AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 1, 1997.
REGISTRATION STATEMENT NO. 333-25065
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- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
PRE-EFFECTIVE AMENDMENT NO. 1 TO FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
TELEGROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
IOWA 4813 42-1344121
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
2098 NUTMEG AVENUE
FAIRFIELD, IOWA 52556
(515) 472-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
DOUGLAS A. NEISH
CHIEF FINANCIAL OFFICER
TELEGROUP, INC.
2098 NUTMEG AVENUE
FAIRFIELD, IOWA 52556
(515) 472-5000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
JOHN J. KLUSARITZ, ESQ. DENNIS J. FRIEDMAN, ESQ.
MORRIS F. DEFEO, JR., ESQ. CHADBOURNE & PARKE LLP
SWIDLER & BERLIN, CHARTERED 30 ROCKEFELLER PLAZA
3000 K STREET, N.W., SUITE 300 NEW YORK, NY 10112
WASHINGTON, D.C. 20007 (212) 408-5100
(202) 424-7500
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The table below sets forth the expenses to be incurred by the Company in
connection with the issuance and distribution of the shares registered for
offer and sale hereby, other than underwriting discounts and commissions. All
amounts shown represent estimates except the Securities Act registration fee
and the NASD filing fee.
<TABLE>
<S> <C>
Registration fee under the Securities Act of 1933............... $43,561
NASD filing fee................................................. 14,875
Nasdaq National Market fee....................................... *
Printing expenses................................................ *
Registrar and Transfer Agent's fees and expenses................. *
Accountants' fees and expenses................................... *
Legal fees and expenses (not including Blue Sky)................. *
Blue Sky fees and expenses....................................... *
Miscellaneous.................................................... *
-------
Total........................................................ $ *
=======
</TABLE>
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* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Iowa Business Corporation Act confers broad powers upon corporations
incorporated in Iowa with respect to indemnification of any person against
liabilities incurred by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another Corporation or other business entity. These provisions are not
exclusive of any other rights to which those seeking indemnification may be
entitled under any bylaw, agreement or otherwise.
The Company's Articles will contain a provision that eliminates the personal
liability of the Company's directors to the Company or its shareholders for
monetary damages for breach of fiduciary duty as a director, except (i) for
liability for any breach of the director's duty of loyalty to the Corporation
or its shareholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or knowing violation of the law, (iii) for any
transaction from which the director derived an improper personal benefit, or
(iv) for unlawful distributions in violation of Section 490.833 of the Iowa
Business Corporation Act. Any repeal or amendment of this provision by the
shareholders of the Corporation will not adversely affect any right or
protection of a director existing at the time of such repeal or amendment.
The Company's Bylaws will contain a provision entitling officers and
directors to be indemnified and held harmless by the Company against expenses,
liabilities and costs (including attorneys' fees) actually and reasonably
incurred by such person, to the fullest extent permitted by the Iowa Business
Corporation Act.
The Company has applied for a director and officer liability policy,
under which each director and certain officers of the Company would be insured
against certain liabilities. In addition, prior to the effectiveness of the
Offering, the Company will enter into indemnity agreements with each of its
officers and directors.
Prior to completion of the Offering, the Company intends to enter into
indemnification agreements with certain of its executive officers and
directors.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following paragraphs of this Item 15 describe all offers and sales of
securities by the Company within the last three years which were not
registered under the Securities Act of 1933, other than securities issued in
connection with stock reclassifications, stock dividends or stock splits:
II-1
<PAGE>
<PAGE>
On April 23, 1996, the Company issued 94,707 shares of Class B Common
Stock to Michael Lackman for the aggregate consideration of $20,946.53 paid
by Mr. Lackman with a promissory note in the principal amount of
$20,946.53.
On April 26, 1996, the Company issued 142,061 shares of Class B Common
Stock to Ronald Stakland for the aggregate consideration of $31,419.80 paid
by Mr. Stakland with a promissory note in the principal amount of
$31,419.80.
On August 21, 1996, in connection with the Plan and Agreement of
Reorganization between the Company, George Apple and Telegroup South
Europe, Inc. ("TGSE"), the Company issued 47,832 shares of Class A Common
Stock and made a cash payment to George Apple in exchange for substantially
all of the assets of TGSE.
Amended and Restated 1996 Telegroup, Inc. Stock Option Plan. See
"Management--Amended and Restated 1996 Telegroup, Inc. Stock Option Plan"
incorporated by reference herein from the Prospectus included in Part I of
this Registration Statement.
November 27, 1996 Issuance of Senior Subordinated Notes and Warrants. On
November 27, 1996, the Company completed a $20 million private placement of
its 12.0% Senior Subordinated Notes, together with warrants to purchase 4.0%
of the Company's fully-diluted Common Stock. See "Certain Transactions--
Subordinated Note Placement" and "Description of Capital Stock--Warrants."
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 issued in such transactions. All recipients had
adequate access, through their relationships with the Company, to information
about the Company.
ITEM 16(A). EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*1.1 Form of Underwriting Agreement
*2.1 Plan and Agreement of Reorganization Between the
Company, George Apple and Telegroup South Europe,
Inc. Dated September 6, 1996
3.1 Restated Articles of Incorporation of Telegroup, Inc.
3.2 Form of Second Restated Articles of Incorporation of
Telegroup, Inc.
3.3 Bylaws of Telegroup, Inc.
3.4 Form of Amended and Restated Bylaws of Telegroup, Inc.
*4.1 Form of Common Stock Certificate of Telegroup, Inc.
4.2 Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4
4.3 Note and Warrant Purchase Agreement dated as of
November 27, 1996
4.4 Form of Warrant to Purchase Class A Common Stock of
Telegroup, Inc.
4.5 Indenture dated as of November 27, 1996 between
Telegroup, Inc. and The Chase Manhattan Bank
*5.1 Opinion of Swidler & Berlin, Chartered
10.1 Loan Agreement Dated as of March 28, 1997 by and
between the Company and American National Bank and
Trust Company of Chicago
</TABLE>
II-2
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.2 Amended and Restated 1996 Telegroup, Inc. Stock Option
Plan
10.3 Form of Employment Agreement between the Company and
Fred Gratzon
10.4 Form of Employment Agreement between the Company and
Clifford Rees
10.5 Form of Indemnification Agreement
10.6 Registration Rights Agreement among Telegroup, Inc.,
Greenwich Street Capital Partners, L.P., Greenwich
Street Capital Offshore Fund, Ltd., TRV Employees
Fund, L.P., The Travelers Insurance Company and The
Travelers Life and Annuity Company Dated as of
November 27, 1996
10.7 Form of Registration Rights Agreement between the
Company and certain shareholders of the Company
*11.1 Statement Regarding Computation of Per Share Earnings
*21.1 Subsidiaries of Telegroup, Inc.
**23.2 Consent of KPMG Peat Marwick, LLP
*23.3 Consent of Swidler & Berlin, Chartered (to be included
in Exhibit 5.1 to this Registration Statement)
**24.1 Power of Attorney
**27.1 Financial Data Schedule
</TABLE>
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* To be filed by amendment.
** Previously filed.
ITEM 16(B). FINANCIAL STATEMENT SCHEDULES.
II--Valuation and Qualifying Accounts (previously filed)
All other schedules are omitted either because they are not applicable or
are not material, or the information presented therein is contained in the
Financial Statements or notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FAIRFIELD, STATE OF
IOWA, ON MAY 1, 1997.
Telegroup, Inc.
*
By: ____________________________
CLIFFORD REES PRESIDENT AND
CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON MAY 1, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* Chairman of the Board and Director
- -------------------------------------
FRED GRATZON
* Chief Executive Officer, President
- ------------------------------------- and Director (Principal Executive
CLIFFORD REES Officer)
* Vice President--Finance, Chief
- ------------------------------------- Financial Officer, Treasurer and
DOUGLAS A. NEISH Director (Principal Financial
Officer)
* Director of Finance and Controller
- ------------------------------------- (Principal Accounting Officer)
GARY KORF
Senior Vice President, International
- ------------------------------------- Services and Director
RONALD B. STAKLAND
</TABLE>
* Charles Johanson, by signing his name hereto, signs this document on behalf
of each of the persons so indicated above pursuant to powers of attorney
duly executed by such person and filed with the Securities and Exchange
Commission.
/s/ Charles Johanson Attorney-in-Fact
- ---------------------------------
CHARLES JOHANSON
II-4
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
------- ----------- -------------
<C> <S> <C>
*1.1 Form of Underwriting Agreement
*2.1 Plan and Agreement of Reorganization Between the
Company, George Apple and Telegroup South Europe,
Inc. Dated September 6, 1996
3.1 Restated Articles of Incorporation of Telegroup, Inc.
3.2 Form of Second Restated Articles of Incorporation of
Telegroup, Inc.
3.3 Bylaws of Telegroup, Inc.
3.4 Form of Amended and Restated Bylaws of Telegroup, Inc.
*4.1 Form of Common Stock Certificate of Telegroup, Inc.
4.2 Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4
4.3 Note and Warrant Purchase Agreement dated as of
November 27, 1996
4.4 Form of Warrant to Purchase Class A Common Stock of
Telegroup, Inc.
4.5 Indenture dated as of November 27, 1996 between
Telegroup, Inc. and The Chase Manhattan Bank
*5.1 Opinion of Swidler & Berlin, Chartered
10.1 Loan Agreement Dated as of March 28, 1997 by and
between the Company and American National Bank and
Trust Company of Chicago
10.2 Amended and Restated 1996 Telegroup, Inc. Stock Option
Plan
10.3 Form of Employment Agreement between the Company and
Fred Gratzon
10.4 Form of Employment Agreement between the Company and
Clifford Rees
10.5 Form of Indemnification Agreement
10.6 Registration Rights Agreement among Telegroup, Inc.,
Greenwich Street Capital Partners, L.P., Greenwich
Street Capital Offshore Fund, Ltd., TRV Employees
Fund, L.P., The Travelers Insurance Company and The
Travelers Life and Annuity Company Dated as of
November 27, 1996
10.7 Form of Registration Rights Agreement between the
Company and certain shareholders of the Company
*11.1 Statement Regarding Computation of Per Share Earnings
*21.1 Subsidiaries of Telegroup, Inc.
**23.2 Consent of KPMG Peat Marwick, LLP
*23.3 Consent of Swidler & Berlin, Chartered (to be included
in Exhibit 5.1 to this Registration Statement)
**24.1 Power of Attorney
**27.1 Financial Data Schedule
</TABLE>
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* To be filed by amendment.
** Previously filed.
Exhibit 3.1
RESTATED ARTICLES OF INCORPORATION
OF
TELEGROUP, INC.
TO THE SECRETARY OF STATE OF THE STATE OF IOWA:
Pursuant to Section 490.1007 of the Iowa Business Corporation Act, the
undersigned corporation adopts the following Restated Articles of
Incorporation:
1. The name of the corporation is Telegroup, Inc.
2. The purpose which the corporation is authorized to pursue is, or
includes, the transaction of any or all lawful business for which the
Corporation may be incorporated under the Iowa Business Corporation Act.
3. The aggregate number of shares which the Corporation has authority
to issue is 15,000,000 shares of common stock of two classes. Of such
15,000,000 shares, 10,000,000 shares, to be known as Class A common shares,
shall have voting rights. The remaining 5,000,000 shares, to be known as
Class B common shares, shall have no voting rights. All of such 15,000,000
shares shall have no par value. Other than the right to vote, Class A common
shares and Class B common shares shall be entitled to the same rights and
preferences.
4. The holders of shares of common stock are entitled to dividends
when and as declared by the Board of Directors from funds legally available
therefor, and upon liquidation are entitled to share pro rata in any
distribution to shareholders. The holders of shares of common stock do not
have pre-emptive rights. Shares of common stock are not redeemable, do not
have any conversation rights, and are not liable, for assessments or further
calls. The Class A common stock does not have cumulative voting rights.
5. The corporation is authorized to include in its Bylaws provisions
restricting the transfer of shares.
6. Unless and until changed in accordance with Iowa law, the address
of the Corporation's registered office is 505 North Third Street, Fairfield,
Iowa 52556, and the name of the Corporation's registered agent at such address
is Ron Stakland.
<PAGE>
<PAGE>
7. No director of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director; however, this provision shall neither eliminate nor limit
the liability of a director (a) for a breach of the director's duty of loyalty
to the Corporation or its stockholders, (b) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of the
law, (c) for a transaction from which the director derives an improper
personal benefit, or (d) under Section 490.833 of the Iowa Business
Corporation Act.
8. These duly adopted Restated Articles of Incorporation supersede
the original Articles of Incorporation and all amendments to them.
9. The Restated Articles of Incorporation amend the Articles of
Incorporation in a manner requiring shareholders approval. The Restated
Articles of Incorporation were approved by the shareholders. The designation,
number of outstanding shares, number of votes entitled to be cast by each
voting group entitled to vote separately on the Restated Articles of
Incorporation, and the specific issues of whether to increase the number of
authorized shares of Class A and Class B shares and the number of votes of
each voting group indisputably represented at the meeting is as follows:
VOTES ENTITLED
TO BE CAST ON VOTES
DESIGNATION OF SHARES RESTATED REPRESENTED AT
GROUP OUTSTANDING ARTICLES MEETING
Class A Common 216.00 216.00 216.00
Class B Common 8.9297 8.9297 6.6804
VOTES ENTITLED
TO BE CAST ON
INCREASING THE
NUMBER OF AUTH- VOTES
DESIGNATION OF SHARES ORIZED SHARES OF REPRESENTED AT
GROUP OUTSTANDING CLASS A MEETING
Class A Common 216.00 216.00 216.00
Class B Common 8.9297 0 0
VOTES ENTITLED
TO BE CAST ON
INCREASING THE
NUMBER OF AUTH- VOTES
DESIGNATION OF SHARES ORIZED SHARES OF REPRESENTED AT
GROUP OUTSTANDING CLASS B MEETING
Class A Common 216.00 0 0
Class B Common 8.9297 8.9297 6.6804
<PAGE>
<PAGE>
10. The total number of undisputed votes case for the Restated
Articles of Incorporation was:
VOTING GROUP VOTES FOR
Class A Common 216.00
Class B Common 6.6804
11. The total number of undisputed votes case for increasing the
number of authorized shares of Class A was:
VOTING GROUP VOTES FOR
Class A Common 216.00
12. The total number of undisputed votes case for increasing the
number of authorized shares of Class B was:
VOTING GROUP VOTES FOR
Class B Common 6.6804
The number of votes cast for the Restated Articles of Incorporation by
each voting group was sufficient for approval by that voting group.
TELEGROUP, INC.
By: _____________________________
Fred Gratzon
Chairman of the Board
Exhibit 3.2
FORM OF SECOND RESTATED ARTICLES OF INCORPORATION
OF
TELEGROUP, INC.
TO THE SECRETARY OF STATE OF IOWA:
Pursuant to Section 1007 of the Iowa Business Corporation Act, the
undersigned corporation adopts the following Second Restated Articles of
Incorporation:
1. The name of the corporation is Telegroup, Inc.
2. The Second Restated Articles of Incorporation of Telegroup, Inc.
attached hereto as Exhibit A amend the Restated Articles of Incorporation in a
manner requiring shareholder approval. The Second Restated Articles of
Incorporation were approved by the shareholders of Telegroup, Inc. The
designation, number of outstanding shares, number of votes entitled to be cast
by each voting group entitled to vote separately on the Second Restated
Articles of Incorporation, and the number of votes of each voting group
represented at the meeting are as follows:
Votes Entited
To Be Cast On Votes
Designation Shares Second Restated Represented
of Group Outstanding Articles At Meeting
- ------------- ------------ ---------------- --------------
Class A Common
Class B Commmon
3. The total number of votes cast for and against the Second Restated
Articles of Incorporation by each voting group entitled to vote separately on
the Second Restated Articles of Incorporation:
Voting Group Votes For Votes Against
------------ ---------- -------------
The number of votes cast for the Second Restated Articles of
Incorporation by each voting group was sufficient for approval by that voting
group.
<PAGE>
<PAGE>
4. The Second Restated Articles of Incorporation so adopted read in
full as set forth in Exhibit A attached hereto and is hereby incorporated by
reference.
5. The duly adopted Second Restated Articles of Incorporation
supersede the Restated Articles of Incorporation and all amendments thereto.
Date: ______________________
TELEGROUP, INC.
By:
-------------------------
Name:
-----------------------
Title:
------------------------
<PAGE>
<PAGE>
EXHIBIT A
SECOND RESTATED ARTICLES OF INCORPORATION
OF
TELEGROUP, INC.
I
The name of the corporation is TELEGROUP, INC. (the "Corporation"). The
address of the Corporation's registered office in the State of Iowa is 2222
Grand Avenue, Des Moines, Iowa 50312, the County of Polk. The name of the
Corporation's registered agent at such address is The Corporation System.
II
The Corporation is organized for the purpose of engaging in any lawful
business for which corporations may be organized under the Iowa Business
Corporation Act.
III
Capitalization. The total number of shares of stock of all classes which
the Corporation shall have authority to issue is 160,000,000 shares, of which
10,000,000 shares shall be preferred stock, no par value per share
(hereinafter called "Preferred Stock"), and 150,000,000 shares of which shall
be common stock, no par value per share (hereinafter called "Common Stock").
The designations and the powers, preferences and rights, and the
qualifications, limitations or restrictions thereof, of the shares of each
class are as follows:
1. The Preferred Stock may be issued from time to time in one or more
series, the shares of each series of Preferred Stock to have the voting
powers, full or limited, and the designations, preferences and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions thereof as are stated and expressed herein or in
the resolution or resolutions providing for the issuance of the series of
Preferred Stock, adopted by the board of directors as hereinafter provided.
2. Authority is hereby expressly granted to the board of directors of
the Corporation, subject to the provisions of this Article III and to the
limitations prescribed by law, to authorize the issuance of one or more series
of Preferred Stock and with respect to each series of Preferred Stock to fix
by resolution or resolutions providing for the issuance of the series of
Preferred Stock the voting powers, full or limited, if any, of the shares of
the
series of Preferred Stock and the designations, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereof. Each series of Preferred Stock shall
consist of such number of shares as shall be stated and expressed in the
resolution or resolutions providing for the issuance of the stock of the
series of Preferred Stock together with such additional number <PAGE>
<PAGE>
of shares as the board of directors by resolution or resolutions may from time
to time determine to issue as a part of the series of Preferred Stock. The
board of directors may from time to time decrease the number of shares of any
series of Preferred Stock (but not below the number thereof then outstanding)
by providing that any unissued shares previously assigned to the series of
Preferred Stock shall no longer constitute part thereof and may assign the
unissued shares to an existing or newly created series of Preferred Stock.
The authority of the board of directors with respect to each series of
Preferred Stock shall include, but not be limited to, the determination or
fixing of the following:
(a) The designation of the series of Preferred Stock.
(b) The dividend rate of the series of Preferred Stock, the conditions
and dates upon which dividends shall be payable, the relation which the
dividends shall bear to the dividends payable on any other class or classes of
stock, and whether the dividends shall be cumulative or non-cumulative.
(c) Whether the shares of the series of Preferred Stock shall be subject
to redemption by the Corporation and, if made subject to redemption, the
times, prices and other terms and conditions of the redemption.
(d) The rights of the holders of the shares of the series of Preferred
Stock upon the dissolution of, or upon the distribution of assets of, the
Corporation, and the amount payable on the shares in the event of voluntary or
involuntary liquidation.
(e) The terms and amount of any sinking fund provided for the purchase
or redemption of the shares of the series of Preferred Stock.
(f) Whether or not the shares of the series of Preferred Stock shall be
convertible into or exchangeable for shares of any other classes or of any
other series of Preferred Stock of any class or classes of stock of the
Corporation and, if provision be made for conversion or exchange, the times,
prices, rates, adjustments, and other terms and conditions of the conversion
or exchange.
(g) The extent, if any, to which the holders of the shares of the series
of Preferred Stock shall be entitled to vote with respect to the election of
directors or otherwise.
3. The holders of shares of each series of Preferred Stock shall be
entitled to receive, when and as declared by the board of directors, out of
funds legally available for the payment of dividends, dividends at the rates
fixed by the board of directors for such series of Preferred Stock, and no
more, before any dividends, other than dividends payable in Common Stock,
shall be declared and paid, or set apart for payment, on the Common Stock with
respect to the same dividend period.
<PAGE>
<PAGE>
4. Whenever, at any time, dividends on the then outstanding Preferred
Stock as may be required with respect to any series of Preferred Stock
outstanding shall have been paid or declared and set apart for payment and
after complying with respect to any retirement or sinking fund or funds for
any series of Preferred Stock, the board of directors may, subject to the
provisions of the resolution or resolutions creating any series of Preferred
Stock, declare and pay dividends on the Common Stock, and the holders of
shares of Preferred Stock shall not be entitled to share therein.
5. The holders of shares of each series of Preferred Stock shall be
entitled upon liquidation or dissolution or upon the distribution of the
assets of the Corporation to such preferences as provided in the resolution or
resolutions creating the series of Preferred Stock, and no more, before any
distribution of the assets of the Corporation shall be made to the holders of
shares of Common Stock. Whenever the holders of shares of Preferred Stock
shall have been paid the full amounts to which they shall be entitled, the
holders of shares of the Common Stock shall be entitled to share ratably in
all the remaining assets of the Corporation.
6. At all meetings of the shareholders of the Corporation, the holders
of shares of the Common Stock shall be entitled to one vote for each share of
Common Stock held by them. Except as otherwise required by law and except for
such voting powers with respect to the election of directors or other matters
as may be stated in the resolution or resolutions of the board of directors
providing for the issuance of any series of Preferred Stock, the holders of
the series of Preferred Stock shall have no voting power whatsoever.
7. No holder of any share of any class of stock of the Corporation shall
have any preemptive right to subscribe for or acquire additional shares of
stock of any class of the Corporation or warrants or options to purchase, or
securities convertible into, shares of any class of stock of the Corporation.
IV
The number of directors of the Corporation shall be fixed from time to
time in the manner provided in the bylaws but shall not be fewer than three
nor more than twelve. The directors shall be divided into three classes:
Class I, Class II, and Class III. Each class shall consist, as nearly as may
be possible, of one-third of the total number of directors. At each annual
meeting of shareholders, successors to the class of directors whose term
expires at that annual meeting shall be elected for a three-year term. The
initial expiration dates for the terms of the Class I, Class II and Class III
directors shall coincide with the dates of the annual meetings of shareholders
to be held in 1998, 1999 and 2000, respectively. If the number of directors
is changed, any increase or decrease shall be apportioned among the classes so
as to maintain the number of directors in each class as nearly equal as
possible, and any additional director of any class shall hold office for a
term that shall coincide with the remaining term of that class, but in no case
will a decrease in the number of directors shorten the term of any incumbent
director. A director shall hold office until the annual meeting for the year
in which his or her term expires and until a successor shall be elected and
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<PAGE>
qualified, subject, however, to prior death, resignation, retirement,
disqualification or removal from office. Any vacancy occurring on the board of
directors may be filled by a majority of the directors in office, although
less than a quorum, or by a sole remaining director, and any vacancy on the
board of directors that results from an increase in the number of directors
may be filled by a majority of the board of directors in office. Any director
elected to fill a vacancy shall have the same remaining term as that of his or
her predecessor.
A director may be removed only for (i) cause or (ii) by the affirmative
vote of the holders of not less than eighty percent (80%) of the outstanding
shares of Voting Stock (as hereinafter defined) at a meeting of shareholders
duly called for the consideration of such removal. Cause shall mean
conviction of a felony or adjudication of liability for negligence or
misconduct in the performance of a director's duty to the Corporation.
The affirmative vote of the holders of not less than eighty percent (80%)
of the outstanding shares of Voting Stock is required to amend the provisions
of this Article IV.
V
Notwithstanding any other provisions of these Second Restated Articles of
Incorporation or bylaws (and notwithstanding the fact that some lesser
percentage may be specified by law), any amendment of these Second Restated
Articles of Incorporation which would permit the holders of stock of the
Corporation to amend, alter, change or repeal the bylaws or any part thereof,
shall require the affirmative vote of holders of not less than eighty percent
(80%) of the outstanding shares of Voting Stock of the Corporation.
VI
The affirmative vote of the holders of not less than eighty percent (80%)
of the outstanding shares of Voting Stock of the Corporation shall be
required for the approval or authorization of any "Business Combination" (as
hereinafter defined) of the Corporation with any "Substantial Shareholder" (as
hereinafter defined); provided, however, that the eighty percent (80%) voting
requirement shall not be applicable if:
1. The "Continuing Directors" of the Corporation (as hereinafter
defined) by a two-thirds (2/3) vote (a) have expressly approved in advance the
acquisition of outstanding shares of Voting Stock of the Corporation that
caused the Substantial Shareholder to become a Substantial Shareholder or (b)
have approved the Business Combination prior to the Substantial Shareholder
involved in the Business Combination having become a Substantial Shareholder;
2. The Business Combination is solely between the Corporation and
another corporation, one-hundred percent (100%) of the Voting Stock of which
is owned directly or indirectly by the Corporation; or
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3. The Business Combination is a merger or consolidation and the cash or
fair market value of the property, securities or "Other Consideration to be
Received" (as hereinafter defined) per share by holders of Common Stock of the
Corporation in the Business Combination is not less than the "Fair Price" (as
hereinafter defined) of the Common Stock.
For the purposes of these Articles:
1. The term "Business Combination" shall mean (a) any merger or
consolidation of the Corporation or a subsidiary with or into a Substantial
Shareholder, (b) any sale, lease, exchange, transfer or other disposition,
including without limitation a mortgage or any other security device, of all
or any "Substantial Part" (as hereinafter defined) of the assets either of the
Corporation (including without limitation any voting securities of a
subsidiary) or of a subsidiary, to the Substantial Shareholder, (c) any merger
or consolidation of a Substantial Shareholder with or into the Corporation or
a subsidiary of the Corporation, (d) any sale, lease, exchange, transfer or
other disposition of all or any Substantial Part of the assets of the
Substantial Shareholder to the Corporation or a subsidiary of the Corporation
for consideration aggregating $5,000,000 or more, (e) the issuance of any
securities of the Corporation or a subsidiary of the Corporation to a
Substantial Shareholder, (f) any reclassification or recapitalization
(including any reverse stock split) of the Corporation or any of its
subsidiaries or a reorganization, in any case having the effect, directly or
indirectly, of increasing the percentage interest of a Substantial Shareholder
in any class of equity securities of the Corporation or such subsidiary, and
(g) any agreement, contract or other arrangement providing for any of the
transactions described in this definition of Business Combination.
2. The term "Substantial Shareholder" shall mean and include any
individual, corporation, partnership or other person or entity which, together
with its "affiliates" and "associates" (as defined in Rule 12b-2 under the
Securities Exchange Act of 1934, as amended, in effect on _____________ (the
"Exchange Act"), "beneficially owns" (as defined in Rule 13d-3 under the
Exchange Act) in the aggregate twenty percent (20%) or more of the outstanding
Voting Stock of the Corporation, and any affiliate or associate of any such
individual, corporation, partnership or other person or entity.
