset Sale Offer is being made pursuant to this Section 4.13;
<PAGE>
(2) the Asset Sale Offer Price (including the amount of accrued interest,
if any) for each Note, the Asset Sale Purchase Date and the date on
which
the Asset Sale Offer expires;
(3) that any Note not tendered or accepted for payment will continue to
accrue interest in accordance with the terms thereof;
(4) that, unless the Company shall default in the payment of the Asset Sale
Offer Price, any Note accepted for payment pursuant to the Asset Sale
Offer shall cease to accrue interest after the Asset Sale Purchase Date;
(5) that Holders electing to have Notes purchased pursuant to an Asset Sale
Offer will be required to surrender their Notes to the Paying Agent at
the address specified in the notice prior to 5:00 p.m., New York City
time, on the Business Day immediately prior to the Asset Sale Purchase
Date and must complete any form of letter of transmittal proposed by the
Company and reasonably acceptable to the Trustee and the Paying Agent;
(6) that Holders will be entitled to withdraw their election if the Paying
Agent receives, not later than 5:00 p.m., New York City time, on the
Business Day immediately prior to the Asset Sale Purchase Date, a tested
telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of Notes the Holder delivered for purchase,
the Note certificate number (if any) and a statement that such Holder is
withdrawing its election to have such Notes purchased;
(7) that if Notes in a principal amount in excess of the Holder's pro rata
share of the amount of Excess Proceeds are tendered pursuant to the
Asset
Sale Offer, the Company shall purchase Notes on a pro rata basis among
the Notes tendered (with such adjustments as may be deemed appropriate
by
the Company so that only Notes in denominations of $1,000 or integral
multiples of $1,000 shall be acquired);
(8) that Holders whose Notes are purchased only in part will be issued new
Notes equal in principal amount to the unpurchased portion of the Notes
surrendered;
(9) the instructions that Holders must follow in order to tender their
Notes;
and
(10) information concerning the business of the Company, the most recent
annual and quarterly reports of the Company filed with the SEC pursuant
to the Exchange Act (or, if the Company is not permitted to file any
such
reports with the Commission, the comparable reports prepared pursuant to
Section 4.19), a description of material developments in the Company's
business, information with respect to pro forma historical financial
information after giving effect to such Asset Sale and Asset Sale Offer
and such other information concerning the circumstances and relevant
facts regarding such Asset Sale Offer as would be material to a Holder
of
Notes in connection with the decision of such Holder as to whether or
not
it should tender Notes pursuant to the Asset Sale Offer.
(d) On the Asset Sale Purchase Date, the Company shall (i) accept for
payment, on a pro rata basis, Notes or portions thereof tendered
pursuant
to the Asset Sale Offer, (ii) deposit with the Paying Agent money, in
immediately available funds, in an amount sufficient to pay the Asset
Sale Offer Price of all Notes or portions thereof so tendered and
accepted and (iii) deliver to the Trustee the Notes so accepted together
with an Officers' Certificate setting forth the Notes or portions
thereof
tendered to and accepted for payment by the Company. The Paying Agent
shall promptly mail or deliver to Holders of Securities so accepted
<PAGE>
payment in an amount equal to the Asset Sale Offer Price, and the
Trustee
shall promptly authenticate and mail or deliver to such Holders a new
Note equal in principal amount to any unpurchased portion of the
Security
surrendered. Any Notes not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof. The Company will
publicly announce the results of the Asset Sale Offer not later than the
first Business Day following the Asset Sale Purchase Date. To the
extent
that the aggregate principal amount of Notes tendered pursuant to an
Asset Sale Offer is less than the Excess Proceeds, the Company may use
such deficiency for general corporate purposes. Upon completion of such
Asset Sale Offer, the amount of Excess Proceeds shall be reset to zero.
For purposes of this Section 4.13, the Trustee shall act as Paying
Agent.
(e) The Company will comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws
and regulations are applicable, in the event that an Asset Sale occurs
and the Company is required to purchase Notes as described above.
4.14 Limitation on Transactions with Interested Persons.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, enter into or suffer to exist any transaction or
series of related transactions (including, without limitation, the sale,
transfer, disposition, purchase, exchange or lease of assets, property or
services) with, or for the benefit of, any Affiliate of the Company or any
beneficial owner (determined in accordance with this Indenture) of 5% or more
of the Company's Common Stock at any time outstanding ("Interested Persons"),
unless (a) such transaction or series of related transactions is on terms
that are no less favorable to the Company or such Subsidiary, as the case may
be, than those which could have been obtained in a comparable transaction at
such time from persons who are not Affiliates of the Company or Interested
Persons, (b) with respect to a transaction or series of transactions
involving aggregate payments or value equal to or greater than $10,000,000,
the Company has obtained a written opinion from an Independent Financial
Advisor stating that the terms of such transaction or series of transactions
are fair to the Company or its Subsidiary, as the case may be, from a
financial point of view and (c) with respect to a transaction or series of
transactions involving aggregate payments or value equal to or greater than
$1,000,000, the Company shall have delivered an Officer's Certificate to the
Trustee certifying that such transaction or series of transactions complies
with the preceding clause (a) and, if applicable, certifying that the
opinion referred to in the preceding clause (b) has been delivered and that
such transaction or series of transactions has been approved by a majority of
the disinterested members of the Board of Directors of the Company; provided,
however, that this covenant will not restrict the Company from (i) making any
payment permitted under Section 4.09, (ii) paying reasonable and customary
fees or other compensation including stock options to directors of the
Company who are not employees of the Company, (iii) making loans or advances
to officers, employees or consultants of the Company and its Subsidiaries
(including travel and moving expenses) in the ordinary course of business for
bona fide business purposes of the Company or such Subsidiary not in excess
of $2,000,000 in the aggregate at any one time outstanding, (iv) transactions
between the Company and its Subsidiaries or between or among the Company and
its Subsidiaries, or (v) compensation arrangements with the Company's
executive officers.
<PAGE>
4.15 Limitation on Dividends and Other Payment Restrictions Affecting
Subsidiaries.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any
Subsidiary of the Company to (a) pay dividends, in cash or otherwise, or make
any other distributions on or in respect of its Capital Stock or any other
interest or participation in, or measured by, its profits, (b) pay any
Indebtedness owed to the Company or any other Subsidiary of the Company, (c)
make loans or advances to, or any Investment in, the Company or any other
Subsidiary of the Company, (d) transfer any of its properties or assets to
the Company or any other Subsidiary of the Company or (e) guarantee any
Indebtedness of the Company or any other Subsidiary of the Company, except
for such encumbrances or restrictions existing under or by reason of (i)
applicable law, (ii) customary non-assignment provisions of any contract or
any lease governing a leasehold interest of the Company or any Subsidiary of
the Company, (iii) customary restrictions on transfers of property subject to
a Lien permitted under this Indenture which could not materially adversely
affect the Company's ability to satisfy its obligations under this Indenture
and the Notes, (iv) any agreement or other instrument of a person acquired by
the Company or any Subsidiary of the Company (or a Subsidiary of such person)
in existence at the time of such acquisition (but not created in
contemplation thereof), which encumbrance or restriction is not applicable to
any person, or the properties or assets of any person, other than the person,
or the properties or assets of the person, so acquired, (v) provisions
contained in agreements or instruments relating to Indebtedness which
prohibit the transfer of all or substantially all of the assets of the
obligor thereunder unless the transferee shall assume the obligations of the
obligor under such agreement or instrument and (vi) encumbrances and
restrictions under Senior Indebtedness in effect on the Issue Date and
encumbrances and restrictions in permitted refinancings or replacements
thereof which are no less favorable to the Holders of the Notes than those
contained in the Senior Indebtedness so refinanced or replaced.
<PAGE>
4.16 [Intentionally Left Blank].
4.17 Waiver of Stay, Extension or Usury Laws.
The Company 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 or any usury
law or other law which would prohibit or forgive the Company from paying all
or any portion of the principal of, premium, if any, or interest on the Notes
as contemplated herein, wherever enacted, now or at any time hereafter in
force, or which may affect the covenants or the performance of this
Indenture; and (to the extent that it may lawfully do so) the Company 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.
4.18 Termination of Trading.
(a) Upon the occurrence of any Termination of Trading Event the
Company shall be obligated, upon the request of any Holder at such Holder's
option, to repurchase all or any part of the Holder's Notes, on the day next
preceding the date (the "Repurchase Date") that is 30 days after the date the
Company gives notice of the Termination of Trading Event as described below,
at a price (the "Repurchase Price") equal to 100% of the principal amount
thereof, together with accrued and unpaid interest to the Repurchase Date.
(b) On or prior to the Repurchase Date, the Company is required to deposit
with the Trustee or a Paying Agent an amount of money in same-day funds
sufficient to pay the Repurchase Price of the Notes to be repaid on the
Repurchase Date. On or before the 15th day after a Termination of Trading
Event occurs, the Company is obligated to mail to all Holders of Notes a
notice of the occurrence which states the Repurchase Date, the date by which
the repurchase right must be exercised, the Repurchase Price and the
procedures the Holder must follow to exercise its repurchase right.
(c) To exercise this right, a Holder must deliver to the Company or
its designated agent and to the Trustee, on or before the close of business
on the Business Day immediately prior to the Repurchase Date, written notice
of the Holder's exercise of that right, together with the certificates
evidencing the Notes to be repurchased, duly endorsed for transfer to the
Company. Any such notice will be irrevocable.
4.19 Reporting Requirements.
The Company will file with the Commission the annual reports, quarterly
reports and other documents required to be filed with the Commission pursuant
to Sections 13 and 15 of the Exchange Act, whether or not the Company has a
class of securities registered under the Exchange Act. The Company will file
with the Trustee and provide to each Noteholder within 15 days after it files
them with the Commission (or if any such filing is not permitted under the
Exchange Act, 15 days after the Company would have been required to make such
filing) copies of such reports and documents.
<PAGE>
ARTICLE FIVE
SUCCESSOR CORPORATION
5.01 When Company May Merge, etc.
The Company will not, in any transaction or series of transactions, merge
or consolidate with or into, or sell, assign, convey, transfer, lease or
otherwise dispose of all or substantially all of its properties and assets
to, any person or persons, and the Company will not permit any of its
Subsidiaries to enter into any such transaction or series of transactions if
such transaction or series of transactions, in the aggregate, would result in
a sale, assignment, conveyance, transfer, lease or other disposition of all
or substantially all of the properties and assets of the Company or the
Company and its Subsidiaries, taken as a whole, to any other person or
persons, unless at the time of and after giving effect thereto (a) either
(i) if the transaction or series of transactions is a merger or
consolidation, the Company shall be the surviving person of such merger or
consolidation, or (ii) the person formed by such consolidation or into which
the Company or such Subsidiary is merged or to which the properties and
assets of the Company or such Subsidiary, as the case may be, are transferred
(any such surviving person or transferee person being the "Surviving Entity")
shall be a corporation organized and existing under the laws of the United
States of America, any state thereof or the District of Columbia and shall
expressly assume by a supplemental indenture executed and delivered to the
Trustee, in form reasonably satisfactory to the Trustee, the due and punctual
payment of the principal of, premium, if any, and interest on all the Notes
and the performance and observance of every covenant and obligation of this
Indenture and the Notes on the part of the Company to be performed or
observed and shall have provided for conversion rights in accordance with
Section 11.11 and, in each case, this Indenture shall remain in full force
and effect;
(b) immediately before and immediately after giving effect to such
transaction or series of transactions on a pro forma basis (including,
without limitation, any Indebtedness incurred or anticipated to be incurred
in connection with or in respect of such transaction or series of
transactions), no Default or Event of Default shall have occurred and be
continuing and the Company, or the Surviving Entity, as the case may be,
after giving effect to such transaction or series of transactions on a pro
forma basis (including, without limitation, any Indebtedness incurred or
anticipated to be incurred in connection with or in respect of such
transaction or series of transactions), could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under Section 4.07 (assuming
a market rate of interest with respect to such additional Indebtedness); and
(c) immediately after giving effect to such transaction or series of
transactions on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction or series of transactions), the Consolidated Net
Worth of the Company or the Surviving Entity, as the case may be, is at least
equal to the Consolidated Net Worth of the Company immediately before such
transaction or series of transactions.
In connection with any consolidation, merger, transfer, lease, assignment or
other disposition contemplated hereby, the Company shall deliver, or cause to
be delivered, to the Trustee, in form and substance reasonably satisfactory
to
<PAGE>
the Trustee, an Officer's Certificate and an Opinion of Counsel, each stating
that such consolidation, merger, transfer, lease, assignment or other
disposition and the supplemental indenture in respect thereof comply with the
requirements under this Indenture; provided, however, that solely for
purposes of computing amounts described in subclause (C) of Section 4.09, any
such successor person shall only be deemed to have succeeded to and be
substituted for the Company with respect to periods subsequent to the
effective time of such merger, consolidation or transfer of assets.
5.02 Successor Substituted.
Upon any consolidation or merger, or any sale, assignment, conveyance,
transfer, lease or disposition of all or substantially all of the properties
and assets of the Company in accordance with Section 5.01 hereof, the
successor person or persons formed by such consolidation or into which the
Company is merged or the successor person to which such sale, assignment,
conveyance, transfer, lease or other disposition is made, shall succeed to,
and be substituted for, and may exercise every right and power of, the
Company under this Indenture and the Notes with the same effect as if such
successor had been named as the Company herein; provided, however, that
solely for purposes of computing amounts described in subclause (C) of
Section 4.09, any such successor person shall only be deemed to have
succeeded to and be substituted for the Company with respect to periods
subsequent to the effective time of such merger, consolidation or transfer of
assets.
<PAGE>
ARTICLE SIX
REMEDIES
6.01 Events of Default.
An "Event of Default" means any of the following events:
(a) default in the payment of the principal of or premium, if any, on
any Notes when the same becomes due and payable (upon Stated Maturity,
acceleration, optional redemption, required purchase, scheduled principal
payment or otherwise); or
(b) default in the payment of an installment of interest on any of
the Notes, when the same becomes due and payable, and any such Default
continues for a period of 30 days; or
(c) failure to perform or observe any other term, covenant or
agreement contained in the Notes or this Indenture (other than Defaults
specified in clause (a) or (b) above) and such Default continues for a period
of 30 days after written notice of such Default requiring the Company to
remedy the same shall have been given (i) to the Company by the Trustee or
(ii) to the Company and the Trustee by Holders of at least 25% in aggregate
principal amount of the Notes then outstanding; or
(d) default or defaults under one or more agreements, instruments,
mortgages, bonds, debentures or other evidences of Indebtedness under which
the Company or any Subsidiary of the Company then has outstanding
Indebtedness in excess of $5,000,000, individually or in the aggregate, and
either (i) such Indebtedness is already due and payable in full or (ii) such
default or defaults have resulted in the acceleration of the maturity of such
Indebtedness; or
(e) one or more judgments, orders or decrees of any court or
regulatory or administrative agency of competent jurisdiction for the payment
of money in excess of $5,000,000, either individually or in the aggregate,
shall be entered against the Company or any Subsidiary of the Company or any
of their respective properties and shall not be discharged or fully bonded
and there shall have been a period of 60 days after the date on which any
period for appeal has expired and during which a stay of enforcement of such
judgment, order or decree, shall not be in effect; or
(f) the Company or any Significant Subsidiary of the Company pursuant
to or under or within the meaning of any Bankruptcy Law:
(i) commences a voluntary case or proceeding;
(ii) consents to the entry of an order for relief against it in an
involuntary case or proceeding;
(iii) consents to the appointment of a Custodian of it or for all or
substantially all of its property;
(iv) makes a general assignment for the benefit of its creditors; or
(v) shall generally not pay its debts when such debts become due or
shall admit in writing its inability to pay its debts generally;
or
<PAGE>
(g) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any Significant
Subsidiary of the Company in an involuntary case or
proceeding;
(ii) appoints a Custodian of the Company or any Significant Subsidiary
of the Company for all or substantially all of its properties; or
(iii) orders the liquidation of the Company or any Significant
Subsidiary of the Company;
and in each case the order or decree remains unstayed and in effect for 60
days.
Subject to the provisions of Sections 7.01 and 7.02, the Trustee shall
not be charged with knowledge of any Default or Event of Default unless
written notice thereof shall have been given to a Trust Officer of the
Trustee by the Company, the Paying Agent, any Holder, any holder of Senior
Indebtedness or any of their respective agents.
<PAGE>
6.02 Acceleration.
If an Event of Default (other than as specified in Section 6.01(f) or
(g)) occurs and is continuing, the Trustee, by written notice to the Company,
or the Holders of at least 25% in aggregate principal amount of the Notes
then outstanding, by written notice to the Trustee and the Company, may
declare the principal of, premium, if any, and accrued and unpaid interest,
if any, on all of the Notes to be due and payable immediately, upon which
declaration, all amounts payable in respect of the Notes shall be immediately
due and payable. If an Event of Default specified in Section 6.01(f) or
6.01(g) occurs and is continuing, then the principal of, premium, if any, and
accrued and unpaid interest, if any, on all of the Notes shall ipso facto
become and be immediately due and payable without any declaration or other
act on the part of the Trustee or any Holder of Notes.
After a declaration of acceleration under this Indenture, but before a
judgment or decree for payment of the money due has been obtained by the
Trustee, the Holders of a majority in aggregate principal amount of the
outstanding Notes, by written notice to the Company and the Trustee, may
rescind such declaration if (a) the Company has paid or deposited with the
Trustee a sum sufficient to pay (i) all amounts due the Trustee under Section
7.08 and the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, (ii) all overdue interest on all Notes,
(iii) the principal of and premium, if any, on any Notes which have become
due otherwise than by such declaration of acceleration and interest thereon
at the rate borne by the Notes, and (iv) to the extent that payment of such
interest is lawful, interest upon overdue interest which has become due
otherwise than by such declaration of acceleration at the rate borne by the
Notes; (b) the rescission would not conflict with any judgment or decree of a
court of competent jurisdiction; and (c) all Events of Default, other than
the non-payment of principal of, premium, if any, and interest on the Notes
that has become due solely by such declaration of acceleration, have been
cured or waived as provided in Section 6.04.
No such rescission shall affect any subsequent Default or Event of
Default or impair any right subsequent therein.
6.03 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy by proceeding at law or in equity to collect the payment
of principal of, premium, if any, or interest on the Notes or to enforce the
performance of any provision of the Notes or this Indenture.
All rights of action and claims under this Indenture or the Notes may be
enforced by the Trustee even if it does not possess any of the Notes or does
not produce any of them in the proceeding. A delay or omission by the
Trustee or any Holder in exercising any right or remedy accruing upon an
Event of Default shall not impair the right or remedy or constitute a waiver
of or acquiescence in the Event of Default. No remedy is exclusive of any
other remedy. All available remedies are cumulative to the extent permitted
by law.
<PAGE>
6.04 Waiver of Past Defaults.
Subject to the provisions of Section 6.07 and 9.02, the Holders of not
less than a majority in aggregate principal amount of the outstanding Notes
by notice to the Trustee may, on behalf of the Holders of all the Notes,
waive any existing Default or Event of Default and its consequences, except a
Default or Event of Default specified in Section 6.01(a) or (b) or in respect
of any provision hereof which cannot be modified or amended without the
consent of the Holder so affected pursuant to Section 9.02. When a Default
or Event of Default is so waived, it shall be deemed cured and shall cease to
exist.
6.05 Control by Majority.
The Holders of not less than a majority in aggregate principal amount of
the outstanding Notes 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, however,
that the Trustee may refuse to follow any direction (a) that conflicts with
any rule of law or this Indenture, (b) that the Trustee determines may be
unduly prejudicial to the rights of another Noteholder, or (c) that may
expose the Trustee to personal liability unless the Trustee has been provided
reasonable indemnity against any loss or expense caused by its following such
direction; and provided, further, that the Trustee may take any other action
deemed proper by the Trustee that is not inconsistent with such direction.
6.06 Limitation on Suits.
No Holder of any Notes shall have any right to institute any proceeding
or pursue any remedy with respect to this Indenture or the Notes unless:
(a) the Holder gives written notice to the Trustee of a continuing Event
of
Default;
(b) the Holders of at least 25% in aggregate principal amount of the
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder or Holders offer and, if requested, provide to the Trustee
reasonable indemnity against any loss, liability or expense;
(d) the Trustee does not comply with the request within 30 days after
receipt of the request and the offer and, if requested, provision of
indemnity; and
(e) during such 30-day period the Holders of a majority in aggregate
principal amount of the outstanding Notes do not give the Trustee a
direction which is inconsistent with the request.
The foregoing limitations shall not apply to a suit instituted by a
Holder for the enforcement of the payment of principal of, premium, if any,
or accrued interest on, such Notes on or after the respective due dates set
forth in such Notes.
<PAGE>
A Holder may not use this Indenture to prejudice the rights of any other
Holders or to obtain priority or preference over such other Holders.
6.07 Right of Holders To Receive Payment.
Notwithstanding any other provision in this Indenture, the right of any
Holder of a Note to receive payment of the principal of, premium, if any, and
interest on such Note, on or after the respective Stated Maturities expressed
in such Note, or to bring suit for the enforcement of any such payment on or
after the respective Stated Maturities, is absolute and unconditional and
shall not be impaired or affected without the consent of the Holder.
6.08 Collection Suit by Trustee.
If an Event of Default specified in clause (a) or (b) of Section 6.01
occurs and is continuing, the Trustee may recover judgment in its own name
and as trustee of an express trust against the Company, or any other obligor
on the Notes for the whole amount of principal of, premium, if any, and
accrued interest remaining unpaid, together with interest on overdue
principal and, to the extent that payment of such interest is lawful,
interest on overdue installments of interest, in each case at the rate per
annum borne by the Notes and 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.
<PAGE>
6.09 Trustee May File Proofs of Claims.
The Trustee may file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel) and the Holders allowed
in any judicial proceedings relative to the Company or the Subsidiaries of
the Company (or any other obligor upon the Notes), their creditors or their
property and shall be entitled and empowered to collect and receive any
monies or other property payable or deliverable on any such claims and to
distribute the same, and any Custodian in any such judicial proceedings 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 to it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agent and counsel, and any other amounts due the Trustee under Section
7.08. Nothing herein contained 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 Notes
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.
6.10 Priorities.
If the Trustee collects any money pursuant to this Article Six, it shall
pay out such money in the following order:
First: to the Trustee for amounts due under Section 7.08;
Second: subject to Article Ten, to Holders for interest accrued on the
Notes,
ratably, without preference or priority of any kind, according to
the
amounts due and payable on the Notes for interest;
Third: subject to Article Ten, to Holders for principal amounts (including
any premium) owing under the Notes, ratably, without preference or
priority of any kind, according to the amounts due and payable on
the
Notes for principal (including any premium); and
Fourth: the balance, if any, to the Company.
The Trustee, upon prior written notice to the Company, may fix a record
date and payment date for any payment to Noteholders pursuant to this Section
6.10.
<PAGE>
6.11 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted
by it as Trustee, a court may in its discretion require the filing by any
party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having
due regard to the merits and good faith of the claims or defenses made by the
party litigant. This Section 6.11 does not apply to any suit by the Trustee,
any suit by a Holder pursuant to Section 6.07, or a suit by Holders of more
than 10% in aggregate principal amount of the outstanding Notes. This
Section 6.11 shall not be deemed to authorize any court to require an
undertaking or to make such an assessment in any suit instituted by the
Company or in any suit for the enforcement of the right to convert any Note
in accordance with Article 11.
<PAGE>
6.12 Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture or any Note 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 the
Company, the Trustee and the Holders shall, subject to any determination in
such proceeding, 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.
ARTICLE SEVEN
TRUSTEE
7.01 Duties.
(a) 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 person would exercise or use under the circumstances in the conduct
of such person's own affairs.
(b) Except during the continuance of an Event of Default,
(i) the Trustee need perform only such duties as are specifically set
forth in this Indenture, and no implied covenants or obligations
shall be read into this Indenture against the Trustee; and
(ii) 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.
(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 willful misconduct, except that
(i) this paragraph does not limit the effect of paragraph (b) of this
Section 7.01;
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts;
(iii) the Trustee shall not be liable with respect to any action it takes
or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05;
<PAGE>
(d) 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.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01.
7.02 Rights of Trustee.
Subject to Section 7.01 hereof and the provisions of TIA Sec. 315:
(a) the Trustee may rely on any document reasonably believed by it to
be genuine and to have been signed or presented by the proper person. The
Trustee need not investigate any fact or matter stated in the document.
(b) before the Trustee acts or refrains from acting, it may consult
with counsel and may require an Officers' Certificate or an Opinion of
Counsel, which shall conform to Sections 12.04 and 12.05. The Trustee shall
not be liable for any action it takes or omits to take in good faith in
reliance on such certificate or opinion.
(c) the Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) the Trustee shall not be liable for any action 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 Indenture other
than any liabilities arising out of its own negligence.
(e) the Trustee may consult with counsel of its own choosing and the
advice or opinion of such counsel as to matters of law shall be full and
complete authorization and protection in respect of any action taken, omitted
or suffered by it hereunder in good faith and in accordance with the advice
or opinion of such counsel.
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters as
it may see fit.
(g) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
<PAGE>
7.03 Individual Rights of Trustee.
The Trustee, any Paying Agent, Registrar or any other agent of the
Company, in its individual or any other capacity, may become the owner or
pledgee of Notes and, subject to Sections 7.11 and 7.12 and TIA Sec. 310 and
311, may otherwise deal with the Company and its Subsidiaries with the same
rights it would have if it were not the Trustee, Paying Agent, Registrar or
such other agent.
7.04 Trustee's Disclaimer.
The Trustee makes no representations as to the validity or sufficiency
of this Indenture or of the Notes, it shall not be accountable for the
Company's use or application of the proceeds from the Notes, it shall not be
responsible for the use or application of any money received by any Paying
Agent other than the Trustee and it shall not be responsible for any
statement in the Notes other than the Trustee's certificate of
authentication.
7.05 Notice of Default.
If a Default or an Event of Default occurs and is continuing and if it
is known to a Trust Officer of the Trustee, the Trustee shall mail to each
Holder notice of the Default or Event of Default within 30 days thereafter;
provided, however, that, except in the case of a Default in the payment of
the principal of, premium, if any, or interest on any Note, the Trustee shall
be protected in withholding such notice if and so long as the board of
directors, the executive committee of the board of directors or a committee
of the directors of the Trustee and/or Trust Officers in good faith
determines that the withholding of such notice is in the interest of the
Holders.
7.06 Money Held in Trust.
All moneys received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were
received, but need not be segregated from other funds except to the extent
required herein or by law. The Trustee shall not be under any liability for
interest on any moneys received by it hereunder, except as the Trustee may
agree with the Company.
7.07 Reports by Trustee to Holders.
Within 60 days after each May 15 beginning with the May 15 following the
date of this Indenture, the Trustee shall, to the extent that any of the
events described in TIA Sec. 313(a) shall have occurred within the previous
twelve months, but not otherwise, mail to each Holder a brief report dated as
of such May 15 that complies with TIA Sec. 313(a). The Trustee also shall
comply with TIA Secs. 313(b) and 313(c).
A copy of each report at the time of its mailing to Holders shall be
mailed to the Company and filed with the SEC and each securities exchange, if
any, on which the Notes are listed.
<PAGE>
The Company shall notify the Trustee in writing if the Notes become
listed on any securities exchange.
7.08 Compensation and Indemnity.
The Company covenants and agrees to pay the Trustee from time to time
reasonable compensation for its services. The Trustee's compensation shall
not be limited by any law on compensation of a trustee of an express trust.
The Company shall reimburse the Trustee upon request for all reasonable
disbursements, expenses and advances incurred or made by it. Such expenses
shall include the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel.
The Company shall indemnify the Trustee for, and hold it harmless
against, any loss or liability incurred by it arising out of or in connection
with the administration of this trust and its rights or duties hereunder,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers
or duties hereunder. The Trustee shall notify the Company promptly of any
claim asserted against the Trustee for which it may seek indemnity. The
Company shall defend the claim and the Trustee shall cooperate in the
defense. The Trustee may have separate counsel and the Company shall pay the
reasonable fees and expenses of such counsel. The Company need not pay for
any settlement made without its prior written consent. The Company need not
reimburse any expense or indemnify against any loss or liability to the
extent incurred by the Trustee through its negligence, bad faith or willful
misconduct.
To secure the Company's payment obligations in this Section 7.08, the
Trustee shall have a Lien prior to the Notes on all assets held or collected
by the Trustee, in its capacity as Trustee, except assets held in trust to
pay principal of, premium, if any, or interest on particular Notes.
When the Trustee incurs expenses or renders services in connection with an
Event of Default specified in Section 6.01(f) or (g), the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The Company's obligations under this Section 7.08 and any Lien arising
hereunder shall survive the resignation or removal of any trustee, the
discharge of the Company's obligations pursuant to Article Eight and/or the
termination of this Indenture.
<PAGE>
7.09 Replacement of Trustee.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the outstanding Notes may remove the Trustee
by so notifying the Company and the Trustee and may appoint a successor
trustee with the Company's prior written consent. The Company may remove the
Trustee if:
(1) the Trustee fails to comply with Section 7.11;
(2) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy
Law;
(3) a receiver or other public officer takes charge of the Trustee or its
property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall notify each Holder of
such event and shall promptly appoint a successor Trustee. The Trustee shall
be entitled to payment of its fees and reimbursement of its expenses while
acting as Trustee, and to the extent such amounts remain unpaid, the Trustee
that has resigned or has been removed shall retain the Lien afforded by
Section 7.08. Within one year after the successor Trustee takes office, the
Holders of a majority in principal amount of the outstanding Notes may, with
the Company's prior written consent, appoint a successor Trustee to replace
the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after
that, the retiring Trustee shall transfer all property held by it as Trustee
to the successor Trustee, subject to the Lien provided in Section 7.08, the
resignation or removal of the retiring Trustee shall become effective, and
the successor Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. A successor Trustee shall mail notice of its
succession to each Noteholder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holders of at least 10% in principal amount of the outstanding Notes may
petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.11, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.09, the Company's obligations under Section 7.08 shall continue for the
benefit of the retiring Trustee.
<PAGE>
7.10 Successor Trustee by Merger, etc.
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation or national banking association, the resulting, surviving or
transferee corporation or national banking association without any further
act shall, if such resulting, surviving or transferee corporation or national
banking association is otherwise eligible hereunder, be the successor
Trustee.
7.11 Eligibility; Disqualification.
There shall at all times be a Trustee hereunder which shall be eligible
to act as Trustee under TIA Sec. 310(a)(1) and 310(a)(5) and which shall have a
combined capital and surplus of at least $50,000,000. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of 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 corporation 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, the Trustee shall
resign immediately in the manner and with the effect hereinafter specified in
this Article.
7.12 Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Sec. 311(a), excluding any creditor
relationship listed in TIA Sec. 311(b). If the present or any future Trustee
shall resign or be removed, it shall be subject to TIA Sec. 311(a) to the
extent provided therein.
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE
8.01 Termination of the Company's Obligations.
The Company may terminate its obligations under the Notes and this
Indenture, except those obligations referred to in the penultimate paragraph
of this Section 8.01, if all Notes previously authenticated and delivered
(other than destroyed, lost or stolen Notes which have been replaced or paid
or Notes for whose payment money has theretofore been deposited with the
Trustee or the Paying Agent in trust or segregated and held in trust by the
Company and thereafter repaid to the Company, as provided in Section 8.04)
have been delivered to the Trustee for cancellation and the Company has paid
all sums payable by it hereunder, or if:
(a) either (i) pursuant to Article Three, the Company shall have
given notice to the Trustee and mailed a notice of redemption to each Holder
of the redemption of all of the Notes under arrangements satisfactory to the
Trustee for the giving of such notice or (ii) all Notes have otherwise become
due and payable hereunder;
<PAGE>
(b) the Company shall have irrevocably deposited or caused to be
deposited with the Trustee or a trustee reasonably satisfactory to the
Trustee, under the terms of an irrevocable trust agreement in form and
substance satisfactory to the Trustee, as trust funds in trust solely for the
benefit of the Holders for that purpose, money in such amount as is
sufficient without consideration of reinvestment of such interest, to pay
principal of, premium, if any, and interest on the outstanding Notes to
maturity or redemption, as certified in a certificate of a nationally
recognized firm of independent public accountants; provided that the Trustee
shall have been irrevocably instructed to apply such money to the payment of
said principal, premium, if any, and interest with respect to the Notes;
(c) no Default or Event of Default with respect to this Indenture or
the Notes shall have occurred and be continuing on the date of such deposit
or shall occur as a result of such deposit and such deposit will not result
in a breach or violation of, or constitute a default under, any other
instrument to which the Company is a party or by which it is bound;
(d) the Company shall have paid all other sums payable by it
hereunder;
(e) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent providing for the termination of the Company's obligation under the
Notes and this Indenture have been complied with.
Notwithstanding the foregoing paragraph, the Company's obligations in
Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02 and 7.08 and in Article Eleven
shall survive until the Notes are no longer outstanding pursuant to the last
paragraph of Section 2.08. After the Notes are no longer outstanding, the
Company's obligations in Sections 7.08, 8.03, 8.04 and 8.05 shall survive.
From and after the time of deposit, the money deposited shall not be subject
to the rights of holders of Senior Indebtedness pursuant to the provisions of
Article Ten.
After such delivery or irrevocable deposit the Trustee upon request
shall acknowledge in writing the discharge of the Company's obligations under
the Notes and this Indenture except for those surviving obligations specified
above.
8.02 Legal Defeasance and Covenant Defeasance.
(a) The Company may, at its option by Board Resolution of the Board
of Directors of the Company, at any time, with respect to the Notes, elect to
have either paragraph (b) or paragraph (c) below be applied to the
outstanding Notes upon compliance with the conditions set forth in
paragraph (d).
(b) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (b), the Company shall be deemed to have been
released and discharged from its obligations with respect to the outstanding
Notes on the date the conditions set forth below are satisfied (hereinafter,
"legal defeasance"). For this purpose, such legal defeasance means that the
Company shall be deemed to have paid and discharged the entire indebtedness
<PAGE>
represented by the outstanding Notes, which shall thereafter be deemed to be
"outstanding" only for the purposes of paragraph (e) below and the other
Sections of and matters under this Indenture referred to in (i) and (ii)
below, and to have satisfied all its other obligations under such Notes and
this Indenture insofar as such Notes are concerned (and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging the
same), and Holders of the Notes and any amounts deposited under paragraph (d)
below shall cease to be subject to any obligations to, or the rights of, any
holder of Senior Indebtedness under Article Ten or otherwise, except for the
following which shall survive until otherwise terminated or discharged
hereunder: (i) the rights of Holders of outstanding Notes to receive solely
from the trust fund described in paragraph (d) below and as more fully set
forth in such paragraph, payments in respect of the principal of, premium,
if any, and interest on such Notes when such payments are due, (ii) the
Company's obligations with respect to such Notes under Sections 2.06, 2.07
and 4.02 and under Article Eleven, and, with respect to the Trustee, under
Section 7.08, (iii) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and (iv) this Article Eight. Subject to compliance with
this Section 8.02, the Company may exercise its option under this
paragraph (b) notwithstanding the prior exercise of its option under
paragraph (c) below with respect to the Notes.
(c) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (c), the Company shall be released and
discharged from its obligations under any covenant contained in Articles Five
and Ten and in Sections 4.07 through 4.16 and Sections 4.18 and 4.19 with
respect to the outstanding Notes on and after the date the conditions set
forth below are satisfied (hereinafter, "covenant defeasance"), and the Notes
shall thereafter be deemed to be not "outstanding" for the purpose of any
direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder and
Holders of the Notes and any amounts deposited under paragraph (d) below
shall cease to be subject to any obligations to, or the rights of, any holder
of Senior Indebtedness under Article Ten or otherwise. For this purpose,
such covenant defeasance means that, with respect to the outstanding Notes,
the Company may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such covenant, whether
directly or indirectly, by reason of any reference elsewhere herein to any
such covenant or by reason of any reference in any such covenant to any other
provision herein or in any other document and such omission to comply shall
not constitute a Default or an Event of Default under Section 6.01(c), but,
except as specified above, the remainder of this Indenture and such Notes
shall be unaffected thereby.