3. The term "Substantial Part" shall mean assets having a "Fair Value"
(as hereinafter defined) in excess of ten percent (10%) of the fair market
value of the total consolidated assets of the Corporation in question as of
the end of its most recent fiscal year ending prior to the time the
determination is being made.
4. Without limitation, any shares of Common Stock of the Corporation
that any Substantial Shareholder has the right to acquire pursuant to any
agreement, or upon exercise of conversion rights, warrants or options, or
otherwise, shall be deemed beneficially owned by the Substantial Shareholder.
5. The term "Other Consideration to be Received" shall include, without
limitation, Common Stock of the Corporation retained by its existing public
shareholders in the event of a Business Combination in which the Corporation
is the surviving corporation. <PAGE>
<PAGE>
6. The term "Voting Stock" shall mean all outstanding shares of capital
stock of the Corporation entitled to vote generally in the election of
directors and each reference to a proportion of shares of Voting Stock shall
refer to such proportion of the votes entitled to be cast by such shares.
7. The term "Continuing Director" shall mean any director of the Company
who has served as a director since May 1997, or one elected or appointed prior
to the time the Substantial Shareholder in question acquired such status, or
one designated as a Continuing Director (prior to his or her initial election
or appointment) by a majority of the whole board, but only if a majority of
the whole board shall then consist of Continuing Directors, or if a majority
of the whole board does not then consist of Continuing Directors, by a
majority of the then Continuing Directors.
8. The term "Fair Price" shall mean not less than the greater of (a) the
highest per share price paid by the Substantial Shareholder in acquiring any
of its shares of stock of the Corporation or (b) an amount which bears the
same or greater percentage relationship to the market price of the Common
Stock of the Corporation immediately prior to the announcement of the Business
Combination equal to the highest percentage relationship that any per share
price theretofore paid by the Substantial Shareholder for any of its holdings
of Common Stock of the Corporation bore to the market price of the Common
Stock of the Corporation immediately prior to commencement of the acquisition
of the Corporation's Common Stock by the Substantial Shareholder.
9. The term "Fair Value" shall mean the fair market value thereof at any
time 90 days prior to the date of the consummation of any transaction, which
value and time shall be determined by a majority of the Continuing Directors
who may, if they wish, be advised on such value by an investment banking firm
selected by them. The fees of any such investment banking firm shall be paid
by the Corporation.
The provisions set forth at this Article VI herein may not be repealed or
amended in any respect, unless such action is approved by the affirmative vote
of the holders of not less than eighty percent (80%) of the outstanding shares
of Voting Stock of the Corporation; provided, however, that this eighty
percent (80%) vote requirement shall not apply if an amendment is recommended
to shareholders by two-thirds (2/3) of the whole board of directors when a
majority of the members of the board of directors acting upon such matters are
Continuing Directors.
VII
A director of the Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its shareholders, (ii) for acts or
omissions not in good faith or which involve the intentional misconduct or a
knowing violation of the law, (iii) for any transaction from which the
director derives an improper personal benefit, or (iv) under Section 490.833
of the Iowa Business Corporation Act.
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Any repeal or modification of this Article VII shall not adversely affect
any right or protection of a director of the Corporation existing at the time
of such repeal or modification.
Date:
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TELEGROUP, INC.
By:
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Name:
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Its:
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ATTEST:
By:
------------------------
Name:
----------------------
Title:
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Exhibit 3.3
BYLAWS
OF
TELEGROUP, INC.
Table of Contents
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Article
I. OFFICES
II. SHAREHOLDERS
Section
1. Annual Meeting
2. Special Meetings
3. Place of Shareholders' Meeting
4. Notice of Meeting
5. Closing of Transfer Books or Fixing of Record Date
6. Voting Lists
7. Quorum
8. Proxies
9. Voting of Shares
10. Voting of Shares by Certain Holders
11. Informal Action by Shareholders
12. Voting by Ballot
13. Order of Business of Business
III. BOARD OF DIRECTORS
Section
1. General Powers
2. Number, Tenure and Qualifications
3. Regular Meetings
4. Special Meetings
5. Notice
6. Quorum
7. Manner of Acting
8. Vacancies
9. Compensation
10. Presumption of Assent
11. Informal Action by Directors
12. Committees
13. Resignation
<PAGE>
<PAGE>
Article
IV. OFFICERS
Section
1. Number
2. Election and Term of Office
3. Removal
4. Vacancies
5. The President
6. The Vice-President
7. The Secretary
8. The Treasurer
9. Assistant Secretaries and Assistant Treasurers
10. Salaries
V. EXECUTIVE COMMITTEE
Section
1. Appointment
2. Authority
3. Tenure Qualifications
4. Meetings
5. Quorum
6. Action Without a Meeting
7. Vacancies
8. Resignations and Removal
9. Procedure
VI. CONTRACTS, LOANS, CHECKS, AND DEPOSITS
Section
1. Contracts
2. Loans
3. Checks, Drafts, etc.
4. Deposits
VII. CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section
1. Certificates for Shares
2. Transfer of Shares
VIII. FISCAL YEAR
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<PAGE>
Article
IX. DIVIDENDS
X. CORPORATE SEAL
XI. VOTING OF SHARES OWNED BY CORPORATION
XII. WAIVER OF NOTICE
XIII. AMENDMENTS
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ARTICLE I. OFFICES
The principal office of the corporation in the State of Iowa shall be located
in the City of Fairfield, County of Jefferson. The corporation may have such
other offices, either within or without the State of Iowa, as the Board of
Directors may designate or as the business of the corporation may require from
time to time.
The registered office of the corporation required by the Iowa Business
Corporation Act to be maintained in the State of Iowa may be, but need not be,
identical with the principal office in the State of Iowa, and the address of
the registered office may be changed from time to time by the Board of
Directors.
ARTICLE II. SHAREHOLDERS
Section 1. Annual Meeting.
The annual meeting of the shareholders shall be held on the second Wednesday
in April in each year beginning with the year 1990, at the hour of 10:00
o'clock A.M., provided the Board of Directors may fix some other date which is
within 30 days before or after said date and may fix some time other than said
above time for such meeting, for the purpose of electing Directors and for the
transaction of such other business as may come before the meeting. If the day
designated above or fixed by the Board of Directors for the annual meeting
shall be a Sunday or other legal holiday in the state where held, such meeting
shall be held on the next succeeding business day. If the election of
Directors shall not be held on the day designated herein for any annual
meeting of the shareholders, or at any adjournment thereof, the Board of
Directors shall cause the election to be held at a special meeting of the
shareholders as soon thereafter as conveniently may be.
Section 2. Special Meetings.
Special meetings of the shareholders, for any purpose or purposes, unless
otherwise prescribed by statute, may be called by the President or by the
Board of Directors, and shall be called by the President at the request of the
holders of not less than one-tenth of all the outstanding shares of the
corporation entitled to vote at the meeting.
Section 3. Place of Shareholders' Meeting.
The Board of Directors may designate any place, either within or without the
State of Iowa, as the place of meeting of any annual meeting or for any
special meeting called by the Board of Directors. A waiver of notice signed by
all shareholders entitled to vote at a meeting may designate any place, either
within or without the State of Iowa, as the place for holding of such meeting.
If no designation is made, or if a special meeting be otherwise called, the
place of meeting shall be the registered office of the corporation in the
State of Iowa.
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Section 4. Notice of Meeting.
Written or printed notice stating the place, day and hour of the meeting and,
in case of a special meeting, the purpose or purposes for which the meeting is
called, shall be delivered to shareholders enticed to vote at the meeting not
less than 10 nor more than 60 days before the date of the meeting, either
personally or by mail by or at the direction of the President, the Secretary,
or the officer or persons calling the meeting. If mailed, such notice shall be
deemed to be delivered when deposited in the United States mail, addressed to
the shareholder or at his address as it appears on the stock transfer books of
the corporation, with postage thereon prepaid.
Section 5. Closing of Transfer Books or Fixing of Record Date.
For the purpose of determining shareholders entitled to notice of, or to vote
at any special meeting of shareholders or any adjournment thereof, or
shareholders entitled to receive payment of any dividend, or in order to make
a determination of shareholders for any other proper purpose, the Board of
Directors of the corporation may provide that the stock transfer books shall
be closed for a stated period but not to exceed, in any case, 60 days. If the
stock transfer books shall be closed for the purpose of determining
shareholders entitled to notice of or to vote at a meeting of shareholders,
such books shall be closed for at least 10 days immediately preceding such
meeting. In lieu of closing the stock transfer books, the Board of Directors
may fix in advance a date as the record date for any such determination of
shareholders, such date in any case to be not more than 70 days prior to the
date on which the particular action, requiring such determination of
shareholders, is to be taken. If the stock transfer books are not closed and
no record date is fixed for the determination of shareholders entitled to
notice of or to vote at a meeting of shareholders, or shareholders entitled to
receive payment of a dividend, the close of business on the day before the
first notice of the meeting is mailed or the date on which the resolution of
the Board of Directors declaring such dividend is adopted, as the case may be,
shall be the record date for such determination of shareholders. When a
determination of shareholders entitled to vote at any meeting of shareholders
has been made as provided in this section, such determination shall apply to
any adjournment thereof unless the meeting is adjourned to a date more than
120 days in the future.
Section 6. Voting Lists.
The officer or agent having charge of the stock transfer books for shares of
the corporation shall make, at least 10 days before each meeting of
shareholders, a complete list of the shareholders entitled to vote at such
meeting, or any adjournment thereof, arranged in alphabetical order, with the
address of and the number of shares held by each, which list, for a period of
10 days prior to such meeting, shall be kept on file at the registered office
of the corporation and shall be subject to inspection by any shareholder at
any time during usual business hours. Such list shall also be produced and
kept open at the time and place of the meeting and shall be subject to the
<PAGE>
<PAGE>
inspection of any shareholder during the whole time of the meeting. The
original stock transfer book shall be prima facie evidence as to who are the
shareholders entitled to examine such list or transfer books or to vote at any
meeting of shareholders.
Section 7. Quorum.
A majority of the outstanding shares of the corporation entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting of
shareholders. If less than a majority of the outstanding shares are
represented at a meeting, a majority of the shares so represented may adjourn
the meeting from time to time without further notice. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. The shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
Section 8. Proxies.
At all meetings of shareholders, a shareholder may vote by proxy executed in
writing by the shareholder or by his duly authorized attorney-in-fact. Such
proxy shall be filed with the Secretary of the corporation before or at the
time of the meeting. No proxy shall be valid after eleven months from the date
of its execution, unless otherwise provided in the proxy.
Section 9. Voting of Shares.
Each outstanding share entitled to vote shall be entitled to one vote upon
each matter submitted to a vote at a meeting of shareholders.
Section 10. Voting of Shares by Certain Holders.
Shares standing in the name of another corporation may be voted by such
officer, agent or proxy as the bylaws of such corporation may prescribe, or,
in the absence of such provision, as the Board of Directors of such
corporation may determine.
Shares held by an administrator, executor, guardian or conservator may be
voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no Trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver, and
shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority to do so be
contained in an appropriate order of the court by which such receiver was
appointed.
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A shareholder whose shares are pledged shall be entitled to vote such shares
until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Neither treasury shares nor shares held by another corporation, if a majority
of the shares entitled to vote for the election of Directors of such other
corporation is held by the corporation, shall be voted at any meeting or
counted in determining the total number of outstanding shares at any given
time.
Section 11. Informal Action bv Shareholders.
Any action required to be taken at a meeting of the shareholders, or any other
action which may be taken at a meeting of the shareholders, may be taken
without a meeting if one or more consents in writing, setting forth the action
so taken, shall be signed by the holders of 90 percent or more of the votes
enticed to be cast with respect to the subject matter thereof, and such
consent(s) are delivered to the corporation for inclusion in the corporate
minutes or records. In the event consents are signed by less than all of the
shareholders, and the law requires notice to be given to shareholders not
entitled to vote, then notice shall be given to such shareholders at least 10
days prior to the proposed action.
Section 12. Voting by Ballot.
Voting by shareholders on any question or in any election may be viva voce
unless the presiding officer shall order or any shareholder shall demand that
voting be by ballot.
Section 13. Order of Business.
The order of business at all meetings of the shareholders, shall be as
follows:
A. Roll Call.
B. Proof of Notice of Meeting or Waiver of Notice.
C. Reading Minutes of Preceding Meeting
D. Reports of Officers.
E. Reports of Committees.
F. Election of Directors.
G. Unfinished Business.
H. New Business.
ARTICLE III. BOARD OF DIRECTORS
Section 1. General Powers.
The business and affairs of the corporation shall be managed by its Board of
Directors.
<PAGE>
<PAGE>
Section 2. Number, Tenure and Qualifications.
The number of directors of the corporation shall be not less than one nor more
than five. Each Director shall hold office until the next annual meeting of
shareholders, or until a next special meeting of shareholders to elect
directors, and until his successor shall have been elected and qualified,
unless removed at a meeting called expressly for that purpose by a vote of the
holders of a majority of the shares then entitled to vote at an election of
Directors. Directors need not be residents of the State of Iowa or
shareholders of the corporation.
Section 3. Regular Meetings.
A regular meeting of the Board of Directors shall be held without other notice
than this by law immediately after, and at the same place as, the annual
meeting of shareholders. The Board of Directors may provide, by resolution,
the time and place, either within or without the State of Iowa, for the
holding of additional regular meetings without other notice than such
resolution.
Section 4. Special Meetings.
Special meetings of the Board of Directors may be called by or at the request
of the President or any one Director. The person or persons authorized to call
special meetings of the Board of Directors may fix any place, either within or
without the State of Iowa, as the place for holding any special meeting of the
Board of Directors called by them.
Section 5. Notice
Notice of the date, time and place of any special meeting shall be given at
least two days prior thereto by written notice delivered personally or mailed
to each Director at his business address, or by telegram or telecopier. If
mailed, such notice shall be deemed to be delivered five days after its
deposit in the United States mail, so addressed, postage thereon prepaid. If
notice be given by telegram, such notice shall be deemed to be delivered when
received. If notice is given by telecopier, such notice shall be deemed to be
delivered when the telecopy is received. Oral notice is effective when
communicated, if communicated in a comprehensible manner. Any Director may
waive notice of any meeting. The attendance of a Director at any meeting shall
constitute a waiver of notice of such meeting, unless the director at the
beginning of the meeting or promptly upon the director's arrival objects to
holding the meeting or transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting. Neither the
business to be transacted at, nor the purpose of, any regular or special
meeting of the Board of Directors need be specified in the notice or waiver of
notice of such meeting.
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<PAGE>
Section 6. Quorum.
A majority of the number of Directors in office immediately before the meeting
begins shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, but if less than such majority is present
at a meeting, a majority of the Directors present may adjourn the meeting from
time to time without further notice.
Section 7. Manner of Acting.
The act of the majority of the Directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors. A Director shall
be considered present at a meeting of the Board of Directors or a committee
designated by the Board of Directors if he participates in such meeting by
conference telephone or similar communications equipment by means of which all
directors participating in the meeting may simultaneously hear each other
during the meeting.
Section 8. Vacancies.
Any vacancy occurring in the Board of Directors and any directorship to be
filled by reason of an increase in the number of Directors may be filled by
the affirmative vote of a majority of the Directors then in office, even if
less than a quorum of the Board of Directors. A Director so elected shall be
elected for the unexpired term of his predecessor in office or the full term
of such new directorship.
Section 9. Compensation.
By resolution of the Board of Directors, each Director may be paid his
expenses, if any, of attendance at each meeting of the Board of Directors, and
may be paid a stated salary as Director or a fixed sum for attendance at each
meeting of the Board of Directors or both. No such payment shall preclude any
Director from serving the corporation in any other capacity and receiving
compensation therefor.
Section 10. Presumption of Assent.
A Director of the corporation who is present at a meeting of the Board of
Directors at which action on any corporate matter is taken shall be presumed
to have assented to the action taken unless his dissent shall be entered in
the minutes of the meeting or unless he shall file his written dissent to such
action with the person acting as the secretary of the meeting before the
adjournment thereof or shall forward such dissent by registered or certified
mail to the secretary of the corporation immediately after the adjournment of
the meeting. Such right to dissent shall not apply to a Director who voted in
favor of such action.
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<PAGE>
Section 11. Informal Action bv Directors.
Any action required to be taken at a meeting of Directors, or any action which
may be taken at a meeting of Directors or a committee of Directors, may be
taken without a meeting if one or more consents in writing setting forth the
action so taken, shall be signed by all of the Directors or all of the members
of the committee of Directors, as the case may be, and such consent(s) are
delivered to the corporation for inclusion in the corporate minutes or
records.
Section 12. Committees.
The Board of Directors from time to time by Resolution adopted by a majority
of the full Board of Directors may appoint from its members a committee or
committees, temporary or permanent, and, to the extent permitted by law and
these bylaws, may designate the duties, powers and authorities of such
committee.
Section 13. Resignation.
A director may resign at any time by giving written notice to the Board, the
President, or the Secretary. Unless otherwise specified in the notice, the
resignation shall take effect upon receipt thereof by the Board of such
officer, and the acceptance of the resignation shall not be necessary to make
it effective.
ARTICLE IV. OFFICERS
Section 1. Number.
The officers of the corporation shall be a President, one or more Vice-
Presidents (the number thereof to be determined by the Board of Directors), a
Secretary, and a Treasurer, each of whom shall be elected by the Board of
Directors. Such other officers and assistant officers as may be deemed
necessary may be elected or appointed by the Board of Directors. Any two or
more offices may be held by the same person.
Section 2. Election and Term of Office.
The officers of the corporation to be elected by the Board of Directors shall
be elected annually by the Board of Directors at the first meeting of the
Board of Directors held after each annual meeting of the shareholders. If the
election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as conveniently may be. Each officer shall hold office
until his successor shall have been duly elected and shall have qualified or
until his death or until he shall resign or shall have been removed in the
manner hereinafter provided.
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<PAGE>
Section 3. Removal.
Any officer or agent may be removed by the Board of Directors whenever in its
judgment the best interests of the corporation will be served thereby, but
such removal shall be without prejudice to the contract rights, if any, of the
person so removed. Election or appointment of an officer or agent shall not of
itself create contract rights.
Section 4. Vacancies.
A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the Board of Directors for the
unexpired portion of the term.
Section 5. Chairman of the Board.
The Chairman of the Board shall be the principal executive officer of the
Corporation and, subject to the control of the Board of Directors, and in
conjunction with the President, shall in general supervise and control all of
the business and affairs of the Corporation. The Chairman of the Board shall,
when present, preside at all meetings of the Shareholders and of the Board of
Directors. He may sign, with the Secretary or any other proper officer of the
corporation thereunto authorized by the Board of Directors, certificates for
shares of the corporation, any deeds, mortgages, bonds, contracts, or other
instruments which the Board of Directors has authorized to be executed, except
in cases where the signing and execution thereof shall be expressly delegated
by the Board of Directors or by these Bylaws to some other officer or agent of
the corporation, or shall be required by law to be otherwise signed or
executed; and in general shall perform all duties incident to his office and
such other duties as may be prescribed by the Board of Directors from time to
time.
Section 6. President.
The President shall be the principal operational officer of the corporation
and, subject to the control of the Board of Directors, and in conjunction with
the Chairman of the Board, shall in general supervise and control all of the
business and affairs of the corporation. He may sign, with the Secretary or
any other proper officer of the corporation thereunto authorized by the Board
of Directors, certficates for shares of the corporation, any deeds, mortgages,
bonds, contracts, or other instruments which the Board of Directors has
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by these
Bylaws to some other officer or agent of the corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to his office and such other duties as may be prescribed by
the Board of Directors from time to time.
<PAGE>
<PAGE>
Section 7. The Vice-President.
In the absence of the President or in the event of his death, inability or
refusal to act, the Vice-President (or in the event there be more than one
Vice-President, the Vice-President in the order designated at the time of
their election, or in the absence of any designation, then in the order of
their election) shall perform the duties of the President, and when so acting,
shall have all the powers of and be subject to all the restrictions upon the
President. Any Vice-President may sign, with the Secretary or an Assistant
Secretary, certificates for shares of the corporation. Any Vice President
shall perform such other duties as from time to time may be assigned to him by
the President or by the Board of Directors.
Section 8. The Secretary.
The Secretary shall: (a) keep the minutes of the proceedings of the
shareholders and of the Board of Directors in one or more books provided for
that purpose; (b) see that all notices are duly given in accordance with the
provisions of these Bylaws or as required by law; (c) be custodian of the
corporate records and of the seal of the corporation, if any, and see that the
seal of the corporation, if said corporation has a seal, is affixed to all
documents the execution of which on behalf of the corporation under its seal
is duly authorized; (d) authenticate records of the corporation; (e) keep a
register of the post office address of each shareholder which shall be
furnished to the Secretary by such shareholder; (f) sign with the President,
or a Vice-President, certificates for shares of the corporation, the issuance
of which shall have been authorized by resolution of the Board of Directors;
(g) have general charge of the stock transfer books of the corporation; and
(h) in general perform all duties as from time to time may be assigned to him
by the President or by the Board of Directors.
Section 9. The Treasurer.
If required by the Board of Directors, the Treasurer shall give a bond for the
faithful discharge of his duties in such sum and with such surety or sureties
as the Board of Directors shall determine. He shall: (a) have charge and
custody of and be responsible for all funds and securities of the corporation;
receive and give receipts for moneys due and payable to the corporation from
any source whatsoever, and deposit all such moneys in the name of the
corporation in such banks, trust companies or other depositories as shall be
selected in accordance with the provisions of Article V of these bylaws; and
(b) in general perform all of the duties incident to the office of Treasurer
and such other duties as from time to time may be assigned to him by the
President or by the Board of Directors.
Section 10. Assistant Secretaries and Assistant Treasurers.
The assistant secretaries, when authorized by the Board of Directors, may sign
with the President or a Vice-President cardficates for shares of the
corporation, the issuance of which shall have been authorized by a resolution
of the Board of Directors. The assistant treasurers shall respectively, if
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required by the Board of Directors, give bonds for the faithful discharge of
their duties in such sums and with such sureties as the Board of Directors
shall determine. The assistant secretaries and assistant treasurers, in
general, shall perform such duties as shall be assigned to them by the
Secretary or the Treasurer, respectively, or by the President or the Board of
Directors.
Section 11. Salaries.
The salaries of the officers shall be fixed from time to time by the Board of
Directors and no officer shall be prevented from receiving such salary by
reason of the fact that he is also a Director of the corporation.
ARTICLE V. EXECUTIVE COMMITTEE
Section 1. Appointment.
The Board of Directors by resolution adopted by a majority of the full Board,
may designate two or more of its members to constitute an executive committee.
The designation of such committee and the delegation thereto of authority
shall not operate to relieve the Board of Directors, or any member thereof, of
any responsibility imposed by law.
Section 2. Authority.
The executive committee, when the Board of Directors is not in session, shall
have and may exercise all of the authority of the Board of Directors except to
the extent, if any, that such authority shall be limited by the resolution
appointing the executive committee and except also that the executive
committee shall not have the authority of the Board of Directors in reference
to amending the Articles of Incorporation, authorizing distributions, adopting
a plan of merger or other disposition of all or substantially all of the
property and assets of the corporation otherwise than in the usual and regular
course of its business, recommending to the shareholders a voluntary
dissolution of the corporation or a revocation thereof, filling vacancies on
the Board of Directors or any of its committees, amending the bylaws of the
corporation, authorizing reacquisition of shares (except according to a
formula or method prescribed by the Board of Directors), or authorizing the
issuance or sale of shares or determining the designation and relative rights,
preferences, and limitations of a class or series of shares (except that the
Board of Directors may authorize a committee or a senior executive officer of
the corporation to do so within limits specifically prescribed by the Board of
Directors).
Section 3. Tenure and Qualifications.
Subject to the provisions of Section 8 of this Article, each member of the
executive committee shall hold office until the next regular meeting of the
Board of Directors following his designation.
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Section 4. Meetings.
Regular meetings of the executive committee may be held without notice at such
times and places as the executive committee may fix from time to time by
resolution. Special meetings of the executive committee may be called by any
member thereof upon not less than two days' notice stating the place, date and
hour of the meeting, which notice may be written or oral, and if mailed, shall
be deemed to be delivered 5 days after deposit in the United States mail
addressed to each member of the executive committee at his business address.
Any member of the executive committee may waive notice of any meeting and no
notice of any meeting need be given to any member thereof who attends in
person. The notice of a meeting of the executive committee need not state the
business proposed to be transacted at the meeting.
Section 5. Quorum.
A majority of the members of the executive committee shall constitute a quorum
for the transaction of business at any meeting thereof and action of the
executive committee must be authorized by the affirmative vote of a majority
of the members present at a meeting at which a quorum is present.
Section 6. Action Without a Meeting.
Any action required or permitted to be taken by the executive committee at a
meeting may be taken without a meeting if a consent in writing, setting forth
the action so taken, shall be signed by all of the members of the executive
committee.
Section 7. Vacancies.
Any vacancy in the executive committee may be filled by a resolution adopted
by a majority of the full Board of Directors.
Section 8. Resignations and Removal.
Any member of the executive committee may be removed at any time with or
without cause by resolution adopted by a majority of the full Board of
Directors. Any member of the executive committee may resign from the executive
committee at any time by giving written notice to the president or secretary
of the corporation, and unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Section 9. Procedure.
The executive committee shall elect a presiding officer from its members and
may fix its own rules of procedure which shall not be inconsistent with these
bylaws. It shall keep regular minutes of its proceedings and report the same
to the Board of Directors for its information at the meeting thereof held next
after the proceedings shall have been taken.
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ARTICLE VI. CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts.
The Board of Directors may authorize any officer or officers, agent or agents,
to enter into any contract or execute and deliver any instrument in the name
of and on behalf of the corporation, and such authority may be general or
confined to specific instances.
Section 2. Loans.
No loans shall be contracted on behalf of the corporation and no evidences of
indebtedness shall be issued in its name unless authorized by a resolution of
the Board of Directors. Such authority may be general or confined to specific
instances.
Section 3. Checks, Drafts. Etc.
All checks, drafts or other orders for the payment of money, notes or other
evidences of indebtedness issued in the name of the corporation, shall be
signed by such officer or officers, agent or agents of the corporation and in
such manner as shall from time to time be determined by resolution of the
Board of Directors.
Section 4. Deposits.
All funds of the corporation not otherwise employed shall be deposited from
time to time to the credit of the corporation in such banks, trust companies
or other depositories as the Board of Directors may select.
ARTICLE VII. CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares.
Certificates representing shares of the corporation shall be in such form as
shall be determined by the Board of Directors. Such certificates shall be
signed by the president or vice-president and by the secretary or an assistant
secretary and if the corporation has a corporate seal, sealed with the
corporate seal or a facsimile thereof. The signatures of such officers upon a
certificate may be facsimiles. Each certificate for shares shall be
consecutively numbered or otherwise identified. The name and address of the
person to whom the shares and date of issue, shall be entered on the stock
transfer books of the corporation. All certificates surrendered to the
corporation for transfer shall be canceled and no new certificate shall be
issued until the form certificate for a like number of shares shall have been
surrendered and canceled, except that in case of a lost, destroyed or
mutilated certificate a new one may be issued therefor upon such terms and
indemnity to the corporation as the Board of Directors may prescribe.
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Section 2. Transfer of Shares.
Transfer of shares of the corporation shall be made only on the stock transfer
books of the corporation by the holder of record thereof or by his legal
representative, who shall furnish proper evidence of authority to transfer, or
by his attorney thereunto authorized by power of attorney duly executed and
filed with the secretary of the corporation. In any event, the transferor
shall surrender for cancellation the certificate for such shares. The person
in whose name shares stand on the books of the corporation shall be deemed by
the corporation to be the owner thereof for all purposes.
ARTICLE VIII. FISCAL YEAR
The fiscal year of the corporation shall be as fixed by the Board of
Directors.
ARTICLE IX. DIVIDENDS
The Board of Directors may, from time to time, declare, and the corporation
may pay, dividends on its outstanding shares in the manner, and upon the terms
and conditions provided by law and its Articles of Incorporation.
ARTICLE X. CORPORATE SEAL
The Board of Directors may provide a corporate seal, which, if provided for
shall be circular in form and shall have inscribed thereon the name of the
corporation and the state of incorporation and the words, "Corporate Seal".
ARTICLE XI. VOTING OF SHARES OWNED BY CORPORATION
Subject always to the specific directions of the Board of Directors, any share
or shares of stock issued by any other corporation and owned or controlled by
the corporation may be voted at any shareholders' meeting of such other
corporation by the president of the corporation if he be present, or in his
absence by any vice-president of the corporation who may be present. Whenever,
in the judgment of the president, or in his absence, of any vice-president, it
is desirable for the corporation to execute a proxy or give a shareholders'
consent in respect to any share or shares of stock issued by any other
corporation and owned by the corporation, such proxy or consent shall be
executed in the name of the corporation by the president or one of the vice-
presidents of the corporation without necessity of any authorization by the
Board of Directors. Any person or persons designated in the manner above
stated as the proxy or proxies of the corporation shall have full right, power
and authority to vote the share or shares of stock issued by such other
corporation and owned by the corporation the same as such share or shares
might be voted by the corporation.
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ARTICLE XII. WAIVER OF NOTICE
Whenever any notice is required to be given to any shareholder or director of
the corporation under the provisions of these bylaws or under the provisions
of the Articles of Incorporation or under the provisions of the Iowa Business
Corporation Act, a waiver thereof in writing signed by the person or persons
entitled to such notice, whether before or after the time stated therein,
shall be deemed equivalent to the giving of such notice.
ARTICLE XIII. AMENDMENTS
These bylaws may be altered, amended or repealed and new bylaws may be adopted
by the corporation's shareholders or by the Board of Directors (unless the
shareholders in amending or repealing a particular bylaw provide expressly
that the Board of Directors shall not amend or repeal that bylaw) at any
regular or special meeting.
Submitted and adopted by resolution of the Board of Directors effective as of
the 21st day of November, 1989.
____________________________
Clifford Rees, Secretary
Exhibit 3.4
FORM OF AMENDED AND RESTATED BYLAWS
OF
TELEGROUP, INC.
ARTICLE I. OFFICES
Section 1. The principal office of the corporation within the State
of Iowa shall be located in the City of Fairfield, County of Jefferson.
Section 2. The corporation may also have offices and places of
business at such other places within or without the State of Iowa as the Board
of Directors may from time to time determine or the business of the
corporation may require.
ARTICLE II. SHAREHOLDERS
Section 1. ANNUAL MEETING. The annual meeting of the shareholders
shall be held on the second Wednesday in the month of April in each year, at
the hour of 10:00 a.m., at the principal office of the corporation or at such
other date, time and place as may be fixed from time to time by resolution of
the Board of Directors and set forth in the notice of the meeting, for the
purpose of electing directors and transacting such other business as may
properly come before the meeting.
At an annual meeting of the shareholders, only such business shall be
conducted as shall have been properly brought before an annual meeting. To be
properly brought before an annual meeting, business must be (i) specified in
the notice of the meeting (or any supplement thereto) given by or at the
direction of the Board of Directors, (ii) otherwise properly brought before
the meeting by or at the direction of the Board of Directors or (iii)
otherwise properly brought before the meeting by a shareholder of the
corporation who was a shareholder of record at the time of giving of notice
provided for in this Section, who is entitled to vote at the meeting and who
complied with the notice procedures set forth in this Section. For business to
be properly brought before an annual meeting by a shareholder, the shareholder
must have given timely notice thereof in writing to the Secretary of the
corporation at the principal executive offices of the corporation. To be
timely, a shareholder's notice shall be delivered not less than 90 days prior
to the first anniversary of the preceding year's meeting; provided, however,
that in the event that the date of the annual meeting is advanced by more than
30 days or delayed by more than 60 days from such anniversary date, notice by
the shareholder, to be timely, must be so delivered not later than the 90th
day prior to such annual meeting or the 10th day following the day on which
public announcement (as defined herein) of the date of such meeting is first
made.
Such shareholder's notice shall set forth as to each matter the
shareholder proposes to bring before the annual meeting (i) a brief
description of the business desired to be brought before the meeting and the
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reasons for conducting such business at the meeting and any material interest
in such business of such shareholder and the beneficial owner, if any, on
whose behalf the proposal is made; and (ii) as to the shareholder giving the
notice and the beneficial owner, if any, on whose behalf the proposal is made
(A) the name and address of such shareholder, as they appear on the
corporation's books, and the name and address of such beneficial owner and (B)
the class and number of shares of the corporation which are owned beneficially
and of record by such shareholder and such beneficial owner; and (iii) in the
event that such business includes a proposal to amend either the Articles of
Incorporation or the Bylaws of the corporation, the language of the proposed
amendment. Notwithstanding anything in these Bylaws to the contrary, no
business shall be conducted at any annual meeting except in accordance with
this paragraph, and the Chairman of the Board or other person presiding at an
annual meeting of shareholders, may refuse to permit any business to be
brought before an annual meeting without compliance with the foregoing
procedures. For the purposes of this paragraph "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant
to Sections 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). In addition to the provisions of this paragraph, a
shareholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth herein. Nothing in these Bylaws shall be deemed to affect any rights of
shareholders to request inclusion of proposals in the corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
Section 2. SPECIAL MEETINGS. Special meetings of the shareholders, for
any purpose or purposes, may be called by the Chairman of the Board, the
President, the Secretary, or the Board of Directors. The holders of shares
having not less than one-tenth of the voting power of the corporation may
demand in writing stating the purpose or purposes, and signed, dated and
delivered to the Secretary of the corporation, that a special meeting of the
shareholders be held. The time, date and place of any such special meeting
shall be determined by the Board of Directors or at its direction, by the
Chairman. Business transacted at a special meeting of the shareholders shall
be confined to the purpose or purposes of the meeting described in the notice
of the meeting.
Section 3. PLACE OF SHAREHOLDERS' MEETING. The Board of Directors may
designate any place, either within or without the State of Iowa as the place
of meeting for any annual meeting or for any special meeting of shareholders.
If no designation is made the place of meeting shall be the principal office
of the corporation in the State of Iowa.
Section 4. NOTICE OF MEETING. Written or printed notice stating the
place, day and hour of the meeting and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not
less than ten days, nor more than sixty days before the date of the meeting,
either personally or by mail, by or at the direction of the Chairman of the
Board, the President, the Secretary, or the Board of Directors, to each
shareholder of record entitled to vote at such meeting. If mailed, such <PAGE>
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notice shall be deemed to be delivered when deposited in the United States
mail, addressed to the shareholder at the address as it appears on the stock
transfer books of the corporation, with postage thereon prepaid.
Section 5. POSTPONEMENT OF MEETINGS. Any previously scheduled annual or
special meeting of shareholders may be postponed by resolution of the Board of
Directors upon public announcement (as defined in Article II, Section 1 of
these Bylaws) made on or prior to the date previously scheduled for such
annual or special meeting.
Section 6. FIXING OF RECORD DATE. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders
or any adjournment thereof, or shareholders entitled to receive payment of any
dividend, or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors of the corporation may fix in advance a
date as the record date for any such determination of shareholders, such date
in any case to be not more than seventy days and, in case of a meeting of
shareholders, not less than ten days prior to the date on which the particular
action requiring such determination of shareholders is to be taken. If no
record date is fixed for the determination of shareholders entitled to notice
of or to vote at a meeting of shareholders, or shareholders entitled to
receive payment of a dividend, the day before the first date on which notice
of the meeting is mailed or the day before the date on which the resolution of
the Board of Directors declaring such dividend is adopted, as the case may be,
shall be the record date for such determination of shareholders. In order to
determine the shareholders entitled to demand a special meeting, the record
date shall be the sixtieth day preceding the date of receipt by the
corporation of written demands sufficient to require the calling of such
meeting, unless otherwise fixed by the Board of Directors. When a
determination of shareholders entitled to vote at any meeting of shareholders
has been made as provided in this section, such determination shall apply to
any adjournment thereof, unless the Board of Directors selects a new record
date or unless a new record date is required by law.
Section 7. VOTING LISTS. After the record date for a meeting has been
fixed, the officer or agent having charge of the stock transfer books for
shares of the corporation shall make, at least ten days before each meeting of
shareholders, a complete list of the shareholders entitled to vote at such
meeting, or any adjournment thereof, arranged by voting group and within each
voting group, in alphabetical order, with the address of and the number and
class of shares held by each, which list, for a period beginning two business
days after notice of the meeting was first given for which the list was
prepared and continuing through the meeting, shall be kept on file at the
principal office of the corporation or at the place identified in the meeting
notice in the city where the meeting will be held. The list shall be subject
to inspection by any shareholder at any time during usual business hours. Such
list shall also be produced and kept open at the time and place of the meeting
and shall be subject to the inspection of any shareholder during the whole
time of the meeting. The list furnished to the corporation by its stock
transfer agent shall be prima facie evidence as to who are the shareholders
entitled to examine such list or transfer books or to vote at any meeting of
shareholders.
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Section 8. QUORUM. At any meeting of the shareholders, a majority of
the votes entitled to be cast on the matter by a voting group constitutes a
quorum of that voting group for action on that matter, unless the
representation of a different number is required by law, and in that case, the
representation of the number so required shall constitute a quorum. If a
quorum shall fail to attend any meeting, the chairman of the meeting or a
majority of the votes present may adjourn the meeting to another place, date
or time. When a meeting is adjourned to another place, date or time, notice
need not be given of the adjourned meeting if the place, date and time thereof
are announced at the meeting at which the adjournment is taken; provided,
however, that if the date of any adjourned meeting is more than one hundred
twenty (120) days after the date for which the meeting was originally noticed,
or if a new record date is fixed for the adjourned meeting, notice of the
place, date and time of the adjourned meeting shall be given in conformity
herewith. At any adjourned meeting, any business may be transacted which might
have been transacted at the original meeting.
Section 9. PROXIES. At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or by the shareholder's
duly authorized attorney in fact. Such proxy shall be filed with the
Secretary of the corporation before or at the time of the meeting. No proxy
shall be valid after eleven months from the date of its execution, unless
otherwise provided in the proxy. No holder of any share of any class of stock
of the corporation shall sell the vote pertaining to such share or issue a
proxy to vote such share in consideration of any sum of money or anything of
value.
Section 10. VOTING OF SHARES. Except as may be otherwise provided by
the Articles of Incorporation, each outstanding share entitled to vote shall
be entitled to one (1) vote in person or by proxy for each share of common
stock standing in the holder's name on the stock transfer records of the
corporation.
Section 11. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the
name of another corporation may be voted by such officer, agent or proxy as
the Bylaws of such corporation may prescribe, or, in the absence of such
provision, as the board of directors of such corporation may determine.
Shares held by an administrator, executor, guardian or conservator may be
voted, either in person or by proxy, without a transfer of such shares. Shares
standing in the name of a trustee may be voted by the trustee, either in
person or by proxy, but no trustee shall be entitled to vote shares so held
without a transfer of such shares into the name of the trustee.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof if authority so to do be contained in an
appropriate order of the court by which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee,
and thereafter the pledgee shall be entitled to vote the shares so
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Neither treasury shares nor, absent special circumstances, shares held by
another corporation if a majority of the shares entitled to vote for the
election of directors of such other corporation is held by the corporation,
shall be voted at any meeting or counted in determining the total number of
outstanding shares at any given time.
Section 12. VOTING BY BALLOT. Voting by shareholders on any question or
in any election may be viva voce unless the presiding officer shall order or
any shareholder shall demand that voting be by ballot.
ARTICLE III. BOARD OF DIRECTORS
Section 1. GENERAL POWERS. The business and affairs of the corporation
shall be managed by its Board of Directors.
Section 2. NUMBER, TENURE AND QUALIFICATIONS; NOMINATIONS. Within the
limits set forth in Article IV of the Articles of Incorporation, the number of
directors of the corporation shall be as fixed from time to time by resolution
of the Board of Directors. The directors shall be divided into classes, and
hold office for the terms as provided in Article IV of the Articles of
Incorporation. Directors need not be residents of the State of Iowa or
shareholders of the corporation.
Nominations of persons for election as directors may be made by the Board
of Directors or by any shareholder entitled to vote for the election of
directors. Any shareholder entitled to vote for the election of directors may
nominate a person or persons for election as director only if written notice
of such shareholder's intent is delivered to the Secretary of the corporation
at the principal executive offices of the corporation (i) with respect to an
election to be held at an annual meeting of shareholders, not later than 90
days prior to the first anniversary of the preceding year's annual meeting, or
as set out below, and (ii) with respect to an election to be held at a special
meeting of shareholders for the election of directors, not later than 10 days
following the date on which public announcement (as defined in Article II,
Section 1 of these Bylaws) of the date of such meeting is first made. In the
event that the date of the annual meeting is advanced by more than 30 days or
delayed by more than 60 days from the anniversary date of the annual meeting,
notice by the shareholder must be delivered not less than 90 days prior to
such annual meeting or the 10th day following the day on which public
announcement of the date of such meeting is first made. Notwithstanding
anything in the foregoing sentence to the contrary, in the event that the
number of directors to be elected to the Board of Directors of the corporation
is increased and there is no public announcement naming all of the nominees
for director or specifying the size of the increased Board of Directors made
by the corporation at least 100 days prior to the first anniversary of the
preceding year's annual meeting, a shareholder's notice required by this
Section shall also be considered timely, but only with respect to nominees for
any new positions created by such increase, if it shall be delivered to the
Secretary of the corporation not later than the close of business on the 10th
day following the day on which such public announcement is first made.
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Such shareholder's notice shall set forth: (a) the name and address of
the shareholder who intends to make the nomination and the name, address, age,
and principal occupation or employment of the person or persons to be
nominated; (b) a representation that the shareholder is a holder of record of
stock of the corporation entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice; (c) the number and class of shares of the corporation
which are owned by such shareholder and the beneficial owner, if any, and the
number and class of shares, if any, beneficially owned by the nominee; (d) a
description of all arrangements or understandings between the shareholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
shareholder; (e) such other information regarding each nominee that is
required to be disclosed in connection with the solicitation of proxies for
the election of directors, or as otherwise required, in each case pursuant to
Regulation 14A under the Exchange Act (including, without limitation, such
person's written consent to being named in a proxy statement as a nominee and
to serving as a director if nominated). The Chairman of the Board or other
person presiding at a meeting of shareholders may refuse to acknowledge the
nomination of any person not made in accordance with the procedures prescribed
by these Bylaws, and in that event the defective nomination shall be
disregarded.
Section 3. REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held without other notice than this Bylaw immediately
after, and at the same place as, the annual meeting of shareholders. The
Board of Directors may provide, by resolution, the time and place, either
within or without the State of Iowa, for the holding of additional regular
meetings without other notice than such resolution.
Section 4. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by or at the request of the Chairman of the Board, the
President, Secretary or any two directors. The person or persons authorized
to call special meetings of the Board of Directors may fix any place, either
within or without the State of Iowa, as the place for holding any special
meeting of the Board of Directors called by them.
Section 5. NOTICE. Notice of any special meeting of the Board of
Directors shall be given at least two days previously thereto by written
notice delivered personally or mailed to each director at the director's
business address, or by telephone, cable, telefax, wireless or telegram. If
mailed, such notice shall be deemed to be delivered when deposited in the
United States mail so addressed, with postage thereon prepaid. If notice be
given by telegram such notice shall be deemed to be delivered when the
telegram is delivered to the telegraph company. Any director may waive notice
of any meeting. The attendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except where a director attends a meeting
for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business
to be transacted at, nor the purpose of, any regular or special meeting of the
Board of Directors need be specified in the notice or waiver of notice of such
meeting.
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Section 6. QUORUM. A majority of the number of directors fixed pursuant
to Section 2 of this Article III shall constitute a quorum for the transaction
of business at any meeting of the Board of Directors, but if less than such
majority is present at a meeting, a majority of the directors present may
adjourn the meeting from time to time without further notice.
Section 7. MANNER OF ACTING. Except as otherwise specified in these
Bylaws, the act of the majority of the directors present at a meeting at which
a quorum is present shall be the act of the Board of Directors.
Section 8. VACANCIES. Any vacancy occurring in the Board of Directors
may be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the Board of Directors. A director elected to
fill a vacancy shall be elected for a term which shall expire at the next
election of directors by the shareholders. A director elected by the
shareholders to fill a vacancy shall be elected for the unexpired term of the
director last elected by the shareholders with respect to the position being
filled. Any directorship to be filled by reason of any increase in the number
of directors by not more than thirty percent (30%) of the number of directors
last approved by the shareholders, may be filled by the Board of Directors for
a term of office continuing only until the next election of directors by the
shareholders.
Section 9. COMPENSATION. By resolution of the Board of Directors, those
directors who are not at the time active employees of the corporation may be
paid an annual retainer and a fixed sum for attendance at each meeting of the
Board of Directors. All directors may be reimbursed for expenses incurred in
connection with their services. No such payment shall preclude any director
from serving the corporation in any other capacity and receiving compensation
therefor.
Section 10. PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
taken unless the director's dissent shall be entered in the minutes of the
meeting or unless the director shall file a written dissent to such action
with the person acting as the Secretary of the meeting before the adjournment
thereof or shall forward such dissent by registered or certified mail to the
Secretary of the corporation immediately after the adjournment of the meeting.
Such right to dissent shall not apply to a director who voted in favor of such
action.
Section 11. INFORMAL ACTION BY DIRECTORS. Any action required to be
taken at a meeting of the directors, or any other action which may be taken at
a meeting of the directors, may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all of the
directors entitled to vote with respect to the subject matter thereof.
Section 12. COMMITTEES OF DIRECTORS. The Board of Directors may, by
resolution or resolutions adopted by a majority of the Board of Directors,
designate from among its members an Executive Committee, Audit Committee,
Compensation Committee or other Committees, each consisting of two (2) or more
<PAGE>
<PAGE>
directors, and each of which, to the extent provided in any such resolution,
shall have all the authority of the Board, except as provided by law, the
Articles of Incorporation or these Bylaws. The Board of Directors may
designate one or more directors as alternate members of any such Committee who
may replace any absent member or members at any meeting of such Committee.
Each such Committee shall serve at the pleasure of the Board of Directors. It
shall keep minutes of its meetings and report the same to the Board.
ARTICLE IV. OFFICERS
Section 1. NUMBER. The officers of the corporation shall be a Chairman
of the Board, a President, one or more Senior Vice Presidents and one or more
Vice Presidents (the number thereof to be determined by the Board of
Directors), a Treasurer and a Secretary, and such other officers as the Board
of Directors may from time to time designate by resolution, each of whom shall
be elected by the Board of Directors. Any two or more offices may be held by
the same person. In its discretion, the Board of Directors may delegate the
powers or duties of any officer to any other officer or agents,
notwithstanding any provision of these Bylaws, and the Board of Directors may
leave unfilled for any such period as it may fix, any office except those of
Chairman of the Board, President, Vice President-Finance, Treasurer and
Secretary.
Section 2. ELECTION AND TERM OF OFFICE. The officers of the corporation
to be elected by the Board of Directors shall be elected annually by the Board
of Directors at the first meeting of the Board of Directors held after each
annual meeting of the shareholders. If the election of officers shall not be
held at such meeting, such election shall be held as soon thereafter as
conveniently may be. Each officer shall hold office until such officer's
successor shall have been duly elected or until death or until such officer
shall resign or shall have been removed in the manner hereinafter provided.
Section 3. REMOVAL. Any officer or agent elected or appointed by the
Board of Directors may be removed by the Board of Directors whenever in its
judgment the best interests of the corporation would be served thereby, but
such removal shall be without prejudice to the contract rights, if any, of the
person so removed.
Section 4. VACANCIES. A vacancy in the office of Chairman of the Board
or President because of death, resignation, removal, disqualification or
otherwise, may be filled only by the Board of Directors for the unexpired
portion of the term. A vacancy in any other office may be filled either by the
Chairman of the Board or, after consultation with the Chairman of the Board,
by the President.
Section 5. CHAIRMAN OF THE BOARD. The Chairman of the Board, subject to
the control of the Board of Directors, and in conjunction with the President,
shall in general supervise and control all of the business, policies and
affairs of the corporation and all other officers of the corporation. The
Chairman of the Board shall, when present, preside at all meetings of the
shareholders and of the Board of Directors. The Chairman of the Board shall
perform such other duties as may be prescribed by the Board of Directors from
time to time. <PAGE>
<PAGE>
Section 6. PRESIDENT. The President, subject to the control of the
Board of Directors, and in conjunction with the Chairman of the Board, shall
in general supervise and control all of the business, policies and affairs of
the corporation and all other officers of the corporation. The President
shall perform such duties as may be prescribed by the Board of Directors from
time to time.
Section 7. SENIOR VICE PRESIDENTS AND VICE PRESIDENTS. Each corporate
Senior Vice President or Vice President shall perform such duties as may be
assigned by the Board of Directors, or the Chairman of the Board or the
President. A Senior Vice President or Vice President may be assigned the
operating authority for managing one or more operating units or service
operations of the corporation as established by the Board of Directors. Upon
assignment by the Board of Directors of operating authority for an operation
or service unit, such Senior Vice President or Vice President shall in general
supervise and control all of the business and affairs of such operation or
service unit, subject only to such supervision and direction as the Board of
Directors, the Chairman of the Board or the President may provide. Each Senior
Vice President and Vice President shall be authorized to sign contracts and
other documents related to the corporation or to the operations under such
officer's supervision and control.
Section 10. VICE PRESIDENT-FINANCE. The Vice President-Finance shall be
the principal and chief finance officer of the corporation. In that
capacity, the Vice President-Finance shall keep and maintain, or cause to be
kept and maintained accurate, correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
the assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The Vice President-Finance shall deposit all
monies and other valuables in the name and to the credit of the corporation
with such depositories as may be designated by the Board of Directors. The
Vice President-Finance shall disburse the funds of the corporation as may be
ordered by the Board of Directors, shall render to the Chairman of the Board,
or President and or the Board of Directors, upon their request, an account of
the financial condition of the corporation, and shall have such other powers
and perform such other duties as may be prescribed from time to time by the
Board of Directors, or the Chairman of the Board or the President.
Section 11. THE SECRETARY. The Secretary shall: (a) keep the minutes
of the shareholders, Board of Directors, and committees of the board meetings
in one or more books provided for that purpose; (b) see that all notices are
duly given in accordance with the provisions of these Bylaws or as required by
law; (c) be custodian of the corporate records and of the seal of the
corporation and see that the seal of the corporation is affixed to all
documents the execution of which on behalf of the corporation under its seal
is duly authorized; (d) keep a register of the post office address of each
shareholder which shall be furnished to the Secretary by such shareholder,
unless such register is maintained by the transfer agent or registrar of the
corporation; (e) have general charge of the stock transfer books of the
corporation; and (f) in general perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned by the
Board of Directors, or the Chairman of the Board or the President. <PAGE>
<PAGE>
Section 12. THE TREASURER. The Treasurer shall: (a) have charge and
custody of and be responsible for all funds and securities of the corporation;
receive and give receipts for monies due and payable to the corporation from
any source whatsoever, and deposit all such monies in the name of the
corporation in such banks, trust companies or other depositories as shall be
selected in accordance with the provisions of Article VI of these Bylaws; (b)
be responsible for filing all required tax returns, and (c) in general perform
all of the duties incident to the office of treasurer and such other duties as
from time to time may be assigned by the Board of Directors, or the Chairman
of the Board, or the President or the Vice President-Finance.
Section 13. THE CONTROLLER. The Controller shall maintain adequate
records showing the financial condition of the corporation and the results of
its operations by established accounting periods, and see that adequate audits
thereof are regularly and currently made. The Controller shall perform such
other duties as from time to time may be assigned by the Board of Directors,
or the Chairman of the Board, or the President or the Vice President-Finance.
Section 14. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
Assistant Secretaries, when authorized by the Board of Directors, may sign
with the Chairman of the Board or the President or a Vice President
certificates for shares of the corporation, the issuance of which shall have
been authorized by a resolution of the Board of Directors. The Assistant
Secretaries, in general, shall perform such duties as shall be assigned to
them by the Secretary, or by the Chairman of the Board, the President, or the
Board of Directors. The Assistant Treasurers, in general, shall perform such
duties as shall be assigned to them by the Treasurer or by the Chairman of the
Board, or the President, or the Board of Directors or the Vice President-
Finance.
Section 15. OTHER ASSISTANT AND ACTING OFFICERS. The Board of Directors
or the Chairman of the Board or, after consultation with the Chairman of the
Board, the President shall have the power to appoint any person to act as
assistant to any officer, or to perform the duties of such officer whenever
for any reason it is impracticable for such officer to act personally, and
such assistant or acting officer so appointed by the Chairman of the Board,
the Board of Directors or, after consultation with the Chairman of the Board,
by the President, shall have the power to perform all the duties of the office
to which the person is so appointed to be assistant, or as to which the person
is so appointed to act, except as such power may be otherwise defined or
restricted by the Board of Directors.
Section 16. SALARIES. The salaries of the officers shall be fixed from
time to time by the Board of Directors or by such committee or superior
officer as may be designated by the Board of Directors, and no officer shall
be prevented from receiving such salary by reason of also being a director of
the corporation.
<PAGE>
<PAGE>
ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. CONTRACTS. The Chairman of the Board or the President may at
any time execute and deliver any deeds, mortgages or bonds which the Board of
Directors has authorized to be executed and delivered and may at any time
execute and deliver any lease, bid, application, note, guarantee, consent,
election, notice or other contract, document or instrument as may be required
in the ordinary course and scope of the business of the corporation or as may
be specifically authorized by the Board of Directors. The Chairman of the
Board or the President may in writing delegate the foregoing authority, and
may delegate authority to redelegate such authority, to any other officer or
officers, agent or agents, or other persons and the authority so delegated may
be general or confined to specific instances. The Board of Directors may
authorize any other officer or officers, agent or agents or other persons to
execute and deliver any other contracts, documents or instruments and such
authority may be general or confined to specific instances.