(d) The following shall be the conditions to application of either
paragraph (b) or paragraph (c) above to the outstanding Notes:
(i) the Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the
requirements of Section 7.11 who shall agree to comply with the
provisions of this Section 8.02 applicable to it) as trust funds in
trust for the purpose of making the following payments,
specifically
pledged as security for, and dedicated solely to, the benefit of
the
<PAGE>
Holders of such Notes, (x) cash, in United States dollars, in an
amount or (y) direct non-callable obligations of, or non-callable
obligations guaranteed by, the United States of America for the
payment of which guarantee or obligation the full faith and credit
of the United States is pledged ("U.S. Government Obligations")
maturing as to principal, premium, if any, and interest in such
amounts of cash, in United States dollars, and at such times as are
sufficient without consideration of any reinvestment of such
interest, to pay principal of, premium, if any, and interest on the
outstanding Notes not later than one day before the due date of any
payment, or (z) a combination thereof, sufficient, in the opinion
of
a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the
Trustee, to pay and discharge and which shall be applied by the
Trustee (or other qualifying trustee) to pay and discharge
principal
of, premium, if any, and interest on the outstanding Notes (except
lost, stolen or destroyed Notes which have been replaced or repaid)
on the Final Maturity Date or otherwise in accordance with the
terms
of this Indenture and of such Notes; provided, however, that the
Trustee (or other qualifying trustee) shall have received an
irrevocable written order from the Company instructing the Trustee
(or other qualifying trustee) to apply such money or the proceeds
of
such U.S. Government Obligations to said payments with respect to
the Notes;
(ii) no Default or Event of Default or event which with notice or lapse
of time or both would become a Default or an Event of Default with
respect to the Notes shall have occurred and be continuing on the
date of such deposit or, insofar as Section 6.01(a) is concerned,
at
any time during the period ending on the 91st day after the date of
such deposit (it being understood that this condition shall not be
deemed satisfied until the expiration of such period);
(iii) such legal defeasance or covenant defeasance shall not cause the
Trustee to have a conflicting interest with respect to any
securities of the Company;
(iv) such legal defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a Default or Event of Default
under, this Indenture or any other material agreement or instrument
to which the Company is a party or by which it is bound;
(v) in the case of an election under paragraph (b) above, the Company
shall have delivered to the Trustee an Opinion of Counsel stating
that (x) the Company has received from, or there has been published
by, the Internal Revenue Service a ruling or (y) since the date of
this Indenture, there has been a change in the applicable Federal
income tax law, in either case to the effect that, and based thereon
such opinion shall confirm that, the Holders of the outstanding
Notes
will not recognize income, gain or loss for Federal income tax
purposes as a result of such legal defeasance and will be subject to
<PAGE>
Federal income tax on the same amounts, in the same manner and at
the
same times as would have been the case if such legal defeasance had
not occurred;
(vi) in the case of an election under paragraph (c) above, the Company
shall have delivered to the Trustee an Opinion of Counsel to the
effect that the Holders of the outstanding Notes will not recognize
income, gain or loss for Federal income tax purposes as a result of
such covenant defeasance and will be subject to Federal income tax
on
the same amounts, in the same manner and at the same times as would
have been the case if such covenant defeasance had not occurred;
(vii) in the case of an election under either paragraph (b) or (c) above,
an Opinion of Counsel to the effect that, (x) the trust funds will
not be subject to any rights of any other holders of Indebtedness of
the Company, and (y) after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable
Bankruptcy Law; provided, however, that if a court were to rule
under
any such law in any case or proceeding that the trust funds remained
property of the Company, no opinion needs to be given as to the
effect of such laws on the trust funds except the following:
(A) assuming such trust funds remained in the Trustee's possession
prior to such court ruling to the extent not paid to Holders of
Notes, the Trustee will hold, for the benefit of the Holders of
Notes, a valid and enforceable security interest in such trust
funds
that is not avoidable in bankruptcy or otherwise, subject only to
principles of equitable subordination, (B) the Holders of Notes will
be entitled to receive adequate protection of their interests in
such
trust funds if such trust funds are used, and (C) no property,
rights
in property or other interests granted to the Trustee or the Holders
of Notes in exchange for or with respect to any of such funds will
be
subject to any prior rights of any other person, subject only to
prior Liens granted under Section 364 of Title 11 of the U.S.
Bankruptcy Code (or any section of any other Bankruptcy Law having
the same effect), but still subject to the foregoing clause (B); and
(viii) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that (x) all
conditions precedent provided for relating to either the legal
defeasance under paragraph (b) above or the covenant defeasance
under
paragraph (c) above, as the case may be, have been complied with and
(y) if any other Indebtedness of the Company shall then be
outstanding or committed, such legal defeasance or covenant
defeasance will not violate the provisions of the agreements or
instruments evidencing such Indebtedness.
(e) All money and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee (or other qualifying trustee,
collectively for purposes of this paragraph (e), the "Trustee") pursuant to
paragraph (d) above in respect of the outstanding Notes shall be held in
trust and applied by the Trustee, in accordance with the provisions of such
Notes and this Indenture, to the payment, either directly or through any
Paying Agent (other than the Company or any Affiliate of the Company) as the
Trustee may
<PAGE>
determine, to the Holders of such Notes of all sums due and to become due
thereon in respect of principal, premium and interest, but such money need
not be segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to paragraph (d) above or the principal, premium, if any,
and interest received in respect thereof other than any such tax, fee or
other charge which by law is for the account of the Holders of the
outstanding Notes.
Anything in this Section 8.02 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the
request, in writing, by the Company any money or U.S. Government Obligations
held by it as provided in paragraph (d) above which, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, are in excess of the
amount thereof which would then be required to be deposited to effect an
equivalent legal defeasance or covenant defeasance.
8.03 Application of Trust Money.
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Sections 8.01 and 8.02, and shall apply the
deposited money and the money from U.S. Government Obligations in accordance
with this Indenture to the payment of principal of, premium, if any, and
interest on the Notes.
8.04 Repayment to Company.
Subject to Sections 7.08, 8.01 and 8.02, the Trustee shall promptly pay
to the Company, upon receipt by the Trustee of an Officers' Certificate, any
excess money, determined in accordance with Section 8.02, held by it at any
time. The Trustee and the Paying Agent shall pay to the Company, upon
receipt by the Trustee or the Paying Agent, as the case may be, of an
Officers' Certificate, any money held by it for the payment of principal,
premium, if any, or interest that remains unclaimed for two years after
payment to the Holders is required; provided, however, that the Trustee and
the Paying Agent before being required to make any payment may, but need not,
at the expense of the Company cause to be published once in a newspaper of
general circulation in The City of New York or mail to each Holder entitled
to such money notice that such money remains unclaimed and that after a date
specified therein, which shall be at least 30 days from the date of such
publication or mailing, any unclaimed balance of such money then remaining
will be repaid to the Company. After payment to the Company, Holders
entitled to money must look solely to the Company for payment as general
creditors unless an applicable abandoned property law designates another
person, and all liability of the Trustee or Paying Agent with respect to such
money shall thereupon cease.
<PAGE>
8.05 Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with this Indenture 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, then and only then the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit
had been made pursuant to this Indenture until such time as the Trustee is
permitted to apply all such money or U.S. Government Obligations in
accordance with this Indenture; provided, however, that if the Company has
made any payment of principal of, premium, if any, or interest on any Notes
because of the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Notes to receive such payment
from the money or U.S. Government Obligations held by the Trustee or Paying
Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
9.01 Without Consent of Holders.
The Company, when authorized by a Board Resolution of its Board of
Directors, and the Trustee may amend, waive or supplement this Indenture or
the Notes without notice to or consent of any Holder:
(a) to cure any ambiguity, defect or inconsistency;
(b) to comply with Article Five and Section 11.11;
(c) to provide for uncertificated Notes in addition to certificated Notes;
(d) to comply with any requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
(e) to make any change that would provide any additional benefit or rights
to the Holders or that does not adversely affect the rights of any
Holder.
Notwithstanding the above, the Trustee and the Company may not make any
change that adversely affects the rights of any Holders hereunder. The
Company shall be required to deliver to the Trustee an Opinion of Counsel
stating that any such change made pursuant to paragraph (a) or (e) of this
Section 9.01 does not adversely affect the rights of any Holder.
<PAGE>
9.02 With Consent of Holders.
Subject to Section 6.04, the Company, when authorized by a Board
Resolution of its Board of Directors, and the Trustee may amend this
Indenture or the Notes with the written consent of the Holders of not less
than a majority in aggregate principal amount of the Notes then outstanding,
and the Holders of not less than a majority in aggregate principal amount of
the Notes then outstanding by written notice to the Trustee may waive future
compliance by the Company with any provision of this Indenture or the Notes.
Notwithstanding the provisions of this Section 9.02, without the consent of
each Holder affected, an amendment or waiver, including a waiver pursuant to
Section 6.04, may not:
(a) reduce the percentage in outstanding aggregate principal amount
of Notes the Holders of which must consent to an amendment, supplement or
waiver of any provision of this Indenture or the Notes;
(b) reduce or change the rate or time for payment of interest on any
Note;
(c) change the currency (including Secondary Notes, if applicable) in
which any Note, or any premium or interest thereon, is payable;
(d) reduce the principal amount outstanding of or extend the fixed
maturity of any Note or alter the redemption provisions with respect thereto;
(e) waive a default in the payment of the principal of, premium, if
any, or interest on, or redemption or an offer to purchase required hereunder
with respect to, any Note;
(f) make the principal of, premium, if any, or interest on any Note
payable in money other than that stated in the Note;
(g) modify this Section 9.02 or Section 6.04 or Section 6.07;
(h) amend, alter, change or modify the obligation of the Company to
make and consummate a Change of Control Offer in the event of a Change of
Control or make and consummate the offer with respect to any Asset Sale or
modify any of the provisions or definitions with respect thereto;
(i) modify or change any provision of this Indenture affecting the
subordination or ranking of the Notes in a manner adverse to the Holders; or
(j) impair the right to institute suit for the enforcement of any
payment on or with respect to the Notes; or
(k) adversely affect the right to convert any Note as provided in
Article Eleven.
<PAGE>
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Company shall mail to the Holder of each Note affected
thereby, with a copy to the Trustee, a notice briefly describing the
amendment, supplement or waiver. Any failure of the Company to mail such
notice, or any defect therein, shall not, however, in any way impair or
affect the validity of any amendment, supplement or waiver.
9.03 Compliance with Trust Indenture Act.
Every amendment of or supplement to this Indenture or the Notes shall
comply with the TIA as then in effect.
9.04 Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent to
it by a Holder is a continuing consent by such Holder and every subsequent
Holder of that Note or portion of that Note that evidences the same debt as
the consenting Holder's Note, even if notation of the consent is not made on
any Note. However, any such Holder or subsequent Holder may revoke the
consent as to his Note or portion of a Note prior to such amendment,
supplement or waiver becoming effective. Such revocation shall be effective
only if the Trustee receives the notice of revocation before the date the
amendment, supplement or waiver becomes effective. Notwithstanding the
above, nothing in this paragraph shall impair the right of any Holder under
Sec. 316(b) of the TIA.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the
second and third sentences of the immediately preceding paragraph, those
persons who were Holders at such record date (or their duly designated
proxies), and only those persons, shall be entitled to consent to such
amendment, supplement or waiver or to revoke any consent previously given,
whether or not such persons continue to be Holders after such record date.
Such consent shall be effective only for actions taken within 90 days after
such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder; unless it makes a change described in any of clauses (a)
through (k) of Section 9.02; if it makes such a change, the amendment,
supplement or waiver shall bind every subsequent Holder of a Note or portion
of a Note that evidences the same debt as the consenting Holder's Note.
<PAGE>
9.05 Notation on or Exchange of Notes.
If an amendment, supplement or waiver changes the terms of a Note, the
Trustee shall (in accordance with the specific direction of the Company)
request the Holder of the Note to deliver it to the Trustee. The Trustee
shall (in accordance with the specific direction of the Company) place an
appropriate notation on the Note about the changed terms and return it to the
Holder. Alternatively, if the Company or the Trustee so determines, the
Company in exchange for the Note shall issue and the Trustee shall
authenticate a new Note that reflects the changed terms. Failure to make the
appropriate notation or issue a new Note shall not affect the validity and
effect of such amendment, supplement or waiver.
9.06 Trustee May Sign Amendments, etc.
The Trustee shall sign any amendment, supplement or waiver authorized
pursuant to this Article Nine if the amendment, supplement or waiver does not
adversely affect the rights, duties, liabilities or immunities of the
Trustee. If it does, the Trustee may, but need not, sign it. In signing or
refusing to sign such amendment, supplement or waiver, the Trustee shall be
entitled to receive, and shall be fully protected in relying upon, an
Officers' Certificate and an Opinion of Counsel stating that the execution of
any amendment, supplement or waiver is authorized or permitted by this
Indenture, that it is not inconsistent herewith and that it will be valid and
binding upon the Company in accordance with its terms.
ARTICLE TEN
SUBORDINATION OF NOTES
10.01 Notes Subordinate to Senior Indebtedness.
The Company covenants and agrees, and each Holder of a Note, by his
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article Ten, the Indebtedness
represented by the Notes is hereby expressly made subordinate and subject in
right of payment as provided in this Article to the prior payment in full in
cash or Cash Equivalents or, as acceptable to the holders of Senior
Indebtedness, in any other manner, of all amounts payable under all existing
and future Senior Indebtedness.
This Article Ten shall constitute a continuing offer to all persons who,
in reliance upon such provisions, become holders of, or continue to hold
Senior Indebtedness; and such provisions are made for the benefit of the
holders of Senior Indebtedness; and such holders are made obligees hereunder
and they or each of them may enforce such provisions.
10.02 Payment Over of Proceeds upon Dissolution, etc.
In the event of (a) any insolvency or bankruptcy case or proceeding, or
any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relating to the Company or to its assets,
or (b) any liquidation, dissolution or other winding-up of the Company,
whether voluntary or involuntary and whether or not involving insolvency or
<PAGE>
bankruptcy, or (c) any assignment for the benefit of creditors or any other
marshaling of assets or liabilities of the Company, then and in any such
event:
(a) the holders of Senior Indebtedness shall be entitled to receive
Payment in full in cash or Cash Equivalents or, as acceptable to the holders
of Senior Indebtedness, in any other manner, of all Senior Indebtedness
(including, in the case of Designated Senior Indebtedness, any interest
accruing subsequent to the filing of a petition for bankruptcy at the rate
provided for in the documentation governing such Designated Senior
Indebtedness, to the extent that such interest is an allowed claim under
applicable law), or provision shall be made for such payment, before the
Holders of the Notes are entitled to receive any payment or distribution of
any kind or character (excluding securities of the Company or any other
person that are equity securities or are subordinated in right of payment to
all Senior Indebtedness that may at the time be outstanding, to substantially
the same extent as, or to a greater extent than, the Notes as provided in
this Article; such securities are hereinafter collectively referred to as
"Permitted Junior Securities") on account of principal of, premium, if any,
or interest on the Notes; and
(b) any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities (excluding Permitted
Junior Securities), by set-off or otherwise, to which the Holders or the
Trustee would be entitled but for the provisions of this Article shall be
paid by the liquidating trustee or agent or other person making such payment
or distribution, whether a trustee in bankruptcy, a receiver or liquidating
trustee or otherwise, directly to the holders of Senior Indebtedness or
their representative or representatives or to the trustee or trustees under
any indenture under which any instruments evidencing any of such Senior
Indebtedness may have been issued, ratably according to the aggregate amounts
remaining unpaid on account of the Senior Indebtedness held or represented by
each, to the extent necessary to make payment in full in cash or Cash
Equivalents or, as acceptable to the holders of Senior Indebtedness, in any
other manner, of all Senior Indebtedness remaining unpaid, after giving
effect to any concurrent payment or distribution to the holders of such
Senior Indebtedness; and
(c) in the event that, notwithstanding the foregoing provisions of
this Section 10.02, the Trustee or the Holder of any Note shall have received
any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, in respect of principal
of, premium, if any, or interest on the Notes before all Senior Indebtedness
is paid in full in cash or Cash Equivalents or, as acceptable to the holders
of Senior Indebtedness, in any other manner, or payment thereof provided for,
then and in such event such payment or distribution (excluding Permitted
Junior Securities) shall be paid over or delivered forthwith to the trustee
in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or
other person making payment or distribution of assets of the Company for
application to the payment of all Senior Indebtedness remaining unpaid, to
the extent necessary to pay all Senior Indebtedness in full in cash or Cash
Equivalents or, as acceptable to the holders of Senior Indebtedness, in any
other manner, after giving effect to any concurrent payment or distribution
to or for the
<PAGE>
holders of Senior Indebtedness.
The consolidation of the Company with, or the merger of the Company with
or into, another person or the liquidation or dissolution of the Company
following the conveyance, transfer or lease of its properties and assets
substantially as an entirety to another person upon the terms and conditions
set forth in Article Five hereof shall not be deemed a dissolution,
winding-up, liquidation, reorganization, assignment for the benefit of
creditors or marshaling of assets and liabilities of the Company for the
purposes of this Article if the person formed by such consolidation or the
surviving entity of such merger or the person which acquires by conveyance,
transfer or lease such properties and assets substantially as an entirety,
as the case may be, shall, as a part of such consolidation, merger,
conveyance, transfer or lease, comply with the conditions set forth in such
Article Five.
10.03 Suspension of Payment When Senior Indebtedness in Default.
(a) Unless Section 10.02 shall be applicable, upon the occurrence of
a Payment Default, no payment or distribution of any assets of the Company of
any kind or character (excluding Permitted Junior Securities) shall be made
by or on behalf of the Company on account of principal of, premium, if any,
or interest on the Notes or on account of the purchase, redemption or other
acquisition of any Notes (other than payments previously made pursuant to
Article Eight) unless and until such Payment Default shall have been cured or
waived or shall have ceased to exist or such Senior Indebtedness as to which
such Payment Default relates shall have been discharged or paid in full in
cash or Cash Equivalents, after which, subject to Section 10.02 (if
applicable), the Company shall resume making any and all required payments in
respect of the Notes, including any missed payments.
(b) Unless Section 10.02 shall be applicable, upon the occurrence of
a Non-payment Default and upon the earlier to occur of (1) the fifth day
following receipt by the Trustee from a Senior Representative of written
notice of such occurrence stating that such notice is a Payment Blockage
Notice pursuant to Section 10.03(b) of this Indenture, or (2) if such
Non-payment Default results from acceleration of the Notes, the date of such
acceleration, no payment or distribution of any assets of the Company of any
kind or character (excluding Permitted Junior Securities and other than
payments previously made pursuant to Article Eight) shall be made by or on
behalf of the Company on account of principal of, premium, if any, or
interest on the Notes or on account of the purchase, redemption or other
acquisition of Notes for a period ("Payment Blockage Period") commencing on
the fifth day following receipt by the Trustee of such notice or the date of
acceleration referred to in clause (2) above, as the case may be, unless and
until the earliest to occur of the following events: (w) 179 days shall have
elapsed since receipt of such written notice by the Trustee or the date of
such acceleration (provided such Designated Senior Indebtedness shall not
theretofore have been accelerated), (x) such Non-payment Default shall have
been cured or waived or shall have ceased to exist, (y) such Designated
Senior Indebtedness shall have been discharged or paid in full in cash or
Cash Equivalents or (z) such Payment Blockage Period shall have been
terminated by written notice to the Company or the Trustee from the Senior
Representative initiating such Payment Blockage Period, after which, in each
case, the
<PAGE>
Company shall resume making any and all required payments in respect of the
Notes, including any missed payments. Notwithstanding any other provision of
this Indenture, only one Payment Blockage Period may be commenced within any
consecutive 365-day period. No Non-payment Default with respect to
Designated Senior Indebtedness which existed or was continuing on the date of
the commencement of any Payment Blockage Period shall be, or be made, the
basis for the commencement of a second Payment Blockage Period, whether or
not within a period of 365 consecutive days, unless such default shall have
been cured for a period of not less than 90 consecutive days. In no event
shall a Payment Blockage Period extend beyond 179 days from the fifth day
following the receipt by the Trustee of the notice referred to in clause (1)
of this Section 10.03(b) or the date of the acceleration referred to in
clause (2) of this Section 10.03(b) and there must be a 186 consecutive day
period in any 365 consecutive day period during which no Payment Blockage
Period is in effect. Notwithstanding the foregoing, no further notice may be
given in respect of any Non-payment Default or in respect of any acceleration
unless and until all scheduled payments of principal, premium, if any, and
interest not paid on the Notes during any such Payment Blockage Period as a
result of any notice or acceleration shall have been paid in full in cash or
Cash Equivalents.
(c) In the event that, notwithstanding the foregoing, the Trustee or
the Holder of any Note shall have received any payment prohibited by the
foregoing provisions of this Section 10.03, then and in such event such
payment shall be paid over and delivered forthwith to the Senior
Representatives or as a court of competent jurisdiction shall direct for
application to the payment of any due and unpaid Senior Indebtedness, to the
extent necessary to pay all such due and unpaid Senior Indebtedness in cash
or Cash Equivalents, after giving effect to any concurrent payment to or for
the holders of Senior Indebtedness.
10.04 Trustee's Relation to Senior Indebtedness.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article Ten, and no implied
covenants or obligations with respect to the holders of Senior Indebtedness
shall be read into this Indenture against the Trustee. The Trustee shall not
be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and
the Trustee shall not be liable to any holder of Senior Indebtedness if it
shall mistakenly pay over or deliver to Holders, the Company or any other
person moneys or assets to which any holder of Senior Indebtedness shall be
entitled by virtue of this Article Ten or otherwise.
10.05 Subrogation to Rights of Holders of Senior Indebtedness.
Upon the payment in full of all Senior Indebtedness, the Holders of the
Notes shall be subrogated to the rights of the holders of such Senior
Indebtedness to receive payments and distributions of cash, property and
securities applicable to the Senior Indebtedness until the principal of,
premium, if any, and interest on the Notes shall be paid in full in cash or
Cash Equivalents. For purposes of such subrogation, no payments or
distributions to the holders of Senior Indebtedness of any cash, property or
<PAGE>
securities to which the Holders of the Notes or the Trustee would be entitled
except for the provisions of this Article, and no payments over pursuant to
the provisions of this Article Ten to the holders of Senior Indebtedness by
Holders of the Notes or the Trustee shall, as among the Company, its
creditors other than holders of Senior Indebtedness, and the Holders of the
Notes, be deemed to be a payment or distribution by the Company to or on
account of the Senior Indebtedness.
If any payment or distribution to which the Holders would otherwise have
been entitled but for the provisions of this Article Ten shall have been
applied, pursuant to the provisions of this Article Ten, to the payment of
all amounts payable under the Senior Indebtedness of the Company, then and in
such case the Holders shall be entitled to receive from the holders of such
Senior Indebtedness at the time outstanding any payments or distributions
received by such holders of such Senior Indebtedness in excess of the amount
sufficient to pay all amounts payable under or in respect of such Senior
Indebtedness in full.
10.06 Provisions Solely To Define Relative Rights.
The provisions of this Article Ten are and are intended solely for the
purpose of defining the relative rights of the Holders of the Notes on the
one hand and the holders of Senior Indebtedness on the other hand. Nothing
contained in this Article Ten or elsewhere in this Indenture or in the Notes
is intended to or shall (a) impair, as among the Company, its creditors other
than holders of Senior Indebtedness and the Holders of the Notes, the
obligation of the Company, which is absolute and unconditional, to pay to the
Holders of the Notes the principal of, premium, if any, and interest on the
Notes as and when the same shall become due and payable in accordance with
their terms; or (b) affect the relative rights against the Company of the
Holders of the Notes and creditors of the Company other than the holders of
Senior Indebtedness; or (c) prevent the Trustee or the Holder of any Note
from exercising all remedies otherwise permitted by applicable law upon a
Default or an Event of Default under this Indenture, subject to the rights,
if any, under this Article Ten of the holders of Senior Indebtedness (1) in
any case, proceeding, dissolution, liquidation or other winding up,
assignment for the benefit of creditors or other marshaling of assets and
liabilities of the Company referred to in Section 10.02, to receive, pursuant
to and in accordance with such Section, cash, property and securities
otherwise payable or deliverable to the Trustee or such Holder, or (2) under
the conditions specified in Section 10.03, to prevent any payment prohibited
by such Section or enforce their rights pursuant to Section 10.03(c).
The failure to make a payment on account of principal of, premium, if
any, or interest on the Notes by reason of any provision of this Article Ten
shall not be construed as preventing the occurrence of a Default or an Event
of Default hereunder.
<PAGE>
10.07 Trustee To Effectuate Subordination.
Each Holder of a Note by such Holder's acceptance thereof authorizes and
directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article Ten and appoints the Trustee his attorney-in-fact for any and all
such purposes, including, in the event of any dissolution, winding-up,
liquidation or reorganization of the Company whether in bankruptcy,
insolvency, receivership proceedings, or otherwise, the timely filing of a
claim for the unpaid balance of the Indebtedness of the Company owing to such
Holder in the form required in such proceedings and the causing of such claim
to be approved. If the Trustee does not file such a claim prior to 30 days
before the expiration of the time to file such a claim, the holders of Senior
Indebtedness, or any Senior Representative, may file such a claim on behalf
of Holders of the Notes.
10.08 No Waiver of Subordination Provisions.
(a) No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such
holder, or by any non-compliance by the Company with the terms, provisions
and covenants of this Indenture, regardless of any knowledge thereof any such
holder may have or be otherwise charged with.
(b) Without limiting the generality of Section 10.08(a), the holders
of Senior Indebtedness may, at any time and from time to time, without the
consent of or notice to the Trustee or the Holders of the Notes, without
incurring responsibility to the Holders of the Notes and without impairing or
releasing the subordination provided in this Article Ten or the obligations
hereunder of the Holders of the Notes to the holders of Senior Indebtedness,
do any one or more of the following: (1) change the manner, place or terms
of payment or extend the time of payment of, or renew or alter, Senior
Indebtedness or any instrument evidencing the same or any agreement under
which Senior Indebtedness is outstanding; (2) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing
Senior Indebtedness; (3) release any person liable in any manner for the
collection or payment of Senior Indebtedness; and (4) exercise or refrain
from exercising any rights against the Company and any other person;
provided, however, that in no event shall any such actions limit the right of
the Holders of the Notes to take any action to accelerate the maturity of the
Notes pursuant to Article Six hereof or to pursue any rights or remedies
hereunder or under applicable laws if the taking of such action does not
otherwise violate the terms of this Indenture.
<PAGE>
10.09 Notice to Trustee.
(a) The Company shall give prompt written notice to the Trustee of
any fact known to the Company which would prohibit the making of any payment
to or by the Trustee in respect of the Notes. Notwithstanding the provisions
of this Article Ten or any other provision of this Indenture, the Trustee
shall not be charged with knowledge of the existence of any facts which would
prohibit the making of any payment to or by the Trustee in respect of the
Notes, unless and until the Trustee shall have received written notice
thereof from the Company or a holder of Senior Indebtedness or from any
trustee, fiduciary or agent therefor; and, prior to the receipt of any such
written notice, the Trustee, subject to the provisions of this Section 10.09,
shall be entitled in all respects to assume that no such facts exist;
provided, however, that if the Trustee shall not have received the notice
provided for in this Section 10.09 at least three Business Days prior to the
date upon which by the terms hereof any money may become payable for any
purpose under this Indenture (including, without limitation, the payment of
the principal of, premium, if any, or interest on any Note), then, anything
herein contained to the contrary notwithstanding but without limiting the
rights and remedies of the holders of Senior Indebtedness or any trustee,
fiduciary or agent thereof, the Trustee shall have full power and authority
to receive such money and to apply the same to the purpose for which such
money was received and shall not be affected by any notice to the contrary
which may be received by it within three Business Days prior to such date;
nor shall the Trustee be charged with knowledge of the curing of any such
default or the elimination of the act or condition preventing any such
payment unless and until the Trustee shall have received an Officers'
Certificate to such effect.
(b) Subject to the provisions of Section 7.01, the Trustee shall be
entitled to rely on the delivery to it of a written notice to the Trustee and
the Company by a person representing himself to be a holder of Senior
Indebtedness (or a trustee, fiduciary or agent therefor) to establish that
such notice has been given by a holder of Senior Indebtedness (or a trustee,
fiduciary or agent therefor). In the event that the Trustee determines in
good faith that further evidence is required with respect to the right of any
person as a holder of Senior Indebtedness to participate in any payment or
distribution pursuant to this Article Ten, the Trustee may request such
person to furnish evidence to the reasonable satisfaction of the Trustee as
to the amount of Senior Indebtedness held by such person, the extent to which
such person is entitled to participate in such payment or distribution and
any other facts pertinent to the rights of such person under this Article
Ten, and if such evidence is not furnished, the Trustee may defer any payment
to such person pending judicial determination as to the right of such person
to receive such payment.
<PAGE>
10.10 Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets of the Company referred to in
this Article Ten, the Trustee, and the Holders, shall be entitled to rely
upon any order or decree entered by any court of competent jurisdiction in
which such insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding-up or similar case or proceeding is pending, or a
certificate of the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee for the benefit of creditors, agent or other person
making such payment or distribution, delivered to the Trustee or to the
Holders, for the purpose of ascertaining the persons entitled to participate
in such payment or distribution, the holders of Senior Indebtedness and other
Indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article.
10.11 Rights of Trustee as a Holder of Senior Indebtedness; Preservation of
Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article Ten with respect to any Senior Indebtedness
which may at any time be held by it, to the same extent as any other holder
of Senior Indebtedness, and nothing in this Indenture shall deprive the
Trustee of any of its rights as such holder. Nothing in this Article Ten
shall apply to claims of, or payments to, the Trustee under or pursuant to
Section 7.08.
10.12 Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying
Agent within its meaning as fully for all intents and purposes as if such
Paying Agent were named in this Article Ten in addition to or in place of the
Trustee; provided, however, that Section 10.11 shall not apply to the Company
or any Affiliate of the Company if it or such Affiliate acts as Paying Agent.
10.13 No Suspension of Remedies.
Nothing contained in this Article Ten shall limit the right of the
Trustee or the Holders of Notes to take any action to accelerate the maturity
of the Notes pursuant to Article Six or to pursue any rights or remedies
hereunder or under applicable law, subject to the rights, if any, under this
Article Ten of the holders, from time to time, of Senior Indebtedness.
<PAGE>
10.14 Certain Conversions Deemed Payment.
For the purposes of this Article only, (a) the issuance and delivery of
Permitted Junior Securities upon conversion of Notes in accordance with
Article Eleven shall not be deemed to constitute a payment or distribution on
account of the principal of or premium, if any, or interest on Notes or on
account of the purchase or other acquisition of Notes, and (b) the payment,
issuance or delivery of cash, property or securities (other than Permitted
Junior Securities) upon conversion of a Note shall be deemed to constitute
payment on account of the principal of such Note. Nothing contained in this
Article or elsewhere in this Indenture or in the Notes is intended to or
shall impair, as among the Company, its creditors other than holders of
Senior Indebtedness and the Holders of the Notes, the right, which is
absolute and unconditional, of the Holder of any Note to convert such Notes
in accordance with Article Eleven.
ARTICLE ELEVEN
CONVERSION OF NOTES
11.01 Conversion Privilege and Conversion Price.
Subject to and upon compliance with the provisions of this Article, at
the option of the Holder thereof, any Note or any portion of the principal
amount thereof which equals $1,000 or any integral multiple thereof may be
converted at the principal amount thereof, or of such portion thereof, into
fully paid and nonassessable shares (calculated as to each conversion to the
nearest 1/100 of a share) of Common Stock, at the conversion price,
determined as hereinafter provided, in effect at the time of conversion.
Such conversion right shall expire at the close of business on the Business
Day next preceding April 15, 2005. In case a Note or portion thereof is
called for redemption, such conversion right in respect of the Note or
portion so called shall expire at the close of business on the Business Day
next preceding the Redemption Date, unless the Company defaults in making the
payment due upon redemption.
The price at which shares of Common Stock shall be delivered upon conversion
(herein called the "conversion price") shall be initially $12.00 per share of
Common Stock. The conversion price shall be adjusted in certain instances as
provided in paragraphs (a), (b), (c), (d), (e), (f) and (i) of Section 11.04.
11.02 Exercise of Conversion Privilege.
In order to exercise the conversion privilege, the Holder of any Note
shall surrender such Note, duly endorsed or assigned to the Company or in
blank, at any office or agency of the Company maintained pursuant to
Section 2.03, accompanied by written notice to the Company in the form
provided in the Note (or such other notice as is acceptable to the Company)
at such office or agency that the Holder elects to convert such Note or, if
less than the entire principal amount thereof is to be converted, the portion
thereof to be converted. In the case of any Note which is surrendered for
conversion during the period from the close of business on any Regular Record
Date through and including the next succeeding Interest Payment Date (other
than any Note whose Stated Maturity is prior to such Interest Payment Date),
interest whose Stated Maturity is on such Interest Payment Date shall be
payable on such Interest Payment Date notwithstanding such conversion, and
<PAGE>
such interest (whether or not punctually paid or duly provided for) shall be
paid to the Person in whose name that Note is registered at the close of
business on such Regular Record Date; provided, however, that Notes so
surrendered for conversion shall (except in the case of Notes or portions
thereof which have been called for redemption on a Redemption Date within
such period) be accompanied by payment in New York Clearing House funds or
other funds acceptable to the Company of an amount equal to the interest
payable on such Interest Payment Date on the principal amount being
surrendered for conversion. Except as provided in the immediately preceding
sentence, in the case of any Note which is converted (a) interest whose
Stated Maturity is after the date of conversion of such Note shall not be
payable and (b) no payment or adjustment shall be made upon conversion on
account of any dividends on the Common Stock issued upon conversion.
Notes shall be deemed to have been converted immediately prior to the
close of business on the day of surrender of such Notes for conversion in
accordance with the foregoing provisions, and at such time the rights of the
Holders of such Notes as Holders shall cease, and the Person or Persons
entitled to receive the Common Stock issuable upon conversion shall be
treated for all purposes as the record holder or holders of such Common Stock
as and after such time. As promptly as practicable on or after the
conversion date, the Company shall issue and shall deliver at any office or
agency of the Company maintained pursuant to Section 2.03 a certificate or
certificates for the number of full shares of Common Stock issuable upon
conversion, together with payment in lieu of any fraction of a share, as
provided in Section 11.03.
In the case of any Note which is converted in part only, upon such conversion
the Company shall execute and the Trustee shall authenticate and deliver to
the Holder thereof, at the expense of the Company, a new Note or Notes of
authorized denominations in aggregate principal amount equal to the
unconverted portion of the principal amount of such Note.
11.03 Fractions of Shares.
No fractional share of Common Stock shall be issued upon conversion of
Notes. If more than one Note shall be surrendered for conversion at one time
by the same Holder, the number of full shares which shall be issuable upon
conversion thereof shall be computed on the basis of the aggregate principal
amount of the Notes (or specified portions thereof) so surrendered. Instead
of any fractional share of Common Stock which would otherwise be issuable
upon conversion of any Note or Notes (or specified portions thereof), the
Company shall pay a cash adjustment in respect of such fractional share in an
amount equal to such fraction multiplied by the Closing Price (as hereinafter
defined) at the close of business on the last Trading Day (as hereafter
defined) immediately preceding the date of conversion.
11.04 Adjustment of Conversion Price.
(a) In case the Company shall make a dividend or other distribution
on the Common Stock exclusively in Common Stock or shall make a dividend or
other distribution on any other class of capital stock of the Company which
dividend or distribution includes Common Stock, the conversion price in
effect at the opening of business on the day following the date fixed for the
determination of shareholders entitled to receive such dividend or other
distribution shall
<PAGE>
be reduced by multiplying such conversion price by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at the
close of business on the date fixed for such determination and the
denominator shall be the sum of such number of shares and the total number of
shares constituting such dividend or other distribution, such reduction to
become effective immediately after the opening of business on the day
following the date fixed for such determination. For the purpose of this
paragraph (a), the number of shares of Common Stock at any time outstanding
shall not include shares held in the treasury of the Company. The Company
shall not pay any dividend or make any distribution on shares of Common Stock
held in the treasury of the Company.
(b) Subject to the last sentence of paragraph (g) of this Section, in
case the Company shall issue rights or warrants entitling the holders thereof
to subscribe for or purchase shares of Common Stock at a price per share less
than the Current Market Price (determined as provided in paragraph (h) of
this Section) on the date of such issuance, the conversion price in effect at
the opening of business on the day following the date of such issuance shall
be reduced by multiplying such conversion price by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at the
close of business on the date of such issuance plus the number of shares of
Common Stock which the aggregate of the offering price of the total number of
shares of Common Stock so offered for subscription or purchase as a result of
the exercise or conversion of such rights or warrants would purchase at such
Current Market Price and the denominator shall be the number of shares of
Common Stock outstanding at the close of business on the date of such
issuance plus the number of shares of Common Stock so offered for
subscription or purchase, such reduction to become effective immediately
after the opening of business on the day following the date of such issuance;
provided, however, that the Company may issue to its officers, business
associates, employees, directors and consultants such rights or warrants to
the extent such rights or warrants are not exercisable or convertible for
more than two percent (2%) of the Common Stock on a fully diluted basis. For
the purposes of this paragraph (b), the number of shares of Common Stock at
any time outstanding shall not include shares held in the treasury of the
Company. The Company shall not issue any rights or warrants in respect of
shares of Common Stock held in the treasury of the Company.
(c) In case outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the conversion price in
effect at the opening of business on the day following the day upon which
such subdivision becomes effective shall be proportionately reduced, and,
conversely, in case outstanding shares of Common Stock shall be combined into
a smaller number of shares of Common Stock, the conversion price in effect at
the opening of business on the day following the day upon which such
combination becomes effective shall be proportionately increased, such
reduction or increase, as the case may be, to become effective immediately
after the opening of business on the day following the day upon which
subdivision or combination becomes effective.