Section 2. LOANS. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name
unless authorized by a resolution of the Board of Directors. Such authority
may be general or confined to specific instances.
Section 3. EVIDENCES OF INDEBTEDNESS. All checks, drafts or other
orders for the payment of money, notes or other evidences of indebtedness
issued in the name of the corporation, shall be signed by such officer or
officers, agent or agents of the corporation and in such manner as shall from
time to time be determined by resolution of the Board of Directors.
Section 4. DEPOSITS. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositories as the Board of
Directors, or committees or officers to whom the Board of Directors have
delegated such authority may select.
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. CERTIFICATES FOR SHARES. Certificates for shares of capital
stock of the corporation shall be in such form as shall be determined by the
Board of Directors. They shall be issued in consecutive order and shall be
numbered in the order of their issue and shall be signed by the Chairman of
the Board or the President or a Vice President and the Secretary or an
Assistant Secretary, provided, however, that if any stock certificate is
countersigned by a transfer agent, other than the corporation or its employee,
or by a registrar, other than the corporation or its employee, any other
signature, including that of any such officer, on such certificate may be a
facsimile, engraved, stamped or printed. In case any officer or agent who has
signed or whose facsimile signature shall be used on any stock certificate
shall cease to be such officer or agent of the corporation because of death,
resignation or otherwise before such stock certificate shall have been
delivered by the corporation, such stock certificate may nevertheless be
issued and delivered as though the person or agent who signed the certificate
or whose facsimile signature shall have been used thereon had not ceased to be
such officer or agent of the corporation. <PAGE>
<PAGE>
Section 2. TRANSFER OF SHARES. Upon surrender to the corporation or its
transfer agent of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall
be the duty of the corporation to issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction on its
books.
Section 3. REGISTERED SHAREHOLDERS. The corporation shall be entitled
to treat the holder of record of any share or shares of stock as the holder in
fact thereof and, accordingly, shall not be bound to recognize any equitable
claim or other interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except
as otherwise provided by the laws of Iowa.
Section 4. LOST CERTIFICATES. Upon the making of an affidavit that a
certificate has been lost or destroyed, the Board of Directors may direct that
a new certificate be issued to the person alleging the loss or destruction of
such certificate. When authorizing such issuance of a new certificate, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost or destroyed certificate or
such owner's legal representative to give the corporation a bond in such sums
as it may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost or
destroyed.
Section 5. STOCK REGULATIONS. The Board of Directors shall have the
power and authority to make all such further rules and regulations not
inconsistent with the statutes of Iowa as they may deem expedient concerning
the issue, transfer and registration of certificates representing shares of
the corporation.
ARTICLE VII. FISCAL YEAR
The fiscal year of the corporation shall be determined by the Board of
Directors.
ARTICLE VIII. DIVIDENDS
The Board of Directors may from time to time declare, and the corporation
may pay, dividends on its outstanding shares in the manner and upon the terms
and conditions provided by law and its Articles of Incorporation.
ARTICLE IX. SEAL
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation
and the state of incorporation and the words, "Corporate Seal."
<PAGE>
<PAGE>
ARTICLE X. WAIVER OF NOTICE
Whenever any notice is required to be given to any shareholder or
director of the corporation under the provisions of the Articles of
Incorporation or under the provisions of the Iowa Business Corporations Act, a
waiver thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice.
ARTICLE XI. INDEMNIFICATION OF DIRECTORS, OFFICERS OR EMPLOYEES
Section 1. RIGHT TO INDEMNIFICATION. Each person who was or is a party
or is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that such person, or a
person of whom such person is the legal representative, is or was a director,
officer or employee of the corporation or is or was serving at the request of
the corporation as director, officer or employee of another corporation or of
a partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, shall be indemnified and held harmless
by the corporation to the fullest extent consistent with the laws of Iowa as
the same now or may hereafter exist (but, in the case of any change, only to
the extent that such change authorizes the corporation to provide broader
indemnification rights than said law permitted the corporation to provide
prior to such change) against all costs, charges, expenses, liabilities and
losses (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement) reasonably incurred or
suffered by such person in connection therewith and such indemnification shall
continue as to a person who has ceased to be a director, officer or employee
and shall inure to the benefit of the heirs, executors and administrators of
such person; provided, however, that the right to indemnification conferred in
this Section shall be conditioned upon the corporation being afforded the
opportunity to participate directly on behalf of such person in such
proceeding and any settlement discussions relating thereto. The right to
indemnification conferred in this Section shall be a contract right and shall,
except with respect to an action or proceeding against the corporation by an
employee who is neither a director nor an officer of the corporation, include
the right to be paid by the corporation the expenses incurred in defending any
such proceeding in advance of its final disposition upon receipt by the
corporation of an undertaking, by or on behalf of such director, officer or
employee to repay all amounts so advanced if it shall ultimately be determined
that the director, officer or employee is not entitled to be indemnified under
this Section or otherwise.
Section 2. RIGHT OF CLAIMANT TO BRING SUIT. If a claim under Section 1
of this Article is not paid in full by the corporation within thirty days
after a written claim has been received by the corporation, the claimant may
at any time thereafter bring suit against the corporation to recover the
unpaid amount of the claim and, if successful in whole or in part, the
claimant shall also be entitled to be paid the expense of prosecuting such
claim. It shall be a defense to any action (other than an action brought to
<PAGE>
<PAGE>
enforce a claim for expenses incurred in defending any proceeding in advance
of its final disposition where the required undertaking has been tendered to
the corporation) that the claimant has failed to meet a standard of conduct
which makes it permissible under Iowa law for the corporation to indemnify the
claimant for the amount claimed, but the burden of proving such defense shall
be on the corporation. Neither the failure of the corporation (including its
Board of Directors, independent legal counsel, or its shareholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is permissible in the circumstances because
such person has met such standard of conduct, nor an actual determination by
the corporation (including its Board of Directors, independent legal counsel,
or its shareholders) that the claimant has not met such standard of conduct,
nor the termination of any proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent, shall create a
presumption that the claimant has failed to meet the required standard of
conduct.
Section 3. NON-EXCLUSIVITY OF RIGHTS. The right to indemnification and
the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article shall not be exclusive of any
other right which any person may have or hereafter acquire under any statute,
provision of the Articles of Incorporation, bylaw, agreement, vote of
shareholders or disinterested directors or otherwise.
Section 4. INSURANCE. The corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
corporation would have the power to indemnify such person against such
expense, liability or loss under Iowa law.
Section 5. EXPENSES AS A WITNESS. To the extent that any director,
officer or employee of the corporation is by reason of such position, or a
position with another entity at the request of the corporation, a witness in
any proceeding, such person shall be reimbursed for all costs and expenses
actually and reasonably incurred in connection therewith.
Section 6. EFFECT OF AMENDMENT. Any amendment, repeal or modification
of any provision of this Article by the shareholders or the directors of the
corporation shall not adversely affect any right or protection of a director,
officer or employee of the corporation existing at the time of such amendment,
repeal or modification.
Section 7. SEVERABILITY. In the event any one or more of the
provisions contained in this Article shall, for any reason, be held to be
invalid, illegal or unenforceable, such invalidity, illegality, or
unenforceability shall not affect any other provisions of this Article.
ARTICLE XII. AMENDMENTS
These Bylaws may be altered, amended or repealed and new Bylaws may be
adopted by the Board of Directors at any regular or special meeting of the
Board of Directors.
Exhibit 4.3
TELEGROUP, INC.
$20,000,000
12% Senior Subordinated Notes
due November 27, 2003
and
Warrants to Purchase Common Stock
-----------------------------
NOTE AND WARRANT PURCHASE AGREEMENT
-----------------------------
Dated as of November 27, 1996
<PAGE>
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
Section 1 Authorization of Notes.............................1
Section 2 Sale and Purchase of the Securities................2
2.1 Sale and Purchase............................2
2.2 Tax Treatment................................3
Section 3 Closing............................................3
Section 4 Conditions to Closing..............................4
4.1 Representations and Warranties...............4
4.2 Performance; No Default......................4
4.3 Indenture; Note Guarantees...................5
4.4 Compliance Certificate.......................5
4.5 Opinions of Counsel..........................5
4.6 Sale of Other Securities.....................5
4.7 Private Placement Numbers....................6
4.8 Payment of Closing Fees......................6
4.9 Compliance with Securities Laws..............6
4.10 Proceedings and Documents....................6
4.11 Secretary's Certificate......................6
4.12 Consummation of Transactions.................7
4.13 No Adverse Legislation, Action or
Decision, Etc..............................7
4.14 No Actions Pending...........................7
4.15 Reservation of Common Stock..................7
4.16 Closing and Funding Notices..................8
Section 5 Representations and Warranties of the Issuer.......8
5.1 Organization, Standing, Qualification, Etc...8
5.2 Authorization................................8
5.3 Capital Stock................................9
5.4 Subsidiaries and Other Equity Interests.....10
5.5 No Violation or Conflict; No Default........11
5.6 No Material Adverse Change;
Financial Statements .....................12
5.7 Third Party Consents........................13
<PAGE>
<PAGE>
5.8 Litigation..................................14
5.9 Taxes.......................................14
5.10 Environmental Matters.......................15
5.11 Labor and Employment Matters................17
5.12 ERISA.......................................18
5.13 Intellectual Property.......................19
5.14 Compliance with Laws........................20
5.15 Title to Properties; Liens..................20
5.16 No Violation of Regulations of Board
of Governors of Federal Reserve System....21
5.17 Governmental Regulations....................21
5.18 Private Offering............................22
5.19 Transactions with Affiliates................22
5.20 Use of Proceeds.............................23
<PAGE>
<PAGE>
5.21 Brokers.....................................23
5.22 Solvency....................................23
5.23 Full Disclosure.............................23
Section 6 Expenses; Indemnification.........................24
6.1 Expenses....................................24
6.2 Indemnification.............................27
Section 7 Purchase for Investment; Source of Funds; Other
Representations and Warranties.................30
7.1 Purchase for Investment.....................31
7.2 Source of Funds.............................31
7.3 No Investment Advice........................32
7.4 Certain Definitions.........................33
7.5 Authorization...............................33
7.6 Enforceability..............................33
7.7 No Public Market............................33
Section 8 Miscellaneous.....................................34
8.1 Amendments, Etc.............................34
8.2 Survival of Agreements, Representations
and Warranties............................34
8.3 Successors and Assigns......................35
8.4 Entire Agreement............................35
8.5 Reproduction of Documents...................35
8.6 Notices, Etc................................35
8.7 Severability................................36
<PAGE>
<PAGE>
8.8 Counterparts................................36
8.9 Table of Contents; Headings.................36
8.10 Satisfaction Requirement....................36
8.11 Solicitation of Holders.....................36
8.12 Substitution of Purchaser...................37
8.13 WAIVER OF JURY TRIAL........................38
8.14 GOVERNING LAW...............................38
Exhibit A Form of Indenture
Exhibit B Form of Warrant
Exhibit C Form of Opinion of Issuer's Counsel
Schedule 2.1 Schedule of Purchasers
Schedule 5.3 Preemptive Rights
Schedule 5.4 Subsidiaries and Other Equity Interests
Schedule 5.5 No Violation or Conflict; No Default
Schedule 5.7 Third-Party Consents
Schedule 5.8 Litigation
Schedule 5.9 Taxes
Schedule 5.10 Environmental Matters
Schedule 5.11 Labor and Employment Matters
Schedule 5.12 ERISA
Schedule 5.13 Intellectual Property
Schedule 5.14 Compliance with Laws
Schedule 5.15 Title to Properties/Liens
Schedule 5.16 No Violation
Schedule 5.17 Government Regulations
Schedule 5.18 Private Offering
Schedule 5.19 Transactions with Affiliates
Schedule 5.20 Use of Proceeds
<PAGE>
<PAGE>
THIS NOTE AND WARRANT PURCHASE AGREEMENT IS AN INTEGRAL PART OF, AND IS
SUBJECT TO THE TERMS AND CONDITIONS OF, THE INDENTURE REFERRED TO
HEREIN.
Telegroup, Inc.
2098 Nutmeg Avenue
Fairfield, Iowa 52556
$20,000,000 12% Senior Subordinated
Notes due November 27, 2003
as of November 27, 1996
TO EACH OF THE PURCHASERS
LISTED ON THE ATTACHED
SCHEDULE OF PURCHASERS
Ladies and Gentlemen:
Telegroup, Inc. (the "Issuer"), a corporation organized and
existing under the laws of the State of Iowa, hereby agrees with you as
follows:
Section 1
Authorization of Notes
----------------------
The Issuer has authorized the issue and sale of (a) $20,000,000 of
its 12% Senior Subordinated Notes due November 27, 2003 (the "Notes"),
-----
which shall be issued pursuant to an Indenture substantially in the form
of Exhibit A hereto (together with all amendments and supplements
---------
thereto entered into in accordance with its terms, herein called the
"Indenture") to be entered into by the
--------<PAGE>
<PAGE>
Company and Chase Manhattan Bank, N.A., as Trustee, and which Notes
shall be substantially in the form of Exhibit A to the Indenture, and
(b) warrants to purchase up to 5% of the shares of Common Stock of the
Company, no par value per share (the "Common Stock") on a fully diluted
------------
basis (the "Warrants" and, together with the Notes, the "Securities") at
-------- ----------
an exercise price of $.01 per share of Common Stock, which warrants
shall be issued pursuant to a form of Warrant substantially in the form
of Exhibit B hereto and shall be entitled to the registration rights set
---------
forth in the Registration Rights Agreement attached to the Warrants (the
"Registration Rights Agreement"). The Notes will bear interest on the
unpaid principal amount thereof from the date of the Note until maturity
at the rate of 12.00% per annum payable semi-annually in arrears on
May 26 and November 27 of each year, with the initial payment of
interest to be made on May 26, 1996. Certain capitalized terms used in
this Agreement but not defined herein are as defined in Section 1.01 of
the Indenture; references to a "Schedule" or an "Exhibit" are, unless
otherwise specified, to a Schedule or an Exhibit attached to this
Agreement.
Section 2
Sale and Purchase of the Securities
-----------------------------------
2.1 Sale and Purchase. Subject to the terms and conditions of
-----------------
this Agreement, the Issuer will issue and sell to you and you will
purchase from the Issuer, at the Closing provided for in Section 3,
Notes in the principal amount specified opposite your name on Schedule
2.1 hereto and Warrants for the purchase of the shares of Common Stock
specified opposite your name on Schedule 2.1, at the aggregate purchase
price of 100% of the principal amount of the Notes. Contemporaneously
with entering into this Agreement, the Issuer is entering into separate
Note and Warrant Purchase Agreements (the "Other Agreements") identical
----------------
to this Agreement with each of the other purchasers named in Schedule
2.1 (the "Other Purchasers"),
----------------<PAGE>
<PAGE>
providing for the sale to each of theOther Purchasers, at the Closing,
of Notes in the respective principal amounts and Warrants for the
purchase of the respective shares of Common Stock specified opposite
their names on Schedule 2.1. The sales of the Securities to you and to
the Other Purchasers are to be separate sales, and this Agreement and
the Other Agreements are to be separate agreements.
2.2 Tax Treatment. The Issuer and, by purchasing any of the
-------------
Securities, you covenant and agree to treat such Notes as debt for U.S.
federal, state and local income and franchise tax purposes. The Issuer
and you, by purchasing any of the Securities, agree that for purposes of
Treasury Regulation Section 1.1273-2(h), the aggregate purchase price
allocated to the Warrants is equal to 1.7% of the total purchase price
and the remainder of the purchase price is allocated to the Notes, and
to use the foregoing for all U.S. federal, state and local income tax
purposes.
Section 3
Closing
-------
The sale of the Securities to be purchased by you and the Other
Purchasers shall take place at the offices of Debevoise & Plimpton, 875
Third Avenue, New York, New York at 10:00 A.M., New York City time, at a
closing (the "Closing") on November 27, 1996 or at such later date as
-------
may be agreed upon by the Issuer and you and such Other Purchasers,
provided that in no event shall the date of Closing be later than
--------
December 31, 1996. At the Closing the Issuer will deliver to you (a)
the Notes to be sold to you in the form of a single Note (or such
greater number of Notes as you may request), dated the date of the
Closing and registered in your name (or in the name of your nominee as
indicated on Schedule 2.2 or otherwise made known by you to the Issuer
prior to the Closing) and (b) the Warrants to be sold to you in the form
of a single Warrant (or such greater number of Warrants as you may
request), dated the date of<PAGE>
<PAGE>
the Closing and registered in your name (or in the name of your nominee
as indicated on Schedule 2.2 or otherwise made known by you to the
Issuer prior to the Closing), against delivery by you to the Issuer of
immediately available funds by federal wire transfer in the amount of
the purchase price therefor. If at the Closing the Issuer shall fail to
tender such Securities to you as provided above in this Section 3, or
any of the conditions specified in Section 4 shall not have been
fulfilled to your satisfaction, you shall, at your election, be relieved
of all further obligations under this Agreement, without thereby waiving
any other rights you may have by reason of such failure or such
nonfulfillment. The Issuer shall have the right to deposit the proceeds
of the Securities in an account or accounts in its own name in any bank
or trust company.
Section 4
Conditions to Closing
---------------------
Your obligations to purchase and pay for the Securities to be sold
to you at the Closing is subject to the fulfillment to your
satisfaction, prior to or at the Closing (except as otherwise specified
below), of the following conditions:
4.1 Representations and Warranties. The representations and
------------------------------
warranties of the Issuer contained in this Agreement shall be true and
correct in all material respects when made and at the time of the
Closing.
4.2 Performance; No Default. The Issuer shall have performed
-----------------------
and complied with all agreements and conditions contained herein
required to be performed or complied with by it prior to or at the
Closing. At the time of the Closing, no event of acceleration or
potential event of acceleration or Event of Default or Potential Event
of Default shall have occurred and be continuing.
<PAGE>
<PAGE>
4.3 Indenture; Note Guarantees. The Issuer, each of its
--------------------------
Subsidiaries, and the Trustee shall have duly authorized, executed and
delivered the Indenture, such Indenture shall be in full force and
effect and you shall have received an originally executed copy of such
Indenture specifying the terms of the Notes and supplementing this Note
and Warrant Purchase Agreement to the extent set forth therein. Each
wholly-owned Subsidiary of the Issuer (other than each wholly-owned
Subsidiary listed on Schedule 4.3 hereto) shall have duly authorized,
executed and delivered a Note Guarantee, each such Note Guarantee shall
be in full force and effect and you shall have received an originally
executed copy of each such Note Guarantee.
4.4 Compliance Certificate. You shall have received an
----------------------
Officer's Certificate of the Issuer, dated the date of the Closing and
satisfactory in form and substance to you, certifying that the
conditions specified in Section 4.1 and 4.2 have been fulfilled and
certifying that, after giving effect to the issuance of all of the
Securities, the Issuer will be in compliance with all limitations on the
incurrence by the Issuer of Indebtedness contained in any instrument or
agreement applicable to or binding on the Issuer in effect on the date
of the Closing.
4.5 Opinions of Counsel. You shall have received from (a)
-------------------
Swidler & Berlin, counsel for the Issuer and (b) Debevoise & Plimpton,
your special counsel in connection with the transactions contemplated by
this Agreement, favorable opinions substantially in the form set forth
as Exhibits C and D, respectively, each addressed to you, dated the date
of the Closing and otherwise satisfactory in substance and form to you.
4.6 Sale of Other Securities. Contemporaneously with the
------------------------
Closing, the Issuer shall sell to the Other Purchasers the Securities
specified in the Schedule of Purchasers to be purchased by them at the
Closing.
<PAGE>
<PAGE>
4.7 Private Placement Numbers. The Issuer shall have obtained
-------------------------
for the Notes a Private Placement Number issued by Standard & Poor's
CUSIP Service Bureau (in cooperation with the Securities Valuation
Office of the National Association of Insurance Commissioners).
4.8 Payment of Closing Fees. The Issuer shall have paid the
-----------------------
reasonable fees, expenses and disbursements of Debevoise & Plimpton,
special counsel to the Purchasers, including reasonable estimated fees,
expenses and disbursements in connection with incidental post-Closing
matters, which are reflected in statements of such counsel rendered
prior to or on the date of the Closing and are required to be paid by
the Issuer pursuant to Section 6.1.
4.9 Compliance with Securities Laws. The offering and sale of
-------------------------------
the Securities to be issued at the Closing shall have complied with all
applicable requirements of federal and state securities laws, and you
shall have received evidence thereof satisfactory to you.
4.10 Proceedings and Documents. All corporate and other
-------------------------
proceedings in connection with the transactions contemplated hereby and
all documents and instruments incident to such transactions shall be
satisfactory to you and your special counsel, and you and your special
counsel shall have received all such counterpart originals or certified
or other copies of such documents as you or they may reasonably request.
4.11 Secretary's Certificate. You shall have received a
-----------------------
Certificate, dated the date of the Closing, of the Secretary or an
Assistant Secretary of the Issuer, certifying as to (a) the incumbency
of the officers or representatives of the Issuer signing documents
specified herein on behalf of the Issuer, (b) the charter documents of
the Issuer not having been amended and being in full force and effect,
copies of which charter documents shall be attached to such certificates
and (c) the resolutions adopted by the board of the Issuer approving the
documents<PAGE>
<PAGE>
and/or transactions contemplated hereby having been adopted and not
amended, copies of which resolutions shall be attached to such
certificates.
4.12 Consummation of Transactions. All conditions precedent to
----------------------------
the consummation of the transaction described herein shall have
occurred, all governmental authorizations, consents, approvals,
exemptions or other actions required in connection with the transaction
shall have been duly received or taken, and the transaction shall have
been duly consummated substantially in accordance with the terms of this
Agreement.
4.13 No Adverse Legislation, Action or Decision, Etc. No
------------------------------------------------
legislation shall have been enacted by either house of Congress or by
any state legislature, no other action shall have been taken by any
United States, state, local or foreign governmental authority, whether
by order, regulation, rule, ruling or otherwise, and no decision shall
have been rendered by any court of competent jurisdiction in the United
States or abroad, which would materially adversely affect the Securities
being purchased by you hereunder as an investment.
4.14 No Actions Pending. There shall be no suit, action,
------------------
investigation, inquiry or other proceeding by any governmental body or
any other Person or any other legal or administrative proceeding pending
or threatened which seeks to enjoin or otherwise prevent the
consummation of, or to recover any damages or obtain relief as a result
of, the transaction contemplated hereby.
4.15 Reservation of Common Stock. The shares of Common Stock
---------------------------
then issuable upon the exercise of the Warrants shall have been duly
authorized and reserved for issuance upon such exercise (assuming, for
such purpose, that the Public Equity Offering does not occur until after
January 1, 1998).
<PAGE>
<PAGE>
4.16 Closing and Funding Notices. You shall have received at
---------------------------
least three Business Days prior to the date of the Closing sufficient
instructions for wiring funds to the account of the Issuer (or to such
other account as directed by the Issuer) in accordance with Section 3.
Section 5
Representations and
Warranties of the Issuer
------------------------
The Issuer represents and warrants on and as of the date hereof,
and as of the date of the Closing, as follows:
5.1 Organization, Standing, Qualification, Etc. The Issuer and
------------------------------------------
each Subsidiary of the Issuer is a corporation duly incorporated,
validly existing and in good standing under the laws of its jurisdiction
of organization, has all the requisite power and authority to own and
operate its properties and assets and to carry on its business as now
conducted and proposed to be conducted and is qualified to do business
in every jurisdiction where such qualification or registration is
required, except where the failure to qualify or register would not have
a Material Adverse Effect (as defined in Section 5.6).
5.2 Authorization. (a) The Issuer has taken all actions
--------------
necessary to authorize it (i) to execute, deliver and perform all of its
obligations under this Agreement, the Indenture and the Registration
Rights Agreement, (ii) to issue and perform all of its obligations under
the Securities, and (iii) to consummate the transactions contemplated
hereby and thereby. Each of this Agreement, the Securities, the
Indenture and the Registration Rights Agreement is (or will be when
executed and delivered) a legally valid and binding obligation of the
Issuer, enforceable against it in accordance with its respective terms,
except as such enforceability may be<PAGE>
<PAGE>
limited by applicable of bankruptcy, insolvency, reorganization, mora-
torium and other laws relating to or affecting the rights of creditors
generally and by general principles of equity (regardless of whether
such enforceability is sought in equity or at law).
(b) The Issuer has caused each of its Subsidiaries to take all
actions necessary to authorize such Subsidiary (i) to execute, deliver
and perform all of its obligations under the Indenture and the Note
Guarantee and to consummate the transactions contemplated thereby. The
Indenture and the Note Guarantee is (or will be when executed and
delivered) a legally valid and binding obligation of each such
Subsidiary, enforceable against it in accordance with its respective
terms, except as such enforceability may be limited by applicable of
bankruptcy, insolvency, reorganization, moratorium and other laws
relating to or affecting the rights of creditors generally and by
general principles of equity (regardless of whether such enforceability
is sought in equity or at law).
5.3 Capital Stock. At the time of the Closing and after
-------------
giving effect to the transactions contemplated hereby, (i) the
authorized capital stock of the Issuer shall consist of 10,000,000
shares of Class A Common Stock, of which 4,367,832 shares shall be
issued and outstanding and 211,701 shares shall be reserved for issuance
upon exercise of the Warrants, and 5,000,000 shares of Class B Common
Stock, of which 415,362 shares shall be issued and outstanding and
387,827 shares shall be reserved for issuance upon exercise of options
(of which 297,632 have previously been granted), and (ii) all such
outstanding shares of Common Stock shall be duly authorized, validly
issued, fully paid and nonassessable, and, except as set forth on
Schedule 5.3, no class of capital stock of the Issuer shall be entitled
to preemptive rights. At the time of the Closing and after giving
effect to the transactions contemplated hereby, other than the Warrants
and as set forth above or on Schedule 5.3, there are no outstanding (w)
<PAGE>
<PAGE>
securities convertible into or exchangeable for any equity interests of
the Issuer, (x) options, warrants or other rights to purchase or
subscribe to equity interests of the Issuer or securities convertible
into or exchangeable for equity interests of the Issuer, (y) contracts,
commitments, agreements, understandings, arrangements, calls or claims
of any kind relating to the issuance of any equity interests of the
Issuer, any such convertible or exchangeable securities or any such
options, warrants or rights or (z) voting trusts, agreements, contracts,
commitments, understandings or arrangements with respect to the voting
or disposition of any of the equity interests of the Issuer.
(b) Except for the Registration Rights Agreement, the Issuer
has not entered into an agreement to register its securities or the
securities of any of its Subsidiaries under the Securities Act. Except
for this Agreement, the Issuer has not entered into any agreement to
issue, purchase or sell any of its securities or the securities of any
of its Subsidiaries.
5.4 Subsidiaries and Other Equity Interests. Schedule 5.4
---------------------------------------
correctly lists as to each Subsidiary of the Issuer (i) its name,(ii)the
jurisdiction of its incorporation, and (iii) the percentage of its
issued and outstanding shares owned by the Issuer or another Subsidiary.
Except as set forth on Schedule 5.4, all such shares indicated as owned
by the Issuer or any of its Subsidiaries are so owned beneficially and
of record by the Issuer or such Subsidiary free and clear of any Lien.
All of the outstanding shares of capital stock of each Subsidiary of the
Issuer are duly authorized, validly issued, fully paid and
nonassessable, and no class of capital stock of any Subsidiary is
entitled to preemptive rights. There are no (w) securities convertible
into or exchangeable for any equity interests of any Subsidiary of the
Issuer, (x) options, warrants or other rights to purchase or subscribe
to equity interests of any such Subsidiary or securities convertible
into or exchangeable for equity interests of any such Subsidiary, (y)
contracts,<PAGE>
<PAGE>
commitments, agreements, understandings, arrangements, calls or claims
of any kind relating to the issuance of any equity interests of any such
Subsidiary, any such convertible or exchangeable securities or any such
options, warrants or rights or (z) voting trusts, agreements, contracts,
commitments, understandings or arrangements with respect to the voting
or disposition of any of the equity interests of any such Subsidiary.
5.5 No Violation or Conflict; No Default. (a) Neither the
------------------------------------
execution, delivery or performance of this Agreement, the Securities,
the Note Guaranties, the Indenture or the Registration Rights Agreement,
nor the compliance with the respective obligations hereunder or there-
under, nor the consummation of the transactions contemplated hereby and
thereby, nor the issuance, sale or delivery of the Securities will:
(i) violate any provision of the articles of incorporation
or bylaws of the Issuer or any of its Subsidiaries;
(ii) violate any statute, law, rule or regulation or any
judgment, decree, order, regulation or rule of any court or
governmental authority or body to which the Issuer or any of its
Subsidiaries or any of their respective properties may be subject;
(iii) permit or cause the acceleration of the maturity of
any Indebtedness of the Issuer or any of its Subsidiaries; or
(iv) violate, or be in conflict with, or constitute a
default under, or permit the termination of, or require the consent
of any Person under, or result in the creation or imposition of any
Lien (other than Permitted Liens) upon any property of the Issuer
or any of its Subsidiaries under, any mortgage, indenture, loan
agreement, note, debenture, agreement for borrowed money or any
other agreement to which the Issuer or any<PAGE>
<PAGE>
of its Subsidiaries is a party or by which the Issuer or any of its
Subsidiaries (or their respective properties) may be bound, other
than such violations, conflicts, defaults, terminations and Liens,
or such failures to obtain consents, which could not reasonably be
expected to result in a Material Adverse Effect.
(b) Neither the Issuer nor any of its Subsidiaries is in
default (without giving effect to any grace or cure period or notice
requirement) under any agreement for borrowed money or under any agree-
ment pursuant to which any of its securities were sold.
5.6 No Material Adverse Change; Financial Statements.
------------------------------------------------
(a) No Material Adverse Change. Since December 31, 1995, neither the
--------------------------
Issuer nor any of its Subsidiaries has suffered any change in its
properties, business, operations, assets, condition (financial or
otherwise) or prospects which could reasonably be expected to result in
a material adverse effect (a) upon the business, operations, properties,
assets, condition (financial or otherwise) or prospects of the Issuer
and its Subsidiaries on a consolidated basis or (b) on the ability of
the Issuer or any of its Subsidiaries to perform its obligations under
this Agreement, the Securities, the Indenture, the Note Guarantee or the
Registration Rights Agreement, as the case may be (a "Material Adverse
----------------
Effect").
------
(b) Financial Statements. The Issuer has previously provided
--------------------
to you (i) its unaudited consolidated balance sheet as of September 30,
1996 and its audited consolidated balance sheets as of December 31,
1995, 1994 and 1993 and (ii) related consolidated statements of income,
changes in shareholders' equity and cash flows for the interim period
ended on September 30 1996 and the years ended December 31, 1995, 1994
and 1993. Such financial statements are true and complete and present
fairly the consolidated financial position, results of operations,
shareholders' equity and cash flows of the Issuer at the respective
dates or for the respective periods to which they<PAGE>
<PAGE>
apply. Except as disclosed therein, such statements and related notes
have been prepared in accordance with GAAP consistently applied
throughout the periods involved (subject, in the case of interim
statements, to normal year-end adjustments).
(c) Projections. The Issuer has previously provided you true
-----------
and complete copies of (i) forecasts or projections of its consolidated
revenues, earnings before depreciation, interest and taxes, operating
margins, net income and capital expenditures for each of the 1996, 1997,
1998, 1999 and 2000 fiscal years, prepared by senior management of the
Issuer, in each case assuming the issuance of the Securities and (ii)
the assumptions and supplemental data used in preparing such
projections. Such projections were prepared on the basis of such
assumptions and supplemental data, which represent a reasonable basis
for such preparation. The projections, assumptions and supplemental
data reflect the best currently available estimates and judgment of the
Issuer's senior management as to the expected future financial
performance of the Issuer, it being understood that the actual future
performance of the Issuer may vary materially from the projections.
5.7 Third Party Consents. Neither the nature of the Issuer or
--------------------
its Subsidiaries, nor of any of its or their businesses or properties,
nor any circumstance in connection with the offer, issuance, sale or
delivery of the Securities at the Closing nor the performance by the
Issuer or its Subsidiaries, of their other obligations hereunder, under
the Indenture, the Note Guarantees or under the Registration Rights
Agreement, as the case may be, or the consummation of the transactions
contemplated by the Securities, this Agreement, the Indenture, the Note
Guarantees or the Registration Rights Agreement is such as to require a
consent, approval or authorization of, or notice to, or filing,
registration or qualification with, any governmental authority or other
Person on the part of the Issuer or any of its Subsidiaries as a
condition to the execution and delivery of this Agreement, the
Indenture, the<PAGE>
<PAGE>
Note Guarantees, the Registration Rights Agreement or the offer, issu-
ance, sale or delivery of the Securities at the Closing, other than such
consents, approvals, authorizations, notices, filings, registrations or
qualifications which shall have been made or obtained on or prior to the
Closing Date (and copies of which will be delivered to the Purchasers)
and such filings under federal and state securities laws which are
permitted to be made after the Closing Date and which the Issuer hereby
agrees to file, or cause to be filed, within the time period prescribed
by applicable law, all of which are listed on Schedule 5.7 hereto.
5.8 Litigation. There is no action, claim, suit, citation or
----------
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition) pending, or to the knowledge of the
Issuer, threatened ("Proceedings") against or affecting the Issuer or
-----------
its Subsidiaries or any of their respective properties or assets, except
for such Proceedings that, if finally determined adversely to any of the
Issuer or its Subsidiaries, could not reasonably be expected to have a
Material Adverse Effect. There is no Proceeding seeking to restrain,
enjoin, prevent the consummation of or otherwise challenge this
Agreement, the Indenture, the Note Guarantees, the Registration Rights
Agreement, the issuance of the Securities or the transactions contem-
plated hereby or thereby. Neither the Issuer nor any of its
Subsidiaries is subject to any judgment, order, decree, rule or
regulation of any court, governmental authority or arbitration board or
tribunal that has had a Material Adverse Effect or that could reasonably
be expected to have a Material Adverse Effect.
5.9 Taxes. All U.S. federal, state, local and foreign tax
-----
returns, declarations, statements, reports, schedules, forms and
information returns relating to all U.S. federal, state, local and
foreign taxes and other assessments of a similar nature (whether imposed
directly or through withholding), including any interest, additions to
<PAGE>
<PAGE>
tax, or penalties applicable thereto ("Taxes") required to be filed by
-----
the Issuer or any of its Subsidiaries have been timely filed and such
returns are true, complete and correct in all material respects. All
Taxes due or claimed to be due from the Issuer or any of its
Subsidiaries that are due and payable have been paid, other than those
being contested in good faith and for which an adequate reserve or
accrual has been established in accordance with GAAP. The Issuer does
not know of any actual or proposed material additional Tax assessments
or any probable basis for the imposition of any material additional Tax
assessments for any fiscal period against it or any of its Subsidiaries.
5.10 Environmental Matters. Except as could not reasonably be
---------------------
expected to have a Material Adverse Effect:
(a) the Issuer and each of its Subsidiaries is in full
compliance with all Environmental Laws (as defined below), which
compliance includes, but is not limited to, (i) the possession of
all permits, licenses, approvals and other authorizations required
under any Environmental Laws or with respect to the operation of
the Issuer's business, property and assets, and compliance with the
terms and conditions thereof and (ii) the making and filing of all
reports, forms and documents and the maintenance of all records
required to be made, filed or maintained by it under any
Environmental Law;
(b) (i) neither the Issuer nor any of its Subsidiaries has
received any communication (written or oral), whether from a
governmental authority, citizens group, employee or otherwise, that
alleges that it is not in full compliance with any Environmental
Law; (ii) neither the Issuer nor any of its Subsidiaries has any
current liability under any Environmental Law and there is no
Environmental Claim (as defined below) pending or threatened
against the Issuer or any of its Subsidiaries; and (iii) there are
no past or present actions, activities, circumstances, conditions,
events<PAGE>
<PAGE>
or incidents (including the release, emission, discharge,
presence or disposal of any Hazardous Materials (as defined below))
that may be expected to prevent or interfere with full compliance
with applicable Environmental Laws in the future, give rise to any
common law or legal liability or otherwise form the basis for any
Environmental Claim;
(c) no real property or facility owned, used, operated,
leased, managed or controlled by the Issuer or any of its
Subsidiaries, or any predecessor in interest, is (i) listed or
proposed for listing on the National Priorities List or the
Comprehensive Environmental Response, Compensation, and Liability
Information System pursuant to the Comprehensive Environmental
Response, Compensation, and Liability Act, as amended, or on any
other state or local list established pursuant to any Environmental
Law or (ii) contains any underground storage tank;
(d) neither the Issuer nor any of its Subsidiaries has in
curred and the Issuer does not expect to incur or for any of its
Subsidiaries to incur liability for contamination at, on, under,
from or into any on-site or off-site locations where it has stored,
disposed or arranged for the disposal of Hazardous Materials; and
(e) For purposes of this Agreement, (i) "Environmental Claim"
means any claim, action, cause of action, demand, suit, proceeding,
hearing, investigation of which the Issuer, including any of its
employees, is aware, or notice (written or oral) by any Person
alleging potential liability (including, without limitation,
potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property
damages, personal injuries, or penalties) arising out of, based on
or resulting from (a) the presence, or release into the environ
ent, of any Hazardous Material at any location,<PAGE>
<PAGE>
whether or not owned or operated by the Issuer or its Subsidiaries,
or (b) circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law; (ii) "Environmental Laws"
means all federal, state, local and foreign Laws relating to
pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata), including, without
limitation, Laws relating to emissions, discharges, releases or
threatened releases of Hazardous Materials, or otherwise relating
to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials;
and (iii) "Hazardous Materials" means chemicals, pollutants,
contaminants, industrial, toxic or hazardous wastes, substances or
constituents, petroleum and petroleum products (or any by-product
or constituent thereof), asbestos or asbestos-containing materials
or polychlorinated biphenyl.
5.11 Labor and Employment Matters. Except as set forth on
----------------------------
Schedule 5.11, (a) there is no labor strike, dispute, slowdown, work
stoppage or lockout actually pending or, to the best knowledge of the
Issuer, after due inquiry (which knowledge, for purposes of this Section
5.11, shall be deemed to include the Issuer, its Subsidiaries and its
and their Affiliates or any Person for whom the Issuer is or may be
responsible by law or contract), threatened against or affecting the
Issuer or its Subsidiaries and, during the past five years, there has
not been any such action; (b) no union, employee association or other
labor organization represents or claims to represent the employees of
the Issuer or its Subsidiaries and no union, employee association or
other labor organization is actively soliciting representation among
such employees and no question of representation exists concerning such
employees; (c) neither the Issuer nor any of its Subsidiaries is a party
to or bound by any collective bargaining or similar agreement with any
labor organization, or work rules or practices agreed to<PAGE>
<PAGE>
with any labor organization or employee association applicable to em-
ployees of the Issuer or its Subsidiaries; (d) there is no grievance or
arbitration proceeding arising out of any collective bargaining or
similar agreement or other grievance procedure relating to the Issuer or
its Subsidiaries; (e) to the best knowledge of the Issuer, no charges or
complaints relating to the Issuer or its Subsidiaries are pending before
the Equal Employment Opportunity Commission or any other corresponding
state or foreign agency; and (f) to the best knowledge of the Issuer, no
federal, state, local or foreign agency responsible for the enforcement
of labor or employment laws, immigration laws, occupational health and
safety laws or any other Law affecting the employees of the Issuer or
its Subsidiaries intends to conduct or currently is conducting an
investigation with respect to or relating to the Issuer or its
Subsidiaries, and no such agencies have threatened to or have filed any
claims, charges, complaints or citations against the Issuer or its
Subsidiaries.
5.12 ERISA. Based upon the Purchasers' representation in
-----
Section 7.2, the execution and delivery of this Agreement and the sale
of the Securities to the Purchasers will not involve any non-exempt
"prohibited transaction." Except as set forth on Schedule 5.12 hereto,
neither the Issuer nor any of its ERISA Affiliates is a "party in
interest" or a "disqualified person" with respect to any "employee
benefit plan." No condition exists or event or transaction has occurred
in connection with any "employee benefit plan" maintained or contributed
to by the Issuer or any of its ERISA Affiliates (any such plan being
herein referred to as an "Issuer Plan") that has resulted or is
reasonably likely to result in the Issuer or any such ERISA Affiliate
incurring any liability, fine or penalty except as could not reasonably
be expected to have a Material Adverse Effect. No Issuer Plan is a
"multiemployer plan" (as defined in Section 3(37) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or is a
"multiple employer plan" within the meaning of Sections 4063 or 4064 of
ERISA. No Issuer Plan is subject to Title IV of ERISA or<PAGE>
<PAGE>
Section 412 of the Internal Revenue Code of 1986, as amended (the
"Code"). There is no liability under Title IV of ERISA, whether actual
or contingent. No amounts payable pursuant to any plan, policy, scheme,
arrangement, contract or agreement will, in connection with the
transactions contemplated under this Agreement fail to be deductible for
federal income tax purposes by virtue of section 280G of the Code. Each
Issuer Plan that is intended to be qualified under Section 401(a) of the
Code and the trust forming part thereof, has received a favorable
determination letter from the IRS and nothing has occurred since the
date of such determination letter that could adversely affect such
qualification or tax-exempt status. The transactions contemplated under
this Agreement will not result in an increase in the amount of
compensation or benefits or the acceleration of the vesting or timing of
payment of any compensation or benefits payable to or in respect of any
employee. The terms "employee benefit plan" and "party in interest"
shall have the meanings assigned to such terms in Section 3 of ERISA,
the term "disqualified person" shall have the meaning assigned to such
term in section 4975 of the Code, the term "prohibited transaction"
shall have the meaning assigned to such term in Section 406 of ERISA and
section 4975 of the Code, and the term "ERISA Affiliate" shall have the
meaning assigned to such term in Section 407 of ERISA.
5.13 Intellectual Property. Except as set forth on Schedule
---------------------
5.13 hereto, each of the Issuer and its Subsidiaries owns or has the
legal right to use all U.S. and foreign trademarks, service marks, trade
names, trade dress, domain names, copyrights and patents (including
registrations and applications therefor), computer software, data and
documentation, inventions, processes, designs, trade secrets,
confidential information and know-how (collectively, "Intellectual
------------
Property"), necessary to conduct its business free and clear of all
--------
liens or other encumbrances. Neither the Issuer nor its Subsidiaries
has received any notice of infringement of or conflict with (or knows or
should know of any such infringement of or<PAGE>
<PAGE>
conflict with) asserted rights of others with respect to its use of such
Intellectual Property. To the best knowledge of the Issuer, all such
Intellectual Property material to its or their business is valid and
enforceable and the Issuer or its Subsidiaries has paid all required
fees and taxes to maintain all registrations and applications of such
Intellectual Property in full force and effect. The Issuer and its
Subsidiaries do not in the conduct of their business infringe or
conflict with any right of any third party, where such infringement or
conflict could reasonably be expected to result in any Material Adverse
Effect and no third party is infringing any Intellectual Property owned
or controlled by the Issuer or its Subsidiaries. All license agreements
to which the Issuer or any of its Subsidiaries is a party relating to
Intellectual Property are valid and binding obligations of the Issuer or
its Subsidiaries, as the case may be, enforceable in accordance with
their terms, and there are no breaches or defaults thereunder. Neither
the Issuer nor its Subsidiaries is obligated to pay any royalty with
respect to any Intellectual Property except as set forth on Schedule
5.13 hereto. All proprietary software of the Issuer or any subsidiary
and, to the best knowledge of the Issuer all licensed software used in
their business that contains or calls on a calendar function, including
but not limited to any function that is indexed to a CPU clock, provides
specific dates or calculates spans of dates, is able to record, store,
process and provide true and accurate dates and calculations for dates
and spans of dates including and following January 1, 2000.
5.14 Compliance with Laws. The Issuer and its Subsidiaries
--------------------
have obtained and have maintained in good standing any licenses,
permits, consents and authorizations required to be obtained by them
under all federal, state, local and foreign laws, ordinances,
regulations, codes, rules or orders applicable to it (collectively, the
"Laws"), the absence of which (individually or in the aggregate) could
reasonably be expected to have a Material Adverse Effect, and all such
licenses, permits, consents and authorizations remain in full force and
effect. The Issuer<PAGE>
<PAGE>
and its Subsidiaries are in material compliance with the Laws, and there
is no pending or, to the Issuer's knowledge, threatened, action or
proceeding against the Issuer or its Subsidiaries under any of the Laws,
other than any such actions or proceedings which, individually or in the
aggregate, if adversely determined, could not reasonably be expected to
have a Material Adverse Effect.
5.15 Title to Properties; Liens. At the time of the Closing
--------------------------
and after giving effect to the transactions contemplated hereby, the
Issuer and its Subsidiaries will have good and, in the case of real
property, marketable title to all of their respective properties and
assets which are material to their business as presently conducted, and
none of such properties or assets will be subject to any Liens. At the
time of the Closing and after giving effect to the transactions
contemplated hereby, the Issuer and its Subsidiaries will enjoy
peaceful and undisturbed possession under all leases of real property on
which facilities owned or operated by them are situated, and all such
leases will be valid and subsisting and in full force and effect and no
default on the part of the Issuer or its Subsidiaries shall exist
thereunder.
5.16 No Violation of Regulations of Board of Governors of
----------------------------------------------------
Federal Reserve System. None of the transactions contemplated by this
-----------------------
Agreement (including, without limitation, the use of the proceeds from
the sale of the Securities) will violate or result in a violation of
Section 7 of the Exchange Act or any regulation issued pursuant thereto,
including, without limitation, Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System.
5.17 Governmental Regulations. The Issuer and its Subsidiaries
------------------------
are not subject to regulation under the Investment Company Act of 1940,
as amended, the Public Utility Holding Issuer Act of 1935, as amended,
the Federal Power Act, the Interstate Commerce Act, the Commodity Ex-
change Act or to any Federal or state statute or regulation<PAGE>
<PAGE>
limiting their ability to incur indebtedness for borrowed money or
consummate the transactions contemplated hereby.
5.18 Private Offering. (a) Assuming the truth and
----------------
correctness of the representations and warranties set forth in Section 7
hereof, the sale of the Securities hereunder is exempt from the
registration and prospectus delivery requirements of the Securities Act.
In the case of each offer or sale of the Securities, no form of general
solicitation or general advertising was used by the Issuer or its rep-
resentatives, including, but not limited to, advertisements, articles,
notices or other communications published in any newspaper, magazine or
similar medium or broadcast over television or radio, or any seminar or
meeting whose attendees have been invited by any general solicitation or
general advertising.
(b) The Purchasers are the sole purchasers of the Securities. No
securities have been issued and sold by the Issuer within the six-month
period immediately prior to the date hereof and no sales of the Issuer
could be integrated with the issuance of the Securities as a single
offering for purposes of the Securities Act. The Issuer agrees that
neither it, nor anyone acting on its behalf, will offer or sell the
Securities, or any portion of them, if such offer or sale might bring
the issuance and sale of the Securities to any Purchaser hereunder
within the provisions of Section 5 of the Securities Act nor offer any
similar securities for issuance or sale to, or solicit any offer to
acquire any of the same from, or otherwise approach or negotiate with
respect thereto with, anyone if the sale of the Securities and any such
securities could be integrated as a single offering for the purposes of
the Securities Act, including without limitation Regulation D
thereunder. It is not necessary, in connection with the transactions
contemplated hereby, to qualify the Indenture under the Trust Indenture
Act of 1939, as amended.
5.19 Transactions with Affiliates. Except as set forth on
----------------------------
Schedule 5.19, no Affiliate of the Issuer or<PAGE>
<PAGE>
any of its Subsidiaries (i) owns any assets used, held for use or
necessary for the business of the Issuer or its Subsidiaries as
presently conducted, (ii) possesses, directly or indirectly, any
financial interest in or is a partner, director, officer or employee of
any partnership, corporation, firm, association, or business
organization which is a client, supplier, customer, lessor, lessee or
competitor of the Issuer or its Subsidiaries or (iii) is a party to any
contract or similar agreement or arrangement with the Issuer or its
Subsidiaries.
5.20 Use of Proceeds. The proceeds of the sale of the
---------------
Securities will be used by the Issuer for the purposes set forth on
Schedule 5.20.
5.21 Brokers. Neither the Issuer nor its Subsidiaries has
-------
dealt with any broker, finder, commission agent or other such
intermediary in connection with the sale of the Securities and the
transactions contemplated by this Agreement other than Smith Barney
Inc., and it and its Subsidiaries are under no obligation to pay any
broker's or finder's fee or commission or similar payment in connection
with such transactions other than to Smith Barney.
5.22 Solvency. Immediately prior to and after giving effect to
--------
the issuance of the Securities and the Note Guarantees and the
execution, delivery and performance of this Agreement, the Indenture and
the Note Guarantees (a) the fair saleable value of the assets of the
Issuer and each Subsidiary of the Issuer will exceed its probable
liability on its debts as they become absolute and mature; (b) the
Issuer and each Subsidiary of the Issuer will be able to pay its debts
or liabilities as such debts and liabilities mature; and (c) the Issuer
and each Subsidiary of the Issuer will not be engaged in a business or
transaction, and is not about to engage in a business or transaction,
for which its assets would constitute an unreasonably small capital.
5.23 Full Disclosure. Neither this Agreement, the financial
----------------
statements referred to in Section 5.6, the<PAGE>
<PAGE>
Indenture nor any other document, certificate or written statement
furnished by the Issuer or any of its agents or employees to any
Purchaser in connection with the negotiation and sale of the Securities
or any other transactions contemplated thereby, when taken as a whole,
contains any untrue statement of a material fact or omits or will omit
to state a material fact required to be stated herein or therein or
necessary to make the statements contained herein or therein not
misleading in light of the circumstances under which they were made.
There is no material fact known to the Issuer or any of its agents or
employees that has had or could reasonably be expected to have a
Material Adverse Effect and that has not been disclosed herein.
Section 6
Expenses; Indemnification
-------------------------
6.1 Expenses. (a) Whether or not the transactions contem
--------
plated by this Agreement and the Other Agreements shall be consummated,
the Issuer will pay and will protect, indemnify and hold you, the Other
Purchasers and any other Person in whose name a Security is registered
(collectively, the "Holders") harmless, in respect of all reasonable
-------
expenses (except as specified elsewhere in this Agreement or below,
other than Taxes, legal fees, expenses and disbursements) in connection
with such transactions and in connection with any amendments or waivers
(whether or not the same become effective) under or in respect of this
Agreement, the Other Agreements or the Warrants, including the
Registration Rights Agreement (collectively, the "Note Documents"),
--------------
including, without limitation: (a) the reasonable costs and expenses of
furnishing all opinions by counsel for the Issuer and all certificates
on behalf of the Issuer and of the performance of and compliance with
all agreements and conditions contained herein and on the part of the
Issuer or its Subsidiaries to be performed or complied with, (b) the
reasonable costs and expenses of<PAGE>
<PAGE>
preparing and reproducing the Note Documents, (c) the reasonable cost of
delivering to the principal office of each Holder, insured to such
Holder's reasonable satisfaction, any Securities delivered to such
Holder upon any substitution of Securities pursuant to the Indenture or
the Warrants and of such Holder or subsequent Holder delivering any
Securities, insured to such Holder's or subsequent Holder's
satisfaction, upon any such substitution, (d) the reasonable fees,
expenses and disbursements of special counsel for the Holders (i) in
connection with such transactions, and (ii) any such amendments or
waivers (whether or not such amendments or waivers become effective),
(e) the reasonable fees, expenses and disbursements of the accountants
for the Holders in connection with such transactions, (f) the cost of
any filing or recording, including, without limitation, the cost of any
later filing or recording, of any of the Note Documents (or proper
notices, statements or other instruments in respect thereof), (g) the
reasonable out-of-pocket expenses incurred by the Holders in connection
with (i) such transactions or (ii) any such amendments or waivers and
(h) all fees and expenses of the Trustee; provided, however, that in no
-------- -------
event shall the aggregate amount required to be paid by the Issuer
pursuant to clauses (b), (d)(i), (e) and (g)(i) above exceed $250,000.
The Issuer also will pay, and will protect, indemnify and hold the
Holders harmless from, all claims in respect of the fees, if any, of
brokers and finders (other than a broker or finder retained by any
Holder in connection with any resale of any Security by such Holder).
Notwithstanding anything in this Agreement or the Indenture to the
contrary, the provisions of this Section 6.1 shall survive the
termination of this Agreement.
(b) All payments to or for the account of any Holder under or
pursuant to a Note or this Agreement (including, but not limited to
payments of principal or interest on the Notes) shall be made free and
clear of, and without deduction or withholding for or on account of, any
present or future Taxes (including, but not limited to, any<PAGE>
<PAGE>
levies, assessments or other governmental charges), except to the extent
required by applicable law. If any such deduction or withholding is so
required, the Issuer shall (i) promptly notify each affected Holder in
writing of such requirement, (ii) pay the full amount required to be
deducted or withheld to the applicable taxing authority on a timely
basis, (iii) promptly furnish an original official receipt or certified
copy thereof (and such other documentation as may reasonably be
requested by the Holder) evidencing the payment to such taxing
authority, and (iv) pay to such Holder such additional amounts
("Additional Amounts") as may be necessary in order that the net amount
---------- -------
received by such holder, free and clear of, and after any deduction or
withholding for or on account of, any Indemnifiable Taxes (including any
deduction or withholding of any Indemnifiable Taxes with respect to such
Additional Amounts) shall equal the amount such holder would have
received had no such deduction or withholding been required. In
addition, the Company shall indemnify, and promptly pay and reimburse,
each Holder against any Indemnifiable Taxes and Other Indemnifiable
Taxes imposed on or assessed against such Holder with respect to a Note,
Warrant or this Agreement (including receiving payment under, or
enforcing, any of the foregoing), provided that such Holder has made
written demand therefor describing such taxes in reasonable detail.