<PAGE>
(d) Subject to the last sentence of this paragraph (d) and the last
sentence of paragraph (g) of this Section, in case the Company shall, by
dividend or otherwise, distribute to all holders of the Common Stock
evidences of indebtedness of the Company or of any Subsidiary, shares of any
class of the Company's capital stock, cash or other assets (including
securities, but excluding any rights or warrants referred to in paragraph (b)
of this Section, excluding any dividend or distribution paid exclusively in
cash and excluding any dividend or distribution referred to in paragraph (a)
of this Section), the conversion price shall be reduced by multiplying the
conversion price in effect immediately prior to the close of business on the
date fixed for the determination of shareholders entitled to such
distribution by a fraction of which the numerator shall be the Current Market
Price (determined as provided in paragraph (h) of this Section) on such date
less the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution) on
such date of the portion of the evidences of indebtedness, shares of capital
stock, cash and other assets to be distributed applicable to one share of
Common Stock and the denominator shall be such Current Market Price, such
reduction to become effective immediately prior to the opening of business on
the day following such date. If the Board of Directors determines the fair
market value of any distribution for purposes of this paragraph (d) by
reference to the actual or when-issued trading market for any securities
comprising part or all of such distribution, it must in doing so consider the
prices in such market over the same period used in computing the Current
Market Price pursuant to paragraph (h) of this Section, to the extent
possible. For purposes of this paragraph (d), any dividend or distribution
that includes shares of Common Stock, rights or warrants to subscribe for or
purchase shares of Common Stock or securities convertible into or
exchangeable for shares of Common Stock shall be deemed to be (x) a dividend
or distribution of the evidences of indebtedness, cash, assets or shares of
capital stock other than such shares of Common Stock, such rights or warrants
or such convertible or exchangeable securities (making any conversion price
reduction required by this paragraph (d)) immediately followed by (y) in the
case of such shares of Common Stock or such rights or warrants, a dividend or
distribution thereof (making any further conversion price reduction required
by paragraph (a) and (b) of this Section, except any shares of Common Stock
included in such dividend or distribution shall not be deemed "outstanding at
the close of business on the date fixed for such determination" within the
meaning of paragraph (a) of this Section), or (z) in the case of such
convertible or exchangeable securities, a dividend or distribution of the
number of shares of Common Stock as would then be issuable upon the
conversion or exchange thereof, whether or not the conversion or exchange of
such securities is subject to any conditions (making any further conversion
price reduction required by paragraph (a) of this Section, except the shares
deemed to constitute such dividend or distribution shall not be deemed
"outstanding at the close of business on the date fixed for such
determination" within the meaning of paragraph (a) of this Section).
(e) In case the Company shall, by dividend or otherwise, at any time
distribute to all holders of the Common Stock cash (excluding any cash that
is distributed as part of a distribution referred to in paragraph (d) of this
Section or in connection with a transaction to which Section 1311 applies) in
an aggregate amount that, together with (i) the aggregate amount of any other
distributions to all holders of the Common Stock made exclusively in cash
<PAGE>
within the 12 months preceding the date fixed for the determination of
shareholders entitled to such distribution and in respect of which no
conversion price adjustment pursuant to paragraph (d) or this paragraph (e)
has been made previously and (ii) the aggregate of any cash plus the fair
market value (as determined by the Board of Directors, whose determination
shall be conclusive and described in a Board Resolution) as of such date of
determination of consideration payable in respect of any tender offer by the
Company or a Subsidiary for all or any portion of the Common Stock
consummated within the 12 months preceding such date of determination and in
respect of which no conversion price adjustment pursuant to paragraph (f) of
this Section has been made previously, exceeds 12.5% of the product of the
Current Market Price (determined as provided in paragraph (h) of this
Section) on such date of determination times the number of shares of Common
Stock outstanding on such date, the conversion price shall be reduced by
multiplying the conversion price in effect immediately prior to the close of
business on such date of determination by a fraction of which the numerator
shall be the Current Market Price (determined as provided in paragraph (h) of
this Section) on such date less the amount of cash to be distributed at such
time applicable to one share of Common Stock and the denominator shall be
such Current Market Price, such reduction to become effective immediately
prior to the opening of business on the day after such date.
(f) In case a tender offer made by the Company or any Subsidiary for
all or any portion of the Common Stock shall be consummated and such tender
offer shall involve an aggregate consideration having a fair market value (as
determined by the Board of Directors, whose determination shall be conclusive
and described in a Board Resolution) as of the last time (the "Expiration
Time") that tenders may be made pursuant to such tender offer (as it shall
have been amended) that, together with (i) the aggregate of the cash plus the
fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution) as of
the Expiration Time of the other consideration paid in respect of any other
tender offer by the Company or a Subsidiary for all or any portion of the
Common Stock consummated within the 12 months preceding the Expiration Time
and in respect of which no conversion price adjustment pursuant to this
paragraph (f) has been made previously and (ii) the aggregate amount of any
distributions to all holders of the Common Stock made exclusively in cash
within the 12 months preceding the Expiration Time and in respect of which no
conversion price adjustment pursuant to paragraphs (d) or (e) of this Section
has been made previously, exceeds 12.5% of the product of the Current Market
Price (determined as provided in paragraph (h) of this Section) immediately
prior to the Expiration Time times the number of shares of Common Stock
outstanding (including any tendered shares) at the Expiration Time, the
conversion price shall be reduced by multiplying the conversion price in
effect immediately prior to the Expiration Time by a fraction of which the
numerator shall be (x) the product of the Current Market Price (determined as
provided in paragraph (h) of this Section) immediately prior to the
Expiration Time times the number of shares of Common Stock outstanding
(including any tendered shares) at the Expiration Time minus (y) the fair
market value (determined as aforesaid) of the aggregate consideration payable
to shareholders upon consummation of such tender offer and the denominator
shall be the product of (A) such Current Market Price times (B) such number
of outstanding shares at the Expiration Time minus the number of shares
accepted
<PAGE>
for payment in such tender offer (the "Purchased Shares"), such reduction to
become effective immediately prior to the opening of business on the day
following the Expiration Time; provided, that if the number of Purchased
Shares or the aggregate consideration payable therefor have not been finally
determined by such opening of business, the adjustment required by this
paragraph (f) shall, pending such final determination, be made based upon the
preliminarily announced results of such tender offer, and, after such final
determination shall have been made, the adjustment required by this paragraph
(f) shall be made based upon the number of Purchased Shares and the
aggregate consideration payable therefor as so finally determined.
(g) The reclassification of Common Stock into securities which
include securities other than Common Stock (other than any reclassification
upon a consolidation or merger to which Section 11.11 applies) shall be
deemed to involve (i) a distribution of such securities other than Common
Stock to all holders of Common Stock (and the effective date of such
reclassification shall be deemed to be "the date fixed for the determination
of shareholders entitled to such distribution" within the meaning of
paragraph (d) of this Section), and (ii) a subdivision or combination, as the
case may be, of the number of shares of Common Stock outstanding immediately
prior to such reclassification into the number of shares of Common Stock
outstanding immediately thereafter (and the effective date of such
reclassification shall be deemed to be "the day upon which such subdivision
becomes effective" or "the day upon which such combination becomes
effective", as the case may be, and "the day upon which such subdivision or
combination becomes effective" within the meaning of paragraph (c) of this
Section).
Rights or warrants issued by the Company to all holders of the Common
Stock entitling the holders thereof to subscribe for or purchase shares of
Common Stock (either initially or under certain circumstances), which rights
or warrants (i) are deemed to be transferred with such shares of Common
Stock, (ii) are not exercisable and (iii) are also issued in respect of
future issuances of Common Stock, in each case in clauses (i) through (iii)
until the occurrence of a specified event or events ("Trigger Event"), shall
for purposes of this Section 11.04 not be deemed issued until the occurrence
of the earliest Trigger Event. In addition, in the event of any distribution
(or deemed distribution) of rights or warrants that was counted for purposes
of calculating a distribution amount for which an adjustment to any
conversion price under this Section 11.04 was made and such rights or
warrants shall have expired or been terminated without exercise by any
holders thereof, the conversion price shall be readjusted as if such rights
and warrants had not been issued.
Notwithstanding any other provision of this Section 11.04 to the
contrary, rights, warrants, evidences of indebtedness, other securities, cash
or other assets (including, without limitation, any rights distributed
pursuant to any stockholder rights plan) shall be deemed not to have been
distributed for purposes of this Section 11.04 if the Company makes proper
provision so that each Holder of Notes of each series who converts a Note (or
any portion thereof) of that series after the date fixed for determination of
stockholders entitled to receive such distribution shall be entitled to
receive on such conversion, in addition to the shares of Common Stock
issuable
<PAGE>
on such conversion, the amount and kind of such distributions which that
Holder would have been entitled to receive if such Holder had immediately
prior to such determination date converted that Note into Common Stock.
(h) For the purpose of any computation under this paragraph and paragraphs
(b), (d), (e) and (f) of this Section, the current market price per share of
Common Stock (the "Current Market Price") on any date shall be deemed to be
the average of the daily Closing Prices for the 5 consecutive Trading Days
selected by the Company commencing not more than 20 Trading Days before, and
ending not later than, the date in question; provided, however, that (i) if
the "ex" date (as hereinafter defined) for any event (other than the issuance
or distribution requiring such computation) that requires an adjustment to
the conversion price pursuant to paragraph (a), (b), (c), (d), (e) or (f)
above occurs on or after the 20th Trading Day prior to the date in question
and prior to the "ex" date for the issuance or distribution requiring such
computation, the Closing Price for each Trading Day prior to the "ex" date
for such other event shall be adjusted by multiplying such Closing Price by
the same fraction by which the conversion price is so required to be adjusted
as a result of such other event, (ii) if the "ex" date for any event (other
than the issuance or distribution requiring such computation) that requires
an adjustment to the conversion price pursuant to paragraph (a), (b), (c),
(d), (e) or (f) above occurs on or after the "ex" date for the issuance or
distribution requiring such computation and on or prior to the date in
question, the Closing Price for each Trading Day on and after the "ex" date
for such other event shall be adjusted by multiplying such Closing Price by
the reciprocal of the fraction by which the conversion price is so required
to be adjusted as a result of such other event, and (iii) if the "ex" date
for the issuance or distribution requiring such computation is on or prior to
the date in question, after taking into account any adjustment required
pursuant to clause (ii) of this proviso, the Closing Price for each Trading
Day on or after such "ex" date shall be adjusted by adding thereto the amount
of any cash and the fair market value on the date in question (as determined
by the Board of Directors in a manner consistent with any determination of
such value for purposes of paragraph (d) or (e) of this Section, whose
determination shall be conclusive and described in a Board Resolution) of the
evidences of indebtedness, shares of capital stock or assets being
distributed applicable to one share of Common Stock as of the close of
business on the day before such "ex" date. For the purpose of any
computation under paragraph (f) of this Section, the Current Market Price on
any date shall be deemed to be the average of the daily Closing Prices for
the 5 consecutive Trading Days selected by the Company commencing on or after
the latest (the "Commencement Date") of (i) the date 20 Trading Days before
the date in question, (ii) the date of commencement of the tender offer
requiring such computation and (iii) the date of the last amendment, if any,
of such tender offer involving a change in the maximum number of shares for
which tenders are sought or a change in the consideration offered, and ending
not later than the Expiration Time of such tender offer; provided, however,
that if the "ex" date for any event (other than the tender offer requiring
such computation) that requires an adjustment to the conversion price
pursuant to paragraph (a), (b), (c), (d), (e) or (f) above occurs on or after
the Commencement Date and prior to the Expiration Time for the tender offer
requiring such computation, the Closing Price for each Trading Day prior to
the "ex" date for such other event shall be adjusted by multiplying such
Closing Price by the same fraction by which the conversion price is so
required to be adjusted as a result of such
<PAGE>
other event. The closing price for any Trading Day (the "Closing Price")
shall be the last reported sales price regular way or, in case no such
reported sale takes place on such day, the average of the reported closing
bid and asked prices regular way, in either case on the New York Stock
Exchange or, if the Common Stock is not listed or admitted to trading on such
exchange, on the principal national securities exchange on which the Common
Stock is listed or admitted to trading or, if not listed or admitted to
trading on any national securities exchange, on the National Association of
Securities Dealers Automated Quotations National Market System or, if the
Common Stock is not listed or admitted to trading on any national securities
exchange or quoted on such National Market System, the average of the closing
bid and asked prices in the over-the-counter market as furnished by any New
York Stock Exchange member firm selected from time to time by the Company for
that purpose. For purposes of this paragraph, the term "Trading Day" means
each Monday, Tuesday, Wednesday, Thursday and Friday, other than any day on
which securities are generally not traded on the applicable securities
exchange or in the applicable securities market, and the term "'ex' date,"
(i) when used with respect to any issuance or distribution, means the first
date on which the Common Stock trades regular way on the relevant exchange or
in the relevant market from which the Closing Prices were obtained without
the right to receive such issuance or distribution, (ii) when used with
respect to any subdivision or combination of shares of Common Stock, means
the first date on which the Common Stock trades regular way on such exchange
or in such market after the time at which such subdivision or combination
becomes effective, and (iii) when used with respect to any tender offer means
the first date on which the Common Stock trades regular way on such exchange
or in such market after the last time that tenders may be made pursuant to
such tender offer (as it shall have been amended).
(i) The Company may make such reductions in the conversion price, in
addition to those required by paragraphs (a), (b), (c), (d), (e) and (f) of
this Section, as it considers to be advisable in order that any event treated
for federal income tax purposes as a dividend of stock or stock rights shall
not be taxable to the recipients or, if that is not possible, to diminish any
income taxes that are otherwise payable because of such event.
(j) No adjustment in the conversion price shall be required unless
such adjustment (plus any other adjustments not previously made by reason of
this paragraph (j)) would require an increase or decrease of at least 1% in
the conversion price; provided, however, that any adjustments which by reason
of this paragraph (j) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment.
(k) Notwithstanding any other provision of this Section 11.04, no
adjustment to the conversion price shall reduce the conversion price below
the then par value per share of the Common Stock, and any such purported
adjustment shall instead reduce the conversion price to such par value. The
Company hereby covenants not to take any action to increase the par value per
share of the Common Stock.
<PAGE>
11.05 Notice of Adjustments of Conversion Price.
Whenever the conversion price is adjusted as herein provided:
(a) the Company shall compute the adjusted conversion price in
accordance with Section 11.04 and shall prepare a certificate signed by the
Treasurer or Chief Financial Officer of the Company setting forth the
adjusted conversion price and showing in reasonable detail the facts upon
which such adjustment is based, and such certificate shall forthwith be filed
(with a copy to the Trustee) at each office or agency maintained for the
purpose of conversion of Notes pursuant to Section 2.03;
(b) a notice stating that the conversion price has been adjusted and
setting forth the adjusted conversion price shall forthwith be prepared, and
as soon as practicable after it is prepared, such notice shall be furnished
by the Company to the Trustee and mailed by the Company at its expense to all
Holders at their last addresses as they shall appear in the Note Register;
and
(c) the Trustee shall have no obligation to calculate or confirm the
conversion price.
11.06 Notice of Certain Corporate Action.
In case:
(a) the Company shall declare a dividend (or any other distribution)
on its Common Stock payable (i) otherwise than exclusively in cash or (ii)
exclusively in cash in an amount that would require a conversion price
adjustment pursuant to paragraph (e) of Section 11.04; or
(b) the Company shall authorize the granting to the holders of its
Common Stock of rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any other rights (excluding shares of
capital stock or options for capital stock issued pursuant to a benefit plan
for employees, officers or directors of the Company); or
(c) of any reclassification of the Common Stock (other than a
subdivision or combination of the outstanding shares of Common Stock), or of
any consolidation, merger or share exchange to which the Company is a party
and for which approval of any shareholders of the Company is required, or of
the sale or transfer of all or substantially all of the assets of the
Company; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(e) the Company or any Subsidiary shall commence a tender offer for
all or a portion of the outstanding shares of Common Stock (or shall amend
any such tender offer to change the maximum number of shares being sought or
the amount or type of consideration being offered therefor);
then the Company shall cause to be filed at each office or agency maintained
pursuant to Section 2.03, and shall cause to be mailed to all Holders at
their last addresses as they shall appear in the Note register, at least 21
days (or
<PAGE>
11 days in any case specified in clause (a), (b) or (e) above) prior to the
applicable record, effective or expiration date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose
of such dividend, distribution or granting of rights or warrants, or, if a
record is not to be taken, the date as of which the holders of Common Stock
of record who will be entitled to such dividend, distribution, rights or
warrants are to be determined, (y) the date on which such reclassification,
consolidation, merger, share exchange, sale, transfer, dissolution,
liquidation or winding up is expected to become effective, and the date as of
which it is expected that holders of Common Stock of record shall be entitled
to exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, share
exchange, sale, transfer, dissolution, liquidation or winding up, or (z) the
date on which such tender offer commenced, the date on which such tender
offer is scheduled to expire unless extended, the consideration offered and
the other material terms thereof (or the material terms of any amendment
thereto). Neither the failure to give any such notice nor any defect therein
shall affect the legality or validity of any action described in clauses (a)
through
(e) of this Section 11.06.
11.07 Company to Reserve Common Stock.
The Company shall at all times reserve and keep available, free from
preemptive rights, out of the authorized but unissued Common Stock or out of
the Common Stock held in treasury, for the purpose of effecting the
conversion of Notes, the full number of shares of Common Stock then issuable
upon the conversion of all outstanding Notes.
11.08 Taxes on Conversions.
The Company will pay any and all original issuance, transfer, stamp and
other similar taxes that may be payable in respect of the issue or delivery
of shares of Common Stock on conversion of Notes pursuant hereto. The
Company shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that of the Holder of the Note or Notes to
be converted, and no such issue or delivery shall be made unless and until
the Person requesting such issue has paid to the Company the amount of any
such tax, or has established to the satisfaction of the Company that such tax
has been paid.
11.09 Covenant as to Common Stock.
The Company covenants that all shares of Common Stock which may be
issued upon conversion of Notes will upon issue be validly issued, fully paid
and nonassessable.
11.10 Cancellation of Converted Notes.
All Notes delivered for conversion shall be delivered to the Trustee to
be canceled by or at the direction of the Trustee.
11.11 Provisions as to Consolidation, Merger or Sale of Assets.
In case of any consolidation of the Company with, or merger of the Company
<PAGE>
into, any other Person, any merger of another Person into the Company (other
than a merger which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of Common Stock) or any sale
or transfer of all or substantially all of the assets of the Company, the
Person formed by such consolidation or resulting from such merger or which
acquires such assets, as the case may be, shall execute and deliver to the
Trustee a supplemental indenture providing that the Holder of each Note then
outstanding shall have the right thereafter, during the period such Note
shall be convertible as specified in Section 11.01, to convert such Note only
into the kind and amount of securities, cash and other property, if any,
receivable upon such consolidation, merger, sale or transfer by a holder of
the number of shares of Common Stock into which such Note might have been
converted immediately prior to such consolidation, merger, sale or transfer,
assuming such holder of Common Stock (i) is not a Person with which the
Company consolidated or into which the Company merged or which merged into
the Company or to which such sale or transfer was made, as the case may be (a
"Constituent Person"), or an Affiliate of a Constituent Person and (ii)
failed to exercise his rights of election, if any, as to the kind or amount
of securities, cash and other property receivable upon such consolidation,
merger, sale or transfer (provided that if the kind or amount of securities,
cash and other property receivable upon such consolidation, merger, sale or
transfer is not the same for each share of Common Stock held immediately
prior to such consolidation, merger, sale or transfer by other than a
Constituent Person or an Affiliate thereof and in respect of which such
rights of election shall not have been exercised ("nonelecting share"), then
for the purpose of this Section the kind and amount of securities, cash and
other property receivable upon such consolidation, merger, sale or transfer
by each nonelecting share shall be deemed to be the kind and amount so
receivable per share by a plurality of the nonelecting shares). Such
supplemental indenture shall provide for adjustments which, for events
subsequent to the effective date of such supplemental indenture, shall be as
nearly equivalent as may be practicable to the adjustments provided for in
this Article. The above provisions of this Section shall similarly apply to
successive consolidations, mergers, sales or transfers.
11.12 Trustee and Conversion Agents Not Liable.
The Company is solely responsible for performing the duties and
responsibilities contained in this Article Eleven. Neither the Trustee nor
any conversion agent shall at any time be under any duty or responsibility to
any Holder of Notes to determine whether any facts exist which may require
any adjustment of the conversion rate, or with respect to the nature or
extent of any such adjustment when made, or with respect to the method
employed, or herein or in any supplemental indenture provided to be employed,
in making the same. Neither the Trustee nor any conversion agent shall be
accountable with respect to the validity or value (or the kind or amount) of
any shares of Common Stock or of any securities or cash or other property
which may at any time be issued or delivered upon the conversion of any Note
or makes any representation with respect thereto. Neither the Trustee nor
any conversion agent shall be responsible for any failure of the Company to
make any cash payment or to issue, transfer or deliver any shares of Common
Stock or stock certificates or other securities or property upon the
surrender of any Note
<PAGE>
for the purpose of conversion, or, subject to Section 7.01, with any of the
covenants of the Company contained in this Article Eleven.
ARTICLE TWELVE
MISCELLANEOUS
12.01 Trust Indenture Act of 1939.
This Indenture is subject to the provisions of the TIA that are required
to be a part of this Indenture, and shall, to the extent applicable, be
governed by such provisions.
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
excluded, as the case may be.
12.02 Notices.
Any notice or communication shall be sufficiently given if in writing
and delivered in person or mailed by first class mail, postage prepaid,
addressed as follows:
If to the Company to:
Telegroup Inc.
2098 Nutmeg Avenue
Fairfield, IA 52556
Attention: Corporate Secretary
With a copy to:
Swidler & Berlin
3000 K Street, N.W.
Suite 300
Washington, DC 20007-5116
If to the Trustee to:
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street
Hartford, CT 06103
Attention: Corporate Trust Administration
The parties hereto by notice to the other parties may designate
additional or different addresses for subsequent notices or communications.
<PAGE>
Any notice or communication mailed, postage prepaid, to a Holder,
including any notice delivered in connection with TIA Sec. 310(b), TIA Sec.
313(c), TIA Sec. 314(a) and TIA Sec. 315(b), shall be mailed by first class
mail to such Holder at the address of such Holder as it appears on the Notes
register maintained by the Registrar and shall be sufficiently given to such
Holder if so mailed within the time prescribed. Copies of any such
communication or notice to a Holder shall also be mailed to the Trustee.
Failure to mail a notice or communication to a Noteholder or any defect in it
shall not affect its sufficiency with respect to other Holders. Except for a
notice to the Trustee, which is deemed given only when received, if a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
12.03 Communication by Holders with Other Holders.
Holders may communicate pursuant to TIA Sec. 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The
obligors, the Trustee, the Registrar and any other person shall have the
protection of TIA Sec. 312(c).
12.04 Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, such obligor shall furnish to the Trustee:
(a) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(b) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
12.05 Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(a) a statement that the person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statement or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
opinion as to whether or not such covenant or condition has been complied
with; and
(d) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with; provided, however, that
with respect to matters of fact an Opinion of Counsel may rely on an
Officers' Certificate or certificates of public officials.
<PAGE>
12.06 Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a meeting of
Noteholders. The Paying Agent or Registrar may make reasonable rules for its
functions.
12.07 Governing Law.
The laws of the State of New York shall govern this Indenture and the
Notes without regard to principles of conflicts of law. The Trustee, the
Company and the Holders agree to submit to the jurisdiction of the courts of
the State of New York in any action or proceeding arising out of or relating
to this Indenture or the Notes.
12.08 No Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any of its Subsidiaries. Any such
indenture, loan or debt agreement may not be used to interpret this
Indenture.
12.09 No Recourse Against Others.
A director, officer, employee, stockholder or Affiliate, as such, of the
Company shall not have any liability for any obligations of the Company under
the Notes or this Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder by accepting a
Note waives and releases all such liability.
12.10 Successors.
All agreements of the Company in this Indenture and the Notes shall bind
its successors. All agreements of the Trustee in this Indenture shall bind
its successors.
12.11 Duplicate Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all such executed copies together
represent the same agreement.
12.12 Separability.
In case any provision in this Indenture or the Notes 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,
and a Holder shall have no claim therefor against any party hereto.
12.13 Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
<PAGE>
12.14 Benefits of Indenture.
Except as provided in Article Ten, nothing in this Indenture or in the
Notes, express or implied, shall give to any person, other than the parties
hereto and their successors hereunder, and the Holders, any benefit or any
legal or equitable right, remedy or claim under this Indenture.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly
executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
TELEGROUP, INC.
By:
Name:
Title:
STATE STREET BANK AND TRUST COMPANY, as Trustee
By:
Name:
Title:
<PAGE>
(FORM OF NOTE)
THIS SECURITY HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR
ANY APPLICABLE STATE SECURITIES LAWS
AND MAY BE REOFFERED AND SOLD ONLY IF
SO REGISTERED OR PURSUANT TO AN
EXEMPTION FROM SUCH REGISTRATION
TELEGROUP, INC.
8% CONVERTIBLE SUBORDINATED NOTE DUE 2005
No. ______ $__________
TELEGROUP, INC., a corporation incorporated under the laws of the State
of Iowa (herein called the "Company", which term includes any successor
corporation under the Indenture hereinafter referred to), for value received,
hereby promises to pay to _______________ or registered assigns, the
principal sum of _______________ Dollars on April 15, 2005, at the office or
agency of the Company referred to below, and to pay interest thereon on April
15 and October 15, in each year, commencing on April 15, 1998; provided that,
until the earlier of (x) April 15, 1999 or (y) the Final Note Interest Time,
at the option of the Company, interest may be paid by the issuance of
Secondary Notes. Interest on the Notes will accrue from the most recent
Interest Payment Date to which interest has been paid or duly provided for
(including by issuing Secondary Notes as provided herein) or, if no interest
has been paid, from the original date of issuance, at the rate of 8% per
annum, until the principal hereof is paid or duly provided for. Interest
shall be computed on the basis of a 360-day year of twelve 30-day months.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in the Indenture referred to on
the reverse hereof, be paid to the person in whose name this Note (or one or
more Predecessor Notes) is registered at the close of business on the Regular
Record Date for such interest, which shall be April 1 or October 1 (whether
or not a Business Day), as the case may be, next preceding such Interest
Payment Date (each a "Regular Record Date"). Any such interest not so
punctually paid, or duly provided for (including by issuing Secondary Notes
as provided herein), and interest on such defaulted interest at the rate
borne by the Notes, to the extent lawful, shall forthwith cease to be payable
to the Holder on such Regular Record Date, and may be paid to the person in
whose name this Note (or one or more Predecessor Notes) 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 of which shall be given to
Holders of Notes not less than 10 days prior to such special record date, or
may be paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Notes may be listed, and
upon such notice as may be required by such exchange, all as more fully
provided in such Indenture.
On each such Interest Payment Date until the earlier of (x) April 15,
1999 or (y) the Final Note Interest Time, the Company may, at its option and
in its sole discretion, in lieu of the payment in whole or in part of
interest in cash on the Notes pay interest on the Notes through the issuance
of Secondary Notes in an aggregate principal amount equal to the amount of
<PAGE>
interest that would be payable with respect to the Notes, if such interest
were paid in cash. Thereafter, the Company shall pay interest on the Notes
in cash. The Company shall notify the Trustee in writing of such election
and the Trustee shall authenticate Secondary Notes for original issuance to
each Holder on the relevant Regular Record Date in the aggregate principal
amount required to pay the amount of interest on the Notes that the Company
has elected to pay through its issuance of Secondary Notes in lieu of cash.
The Company shall pay cash in lieu of issuing Secondary Notes in any
denomination of less than $1,000 (which shall be determined with respect to
the aggregate amount of Notes held by each Holder as shown by the records of
the Trustee).
Payment of the principal of, premium, if any, and interest on this Note will
be made at the office or agency of the Company maintained for that purpose in
the Borough of Manhattan in The City of New York, or at such other office or
agency of the Company as may be maintained 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
payment of interest may be made at the option of the Company by check mailed
to the address of the person entitled thereto as such address shall appear on
the security register maintained by the Registrar.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof by manual signature, and a
seal has been affixed hereon, this Note shall not be entitled to any benefit
under the Indenture, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated: , 1997 TELEGROUP, INC.
By:
Name:
Title:
[SEAL]
Attest:
____________________
Authorized Signature
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Notes referred to in the within-mentioned Indenture.
STATE STREET BANK AND TRUST COMPANY, as Trustee
By:
Authorized Officer
<PAGE>
(Reverse of Note)
1. Indenture. This Note is one of a duly authorized issue of Notes of the
Company designated as its 8% Convertible Subordinated Notes due 2005, limited
(except as otherwise provided in the Indenture referred to below) in
aggregate principal amount to $25,000,000 (plus the aggregate principal
amount of any Secondary Notes), which may be issued under an indenture
(herein called the "Indenture") dated as of September 30, 1997, among
Telegroup, Inc., an Iowa corporation, as issuer (the "Company"), and State
Street Bank and Trust Company, a Massachusetts trust company, as trustee
(herein called the "Trustee," which term includes any successor Trustee under
the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights,
limitations of rights, duties, obligations and immunities thereunder of the
Company, the Trustee and the Holders of the Notes, and of the terms upon
which the Notes are, and are to be, authenticated and delivered.
All capitalized terms used in this Note which are defined in the Indenture
and not otherwise defined herein shall have the meanings assigned to them in
the Indenture.
No reference herein to the Indenture and no provisions of this Note or of the
Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, premium, if any, and
interest on this Note at the times, place and rate, and in the coin or
currency, herein prescribed.
2. Subordination. The Indebtedness evidenced by the Notes is, to the
extent and in the manner provided in the Indenture, subordinate and subject
in right of payment to the prior payment in full in cash or Cash Equivalents
of all Senior Indebtedness (including, without limitation, in the case of
Designated Senior Indebtedness, any interest accruing subsequent to the
filing of a petition for bankruptcy of the Company at the rate provided for
in the documentation governing such Designated Senior Indebtedness of the
Company to the extent such interest is an allowed claim under applicable law)
as defined in the Indenture, and this Note is issued subject to such
provisions. Each Holder of this Note, by accepting the same, (a) agrees to
and shall be bound by such provisions, (b) authorizes and directs the
Trustee, on behalf of such Holder, to take such action as may be necessary or
appropriate to effectuate the subordination as provided in the Indenture and
(c) appoints the Trustee attorney-in-fact of such Holder for such purpose;
provided, however, that the Indebtedness evidenced by this Note shall cease
to be so subordinate and subject in right of payment upon any defeasance of
this Note referred to in Paragraph 8 below.
<PAGE>
3. Redemption.
(a) Optional Redemption. The Notes will not be subject to redemption
prior to October 15, 2000 and will be redeemable on or after such date, at
the option of the Company, as a whole or in part, in principal amounts of
$1,000 or any integral multiple of $1,000, upon not less than 30 nor more
than 60 days' prior notice at the following Redemption Prices (expressed as
percentages of the principal amount) if redeemed during the 12-month period
beginning October 15 of the years indicated below; provided that
notwithstanding the foregoing, the Notes shall not be redeemable on or after
October 15, 2000 and before October 14, 2001, unless the last reported sales
price of the Common Stock shall be equal to or greater than 150% of the
conversion price (as defined in the Indenture) for at least 20 trading days
within a period of 30 consecutive trading days ending within five trading
days of the call for redemption.
Year Redemption Price
2000.................104.00%
2001.................103.00%
2002.................101.50%
2003 and thereafter..100.00%
plus accrued and unpaid interest, if any, to the Redemption Date, all as
provided in the Indenture.
(b) Interest Payments. In the case of any redemption of Notes,
interest installments whose Stated Maturity is on or prior to the Redemption
Date will be payable to the Holders of such Notes, or one or more Predecessor
Notes, of record at the close of business on the Record Date referred to on
the face hereof. Notes (or portions thereof) for whose redemption and
payment provision is made in accordance with the Indenture shall cease to
bear interest from and after the Redemption Date.
(c) Partial Redemption. In the event of redemption of this Note in
part only, a new Note or Notes for the unredeemed portion hereof shall be
issued in the name of the Holder hereof upon the cancellation hereof.
4. Offers to Purchase. Sections 4.12 and 4.13 of the Indenture provide
that upon the occurrence of a Change of Control and following certain Asset
Sales, and subject to further limitations contained therein, the Company
shall make an offer to purchase certain amounts of the Notes in accordance
with the procedures set forth in the Indenture.
5. Termination of Trading. Section 4.17 of the Indenture provides that
upon the occurrence of a Termination of Trading Event, the Company is
required, at the option of the Holder, to repurchase all or any part of the
Notes in accordance with the procedures set forth in the Indenture.
<PAGE>
6. Conversion. The Holder of this Note is entitled, at his option, at any
time on or before the close of business on the Business Day next preceding
April 15, 2005, or in case this Note or a portion hereof is called for
redemption, then in respect of this Note or such portion hereof until and
including, but (unless the Company defaults in making the payment due upon
redemption) not after, the close of business on the Business Day next
preceding the Redemption Date, to convert this Note (or any portion of the
principal amount hereof which is $1,000 or an integral multiple thereof), at
the principal amount hereof, or of such portion, into fully paid and non-
assessable shares (calculated as to each conversion to the nearest 1/100th of
a share) of Common Stock of the Company at a conversion price equal to $12.00
principal amount for each share of Common Stock (or at the current adjusted
conversion price if an adjustment has been made as provided in the Indenture)
by surrender of this Note, duly endorsed or assigned to the Company or in
blank, to the Company at its office or agency maintained for that purpose
pursuant to Section 2.03 of the Indenture, accompanied by written notice to
the Company on the back of this Note (or such other notice as is acceptable
to the Company) that the Holder hereof elects to convert this Note, or if
less than the entire principal amount hereof is to be converted, the portion
hereof to be converted, and, in case such surrender shall be made during the
period from the close of business on any Regular Record Date next preceding
any Interest Payment Date to the close of business on such Interest Payment
Date (unless this Note or the portion thereof being converted has been called
for redemption on a Redemption Date within such period), also accompanied by
payment in New York Clearing House funds, or other funds acceptable to the
Company of an amount equal to the interest payable on such Interest Payment
Date on the principal amount of this Note then being converted. Subject to
the aforesaid requirement for payment and, in the case of a conversion after
the Regular Record Date next preceding any Interest Payment Date and on or
before such Interest Payment Date, to the right of the Holder of this Note
(or any Predecessor Note) of record at such Regular Record Date to receive an
installment of interest (with certain exceptions provided in the Indenture),
no payment or adjustment is to be made upon conversion on account of any
interest accrued hereon or on account of any dividends on the Common Stock
issued upon conversion. No fractional shares or scrip representing fractions
of shares will be issued on conversion, but instead of any fractional share
the Company shall pay a cash adjustment as provided in the Indenture. The
conversion price is subject to adjustment as provided in the Indenture.
In addition, the Indenture provides that in case of certain consolidations or
mergers to which the Company is a party or the sale or transfer of all or
substantially all of the assets of the Company, the Indenture shall be
amended, without the consent of any Holders of Notes, so that this Note, if
then outstanding, will be convertible thereafter, during the period this Note
shall be convertible as specified above, only into the kind and amount of
securities, cash and other property receivable upon the consolidation,
merger, sale or transfer by a Holder of the number of shares of Common Stock
into which this Note was convertible immediately prior to such consolidation,
merger, sale or transfer (assuming such holder of Common Stock failed to
exercise any rights of election and received per share the kind and amount
received per share by a plurality of non-electing shares).
<PAGE>
7. Defaults and Remedies. If an Event of Default shall occur and be
continuing, the principal of all of the outstanding Notes, plus all accrued
and unpaid interest, if any, to and including the date the Notes are paid,
may be declared due and payable in the manner and with the effect provided in
the Indenture.
8. Defeasance. The Indenture contains provisions (which provisions apply
to this Note) for defeasance at any time of (a) the entire indebtedness of
the Company under this Note and (b) certain restrictive covenants and related
Defaults and Events of Default, in each case upon compliance by the Company
with certain conditions set forth therein.
9. Amendments and Waivers. The Indenture permits, with certain exceptions
as therein provided, the amendment thereof and the modification of the rights
and obligations of the Company and the rights of the Holders under the
Indenture at any time by the Company and the Trustee with the consent of the
Holders of not less than a majority in aggregate principal amount of the
Notes at the time outstanding. The Indenture also contains provisions
permitting the Holders of specified percentages in aggregate principal amount
of the Notes at the time outstanding, on behalf of the Holders of all the
Notes, to waive compliance by the Company with certain provisions of the
Indenture and certain past Defaults under the Indenture and this Note and
their consequences. Any such consent or waiver by or on behalf of the Holder
of this Note shall be conclusive and binding upon such Holder and upon all
future Holders of this Note and of any Note 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 Note.
10. Denominations, Transfer and Exchange. The Notes are issuable only in
registered form without coupons in denominations of $1,000 and any integral
multiple thereof. As provided in the Indenture and subject to certain
limitations therein set forth, the Notes are exchangeable for a like
aggregate principal amount of Notes of a different authorized denomination,
as requested by the Holder surrendering the same.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Note is registrable on the security register of
the Company, upon surrender of this Note for registration of transfer at the
office or agency of the Company maintained for such purpose in the Borough of
Manhattan in The City of New York or at such other office or agency of the
Company as may be maintained for such purpose, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Registrar duly executed by, the Holder hereof or his attorney
duly authorized in writing, and thereupon one or more new Notes, of
authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
No service charge shall be made for any registration of transfer or exchange
or redemption of Notes, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
connection therewith.
<PAGE>
11. Persons Deemed Owners. Prior to and at the time of due presentment of
this Note for registration of transfer, the Company, the Trustee and any
agent of the Company or the Trustee may treat the person in whose name this
Note is registered as the owner hereof for all purposes, whether or not this
Note shall be overdue, and neither the Company, the Trustee nor any agent
shall be affected by notice to the contrary.
12. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York, without regard to
conflicts of law principles.
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 4.12, 4.13 or 4.18 of the Indenture, check the appropriate box:
Section 4.12 [ ]
Section 4.13 [ ]
Section 4.18 [ ]
If you wish to have a portion of this Note purchased by the Company pursuant
to Section 4.12, 4.13 or 4.18 of the Indenture, state the amount:
$
Date: _____________ Your signature:
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
<PAGE>
ASSIGNMENT FORM
If you the holder want to assign this Note, fill in the form below and have
your signature guaranteed:
I or we assign and transfer this Note to
(Insert assignee's social security or tax ID number)
(Print or type assignee's name, address and zip code) and irrevocably appoint
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
Date: _____________ Your signature:
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
<PAGE>
CONVERSION NOTICE
If you want to convert this Note into Common Stock of the Company, check the
box:
If you want to convert only part of this Note, state the amount:
$ (must be multiples of $1,000.00)
If you want the stock certificate made out in another person's name, fill in
the form below and have your signature guaranteed:
(Please insert other person's security or tax identification number)
(Print or type other person's name, address and zip code)
Date: Your signature:
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
Telegroup, Inc., as Issuer
and
State Street Bank and Trust Company, as Trustee
---------------------------
INDENTURE
Dated as of October 23, 1997
---------------------
$150,000,000
10 1/2% Senior Discount Notes due 2004
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION.....1
1.01 Definitions........................................................1
1.02 Incorporation by Reference of Trust Indenture Act.................25
1.03 Rules of Construction.............................................25
ARTICLE TWO THE NOTES..................................................26
2.01 Forms and Dating..................................................26
2.02 Execution and Authentication......................................27
2.03 Registrar and Paying Agent........................................29
2.04 Paying Agent To Hold Money in Trust...............................30
2.05 Noteholder Lists..................................................30
2.06 Transfer and Exchange.............................................30
2.07 Replacement Notes.................................................32
2.08 Outstanding Notes.................................................32
2.09 Treasury Notes....................................................33
2.10 Temporary Notes...................................................33
2.11 Cancellation......................................................33
2.12 Defaulted Interest................................................34
2.13 CUSIP Number......................................................34
2.14 Deposit of Moneys.................................................34
2.15 Book-Entry Provisions for Global Note.............................34
2.16 Special Transfer Provisions.......................................36
ARTICLE THREE REDEMPTION OF NOTES......................................39
3.01 Notices to the Trustee............................................39
3.02 Selection of Notes To Be Redeemed.................................39
3.03 Notice of Redemption..............................................40
3.04 Effect of Notice of Redemption....................................41
3.05 Deposit of Redemption Price.......................................41
3.06 Notes Redeemed or Purchased in Part...............................42
ARTICLE FOUR COVENANTS.................................................42
4.01 Payment of Notes..................................................42
4.02 Maintenance of Office or Agency...................................42
4.03 Corporate Existence...............................................43
4.04 Payment of Taxes and Other Claims.................................43
4.05 Maintenance of Properties; Insurance;
Books and Records; Compliance with Law...........................44
4.06 Compliance Certificate............................................45
4.07 Limitation on Indebtedness........................................46
4.08 Limitation on Other Indebtedness..................................47
4.09 Limitation on Restricted Payments.................................47
4.10 Limitation on Issuances and Sale of Preferred Stock by
Subsidiaries....................................................50
<PAGE>
4.11 Limitation on Liens...............................................50
4.12 Change of Control.................................................51
4.13 Disposition of Proceeds of Asset Sales............................53
4.14 Limitation on Transactions with Interested Persons................57
4.15 Limitation on Dividends and Other Payment Restrictions
Affecting Subsidiaries..........................................58
4.16 Limitations on Issuances of Guarantees of Indebtedness
by Subsidiaries.................................................59
4.17 Waiver of Stay, Extension or Usury Laws...........................60
4.18 Reporting Requirements............................................60
4.19 Limitation on Sale and Leaseback Transactions.....................60
ARTICLE FIVE SUCCESSOR CORPORATION.....................................61
5.01 When Company May Merge, etc.......................................61
5.02 Successor Substituted.............................................62
ARTICLE SIX REMEDIES...................................................63
6.01 Events of Default.................................................63
6.02 Acceleration......................................................65
6.03 Other Remedies....................................................66
6.04 Waiver of Past Defaults...........................................66
6.05 Control by Majority...............................................66
6.06 Limitation on Suits...............................................67
6.07 Right of Holders To Receive Payment...............................67
6.08 Collection Suit by Trustee........................................68
6.09 Trustee May File Proofs of Claims.................................68
6.10 Priorities........................................................69
6.11 Undertaking for Costs.............................................69
6.12 Restoration of Rights and Remedies................................70
ARTICLE SEVEN TRUSTEE..................................................70
7.01 Duties............................................................70
7.02 Rights of Trustee.................................................71
7.03 Individual Rights of Trustee......................................72
7.04 Trustee's Disclaimer..............................................73
7.05 Notice of Default.................................................73
7.06 Money Held in Trust...............................................73
7.07 Reports by Trustee to Holders.....................................73
7.08 Compensation and Indemnity........................................74
7.09 Replacement of Trustee............................................75
7.10 Successor Trustee by Merger, etc..................................76
7.11 Eligibility; Disqualification.....................................76
7.12 Preferential Collection of Claims Against Company.................77
ARTICLE EIGHT SATISFACTION AND DISCHARGE OF INDENTURE..................77
8.01 Termination of the Company's Obligations..........................77
8.02 Legal Defeasance and Covenant Defeasance..........................78
8.03 Application of Trust Money........................................83
8.04 Repayment to Company..............................................83
8.05 Reinstatement.....................................................84
ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS.......................84
9.01 Without Consent of Holders........................................84
9.02 With Consent of Holders...........................................85
9.03 Compliance with Trust Indenture Act...............................87
9.04 Revocation and Effect of Consents.................................87
9.05 Notation on or Exchange of Notes..................................88
9.06 Trustee May Sign Amendments, etc..................................88
ARTICLE TEN MISCELLANEOUS..............................................88
10.01 Trust Indenture Act of 1939......................................88
10.02 Notices..........................................................89
10.03 Communication by Holders with Other Holders......................90
10.04 Certificate and Opinion as to Conditions Precedent...............90
10.05 Statements Required in Certificate or Opinion....................90
10.06 Rules by Trustee, Paying Agent, Registrar........................91
10.07 Governing Law....................................................91
10.08 No Interpretation of Other Agreements............................91
10.09 No Recourse Against Others.......................................91
10.10 Successors.......................................................92
10.11 Duplicate Originals..............................................92
10.12 Separability.....................................................92
10.13 Table of Contents, Headings, etc.................................92
10.14 Benefits of Indenture............................................92
EXHIBITS
Exhibit A. - Form of Face and Reverse of Initial Note................A-1
Exhibit B. - Form of Face and Reverse of Exchange Note...............B-1
Exhibit C. - Form of Certificate to be Delivered in Connection
with Transfers to Non-QIB Institutional
Accredited Investors....................................C-1
Exhibit D. - Intentionally Omitted
Exhibit E. - Intentionally Omitted
Exhibit F. - Form of Certificate to be Delivered in Connection
with Transfers Pursuant to Rule 144A....................F-1
Exhibit G. - Form of Certificate to be Delivered in Connection
with Transfers Pursuant to Regulation S.................G-1
<PAGE>
Reconciliation and tie between Trust Indenture Act of 1939 and
Indenture, dated as of October 23, 1997.
Trust Indenture Indenture
Act Section Section
310(a)(1) 7.11
(a)(2) 7.11
(a)(3) N.A.
(a)(4) N.A.
(a)(5) 7.11
(b) 7.09; 7.11; 10.02
(c) N.A.
311(a) 7.12
(b) 7.12
(c) N.A.
312(a) 2.05
(b) 10.03
(c) 10.03
313(a) 7.07
(b) 7.07
(c) 7.07; 10.02
(d) 7.07
314(a) 4.07; 10.02
(b) N.A.
(c)(1) 10.04
(c)(2) 10.04
(c)(3) N.A.
(d) N.A.
(e) 10.05
315(a) 7.01(b)
(b) 7.05
(c) 7.01(a)
(d) 7.01(c)
(e) 6.11
316(a) (last sentence) 2.09
(a)(1)(A) 6.05
(a)(1)(B) 6.04
(a)(2) N.A.
(b) 6.07
317(a)(1) 6.08
(a)(2) 6.09
(b) 2.04
318(a) 10.01
(c) 10.01
- -----------------------
Note: This reconciliation and tie shall not, for any purpose, be deemed
to be a part of the indenture.
INDENTURE, dated as of October 23, 1997, between TELEGROUP, INC., a
corporation incorporated under the laws of the State of Iowa ("the Company"),
and State Street Bank and Trust Company, a Massachusetts trust company, as
trustee (the "Trustee").
Each party hereto agrees as follows for the benefit of each other party
and for the equal and ratable benefit of the Holders of the Company's 10.5%
Senior Discount Notes due 2004 (the "Initial Notes") and, when and if issued
pursuant to a registered exchange for the Notes, the Company's 10.5% Senior
Discount Notes due 2004 (the "Exchange Notes").
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
1.01 Definitions.
"Accreted Value" is defined to mean, for any specified date (the
"Specified Date"), the amount calculated pursuant to (i), (ii), (iii) or (iv)
for each $1,000 principal amount at maturity of Notes:
(i) if the Specified Date occurs on one or more of the following dates
(each a "Semi-Annual Accrual Date"), the Accreted Value will equal
the amount set forth below for such Semi-Annual Accrual Date:
Semi-Annual Accreted
Accrual Date Value
November 1, 1997 $774.26
May 1, 1998 $814.91
November 1, 1998 $857.69
May 1, 1999 $902.72
November 1, 1999 $950.11
May 1, 2000 $1,000.00
(ii) if the Specified Date occurs before the first Semi-Annual Accrual
Date, the Accreted Value will equal the sum of (a) the original
issue price and (b) an amount equal to the product of (1) the
Accreted Value for the first Semi-Annual Accrual Date less the
original issue price multiplied by (2) a fraction, the numerator of
which is the number of days from the issue date of the Notes 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 Notes to the first Semi-Annual Accrual Date,
using
a 360-day year of twelve 30-day months;
(iii) if the Specified Date occurs between two Semi-Annual Accrual Dates,
the Accreted Value will equal the sum of (a) the Accreted Value for
the Semi-Annual Accrual Date immediately preceding such Specified
Date and (b) an amount equal to the product of (1) the Accreted
Value for the immediately following Semi-Annual Accrual Date less
the Accreted Value for the immediately preceding Semi-Annual
Accrual
<PAGE>
Date multiplied by (2) a fraction, the numerator of which is the
number of days from the immediately preceding Semi-Annual 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 Semi-Annual Accrual
Date, the Accreted Value will equal $1,000.
"Acquired Indebtedness" means Indebtedness of a person (a) assumed in
connection with an Asset Acquisition from such person or (b) existing at the
time such person becomes a Subsidiary of any other person; provided that
Acquired Indebtedness shall not include any such Indebtedness that was
incurred in anticipation or contemplation of such Asset Acquisition or such
person becoming a Subsidiary.
"Affiliate" means, with respect to any specified person, any other
person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified person.
"Agent" means any Registrar, Paying Agent, co-registrar or agent for
service of notices and demands.
"Agent Members" shall have the meaning set forth in Section 2.15.
"Asset Acquisition" means (a) an Investment by the Company or any
Subsidiary of the Company in any other person pursuant to which such person
shall become a Subsidiary of the Company, or shall be merged with or into the
Company or any Subsidiary of the Company, (b) the acquisition by the Company
or any Subsidiary of the Company of the assets of any person (other than a
Subsidiary of the Company) which constitute all or substantially all of the
assets of such person or (c) the acquisition by the Company or any Subsidiary
of the Company of any division or line of business of any person (other than
a Subsidiary of the Company).
"Asset Disposition" means the sale or other disposition by the Company
or any of its Subsidiaries (other than to the Company or another Subsidiary
of the Company) of (i) all or substantially all of the Capital Stock of any
Subsidiary of the Company or (ii) all or substantially all of the assets that
constitute a division or line of business of the Company or any of its
Subsidiaries.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease or other disposition to any person other than the Company or
a Wholly-Owned Subsidiary of the Company, in one or a series of related
transactions, of (a) any Capital Stock of any Subsidiary of the Company
(other than in respect of director's qualifying shares or investments by
foreign nationals mandated by applicable law); (b) all or substantially all
of the properties and assets of any division or line of business of the
Company or any Subsidiary of the Company; or (c) any other properties or
assets of the Company or any Subsidiary of the Company other than in the
ordinary course of business. For the purposes of this definition, the term
"Asset Sale" shall not include (i) any sale, transfer or other disposition of
equipment, tools or
<PAGE>
other assets (including Capital Stock of any Subsidiary of the Company) by
the Company or any of its Subsidiaries in one or a series of related
transactions in respect of which the Company or such Subsidiary receives cash
or property with an aggregate Fair Market Value of $1,000,000 or less or
(ii) any sale, issuance, conveyance, transfer, lease or other disposition of
properties or assets that is governed by the provisions of Article V.
"Asset Sale Offer" shall have the meaning set forth in Section 4.13.
"Asset Sale Offer Price" shall have the meaning set forth in Section
4.13.
"Asset Sale Purchase Date" shall have the meaning set forth in Section
4.13.
"Attributable Value" means, as to any particular lease and at any date
as of which the amount thereof is to be determined, the total net amount of
rent required to be paid by such Person under such lease during the initial
term thereof as determined in accordance with GAAP, discounted from the last
date of such initial term to the date of determination at a rate per annum
equal to the discount rate which would be applicable to a Capitalized Lease
Obligation with a like term in accordance with GAAP. The net amount of rent
required to be paid under any such lease for any such period shall be the
aggregate amount of rent payable by the lessee with respect to such period
after excluding amounts required to be paid on account of insurance, taxes,
assessments, utility, operating and labor costs and similar charges. In the
case of any lease which is terminable by the lessee upon the payment of a
penalty, such net amount shall also include the amount of such penalty, but
no rent shall be considered as required to be paid under such lease
subsequent to the first date upon which it may be so terminated.
"Average Life to Stated Maturity" means, with respect to any
Indebtedness, as at any date of determination, the quotient obtained by
dividing (a) the sum of the products of (i) the number of years (or any
fraction thereof) from such date to the date or dates of each successive
scheduled principal payment (including, without limitation, any sinking fund
requirements) of such Indebtedness multiplied by (ii) the amount of each such
principal payment by (b) the sum of all such principal payments.
"Bankruptcy Law" means Title 11 United States Code or any similar law
for the relief of debtors.
"Board of Directors" means the board of directors of the Company or any
duly authorized committee of such board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors of the Company and to be in full force and effect
on the date of such certification, and delivered to the Trustee.
<PAGE>
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in The City of New
York, State of New York or the city in which the Corporate Trust Office is
located, are authorized or obligated by law, regulation or executive order to
close.
"Capital Stock" means, with respect to any person, any and all shares,
interests, participations, rights in or other equivalents (however
designated) of such person's capital stock, and any rights (other than debt
securities convertible into capital stock), warrants or options exchangeable
for or convertible into such capital stock.
"Capitalized Lease Obligation" means any obligation under a lease of (or
other agreement conveying the right to use) any property (whether real,
personal or mixed) that is required to be classified and accounted for as a
capital lease obligation under GAAP, and the amount of any such obligation at
any date shall be the capitalized amount thereof at such date, determined in
accordance with GAAP.
"Cash Equivalents" means, at any time, (i) any evidence of Indebtedness
with a maturity of 180 days or less issued or directly and fully guaranteed
or insured by the United States of America or any agency or instrumentality
thereof (provided that the full faith and credit of the United States of
America is pledged in support thereof); (ii) certificates of deposit or
acceptances with a maturity of 180 days or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $500,000,000; (iii) Eurodollar
time deposits with a maturity of 180 days or less of any financial
institution that is not organized under the laws of the United States, any
state thereof or the District of Columbia that are rated at least A-1 by S&P
or at least P-1 by Moody's or at least an equivalent rating category of
another nationally recognized securities rating agency; (iv) commercial paper
with a maturity of 180 days or less that are rated at least A-1 by S&P, or at
least P-1 by Moody's or at least an equivalent rating category of another
nationally recognized securities rating agency; (v) tax-exempt investments
that are rated at least SP1/A1 by S&P and/or P1/VM1G1/M1G1 by Moody's; (vi)
money market accounts of any financial institution that is a member of the
Federal Reserve System having combined capital and surplus and undivided
profits of not less that $500,000,000; and (vii) repurchase agreements and
reverse repurchase agreements relating to marketable direct obligations
issued or unconditionally guaranteed by the government of the United States
of America or issued by any agency thereof and backed by the full faith and
credit of the United States of America, in each case maturing within 180 days
from the date of acquisition; provided that the terms of such agreements
comply with the guidelines set forth in the Federal Financial Agreements of
Depository Institutions With Securities Dealers and Others, as adopted by the
Comptroller of the Currency on October 31, 1985.
"Change of Control" means the occurrence of any of the following events:
(a) any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act), excluding Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of
all securities that such person has the right to acquire, whether such right
<PAGE>
is exercisable immediately or only after the passage of time, upon the
happening of an event or otherwise), directly or indirectly, of more than 35%
of the voting power of the total Voting Stock of the Company; provided,
however, that the Permitted Holders in the aggregate (i) "beneficially own"
(as so defined) a lower percentage of the voting power of the Voting Stock
than such other person or "group" and (ii) do not have the right or ability
by voting power, contract or otherwise to elect or designate for election a
majority of the Board of Directors of the Company; or (b) individuals who on
the Issue Date constitute the Board of Directors of the Company (together
with any new directors whose election by the Board of Directors of the
Company or whose nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the members of the Board of
Directors of the Company then in office who either were members of the Board
of Directors of the Company on the Issue Date of 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 of the Company then in
office.
"Change of Control Offer" shall have the meaning set forth in Section
4.12.
"Change of Control Purchase Date" shall have the meaning set forth in
Section 4.12.
"Change of Control Purchase Price" shall have the meaning set forth in
Section 4.12.
"Common Stock" means, with respect to any person, any and all shares,
interests or other participations in, and other equivalents (however
designated and whether voting or nonvoting) of, such person's common stock,
whether outstanding at the Issue Date or issued after the Issue Date, and
includes, without limitation, all series and classes of such common stock.
"Company" means the party named as such in this Indenture until a
successor replaces it (or any previous successor) pursuant to this Indenture,
and thereafter means such successor.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by any one of its Chairman of the Board,
its Vice-Chairman, its President, an Executive Vice President or a Vice
President, and by any one of its Treasurer, an Assistant Treasurer, its
Secretary or an Assistant Secretary, and delivered to the Trustee.
"Consolidated Cash Flow" means, for any period, the sum of the amounts
for such period of (i) Consolidated Net Income, (ii) Consolidated Interest
Expense, (iii) income taxes, to the extent such amount was deducted in
calculating Consolidated Net Income (other than income taxes (either positive
or negative) attributable to extraordinary and non-recurring gains or losses
or sales of assets), (iv) depreciation expense, to the extent such amount was
deducted in calculating Consolidated Net Income, (v) amortization expense, to
the extent such amount was deducted in calculating Consolidated Net Income,
and (vi) all other non-cash items reducing Consolidated Net Income (excluding
any non-cash charge to the extent that it represents an accrual of or reserve
for cash charges in any future period), less all non-cash items increasing
<PAGE>
Consolidated Net Income, all as determined on a consolidated basis for the
Company and its Subsidiaries in conformity with GAAP.
"Consolidated Fixed Charges" means, for any period, Consolidated
Interest Expense plus dividends declared and payable on Preferred Stock.
"Consolidated Interest Expense" means, for any period, the aggregate
amount of interest in respect of Indebtedness (including capitalized
interest, amortization of original issue discount on any Indebtedness and the
interest portion of any deferred payment obligation, calculated in accordance
with the effective interest method of accounting; all commissions, discounts
and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing; the net costs associated with Interest Rate
Protection Agreements; and interest on Indebtedness that is guaranteed or
secured by the Company or any of its Subsidiaries) and all but the principal
component of rentals in respect of Capitalized Lease Obligations paid,
accrued or scheduled to be paid or to be accrued by the Company and its
Subsidiaries during such period.
"Consolidated Net Income" means, for any period, the aggregate net income
(or loss) of the Company and its Subsidiaries for such period determined in
conformity with GAAP; provided that the following items shall be excluded in
computing Consolidated Net Income (without duplication): (i) solely for the
purposes of calculating the amount of Restricted Payments that may be made
pursuant to clause (C) of the first paragraph of Section 4.09, the net income
(or loss) of any person accrued prior to the date it becomes a Subsidiary or
is merged into or consolidated with the Company or any of its Subsidiaries or
all or substantially all of the property and assets of such Person are
acquired by the Company or any of its Subsidiaries; (ii) any gains or losses
(on an after-tax basis) attributable to Asset Sales; (iii) except for
purposes of calculating the amount of Restricted Payments that may be
pursuant to clause (C) of the first paragraph of Section 4.09, any amount
paid or accrued as dividends on Preferred Stock of the Company or Preferred
Stock of any Subsidiary owned by Persons other than the Company and any of
its Subsidiaries; (iv) all extraordinary gains and extraordinary losses; and
(v) the net income (or loss) of any Person (other than net income (or loss)
attributable to a Subsidiary) in which any Person (other than the Company or
any of its Subsidiaries) has a joint interest, except to the extent of the
amount of dividends or other distributions actually paid to the Company or
any of its Subsidiaries by such other Person during such period.
"Consolidated Net Worth" means, with respect to any person at any date,
the consolidated stockholders' equity of such person less the amount of such
stockholders' equity attributable to Redeemable Capital Stock of such person
and its Subsidiaries, as determined in accordance with GAAP.
"consolidation" means, with respect to any person, the consolidation of
the accounts of such person and each of its Subsidiaries if and to the extent
the accounts of such person and each of its Subsidiaries would normally be
consolidated with those of such person, all in accordance with GAAP. The
term
"consolidated" shall have a meaning correlative to the foregoing.
<PAGE>
"control" means, with respect to any specified person, the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of Voting Stock, by contract or otherwise; and
the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Corporate Trust Office" means the corporate trust office of the Trustee
at which at any particular time this Indenture shall be principally
administered, which on the date hereof is located in Hartford, Connecticut.
"covenant defeasance" shall have the meaning set forth in Section 8.02.
"Credit Facilities" means, with respect to the Company, one or more debt
facilities or commercial paper facilities with banks or other institutional
lenders providing for revolving credit loans, term loans, receivables
financing (including through the sale of receivables to such lenders or to
special purpose entities formed to borrow from such lenders against such
receivables) or letters of credit, in each case, as amended, restated,
modified, renewed, refunded, replaced or refinanced in whole or in part from
time to time.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any of its Subsidiaries against fluctuations in currency values.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Depositary" means, with respect to Global Notes, the Person designated
as Depositary pursuant to Section 2.01 until a successor Depositary shall
have become such pursuant to the applicable provisions of this Indenture, and
thereafter "Depositary" shall mean each Person who is then a Depositary
hereunder, and if at any time there is more than one such Person, such
Persons.
"Eligible Accounts Receivable" is defined to mean the accounts
receivables (net of any reserves and allowances for doubtful accounts in
accordance with GAAP) of any person that are not more than 60 days past their
due date and that were entered into in the ordinary course of business on
normal payment terms as shown on the most recent consolidated balance sheet
of such person filed with the SEC, all in accordance with GAAP.
"Event of Default" shall have the meaning set forth in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange and Registration Rights Agreement" means the Exchange and
Registration Rights Agreement dated as of the Issue Date by and among the
Initial Purchasers and the Company, as such agreement may be amended,
modified or supplemented from time to time in accordance with the terms
thereof.
<PAGE>
"Exchange Offer" shall have the meaning set forth in the Exchange and
Registration Rights Agreement.
"Fair Market Value" means, with respect to any asset, the price, as
determined by the Board of Directors of the Company, acting in good faith,
which could be negotiated in an arm's-length free market transaction, for
cash, between a willing seller and a willing buyer, neither of which is under
pressure or compulsion to complete the transaction; provided, however, that
with respect to any transaction which involves an asset or assets in excess
of $2,000,000, such determination shall be evidenced by a Board Resolution
delivered to the Trustee.
"Final Maturity Date" means November 1, 2004.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment
of the accounting profession of the United States of America, which are
applicable from time to time and are consistently applied.
"Global Note" shall have the meaning set forth in Section 2.01.
"guarantee" means, as applied to any obligation, (i) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment
or performance (or payment of damages in the event of non-performance) of all
or any part of such obligation, including, without limiting the foregoing,
the payment of amounts drawn down by letters of credit.
"Holder" or "Noteholder" means the person in whose name a Note is
registered on the Registrar's books.
"IAI" shall have the meaning set forth in Section 2.01.
"Indebtedness" means, with respect to any person at any date of
determination (without duplication), (i) all indebtedness of such person for
borrowed money, (ii) all obligations of such person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
person in respect of letters of credit or other similar instruments
(including reimbursement obligations with respect thereto), (iv) all
obligations of such person to pay the deferred and unpaid purchase price of
property or services, which purchase price is due more than six months after
the date of placing such property in service or taking delivery and title
thereto or the completion of such services, except Trade Payables, (v) all
obligations of such person as lessee under Capitalized Lease Obligations,
(vi) all Indebtedness of other persons secured by a Lien on any asset of such
person, whether or not such Indebtedness is assumed by such person; provided
that the amount of such Indebtedness shall be the lesser of (A) the fair
market value of such asset at such date of determination and (B) the amount
of such
<PAGE>
Indebtedness, (vii) all Indebtedness of other persons guaranteed by such
person to the extent such Indebtedness is guaranteed by such person, (viii)
the maximum fixed redemption or repurchase price of Redeemable Capital Stock
of such person at the time of determination and (ix) to the extent not
otherwise included in this definition, obligations under Currency Agreements
and Interest Rate Protection Agreements. The amount of Indebtedness of any
Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described above and, with respect to contingent
obligations, the maximum liability upon the occurrence of the contingency
giving rise to the obligation, provided (i) that the amount outstanding at
any time of any Indebtedness issued with original issue discount is the face
amount of such Indebtedness less the remaining unamortized portion of the
original issue discount of such Indebtedness at such time as determined in
conformity with GAAP and (ii) that Indebtedness shall not include any
liability for federal, state, local or other taxes.
"Indenture" means this Indenture, as amended, modified or supplemented
from time to time.
"Independent Financial Advisor" means a firm (i) which does not, and
whose directors, officers and employees or Affiliates do not, have a direct
or indirect financial interest in the Company and (ii) which, in the judgment
of the Board of Directors of the Company, is otherwise independent and
qualified
to perform the task for which it is to be engaged.
"Initial Notes" shall have the meaning set forth in the Preamble.
"Initial Purchasers" means Smith Barney Inc. and BT Alex. Brown
Incorporated.
"Interest" means, with respect to any Note, the amount of all interest
accruing on such Note, including all interest accruing subsequent to the
occurrence of any events specified in Sections 6.01(f) and (g) or which would
have accrued but for any such event, whether or not such claims are allowable
under applicable law.
"Interested Persons" shall have the meaning set forth in Section 4.14.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Notes, as set forth therein.
"Interest Rate Protection Agreement" means any arrangement with any
other person whereby, directly or indirectly, such person is entitled to
receive from time to time periodic payments calculated by applying either a
floating or a fixed rate of interest on a stated notional amount in exchange
for periodic payments made by such person calculated by applying a fixed or a
floating rate of interest on the same notional amount and shall include
without limitation, interest rate swaps, caps, floors, collars and similar
agreements.
<PAGE>
"Investment" means, with respect to any person, any direct or indirect,
loan, guarantee, or other extension of credit or capital contribution to (by
means of any transfer of cash or other property to others or any payment for
property or services for the account or use of others), or any purchase or
acquisition by such person of any Capital Stock, bonds, notes, debentures or
other securities or evidences of Indebtedness issued by, any other person.
In addition, the Fair Market Value of the assets of any Subsidiary of the
Company at the time that such Subsidiary is designated as an Unrestricted
Subsidiary shall be deemed to be an Investment made by the Company in such
Unrestricted Subsidiary at such time. "Investments" shall exclude extensions
of trade credit by the Company and its Subsidiaries in the ordinary course of
business in accordance with normal trade practices of the Company or such
Subsidiary, as the case may be.
"Issue Date" means October 23, 1997.
"legal defeasance" shall have the meaning set forth in Section 8.02.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim, or
preference or priority or other encumbrance upon or with respect to any
property of any kind. A person shall be deemed to own subject to a Lien any
property which such person has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement.
"Maturity Date" means, with respect to any Note, the date on which any
principal of such Note becomes due and payable as therein or herein provided,
whether at the Stated Maturity with respect to such principal or by
declaration of acceleration, call for redemption or purchase or otherwise.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in
respect of deferred payment obligations when received in the form of cash or
Cash Equivalents (except to the extent that such obligations are financed or
sold with recourse to the Company or any Subsidiary of the Company) net of
(i) brokerage commissions and other fees and expenses (including, without
limitation, fees and expenses of legal counsel and investment bankers)
related to such Asset Sale, (ii) provisions for all taxes payable as a result
of such Asset Sale, (iii) amounts required to be paid to any person (other
than the Company or any Subsidiary of the Company) owning a beneficial
interest in the assets subject to the Asset Sale and (iv) appropriate amounts
to be provided by the Company or any Subsidiary of the Company, as the case
may be, as a reserve required in accordance with GAAP against any liabilities
associated with such Asset Sale and retained by the Company or any Subsidiary
of the Company, as the case may be, after such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale, all as reflected
in an Officers' Certificate delivered to the Trustee.
"Non-U.S. Person" means a Person who is not a U.S. Person as defined in
Regulation S under the Securities Act.
<PAGE>
"Notes" means the securities that are issued from time to time under
this Indenture.
"Officer" means the Chairman of the Board, the President, any Executive
Vice President, any Vice President, the Chief Financial Officer, the
Treasurer, the Secretary or the Controller of the Company.
"Officers' Certificate" means a certificate signed by two Officers or by an
Officer and an Assistant Treasurer or Assistant Secretary of the Company and
delivered to the Trustee.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company.
"Pari Passu Indebtedness" means Indebtedness of the Company which ranks
pari passu in right of payment with the Notes.
"Paying Agent" has the meaning set forth in Section 2.03, except that,
for the purposes of Section 4.12 and Section 4.13 and Articles Three and
Eight, the Paying Agent shall not be the Company or a Subsidiary of the
Company or any of their respective Affiliates.
"Permitted Holder" means any of (x) Fred Gratzon, Shelley Levin-Gratzon
or Clifford Rees or (y) any Affiliate of any Person named in the foregoing
clause (x) or any trust for the benefit of any such Person or any of such
Person's family members or descendants.
"Permitted Indebtedness" means the following Indebtedness (each of which
shall be given independent effect):
(a) Indebtedness of the Company evidenced by the Notes issued and
outstanding on the Issue Date;
(b) Indebtedness of the Company and its Subsidiaries outstanding on the
Issue Date;
(c) Indebtedness, including Acquired Indebtedness, in an aggregate
principal amount at any one time outstanding not to exceed $25 million;
(d) Indebtedness (other than Acquired Indebtedness) incurred to finance
the cost (including the cost of design, development, construction,
acquisition, installation or integration) of equipment used in the
telecommunications business or ownership rights with respect to indefeasible
rights of use or minimum investment units (or similar ownership interests) in
transnational fiber optic cable or other transmission facilities, in each
case purchased or leased by the Company or a Subsidiary after the Issue Date;
(e) Indebtedness of the Company or any Subsidiary (A) in respect of
performance, surety or appeal bonds or letters of credit supporting trade
payables, in each case provided in the ordinary course of business, (B) under
Currency Agreements and Interest Rate Protection Agreements; provided that
such agreements do not increase the Indebtedness of the obligor outstanding
at any time other than as a result of fluctuations in foreign currency
exchange
<PAGE>
rates or interest rates or by reason of fees, indemnities and compensation
payable thereunder; and (C) arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or from
guarantees or letters of credit, surety bonds or performance bonds securing
any obligations of the Company or any of its Subsidiaries pursuant to such
agreements, in any case incurred in connection with the disposition of any
business, assets or Subsidiary of the Company (other than guarantees of
Indebtedness incurred by any Person acquiring all or any portion of such
business, assets or Subsidiary for the purpose of financing such
acquisition), in a principal amount not to exceed the gross proceeds actually
received by the Company or any Subsidiary in connection with such
disposition;
(f) Indebtedness of a Wholly-Owned Subsidiary owed to and held by the
Company or another Wholly-Owned Subsidiary, in each case which is not
subordinated in right of payment to any Indebtedness of such Wholly-Owned
Subsidiary, except that any transfer of such Indebtedness by the Company or a
Wholly-Owned Subsidiary (other than to the Company or to a Wholly-Owned
Subsidiary) or any event which results in any such Wholly-Owned Subsidiary
ceasing to be a Wholly-Owned Subsidiary shall, in each case, be an incurrence
of Indebtedness by such Wholly-Owned Subsidiary subject to the provisions of
Section 4.07.
(g) Indebtedness of the Company owed to and held by a Wholly-Owned
Subsidiary of the Company which is unsecured and subordinated in right of
payment to the payment and performance of the Company's obligations under the
Indenture and the Notes except that any transfer of such Indebtedness by a
Wholly-Owned Subsidiary of the Company (other than to another Wholly-Owned
Subsidiary of the Company) or any event which results in any such Wholly-
Owned Subsidiary ceasing to be a Wholly-Owned Subsidiary shall, in each case,
be an incurrence of Indebtedness by the Company subject to the provisions of
Section 4.07;
(h) Indebtedness of (x) the Company not to exceed, at any one time
outstanding, 1.75 times the net cash proceeds (less the amount of such
proceeds applied as provided in clause (ii) or (iii) of the second paragraph
of Section 4.09 received by the Company after the Issue Date from the
issuance and sale of its Common Stock to a Person that is not a Subsidiary of
the Company and (y) the Company or Acquired Indebtedness of a Subsidiary not
to exceed, at one time outstanding, 1.5 times the Fair Market Value of any
Common Stock of the Company issued after the Issue Date as consideration for
an Asset Acquisition in the Company's line of business; provided that, in any
such case, such Indebtedness (other than Acquired Indebtedness) matures after
the Stated Maturity of the Notes and has an Average Life to Stated Maturity
longer than the Notes;
(i) Indebtedness of the Company, to the extent that the net proceeds
thereof are promptly (A) used to repurchase Notes tendered in a Change of
Control Offer or (B) deposited to defease all of the Notes pursuant to
Section 8.02;
(j) Indebtedness of a Subsidiary represented by a guarantee of the
Notes permitted by and made in accordance with Section 4.16;
(k) Indebtedness of the Company or any Subsidiary under one or more
Credit Facilities, provided that if any Indebtedness is incurred pursuant to
this clause (k), total Indebtedness under this clause (k) and clause (c)
above does not exceed at any one time outstanding an amount equal to the sum
of (x) 65% of Eligible Accounts Receivable and (y) without duplication of
amounts
<PAGE>
included in the previous clause (x), 30% of the Company's unbilled, domestic
unencumbered accounts receivable; and
(l) (i) Indebtedness of the Company the proceeds of which are used
solely to refinance (whether by amendment, renewal, extension or refunding)
Indebtedness of the Company or any of its Subsidiaries and (ii) Indebtedness
of any Subsidiary of the Company the proceeds of which are used solely to
refinance (whether by amendment, renewal, extension or refunding)
Indebtedness of such Subsidiary, in each case other than the Indebtedness
incurred under clause (c) through (k) above (which clauses provide for the
refinancing of Indebtedness incurred thereunder); provided, however, that (x)
the principal amount of Indebtedness incurred pursuant to this clause (l)
(or, if such Indebtedness provides for an amount less than the principal
amount thereof to be due and payable upon a declaration of acceleration of
the maturity thereof, the original issue price of such Indebtedness) shall
not exceed the sum of the principal amount of Indebtedness so refinanced,
plus the amount of any premium required to be paid in connection with such
refinancing pursuant to the terms of such Indebtedness or the amount of any
premium reasonably determined by the Board of Directors of the Company as
necessary to accomplish such refinancing by means of a tender offer or
privately negotiated purchase, plus the amount of expenses in connection
therewith, (y) in the case of Indebtedness incurred by the Company pursuant
to this clause (l) to refinance Subordinated Indebtedness, such Indebtedness
(A) has an Average Life to Stated Maturity greater than the remaining Average
Life to Stated Maturity of the Indebtedness being refinanced and (B) is
expressly subordinated to the Notes in the same manner and to the same extent
that the Subordinated Indebtedness being refinanced is subordinated to the
Notes and (z) in the case of Indebtedness incurred by the Company pursuant to
this clause (l) to refinance Pari Passu Indebtedness, such Indebtedness (A)
has an Average Life to Stated Maturity greater than the remaining Average
Life to Stated Maturity of the Indebtedness being refinanced and
(B) constitutes Pari Passu Indebtedness or Subordinated Indebtedness.