(c) For purposes of this Section 6.2, (i) "Indemnifiable
-------------
Tax" means any present or future Tax (including, without limitation, any
---
levy, assessment or other governmental charge), imposed by any
jurisdiction from which payments under a Note, Warrant or this Agreement
are made or deemed made (including any taxing authority or political
subdivision thereof or therein) other than any Tax, with respect to each
Holder, that is imposed on such Holder by reason of a present or former
connection between such jurisdiction and such Holder other than the mere
purchase, ownership, holding, or actual or deemed transfer or exchange
of, or receipt of any payment under, or enforcement of, any Note,
Warrant or this Agreement and (ii)<PAGE>
<PAGE>
"Other Indemnifiable Taxes" means any and all present or future stamp,
-------------------------
value added, transfer, documentary, and excise taxes and other similar
charges or levies imposed by reason of the preparation, execution,
issuance, delivery, registration, notarization, filing, recording or
enforcement of any Note, Warrant or this Agreement. Each Holder agrees
that it will deliver to the Issuer, upon reasonable written demand
therefor and at the expense of the Issuer, any form or document that may
be reasonably requested in writing by the Issuer (together with
information sufficient to permit such holder to complete such form or
document) in order to allow the Issuer or any paying agent to make
payments to such Holder without deduction or withholding for or on
account of any tax or with such deduction or withholding at a reduced
rate, so long as the completion, execution or submission of such form or
document would not, in such Holder's reasonable judgment, be materially
disadvantageous to such Holder's legal or commercial position.
6.2 Indemnification. In addition to all other sums due
---------------
hereunder or provided for in this Agreement or the Indenture, the Issuer
hereby agrees, without limitation as to time, to indemnify each Holder
and its Affiliates, partners, directors, officers, employees, counsel,
agents or representatives (collectively, the "Indemnified Parties")
-------------------
against, and holds each of them harmless from, to the fullest extent
lawful, all losses, claims, damages, liabilities, costs (including,
without limitation, costs of preparation and attorneys' fees and
disbursements) and expenses, including expenses of investigation
(collectively, "Losses"), incurred by each of them and arising out of or
------
in connection with this Agreement, a breach of any representation,
warranty, condition, covenant or agreement hereunder, the Indenture, the
Warrants or the transactions contemplated hereby or thereby (or any
other document or instrument executed herewith or pursuant hereto or
thereto), whether or not the transactions contemplated by this Agreement
are consummated and whether or not any Indemnified Party is a formal
party to any proceeding; provided, however, that the Issuer shall not be
-------- -------
liable to<PAGE>
<PAGE>
any Indemnified Party for any Losses to the extent that it shall be
finally determined by a court of competent jurisdiction that such Losses
arose from the gross negligence or willful misconduct of such Indem-
nified Party, which actions (i) are independent of any wrongful act by
the Issuer, its Affiliates or any of its representatives and (ii) were
not taken by such Indemnified Party in reliance upon any of the
representations, warranties, conditions, covenants or agreements of the
Issuer. The Issuer agrees to reimburse any Indemnified Party promptly
for all such Losses as they are incurred by such Indemnified Party
(regardless of whether it is or may be ultimately determined that an
Indemnified Party is not entitled to Indemnification hereunder). The
obligations of the Issuer to each Indemnified Party hereunder shall be
separate obligations, and the Issuer's liability to any such Indemnified
Party hereunder shall not be extinguished solely because any other
Indemnified Party is not entitled to indemnity hereunder. The
obligations of the Issuer under this Section 6.2 shall survive the
payment or prepayment of the Notes, at maturity, upon acceleration,
redemption or otherwise, the exercise of the Warrants purchased by any
Purchaser, the redemption or repurchase by the Issuer of the Warrants
purchased by any Purchaser, the redemption or repurchase of any Warrant
Shares, any transfer of the Securities by any Purchaser and the
termination of this Agreement or the Indenture.
(b) In case any action, claim or proceeding shall be brought
against any Indemnified Party with respect to which indemnity may be
sought from the Issuer hereunder, such Indemnified Party shall promptly
notify the Issuer in writing and the Issuer shall assume the defense
thereof, including the employment of counsel reasonably satisfactory to
such Indemnified Party and payment of all fees and expenses incurred in
connection with the defense thereof. The failure to so notify the
Issuer shall not affect any obligation it may have to any Indemnified
Party under this Agreement or otherwise except to the extent that (as
finally determined by a court of competent jurisdiction (which
determination is not subject to review or appeal)) such<PAGE>
<PAGE>
failure materially and adversely prejudiced the Issuer. Each
Indemnified Party shall have the right to employ separate counsel in
such action, claim or proceeding and participate in the defense thereof,
but the fees and expenses of such counsel shall be at the expense of
each Indemnified Party unless: (i) the Issuer has agreed to pay such
expenses; (ii) the Issuer has failed promptly to assume the defense and
employ counsel reasonably satisfactory to such Indemnified Party; or
(iii) the named parties to any such action, claim or proceeding
(including any impleaded parties) include any Indemnified Party and the
Issuer or an Affiliate of the Issuer, and such Indemnified Party shall
have been advised by counsel that either (x) there may be one or more
legal defenses available to them that are different from or in addition
to those available to the Issuer or its Affiliates or (y) a conflict of
interest may exist if such counsel represents such Indemnified Party and
the Issuer or its Affiliate; provided that, if such Indemnified Party
--------
notifies the Issuer in writing that it elects to employ separate counsel
in the circumstances described in clause (i), (ii) or (iii) above, the
Issuer shall not have the right to assume the portion of the defense
thereof and such counsel shall be at the expense of the Issuer;
provided, further, that the Issuer shall not, in connection with any one
-------- -------
such action or proceeding or separate but substantially similar or
related actions or proceedings in the same jurisdiction arising out of
the same general allegations or circumstances, be responsible hereunder
for the fees and expenses of more than one such firm of separate counsel
(in addition to any local counsel), which counsel shall be designated by
such Indemnified Party. The Issuer shall not be liable for any
settlement of any such action effected without its written consent
(which shall not be unreasonably withheld). The Issuer agrees that it
will not, without the Indemnified Party's prior written consent, consent
to entry of any judgment or settle or compromise any pending or
threatened claim, action or proceeding in respect of which
indemnification or contribution may be sought hereunder unless the
foregoing contains an unconditional release, in form and substance
reasonably<PAGE>
<PAGE>
satisfactory to the Indemnified Parties, of the Indemnified Parties from
all liability and obligation arising therefrom.
(c) If the indemnification provided for in this Section 6.2
is unavailable to, or insufficient to hold harmless, any Indemnified
Party in respect of any Losses referred to therein, then the Issuer
shall have an obligation to contribute to the amount paid or payable by
such Persons as a result of such Losses in such proportion as is
appropriate to reflect its relative fault and that of its Affiliates, on
the one hand, and such Indemnified Party, on the other hand, in
connection with the actions which resulted in such Losses as well as any
other relevant equitable considerations. The amount paid or payable by
any such Person as a result of the Losses referred to above shall be
deemed to include, subject to the limitations set forth in Section 6.2,
any legal or other fees or expenses reasonably incurred by such Person
in connection with any investigation, lawsuit or legal or administrative
action or proceeding.
(d) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 6.2 were determined
by pro rata allocation or by any other method of allocation that does
not take account of the equitable considerations referred to in
subsection (c) of this Section 6.2. No Person guilty of fraudulent mis-
representation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any Person who is not guilty
of such fraudulent misrepresentation.
Section 7
Purchase for Investment; Source of Funds;
Other Representations and Warranties
------------------------------------
You represent and warrant on and as of the date hereof and as of
the date of issuance of your Securities and, to the extent specified
below, you agree, as follows:
<PAGE>
<PAGE>
7.1 Purchase for Investment. You are purchasing the Securities
-----------------------
for your own account or for one or more separate accounts maintained by
you, in each case for investment and not with a view to the distribution
or sale thereof in violation of the securities laws, provided that the
disposition of your property shall at all times be within your control.
7.2 Source of Funds. The following statements are, and you
---------------
agree will remain at all times, accurate representations and
confirmations as to the source of funds (a "Source") to be used by you
to pay the purchase price for, or to be attributed to the holding of,
the Securities purchased by you hereunder:
(a) if the Purchaser is an insurance company: (i) the Source
does not include assets allocated to any separate account in which
any employee benefit plan (or its related trust) has any interest,
other than a separate account that is maintained solely in
connection with fixed contractual obligations under which the
amounts payable, or credited, to such plan and to any participant
or beneficiary of such plan (including any annuitant) are not
affected in any manner by the investment performance of the
separate account; and (ii) the Purchaser's general account
satisfies the percentage limitation of Section I(a) of Prohibited
Transaction Class Exemption ("PTE") 95-60 (issued July 7, 1995); or
(b) the Source is an insurance company pooled separate
account, within the meaning PTE 90-1 (issued January 29, 1990) and,
except as such Purchaser has disclosed to the Company in writing
pursuant to this paragraph (b), no employee benefit plan or group
of plans maintained by the same employer or employee organization
beneficially owns more than 10% of all assets allocated to such
pooled separate account; or
<PAGE>
<PAGE>
(c) the Source constitutes assets of an "investment fund"
(within the meaning of Part V of the QPAM Exemption) managed by a
"qualified professional asset manager" or "QPAM" (within the mean
ing of Part V of the QPAM Exemption), no employee benefit plan's
assets that are included in such investment fund, when combined
with the assets of all other employee benefit plans established or
maintained by the same employer or by an affiliate (within the
meaning of Section V(c)(1) of the QPAM Exemption) of such employer
or by the same employee organization and managed by such QPAM,
exceed 20% of the total client assets managed by such QPAM, the
conditions of Part I(c) and (g) of the QPAM Exemption are
satisfied, neither the QPAM nor a person controlling or controlled
by the QPAM (applying the definition of "control" in Section V(e)
of the QPAM Exemption) owns a 5% or more interest in the Company
and (i) the identity of such QPAM and (ii) the names of all
employee benefit plans whose assets are included in such investment
fund have been disclosed to the Company in writing pursuant to this
paragraph (c); or
(d) the Source is a governmental plan; or
(e) the Source is one or more employee benefit plans, or a
separate account or trust fund comprised of one or more employee
benefit plans, each of which has been identified to the Company in
writing pursuant to this paragraph (e); or
(f) the Source does not include assets of any employee
benefit plan, other than a plan exempt from the coverage of ERISA.
7.3 No Investment Advice. To the extent the source of funds to
--------------------
be used by you to pay the purchase price of the Securities purchased by
you hereunder constitutes Plan Assets (as defined in Department of Labor
Regulation Section 2510.3-101), you have evaluated the merits of the
purchase of such Securities, you have neither solicited nor<PAGE>
<PAGE>
received from the Issuer or any other entity known by you to be an
affiliate of the Issuer any evaluation or other investment advice in
respect of the advisability of the purchase of the Securities and you
are not relying and have not relied on any such advice from the Issuer
or any such entity in a manner that would cause the Issuer or any such
entity to become a "party-in-interest", within the meaning of ERISA, or
a "disqualified person", within the meaning of the Code, with respect to
such employee benefit plan.
7.4 Certain Definitions. As used in this Section 7, the terms
-------------------
"employee benefit plan," "governmental plan" and "separate account"
shall have the respective meanings assigned to such terms in Section 3
of ERISA.
7.5 Authorization. The execution, delivery and performance by
-------------
you of this Agreement and the Indenture are within your powers
(corporate or otherwise), have been duly authorized by all necessary
action (corporate or otherwise), and do not contravene or constitute a
default under (a) any provision of applicable law, rule or regulation,
(b) your certificate of incorporation, bylaws, partnership agreement or
other governing instruments or (c) any agreement, judgment, injunction,
order, decree or other instrument binding upon you.
7.6 Enforceability. This Agreement constitutes your legally
--------------
valid and binding obligation, enforceable against you in accordance with
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or affecting the rights of creditors generally and by
general principles of equity (regardless of whether such enforceability
is sought in equity or at law).
7.7 No Public Market. You understand (i) that the offering and
----------------
the sale of the Securities are intended to be exempt from registration
under the Securities Act pursuant to Section 4(2) of the Securities Act
and (ii) that there is no existing public or other market for the<PAGE>
<PAGE>
Securities and that there can be no assurance that you will be able to
sell or dispose of any of the Securities. You are an accredited
investor within the meaning of Regulation D under the Securities Act.
You understand that you may not transfer any of the Securities except in
compliance with the Indenture.
Section 8
Miscellaneous
-------------
8.1 Amendments, Etc. Any term of this Agreement may be amended
---------------
and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively) only with the written consent of the Issuer and all the
Holders. Any amendment or waiver effected in accordance with this
Section shall be binding upon each Holder of any Security at the time
outstanding, each future Holder of any Security and the Issuer.
8.2 Survival of Agreements, Representations and Warranties.
------------------------------------------------------
The rights and remedies in respect of the representations, warranties,
covenants and agreements herein or in any certificate or other
instrument delivered in connection with this Agreement shall survive the
sale and purchase of the Securities herein contemplated regardless of
any investigation made by any party hereto and shall continue in full
force and effect until all amounts due or to become due under the
Securities have been paid in full in cash and are no longer subject to
any right of recovery. No representation or warranty made or deemed
made as of any date pursuant to any Section of this Agreement shall be
deemed by reason of this Section 8.2 to have been made or deemed made as
of any other date. All statements in any such certificate or other
instrument shall constitute representations and warranties as of the
date of such certificates.
<PAGE>
<PAGE>
8.3 Successors and Assigns. This Agreement shall be binding
----------------------
upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto, whether so expressed or
not, and, in particular, shall inure to the benefit of and be
enforceable by any Holder or Holders at any time of any Securities or
any part thereof.
8.4 Entire Agreement. This Agreement embodies the entire
----------------
agreement and understanding between the Issuer and you and supersedes
all prior agreements and understandings, written or oral, relating to
the subject matter hereof.
8.5 Reproduction of Documents. In accordance with the
-------------------------
provisions of this Agreement and all documents relating hereto,
including, without limitation, (a) consents, waivers and modifications
which may hereafter be executed, (b) documents received by the Holders
at any time, including, without limitation, in connection with the
Closing (except the Securities themselves), and (c) financial
statements, certificates and other information previously or hereafter
furnished to the Holders, may be reproduced by the Holders by any
photographic, photostatic, microfilm, microcard, miniature photographic
or other similar process and the Holders may destroy any original
document so reproduced. The Issuer agrees and stipulates that, to the
extent permitted by applicable law, any such reproduction shall be
admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence
and whether or not such reproduction was made by the Holders in the
regular course of business) and any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in
evidence.
8.6 Notices, Etc. Except as otherwise provided in this
------------
Agreement, notices and other communications under this Agreement shall
be made in the manner and at the addresses referred to in Section 12.02
of the Indenture.
<PAGE>
<PAGE>
8.7 Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof,
and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction. There shall be substituted for any such provision so
rendered ineffective a provision which, as far as legally possible, most
nearly reflects the intent of the parties hereto.
8.8 Counterparts. This Agreement may be executed in any number
------------
of counterparts, and by each party hereto in separate counterparts, each
of which counterpart shall be an original, but all of which together
shall constitute one and the same Agreement. Delivery of an executed
counterpart of a signature page of this Agreement by telecopier shall be
effective as delivery of a manually executed counterpart of this
Agreement.
8.9 Table of Contents; Headings. The table of contents and the
---------------------------
section headings in this Agreement are for purposes of reference only
and shall not limit or define the meaning hereof.
8.10 Satisfaction Requirement. If any agreement, certificate
------------------------
or other writing, or any action taken or to be taken, is by the terms of
this Agreement required to be satisfactory to the Holders, the
determination of such satisfaction shall, except where otherwise
expressly indicated, be made by the Holders in their sole and exclusive
judgment made in good faith.
8.11 Solicitation of Holders. The Issuer will provide each
-----------------------
Holder (irrespective of the amount of Securities then owned by it) with
sufficient information, sufficiently far in advance of the date a
decision is required, to enable such Holder to make an informed and
considered decision with respect to any proposed amendment, waiver or<PAGE>
<PAGE>
consent in respect of any of the provisions hereof. The Issuer will
deliver executed or true and correct copies of each amendment, waiver or
consent effected pursuant to Article 9 of the Indenture, Section 8.1 or
this Section 8.11 to each Holder of outstanding Securities promptly
following the date on which it is executed and delivered by, or receives
the consent or approval of, the holders of the Notes in the manner
required by Article Nine of the Indenture. The Issuer will not,
directly or indirectly, pay or cause to be paid any remuneration,
whether by way of supplemental or additional interest, fee or otherwise,
to any Holder as consideration for or as an inducement to the entering
into by any Holder of any waiver or amendment of any of the terms and
provisions of this Agreement or any other Note Document unless such re-
muneration is concurrently paid, on the same terms, ratably to each
holder of the then outstanding Securities whether or not such Holder
grants such waiver or agrees to such amendment.
8.12 Substitution of Purchaser. You shall have the right to
-------------------------
substitute any one of your Affiliates as the purchaser of the Securities
which you have agreed to purchase hereunder, by written notice to the
Issuer, which notice shall be signed by both you and such Affiliate,
shall contain such Affiliate's agreement to be bound by this Agreement
and shall contain a confirmation by such Affiliate of the accuracy with
respect to it of the representations set forth in Section 7. Upon
receipt of such notice, wherever the word "you" is used in this
Agreement (other than in this Section 8.12), such word shall be deemed
to refer to such Affiliate in lieu of you, provided, however, that the
obligations of the Issuer under Section 6 of this Agreement in
connection with the transactions contemplated by the Note and Warrant
Purchase Agreements shall not be increased as a result of such a
substitution. In the event that such Affiliate is so substituted as a
purchaser hereunder and such Affiliate thereafter transfers to you all
of the Securities then held by such Affiliate, upon receipt by the
Issuer of notice of such transfer and confirmation by you of the
continued accuracy with respect to you of the<PAGE>
<PAGE>
representations set forth in Section 7, wherever the word "you" is used
in this Agreement, such word shall no longer be deemed to refer to such
Affiliate, but shall refer to you, and you shall have all the rights of
an original holder of the Securities under this Agreement.
8.13 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO
--------------------
IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL OR EQUITABLE ACTION, SUIT, PROCEEDING OR COUNTERCLAIM (WHETHER
BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE SECURITIES OR ANY TRANSACTION CONTEMPLATED HEREBY OR
THEREBY, THE SUBJECT MATTER OF ANY OF THE FOREGOING OR THE ACTIONS OF
ANY PARTY HERETO OR THERETO IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT HEREOF OR THEREOF.
8.14 GOVERNING LAW. THIS AGREEMENT AND (UNLESS OTHERWISE
-------------
EXPRESSLY PROVIDED) ALL AMENDMENTS AND SUPPLEMENTS TO, AND ALL CONSENTS
AND WAIVERS PURSUANT TO, THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterparts of this letter and return one
of the same to the Issuer, whereupon this letter shall become a binding
agreement between you and the Issuer.
Very truly yours,
TELEGROUP, INC.
By:
-----------------------------
Name:
Title:
<PAGE>
<PAGE>
The foregoing Agreement is hereby
agreed to as of the date thereof:
GREENWICH STREET CAPITAL
PARTNERS, L.P.
By:Greenwich Street
Investments, L.P.
General Partner
By:Greenwich Street Investments,
Inc.
General Partner
By:
-----------------------------
Name:
Title:
GREENWICH STREET CAPITAL OFFSHORE
FUND, LTD.
By: Greenwich Street Capital
Partners, Inc, as Manager
By:
-----------------------------
Name:
Title:
TRV EMPLOYEES FUND, L.P.
By: TRV Employees Investments, Inc
General Partner
By:
----------------------------------
Name:
Title:
<PAGE>
<PAGE>
THE TRAVELERS INSURANCE COMPANY
By:
--------------------------------
Name:
Title:
THE TRAVELERS LIFE AND ANNUITY COMPANY
By:
----------------------------------
Name:
Title:
<PAGE>
<PAGE>
SCHEDULE 2.1
<TABLE>
<CAPTION>
Schedule of Purchasers
----------------------
Warrant for Specified
Aggregate Principal Number of Shares of Total
Name of Amount of Notes Common Stock to be Purchase
Purchaser to be Purchases Purchased Price
- ---------- -------------------- --------------------- --------
<S> <C> <C> <C>
Greenwich Street
Capital Partners,
L.P. $14,483,639.61 153,310 $14,483,639.61
Greenwich Street
Capital Offshore
Fund, Ltd. $ 882,681.02 9,343 $ 882,681.02
TRV Employees
Fund, L.P. $ 3,538,729.32 37,458 $ 3,538,729.32
The Travelers
Insurance Company $ 733,616.53 7,765 $ 733,616.53
The Travelers Life
and Annuity
Company $ 361,333.52 3,825 $ 361,333.52
</TABLE>
Exhibit 4.4
EXHIBIT B
[FORM OF WARRANT]
THIS WARRANT AND THE SHARES OF CLASS A COMMON STOCK PURCHASABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD,
ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS AND
UNTIL REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR UNLESS THE ISSUER HAS RECEIVED AN OPINION OF COUNSEL
TO THE HOLDER OF THIS WARRANT IN FORM AND SUBSTANCE SATISFACTORY TO THE
ISSUER, THAT SUCH OFFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION,
TRANSFER OR OTHER DISPOSITION IS EXEMPT FROM REGISTRATION OR IS
OTHERWISE IN COMPLIANCE WITH THE SECURITIES ACT AND SUCH LAWS. THE
SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT ARE SUBJECT TO CERTAIN
RIGHTS AND OBLIGATIONS AS SET FORTH IN A REGISTRATION RIGHTS AGREEMENT,
DATED AS OF NOVEMBER 27, 1996, A COPY OF WHICH IS ON FILE AT THE OFFICES
OF THE COMPANY.
-------------------------------------- ----------
No. of Shares of Class A Common Stock: __________
Warrant No.:5
-------------------------------------- -----------
WARRANT
To Purchase Class A Common Stock of
Telegroup, Inc.
THIS IS TO CERTIFY THAT __________, (the "Purchaser") a Delaware
---------
limited partnership, or its registered assigns, is entitled, at any time
prior to the Expiration Date (as hereinafter defined), to purchase from
Telegroup, Inc., an Iowa corporation (the "Company"), 3,825 shares of
-------
Common Stock (as hereinafter defined and subject to adjustment as
provided herein), in whole or in part, at a<PAGE>
<PAGE>
purchase price of $.01 per share, all on the terms and conditions and
pursuant to the provisions hereinafter set forth.
1. Definitions. As used in this Agreement, the following terms
-----------
have the respective meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of Common
----------------------------------
Stock issued by the Company after the Initial Date, other than any
Warrant Stock.
"Applicable Percentage" means, as of any date of determination, the
---------------------
number of shares of Common Stock which then represents 4% of the Common
Stock on a fully diluted basis (exclusive of any Excluded Shares),
except that if a Public Offering has not occurred prior to July 1, 1997,
the term "Applicable Percentage" shall thereafter mean, as of any date
of determination, the number of shares of Common Stock which then
represents 4.5% of the Common Stock on a fully diluted basis (exclusive
of any Excluded Shares) and if a Public Offering has not occurred prior
to January 1, 1998, the term "Applicable Percentage" shall thereafter
mean, as of any date of determination, the number of shares of Common
Stock which then represents 5% of the Common Stock on a fully diluted
basis (exclusive of any Excluded Shares).
"Business Day" shall mean any day that is not a Saturday or Sunday
------------
or a day on which banks are required or permitted to be closed in the
State of New York.
"Close of Business" shall have the meaning set forth in
-----------------
Section 2(a).
"Commission" shall mean the Securities and Exchange Commission.
----------
"Class A Common Stock" shall mean the Class A Common Stock of the
Company, no par value per share.
"Class B Common Stock" shall mean the Class B Common Stock of the
--------------------
Company, no par value per share.
<PAGE>
<PAGE>
"Common Stock" shall mean (except where the context otherwise
------------
indicates) the Class A Common Stock and Class B Common Stock, as con-
stituted on the date hereof, and any capital stock into which any such
Common Stock may thereafter be changed, and any capital stock of the
Company of any other class (regardless of how denominated) issued to the
holders of shares of Common Stock upon any reclassification thereof
which is also not preferred as to dividends or assets over any other
class of capital stock of the Company and which is not subject to
redemption.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, and the rules and regulations of the Commission thereunder, as
in effect from time to time.
"Excluded Shares" means (without duplication) (i) all shares of
---------------
Common Stock issued in a Public Offering, (ii) all newly issued shares
of Common Stock issued to any Person other than in a Public Offering to
the extent (and only to the extent) that such shares are issued for Fair
Market Value, (iii) all newly issued shares of Common Stock, up to the
Maximum Amount, issued or issuable pursuant to options granted to
employees of the Company (other than to Fred Gratzon or Clifford Rees)
to the extent (and only to the extent) that the exercise price for such
shares on the date of the grant of the related option was no less than
the Fair Market Value of such shares on such date of grant and (iv) all
newly issued shares of Common Stock, up to the Grand fathered Amount,
issued or issuable pursuant to options granted to employees of the
Company after a Public Offering (other than to Fred Gratzon or Clifford
Rees) to the extent (and only to the extent) that the exercise price for
such shares on the date of the grant of the related option was no less
than the Fair Market Value of such shares on such date of grant.
<PAGE>
<PAGE>
"Exercise Price" shall have the meaning set forth in Section 2(b)
--------------
hereof.
"Expiration Date" shall have the meaning set forth in Section 2(a)
---------------
hereof.
"Fair Market Value" of a share of Common Stock shall mean, as of
-----------------
any date of determination (the "Determination Date"):
(i) If the Determination Date is the date on which any
class of Common Stock is first sold to the public pursuant to a
Public Offering, then the initial public offering price (before
deducting commissions, discounts or expenses) at which such Common
Stock is sold in such Public Offering;
(ii) If the Determination Date is a date after the date on
which any shares of any class of Common Stock are first sold to the
public pursuant to a Public Offering, then the price per share of
such Common Stock equal to the average last sales price of such
Common Stock on each of the ten trading days prior to the
Determination Date on the principal exchange on which the Common
Stock may at the time be listed or, if there shall have been no
sales on such exchange on any such trading day, the average of the
closing bid and asked prices on such exchange at the end of such
trading day or if there is no such bid and asked price on such
trading day on the next preceding date when such bid and asked
price occurred or, if the Common Stock shall not be so listed, the
average of the closing sales prices as reported by NASDAQ at the
end of each of the ten trading days prior to the Determination Date
in the over-the-counter marked, provided that if one class of the
--------
Common Stock is listed or reported as described in this sentence
but the class of Common Stock with respect to which Fair Market
Value is being measured is not so listed or reported, then the Fair
Market Value per share with respect to such unlisted and unreported
<PAGE>
<PAGE>
class shall be identical to such listed or reported class;
(iii) If the Determination Date is prior to the date on which
any Class of Common Stock is first sold to the public pursuant to a
Public Offering, as determined in good faith by the Company's Board
of Directors upon a review of relevant factors, provided that if
such determination relates to any shares of Common Stock which,
together with all other shares of Common Stock for which a
determination of Fair Market Value was made under this Warrant
within the 12 months preceding the Determination Date in question,
exceed 3% of the Common Stock on a fully diluted basis, such
determination shall be supported by a written opinion of an
investment banking firm that is nationally recognized in the United
States;
it being understood and agreed that in no event will there be any
difference between the Fair Market Value of a share of Class A Common
Stock and the Fair Market Value of a share of Class B Common Stock, it
being the intention of the parties that the value of par share of Common
Stock shall constitute a pro rata portion of the Company's equity on a
fully diluted basis, valuing the Company as a going concern.