"Permitted Investments" means any of the following: (i) Investments in
any Subsidiary of the Company (including any person that pursuant to such
Investment becomes a Subsidiary of the Company) and any person that is merged
or consolidated with or into, or transfers or conveys all or substantially
all of its assets to, the Company or any Subsidiary of the Company at the
time such Investment is made; (ii) Investments in Cash Equivalents;
(iii) Investments in deposits with respect to leases or utilities provided to
third parties in the ordinary course of business; (iv) Investments in
Currency Agreements on commercially reasonable terms entered into by the
Company or any of its Subsidiaries in the ordinary course of business in
connection with the operations of the business of the Company or its
Subsidiaries to hedge against fluctuations in foreign exchange rates;
(v) loans or advances to officers, employees or consultants of the Company
and its Subsidiaries in the ordinary course of business for bona fide
business purposes of the Company and its Subsidiaries (including travel and
moving expenses) not in excess of $1,000,000 in the aggregate at any one time
outstanding; (vi) Investments in evidences of Indebtedness, securities or
other property received from another person by the Company or any of its
Subsidiaries in connection with any bankruptcy proceeding or by reason of a
composition or readjustment of debt or a reorganization of such person or as
a result of foreclosure, perfection or
<PAGE>
enforcement of any Lien in exchange for evidences of Indebtedness, securities
or other property of such person held by the Company or any of its
Subsidiaries, or for other liabilities or obligations of such other person to
the Company or any of its Subsidiaries that were created in accordance with
the terms of this Indenture; and (vii) Investments in Interest Rate
Protection Agreements on commercially reasonable terms entered into by the
Company or any of its Subsidiaries in the ordinary course of business in
connection with the operations of the business of the Company or its
Subsidiaries to hedge against fluctuations in interest rates.
"Permitted Liens" means the following types of Liens:
(a) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or any of its Subsidiaries shall have
set aside on its books such reserves as may be required pursuant to GAAP;
(b) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(c) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, governmental contracts,
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
(d) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(e) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company or
any of its Subsidiaries;
(f) any interest or title of a lessor under any Capitalized Lease
Obligation or operating lease;
(g) Liens to finance the acquisition, cost of design, development,
construction, installation or integration of property or assets of the
Company or any Subsidiary of the Company in the ordinary course of business;
provided, however, that (i) the related Indebtedness shall not be secured by
any property or assets of the Company or any Subsidiary of the Company other
than such property or assets and any improvements thereto and (ii) the Lien
securing such Indebtedness either (x) exists at the time of such acquisition
or construction or (y) shall be created within 90 days of such acquisition,
<PAGE>
construction or commencement of full operation of such property or assets;
(h) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(i) leases or subleases granted to others that do not materially
interfere with the ordinary course of business of the Company and its
Subsidiaries, taken as a whole;
(j) Liens encumbering property or assets under construction arising
from progress or partial payments by a customer of the Company or its
Subsidiaries relating to such property or assets;
(k) Liens arising from filing Uniform Commercial Code financing
statements regarding leases;
(l) Liens on property of, or on shares of stock or Indebtedness of, any
corporation existing at the time such corporation becomes, or becomes a part
of, any Subsidiary; provided that such Liens do not extend to or cover any
property or assets of the Company or any Subsidiary other than the property
or assets acquired and were not created in contemplation of such transaction;
(m) Liens securing reimbursement obligations with respect to letters of
credit that encumber documents and other property relating to such letters of
credit and the products and proceeds thereof; and
(n) Liens encumbering customary initial deposits and margin deposits
and other Liens that are either within the general parameters customary in
the industry or incurred in the ordinary course of business, in each case
securing Indebtedness under Interest Rate Protection Agreements and Currency
Agreements.
"Person" or "person" means any individual, corporation, limited
liability company, partnership, joint venture, association, joint-stock
company, trust, charitable foundation, unincorporated organization,
government or any agency or political subdivision thereof or any other
entity.
"Predecessor Note" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced
by such particular Note; and, for the purposes of this definition, any Note
authenticated and delivered under Section 2.07 hereof in exchange for a
mutilated Note or in lieu of a lost, destroyed or stolen Note shall be deemed
to evidence the same debt as the mutilated, lost, destroyed or stolen Note.
"Preferred Stock" means, with respect to any person, any and all shares,
interests, participations or other equivalents, however designated, whether
voting or nonvoting, of such persons preferred or preferred stock, whether
new outstanding or issued after the Issue Date, including without limitation,
all series and classes of such preferred or preferred stock.
<PAGE>
"Principal" means, with respect to any debt security, the principal of
the security plus, when appropriate, the premium, if any, on the security and
any interest on overdue principal.
"Private Placement Legend" means the legend set forth under such caption
in the form of Initial Note in Exhibit A hereto.
"Pro Forma Consolidated Cash Flow" means, for any period, the
Consolidated Cash Flow of the Company for such period calculated on a pro
forma basis to give effect to any Asset Disposition or Asset Acquisition not
in the ordinary course of business (including acquisition of other persons by
merger, consolidation or purchase of Capital Stock) during such period as if
such Asset Disposition or Asset Acquisition had taken place on the first day
of such period.
"Property" means, with respect to any Person, any interest of such
Person in any kind of property or asset, whether real, personal or mixed, or
tangible or intangible, excluding Capital Stock in any other Person.
"Purchase Agreement" means the Purchase Agreement dated October 20, 1997
among the Company and the Initial Purchasers.
"QIBs" shall have the meaning set forth in Section 2.01.
"Redeemable Capital Stock" means any shares of any class or series of
Capital Stock that, either by the terms thereof, by the terms of any security
into which it is convertible or exchangeable or by contract or otherwise, is
or upon the happening of an event or passage of time would be, required to be
redeemed prior to the final Stated Maturity with respect to the principal of
any Note or is redeemable at the option of the Holder thereof at any time
prior to any such Stated Maturity, or is convertible into or exchangeable for
debt securities at any time prior to any such Stated Maturity.
"Redemption Date" means, with respect to any Note to be redeemed, the
date fixed by the Company for such redemption pursuant to this Indenture and
the Notes.
"Redemption Price" means, with respect to any Notes to be redeemed, the
price fixed for such redemption pursuant to the terms of this Indenture and
the Notes.
"Registered Exchange Offer" shall have the meaning set forth in the
Exchange and Registration Rights Agreement.
"Registrar" has the meaning set forth in Section 2.03.
"Regular Record Date" means, with respect to any Interest payable on any
Interest Payment Date, the April 15 and October 15 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date.
"Replacement Assets" has the meaning set forth in Section 4.13.
"Repurchase Date" has the meaning set forth in Section 4.18.
<PAGE>
"Resale Restriction Termination Date" shall have the meaning set forth
in Section 2.16 hereof.
"Restricted Payment" has the meaning set forth in Section 4.09.
"Rule 144A" shall have the meaning set forth in Section 2.01.
"Sale and Leaseback Transaction" means, with respect to any Person, any
direct or indirect arrangement pursuant to which Property is sold or
transferred by such Person or a Subsidiary of such Person and is thereafter
leased back from the purchaser or transferee thereof by such Person or one of
its Subsidiaries.
"SEC" means the Securities and Exchange Commission, as from time to time
constituted, or if at any time after the execution of the Indenture such
Commission is not existing and performing the applicable duties now assigned
to it, then the body or bodies performing such duties at such time.
"Securities Act" means the Securities Act of 1933, as amended from time
to time.
"Significant Subsidiary" shall have the same meaning ascribed to it in
Rule 1.02(w) of Regulation S-X under the Securities Act.
"S&P" means Standard & Poor's Corporation, and its successors.
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is
due and payable, and when used with respect to any other Indebtedness, means
the date specified in the instrument governing such Indebtedness as the fixed
date on which the principal of such Indebtedness, or any installment of
interest thereon, is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company which is
expressly subordinated in right of payment to the Notes.
"Subsidiary" means, with respect to any person, (i) a corporation a
majority of whose Voting Stock is at the time, directly or indirectly, owned
by such person, by one or more Subsidiaries of such person or by such person
and one or more Subsidiaries thereof and (ii) any other person (other than a
corporation), including, without limitation, a joint venture, in which such
person, one or more Subsidiaries thereof or such person and one or more
Subsidiaries thereof, directly or indirectly, at the date of determination
thereof, has at least majority ownership interest entitled to vote in the
election of directors, managers or trustees thereof (or other person
performing similar functions). For purposes of this definition, any
directors' qualifying shares or investments by foreign nationals mandated by
applicable law shall be disregarded in determining the ownership of a
Subsidiary. Notwithstanding the foregoing, an Unrestricted Subsidiary shall
not be deemed a Subsidiary of the Company under this Indenture, other than
for purposes of the definition of an Unrestricted Subsidiary, unless the
Company shall have designated an Unrestricted Subsidiary as a "Subsidiary" by
written notice to the Trustee under this Indenture, accompanied by an
Officers'
<PAGE>
Certificate as to compliance with the Indenture; provided, however, that the
Company shall not be permitted to designate any Unrestricted Subsidiary as a
Subsidiary unless, after giving pro forma effect to such designation, (i) the
Company would be permitted to incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under Section 4.07 (assuming a market rate of
interest with respect to such Indebtedness) and (ii) all Indebtedness and
Liens of such Unrestricted Subsidiary would be permitted to be incurred by a
Subsidiary of the Company under this Indenture. A designation of an
Unrestricted Subsidiary as a Subsidiary may not thereafter be rescinded.
"Surviving Entity" shall have the meaning set forth in Section 5.01.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code
Secs. 77aaa-77bbbb) as in effect on the Issue Date.
"Trade Payables" means any accounts payable or any other indebtedness or
monetary obligation to trade creditors created, assumed or guaranteed by the
Company or any of its Subsidiaries arising in the ordinary course of business
in connection with the acquisition of goods and services.
"Transaction Date" means, with respect to the incurrence of any
Indebtedness by the Company or any of its Subsidiaries, the date such
Indebtedness is to be incurred.
"Trust Officer" means any officer in the Corporate Trust Administration
of the Trustee 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.
"Trustee" means the party named as such in this Indenture until a
successor replaces such party (or any previous successor) in accordance with
the provisions of this Indenture, and thereafter means such successor.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that
shall be designated an Unrestricted Subsidiary by the Board of Directors of
the Company in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary
(including any newly acquired or newly formed Subsidiary of the Company) to
be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock
of, or owns or holds any Lien on any property of, the Company or any
Subsidiary; provided that (A) any guarantee by the Company or any Subsidiary
of any Indebtedness of the Subsidiary being so designated shall be deemed an
"incurrence" of such Indebtedness and an "Investment" by the Company or such
Subsidiary (or both, if applicable) at the time of such designation; (B) such
designation would be permitted under Section 4.09 and (C) if applicable, the
Incurrence of Indebtedness and the Investment referred to in clause (A) of
this proviso would be permitted under the Section 4.07 and Section 4.09.
"U.S. Government Obligations" shall have the meaning set forth in
Section 8.02.
<PAGE>
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors,
managers or trustees of any person (irrespective of whether or not, at the
time, Capital Stock of any other class or classes shall have, or might have,
voting power by reason of the happening of any contingency).
"Wholly-Owned Subsidiary" means any Subsidiary of the Company of which
100% of the outstanding Capital Stock is owned by one or more Wholly-Owned
Subsidiaries of the Company, by the Company and one or more Wholly-Owned
Subsidiaries of the Company or by the Company. For purposes of this
definition, any directors' qualifying shares or investments by foreign
nationals mandated by applicable law shall be disregarded in determining the
ownership of a Subsidiary.
1.02 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC;
"indenture securities" means the Notes;
"indenture security holder" means a Noteholder or Holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the indenture securities means the Company or any other obligor
on the Notes.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
<PAGE>
1.03 Rules of Construction.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
1. a term has the meaning assigned to it;
2. words in the singular include the plural, and words in the plural
include the singular;
3. "or" is not exclusive;
4. provisions apply to successive events and transactions;
5. all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with GAAP;
6. 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; and
7. all references to $ or dollars shall refer to the lawful currency of
the United States of America.
ARTICLE TWO
THE NOTES
2.01 Forms and Dating.
The Initial Notes (including any Global Notes) and the Trustee's
certificate of authentication thereon, shall be in substantially the form of
Exhibit A hereto. Any Exchange Notes and the Trustee's certificate of
authentication thereon shall be in substantially the form of Exhibit B
hereto. The Initial Notes and the Exchange Notes may contain such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture and may have such letters, numbers or
other marks of identification and such legends or endorsements placed thereon
as may be required to comply with any applicable law or with the rules of any
securities exchange or as may, consistently herewith, be determined by the
Officers executing such Notes, as evidenced by their execution thereof. The
Notes shall be issuable only in registered form without coupons and only in
denominations of $1,000 in principal amount at maturity and integral
multiples thereof.
The Notes shall be printed, typewritten, lithographed or engraved or
produced by any combination of these methods or may be produced in any other
manner permitted by the rules of any securities exchange on which the Notes
may be listed, all as determined by the officers executing such Notes, as
evidenced by their execution of such Notes. Each Note shall be dated the
date of its authentication.
The terms and provisions contained in the forms of the Notes, annexed
hereto as Exhibits A and B shall constitute, and are hereby expressly made, a
part of this Indenture and, to the extent applicable, the Company and the
<PAGE>
Trustee, by their execution and delivery of this Indenture, expressly agree
to such terms and provisions and to be bound thereby.
The Notes are being offered and sold by the Company pursuant to the
Purchase Agreement. The Notes are being offered and sold to "qualified
institutional buyers" (as defined in Rule 144A under the Securities Act
("Rule 144A")) ("QIBs") in accordance with Rule 144A as provided in the
Purchase Agreement and shall be issued on the Issue Date initially in the
form of a permanent Global Note substantially in the form set forth in
Exhibit A (the "Global Note"). On the Issue Date, the Global Note will be
deposited with the Trustee, as custodian for the Depositary, duly executed by
the Company and authenticated by the Trustee as hereinafter provided. The
aggregate principal amount of the Global Note may from time to time be
increased or decreased by adjustments made on the records of the Trustee, as
custodian for the Depositary or its nominee, as hereinafter provided in
accordance with the Trustee's and Depositary's standard operating procedures.
2.02 Execution and Authentication.
Two Officers shall execute the Notes on behalf of the Company by either
manual or facsimile signature. The Company's seal may be impressed, affixed,
imprinted or reproduced on the Notes.
If an Officer whose signature is on a Note no longer holds that office
at the time the Trustee authenticates the Note or at any time thereafter, the
Note shall be valid nevertheless.
A Note shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Note. Such signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture.
The Trustee or an authenticating agent shall (1) authenticate Initial
Notes for original issue in an aggregate principal amount at maturity of up
to $150,000,000 and (2) authenticate Exchange Notes for issue only in a
Registered Exchange Offer, pursuant to the Exchange and Registration Rights
Agreement, for Initial Notes for a like principal amount of Initial Notes
exchanged pursuant thereto, in each case upon a Company Request. The
aggregate principal amount at maturity of Notes outstanding at any time may
not exceed $150,000,000 except as provided in Section 2.07 hereof. The Notes
shall be issuable only in registered form without coupons and only in
denominations of $1,000 and integral multiples thereof.
The Company Request directing the authentication and delivery of Notes
shall specify whether such Notes shall be issued in the form of definitive
Notes or Global Notes. Such Company Request shall specify the amount of the
Notes to be authenticated, the date on which the original issue of the Notes
is to be authenticated and whether the Notes are to be Initial Notes or
Exchange Notes. If the Company Request specifies that the Notes are to be
issued in the form of one or more Global Notes, then the Company shall
execute and the Trustee shall, in accordance with this Section and such
Company Request, authenticate and deliver one or more Global Notes in
definitive form that:
<PAGE>
(a) shall be registered in the name of the Depositary or a nominee
of such Depositary,
(b) shall, at the instruction of the Company, be delivered by the
Trustee to the Depositary or held by the Trustee as custodian for the
Depositary, and
(c) shall include and bear a legend substantially to the effect that
unless and until it is exchanged in whole or in part for definitive Notes,
such Global Notes may not be transferred except as a whole by the Depositary
to a nominee of the Depositary or by a nominee of the Depositary to the
Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary.
The Depositary must, at the time of its designation and at all times
when it serves as Depositary, be a clearing agency registered under the
Exchange Act and any other applicable statute or regulation.
The Trustee may appoint an authenticating agent reasonably acceptable to
the Company to authenticate Notes. An authenticating agent may authenticate
Notes whenever the Trustee may do so. Any appointment shall be evidenced by
instrument signed by an authorized officer of the Trustee, a copy of which
shall be furnished to the Company. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same right as an Agent to deal with the Company
or an Affiliate of the Company.
2.03 Registrar and Paying Agent.
The Company shall maintain an office or agency (which shall be located
in the Borough of Manhattan, The City of New York, State of New York) where
Notes may be presented for registration of transfer, for exchange or for
conversion (the "Registrar"), an office or agency (which shall be located in
the Borough of Manhattan, The City of New York, State of New York) where
Notes may be presented for payment of principal, premium, if any, and
interest (the "Paying Agent") and an office or agency where notices and
demands to or upon the Company in respect of the Notes and this Indenture may
be served. The Registrar shall keep a register of the Notes and of their
transfer and exchange. The Company may have one or more co-Registrars and
one or more additional paying agents. The term "Paying Agent" includes any
additional paying agent. Except as otherwise expressly provided in this
Indenture, the Company or any Affiliate thereof may act as Paying Agent.
The Company shall enter into an appropriate agency agreement with any
Registrar or Paying Agent not a party to this Indenture, which shall
incorporate the provisions of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such Registrar or Paying Agent.
The Company shall notify the Trustee of the name and address of any such
Registrar or Paying Agent. If the Company fails to maintain a Registrar,
Paying Agent or agent for service of notices and demands, or fails to give
the foregoing notice, the Trustee shall act as such and shall be entitled to
<PAGE>
appropriate compensation in accordance with Section 7.08.
The Company initially appoints the Trustee as Registrar, Paying Agent
and agent for service of notices and demands in connection with the Notes.
2.04 Paying Agent To Hold Money in Trust.
Each Paying Agent shall hold in trust for the benefit of Holders or the
Trustee all money held by the Paying Agent for the payment of principal of,
or interest on, the Notes (whether such money has been distributed to it by
the Company or any other obligor on the Notes), and the Company (or any other
obligor on the Notes) and the Paying Agent shall notify the Trustee of any
default by the Company (or any other obligor on the Notes) in making any such
payment. If the Company or an Affiliate of the Company acts as Paying Agent,
it shall segregate the money and hold it as a separate trust fund. The
Company at any time may require a Paying Agent to distribute all money held
by it to the Trustee and account for any funds disbursed and the Trustee may
at any time during the continuance of any payment default with respect to the
Notes, upon written request to a Paying Agent, require such Paying Agent to
pay all money held by it to the Trustee and to account for any funds
distributed. Upon doing so, the Paying Agent (other than an obligor on the
Notes) shall have no further liability for the money so paid over to the
Trustee.
2.05 Noteholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses
of Holders and shall otherwise comply with TIA Sec. 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least ten
Business Days before each Interest Payment Date and at such other times as
the Trustee may request in writing a list in such form and as of such date as
the Trustee may reasonably require of the names and addresses of Holders,
which list may be conclusively relied upon by the Trustee.
2.06 Transfer and Exchange.
Subject to Section 2.16, when Notes are presented to the Registrar or a
co-Registrar with a request to register the transfer of such Notes or to
exchange such Notes for an equal principal amount of Notes of other
authorized denominations, the Registrar or co-Registrar shall register the
transfer or make the exchange as requested if its requirements for such
transaction are met; provided, however, that the Notes surrendered for
transfer or exchange shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Registrar
or co-Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing. To permit registrations of transfers and exchanges,
the Company shall execute and the Trustee shall authenticate Notes at the
Registrar's or co-Registrar's request. No service charge shall be made for
any transfer, exchange or redemption, but the Company may require payment of
a sum sufficient to cover any transfer tax or similar governmental charge
payable in connection therewith (other than any such transfer taxes or
similar governmental charge payable upon exchanges or transfers pursuant to
Sections 2.02, 2.07, 2.10, 3.06, 4.12, 4.13 or 9.05). The Registrar or co-
Registrar shall not be required to register the transfer of or exchange of
any Note (i) during a period beginning at the opening of business 15 days
before the mailing of a notice of redemption of Notes and ending at the close
of business on the day of such mailing and (ii) selected for redemption in
whole or in part pursuant to Article Three, except the unredeemed portion of
any Note being redeemed in part.
Notwithstanding any other provision of this Section 2.06, unless and
until it is exchanged in whole or in part for definitive Notes, a Global Note
may not be transferred except as a whole by the Depositary to a nominee of
such Depositary or by a nominee of such Depositary to such Depositary or
another nominee of such Depositary or by such Depositary or any such nominee
to a successor Depositary or a nominee of such successor Depositary.
If (i) the Depositary is at any time unwilling, unable or ineligible to
continue as Depositary and a successor Depositary is not appointed by the
Company within 60 days of the date the Company is so informed in writing or
becomes aware of the same, or (ii) an Event of Default has occurred and is
continuing, the Company promptly will execute and deliver to the Trustee
definitive Notes, and the Trustee, upon receipt of a Company Request for the
authentication and delivery of such definitive Notes (which the Company will
promptly execute and deliver to the Trustee), will authenticate and deliver
definitive Notes, without charge, in an aggregate principal amount at
maturity equal to the principal amount at maturity of the outstanding Global
Note, in exchange for and upon surrender of the Global Note.
Upon the exchange of a Global Note for definitive Notes, such Global
Note shall be canceled by the Trustee. Definitive Notes issued in exchange
for Global Notes pursuant to this Section 2.06 shall be registered in such
names and in such authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee.
2.07 Replacement Notes.
If a mutilated Note is surrendered to the Trustee or if the Holder of a
Note claims that the Note has been lost, destroyed or wrongfully taken, the
Company shall issue and the Trustee shall authenticate a replacement Note if
the Trustee's requirements are met. If required by the Trustee or the
Company, such Holder must provide an indemnity bond or other indemnity,
sufficient in the judgment of both the Company and the Trustee, to protect
the Company, the Trustee or any Paying Agent or Registrar from any loss
which any of them may suffer if a Note is replaced. The Company may charge
such Holder for its reasonable, out-of-pocket expenses in replacing a Note,
including reasonable fees and expenses of counsel. Every replacement Note is
an additional obligation of the Company.
2.08 Outstanding Notes.
Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee except those canceled by it, those delivered to
it for cancellation and those described in this Section as not outstanding.
A Note does not cease to be outstanding because the Company or any of its
Affiliates holds the Note.
<PAGE>
If a Note is replaced pursuant to Section 2.07 (other than a mutilated
Note surrendered for replacement), it ceases to be outstanding unless the
Trustee receives proof satisfactory to it that the replaced Note is held by a
bona fide purchaser. A mutilated Note ceases to be outstanding upon
surrender of such Note and replacement thereof pursuant to Section 2.07.
If on a Redemption Date or a Maturity Date the Paying Agent (other than
the Company or an Affiliate of the Company) holds cash or U.S. Government
Obligations sufficient to pay all of the principal and interest due on the
Notes payable on that date, and is not prohibited from paying such cash or
U.S. Government Obligations to the Holders of such Notes pursuant to the
terms of this Indenture, then on and after that date such Notes cease to be
outstanding and interest on them shall cease to accrue.
2.09 Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company or any of its Affiliates shall be disregarded, except that, for the
purposes of determining whether the Trustee shall be protected in relying on
any such direction, waiver or consent, only Notes that a Trust Officer of the
Trustee knows are so owned shall be disregarded.
2.10 Temporary Notes.
Until definitive Notes are prepared and ready for delivery, the Company
may prepare and the Trustee shall authenticate temporary Notes. Temporary
Notes shall be substantially in the form of definitive Notes but may have
variations that the Company considers appropriate for temporary Notes.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate definitive Notes in exchange for temporary Notes. Until such
exchange, temporary Notes shall be entitled to the same rights, benefits and
privileges as definitive Notes.
2.11 Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the
Trustee any Notes surrendered to them for transfer, redemption, conversion,
exchange or payment. The Trustee, or at the direction of the Trustee, the
Registrar or the Paying Agent (other than the Company or an Affiliate of the
Company), and no one else, shall promptly cancel and, at the written
direction of the Company, shall dispose of all Notes surrendered for
transfer, redemption, conversion, exchange, payment or cancellation. Subject
to Section 2.07, the Company may not issue new Notes to replace Notes that it
has paid or delivered to the Trustee for cancellation. If the Company shall
acquire any of the Notes, such acquisition shall not operate as a redemption
or satisfaction of the Indebtedness represented by such Notes unless and
until the same are surrendered to the Trustee for cancellation pursuant to
this Section 2.11.
<PAGE>
2.12 Defaulted Interest.
If the Company defaults on a payment of interest on the Notes, it shall
pay the defaulted interest, plus (to the extent permitted by law) any
interest payable on the defaulted interest, in accordance with the terms
hereof and the Notes, to the persons who are Holders on a subsequent special
record date, which date shall be at least five Business Days prior to the
payment date. The Company shall fix such special record date and payment
date in a manner satisfactory to the Trustee. At least 15 days before such
special record date, the Company shall mail to each Holder a notice that
states the special record date, the payment date and the amount of defaulted
interest, and interest payable on such defaulted interest, if any, to be
paid.
2.13 CUSIP Number.
The Company in issuing the Notes may use a "CUSIP" number (if then
generally in use), and if so, the Trustee may use the CUSIP numbers in
notices of redemption or exchange as a convenience to Holders; provided,
however, that any such notice may state that no representation is made as to
the correctness or accuracy of the CUSIP number printed in the notice or on
the Notes, and that reliance may be placed only on the other identification
numbers printed on the Notes. The Company will promptly notify the Trustee
of any change in the CUSIP number.
2.14 Deposit of Moneys.
On or before each Interest Payment Date and Maturity Date, the Company
shall deposit with the Trustee or Paying Agent in immediately available funds
money sufficient to make cash payments, if any, due on such Interest Payment
Date or Maturity Date, as the case may be, in a timely manner which permits
the Paying Agent to remit payment to the Holders on such Interest Payment
Date or Maturity Date, as the case may be.
2.15 Book-Entry Provisions for Global Notes.
(a) Global Notes initially shall (i) be registered in the name of
the Depositary for such Global Note or the nominee of such Depositary and
(ii) be delivered to the Trustee as custodian for such Depositary.
Members of, or participants in, the Depositary ("Agent Members") shall have
no rights under this Indenture with respect to any Global Note held on their
behalf by the Depositary, or the Trustee as its custodian, or under such
Global Note, and the Depositary may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the absolute owner of such
Global Note for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Trustee or the Company from giving effect to
any written certification, proxy or other authorization furnished by the
Depositary or shall impair, as between the Depositary and its Agent Members,
the operation of customary practices governing the exercise of the rights of
a Holder of any Note.
(b) Transfers of a Global Note shall be limited to transfers of such
Global Note in whole, but not in part, to the Depositary, its successors or
their respective nominees. Interests of beneficial owners in a Global Note
<PAGE>
may be transferred in accordance with the rules and procedures of the
Depositary and the provisions of Section 2.16. If required to do so pursuant
to any applicable law or regulation, beneficial owners may obtain definitive
Notes in exchange for their beneficial interests in a Global Note upon
written request in accordance with the Depositary's and the Registrar's
procedures.
(c) In connection with any transfer of a portion of the beneficial
interest in a Global Note pursuant to subsection (b) of this Section 2.15 to
beneficial owners identified by the Depositary who are required to hold
definitive Notes, the Registrar shall reflect on its books and records the
date and a decrease in the principal amount at maturity of such Global Note
in an amount equal to the principal amount at maturity of the beneficial
interest in the Global Note to be transferred, and the Company shall execute,
and the Trustee shall authenticate and deliver, one or more definitive Notes
of like tenor and amount.
(d) In connection with the transfer of an entire Global Note to
beneficial owners pursuant to subsection (b) of this Section 2.15, such
Global Note shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee shall
authenticate and deliver, to each beneficial owner identified by the
Depositary in exchange for its beneficial interest in such Global Note, an
equal aggregate principal amount at maturity of definitive Notes of
authorized denominations.
(e) Any definitive Note delivered in exchange for an interest in a
Global Note pursuant to subsection (c) or subsection (d) of this Section 2.15
shall, except as otherwise provided by paragraph (d) of Section 2.16, bear
the Private Placement Legend.
(f) The registered holder of a Global Note may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Notes.
2.16. Special Transfer Provisions.
Unless and until an Initial Note is transferred or exchanged under an
effective registration statement under the Securities Act, the following
provisions shall apply:
(a) Transfers to Non-QIB Institutional Accredited Investors. The
following provisions shall apply with respect to the registration of any
proposed transfer of an Initial Note to any IAI which is not a QIB (excluding
Non-U.S. Persons):
(i) The Registrar shall register the transfer of such Initial Note
if
(x) the requested transfer is after the date that is two years
after the later of the Issue Date and the last date on which the
Company or any of its Affiliates was the owner of such Initial
Note (such later date, the "Resale Restriction Termination
Date")
or (y) the proposed transferee has delivered to the Registrar a
certificate substantially in the form set forth in Exhibit C.
<PAGE>
(ii) If the proposed transferee is entitled to receive a definitive
Note as provided in Section 2.15 and the proposed transferor is
an
Agent Member holding a beneficial interest in a Global Note, upon
receipt by the Registrar of (x) the documents, if any, required
by
paragraph (i) and (y) instructions given in accordance with the
Depositary's and the Registrar's procedures therefor, the
Registrar shall reflect on its books and records the date and a
decrease in the principal amount at maturity of such Global Note
in an amount equal to the principal amount at maturity of the
beneficial interest in such Global Note to be transferred, and
the
Company shall execute, and the Trustee shall authenticate and
deliver, one or more definitive Notes of like tenor and amount.
(iii) If the Initial Note to be transferred consists of definitive
Notes
and the proposed transferee is entitled to receive a definitive
Note as provided in Section 2.15, upon receipt by the Registrar
of
the document, if any, required by paragraph (i), the Registrar
shall register such transfer and the Company shall execute, and
the Trustee shall authenticate and deliver, one or more
definitive
Notes of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of an Initial Note to a
QIB (excluding Non-U.S. Persons):
(i) If the Note to be transferred consists of definitive Notes, the
Registrar shall register the transfer if the proposed transfer is
after the Resale Restriction Termination Date or such transfer is
being made by a proposed transferor who has provided the
Registrar
with a certificate substantially in the form set forth in
Exhibit F hereto.
(ii) If the proposed transferee is an Agent Member, and the Initial
Note to be transferred consists of definitive Notes, upon receipt
by the Registrar of (x) the document, if any, required by
paragraph (i) and (y) instructions given in accordance with the
Depositary's and the Registrar's procedures therefor, the
Registrar shall reflect on its books and records the date and an
increase in the principal amount at maturity of the Global Note
in
an amount equal to the principal amount at maturity of the
definitive Notes, to be transferred, and the Trustee shall cancel
the definitive Note so transferred.
(iii) If the proposed transferee is entitled to receive a definitive
Note as provided in Section 2.15 and the proposed transferor is
an
Agent Member holding a beneficial interest in a Global Note, upon
receipt by the Registrar of (x) the documents, if any, required
by
paragraph (i) and (y) instructions given in accordance with the
Depositary's and the Registrar's procedures therefor, the
Registrar shall reflect on its books and records the date and a
decrease in the principal amount at maturity of such Global Note
in an amount equal to the principal amount at maturity of the
beneficial interest in such Global Note to be transferred, and
the
<PAGE>
Company shall execute, and the Trustee shall authenticate and
deliver, one or more definitive Notes of like tenor and amount.
(iv) If the Initial Note to be transferred consists of definitive
Notes
and the proposed transferee is entitled to receive a definitive
Note as provided in Section 2.15, upon receipt by the Registrar
of
the document, if any, required by paragraph (i), the Registrar
shall register such transfer and the Company shall execute, and
the Trustee shall authenticate and deliver, one or more
definitive
Notes of like tenor and amount.
(c) Transfers to Non-U.S. Persons. The following provisions shall
apply with respect to any transfer of an Initial Note to a Non-U.S. Person
(as defined in Regulation S under the Securities Act):
(i) The Registrar shall register any proposed transfer of an Initial
Note to a Non-U.S. Person if the proposed transfer is after the
Resale Restriction Termination Date or upon receipt of a
certificate substantially in the form set forth in Exhibit G from
the proposed transferor and the Company shall execute, and the
Trustee shall authenticate and make available for delivery, one
or
more definitive Notes.
(ii) If the proposed transferor is an Agent Member holding a
beneficial
interest in a Global Note, upon receipt by the Registrar of (x)
the document, if any, required by paragraph (i), and (y)
instructions in accordance with the Depositary's and the
Registrar's procedures therefor, the Registrar shall reflect on
its books and records the date and a decrease in the principal
amount at maturity equal to the principal amount at maturity of
the beneficial interest in the Global Note to be transferred and
the Company shall execute, and the Trustee shall authenticate and
deliver, one or more definitive Notes of like tenor and amount.
(d) Private Placement Legend. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Notes bearing the Private Placement
Legend, the Registrar shall deliver only Notes that bear the Private
Placement Legend unless either (i) such transfer, exchange or replacement of
such Notes occurs after the Resale Restriction Termination Date (which date
shall be set forth in an Officers' Certificate of the Company delivered to
the Trustee) or (ii) there is delivered to the Registrar an Opinion of
Counsel reasonably satisfactory to the Company and the Trustee to the effect
that neither such legend nor the related restrictions on transfer are
required in order to maintain compliance with the provisions of the
Securities Act.
(e) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Note only as provided
in this Indenture.
<PAGE>
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.15 or this Section
2.16. The Company shall have the right to inspect and make copies of all
such letters, notices or other written communications at any reasonable time
upon the giving of reasonable written notice to the Registrar.
ARTICLE THREE
REDEMPTION OF NOTES
3.01 Notices to the Trustee.
If the Company elects to redeem Notes pursuant to Paragraph 3(a) of the
Notes, it shall notify the Trustee of the Redemption Date and principal
amount of Notes to be redeemed.
The Company shall notify the Trustee by an Officers' Certificate,
stating that such redemption will comply with the provisions hereof and of
the Notes, of any redemption at least 35 days before the Redemption Date.
3.02 Selection of Notes To Be Redeemed.
If less than all the Notes are to be redeemed, the particular Notes or
portions thereof to be redeemed shall be selected from the outstanding Notes
not previously called for redemption pro rata, by lot or by such other method
as the Trustee considers to be fair and appropriate. The amounts to be
redeemed shall be equal to $1,000 in principal amount at maturity or any
integral multiple thereof.
The Trustee shall promptly notify the Company and the Registrar in
writing of the Notes selected for redemption and, in the case of any Notes
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 redemption of Notes shall relate, in the
case of any Note redeemed or to be redeemed only in part, to the portion of
the principal amount at maturity of such Note which has been or is to be
redeemed.
3.03 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 Notes to be redeemed, at the address of
such Holder appearing in the Note register maintained by the Registrar.
All notices of redemption shall identify the Notes to be redeemed and
shall state:
(a) the Redemption Date;
(b) the Redemption Price and the amount of accrued interest, if any, to
be paid;
<PAGE>
(c) that, unless the Company defaults in making the redemption payment,
interest on Notes called for redemption ceases to accrue on and after the
Redemption Date, and original issue discount will cease to accrete, as the
case may be, and the only remaining right of the Holders of such Notes is to
receive payment of the Redemption Price upon surrender to the Paying Agent of
the Notes redeemed;
(d) if any Note is to be redeemed in part, the portion of the principal
amount (equal to $1,000 in principal amount at maturity or any integral
multiple thereof) of such Note to be redeemed and that on and after the
Redemption Date, upon surrender for cancellation of such original Note to the
Paying Agent, a new Note or Notes in the aggregate principal amount at
maturity equal to the unredeemed portion thereof will be issued without
charge to the Holder;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the Redemption Price and the name and address of the Paying
Agent;
(f) the CUSIP number, if any, relating to such Notes, but no
representation is made as to the correctness or accuracy of any such CUSIP
numbers; and
(g) the paragraph of the Notes pursuant to which the Notes are being
redeemed.
Notice of redemption of Notes to be redeemed at the election of the
Company shall be given by the Company or, at the Company's written request,
by the Trustee in the name and at the expense of the Company.
3.04 Effect of Notice of Redemption.
Once notice of redemption is mailed, Notes called for redemption become
due and payable on the Redemption Date and at the Redemption Price. Upon
surrender to the Paying Agent, such Notes called for redemption shall be paid
at the Redemption Price plus accrued interest to the Redemption Date, but
interest installments whose maturity is on or prior to such Redemption Date
will be payable on the relevant Interest Payment Dates to the Holders of
record at the close of business on the relevant record dates referred to in
the Notes.
3.05 Deposit of Redemption Price.
On or prior to 12:00 p.m. New York time on any Redemption Date, the
Company shall deposit with the Paying Agent an amount of money in same day
funds sufficient to pay the Redemption Price of, and accrued interest on, all
the Notes or portions thereof which are to be redeemed on that date, other
than Notes or portions thereof called for redemption on that date which have
been delivered by the Company to the Trustee for cancellation.
If the Company complies with the preceding paragraph, then, unless the
Company defaults in the payment of such Redemption Price, interest on the
Notes to be redeemed will cease to accrue and original issue discount will
cease to
<PAGE>
accrete, as the case may be, on and after the applicable Redemption Date,
whether or not such Notes are presented for payment. If any Note called for
redemption shall not be so paid upon surrender thereof for redemption, the
principal, premium, if any, and, to the extent lawful, accrued interest
thereon shall, until paid, bear interest from the Redemption Date at the rate
and in the manner provided in the Notes.
3.06 Notes Redeemed or Purchased in Part.
Upon surrender to the Paying Agent of a Note which is to be redeemed in
part, the Company shall execute and the Trustee shall authenticate and
deliver to the Holder of such Note without service charge, a new Note or
Notes, 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 Note so surrendered that is not redeemed.
ARTICLE FOUR
COVENANTS
4.01 Payment of Notes.
The Company will pay, or cause to be paid, the principal of and interest
on the Notes on the dates and in the manner provided in the Notes and this
Indenture. An installment of principal or interest shall be considered paid
on the date due if the Trustee or Paying Agent (other than the Company, a
Subsidiary of the Company or any Affiliate thereof) holds at 12:00 p.m. New
York time on that date money designated and set aside for and sufficient to
pay the installment in a timely manner and is not prohibited from paying such
money to the Holders of the Notes pursuant to the terms of this Indenture.
The Company will pay interest on overdue principal at the rate and in the
manner provided in the Notes; it shall pay interest on overdue installments
of interest at the same rate and in the same manner, to the extent lawful.
4.02 Maintenance of Office or Agency.
The Company will maintain in the Borough of Manhattan, The City of New
York, an office or agency where Notes may be surrendered for registration of
transfer or exchange or for presentation for payment and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may
be served. The Company 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 Company 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
address of State Street Bank and Trust Company, N.A.
The Company may also from time to time designate one or more other
offices or agencies where the Notes 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 Company of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York, for such purposes. The Company
will give prompt written notice to the Trustee of any such designation or
<PAGE>
rescission and of any change in the location of any such other office or
agency.
The Company hereby initially designates the office of State Street Bank
and Trust Company, N.A. located at 61 Broadway, 15th floor, in the Borough of
Manhattan, City of New York 10006, as such office of the Company in
accordance with this Section 4.02.
4.03 Corporate Existence.
Subject to Article Five, the Company shall do or cause to be done all
things necessary to and will cause each of its Subsidiaries to, preserve and
keep in full force and effect the corporate or partnership existence and
rights (charter and statutory), licenses and/or franchises of the Company and
each of its Subsidiaries; provided, however, that the Company or any of its
Subsidiaries shall not be required to preserve any such rights, licenses or
franchises if the Board of Directors of the Company shall reasonably
determine that (x) the preservation thereof is no longer desirable in the
conduct of the business of the Company and its Subsidiaries taken as a whole
and (y) the loss thereof is not materially adverse to either the Company and
its Subsidiaries taken as a whole or to the ability of the Company to
otherwise satisfy its obligations hereunder.
4.04 Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all taxes, assessments and
governmental charges levied or imposed upon the Company or any of its
Subsidiaries or upon the income, profits or property of the Company or any of
its Subsidiaries, and (b) all lawful claims for labor, materials and supplies
which, if unpaid, might by law become a Lien upon the property of the Company
or any Subsidiary of the Company; provided, however, that the Company shall
not be required to pay or discharge or cause to be paid or discharged any
such tax, assessment, charge or claim the amount, applicability or validity
of which is being contested in good faith by appropriate proceedings and for
which adequate provision has been made or where the failure to effect such
payment or discharge is not adverse in any material respect to the Company.
4.05 Maintenance of Properties; Insurance; Books and Records;
Compliance with Law.
(a) The Company shall, and shall cause each of its Subsidiaries to,
cause all properties and assets to be maintained and kept in good condition,
repair and working order (reasonable wear and tear excepted) and supplied
with all necessary equipment, and shall cause to be made all necessary
repairs, renewals, replacements, additions, betterments and improvements
thereto, as shall be reasonably necessary for the proper conduct of its
business; provided, however, that nothing in this Section 4.05(a) shall
prevent the Company or any of its Subsidiaries from discontinuing the
operation and maintenance of any of its properties or assets if such
discontinuance is, in the judgment of the Board of Directors of the Company
or such Subsidiary, desirable in the conduct of its business and if such
discontinuance is not materially adverse to either the Company and its
Subsidiaries taken as a whole
<PAGE>
or the ability of the Company to otherwise satisfy its obligations hereunder.
(b) The Company shall, and shall cause each of its Subsidiaries to,
maintain with financially sound and reputable insurers such insurance as may
be required by law (other than with respect to any environmental impairment
liability insurance not commercially available) and such other insurance to
such extent and against such hazards and liabilities, as is customarily
maintained by companies similarly situated (which may include self-insurance
in the same form as is customarily maintained by companies similarly
situated).
(c) The Company shall, and shall cause each of its Subsidiaries to,
keep proper books of record and account, in which full and correct entries
shall be made of all business and financial transactions of the Company and
each Subsidiary of the Company and reflect on its financial statements
adequate accruals and appropriations to reserves, all in accordance with GAAP
consistently applied to the Company and its Subsidiaries taken as a whole.
(d) The Company shall and shall cause each of its Subsidiaries to
comply with all statutes, laws, ordinances, or government rules and
regulations to which it is subject, non-compliance with which would
materially adversely affect the business, earnings, properties, assets or
condition (financial or otherwise) of the Company and its Subsidiaries taken
as a whole.
4.06 Compliance Certificate.
(a) The Company will deliver to the Trustee within 60 days after the
end of each of the Company's first three fiscal quarters and within 90 days
after the end of the Company's fiscal year an Officers' Certificate stating
whether or not the signers know of any Default or Event of Default under this
Indenture by the Company or an event which, with notice or lapse of time or
both, would constitute a default by the Company under any Senior Indebtedness
that occurred during such fiscal period. If they do know of such a Default,
Event of Default or default, the certificate shall describe any such Default,
Event of Default or default and its status. The first certificate to be
delivered pursuant to this Section 4.06(a) shall be for the first fiscal
quarter of the Company beginning after the Issue Date. The Company shall
also deliver a certificate to the Trustee at least annually from its
principal executive, financial or accounting officer as to his or her
knowledge of the Company's compliance with all conditions and covenants under
this Indenture and the Company's Senior Indebtedness, such compliance to be
determined without regard to any period of grace or requirement of notice
provided herein or therein.
(b) The Company shall deliver to the Trustee within 90 days after
the end of each fiscal year a written statement by the Company's independent
certified public accountants stating (A) that their audit examination has
included a review of the terms of this Indenture and the Notes as they relate
to accounting matters, and (B) whether, in connection with their audit
examination, any Default or Event of Default under this Indenture has come to
their attention and, if such a Default or Event of Default has come to their
attention, specifying the nature and period of existence thereof; provided,
however, that, without any restriction as to the scope of the audit
<PAGE>
examination, such independent certified public accountants shall not be
liable by reason of any failure to obtain knowledge of any such Default or
Event of Default that would not be disclosed in the course of an audit
examination conducted in accordance with GAAP.
(c) The Company will deliver to the Trustee as soon as possible, and
in any event within 10 days after the Company becomes aware or should
reasonably have become aware of the occurrence of any Default, Event of
Default or an event which, with notice or lapse of time or both, would
constitute a default by the Company under any Senior Indebtedness, an
Officers' Certificate specifying such Default, Event of Default or default
and what action the Company is taking or proposes to take with respect
thereto.
4.07 Limitation on Indebtedness.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or in any
manner become directly or indirectly liable, contingently or otherwise, for
the payment of (in each case, to "incur") any Indebtedness (including,
without limitation, any Acquired Indebtedness) other than Permitted
Indebtedness; provided, however, that the Company will be permitted to incur
Indebtedness (including, without limitation, Acquired Indebtedness) and any
Subsidiary will be permitted to incur Acquired Indebtedness, if immediately
thereafter the ratio of (i) the aggregate principal amount (or accreted
value, as the case may be) of Indebtedness of the Company and its
Subsidiaries on a consolidated basis outstanding as of the Transaction Date
to (ii) the Pro Forma Consolidated Cash Flow for the preceding two fiscal
quarters multiplied by two, determined on a pro forma basis as if any such
Indebtedness had been incurred and the proceeds thereof had been applied at
the beginning of such two fiscal quarters, would be greater than zero and
less than 5.0 to 1.
For purposes of determining any particular amount of Indebtedness under this
Section 4.07, guarantees, Liens or obligations with respect to letters of
credit supporting Indebtedness otherwise included in the determination of
such particular amount shall not be included. For purposes of determining
compliance with this Section 4.07, (A) in the event that an item of
Indebtedness meets the criteria of more than one of the clauses contained in
the definition of "Permitted Indebtedness" contained in Section 1.01, the
Company, in its sole discretion, shall classify such item of Indebtedness and
only be required to include the amount and type of such Indebtedness in one
of such clauses and (B) the principal amount of Indebtedness issued at a
price that is less than the principal amount thereof shall be equal to the
amount of the liability in respect thereof determined in conformity with
GAAP.
4.08 Limitation on Other Indebtedness.
The Company will not, directly or indirectly, incur any Indebtedness
(including Acquired Indebtedness) that is subordinate in right of payment to
any Indebtedness of the Company, unless such Indebtedness is expressly
subordinate in right of payment to the Notes.
<PAGE>
4.09 Limitation on Restricted Payments.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly:
(a) declare or pay any dividend or make any other distribution or
payment on or in respect of Capital Stock of the Company or any of its
Subsidiaries or any payment made to the direct or indirect holders (in their
capacities as such) of Capital Stock of the Company or any of its
Subsidiaries (other than (x) dividends or distributions payable solely in
Capital Stock of the Company (other than Redeemable Capital Stock) or in
options, warrants or other rights to purchase Capital Stock of the Company
(other than Redeemable Capital Stock), (y) the declaration or payment of
dividends or other distributions to the extent declared or paid to the
Company or any Subsidiary of the Company and (z) the declaration or payment
of dividends or other distributions by any Subsidiary of the Company to all
holders of Common Stock of such Subsidiary on a pro rata basis),
(b) purchase, redeem, defease or otherwise acquire or retire for
value any Capital Stock of the Company or any of its Subsidiaries (other than
any such Capital Stock owned by a Wholly-Owned Subsidiary of the Company),
(c) make any principal payment on, or purchase, defease, repurchase,
redeem or otherwise acquire or retire for value, prior to any scheduled
maturity, scheduled repayment, scheduled sinking fund payment or other Stated
Maturity, any Subordinated Indebtedness (other than any such Indebtedness
owned by the Company or a Wholly-Owned Subsidiary of the Company), or
(d) make any Investment (other than any Permitted Investment) in any
person (such payments or Investments described in the preceding clauses (a),
(b), (c) and (d) are collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to the proposed Restricted
Payment (the amount of any such Restricted Payment, if other than cash, shall
be the Fair Market Value on the date of such Restricted Payment of the
asset(s) proposed to be transferred by the Company or such Subsidiary, as the
case may be, pursuant to such Restricted Payment), (A) no Default or Event of
Default shall have occurred and be continuing, (B) immediately prior to and
after giving effect to such Restricted Payment, the Company would be able to
incur $1.00 of additional Indebtedness pursuant to the first paragraph of
Section 4.07 (assuming a market rate of interest with respect to such
additional Indebtedness) and (C) the aggregate amount of all Restricted
Payments declared or made from and after the Issue Date would not exceed the
sum of (1) the remainder of (a) 100% of the aggregate amount of the
Consolidated Cash Flow accrued on a cumulative basis during the period (taken
as one accounting period) beginning on the first day of the last fiscal
quarter immediately preceding the Issue Date and ending on the last day of
the last fiscal quarter preceding the date of such proposed Restricted
Payment minus (b) the product of 2.00 times cumulative Consolidated Fixed
Charges accrued on a cumulative basis during the period (taken as one
accounting period) beginning on the first day of the last fiscal quarter
immediately preceding the Issue Date and ending on the last day of the last
fiscal quarter preceding the date of such proposed Restricted Payment plus
(2) the aggregate net cash proceeds received by the Company after the Issue
Date from the
<PAGE>
issuance and sale permitted by this Indenture of its Capital Stock (other
than Redeemable Capital Stock) to a Person who is not a Subsidiary of the
Company (except to the extent such net cash proceeds are used to incur new
Indebtedness outstanding pursuant to clause (h) of the definition of
"Permitted Indebtedness") plus (3) the aggregate net cash proceeds received
after the Issue Date by the Company from the issuance or sale of debt
securities that have been converted into or exchanged for Capital Stock of
the Company (other than Redeemable Capital Stock) together with the aggregate
cash received by the Company at the time of such conversion or exchange plus
(4) without duplication of any amount included in the calculation of
Consolidated Cash Flow, in the case of repayment of, or return of capital in
respect of, any Investment constituting a Restricted Payment made after the
Issue Date, an amount equal to the lesser of the return of capital with
respect to such Investment and the cost of such Investment, in either case
less the cost of the disposition of such Investment.
None of the foregoing provisions will prohibit (i) the payment of any
dividend within 60 days after the date of its declaration, if at the date of
declaration such payment would be permitted by the foregoing paragraph; (ii)
so long as no Default or Event of Default shall have occurred and be
continuing, the redemption, repurchase or other acquisition or retirement of
any shares of any class of Capital Stock of the Company or any Subsidiary of
the Company in exchange for, or out of the net cash proceeds of, a
substantially concurrent (x) capital contribution to the Company from any
person (other than a Subsidiary of the Company) or (y) issue and sale of
other shares of Capital Stock (other than Redeemable Capital Stock) of the
Company to any person (other than to a Subsidiary of the Company); provided,
however, that the amount of any such net cash proceeds that are utilized for
any such redemption, repurchase or other acquisition or retirement shall be
excluded from clause (C)(2) and (3) of the preceding paragraph; (iii) so long
as no Default or Event of Default shall have occurred and be continuing, any
redemption, repurchase or other acquisition or retirement of Subordinated
Indebtedness by exchange for, or out of the net cash proceeds of, a
substantially concurrent (x) capital contribution to the Company from any
person (other than a Subsidiary of the Company) or (y) issue and sale of (1)
Capital Stock (other than Redeemable Capital Stock) of the Company to any
person (other than to a Subsidiary of the Company); provided, however, that
the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase or other acquisition or retirement shall be excluded
from clause (C)(2) and (3) of the preceding paragraph; or (2) Indebtedness of
the Company issued to any person (other than a Subsidiary of the Company),
so long as such Indebtedness is Subordinated Indebtedness which (x) has no
Stated Maturity earlier than the 91st day after the Final Maturity Date, (y)
has an Average Life to Stated Maturity equal to or greater than the remaining
Average Life to Stated Maturity of the Notes and (z) is subordinated to the
Notes in the same manner and at least to the same extent as the Subordinated
Indebtedness so purchased, exchanged, redeemed, acquired or retired; (iv)
Investments constituting Restricted Payments made as a result of the receipt
of non-cash consideration from any Asset Sale made pursuant to and in
compliance with Section 4.13; (v) so long as no Default or Event of Default
has occurred and is continuing, repurchases by the Company of Common Stock of
the Company from employees of the Company or any of its Subsidiaries or their
authorized representatives upon the death, disability or termination of
<PAGE>
employment of such employees, in an aggregate amount not exceeding $1,000,000
in any calendar year; (vi) Investments in persons other than Subsidiaries at
any one time outstanding (measured on the date each such Investment was made
without giving effect to subsequent changes in value) not to exceed
$20 million in the aggregate provided that such persons primary business is
related, ancillary or complementary to the business of the Company and its
Subsidiaries on the date of such Investment; and (vii) Investments in any
person at any one time outstanding (measured on the date each such Investment
was made without giving effect to subsequent changes in value) in an
aggregate amount not to exceed 5.0% of the Company's total consolidated
assets. In computing the amount of Restricted Payments previously made for
purposes of clause (C) of the preceding paragraph, Restricted Payments made
under the preceding clauses (v), (vi) and (vii) shall be included and
clauses (i), (ii), (iii) and (iv) shall not be so included.
4.10 Limitation on Issuances and Sale of Preferred Stock by Subsidiaries.
The Company (a) will not permit any of its Subsidiaries to issue any
Preferred Stock (other than to the Company or a Wholly-Owned Subsidiary of
the Company) and (b) will not permit any person (other than the Company or a
Wholly-Owned Subsidiary of the Company) to own any Preferred Stock of any
Subsidiary of the Company; provided, however, that this covenant shall not
prohibit the issuance and sale of (x) all, but not less than all, of the
issued and outstanding Capital Stock of any Subsidiary of the Company owned
by the Company or any of its Subsidiaries in compliance with the other
provisions of this Indenture or (y) directors' qualifying shares or
investments by foreign nationals mandated by applicable law.
4.11 Limitation on Liens.
The Company will not, and will not permit any of its Subsidiaries to,
create, incur, assume or suffer to exist any Liens of any kind against or
upon any of its property or assets, or any proceeds therefrom, unless (x) in
the case of Liens securing Subordinated Indebtedness, the Notes are secured
by a Lien on such property, assets or proceeds that is senior in priority to
such Liens and (y) in all other cases, the Notes are equally and ratably
secured, except for (a) Liens existing as of the Issue Date; (b) Liens
securing the Notes; (c) Liens securing Indebtedness under Credit Facilities
incurred in compliance with clauses (c) and (k) of the definition of
"Permitted Indebtedness" contained in Section 1.01; (d) Liens on the
Company's headquarters and other business premises securing Indebtedness in
an aggregate principal amount not to exceed $10 million; (e) Liens in favor
of the Company or any Subsidiary; (f) Liens securing Indebtedness which is
incurred to refinance Indebtedness which has been secured by a Lien permitted
under this Indenture and which has been incurred in accordance with the
provisions of this Indenture; provided, however, that such Liens do not
extend to or cover any property or assets of the Company or any of its
Subsidiaries not securing the Indebtedness so refinanced; and (g) Permitted
Liens.
<PAGE>
4.12 Change of Control.
Upon the occurrence of a Change of Control, the Company shall be
obligated to make an offer to purchase (a "Change of Control Offer"), and
shall purchase, on a business day (the "Change of Control Purchase Date") not
more than 60 nor less than 30 days following the occurrence of the Change of
Control, all of the then outstanding Notes at a purchase price (the "Change
of Control Purchase Price") equal to 101% of the Accreted Value thereof on
the Change of Control Purchase Date plus accrued and unpaid interest, if any,
to the Change of Control Purchase Date.
Notice of a Change of Control Offer shall be mailed by the Company not
later than the 30th day after the Change of Control Date to the Holders of
Notes at their last registered addresses with a copy to the Trustee and the
Paying Agent. The Change of Control Offer shall remain open from the time of
mailing for at least 20 Business Days and until 5:00 p.m., New York City
time, on the Change of Control Purchase Date. The notice, which shall govern
the terms of the Change of Control Offer, shall include such disclosures as
are required by law and shall state:
(a) that the Change of Control Offer is being made pursuant to this
Section 4.12 and that all Notes validly tendered into the Change of Control
Offer and not withdrawn will be accepted for payment;
(b) the Change of Control Purchase Price, the Change of Control
Purchase Date and the date on which the Change of Control Offer expires;
(c) that any Note not tendered for payment will continue to accrue
interest or accrete original issue discount, as the case may be, in
accordance with the terms thereof;
(d) that, unless the Company shall default in the payment of the
purchase price, any Note accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest or accrete original issue
discount, as the case may be, after the Change of Control Purchase Date;
(e) that Holders electing to have Notes purchased pursuant to a Change
of Control Offer will be required to surrender their Securities to the Paying
Agent at the address specified in the notice prior to 5:00 p.m., New York
City time, on the Business Day immediately prior to the Change of Control
Purchase Date and must complete any form of letter of transmittal proposed by
the Company and reasonably acceptable to the Trustee and the Paying Agent;
(f) that Holders of Notes will be entitled to withdraw their election
if the Paying Agent receives, not later than 5:00 p.m., New York City time,
on the Business Day immediately prior to the Change of Control Purchase Date,
a tested telex, facsimile transmission or letter setting forth the name of
the Holder, the principal amount of Notes the Holder delivered for purchase,
the Note certificate number (if any) and a statement that such Holder is
withdrawing its election to have such Securities purchased;
<PAGE>
(g) that Holders whose Notes are purchased only in part will be issued
Notes equal in principal amount at maturity to the unpurchased portion of the
Notes surrendered;
(h) the instructions that Holders must follow in order to tender their
Notes; and
(i) information concerning the business of the Company, the most recent
annual and quarterly reports of the Company filed with the SEC pursuant to
the Exchange Act (or, if the Company is not then permitted to file any such
reports with the SEC, the comparable reports prepared pursuant to Section
4.18), a description of material developments in the Company's business,
information with respect to pro forma historical financial information after
giving effect to such Change of Control and such other information concerning
the circumstances and relevant facts regarding such Change of Control Offer
as would be material to a Holder of Notes in connection with the decision of
such Holder as to whether or not it should tender Notes pursuant to the
Change of Control Offer.
On the Change of Control Purchase Date, the Company shall (i) accept for
payment Notes or portions thereof validly tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent money, in immediately
available funds, sufficient to pay the purchase price of all Securities or
portions thereof so tendered and accepted and (iii) deliver to the Trustee
the Notes so accepted together with an Officers' Certificate setting forth
the Notes or portions thereof tendered to and accepted for payment by the
Company. The Paying Agent shall promptly mail or deliver to the Holders of
Notes 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
Note equal in principal amount at maturity to any unpurchased portion of the
Note surrendered. Any Notes not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof. The Company will publicly
announce the results of the Change of Control Offer not later than the first
Business Day following the Change of Control Purchase Date.
The Company shall not be required to make a Change of Control Offer upon
a Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements
applicable to a Change of Control Offer made by the Company and purchases all
Notes validly tendered and not withdrawn under such Change of Control Offer.
The Company will comply with Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that a Change of Control occurs and
the Company is required to purchase Notes as described above.
4.13 Disposition of Proceeds of Asset Sales.
(a) The Company will not, and will not permit any of its
Subsidiaries to, make any Asset Sale unless (a) the Company or such
Subsidiary, as the case may be, receives consideration at the time of such
Asset Sale at least equal to the Fair Market Value of the shares or assets
sold or otherwise disposed of and (b) at least 80% of such consideration
consists of cash or Cash Equivalents. To the extent the Net Cash Proceeds of
<PAGE>
any Asset Sale are not used to permanently repay unsubordinated Indebtedness
of the Company or Indebtedness of any Subsidiary, in each case owing to a
person other than the Company or any of its Subsidiaries, the Company or such
Subsidiary, as the case may be, may, within 180 days of such Asset Sale,
apply such Net Cash Proceeds to an investment in properties and assets that
replace the properties and assets that were the subject of such Asset Sale or
in properties and assets that will be used in the business of the Company and
its Subsidiaries existing on the Issue Date or in businesses reasonably
related thereto ("Replacement Assets"). Any Net Cash Proceeds from any Asset
Sale that are neither used to repay, and permanently reduce any commitments
under, such unsubordinated Indebtedness of the Company or Indebtedness of any
Subsidiary, nor invested in Replacement Assets within the 180 period
described above constitute "Excess Proceeds" subject to disposition as
provided below.
(b) When the aggregate amount of Excess Proceeds equals or exceeds
$10,000,000, the Company shall make an offer to purchase (an "Asset Sale
Offer"), from all Holders, on a day not more than 40 Business Days thereafter
(the "Asset Sale Purchase Date"), the maximum principal amount (expressed as
a multiple of $1,000) of Notes that may be purchased with such Excess
Proceeds, at a price in cash equal to 100% of the Accreted Value of the Notes
plus accrued and unpaid interest, if any, to the purchase date (the "Asset
Sale Offer Price").
(c) Notice of an Asset Sale Offer shall be mailed by the Company to
all Holders of Notes not less than 20 Business Days nor more than 40 Business
Days before the Asset Sale Purchase Date at their last registered address
with a copy to the Trustee and the Paying Agent. The Asset Sale Offer shall
remain open from the time of mailing for at least 20 Business Days and until
at least 5:00 p.m., New York City time, on the Asset Sale Purchase Date. The
notice, which shall govern the terms of the Asset Sale Offer, shall include
such disclosures as are required by law and shall state:
(1) that the Asset Sale Offer is being made pursuant to this Section 4.13;
(2) the Asset Sale Offer Price (including the amount of accrued interest,
if any) for each Note, the Asset Sale Purchase Date and the date on
which
the Asset Sale Offer expires;
(3) that any Note not tendered or accepted for payment will continue to
accrue interest or accrete original issue discount, as the case may be,
in accordance with the terms thereof;
(4) that, unless the Company shall default in the payment of the Asset Sale
Offer Price, any Note accepted for payment pursuant to the Asset Sale
Offer shall cease to accrue interest or accrete original issue discount,
as the case may be, after the Asset Sale Purchase Date;
(5) that Holders electing to have Notes purchased pursuant to an Asset Sale
Offer will be required to surrender their Notes to the Paying Agent at
the address specified in the notice prior to 5:00 p.m., New York City
time, on the Business Day immediately prior to the Asset Sale Purchase
Date and must complete any form of letter of transmittal proposed by the
Company and reasonably acceptable to the Trustee and the Paying Agent;
<PAGE>
(6) that Holders will be entitled to withdraw their election if the Paying
Agent receives, not later than 5:00 p.m., New York City time, on the
Business Day immediately prior to the Asset Sale Purchase Date, a tested
telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of Notes the Holder delivered for purchase,
the Note certificate number (if any) and a statement that such Holder is
withdrawing its election to have such Notes purchased;
(7) that if Notes in a principal amount in excess of the Holder's pro rata
share of the amount of Excess Proceeds are tendered pursuant to the
Asset
Sale Offer, the Company shall purchase Notes on a pro rata basis among
the Notes tendered (with such adjustments as may be deemed appropriate
by
the Company so that only Notes in denominations of $1,000 or integral
multiples of $1,000 shall be acquired);
(8) that Holders whose Notes are purchased only in part will be issued new
Notes equal in principal amount at maturity to the unpurchased portion
of
the Notes surrendered;
(9) the instructions that Holders must follow in order to tender their
Notes;
and
(10) information concerning the business of the Company, the most recent
annual and quarterly reports of the Company filed with the SEC pursuant
to the Exchange Act (or, if the Company is not permitted to file any
such
reports with the Commission, the comparable reports prepared pursuant to
Section 4.18), a description of material developments in the Company's
business, information with respect to pro forma historical financial
information after giving effect to such Asset Sale and Asset Sale Offer
and such other information concerning the circumstances and relevant
facts regarding such Asset Sale Offer as would be material to a Holder
of
Notes in connection with the decision of such Holder as to whether or
not
it should tender Notes pursuant to the Asset Sale Offer.
(d) On the Asset Sale Purchase Date, the Company shall (i) accept for
payment, on a pro rata basis, Notes or portions thereof tendered pursuant to
the Asset Sale Offer, (ii) deposit with the Paying Agent money, in
immediately available funds, in an amount sufficient to pay the Asset Sale
Offer Price of all Notes or portions thereof so tendered and accepted and
(iii) deliver to the Trustee the Notes so accepted together with an Officers'
Certificate setting forth the Notes or portions thereof tendered to and
accepted for payment by the Company. The Paying Agent shall promptly mail or
deliver to Holders of Notes so accepted payment in an amount equal to the
Asset Sale Offer Price, and the Trustee shall promptly authenticate and mail
or deliver to such Holders a new Note equal in principal amount at maturity
to any unpurchased portion of the Security surrendered. Any Notes not so
accepted shall be promptly mailed or delivered by the Company to the Holder
thereof. The Company will publicly announce the results of the Asset Sale
Offer not later than the first Business Day following the Asset Sale Purchase
Date. To the extent that the aggregate principal amount of Notes tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company
may use such deficiency for general corporate purposes. Upon completion of
such Asset Sale Offer, the amount of Excess Proceeds shall be reset to zero.
For purposes of
<PAGE>
this Section 4.13, the Trustee shall act as Paying Agent.
(e) The Company will comply with Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable, in the event that an Asset Sale occurs and
the Company is required to purchase Notes as described above.
4.14 Limitation on Transactions with Interested Persons.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, enter into or suffer to exist any transaction or
series of related transactions (including, without limitation, the sale,
transfer, disposition, purchase, exchange or lease of assets, property or
services) with, or for the benefit of, any Affiliate of the Company or any
beneficial owner (determined in accordance with this Indenture) of 5% or more
of the Company's Common Stock at any time outstanding ("Interested Persons"),
unless (a) such transaction or series of related transactions is on terms
that are no less favorable to the Company or such Subsidiary, as the case may
be, than those which could have been obtained in a comparable transaction at
such time from persons who are not Affiliates of the Company or Interested
Persons, (b) with respect to a transaction or series of transactions
involving aggregate payments or value equal to or greater than $10,000,000,
the Company has obtained a written opinion from an Independent Financial
Advisor stating that the terms of such transaction or series of transactions
are fair to the Company or its Subsidiary, as the case may be, from a
financial point of view and (c) with respect to a transaction or series of
transactions involving aggregate payments or value equal to or greater than
$2,000,000, the Company shall have delivered an Officer's Certificate to the
Trustee certifying that such transaction or series of transactions complies
with the preceding clause (a) and, if applicable, certifying that the opinion
referred to in the preceding clause (b) has been delivered and that such
transaction or series of transactions has been approved by a majority of the
disinterested members of the Board of Directors of the Company; provided,
however, that this Section 4.14 will not restrict the Company or any
Subsidiary from (i) making any payment permitted under Section 4.09,
(ii) paying reasonable and customary fees to directors of the Company who are
not employees of the Company, (iii) making loans or advances to officers,
employees or consultants of the Company and its Subsidiaries (including
travel and moving expenses) in the ordinary course of business for bona fide
business purposes of the Company or such Subsidiary not in excess of
$2,000,000 in the aggregate at any one time outstanding, (iv) from entering
into any transaction between the Company and any of its Subsidiaries or
between its Subsidiaries or (v) compensation arrangements with the Company's
executive officers.
4.15 Limitation on Dividends and Other Payment Restrictions
Affecting Subsidiaries.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any
Subsidiary of the Company to (a) pay dividends, in cash or otherwise, or make
any other distributions on or in respect of its Capital Stock or any other
interest or participation in, or measured by, its profits, (b) pay any
Indebtedness owed
<PAGE>
to the Company or any other Subsidiary of the Company, (c) make loans or
advances to, or any Investment in, the Company or any other Subsidiary of the
Company, (d) transfer any of its properties or assets to the Company or any
other Subsidiary of the Company or (e) guarantee any Indebtedness of the
Company or any other Subsidiary of the Company, except for such encumbrances
or restrictions existing under or by reason of (i) applicable law, (ii)
customary non-assignment provisions of any contract or any lease governing a
leasehold interest of the Company or any Subsidiary of the Company, (iii)
customary restrictions on transfers of property subject to a Lien permitted
under this Indenture, (iv) any agreement or other instrument of a person
acquired by the Company or any Subsidiary of the Company (or a Subsidiary of
such person) in existence at the time of such acquisition (but not created in
contemplation thereof), which encumbrance or restriction is not applicable to
any person, or the properties or assets of any person, other than the person,
or the properties or assets of the person, so acquired, (v) provisions
contained in agreements or instruments relating to Indebtedness which
prohibit the transfer of all or substantially all of the assets of the
obligor thereunder unless the transferee shall assume the obligations of the
obligor under such agreement or instrument, (vi) any such encumbrance or
restriction existing on the Issue Date in this Indenture or any other
agreements in effect on the Issue Date, and any extensions, refinancings,
renewals or replacements of such agreements; provided that the encumbrances
and restrictions in any such extensions, refinancings, renewals or
replacements are no less favorable in any material respect to the Holders
than those encumbrances or restrictions that are then in effect and that are
being extended, refinanced, renewed or replaced; and (vii) contained in the
terms of any Indebtedness or any agreement pursuant to which such
Indebtedness was issued if the encumbrance or restriction applies only in the
event of a default with respect to a financial covenant contained in such
Indebtedness or agreement and such encumbrance or restriction is not
materially more disadvantageous to the Holders than is customary in
comparable financing (as determined by the Company) and the Company
determines that any such encumbrance or restriction will not materially
affect the Company's ability to make principal or interest payments on the
Notes. Nothing contained in this Section 4.15 shall prevent the Company or
any Subsidiary from (1) creating, incurring, assuming or suffering to exist
any Liens otherwise permitted in Section 4.11 or (2) restricting the sale or
other disposition of property or assets of the Company or any of its
Subsidiaries that secure Indebtedness of the Company or any of its
Subsidiaries.
4.16 Limitations on Issuances of Guarantees of Indebtedness by Subsidiaries.
The Company will not permit any Subsidiary, directly or indirectly, to
guarantee, assume or in any other manner become liable with respect to any
Indebtedness of the Company, other than Indebtedness under Credit Facilities
incurred under clauses (c) and (l) in the definition of "Permitted
Indebtedness" contained in Section 1.01, unless (i) such Subsidiary
simultaneously executes and delivers a supplemental indenture to the
Indenture providing for a guarantee of the Notes on terms substantially
similar to the guarantee of such Indebtedness, except that if such
Indebtedness is by its express terms subordinated in right of payment to the
Notes, any such assumption, guarantee or other liability of such Subsidiary
with respect to such Indebtedness shall be subordinated in right of payment
to such
<PAGE>
Subsidiary's assumption, guarantee or other liability with respect to the
Notes substantially to the same extent as such Indebtedness is subordinated
to the Notes and (ii) such Subsidiary waives, and will not in any manner
whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any rights against the Company or
any other Subsidiary as a result of any payment by such Subsidiary under its
guarantee.
Notwithstanding the foregoing, any guarantee by a Subsidiary may provide
by its terms that it will be automatically and unconditionally released and
discharged upon (i) any sale, exchange or transfer, to any person not an
Affiliate of the Company, of all of the Company's and each Subsidiary's
Capital Stock in, or all or substantially all of the assets of, such
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 guarantee of the Notes, except a discharge or release
by or as a result of payment under such guarantee.
4.17 Waiver of Stay, Extension or Usury Laws.
The Company 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 or any usury
law or other law which would prohibit or forgive the Company from paying all
or any portion of the principal of, premium, if any, or interest on the Notes
as contemplated herein, wherever enacted, now or at any time hereafter in
force, or which may affect the covenants or the performance of this
Indenture; and (to the extent that it may lawfully do so) the Company 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.
4.18 Reporting Requirements.
The Company will file with the Commission the annual reports, quarterly
reports and other documents required to be filed with the Commission pursuant
to Sections 13 and 15 of the Exchange Act, whether or not the Company has a
class of securities registered under the Exchange Act. The Company will file
with the Trustee and provide to each Noteholder within 15 days after it files
them with the Commission (or if any such filing is not permitted under the
Exchange Act, 15 days after the Company would have been required to make such
filing) copies of such reports and documents.
4.19 Limitation on Sale and Leaseback Transactions.
Neither the Company nor any Subsidiary will, directly or indirectly,
enter into any Sale and Leaseback Transaction, except that the Company or any
Subsidiary may enter into a Sale and Leaseback Transaction if (x) the
aggregate Fair Market Value of all Sale and Leaseback Transactions entered
into by the Company and its Subsidiaries after the Issue Date shall not
involve property or assets having an aggregate Fair Market Value of more than
$20 million or (y) (i) immediately prior thereto, and after giving effect to
<PAGE>
such Sale and Leaseback Transaction (the Indebtedness thereunder being
equivalent to the Attributable Value thereof) the Company could incur at
least $1.00 of additional Indebtedness pursuant to the first paragraph of
Section 4.07 (other than Permitted Indebtedness) and (ii) the Sale and
Leaseback Transaction constitutes an Asset Sale effected in accordance with
the requirements of Section 4.13.
ARTICLE FIVE
SUCCESSOR CORPORATION
5.01 When Company May Merge, etc..
The Company will not, in any transaction or series of transactions,
merge or consolidate with or into, or sell, assign, convey, transfer, lease
or otherwise dispose of all or substantially all of its properties and assets
to, any person or persons, and the Company will not permit any of its
Subsidiaries to enter into any such transaction or series of transactions if
such transaction or series of transactions, in the aggregate, would result in
a sale, assignment, conveyance, transfer, lease or other disposition of all
or substantially all of the properties and assets of the Company or the
Company and its Subsidiaries, taken as a whole, to any other person or
persons, unless at the time of and after giving effect thereto (a) either
(i) if the transaction or series of transactions is a merger or
consolidation, the Company shall be the surviving person of such merger or
consolidation, or (ii) the person formed by such consolidation or into which
the Company or such Subsidiary is merged or to which the properties and
assets of the Company or such Subsidiary, as the case may be, are transferred
(any such surviving person or transferee person being the "Surviving Entity")
shall be a corporation organized and existing under the laws of the United
States of America, any state thereof or the District of Columbia and shall
expressly assume by a supplemental indenture executed and delivered to the
Trustee, in form reasonably satisfactory to the Trustee, all of the
obligations of the Company under the Notes and this Indenture and, in each
case, this Indenture shall remain in full force and effect; (b) immediately
before and immediately after giving effect to such transaction or series of
transactions on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction or series of transactions), no Default or Event
of Default shall have occurred and be continuing and the Company, or the
Surviving Entity, as the case may be, after giving effect to such transaction
or series of transactions on a pro forma basis (including, without
limitation, any Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction or series of transactions),
could incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) under Section 4.07 (assuming a market rate of interest with
respect to such additional Indebtedness); and (c) immediately after giving
effect to such transaction or series of transactions on a pro forma basis
(including, without limitation, any Indebtedness incurred or anticipated to
be incurred in connection with or in respect of such transaction or series of
transactions), the Consolidated Net Worth of the Company or the Surviving
Entity, as the case may be, is at least equal to the Consolidated Net Worth
of the Company immediately before such transaction or series of transactions.