"Grand fathered Amount" means the number of shares of Common Stock
---------------------
equal to the excess of (i) 90,125 over (ii) the number of shares of
Common Stock which are granted to employees in respect of options,
warrants and other like arrangements subsequent to the date hereof and
prior to the Company's initial Public Offering.
"Holder" shall mean the Initial Holder and any person or persons in
------
whose name or names the Warrant is registered from time to time on the
Warrant Register.
"Initial Date" shall mean NOVEMBER 27, 1996.
------------
"Initial Holder" shall mean the Purchaser or any direct or indirect
--------------
wholly owned subsidiary of the Purchaser.
<PAGE>
<PAGE>
"Maximum Amount" means, as of any date of determination, the
--------------
number of shares of Common Stock equal to 7.5% of all Excluded Shares of
a type referred to in clauses (i) and (ii) of the definition of Excluded
Shares which have been issued on or prior to such date.
"Office of the Company" shall mean the principal executive offices
---------------------
of the Company as notified from time to time pursuant to Section 13 or
the office or agency of the Company designated pursuant to Section 11.
"Other Holders" shall mean Greenwich Street Capital Partners, L.P.,
-------------
Greenwich Street Capital Offshore Fund, Ltd., TRV Employees Fund, L.P.
and ____________________.
"Other Holders' Warrants" shall mean the warrants to purchase Class
-----------------------
A Common Stock of common date herewith issued to the Other Holders and
all warrants issued upon transfer, division or combination of, or in
substitution for, such warrants.
"Outstanding" shall mean, when used with reference to Common Stock,
-----------
at any date as of which the number of shares thereof is to be
determined, all issued shares of Common Stock, except shares then owned
or held by or for the account of the Company or any wholly-owned
subsidiary thereof.
"Public Offering" shall mean an underwritten public offering of
---------------
newly issued shares of any class of Common Stock (whether alone or in
conjunction with any secondary public offering) which produces Net Cash
Proceeds (as defined in the Indenture) for the Company of at least
$25,000,000 and after which an established trading market exists for the
Common Stock.
<PAGE>
<PAGE>
"Securities Act" shall mean the Securities Act of 1933, as amended,
--------------
and the rules and regulations of the Commission thereunder, as in effect
from time to time.
"Stock Register" shall mean the register maintained by the Company
--------------
to record ownership and transfer of Common Stock.
"Warrant" or "Warrants" shall mean this Warrant and all warrants
------- --------
issued upon transfer, division or combination of, or in substitution
for, thereof.
"Warrant Register" shall mean the register maintained by the
----------------
Company to record ownership and transfers of this Warrant pursuant to
the terms hereof.
"Warrant Stock" shall mean the shares of Class A Common Stock
-------------
purchased upon exercise of this Warrant.
2. Duration and Exercise of Warrant.
--------------------------------
(a) Duration. The Warrant shall expire at 5:00 p.m., New York
--------
City time (the "Close of Business"), on November 27, 2003 (the
-----------------
"Expiration Date"). The Warrant may be exercised on any business day
---------------
prior to the Close of Business on the Expiration Date. After the Close
of Business on the Expiration Date, the Warrant will become wholly void
and of no value.
(b) Exercise. Subject to the provisions of this Agreement, the
--------
Holder of this Warrant shall have the right to purchase from the Company
(and the Company shall issue and sell to such Holder) the aggregate
number of fully paid and nonassessable shares of Class A Common Stock of
the Company set forth on the first page hereof (or such additional
number of shares as may be further provided in this Agreement) at the
price per share set forth on the first page hereof, as adjusted from
time to time as provided in this Agreement (such price, as so adjusted,
being referred to herein as the "Exercise Price"). The Exercise<PAGE>
<PAGE>
Price shall be payable in cash or by bank cashier's check in New York
Clearing House funds payable to the order of the Company. The Warrant
shall be exercisable by (i) delivering to the Company the form of notice
of exercise attached hereto as Exhibit A duly completed and signed by
---------
the Holder or by the duly appointed legal representative or duly
authorized attorney thereof, and (ii) within five business days
thereafter, depositing with the Company the certificate evidencing the
Warrant and paying the aggregate Exercise Price for the number of shares
of Class A Common Stock in respect of which the Warrant is being
exercised; provided, that the Exercise Price must in any event be paid
--------
and the certificate representing the Warrant deposited with the Company
prior to the Close of Business on the Expiration Date.
(c) Conversion Right. In lieu of the payment set forth in
----------------
Section 2(b) above, the Holder shall have the right to convert this
Warrant (the "Conversion Right"), in its entirety, at any time prior to
the Expiration Date, into shares of Class A Common Stock as provided for
in this Sections 2(c)-2(f). Upon exercise of the Conversion Right, the
Company shall deliver to the Holder (without payment by the Holder of
any Exercise Price) that number of shares of Class A Common Stock equal
to the quotient obtained by dividing (x) the value of the Warrant at the
time the Conversion Right is exercised (determined by subtracting the
aggregate Exercise Price for the Warrant Stock in effect immediately
prior to the exercise of the Conversion Right from the aggregate Fair
Market Value, as defined below, for the Warrant Stock immediately prior
to the exercise of the Conversion Right) by (y) the Fair Market Value of
one share of the Warrant Stock immediately prior to the exercise of the
Conversion Right.
(d) Exercise of the Conversion Right. The Conversion Right may
--------------------------------
be exercised by the Holder, at any time prior to the Close of Business
on the Expiration Date. Such exercise shall be effected by (i) delivery
of the Notice of Conversion attached hereto as Exhibit B at the office
---------
of the<PAGE>
<PAGE>
Company and (ii) within five business days thereafter, depositing with
the Company the certificate evidencing this Warrant; provided that the
--------
certificate representing this Warrant shall in any event be deposited
with the Company prior to the Close of Business on the Expiration Date.
(e) Effect of Conversion. This Warrant shall be deemed to have
--------------------
been converted immediately prior to the Close of Business on the date of
its surrender for conversion as provided above, and the person entitled
to receive the shares of Class A Common Stock issuable upon such
conversion shall be treated for all purposes as the holder of record of
such shares as of the Close of Business on such date. As promptly as
practicable on or after such date, the Company, at its expense, shall
issue and deliver to the person or persons entitled to receive the same
a certificate or certificates for the number of shares issuable upon
such conversion.
(f) Fair Market Value. Fair Market Value of a Warrant Share as
-----------------
of a particular date (the "Determination Date") shall mean the Fair
Market Value of a share of the Common Stock as of such Determination
Date.
3. Payment of Taxes and Expenses. The Company shall pay all
-----------------------------
expenses in connection with, and all taxes and other governmental
charges that may be imposed with respect to, the issuance or delivery of
this Warrant and the Warrant Stock, unless such tax or charge is imposed
by law upon the Holder, in which case such taxes or charges shall be
paid by the Holder. The Company shall not be required, however, to pay
any tax or other charge imposed in connection with any transfer involved
in the issuance of any certificate for shares of Class A Common Stock in
any name other than that of the Holder, and in such case the Company
shall not be required to issue or deliver any stock certificate until
such tax or other charge has been paid or it has been established to the
satisfaction of the Company that no such tax or other charge is due.
<PAGE>
<PAGE>
4. Fractional Shares. The Company shall not be required to
------------------
issue a fractional share of Class A Common Stock upon exercise of the
Warrant. As to any fraction of a share which the Holder would otherwise
be entitled to purchase upon any exercise of the Warrant, the Company
shall pay a cash adjustment in respect of such fraction in an amount
equal to the same fraction of the Fair Market Value of the Common Stock
on the date of exercise, less the portion of the Exercise Price
attributable to such fraction.
5. Transfer, Division and Combination.
----------------------------------
(a) Transfer. Subject to compliance with the provisions of
--------
Section 9, transfers of this Warrant, in whole or in part, shall be
recorded on the Warrant Register upon surrender of the Warrant at the
Office of the Company, together with (i) a written assignment
substantially in the form of Exhibit C hereto, duly completed and signed
---------
by the Holder or by the duly appointed legal representative or duly
authorized attorney thereof and (ii) funds sufficient to pay any
applicable transfer taxes or evidence that any such transfer taxes have
been paid or that no such transfer taxes are due. Upon such surrender
and, if required, such payment, the Company shall, subject to compliance
with Section 9, execute and deliver a new Warrant or Warrants in the
name of the assignee or assignees and in the denomination or
denominations specified in the instrument of assignment, and shall issue
to the assignor a new Warrant evidencing any portion of this Warrant not
so assigned, and this Warrant certificate shall promptly be canceled. A
Warrant, if properly assigned in its entirety in compliance with
Section 9, may be exercised by the new Holder without the issuance of a
new Warrant certificate.
(b) Division and Combination. Subject to compliance with
------------------------
Section 9, this Warrant may be divided or combined with other Warrants
upon presentation thereof at the Office of the Company, together with a
written notice specifying the name or names and denomination or
denominations in which a new Warrant or new Warrants are to be<PAGE>
<PAGE>
issued, signed by the Holder or by the duly appointed legal
representative or duly authorized attorney thereof. Subject to
compliance with Section 9 as to any transfer which may be involved in
such division or combination, the Company shall execute and deliver a
new Warrant or Warrants in exchange for the Warrant or Warrants to be
divided or combined in accordance with such notice.
(c) Maintenance of Warrant Register. The Company agrees to
-------------------------------
maintain the Warrant Register at all times prior to the Expiration Date
at the Office of the Company, and to cause the Warrant Register to be
available for inspection during normal working hours by any Holder or
its representatives or any prospective purchaser of a Warrant designated
by a Holder or its representatives.
(d) Maintenance of Stock Register. The Company agrees to
-----------------------------
maintain the Stock Register at all times at the Office of the Company,
and to cause the Stock Register to be available for inspection during
normal working hours by any Holder or owner of Warrant Stock or their
representatives.
6. Adjustments.
-----------
(a) Adjustment. The number of shares of Class A Common Stock
----------
for which this Warrant is exercisable and the Exercise Price at which
such shares may be purchased shall be subject to adjustment from time to
time as set forth in this Section 6.
(b) (i) If the Company has not consummated an initial Public
Offering prior to July 2, 1997, this Warrant shall thereafter be
immediately exercisable for such number of shares of Class A Common
Stock such that the aggregate number of shares held upon exercise of
this Warrant and the Other Holders' Warrants in full on such date would
equal the Applicable Percentage on such date (divided pro rata based on
the number of shares of Class A Common Stock into which this Warrant and
each such warrant are initially<PAGE>
<PAGE>
exercisable), and such shares shall be subject to further adjustment as
set forth in this Section 6.
(ii) In addition, if the Company has not consummated an initial
Public Offering on or prior to January 2, 1998, this Warrant shall
thereafter be immediately exercisable for such number of shares of Class
A Common Stock such that the aggregate number of shares held upon
exercise of this Warrant and the Other Holders' Warrants in full on such
date would equal the Applicable Percentage on such date (divided pro
rata based on the number of shares of Class A Common Stock into which
this Warrant and each such warrant are initially exercisable), and such
shares shall be subject to further adjustment as set forth in this
Section 6.
(c) Stock Dividends, Subdivisions and Combinations. If at any
----------------------------------------------
time the Company shall:
(i) declare, order, pay or make a dividend payable in, or
other distribution of, Additional Shares of Common Stock;
(ii) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock; or
(iii)combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock;
then (A) the number of shares of Class A Common Stock for which this
Warrant is exercisable immediately after the happening of such event
shall be adjusted to equal the number of shares of Common Stock which a
record holder of the same number of shares of Class A Common Stock
immediately prior to the happening of such event would own or be
entitled to receive after the happening of such event, and (B) the
Exercise Price shall be adjusted to equal (1) the Exercise Price in
effect immediately prior to such event multiplied by the number of
shares of Class A Common <PAGE>
<PAGE>
Stock for which this Warrant is exercisable immediately prior to the
adjustment divided by (2) the number of shares for which this Warrant is
exercisable immediately after such adjustment.
(d) Dividends and Distributions. If the Company shall
---------------------------
distribute to all holders of its outstanding shares of Common Stock
evidence of indebtedness of the Company, cash (including cash dividends
payable out of consolidated earnings or earned surplus) or assets or
securities other than Additional Shares of Common Stock, including stock
of a subsidiary but excluding dividends or distributions referred to in
Section 6(c) above (any such evidences of indebtedness, cash, assets or
securities, the "assets or securities"), then, in each case, the
Exercise Price shall be adjusted by subtracting from the Exercise Price
then in effect the value of the assets or securities that a Holder would
have been entitled to receive as a result of such distribution had this
Warrant been exercised with respect to all shares of Class A Common
Stock for which this Warrant is then exercisable and all such shares of
Class A Common Stock issued in the name of such Holder immediately prior
to the record date for such distribution; provided that if, after giving
effect to such adjustment, the Exercise Price would be less than zero,
the Company shall distribute such assets or securities to such Holder as
if such Holder had exercised this Warrant and the shares of Class A
Common Stock had been issued in the name of such Holder immediately
prior to the record date for such distribution. Any adjustment required
by this Section 6(d) shall be made whenever any such distribution is
made, and shall become effective on the date of distribution retroactive
to the record date for the determination of shareholders entitled to
receive such distribution.
(e) Reorganization, Reclassification, Consolidation or Merger.
---------------------------------------------------------
If the Company shall (i) effect any reorganization or reclassification
of its capital stock or (ii) consolidate or merge with or into, or
transfer all or substantially all of its properties and assets to, any
other<PAGE>
<PAGE>
person, in either case in a transaction in connection with which a
Holder has not exercised this Warrant, then, upon any exercise of this
Warrant subsequent to the consummation thereof, such Holder shall be
entitled to receive, in lieu of the Class A Common Stock issuable upon
exercise immediately prior to such consummation, the highest amount of
stock, other securities or property (including cash) to which such
Holder would have been entitled upon such consummation if such Holder
had exercised this Warrant immediately prior thereto, all subject to
further adjustments thereafter as provided in this Section 6.
(f) Other Adjustments. The Company and the Holder intend that
-----------------
the aggregate shares exercisable upon exercise of this Warrant (together
with the Other Holders' Warrants) shall at all times equal the
Applicable Percentage at such time (after giving effect to the exercise
of this Warrant). Accordingly, if, at any time, the number of shares of
Warrant Stock issuable upon the exercise of this Warrant (when taken in
the aggregate with the Other Holders' Warrants) would not equal the then
Applicable Percentage of Common Stock (or the equivalent thereof)
immediately following such exercise, the Company shall make such adjust-
ments to the number of shares of Warrant Stock issuable upon the
exercise of this Warrant as may be required such that the aggregate
shares exercisable upon exercise of this Warrant and the Other Holders'
Warrants equal such Applicable Percentage (divided pro rata based on the
number of shares of Class A Common Stock into which this Warrant and
each such warrant are initially exercisable).
7. Notices.
-------
(a) Notice of Adjustment. Whenever the number of shares of Class
--------------------
A Common Stock for which this Warrant is exercisable or the Exercise
Price shall be adjusted pursuant to Section 6, the Company shall
forthwith prepare a certificate to be executed by the chief financial
officer of the Company setting forth, in reasonable detail, the event
requiring the adjustment, the method by which the adjustment<PAGE>
<PAGE>
was calculated and describing the number of shares of Common Stock for
which this Warrant is exercisable and the Exercise Price after giving
effect to such adjustment or change. The Company shall promptly cause a
signed copy of such certificate to be delivered to each Holder. The
Company shall keep at the Office of the Company copies of all such
certificates and cause the same to be available for inspection during
normal business hours by any Holder or any prospective purchaser of a
Warrant designated by a Holder.
(b) Notice of Extraordinary Distributions. In the event that the
-------------------------------------
Company proposes to set a record date for the purpose of entitling
holders of its Common Stock to receive any dividend or other
distribution of:
(i) cash in an amount in excess of the previous regular cash
dividend; or
(ii) any evidences of its indebtedness, any shares of its
stock or any other securities or property of any nature whatsoever,
including any warrants or other rights to subscribe for or purchase
any evidences of its indebtedness, any shares of its stock or any
other securities or property;
(iii) then the Company shall deliver to each Holder written
notice of such proposed dividend or distribution at least 30 days
prior to such proposed record date. A reclassification of Common
Stock (other than a change in par value, or from par value to no
par value or from no par value to par value) into shares of Common
Stock and shares of any other class of stock shall be deemed a
distribution by the Company to the holders of its Common Stock of
such shares of such other class of stock within the meaning of this
Section 7(b) and, if the outstanding shares of Common Stock shall
be changed into a larger or smaller number of shares of Common
Stock as a part of such reclassification, shall be deemed a
subdivision or combination, as the case may be, of the outstanding
shares of Common Stock within the meaning of Section 6(c).
<PAGE>
<PAGE>
(c) Notice of Certain Mergers and Asset Dispositions. In the
------------------------------------------------
event that the Company proposes to consolidate with or merge into
another corporation in a transaction in which the Common Stock will be
changed or converted into other securities, cash or property, or to
sell, transfer or otherwise dispose of all or substantially all of its
property, assets or business to another corporation or other entity, the
Company shall deliver to each Holder written notice of such proposed
transaction at least 15 days prior to the earlier of its consummation or
the taking of any record of the holders of its Common Stock for the
purpose of determining their rights pursuant to such transactions.
(d) Notice of Registration Statement. In the event that the
--------------------------------
Company shall propose to file a registration statement under the
Securities Act after the Initial Date with respect to any shares of
Common Stock of the Company, it shall deliver to each Holder (i) at
least 15 days' advance notice of its intention to file such registration
statement and the anticipated range of prices at which the shares of
Common Stock are proposed to be offered; (ii) prompt notice of any
change in such anticipated range of prices; and (iii) notice by 10:00
a.m., New York City time, on the day prior to the date on which the
registration statement is expected to become effective.
(e) Financial Statements of the Company. The Company shall
------------------------------------
promptly deliver to the Holders any annual, quarterly or other financial
statements that are provided to any holders of equity or debt (other
than bank debt) securities of the Company in their capacity as holders
of such securities.
8. Reservation and Authorization of Class A Common Stock.
-----------------------------------------------------
(a) The Company shall at all times reserve and keep available
for issuance upon the exercise of the Warrant the maximum number of its
authorized but unissued shares of Class A Common Stock as could then
potentially be required<PAGE>
<PAGE>
to permit the exercise in full of all outstanding Warrants. All shares
of Class A Common Stock issuable upon exercise of any Warrant and
payment therefor in accordance with the terms of such Warrant shall be
duly and validly issued and fully paid and nonassessable, and not
subject to preemptive rights.
(b) Before taking any action which would cause an adjustment
reducing the Exercise Price below the then par value, if any, of the
shares of Class A Common Stock issuable upon exercise of the Warrants,
the Company shall take any corporate action which may be necessary in
order that the Company may validly and legally issue fully paid and
nonassessable shares of such Class A Common Stock at such adjusted
Exercise Price.
9. Legends.
-------
(a) Warrant Restrictive Legend. Except as otherwise provided in
---------------------------
this Section 9, each Warrant shall be stamped or otherwise imprinted
with a legend in substantially the following form:
THIS WARRANT AND THE SHARES OF Class A Common Stock
PURCHASABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, HYPOTHE
CATED OR OTHERWISE DISPOSED OF UNLESS AND UNTIL REGISTERED
UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR
UNLESS THE ISSUER HAS RECEIVED AN OPINION OF COUNSEL TO THE
HOLDER OF THIS WARRANT IN FORM AND SUBSTANCE SATISFACTORY TO
THE ISSUER, THAT SUCH OFFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION, TRANSFER OR OTHER DISPOSITION IS EXEMPT FROM
REGISTRATION OR IS OTHERWISE IN COMPLIANCE WITH THE ACT AND
SUCH LAWS. THE SHARES ISSUABLE UPON EXERCISE OF THIS
WARRANT ARE SUBJECT TO CERTAIN RIGHTS AND<PAGE>
<PAGE>
OBLIGATIONS AS SET FORTH IN A REGISTRATION RIGHTS AGREEMENT,
DATED AS OF NOVEMBER 27, 1996, A COPY OF WHICH IS ON FILE AT
THE OFFICES OF THE COMPANY.
(b) Warrant Stock Restrictive Legend. Except as otherwise
--------------------------------
provided in this Section 9, each certificate for Warrant Stock initially
issued upon the exercise of this Warrant, and each certificate for
Warrant Stock issued to any subsequent transferee of any such
certificate, shall be stamped or otherwise imprinted with a legend in
substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS AND UNTIL
REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR UNLESS THE ISSUER HAS RECEIVED AN OPINION
OF COUNSEL TO THE HOLDER OF THESE SHARES IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER, THAT SUCH OFFER, SALE,
ASSIGNMENT, PLEDGE, HYPOTHECATION, TRANSFER OR OTHER
DISPOSITION IS EXEMPT FROM REGISTRATION OR IS OTHERWISE IN
COMPLIANCE WITH THE ACT AND SUCH LAWS. THE SHARES ARE
SUBJECT TO THE CONDITIONS SPECIFIED IN A CERTAIN WARRANT,
DATED NOVEMBER 27, 1996. THE HOLDER OF THIS CERTIFICATE, BY
ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY THE
PROVISIONS OF SUCH WARRANT.
(c) Termination of Restrictions. The legend requirements of
---------------------------
Sections 9(a) and 9(b) shall terminate (i) when and so long as the
security in question shall have been effectively registered under the
Securities Act and disposed of pursuant thereto or (ii) when the Company
shall have received an opinion of counsel reasonably satisfactory<PAGE>
<PAGE>
to it that such legend is not required in order to insure compliance
with the Securities Act.
10. Loss or Mutilation. Upon receipt by the Company from any
-------------------
Holder of evidence reasonably satisfactory to it of the ownership of and
the loss, theft, destruction or mutilation of this Warrant and an
indemnity reasonably satisfactory to it (and in case of mutilation upon
surrender and cancellation hereof), the Company will execute and deliver
in lieu hereof a new Warrant of like tenor to such Holder; provided, in
the case of mutilation, no indemnity shall be required if this Warrant
in identifiable form is surrendered to the Company for cancellation.
11. Office of the Company. As long as any of the Warrants
---------------------
remain outstanding, the Company shall maintain an office or agency
(which may be the principal executive offices of the Company) where the
Warrants may be presented for exercise, registration of transfer,
division or combination as provided in this Warrant, and where the
Warrant Register shall be maintained.
12. No Rights or Liabilities as Stockholder. Nothing contained
---------------------------------------
in this Warrant shall be construed as conferring upon any Holder any
rights as a stockholder of the Company or as imposing any liabilities on
such Holder to purchase any securities or as a stockholder of the
Company, whether such liabilities are asserted by the Company or by
creditors or stockholders of the Company or otherwise.
13. Notice. All notices, requests, demands, letters, waivers
------
and other communications required or permitted to be given hereunder
shall be in writing and shall be deemed to have been duly given if
(a) delivered personally, (b) mailed, certified or registered mail with
postage prepaid, (c) sent by next-day or overnight mail or delivery or
(d) sent by telecopy or telegram, as follows:
<PAGE>
<PAGE>
(i) If to the Initial Holder:
-------------------------
-------------------------
-------------------------
Telecopier No.:
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10128
Attention: Andrew L. Sommer, Esq.
Telecopier No.: (212) 909-6836
(ii) If to any other Holder, at its last known address appearing
on the Warrant Register
(iii) If to the Company:
Telegroup, Inc.
2098 Nutmeg Avenue
Fairfield, Iowa 52556
Attention: Douglas Neish
Telecopier No.: (515) 469-4610
with a copy to:
Swidler & Berlin
3000 K Street
Suite 300
Washington, D.C. 20007-5116
Attention: John Klusaritz, Esq.
Telecopier No.: (202) 424-7643
All such notices, requests, demands, letters, waivers and other
communications shall be deemed to have been received (w) if by personal
delivery on the day after such delivery, (x) if by certified or
registered mail, on the fifth<PAGE>
<PAGE>
business day after the mailing thereof, (y) if by next-day or overnight
mail or delivery, on the day delivered or (z) if by telecopy or tele-
gram, on the next day following the day on which such telecopy or
telegram was sent, provided that a copy is also sent by certified or
registered mail.
14. Successors and Assigns. This Warrant and the rights
----------------------
evidenced hereby shall be binding upon and shall inure to the benefit of
the successors of the Company and the successors and assigns of the
Holder. In addition, and provided that an express assignment shall have
been made, a copy of which shall have been delivered to the Company, the
provisions of this Warrant shall be for the benefit of and enforceable
by all Holders from time to time of this Warrant and shall be
enforceable by any Holder.
15. Amendment. This Warrant may be amended, modified or
---------
supplemented or the provisions hereof waived with the written consent of
the Company, on the one hand, and the Holder and the Other Holders who
hold warrants exercisable for more than 50% of the aggregate number of
shares of Class A Common Stock then purchasable upon exercise of all
such warrants, on the other hand; provided, that no Warrant may be
modified or amended to reduce the number of shares of Class A Common
Stock for which the Warrant is exercisable or to increase the Exercise
Price (before giving effect to any adjustment as provided therein)
without the prior written consent of the Holder thereof.
16. Headings. The headings and captions contained in this
--------
Warrant are for convenience of reference only and shall not control or
affect the meaning or construction of any provision hereof.
17. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
NEW YORK, WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PRINCIPLES THEREOF.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and attested by its Secretary or an Assistant Secretary.
Dated: November 27, 1996
TELEGROUP, INC.
By:
--------------------------
Attest:
By:
----------------------------------
Secretary<PAGE>
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
------------------
[To be executed only upon exercise of the Warrant]
The undersigned registered owner of Warrant No. 5 dated November
27, 1996, to purchase Class A Common Stock of Telegroup, Inc. (the
"Company"), irrevocably exercises such Warrant for the purchase of 3,825
shares of Class A Common Stock of the Company, and hereby undertakes to
make payment therefor and to deposit with the Company the certificate
representing such Warrant, in each case as set forth in Section 2(b)
thereof and at the price and on the other terms and conditions specified
therein. The undersigned requests that certificates for the shares of
Class A Common Stock to be purchased pursuant hereto be issued in the
name of and delivered to ___________________ whose address is
--------------------------------------------------------------------.
and, if such shares of Class A Common Stock shall not include all of the
shares of Class A Common Stock issuable as provided in such Warrant,
that a new Warrant of like tenor and date for the balance of the shares
of Class A Common Stock issuable thereunder be delivered to the
undersigned.