<PAGE>
In connection with any consolidation, merger, transfer, lease,
assignment or other disposition contemplated hereby, the Company shall
deliver, or cause to be delivered, to the Trustee, in form and substance
reasonably satisfactory to the Trustee, an Officer's Certificate and an
Opinion of Counsel, each stating that such consolidation, merger, transfer,
lease, assignment or other disposition and the supplemental indenture in
respect thereof comply with the requirements under this Indenture; provided,
however, that solely for purposes of computing amounts described in
subclause (C) of Section 4.09, any such successor person shall only be deemed
to have succeeded to and be substituted for the Company with respect to
periods subsequent to the effective time of such merger, consolidation or
transfer of assets.
5.02 Successor Substituted.
Upon any consolidation or merger, or any sale, assignment, conveyance,
transfer, lease or disposition of all or substantially all of the properties
and assets of the Company in accordance with Section 5.01 hereof, the
successor person or persons formed by such consolidation or into which the
Company is merged or the successor person to which such sale, assignment,
conveyance, transfer, lease or other disposition is made, shall succeed to,
and be substituted for, and may exercise every right and power of, the
Company under this Indenture and the Notes with the same effect as if such
successor had been named as the Company herein; provided, however, that
solely for purposes of computing amounts described in subclause (C) of
Section 4.09, any such successor person shall only be deemed to have
succeeded to and be substituted for the Company with respect to periods
subsequent to the effective time of such merger, consolidation or transfer of
assets.
ARTICLE SIX
REMEDIES
6.01 Events of Default.
An "Event of Default" means any of the following events:
(a) default in the payment of the principal of or premium, if any,
on any Notes when the same becomes due and payable (upon Stated Maturity,
acceleration, optional redemption, required purchase, scheduled principal
payment or otherwise); or
(b) default in the payment of an installment of interest on any of
the Notes, when the same becomes due and payable, and any such Default
continues for a period of 30 days; or
(c) failure to perform or observe any other term, covenant or
agreement contained in the Notes or this Indenture (other than Defaults
specified in clause (a) or (b) above) and such Default continues for a period
of 30 days after written notice of such Default requiring the Company to
remedy the same shall have been given (i) to the Company by the Trustee or
(ii) to the Company and the Trustee by Holders of at least 25% in aggregate
principal amount of the Notes then outstanding; or
<PAGE>
(d) default or defaults under one or more agreements, instruments,
mortgages, bonds, debentures or other evidences of Indebtedness under which
the Company or any Subsidiary of the Company then has outstanding
Indebtedness in excess of $10,000,000, individually or in the aggregate, and
either (i) such Indebtedness is already due and payable in full or (ii) such
default or defaults have resulted in the acceleration of the maturity of such
Indebtedness; or
(e) one or more judgments, orders or decrees of any court or
regulatory or administrative agency of competent jurisdiction for the payment
of money in excess of $10,000,000, either individually or in the aggregate,
shall be entered against the Company or any Subsidiary of the Company or any
of their respective properties and shall not be discharged or fully bonded
and there shall have been a period of 60 days after the date on which any
period for appeal has expired and during which a stay of enforcement of such
judgment, order or decree, shall not be in effect; or
(f) the Company or any Significant Subsidiary of the Company
pursuant to or under or within the meaning of any Bankruptcy Law:
(i) commences a voluntary case or proceeding;
(ii) consents to the entry of an order for relief against it in an
involuntary case or proceeding;
(iii) consents to the appointment of a Custodian of it or for all or
substantially all of its property;
(iv) makes a general assignment for the benefit of its creditors; or
(v) shall generally not pay its debts when such debts become due or
shall admit in writing its inability to pay its debts generally;
or
(g) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(i) is for relief against the Company or any Significant Subsidiary
of the Company in an involuntary case or proceeding;
(ii) appoints a Custodian of the Company or any Significant
Subsidiary
of the Company for all or substantially all of its properties;
or
(iii) orders the liquidation of the Company or any Significant
Subsidiary of the Company;
and in each case the order or decree remains unstayed and in effect for 60
days.
Subject to the provisions of Sections 7.01 and 7.02, the Trustee shall
not be charged with knowledge of any Default or Event of Default unless
written notice thereof shall have been given to a Trust Officer of the
Trustee by the Company, the Paying Agent, any Holder, any holder of Senior
Indebtedness or any of their respective agents.
6.02 Acceleration.
If an Event of Default (other than as specified in Section 6.01(f) or
(g)) occurs and is continuing, the Trustee, by written notice to the Company,
or the Holders of at least 25% in aggregate principal amount at maturity of
<PAGE>
the Notes then outstanding, by written notice to the Trustee and the Company,
may declare the Accreted Value, premium, if any, and accrued and unpaid
interest, if any, on all of the Notes to be due and payable immediately, upon
which declaration, all amounts payable in respect of the Notes shall be
immediately due and payable. If an Event of Default specified in Section
6.01(f) or 6.01(g) occurs and is continuing, then the Accreted Value,
premium, if any, and accrued and unpaid interest, if any, on all of the Notes
shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder of Notes.
After a declaration of acceleration under this Indenture, but before a
judgment or decree for payment of the money due has been obtained by the
Trustee, the Holders of a majority in aggregate principal amount of the
outstanding Notes, by written notice to the Company and the Trustee, may
rescind such declaration if (a) the Company has paid or deposited with the
Trustee a sum sufficient to pay (i) all amounts due the Trustee under Section
7.08 and the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, (ii) all overdue interest on all Notes,
(iii) the principal of and premium, if any, on any Notes which have become
due otherwise than by such declaration of acceleration and interest thereon
at the rate borne by the Notes, and (iv) to the extent that payment of such
interest is lawful, interest upon overdue interest which has become due
otherwise than by such declaration of acceleration at the rate borne by the
Notes; (b) the rescission would not conflict with any judgment or decree of a
court of competent jurisdiction; and (c) all Events of Default, other than
the non-payment of principal of, premium, if any, and interest on the Notes
that has become due solely by such declaration of acceleration, have been
cured or waived as provided in Section 6.04.
No such rescission shall affect any subsequent Default or Event of
Default or impair any right subsequent therein.
6.03 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy by proceeding at law or in equity to collect the payment
of principal of, premium, if any, or interest on the Notes or to enforce the
performance of any provision of the Notes or this Indenture.
All rights of action and claims under this Indenture or the Notes may be
enforced by the Trustee even if it does not possess any of the Notes or does
not produce any of them in the proceeding. A delay or omission by the
Trustee or any Holder in exercising any right or remedy accruing upon an
Event of Default shall not impair the right or remedy or constitute a waiver
of or acquiescence in the Event of Default. No remedy is exclusive of any
other remedy. All available remedies are cumulative to the extent permitted
by law.
6.04 Waiver of Past Defaults.
Subject to the provisions of Sections 6.02, 6.07 and 9.02, the Holders
of not less than a majority in aggregate principal amount at maturity of the
outstanding Notes by notice to the Trustee may, on behalf of the Holders of
all the Notes, waive any existing Default or Event of Default and its
consequences, except a Default or Event of Default specified in Section
<PAGE>
6.01(a) or (b) or in respect of any provision hereof which cannot be modified
or amended without the consent of the Holder so affected pursuant to Section
9.02. When a Default or Event of Default is so waived, it shall be deemed
cured and shall cease to exist.
6.05 Control by Majority.
The Holders of not less than a majority in aggregate principal amount at
maturity of the outstanding Notes 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,
however, that the Trustee may refuse to follow any direction (a) that
conflicts with any rule of law or this Indenture, (b) that the Trustee
determines may be unduly prejudicial to the rights of another Noteholder, or
(c) that may expose the Trustee to personal liability unless the Trustee has
been provided reasonable indemnity against any loss or expense caused by its
following such direction; and provided, further, that the Trustee may take
any other action deemed proper by the Trustee that is not inconsistent with
such direction.
6.06 Limitation on Suits.
No Holder of any Notes shall have any right to institute any proceeding
or pursue any remedy with respect to this Indenture or the Notes unless:
(a) the Holder gives written notice to the Trustee of a continuing
Event of Default;
(b) the Holders of at least 25% in aggregate principal amount at
maturity of the outstanding Notes make a written request to the Trustee to
pursue the remedy;
(c) such Holder or Holders offer and, if requested, provide to the
Trustee reasonable indemnity against any loss, liability or expense;
(d) the Trustee does not comply with the request within 30 days
after receipt of the request and the offer and, if requested, provision of
indemnity; and
(e) during such 30-day period the Holders of a majority in aggregate
principal amount at maturity of the outstanding Notes do not give the Trustee
a direction which is inconsistent with the request.
The foregoing limitations shall not apply to a suit instituted by a
Holder for the enforcement of the payment of principal of, premium, if any,
or accrued interest on, such Notes on or after the respective due dates set
forth in such Notes.
A Holder may not use this Indenture to prejudice the rights of any other
Holders or to obtain priority or preference over such other Holders.
<PAGE>
6.07 Right of Holders To Receive Payment.
Notwithstanding any other provision in this Indenture, the right of any
Holder of a Note to receive payment of the principal of, premium, if any, and
interest on such Note, on or after the respective Stated Maturities expressed
in such Note, or to bring suit for the enforcement of any such payment on or
after the respective Stated Maturities, is absolute and unconditional and
shall not be impaired or affected without the consent of the Holder.
6.08 Collection Suit by Trustee.
If an Event of Default specified in clause (a) or (b) of Section 6.01
occurs and is continuing, the Trustee may recover judgment in its own name
and as trustee of an express trust against the Company, or any other obligor
on the Notes for the whole amount of principal of, premium, if any, and
accrued interest remaining unpaid, together with interest on overdue
principal and, to the extent that payment of such interest is lawful,
interest on overdue installments of interest, in each case at the rate per
annum borne by the Notes and 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.
6.09 Trustee May File Proofs of Claims.
The Trustee may file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel) and the Holders allowed
in any judicial proceedings relative to the Company or the Subsidiaries of
the Company (or any other obligor upon the Notes), their creditors or their
property and shall be entitled and empowered to collect and receive any
monies or other property payable or deliverable on any such claims and to
distribute the same, and any Custodian in any such judicial proceedings 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 to it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agent and counsel, and any other amounts due the Trustee under Section
7.08. Nothing herein contained 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 Notes
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.
6.10 Priorities.
If the Trustee collects any money pursuant to this Article Six, it shall
pay out such money in the following order:
First: to the Trustee for amounts due under Section 7.08;
<PAGE>
Second: to Holders for interest accrued on the Notes, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Notes for interest;
Third: to Holders for principal amounts (including any premium) owing under
the Notes, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for principal
(including any premium); and
Fourth: the balance, if any, to the Company.
The Trustee, upon prior written notice to the Company, may fix a record
date and payment date for any payment to Noteholders pursuant to this Section
6.10.
6.11 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted
by it as Trustee, a court may in its discretion require the filing by any
party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having
due regard to the merits and good faith of the claims or defenses made by the
party litigant. This Section 6.11 does not apply to any suit by the Trustee,
any suit by a Holder pursuant to Section 6.07, or a suit by Holders of more
than 10% in aggregate principal amount of the outstanding Notes. This
Section 6.11 shall not be deemed to authorize any court to require an
undertaking or to make such an assessment in any suit instituted by the
Company or in any suit for the enforcement of the right to convert any Note
in accordance with Article 11.
6.12 Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture or any Note 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 the
Company, the Trustee and the Holders shall, subject to any determination in
such proceeding, 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.
ARTICLE SEVEN
TRUSTEE
7.01 Duties.
(a) 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 person would exercise or use under the circumstances in the conduct
of such person's own affairs.
<PAGE>
(b) Except during the continuance of an Event of Default,
(i) the Trustee need perform only such duties as are specifically set
forth in this Indenture, and no implied covenants or obligations
shall be read into this Indenture against the Trustee; and
(ii) 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.
(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 willful misconduct, except that
(i) this paragraph does not limit the effect of paragraph (b) of this
Section 7.01;
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts;
(iii) the Trustee shall not be liable with respect to any action it takes
or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05;
(d) 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.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01.
7.02 Rights of Trustee.
Subject to Section 7.01 hereof and the provisions of TIA Sec. 315:
(a) the Trustee may rely on any document reasonably believed by it
to be genuine and to have been signed or presented by the proper person. The
Trustee need not investigate any fact or matter stated in the document.
(b) before the Trustee acts or refrains from acting, it may consult
with counsel and may require an Officers' Certificate or an Opinion of
Counsel, which shall conform to Sections 10.04 and 10.05. The Trustee shall
not be liable for any action it takes or omits to take in good faith in
reliance on such certificate or opinion.
<PAGE>
(c) the Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) the Trustee shall not be liable for any action 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 Indenture other
than any liabilities arising out of its own negligence.
(e) the Trustee may consult with counsel of its own choosing and the
advice or opinion of such counsel as to matters of law shall be full and
complete authorization and protection in respect of any action taken, omitted
or suffered by it hereunder in good faith and in accordance with the advice
or opinion of such counsel.
(f) the Trustee shall not be bound to make any investigation into
the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters as
it may see fit.
(g) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
7.03 Individual Rights of Trustee.
The Trustee, any Paying Agent, Registrar or any other agent of the
Company, in its individual or any other capacity, may become the owner or
pledgee of Notes and, subject to Sections 7.11 and 7.12 and TIA Secs. 310 and
311, may otherwise deal with the Company and its Subsidiaries with the same
rights it would have if it were not the Trustee, Paying Agent, Registrar or
such other agent.
7.04 Trustee's Disclaimer.
The Trustee makes no representations as to the validity or sufficiency
of this Indenture or of the Notes, it shall not be accountable for the
Company's use or application of the proceeds from the Notes, it shall not be
responsible for the use or application of any money received by any Paying
Agent other than the Trustee and it shall not be responsible for any
statement in the Notes other than the Trustee's certificate of
authentication.
7.05 Notice of Default.
If a Default or an Event of Default occurs and is continuing and if it
is known to a Trust Officer of the Trustee, the Trustee shall mail to each
Holder notice of the Default or Event of Default within 30 days thereafter;
provided, however, that, except in the case of a Default in the payment of
the principal of, premium, if any, or interest on any Note, the Trustee shall
be protected
<PAGE>
in withholding such notice if and so long as the board of directors, the
executive committee of the board of directors or a committee of the directors
of the Trustee and/or Trust Officers in good faith determines that the
withholding of such notice is in the interest of the Holders.
7.06 Money Held in Trust.
All moneys received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were
received, but need not be segregated from other funds except to the extent
required herein or by law. The Trustee shall not be under any liability for
interest on any moneys received by it hereunder, except as the Trustee may
agree with the Company.
7.07 Reports by Trustee to Holders.
Within 60 days after each May 15 beginning with the May 15 following the
date of this Indenture, the Trustee shall, to the extent that any of the
events described in TIA Sec. 313(a) shall have occurred within the previous
twelve months, but not otherwise, mail to each Holder a brief report dated as
of such May 15 that complies with TIA Sec. 313(a). The Trustee also shall
comply with TIA Secs. 313(b) and 313(c).
A copy of each report at the time of its mailing to Holders shall be
mailed to the Company and filed with the SEC and each securities exchange, if
any, on which the Notes are listed.
The Company shall notify the Trustee in writing if the Notes become
listed on any securities exchange.
7.08 Compensation and Indemnity.
The Company covenants and agrees to pay the Trustee from time to time
reasonable compensation for its services. The Trustee's compensation shall
not be limited by any law on compensation of a trustee of an express trust.
The Company shall reimburse the Trustee upon request for all reasonable
disbursements, expenses and advances incurred or made by it. Such expenses
shall include the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel.
The Company shall indemnify the Trustee for, and hold it harmless
against, any loss or liability incurred by it arising out of or in connection
with the administration of this trust and its rights or duties hereunder,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers
or duties hereunder. The Trustee shall notify the Company promptly of any
claim asserted against the Trustee for which it may seek indemnity. The
Company shall defend the claim and the Trustee shall cooperate in the
defense. The Trustee may have separate counsel and the Company shall pay the
reasonable fees and expenses of such counsel. The Company need not pay for
any settlement made without its prior written consent. The Company need not
reimburse any expense or indemnify against any loss or liability to the
extent incurred by the Trustee through its negligence, bad faith or willful
<PAGE>
misconduct.
To secure the Company's payment obligations in this Section 7.08, the
Trustee shall have a Lien prior to the Notes on all assets held or collected
by the Trustee, in its capacity as Trustee, except assets held in trust to
pay principal of, premium, if any, or interest on particular Notes.
When the Trustee incurs expenses or renders services in connection with an
Event of Default specified in Section 6.01(f) or (g), the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The Company's obligations under this Section 7.08 and any Lien arising
hereunder shall survive the resignation or removal of any trustee, the
discharge of the Company's obligations pursuant to Article Eight and/or the
termination of this Indenture.
7.09 Replacement of Trustee.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount at maturity of the outstanding Notes may remove
the Trustee by so notifying the Company and the Trustee and may appoint a
successor trustee with the Company's prior written consent. The Company may
remove the Trustee if:
(1) the Trustee fails to comply with Section 7.11;
(2) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy
Law;
(3) a receiver or other public officer takes charge of the Trustee or its
property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall notify each Holder of
such event and shall promptly appoint a successor Trustee. The Trustee shall
be entitled to payment of its fees and reimbursement of its expenses while
acting as Trustee, and to the extent such amounts remain unpaid, the Trustee
that has resigned or has been removed shall retain the Lien afforded by
Section 7.08. Within one year after the successor Trustee takes office, the
Holders of a majority in principal amount of the outstanding Notes may, with
the Company's prior written consent, appoint a successor Trustee to replace
the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after
that, the retiring Trustee shall transfer all property held by it as Trustee
to the successor Trustee, subject to the Lien provided in Section 7.08, the
resignation or removal of the retiring Trustee shall become effective, and
the successor Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. A successor Trustee shall mail notice of its
succession
<PAGE>
to each Noteholder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holders of at least 10% in principal amount of the outstanding Notes may
petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.11, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.09, the Company's obligations under Section 7.08 shall continue for the
benefit of the retiring Trustee.
7.10 Successor Trustee by Merger, etc..
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation or national banking association, the resulting, surviving or
transferee corporation or national banking association without any further
act shall, if such resulting, surviving or transferee corporation or national
banking association is otherwise eligible hereunder, be the successor
Trustee.
7.11 Eligibility; Disqualification.
There shall at all times be a Trustee hereunder which shall be eligible
to act as Trustee under TIA Secs. 310(a)(1) and 310(a)(5) and which shall
have a combined capital and surplus of at least $50,000,000. If such
corporation publishes reports of condition at least annually, pursuant to law
or to the requirements of 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 corporation 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, the Trustee shall
resign immediately in the manner and with the effect hereinafter specified in
this Article.
7.12 Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Sec. 311(a), excluding any creditor
relationship listed in TIA Sec. 311(b). If the present or any future Trustee
shall resign or be removed, it shall be subject to TIA Sec. 311(a) to the
extent provided therein.
<PAGE>
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE
8.01 Termination of the Company's Obligations.
The Company may terminate its obligations under the Notes and this
Indenture, except those obligations referred to in the penultimate paragraph
of this Section 8.01, if all Notes previously authenticated and delivered
(other than destroyed, lost or stolen Notes which have been replaced or paid
or Notes for whose payment money has theretofore been deposited with the
Trustee or the Paying Agent in trust or segregated and held in trust by the
Company and thereafter repaid to the Company, as provided in Section 8.04)
have been delivered to the Trustee for cancellation and the Company has paid
all sums payable by it hereunder, or if:
(a) either (i) pursuant to Article Three, the Company shall have
given notice to the Trustee and mailed a notice of redemption to each Holder
of the redemption of all of the Notes under arrangements satisfactory to the
Trustee for the giving of such notice or (ii) all Notes have otherwise become
due and payable hereunder;
(b) the Company shall have irrevocably deposited or caused to be
deposited with the Trustee or a trustee reasonably satisfactory to the
Trustee, under the terms of an irrevocable trust agreement in form and
substance satisfactory to the Trustee, as trust funds in trust solely for the
benefit of the Holders for that purpose, money in such amount as is
sufficient without consideration of reinvestment of such interest, to pay
principal of, premium, if any, and interest on the outstanding Notes to
maturity or redemption, as certified in a certificate of a nationally
recognized firm of independent public accountants; provided that the Trustee
shall have been irrevocably instructed to apply such money to the payment of
said principal, premium, if any, and interest with respect to the Notes;
(c) no Default or Event of Default with respect to this Indenture or
the Notes shall have occurred and be continuing on the date of such deposit
or shall occur as a result of such deposit and such deposit will not result
in a breach or violation of, or constitute a default under, any other
instrument to which the Company is a party or by which it is bound;
(d) the Company shall have paid all other sums payable by it
hereunder;
(e) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent providing for the termination of the Company's obligation under the
Notes and this Indenture have been complied with.
Notwithstanding the foregoing paragraph, the Company's obligations in
Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02 and 7.08 shall survive until the
Notes are no longer outstanding pursuant to the last paragraph of
Section 2.08. After the Notes are no longer outstanding, the Company's
obligations in Sections 7.08, 8.03, 8.04 and 8.05 shall survive.
<PAGE>
After such delivery or irrevocable deposit the Trustee upon request
shall acknowledge in writing the discharge of the Company's obligations under
the Notes and this Indenture except for those surviving obligations specified
above.
8.02 Legal Defeasance and Covenant Defeasance.
(a) The Company may, at its option by Board Resolution of the Board
of Directors of the Company, at any time, with respect to the Notes, elect to
have either paragraph (b) or paragraph (c) below be applied to the
outstanding Notes upon compliance with the conditions set forth in
paragraph (d).
(b) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (b), the Company shall be deemed to have been
released and discharged from its obligations with respect to the outstanding
Notes on the date the conditions set forth below are satisfied (hereinafter,
"legal defeasance"). For this purpose, such legal defeasance means that the
Company shall be deemed to have paid and discharged the entire indebtedness
represented by the outstanding Notes, which shall thereafter be deemed to be
"outstanding" only for the purposes of paragraph (e) below and the other
Sections of and matters under this Indenture referred to in (i) and (ii)
below, and to have satisfied all its other obligations under such Notes and
this Indenture insofar as such Notes are concerned (and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging the
same), except for the following which shall survive until otherwise
terminated or discharged hereunder: (i) the rights of Holders of outstanding
Notes to receive solely from the trust fund described in paragraph (d) below
and as more fully set forth in such paragraph, payments in respect of the
principal of, premium, if any, and interest on such Notes when such payments
are due, (ii) the Company's obligations with respect to such Notes under
Sections 2.06, 2.07 and 4.02 and, with respect to the Trustee, under
Section 7.08, (iii) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and (iv) this Article Eight. Subject to compliance with
this Section 8.02, the Company may exercise its option under this
paragraph (b) notwithstanding the prior exercise of its option under
paragraph (c) below with respect to the Notes.
(c) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (c), the Company shall be released and
discharged from its obligations under any covenant contained in Articles Five
and Ten and in Sections 4.07 through 4.16 and Sections 4.18 and 4.19 with
respect to the outstanding Notes on and after the date the conditions set
forth below are satisfied (hereinafter, "covenant defeasance"), and the Notes
shall thereafter be deemed to be not "outstanding" for the purpose of any
direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder. For
this purpose, such covenant defeasance means that, with respect to the
outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any
such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any
such covenant to any other provision herein or in any other document and such
omission to comply shall
<PAGE>
not constitute a Default or an Event of Default under Section 6.01(c), but,
except as specified above, the remainder of this Indenture and such Notes
shall be unaffected thereby.
(d) The following shall be the conditions to application of either
paragraph (b) or paragraph (c) above to the outstanding Notes:
(i) the Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the
requirements of Section 7.11 who shall agree to comply with the
provisions of this Section 8.02 applicable to it) as trust funds
in trust for the purpose of making the following payments,
specifically pledged as security for, and dedicated solely to,
the benefit of the Holders of such Notes, (x) cash, in United
States dollars, in an amount or (y) direct non-callable
obligations of, or non-callable obligations guaranteed by, the
United States of America for the payment of which guarantee or
obligation the full faith and credit of the United States is
pledged ("U.S. Government Obligations") maturing as to
principal,
premium, if any, and interest in such amounts of cash, in United
States dollars, and at such times as are sufficient without
consideration of any reinvestment of such interest, to pay
principal of, premium, if any, and interest on the outstanding
Notes not later than one day before the due date of any payment,
or (z) a combination thereof, sufficient, in the opinion of a
nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the
Trustee, to pay and discharge and which shall be applied by the
Trustee (or other qualifying trustee) to pay and discharge
principal of, premium, if any, and interest on the outstanding
Notes (except lost, stolen or destroyed Notes which have been
replaced or repaid) on the Final Maturity Date or otherwise in
accordance with the terms of this Indenture and of such Notes;
provided, however, that the Trustee (or other qualifying
trustee)
shall have received an irrevocable written order from the
Company
instructing the Trustee (or other qualifying trustee) to apply
such money or the proceeds of such U.S. Government Obligations
to
said payments with respect to the Notes;
(ii) no Default or Event of Default or event which with notice or
lapse of time or both would become a Default or an Event of
Default with respect to the Notes shall have occurred and be
continuing on the date of such deposit or, insofar as
Section 6.01(a) is concerned, at any time during the period
ending on the 91st day after the date of such deposit (it being
understood that this condition shall not be deemed satisfied
until the expiration of such period);
(iii) such legal defeasance or covenant defeasance shall not cause the
Trustee to have a conflicting interest with respect to any
securities of the Company;
<PAGE>
(iv) such legal defeasance or covenant defeasance shall not result in
a breach or violation of, or constitute a Default or Event of
Default under, this Indenture or any other material agreement or
instrument to which the Company is a party or by which it is
bound;
(v) in the case of an election under paragraph (b) above, the
Company
shall have delivered to the Trustee an Opinion of Counsel
stating
that (x) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (y) since
the date of this Indenture, there has been a change in the
applicable Federal income tax law, in either case to the effect
that, and based thereon such opinion shall confirm that, the
Holders of the outstanding Notes will not recognize income, gain
or loss for Federal income tax purposes as a result of such
legal
defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have
been the case if such legal defeasance had not occurred;
(vi) in the case of an election under paragraph (c) above, the
Company
shall have delivered to the Trustee an Opinion of Counsel to the
effect that the Holders of the outstanding Notes will not
recognize income, gain or loss for Federal income tax purposes
as
a result of such covenant defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and
at
the same times as would have been the case if such covenant
defeasance had not occurred;
(vii) in the case of an election under either paragraph (b) or (c)
above, an Opinion of Counsel to the effect that, (x) the trust
funds will not be subject to any rights of any other holders of
Indebtedness of the Company, and (y) after the 91st day
following
the deposit, the trust funds will not be subject to the effect
of
any applicable Bankruptcy Law; provided, however, that if a
court
were to rule under any such law in any case or proceeding that
the trust funds remained property of the Company, no opinion
needs to be given as to the effect of such laws on the trust
funds except the following: (A) assuming such trust funds
remained in the Trustee's possession prior to such court ruling
to the extent not paid to Holders of Notes, the Trustee will
hold, for the benefit of the Holders of Notes, a valid and
enforceable security interest in such trust funds that is not
avoidable in bankruptcy or otherwise, subject only to principles
of equitable subordination, (B) the Holders of Notes will be
entitled to receive adequate protection of their interests in
such trust funds if such trust funds are used, and (C) no
property, rights in property or other interests granted to the
Trustee or the Holders of Notes in exchange for or with respect
to any of such funds will be subject to any prior rights of any
other person, subject only to prior Liens granted under Section
364 of Title 11 of the U.S. Bankruptcy Code (or any section of
any other Bankruptcy Law having the same effect), but still
subject to the foregoing clause (B); and
<PAGE>
(viii) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that (x) all
conditions precedent provided for relating to either the legal
defeasance under paragraph (b) above or the covenant defeasance
under paragraph (c) above, as the case may be, have been
complied
with and (y) if any other Indebtedness of the Company shall then
be outstanding or committed, such legal defeasance or covenant
defeasance will not violate the provisions of the agreements or
instruments evidencing such Indebtedness.
(e) All money and U.S. Government Obligations (including the
proceeds thereof) deposited with the Trustee (or other qualifying trustee,
collectively for purposes of this paragraph (e), the "Trustee") pursuant to
paragraph (d) above in respect of the outstanding Notes shall be held in
trust and applied by the Trustee, in accordance with the provisions of such
Notes and this Indenture, to the payment, either directly or through any
Paying Agent (other than the Company or any Affiliate of the Company) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium and interest, but such
money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to paragraph (d) above or the principal, premium, if any,
and interest received in respect thereof other than any such tax, fee or
other charge which by law is for the account of the Holders of the
outstanding Notes.
Anything in this Section 8.02 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the
request, in writing, by the Company any money or U.S. Government Obligations
held by it as provided in paragraph (d) above which, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, are in excess of the
amount thereof which would then be required to be deposited to effect an
equivalent legal defeasance or covenant defeasance.
8.03 Application of Trust Money.
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Sections 8.01 and 8.02, and shall apply the
deposited money and the money from U.S. Government Obligations in accordance
with this Indenture to the payment of principal of, premium, if any, and
interest on the Notes.
8.04 Repayment to Company.
Subject to Sections 7.08, 8.01 and 8.02, the Trustee shall promptly pay
to the Company, upon receipt by the Trustee of an Officers' Certificate, any
excess money, determined in accordance with Section 8.02, held by it at any
time. The Trustee and the Paying Agent shall pay to the Company, upon
receipt by the Trustee or the Paying Agent, as the case may be, of an
Officers' Certificate, any money held by it for the payment of principal,
premium, if any, or interest that remains unclaimed for two years after
payment to the
<PAGE>
Holders is required; provided, however, that the Trustee and the Paying Agent
before being required to make any payment may, but need not, at the expense
of the Company cause to be published once in a newspaper of general
circulation in The City of New York or mail to each Holder entitled to such
money notice that such money remains unclaimed and that after a date
specified therein, which shall be at least 30 days from the date of such
publication or mailing, any unclaimed balance of such money then remaining
will be repaid to the Company. After payment to the Company, Holders
entitled to money must look solely to the Company for payment as general
creditors unless an applicable abandoned property law designates another
person, and all liability of the Trustee or Paying Agent with respect to such
money shall thereupon cease.
8.05 Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with this Indenture 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, then and only then the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit
had been made pursuant to this Indenture until such time as the Trustee is
permitted to apply all such money or U.S. Government Obligations in
accordance with this Indenture; provided, however, that if the Company has
made any payment of principal of, premium, if any, or interest on any Notes
because of the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Notes to receive such payment
from the money or U.S. Government Obligations held by the Trustee or Paying
Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
9.01 Without Consent of Holders.
The Company, when authorized by a Board Resolution of its Board of
Directors, and the Trustee may amend, waive or supplement this Indenture or
the Notes without notice to or consent of any Holder:
(a) to cure any ambiguity, defect or inconsistency;
(b) to comply with Article Five;
(c) to provide for uncertificated Notes in addition to certificated
Notes;
(d) to comply with any requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
(e) to make any change that would provide any additional benefit or
rights
to the Holders or that does not adversely affect the rights of any
Holder.
Notwithstanding the above, the Trustee and the Company may not make any
change that adversely affects the rights of any Holders hereunder. The
Company shall be required to deliver to the Trustee an Opinion of Counsel
<PAGE>
stating that any such change made pursuant to paragraph (a) or (e) of this
Section 9.01 does not adversely affect the rights of any Holder.
9.02 With Consent of Holders.
Subject to Section 6.04, the Company, when authorized by a Board
Resolution of its Board of Directors, and the Trustee may amend this
Indenture or the Notes with the written consent of the Holders of not less
than a majority in aggregate principal amount at maturity of the Notes then
outstanding, and the Holders of not less than a majority in aggregate
principal amount of the Notes then outstanding by written notice to the
Trustee may waive future compliance by the Company with any provision of this
Indenture or the Notes.
Notwithstanding the provisions of this Section 9.02, without the consent
of each Holder affected, an amendment or waiver, including a waiver pursuant
to Section 6.04, may not:
(a) reduce the percentage in outstanding aggregate principal amount
at maturity of Notes the Holders of which must consent to an amendment,
supplement or waiver of any provision of this Indenture or the Notes;
(b) reduce or change the rate or time for payment of interest on any
Note;
(c) change the currency in which any Note, or any premium or
interest thereon, is payable;
(d) reduce the principal amount outstanding of, or Accreted Value
of, or extend the fixed maturity of any Note or alter the redemption
provisions with respect thereto;
(e) waive a default in the payment of the principal of, premium, if
any, or interest on, or redemption or an offer to purchase required hereunder
with respect to, any Note;
(f) make the principal of, premium, if any, or interest on any Note
payable in money other than that stated in the Note;
(g) modify this Section 9.02 or Section 6.04 or Section 6.07;
(h) amend, alter, change or modify the obligation of the Company to
make and consummate a Change of Control Offer in the event of a Change of
Control or make and consummate the offer with respect to any Asset Sale or
modify any of the provisions or definitions with respect thereto;
(i) modify or change any provision of this Indenture affecting the
ranking of the Notes in a manner adverse to the Holders; or
(j) impair the right to institute suit for the enforcement of any
payment on or with respect to the Notes.
<PAGE>
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Company shall mail to the Holder of each Note affected
thereby, with a copy to the Trustee, a notice briefly describing the
amendment, supplement or waiver. Any failure of the Company to mail such
notice, or any defect therein, shall not, however, in any way impair or
affect the validity of any amendment, supplement or waiver.
9.03 Compliance with Trust Indenture Act.
Every amendment of or supplement to this Indenture or the Notes shall
comply with the TIA as then in effect.
9.04 Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent to
it by a Holder is a continuing consent by such Holder and every subsequent
Holder of that Note or portion of that Note that evidences the same debt as
the consenting Holder's Note, even if notation of the consent is not made on
any Note. However, any such Holder or subsequent Holder may revoke the
consent as to his Note or portion of a Note prior to such amendment,
supplement or waiver becoming effective. Such revocation shall be effective
only if the Trustee receives the notice of revocation before the date the
amendment, supplement or waiver becomes effective. Notwithstanding the
above, nothing in this paragraph shall impair the right of any Holder under
Sec. 316(b) of the TIA.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the
second and third sentences of the immediately preceding paragraph, those
persons who were Holders at such record date (or their duly designated
proxies), and only those persons, shall be entitled to consent to such
amendment, supplement or waiver or to revoke any consent previously given,
whether or not such persons continue to be Holders after such record date.
Such consent shall be effective only for actions taken within 90 days after
such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder; unless it makes a change described in any of clauses (a)
through (j) of Section 9.02; if it makes such a change, the amendment,
supplement or waiver shall bind every subsequent Holder of a Note or portion
of a Note that evidences the same debt as the consenting Holder's Note.
9.05 Notation on or Exchange of Notes.
If an amendment, supplement or waiver changes the terms of a Note, the
Trustee shall (in accordance with the specific direction of the Company)
request the Holder of the Note to deliver it to the Trustee. The Trustee
<PAGE>
shall (in accordance with the specific direction of the Company) place an
appropriate notation on the Note about the changed terms and return it to the
Holder. Alternatively, if the Company or the Trustee so determines, the
Company in exchange for the Note shall issue and the Trustee shall
authenticate a new Note that reflects the changed terms. Failure to make the
appropriate notation or issue a new Note shall not affect the validity and
effect of such amendment, supplement or waiver.
9.06 Trustee May Sign Amendments, etc.
The Trustee shall sign any amendment, supplement or waiver authorized
pursuant to this Article Nine if the amendment, supplement or waiver does not
adversely affect the rights, duties, liabilities or immunities of the
Trustee. If it does, the Trustee may, but need not, sign it. In signing or
refusing to sign such amendment, supplement or waiver, the Trustee shall be
entitled to receive, and shall be fully protected in relying upon, an
Officers' Certificate and an Opinion of Counsel stating that the execution of
any amendment, supplement or waiver is authorized or permitted by this
Indenture, that it is not inconsistent herewith and that it will be valid and
binding upon the Company in accordance with its terms.
ARTICLE TEN
MISCELLANEOUS
10.01 Trust Indenture Act of 1939.
This Indenture is subject to the provisions of the TIA that are required
to be a part of this Indenture, and shall, to the extent applicable, be
governed by such provisions.
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
excluded, as the case may be.
10.02 Notices.
Any notice or communication shall be sufficiently given if in writing
and delivered in person or mailed by first class mail, postage prepaid,
addressed as follows:
If to the Company to:
Telegroup, Inc.
2098 Nutmeg Avenue
Fairfield, IA 52556
Attention: Corporate Secretary
<PAGE>
With a copy to:
Swidler & Berlin, Chartered
3000 K Street, N.W.
Suite 300
Washington, DC 20007-5116
Attn: Morris F. DeFeo, Jr.
If to the Trustee to:
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street
Hartford, CT 06103
Attention: Corporate Trust Administration
The parties hereto by notice to the other parties may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed, postage prepaid, to a Holder, including
any notice delivered in connection with TIA Sec. 310(b), TIA Sec. 313(c), TIA
Sec. 314(a) and TIA Sec. 315(b), shall be mailed by first class mail to such
Holder at the address of such Holder as it appears on the Notes register
maintained by the Registrar and shall be sufficiently given to such Holder if
so mailed within the time prescribed. Copies of any such communication or
notice to a Holder shall also be mailed to the Trustee.
Failure to mail a notice or communication to a Noteholder or any defect
in it shall not affect its sufficiency with respect to other Holders. Except
for a notice to the Trustee, which is deemed given only when received, if a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
10.03 Communication by Holders with Other Holders.
Holders may communicate pursuant to TIA Sec. 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The
obligors, the Trustee, the Registrar and any other person shall have the
protection of TIA Sec. 312(c).
10.04 Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, such obligor shall furnish to the Trustee:
(a) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(b) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
<PAGE>
10.05 Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(a) a statement that the person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statement or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such person, he has made
such examination or investigation as is necessary to enable him to express an
opinion as to whether or not such covenant or condition has been complied
with; and
(d) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with; provided, however, that
with respect to matters of fact an Opinion of Counsel may rely on an
Officers' Certificate or certificates of public officials.
10.06 Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a meeting of
Noteholders. The Paying Agent or Registrar may make reasonable rules for its
functions.
10.07 Governing Law.
The laws of the State of New York shall govern this Indenture and the
Notes without regard to principles of conflicts of law. The Trustee, the
Company and the Holders agree to submit to the jurisdiction of the courts of
the State of New York in any action or proceeding arising out of or relating
to this Indenture or the Notes.
10.08 No Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any of its Subsidiaries. Any such
indenture, loan or debt agreement may not be used to interpret this
Indenture.
10.09 No Recourse Against Others.
A director, officer, employee, stockholder or Affiliate, as such, of the
Company shall not have any liability for any obligations of the Company under
the Notes or this Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder by accepting a
Note waives and releases all such liability.
<PAGE>
10.10 Successors.
All agreements of the Company in this Indenture and the Notes shall bind
its successors. All agreements of the Trustee in this Indenture shall bind
its successors.
10.11 Duplicate Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all such executed copies together
represent the same agreement.
10.12 Separability.
In case any provision in this Indenture or the Notes 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,
and a Holder shall have no claim therefor against any party hereto.
10.13 Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
10.14 Benefits of Indenture.
Except as provided in Article Ten, nothing in this Indenture or in the
Notes, express or implied, shall give to any person, other than the parties
hereto and their successors hereunder, and the Holders, any benefit or any
legal or equitable right, remedy or claim under this Indenture.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
TELEGROUP, INC.
By:
Name:
Title:
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:
Name:
Title:
<PAGE>
[FORM OF FACE OF INITIAL NOTE]
[Global Notes Legend]
Unless and until it is exchanged in whole or in part for Notes in definitive
form, this Note may not be TRANSFERRED except as a whole by the depository to
a nominee of the depository or by a nominee of the depository to the
depository or any such nominee to a successor DEPOSITORY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITORY. unless this certificate is presented by an authorized
representative of the depository trust company ("DTC") to the company or its
agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of cede & co. or such other name as
REQUESTED BY an authorized representative of dtc (and any payment is made to
cede & co. or such other entity as is requested by an authorized
representative of dtc), any transfer, pledge or other use hereof for value or
otherwise or to any person is wrongful inasmuch as the registered owner
hereof, cede & co., has an interest herein.<FN1>
<FN1> This paragraph should only be added if the Security is issued in
global
form.
[Private Placement Legend]
This Security has not been registered under the securities act of 1933, as
amended (the "Securities Act"), or any state securities laws. Neither this
security nor any interest or participation herein may be reoffered, sold,
assigned, transferred, pledged, encumbered or otherwise disposed of in the
absence of such registration or unless such transaction is exempt from, or
not subject to, registration.
The holder of this security by its acceptance hereof agrees to offer, sell or
otherwise transfer such security, prior to the date (the "resale restriction
termination date") which is two years after the later of the original issue
<PAGE>
date hereof and the last date on which the company or any affiliate of the
company was the owner of this security (or any predecessor of such security)
only (a) to the company, (b) pursuant to a registration statement that has
been declared effective under the securities act, (c) for so long as the
securities are eligible for resale pursuant to rule 144A under the securities
act, to a person it reasonably believes is a "qualified institutional buyer"
as defined in rule 144A under the securities act that purchases for its own
account or for the account of a qualifieD institutional buyer to whom notice
is given that the transfer is being made in reliance on rule 144A, (d)
pursuant to offers and sales that occur outside the united states within the
meaning of regulation s under the securities act, (e) to an institutional
"accredited investor" within the meaning of rule 501(a)(1), (2), (3) or (7)
under the securities act that is acquiring the security for its own account,
or for the account of such an institutional accredited investor, in each case
in a transaction for such securities for investment purposes and not with a
view to or for offer or sale in connection with any distribution in violation
of the securities act, or (f) pursuant to another available exemption from
the registration requirements of the securities act, subject to the company's
and the trustee's right prior to any such offer, sale or transfer pursuant to
clause (d), (e) or (f) to require the delivery of an opinion of counsel,
certification or other information satisfactory to each of them, and in the
case of any of the foregoing Cases, a certificate of transfer in the form
appearing on the other side of this security is completed and delivered by
the transferor to the company and the trustee. This legend will be removed
upon the request of the holder after the resale Restriction Termination Date.
TELEGROUP, INC.
10 1/2% SENIOR DISCOUNT NOTE DUE 2004
No. ______ $__________
CUSIP:
[The following information is supplied for purposes of Sections 1273 and 1275
of the Internal Revenue Code:]
Issue Date: October 23, 1997
Yield to maturity for period from Issue Date to November 1, 2004: 10 1/2%,
compounded semi-annually on May 1 and November 1, and commencing November 1,
2000 (computed without giving effect to the additional payments of interest
in the event the issuer fails to commence the exchange offer or cause the
registration statement to be declared effective, each as described on the
reverse hereof)
Original issue discount under Section 1273 of the Internal Revenue Code (for
each $1,000 principal amount): ___________
Issue Price (for each $1,000 principal amount): ___________
<PAGE>
TELEGROUP, INC., a corporation incorporated under the laws of the State
of Iowa (herein called the "Company", which term includes any successor
corporation under the Indenture hereinafter referred to), for value received,
hereby promises to pay to _______________ or registered assigns, the
principal sum of _______________ Dollars on November 1, 2004, at the office
or agency of the Company referred to below, and to pay interest thereon,
accruing from May 1, 2000, on May 1 and November 1, in each year, commencing
on November 1, 2000. After May 1, 2000, interest on the Notes will accrue
from the most recent Interest Payment Date to which interest has been paid or
duly provided for or, if no interest has been paid, from May 1, 2000, at the
rate of 10.5% per annum, until the principal hereof is paid or duly provided
for. Interest shall be computed on the basis of a 360-day year of twelve
30-day months.
If an exchange offer registered under the Securities Act is not consummated
and a shelf registration statement under the Securities Act with respect to
resales of the Notes is not declared effective by the Commission, in
accordance with the terms of the Registration Rights Agreement dated
October 23, 1997 among the Company, Smith Barney Inc. and BT Alex. Brown
Incorporated (the "Registration Rights Agreement"), interest (in addition to
the accrual of original issue discount during the period ending May 1, 2000
and in addition to the interest otherwise due on the Notes after such date)
will accrue in accordance with the terms of the Registration Rights Agreement
as set forth on the reverse of this Note. The Holder of this Note is
entitled to the benefits of such Registration Rights Agreement.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in the Indenture referred to on
the reverse hereof, be paid to the person in whose name this Note (or one or
more Predecessor Notes) is registered at the close of business on the Regular
Record Date for such interest, which shall be April 15 or October 15 (whether
or not a Business Day), as the case may be, next preceding such Interest
Payment Date (each a "Regular Record Date"). Any such interest not so
punctually paid, or duly provided for, and interest on such defaulted
interest at the rate borne by the Notes, to the extent lawful, shall
forthwith cease to be payable to the Holder on such Regular Record Date, and
may be paid to the person in whose name this Note (or one or more Predecessor
Notes) 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 of
which shall be given to Holders of Notes not less than 10 days prior to such
special record date, or may be paid at any time in any other lawful manner
not inconsistent with the requirements of any securities exchange on which
the Notes may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in such Indenture.
Payment of the principal of, premium, if any, and interest on this Note
will be made at the office or agency of the Company maintained for that
purpose in the Borough of Manhattan in The City of New York, or at such other
office or agency of the Company as may be maintained for such purpose, in
such
<PAGE>
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
payment of interest may be made at the option of the Company by check mailed
to the address of the person entitled thereto as such address shall appear on
the security register maintained by the Registrar.
Reference is hereby made to the further provisions of this Note 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 duly executed
by the Trustee referred to on the reverse hereof by manual signature, and a
seal has been affixed hereon, this Note shall not be entitled to any benefit
under the Indenture, or be valid or obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated: October 23, 1997 TELEGROUP, INC.
By:
Name:
Title:
Attest:
- ---------------------
Authorized Signature
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred to in the within-mentioned Indenture.
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:
----------------------------------
Authorized Officer
<PAGE>
[Form of Reverse Side of Initial Note]
1. Indenture. This Note is one of a duly authorized issue of Notes of
the Company designated as its 10.5% Senior Discount Notes due 2004, limited
(except as otherwise provided in the Indenture referred to below) in
aggregate principal amount at maturity to $150,000,000, which may be issued
under an indenture (herein called the "Indenture") dated as of October 23,
1997, among Telegroup, Inc., an Iowa corporation, as issuer (the "Company"),
and State Street Bank and Trust Company, a Massachusetts trust company, as
trustee (herein called the "Trustee," which term includes any successor
Trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties, obligations and immunities
thereunder of the Company, the Trustee and the Holders of the Notes, and of
the terms upon which the Notes are, and are to be, authenticated and
delivered.
All capitalized terms used in this Note which are defined in the
Indenture and not otherwise defined herein shall have the meanings assigned
to them in the Indenture.
No reference herein to the Indenture and no provisions of this Note or
of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of, premium, if any, and
interest on this Note at the times, place and rate, and in the coin or
currency, herein prescribed.
2. Additional Interest.
(a) if (1) neither a registration statement (the "Exchange Offer
Registration Statement") with respect to a registered offer to exchange the
Notes (the "Exchange Offer") for notes of the Company which will have terms
substantially identical in all material respects to the Notes (the "Exchange
Notes") nor a shelf registration statement covering the resale of the Notes
<PAGE>
(a "Shelf Registration Statement") is filed with the Commission on or prior
to 90 days from the Issue Date (the "Filing Date") or (2) notwithstanding
that the Company has consummated or will consummate an Exchange Offer, the
Company is required to file a Shelf Registration Statement and such Shelf
Registration Statement is not filed on or prior to the Filing Date, then
commencing on the day after either such required Filing Date, additional
interest ("Additional Interest") shall accrue on the Accreted Value of the
Notes at a rate of .50% per annum for the first 90 days immediately following
each such Filing Date, such Additional Interest rate increasing by an
additional .50% per annum at the beginning of each subsequent 90-day period;
or
(b) if (1) neither the Exchange Offer Registration Statement nor a
Shelf Registration Statement is declared effective by the Commission on or
prior to 180 days after the Issue Date or (2) notwithstanding that the
Company has consummated or will consummate an Exchange Offer, the Company is
required to file a Shelf Registration Statement and such Shelf Registration
Statement is not declared effective by the Commission on or prior to the 75th
day following the date of such Shelf Registration Statement was filed, then,
commencing on the day after the date such registration statement is required
to be declared effective, Additional Interest shall accrue on the Accreted
Value of the Notes at a rate of .50% per annum for the first 90 days
immediately following such date, such Additional Interest rate increasing by
an additional .50% per annum at the beginning of each subsequent 90-period;
or
(c) if (1) the Company has not exchanged Exchange Notes for all
Notes validly tendered in accordance with the terms of the Exchange Offer on
or prior to the 30th day after the date on which the Exchange Offer
Registration Statement was declared effective or (2) if applicable, the Shelf
Registration Statement has been declared effective and such Shelf
Registration Statement ceases to be effective at any time prior to the second
anniversary of its effective date (other than after such time as all Notes
have been disposed of thereunder), Additional Interest shall accrue on the
Accreted Value of the Notes at a rate of .50% per annum for the first 90 days
commencing on (x) the
<PAGE>
31st day after such effective date, in the case of (1) above, or (y) the day
such Shelf Registration Statement ceases to be effective in the case of (2)
above, such Additional Interest rate increasing by an additional .50% per
annum at the beginning of each subsequent 90-day period; provided, however,
that the Additional Interest rate on the Notes may not exceed in the
aggregate 2.00% per annum, and provided, further, that (1) upon the filing of
the Exchange Offer Registration Statement or a Shelf Registration Statement
(in the case of clause (a) above), (2) upon the effectiveness of the Exchange
Offer Registration Statement or a Shelf Registration (in the case of clause
(b) above), or (3) upon the exchange of Exchange Notes for all Notes tendered
(in the case of clause (c) (1) above), or upon the effectiveness of the Shelf
Registration Statement which had ceased to remain effective (in the case of
clause (c)(2) above), Additional Interest on the Notes as a result of such
clause (or the relevant subclause thereof), as the case may be, shall cease
to accrue.
Any amounts of Additional Interest due pursuant to clause (a), (b) or
(c) above will be payable in cash on May 1 and November 1 of each year to the
holders of record on the preceding April 15 or October 15, respectively. The
amount of Additional Interest will be determined by multiplying the
applicable Additional Interest rate by the Accreted Value of the Notes,
multiplied by a fraction, the numerator of which is the number of days such
Additional Interest rate was applicable during such period (determined on the
basis of a 360-day year comprised of twelve 30-day months, and, in the case
of a partial month, the actual number of days elapsed), and the denominator
of which is 360. The Company shall notify the Trustee within a reasonable
time of the incurrence of any Additional Interest due pursuant to clauses
(a), (b) or (c) above.
<PAGE>
3. Redemption.
(a) Optional Redemption. The Notes will not be subject to
redemption prior to November 1, 2001 and will be redeemable on or after such
date, at the option of the Company, as a whole or in part, in principal
amounts at maturity of $1,000 or any integral multiple of $1,000, upon not
less than 30 nor more than 60 days' prior notice at the following Redemption
Prices (expressed as percentages of the principal amount) if redeemed during
the 12-month period beginning November 1 of the years indicated below.
Year Redemption Price
2001...................105.25%
2002...................103.50%
2003 and thereafter....101.75%
plus accrued and unpaid interest, if any, to the Redemption Date, all as
provided in the Indenture.
(b) Interest Payments. In the case of any redemption of Notes,
interest installments whose Stated Maturity is on or prior to the Redemption
Date will be payable to the Holders of such Notes, or one or more Predecessor
Notes, of record at the close of business on the Record Date referred to on
the face hereof. Notes (or portions thereof) for whose redemption and
payment provision is made in accordance with the Indenture shall cease to
bear interest from and after the Redemption Date.
(c) Partial Redemption. In the event of redemption of this Note in
part only, a new Note or Notes for the unredeemed portion hereof shall be
issued in the name of the Holder hereof upon the cancellation hereof.
<PAGE>
4. Offers to Purchase. Sections 4.12 and 4.13 of the Indenture provide
that upon the occurrence of a Change of Control and following certain Asset
Sales, and subject to further limitations contained therein, the Company
shall make an offer to purchase certain amounts of the Notes in accordance
with the procedures set forth in the Indenture.
5. Public Offerings. In the event that on or prior to November 1, 2000,
the Company consummates one or more public offerings of its Common Stock, the
Company may, at its option, redeem from the net proceeds of such public
offerings of the Company's Common Stock no later than 60 days following the
consummation of such offerings up to 33% of the aggregate principal amount at
maturity of the Notes originally issued at a redemption price equal to
110.50% of the Accreted Value on the date of redemption of the Notes so
redeemed plus accrued and unpaid interest, if any; provided, however, that
immediately after giving effect to any such redemption, not less than 66.0%
of the aggregate principal amount at maturity of the Notes originally issued
remains outstanding.
6. Defaults and Remedies. If an Event of Default shall occur and be
continuing, the principal of all of the outstanding Notes, plus all accrued
and unpaid interest, if any, to and including the date the Notes are paid,
may be declared due and payable in the manner and with the effect provided in
the Indenture.
7. Defeasance. The Indenture contains provisions (which provisions apply
to this Note) for defeasance at any time of (a) the entire indebtedness of
the Company under this Note and (b) certain restrictive covenants and related
Defaults and Events of Default, in each case upon compliance by the Company
with certain conditions set forth therein.
8. Amendments and Waivers. The Indenture permits, with certain
exceptions as therein provided, the amendment thereof and the modification of
the rights and obligations of the Company and the rights of the Holders under
the
<PAGE>
Indenture at any time by the Company and the Trustee with the consent of the
Holders of not less than a majority in aggregate principal amount at
maturity of the Notes at the time outstanding. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate
principal amount at maturity of the Notes at the time outstanding, on behalf
of the Holders of all the Notes, to waive compliance by the Company with
certain provisions of the Indenture and certain past Defaults under the
Indenture and this Note and their consequences. Any such consent or waiver
by or on behalf of the Holder of this Note shall be conclusive and binding
upon such Holder and upon all future Holders of this Note and of any Note
issued upon the registration of transfer hereof or in exchange here for or in
lieu hereof whether or not notation of such consent or waiver is made upon
this Note.
9. Denominations, Transfer and Exchange. The Notes are issuable only in
registered form without coupons in principal denominations of $1,000 and any
integral multiple thereof. As provided in the Indenture and subject to
certain limitations therein set forth, the Notes are exchangeable for a like
aggregate principal amount of Notes of a different authorized denomination,
as requested by the Holder surrendering the same.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Note is registrable on the security register
of the Company, upon surrender of this Note for registration of transfer at
the office or agency of the Company maintained for such purpose in the
Borough of Manhattan in The City of New York or at such other office or
agency of the Company as may be maintained for such purpose, duly endorsed
by, or accompanied by a written instrument of transfer in form satisfactory
to the Company and the Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Notes, of
authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
<PAGE>
No service charge shall be made for any registration of transfer or
exchange or redemption of Notes, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
connection therewith.
10. Persons Deemed Owners. Prior to and at the time of due presentment
of this Note for registration of transfer, the Company, the Trustee and any
agent of the Company or the Trustee may treat the person in whose name this
Note is registered as the owner hereof for all purposes, whether or not this
Note shall be overdue, and neither the Company, the Trustee nor any agent
shall be affected by notice to the contrary.
11. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York, without regard to
conflicts of law principles.
<PAGE>
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER
RESTRICTED SECURITIES
This certificate relates to $ principal amount at maturity of
Notes held in (check applicable space) book-entry or definitive
form by the undersigned.
The undersigned (check one box below):
/___/ has requested the Trustee by written order to deliver in exchange for
its beneficial interest in the Global Note held by the Depository a Note or
Notes in definitive, registered form of authorized denominations and an
aggregate principal amount at maturity equal to its beneficial interest in
such Global Note (or the portion thereof indicated above);
/___/ has requested the Trustee by written order to exchange or register the
transfer of a Note or Notes. In connection with any transfer of any of the
Notes evidenced by this certificate occurring prior to the expiration of the
period referred to in Rule 144(k) under the Securities Act after the later of
the date of original issuance of such Notes and the last date, if any, on
which such Notes were owned by the Company or any Affiliate of the Company,
the undersigned confirms that such Notes are being transferred in accordance
with its terms:
CHECK ONE BOX BELOW:
(1) to the Company; or
(2) pursuant to an effective registration statement under the Securities Act
of 1933; or
(3) inside the United States to a "qualified institutional buyer" (as defined
in Rule 144A under the Securities Act of 1933) that purchases for its own
account or for the account of a qualified institutional buyer to whom
notice is given that such transfer is being made in reliance on Rule
144A,
in each case pursuant to and in compliance with Rule 144A under the
Securities Act of 1933; or
(4) outside the United States in an offshore transaction within the meaning
of
Regulation S under the Securities Act in compliance with Rule 904 under
the Securities Act of 1933; or
(5) pursuant to another available exemption from registration such as the
exemption provided by Rule 144 under the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register
any of the Notes evidenced by this certificate in the name of any person
other than the registered holder thereof; provided, however, that if box
(4) or (5) is checked, the Trustee may require, prior to registering any
such transfer of the Notes, such legal opinions, certifications and other
information as the Company has reasonably requested to confirm that such
transfer is being made pursuant to an exemption from, or in a transaction
not subject to, the registration requirements of the Securities Act of
1933, such as the exemption provided by Rule 144 under such Act.
----------------------------
Signature
Signature Guarantee:
Signature must be guaranteed
- -------------------------------
Signature
<PAGE>
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Note for
its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
of 1933, and is aware that the sale to it is being made in reliance on Rule
144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in
order to claim the exemption from registration provided by Rule 144A.
Dated:
NOTICE: To be executed by an executive officer
<PAGE>
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Note have been made:
Date of Amount of Decrease Amount of Increase Maturity of Signature of
Exchange in Principal in Principal this Global Authorized
Amount at Amount at Note following Officer of
Maturity of Maturity of Such Decrease Trustee or
This Global This Global or Increase Custodian
Note Note
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to Section 4.12
or 4.13
of the Indenture, check the appropriate box:
Section 4.12 [ ]
Section 4.13 [ ]
If you wish to have a portion of this Note purchased by the Company pursuant to
Section
4.12 or 4.13 of the Indenture, state the amount:
$
Date: _____________ Your signature:
--------------------------
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
<PAGE>
ASSIGNMENT FORM
If you the holder want to assign this Note, fill in the form below and have
your signature guaranteed:
I or we assign and transfer this Note to
--------------------------------
(Insert assignee's social security
or tax ID number)
- ----------------------------------------------------------------------------
(Print or type assignee's name, address and zip code) and irrevocably appoint
- ------------------------------------ agent to transfer this Note on the books of
of the Company. The agent may substitute another to act for him.
Date: _____________ Your signature:
--------------------------
(Sign exactly as your name
appears on the other side
of this Note)
Signature Guarantee:
<PAGE>
[FORM OF FACE OF EXCHANGE NOTE]
[Global Notes Legend]
Unless and until it is exchanged in whole or in part for securities in
definitive form, this Note may not be TRANSFERREd except as
a whole by the depository to a nominee of the depository or by a nominee of
the depository to the depository or any such nominee to a successor
depository or a nominee of such successor depository. unless this
certificate is presented by an authorized representative of the depository
trust company ("DTC") to the company or its agent for registration of
transfer, exchange or payment, and any certificate issued is registered in
the name of cede & co. or such other name as REQUESTED BY an authorized
representative of dtc (and any payment is made to cede & co. or such other
entity as is requested by an authorized representative of dtc), any transfer,
pledge or other use hereof for value or otherwise or to any person is
wrongful inasmuch as the registered owner hereof, cede & co., has an interest
herein.
TELEGROUP, INC.
10 1/2% SENIOR DISCOUNT NOTE DUE 2004
No. ______ $__________
CUSIP:
The following information is supplied for purposes of Sections 1273 and 1275 of
the Internal Revenue Code:
Issue Date: October 23, 1997
Yield to maturity for period from Issue Date to November 1, 2004: 10.5%,
compounded semi-annually on May 1 and November 1, and
commencing November 1, 2000 (computed without giving effect to the additional
payments of interest in the event the issuer fails to commence the exchange
offer or cause the registration statement to be declared effective, each as
described on the reverse hereof)
Original issue discount under Section 1273 of the Internal Revenue Code (for
each $1,000 principal amount): ___________
Issue Price (for each $1,000 principal amount): ___________
<PAGE>
TELEGROUP, INC., a corporation incorporated under the laws of the State
of Iowa (herein called the "Company", which term
includes any successor corporation under the Indenture hereinafter referred
to), for value received, hereby promises to pay to _______________ or
registered assigns, the principal sum of _______________ Dollars on November
1, 2004, at the office or agency of the Company referred to below, and to pay
interest thereon, accruing from May 1, 2000, on May 1 and November 1, in each
year, commencing on November 1, 2000. After May 1, 2000, interest on the
Notes will accrue from the most recent Interest Payment Date to which
interest has been paid or duly provided for or, if no interest has been paid,
from May 1, 2000, at the rate of 10.5% per annum, until the principal hereof
is paid or duly provided for. Interest shall be computed on the basis of a
360-day year of twelve 30-day months.
The interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in the Indenture
referred to on the reverse hereof, be paid to the person in whose name this
Note (or one or more Predecessor Notes) is registered at the close of
business on the Regular Record Date for such interest, which shall be April
15 or October 15 (whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date (each a "Regular Record Date"). Any
such interest not so punctually paid, or duly provided for, and interest on
such defaulted interest at the rate borne by the Notes, to the extent lawful,
shall forthwith cease to be payable to the Holder on such Regular Record
Date, and may be paid to the person in whose name this Note (or one or more
Predecessor Notes) 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 of which shall be given to Holders of Notes not less than 10 days
prior to such special record date, or may be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities
exchange on which the Notes may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in such Indenture.
<PAGE>
Payment of the principal of, premium, if any, and interest on this Note
will be made at the office or agency of the Company
maintained for that purpose in the Borough of Manhattan in The City of New
York, or at such other office or agency of the Company as may be maintained
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 payment of interest may be made at the option
of the Company by check mailed to the address of the person entitled thereto
as such address shall appear on the security register maintained by the
Registrar.
Reference is hereby made to the further provisions of this Note 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 duly executed by
the Trustee referred to on the reverse hereof by
manual signature, and a seal has been affixed hereon, this Note shall not be
entitled to any benefit under the Indenture, or be valid or obligatory for
any purpose.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated: October 23, 1997 TELEGROUP, INC.
By:
Name:
Title:
By:
Name:
Title:
Attest:
____________________
Authorized Signature
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred to in the within-mentioned Indenture.
STATE STREET BANK AND TRUST COMPANY, as Trustee
By:
------------------------------------
Authorized Officer
<PAGE>
[Form of Reverse Side of Exchange Note]
1. Indenture. This Note is one of a duly authorized issue of Notes of the
Company designated as its 10.5% Senior Discount Notes
due 2004, limited (except as otherwise provided in the Indenture referred to
below) in aggregate principal amount at maturity to $150,000,000, which may
be issued under an indenture (herein called the "Indenture") dated as of
October 23, 1997, among Telegroup, Inc., an Iowa corporation, as issuer (the
"Company"), and State Street Bank and Trust Company, a Massachusetts trust
company, as trustee (herein called the "Trustee," which term includes any
successor Trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties, obligations and immunities
thereunder of the Company, the Trustee and the Holders of the Notes, and of
the terms upon which the Notes are, and are to be, authenticated and
delivered.
All capitalized terms used in this Note which are defined in the Indenture and
not otherwise defined herein shall have the meanings
assigned to them in the Indenture.
No reference herein to the Indenture and no provisions of this Note or of
the Indenture shall alter or impair the obligation
of the Company, which is absolute and unconditional, to pay the principal of,
premium, if any, and interest on this Note at the times, place and rate, and
in the coin or currency, herein prescribed.
<PAGE>
2. Redemption.
(a) Optional Redemption. The Notes will not be subject to redemption
prior to November 1, 2001 and will be redeemable on
or after such date, at the option of the Company, as a whole or in part, in
principal amounts at maturity of $1,000 or any integral multiple of $1,000,
upon not less than 30 nor more than 60 days' prior notice at the following
Redemption Prices (expressed as percentages of the principal amount) if
redeemed during the 12-month period beginning November 1 of the years
indicated below.
Redemption Year Price
2001 105.25%
2002 103.50%
2003 and thereafter 101.75%
plus accrued and unpaid interest, if any, to the Redemption Date, all as
provided in the Indenture.
(b) Interest Payments. In the case of any redemption of Notes,
interest installments whose Stated Maturity is on or prior
to the Redemption Date will be payable to the Holders of such Notes, or one
or more Predecessor Notes, of record at the close of business on the Record
Date referred to on the face hereof. Notes (or portions thereof) for whose
redemption and payment provision is made in accordance with the Indenture
shall cease to bear interest from and after the Redemption Date.
(c) Partial Redemption. In the event of redemption of this Note
in part only, a new Note or Notes for the unredeemed portion hereof shall be
issued in the name of the Holder hereof upon the cancellation hereof.
3. Offers to Purchase. Sections 4.12 and 4.13 of the Indenture provide
that upon the occurrence of a Change of Control and
following certain Asset Sales, and subject to further limitations contained
therein, the Company shall make
<PAGE>
an offer to purchase certain amounts of the Notes in accordance with the
procedures set forth in the Indenture.
4. Public Offerings. In the event that on or prior to November 1, 2000,
the Company consummates one or more public offerings of its Common Stock, the
Company may, at its option, redeem from the net proceeds of such public
offerings of the Company's Common Stock no later than 60 days following the
consummation of such offerings up to 33% of the aggregate principal amount at
maturity of the Notes originally issued at a redemption price equal to
110.50% of the Accreted Value on the date of redemption of the Notes so
redeemed plus accrued and unpaid interest, if any; provided, however, that
immediately after giving effect to any such redemption, not less than 66.0%
of the aggregate principal amount at maturity of the Notes originally issued
remains outstanding.
5. Defaults and Remedies. If an Event of Default shall occur and be
continuing, the principal of all of the outstanding Notes, plus all accrued
and unpaid interest, if any, to and including the date the Notes are paid, may
be declared due and payable in the manner and with the effect provided in the
Indenture.
6. Defeasance. The Indenture contains provisions (which provisions apply
to this Note) for defeasance at any time of (a) the entire indebtedness of the
Company under this Note and (b) certain restrictive covenants and related
Defaults and Events of Default, in each case upon compliance by the Company
with certain conditions set forth therein.
7. Amendments and Waivers. The Indenture permits, with certain exceptions
as therein provided, the amendment thereof and the modification of the rights
and obligations of the Company and the rights of the Holders under the
Indenture at any time by the Company and the Trustee with the consent of the
Holders of not less than a majority in aggregate principal amount of the
Notes at the time outstanding. The Indenture also contains provisions
<PAGE>
permitting the Holders of specified percentages in aggregate principal amount
of the Notes at the time outstanding, on behalf of
the Holders of all the Notes, to waive compliance by the Company with certain
provisions of the Indenture and certain past Defaults under the Indenture and
this Note and their consequences. Any such consent or waiver by or on behalf
of the Holder of this Note shall be conclusive and binding upon such Holder
and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange here for or in lieu hereof
whether or not notation of such consent or waiver is made upon this Note.
8. Denominations, Transfer and Exchange. The Notes are issuable only in
registered form without coupons in principal denominations of $1,000 and any
integral multiple thereof. As provided in the Indenture and subject to
certain limitations therein set forth, the Notes are exchangeable for a like
aggregate principal amount of Notes of a different authorized denomination,
as requested by the Holder surrendering the same.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Note is registrable on
the security register of the Company, upon surrender of this Note for
registration of transfer at the office or agency of the Company maintained
for such purpose in the Borough of Manhattan in The City of New York or at
such other office or agency of the Company as may be maintained for such
purpose, duly endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to the Company and the Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one
or more new Notes, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.
No service charge shall be made for any registration of transfer or
exchange or redemption of Notes, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
<PAGE>
9. Persons Deemed Owners. Prior to and at the time of due presentment
of this Note for registration of transfer, the Company, the Trustee and any
agent of the Company or the Trustee may treat the person in whose name this
Note is registered as the owner hereof for all purposes, whether or not this
Note shall be overdue, and neither the Company, the Trustee nor any agent shall
be affected by notice to the contrary.
10. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York, without regard to conflicts
of law principles.
<PAGE>
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Note have been made:
Date of Amount of Decrease Amount of Increase Maturity of Signature of
Exchange in Principal in Principal this Global Authorized
Amount at Amount at Note following Officer of
Maturity of Maturity of Such Decrease Trustee or
This Global This Global or Increase Custodian
Note Note
<PAGE>
[FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS TO
NON-QIB INSTITUTIONAL ACCREDITED INVESTORS]
Transferee Letter of Representation
Telegroup, Inc.
c/o State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Location: Corporate Trust Department
Dear Ladies and Gentlemen:
This certificate is delivered to request a transfer of $
principal amount at maturity of the 10.5% Senior
Discount Notes due 2004 (the "Notes") of Telegroup, Inc. (the "Company").
Upon transfer, the Notes would be registered in the name of the new beneficial
owner as follows:
Name:
Address:
Taxpayer ID Number:
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act of
1933, as amended (the "Securities Act")) purchasing for our own account or
for the account of such an institutional "accredited investor" and we are
acquiring the Notes not with a view to, or for offer or sale in connection
with, any distribution in violation of the Securities Act. We have such
knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risk of our investment in the Notes and invest
in or purchase securities
<PAGE>
similar to the Notes in the normal course of our business. We and any
accounts for which we are acting are each able to bear the
economic risk of our or its investment.
2. We understand that the Notes have not been registered under the
Securities Act and, unless so registered, may not be sold
except as permitted in the following sentence. We agree on our own behalf
and on behalf of any investor account for which we are purchasing Notes to
offer, sell or otherwise transfer such Notes prior to the date which is two
years after the later of the date of original issue and the last date on
which the Company or any affiliate of the Company was the owner of such Notes
(or any predecessor thereto) (the "Resale Restriction Termination Date") only
(a) to the Company, (b) pursuant to a registration statement which has been
declared effective under the Securities Act, (c) in a transaction complying
with the requirements of Rule 144A under the Securities Act, to a person we
reasonably believe is a qualified institutional buyer under Rule 144A (a
"QIB") that purchases for its own account or for the account of a QIB and to
whom notice is given that the transfer is being made in reliance on Rule
144A, (d) pursuant to offers and sales that occur outside the United States
within the meaning of Regulation S under the Securities Act or (e) to an
institutional "accredited investor" within the meaning of Rule 501(a)(1),
(2), (3) or (7) under the Securities Act that is purchasing for its own
account or for the account of such an institutional "accredited investor", or
(f) pursuant to any other available exemption from the registration
requirements of the Securities Act, subject in each of the foregoing cases to
any requirement of law that the disposition of our property or the property
of such investor account or accounts be at all times within our or their
control and in compliance with any applicable state securities laws. The
foregoing restrictions on resale will not apply subsequent to the Resale
Restriction Termination Date. If any resale or other transfer of the Notes
is proposed to be made pursuant to clause (e) above prior to the Resale
Restriction Termination Date, the transferor shall deliver a letter from the
transferee substantially in the form of this letter to the Company and the
Trustee, which shall provide, among other things, that the transferee is an
institutional "accredited investor" within the meaning of
<PAGE>
Rule 501(a)(1), (2), (3) or (7) under the Securities Act and that it is
acquiring such Notes for investment purposes and not for
distribution in violation of the Securities Act. Each purchaser acknowledges
that the Company and the Trustee reserve the right prior to any offer, sale
or other transfer prior to the Resale Termination Date of the Notes pursuant
to clause (d), (e) or (f) above to require the delivery of an opinion of
counsel, certifications and/or other information satisfactory to the Company
and the Trustee.
TRANSFEREE:
BY
-----------------------
<PAGE>
[FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS
PURSUANT TO RULE 144A]
Telegroup, Inc.
c/o State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Location:Corporate Trust Department
[date]
Re: Telegroup, Inc. (the "Company") 10.5% Senior Discount Notes due
2004 (the "Notes")
Ladies and Gentlemen:
In connection with our proposed sale of $ aggregate principal
amount at maturity of the Notes, we hereby certify that
such transfer is being effected pursuant to and in accordance with Rule 144A
under the United States Securities Act of 1933, as amended (the "Securities
Act"), and, accordingly, we hereby further certify that the Notes are being
transferred to a person that we reasonably believe is purchasing the Notes
for its own account, or for one or more accounts with respect to which such
person exercises sole investment discretion, and such person and each such
account is a "qualified institutional buyer" within the meaning of Rule 144A
in a transaction meeting the requirements of Rule 144A and such Notes are
being transferred in compliance with any applicable blue sky securities laws
of any state of the United States.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceedings or
official inquiry with respect to the matters covered hereby.
Very truly yours,
[Name of Transferor]
By:
-------------------------
Authorized Signature
<PAGE>
[Form of Certificate to Be Delivered in Connection with
Transfers Pursuant to Regulation S]
[date]
Telegroup, Inc.
c/o State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Location: Corporate Trust Department
Re: Telegroup, Inc. (the "Company") 10.5% Senior Discount Notes due 2004
(the "Notes")
Ladies and Gentlemen:
In connection with our proposed sale of $ aggregate principal
amount at maturity of the Notes, we confirm that such
sale has been effected pursuant to and in accordance with Regulation S under
the United States Securities Act of 1933, as amended (the "Securities Act"),
and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) either (a) at the time the buy order was originated, the
transferee was outside the United States or we and any person
acting on our behalf reasonably believed that the transferee was outside the
United States or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor any
person acting on our behalf knows that the transaction has been prearranged
with a buyer in the United States;
(3) no directed selling efforts have been made in the United States in
contravention of the requirements of Rule Rule 904(b) of Regulation S, and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
In addition, if the sale is made during a restricted period and the provisions
of Rule 904(c)(1) of Regulation S are applicable
thereto, we confirm that such sale has been made in accordance with the
applicable provisions of Rule 904(c)(1).
You and the Company are entitled to rely upon this letter and are
rrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceedings or
official inquiry with respect to the matters covered hereby. Terms used in
this certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
---------------------------
Authorized Signature
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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