-------------------------------
(Name of Registered Owner)
---------------------------------
(Signature of Registered Owner)
----------------------------------
(Street Address)
-----------------------------------
(City)(State)(Zip Code)
NOTICE: The signature on this notice of exercise must correspond with
the name as written upon the face of the Warrant in every particular,
without alteration or enlargement or any change whatsoever.<PAGE>
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
---------------
FOR VALUE RECEIVED, the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named
below all of the rights of the undersigned under this Warrant, with
respect to the number of shares of Class A Common Stock set forth below:
No. of Shares of
Name and Address of Assignee Class A Common Stock
----------------------------- ----------------------
----------------------------
----------------------------
and does hereby irrevocably constitute and appoint
attorney-in-fact to register such transfer on
--------------------------
the Warrant Register of Telegroup, Inc. maintained for the purpose, with
full power of substitution in the premises.
Dated: Print Name:
------------------------- --------------------
Signature:
---------------------
Witness:
---------------------
NOTICE: The signature on this assignment must correspond with the name
as written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
Exhibit 4.5
INDENTURE, dated as of November 27, 1996, between TELEGROUP,
INC., a corporation incorporated under the laws of the State of Iowa
(together with its successors, the "Company"), as issuer, and THE CHASE
MANHATTAN BANK, 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 12% Senior Subordinated Notes due 2003 (the "Notes").
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.01 Definitions.
-----------
"Affiliate" of any specified Person means any other Person,
directly or indirectly, controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of
this definition, "control" when used with respect to any Person means
the power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing. "Affiliate" shall also mean any
Beneficial Owner of shares representing 10% or more of the total voting
power of the Voting Stock (on a fully diluted basis) of the Company,
and, for purposes of Section 4.10 only, any Person who would be an
Affiliate of any such Beneficial Owner pursuant to the first sentence
hereof.
"Agent" means any Registrar or Paying Agent of the Notes.
"Asset Sale" means any sale, issuance, conveyance, transfer,
lease or other disposition (including by merger,<PAGE>
<PAGE>
consolidation or otherwise) by the Company or any Subsidiary of the
Company, in one or a series of related transactions, of: (a) any Capital
Stock of any Subsidiary of the Company; (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) other than in the
ordinary course of business, any properties or assets of the Company or
a Subsidiary of the Company. For the purposes of this definition, the
term "Asset Sale" shall not include any sale, issuance, conveyance,
transfer, lease or other disposition of properties or assets (i) to the
Company or any Subsidiary of the Company, (ii) that is governed by
Section 5.01, (iii) that is governed by Section 4.09 or (iv) in one
transaction or a series of related transactions involving assets with a
Fair Market Value not in excess of $2,000,000.
"Attributable Debt" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at
the interest rate assumed in making calculations in accordance with FAS
13) of the total obligations of the lessee for rental payments during
the remaining term of the lease included in such Sale/Leaseback
Transaction (including any period for which such lease has been
extended).
"Average Life" means, 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 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.
"Bank Agent" means American National Bank and Trust Company of
Chicago or any successor or replacement administrative agent under the
Credit Agreement.
<PAGE>
<PAGE>
"Bankruptcy Law" means Title 11 of the United States Code or
any similar federal, state or foreign law for the relief of debtors.
"Beneficial Owner" means a "beneficial owner" as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall
be deemed to be a "beneficial owner" of all securities that such Person
has the right to acquire, whether that right is exercisable immediately
or only after the passage of time.
"Board of Directors" means the Board of Directors of the
Company or a designated committee thereof.
"Board Resolution" means a copy of a resolution certified by
the Secretary of the Company or any Note Guarantor, as the case may be,
to have been duly adopted by the Board of Directors or the board of
directors (or designated committee thereof) of the relevant Note
Guarantor and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means a day other than a Saturday, Sunday or
any other day on which banking institutions in New York State are
authorized or required by law to close.
"Capital Stock" of any Person means any and all shares of,
rights to purchase, warrants or options for, or participations or other
interests in (however designated) equity of such Person, including
Preferred Stock, but excluding any debt securities convertible into such
equity.
"Capitalized Lease Obligations" means an obligation that is
required to be classified and accounted for as a capitalized lease for
financial reporting purposes in accordance with GAAP, and the amount of
Indebtedness represented by such obligation shall be the capitalized
amount of such obligation determined in accordance with GAAP; and the
Stated Maturity thereof shall be the date of the last payment of rent or
any other amount due under such lease.
<PAGE>
<PAGE>
"Cash Equivalents" means (i) any security, maturing not more
than one year after the date of acquisition, issued by the United States
of America, or an instrumentality or agency thereof and guaranteed fully
as to principal, premium, if any, and interest by the United States of
America; (ii) any certificate of deposit, time deposit or bankers'
acceptance (or, with respect to non-U.S. banking institutions, similar
instruments), maturing not more than one year after the day of
acquisition, issued by any commercial banking institution that is a
member of the Federal Reserve System or a commercial banking institution
organized and located in a country recognized by the United States of
America, in each case, having combined capital and surplus and undivided
profits of not less than $500,000,000 (or the foreign currency
equivalent thereof), whose short-term debt has a rating, at the time as
of which any investment therein is made, of "P-1" (or higher) according
to Moody's or "A-1" (or higher) according to S&P; (iii) commercial paper
maturing not more than one year after the date of acquisition issued by
a corporation (other than an Affiliate or Subsidiary of the Company)
with a rating, at the time as of which any investment therein is made,
of "P-1" (or higher) according to Moody's or "A-1" (or higher) according
to S&P; and (iv) any money market deposit accounts issued or offered by
a commercial banking institution that is a member of the Federal Reserve
System or a commercial banking institution organized and located in a
country recognized by the United States of America, in each case, having
combined capital and surplus and undivided profits in excess of
$500,000,000 (or the foreign currency equivalent thereof).
"Change of Control" has the meaning set forth in
Section 4.16(b).
"Commodities Agreements" means one or more of the following
agreements entered into by a Person and one or more financial
institutions: commodity future contracts, forward contracts, options or
other similar agreements or arrangements designed to protect against
fluctuations in the <PAGE>
<PAGE>
price of, or the shortage of supply of, commodities from time to time.
"Company" means Telegroup, Inc., an Iowa corporation, until a
successor Person shall have become such pursuant to Article Five, and
thereafter "Company" shall mean such successor Person.
"Consolidated Coverage Ratio" as of any date of determination
means the ratio of (i) the aggregate amount of EBITDA of the Company for
the period of the most recent four consecutive fiscal quarters ending
prior to the date of such determination for which consolidated financial
statements of the Company are available to (ii) Consolidated Interest
Expense of the Company for such four fiscal quarters, provided, however,
-------- -------
that:
(1) if the Company or any Subsidiary of the Company (x) has
Incurred any Indebtedness since the beginning of such period that
remains outstanding on such date of determination or if the transaction
giving rise to the need to calculate the Consolidated Coverage Ratio is
an Incurrence of Indebtedness, EBITDA and Consolidated Interest Expense
for such period shall be calculated after giving effect on a pro forma
basis to such Indebtedness and the application of the proceeds thereof
as if such Indebtedness had been Incurred on the first day of such
period or (y) has repaid, repurchased, defeased or otherwise discharged
any Indebtedness since the beginning of the period that is no longer
outstanding on such date of determination, or if the transaction giving
rise to the need to calculate the Consolidated Coverage Ratio involves a
discharge of Indebtedness, EBITDA and Consolidated Interest Expense for
such period shall be calculated after giving effect to such discharge of
such Indebtedness, including with the proceeds of such new Indebtedness,
as if such discharge had occurred on the first day of such period;
(2) if since the beginning of such period the Company or any
Subsidiary of the Company shall have<PAGE>
<PAGE>
disposed of any company or any business or any group of assets
constituting an operating unit (a "Disposal"), (x) EBITDA for such
period shall be reduced by an amount equal to the EBITDA (if positive)
directly attributable to the assets which are the subject of such
Disposal for such period or increased by an amount equal to the EBITDA
(if negative) directly attributable thereto for such period and (y)
Consolidated Interest Expense for such period shall be reduced by an
amount equal to the Consolidated Interest Expense directly attributable
to any Indebtedness of the Company or any Subsidiary repaid,
repurchased, defeased or otherwise discharged with respect to the
Company and its continuing Subsidiaries in connection with such Disposal
for such period (and, if the Capital Stock of any Subsidiary is sold,
the Consolidated Interest Expense for such period directly attributable
to the Indebtedness of such Subsidiary to the extent the Company and its
continuing Subsidiaries are no longer liable for such Indebtedness after
such sale);
(3) if since the beginning of such period the Company or any
Subsidiary of the Company (by merger or otherwise) shall have acquired
any company or any business or any group of assets constituting an
operating unit (for purposes of this definition, an "Acquisition"),
EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto (including the
Incurrence of any Indebtedness) as if such Acquisition had occurred on
the first day of such period; and
(4) if since the beginning of such period any Person (that
subsequently became a Subsidiary of the Company or was merged with or
into the Company or any Subsidiary of the Company since the beginning of
such period) shall have made any Disposal or Acquisition that would have
required an adjustment pursuant to clause (2) or (3) above if made by
the Company or a Subsidiary of the Company during such period, EBITDA
and Consolidated Interest Expense for such period shall<PAGE>
<PAGE>
be calculated after giving pro forma effect thereto as if such Disposal
or Acquisition occurred on the first day of such period.
If any Indebtedness bears a floating rate of interest and is
being given pro forma effect, the interest expense on such Indebtedness
shall be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period (taking
into account any Interest Rate Agreement applicable to such Indebtedness
if such Interest Rate Agreement has a remaining term as at the date of
determination in excess of 12 months). If any Indebtedness bears, at
the option of the Company or a Subsidiary of the Company, a fixed or
floating rate of interest and is being given pro forma effect, the
interest expense on such Indebtedness shall be computed by applying, at
the option of the Company, either a fixed or floating rate. If any
Indebtedness which is being given pro forma effect was Incurred under a
revolving credit facility, the interest expense on such Indebtedness
shall be computed based upon the average daily balance of such
Indebtedness during the applicable period.
"Consolidated Income Tax Expense" means for any period, as
applied to any Person, the provision for federal, state, local and
foreign income taxes and capital taxes of such Person and its
Consolidated Subsidiaries for such period as recorded under "provision
for taxes" on the statement of operations of such Person as determined
in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, the
total interest expense of the Company and its Consolidated Subsidiaries,
as determined in accordance with GAAP, plus, to the extent Incurred by
the Company and its Subsidiaries in such period but not included in such
interest expense, (i) amortization of debt discount (including
amortization of fees), (ii) the interest portion of any deferred payment
obligation which in accordance with GAAP is required to be reflected on
an income statement, (iii) net costs (including amortization of
discounts and<PAGE>
<PAGE>
fees) associated with Interest Rate Agreements or Currency Agreements,
(iv) interest accruing on any Indebtedness of any other Person that is
Guaranteed by the Company or any Subsidiary of the Company, (v) all
commissions, discounts and other fees and charges with respect to
letters of credit and bankers' acceptance financing, (vi) all accrued
interest, (vii) the aggregate dividends paid or accrued on Preferred
Stock held by Persons other than the Company or a Wholly Owned
Subsidiary of the Company, (viii) the interest component of Capitalized
Lease Obligations paid, accrued and/or scheduled to be paid by the
Company and the Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP, and (ix) the cash
contributions to any employee stock ownership plan or similar trust to
the extent such contributions are used by such plan or trust to pay
interest or fees to any Person (other than the Company) in connection
with Indebtedness Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net
income (loss) of the Company and its Consolidated Subsidiaries, as
determined in accordance with GAAP; provided, however, that there shall
-------- -------
not be included in such Consolidated Net Income: (i) any net income of
any Person that is not the Company or a Subsidiary of the Company,
except that, subject to the limitations contained in clause (iv) below,
the Company's equity in the net income of any such Person for such
period shall be included in such Consolidated Net Income up to the
aggregate amount of cash actually distributed by such Person during such
period to the Company or a Subsidiary of the Company as a dividend or
other distribution (subject, in the case of a dividend or other
distribution to a Subsidiary , to the limitations contained in clause
(iii) below); (ii) any net income or loss of any Person acquired by the
Company or a Subsidiary of the Company in a pooling of interests
transaction for any period prior to the date of such acquisition; (iii)
any net income of any Subsidiary of the Company if such Subsidiary is
subject to restrictions, directly or indirectly, on the payment of
dividends or the making of distributions by such Subsidiary, directly or
indirectly, to the Company, except<PAGE>
<PAGE>
that, subject to the limitations contained in clause (iv) below, the
Company's equity in the net income of any such Subsidiary for such
period shall be included in such Consolidated Net Income up to the
aggregate amount of cash that could have been distributed by such
Subsidiary during such period to the Company or another Subsidiary as a
dividend (subject, in the case of a dividend that could have been made
to another Subsidiary of the Company, to the limitation contained in
this clause); (iv) any gain or loss realized upon any Asset Sale and any
gain or loss realized upon the sale or other disposition of any Capital
Stock of any Person; (v) any extraordinary gain or loss as recorded on
the statement of operations of the Company in accordance with GAAP;
(vi) the cumulative effect of a change in accounting principles as
recorded on the statement of operations of the Company in accordance
with GAAP; (vii) all deferred financing costs written off in connection
with the early extinguishment of indebtedness under the Credit Agreement
or the Notes as recorded on the Company's statement of operations in
accordance with GAAP; (viii) unrealized foreign currency transaction
gains or losses in respect of Indebtedness of any Person denominated in
a currency other than the functional currency of such Person and
permitted to be Incurred under Section 4.08 as recorded on the statement
of operations of the Company in accordance with GAAP; (ix) non-recurring
charges related to any acquisition by the Company or any Subsidiary of
the Company occurring after the Issue Date as recorded on the statement
of operations of the Company in accordance with GAAP; (x) non-cash,
non-recurring charges as recorded on the Company's statement of operations
in accordance with GAAP; and (xi) unrealized gains or losses in respect
of Currency Agreements permitted by Section 4.08(v) as recorded on the
statement of operations in accordance with GAAP; provided that in the
case of any amount or charge specified in clause (vii), (viii), (ix),
(x) or (xi), such amount or charge shall be net of any tax or tax
benefit to the Company or any of its consolidated Subsidiaries resulting
therefrom.
"Consolidated Non-Cash Charges" of any Person means, for any
period, the aggregate depreciation,<PAGE>
<PAGE>
amortization and other non-cash charges of such Person and its
consolidated Subsidiaries for such period, on a Consolidated basis, as
determined in accordance with GAAP (excluding any non-cash charge that
requires an accrual or reserve for cash charges for any future period).
"Consolidated Net Worth" means, with respect to any Person as
of any date, the sum of (i) the consolidated equity of the common
stockholders of such Person and its consolidated Subsidiaries as of such
date plus (ii) the respective amounts reported on such Person's balance
sheet as of such date with respect to any series of Preferred Stock
(other than Preferred Stock which is Redeemable Capital Stock) that by
its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect
of the year of such declaration and payment, but only to the extent of
any cash received by such Person upon issuance of such Preferred Stock,
less (to the extent otherwise included in (i) and (ii) above) (w) all
write-ups (other than write-ups resulting from foreign currency
translations and write-ups of tangible assets of a going concern
business made within 12 months after the acquisition of such business)
subsequent to the Issue Date in the book value of any asset owned by
such Person or a consolidated Subsidiary of such Person, (x) all amounts
attributable to interests in Subsidiaries of such Person held by Persons
other than such Person or its Subsidiaries, (y) all investments as of
such date in unconsolidated Subsidiaries and in Persons that are not
Subsidiaries, and (z) all unamortized debt discount and expense and
unamortized deferred charges as of such date, all of the foregoing
determined in accordance with GAAP.
"Consolidation" means the consolidation of the amounts of each
of the Company's Subsidiaries with those of the Company in accordance
with GAAP consistently applied. The term "Consolidated" has a
correlative meaning.
"Corporate Trust Office" means the corporate trust office of
the Trustee at which at any particular time its corporate trust business
shall be principally administered,<PAGE>
<PAGE>
which on the date hereof is 450 West 33rd Street, 15th Floor, New York,
New York 10001.
"covenant defeasance" has the meaning set forth in Section
8.02 (c).
"Credit Agreement" means the Credit Agreement, among the
Company and the other financial institutions which are to become parties
thereto from time to time, as such agreement may be amended, modified,
supplemented, renewed, refunded, replaced, increased or refinanced (in
whole or in part) from time to time by one or more instruments or
agreements with the same or other, or any combination of the same and
other, lenders and, in each case, including, without limitation, any
related notes, letters of credit and applications therefor, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, in each case as amended, modified, supplemented, renewed,
refunded, replaced, increased or refinanced (in whole or in part) from
time to time by one or more instruments or agreements. Without limiting
the generality of the foregoing, the term "Credit Agreement" shall,
subject to the covenants of this Indenture, include any agreement (i)
changing the maturity of any Indebtedness incurred thereunder or
contemplated thereby, (ii) adding Subsidiaries of the Company as
additional borrowers or guarantors thereunder, (iii) increasing the
amount of Indebtedness incurred thereunder or available to be borrowed
thereunder or (iv) otherwise altering the terms and conditions thereof.
"Credit Agreement Obligations" means all monetary obligations
of every nature of the Company or a Subsidiary of the Company,
including, without limitation, obligations to pay principal and
interest, reimbursement obligations under letters of credit, fees,
expenses and indemnities, from time to time owed to the lenders or any
agent under or in respect of the Credit Agreement.
"Currency Agreement" means in respect of any Person any
foreign exchange contract, currency swap<PAGE>
<PAGE>
agreement or other similar agreement as to which such Person is a party
or a beneficiary.
"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.
"defeasance" has the meaning set forth in Section 8.02 (b).
"Disinterested Director" means a member of the Board of
Directors who does not have any material direct or indirect financial
interest in or with respect to any transaction or series of
transactions.
"Dollar" or "$" means the lawful money of the United States of
America.
"EBT" means, with respect to any Person for any period, the
sum of Consolidated Net Income of such Person for such period, plus all
Consolidated Income Tax Expense deducted in computing such Consolidated
Net Income for such period, all determined on a consolidated basis in
accordance with GAAP.
"EBITDA" for any period means, with respect to any Person, the
sum of Consolidated Net Income, Consolidated Interest Expense,
Consolidated Income Tax Expense and Consolidated Non-Cash Charges
deducted in computing Consolidated Net Income, without duplication, in
each case for such period, of such Person and its consolidated
Subsidiaries on a consolidated basis, all determined in accordance with
GAAP.
"Event of Default" has the meaning set forth under
Section 6.01.
<PAGE>
<PAGE>
"Excess Proceeds" has the meaning set forth in Section
4.15(a).
"Excess Proceeds Offer" has the meaning set forth in
Section 4.15(b).
"Excess Proceeds Offer Price" has the meaning set forth in
Section 4.15(b).
"Excess Proceeds Purchase Date" has the meaning set forth in
Section 4.15(c).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" means, with respect to any asset or
property, the price that could be negotiated in an arm's-length free
market transaction, for cash, between an informed and willing seller and
an informed and willing buyer, neither of whom is under undue pressure
or compulsion to complete the transaction.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect as of the Issue Date, including
those set forth in 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. All ratios and computations based on GAAP
contained in this Indenture shall be computed in conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person and any obligation, direct or indirect,
contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of such Person (whether arising by
virtue of partnership arrangements, or by agreement to keep well, to
purchase assets, goods, securities or services, to<PAGE>
<PAGE>
take-or-pay, or to maintain financial statement conditions or otherwise)
or (ii) entered into for purposes of assuring in any other manner the
obligee of such Indebtedness or other obligation of the payment thereof
or to protect such obligee against loss in respect thereof (in whole or
in part), provided, however, that the term "Guarantee" shall not include
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(x) endorsements for collection or deposit in the ordinary course of
business and (y) any obligation of any kind whatsoever of (i) the
Company with respect to any Wholly-Owned Subsidiary, (ii) any Wholly-Owned
Subsidiary with respect to the Company or (iii) any Wholly-Owned
Subsidiary with respect to any other Wholly-Owned Subsidiary. The term
"Guarantee" used as a verb has a corresponding meaning.
"Guarantor Senior Indebtedness" means, with respect to any
Note Guarantor, the principal of, premium, if any, and interest
(including interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect
thereto, whether or not such interest is an allowed claim under
applicable state, federal or foreign law) on and other amounts due on or
in connection with (including any fees, premiums, expenses, including
costs of collection, and indemnities) any Indebtedness of such Note
Guarantor, whether 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 Note Guarantee of such Note
Guarantor. Without limiting the generality of the foregoing, "Guarantor
Senior Indebtedness" shall also include the principal of, premium, if
any, and interest (including any interest accruing subsequent to the
filing of a petition of bankruptcy at the rate provided for in the
documentation with respect thereto, whether or not such interest is an
allowed claim under applicable state, federal or foreign law) on, and
all other amounts owing in respect of all Credit Agreement Obligations
of such Note Guarantor.
<PAGE>
<PAGE>
"Holder" or "Noteholder" means the Person in whose name a Note
is registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise
become liable for, provided, however, that any Indebtedness or Capital
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Stock of a Person existing at the time such Person becomes a Subsidiary
(whether by merger, consolidation, acquisition or otherwise) shall be
deemed to be Incurred by such Person at the time it becomes a
Subsidiary.
"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 accounts payable, other accrued current liabilities and
liabilities of the kind referred to in clauses (f) and (g) of the second
sentence of the definition of the term "Senior Indebtedness", in each
case to the extent the same is incurred in the ordinary course of
business consistent with past practice, 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, or in connection with any agreement to
purchase, redeem, exchange, convert or otherwise acquire for value any
Capital Stock of such Person, or any warrants, rights or options to
acquire such Capital Stock, now or hereafter outstanding, (b) all
obligations of such Person evidenced by bonds, notes, debentures or
other similar instruments, (c) all indebtedness of such Person 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 and all Attributable
Debt 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<PAGE>
<PAGE>
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 such Person in respect of
Indebtedness of another Person of any of the types referred to in this
definition, (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 Currency Agreements, Interest Rate
Agreements and Commodities Agreements of such Person and (i) any
amendment, supplement, modification, deferral, renewal, extension or
refunding of any liability of such Person of any of the types referred
to in clauses (a) through (h) above.
For purposes hereof, (x) the "maximum fixed repurchase price"
of any Redeemable Capital Stock that 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 and (y)
Indebtedness is deemed to be incurred pursuant to a revolving credit
facility each time an advance is made thereunder. When any Person
becomes a Subsidiary there shall be deemed to have been an Incurrence by
such Subsidiary of all Indebtedness for which it is liable at the time
it becomes a Subsidiary. If the Company or any Subsidiary of the
Company, directly or indirectly, Guarantees Indebtedness of another
Person or otherwise Incurs a contingent obligation, there shall be
deemed to be an Incurrence of such Guaranteed Indebtedness or the
Incurrence of the maximum amount of such contingent obligation, as the
case may be, as if the Company or such<PAGE>
<PAGE>
Subsidiary had directly incurred or otherwise assumed such Guaranteed
Indebtedness or directly incurred or otherwise assumed the maximum
amount of such contingent obligation, as the case may be.
"Indenture" means this Indenture, as amended, modified or
supplemented from time to time.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Notes, as set forth therein.
"Interest Rate Agreement" means with respect to any Person,
any interest rate protection agreement, interest rate future agreement,
interest rate option agreement, interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement, interest rate hedge
agreement or other similar agreement or arrangement as to which such
Person is party or a beneficiary.
"Investment" in any Person means any direct or indirect
advance, loan (other than advances to customers in the ordinary course
of business that are recorded as accounts receivable on the balance
sheet of the Person making such advance) or other extension of credit
(including by way of Guarantee or similar arrangement) 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 of Capital Stock, Indebtedness
or other similar instruments issued by such Person.
"Issue Date" means the date on which the Notes are originally
issued.
"Lien" means any mortgage, pledge, security interest,
hypothecation, assignment, conveyance, preference, priority,
encumbrance, lien (statutory or other) or charge of any kind (including
any conditional sale or other title retention agreement or lease in the
nature thereof).
<PAGE>
<PAGE>
"Material Adverse Effect" means any material adverse change in
the properties, business, operations, assets, condition (financial or
otherwise) or prospects of the Company or its Subsidiaries which could
reasonably be expected to result in a material adverse effect upon the
business, operations, properties, assets, condition (financial or
otherwise) or prospects of the Company and its Subsidiaries taken as a
whole.
"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 (including pursuant to an Excess Proceeds Offer or an offer in
the event of a Change of Control) or otherwise.
"Maximum Amount" shall mean, with respect to any fiscal year of the
Company, (i) $2 million, if the EBT for the Company in the year
immediately preceding such fiscal year, as derived from the audited
financial statements delivered by the Company pursuant to Section 4.17
(iii), is $2 million or greater, (ii) $1 million plus the Excess Amount
(as defined below) for such year, if the EBT for the Company in the year
immediately preceding such fiscal year, as derived from the audited
financial statements delivered by the Company pursuant to Section 4.17
(iii), is greater than $1 million but less than $2 million (the amount
by which such EBT exceeds $1 million in such year being referred to
herein as the "Excess Amount") or (iii) $1 million, in the event that
the EBT for the Company in the year immediately preceding such fiscal
year, as derived from the financial statements delivered by the Company
pursuant to Section 4.17 (iii), is $1 million or less.
"Moody's" means Moody's Investors Service, Inc. or any
successor rating agency.
"Net Cash Proceeds" means, (a) with respect to any Asset Sale,
the proceeds thereof in the form of cash or Cash Equivalents, including
payments in respect of deferred<PAGE>
<PAGE>
payment obligations when received in the form of, or stock or other
assets when disposed for, cash or Cash Equivalents (except to the extent
that such obligations are financed or sold, but only to the extent they
continue to be, with recourse to the Company or any Subsidiary), net of
(i) brokerage commissions and other reasonable fees and expenses
(including fees and expenses of legal counsel and investment banks)
actually incurred and 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, and (b) with respect to any
issuance or sale of Capital Stock, means the proceeds of such issuance
or sale in the form of cash or Cash Equivalents, including payments in
respect of deferred payment obligations when received in the form of, or
stock or other assets when disposed for, cash or Cash Equivalents
(except to the extent that such obligations are financed or sold, but
only to the extent they continue to be, with recourse to the Company or
any Subsidiary of the Company), net of (i) brokerage commissions and
other reasonable fees and expenses (including fees of legal counsel and
investment banks) actually incurred and related to such issuance or sale
and (ii) provisions for all taxes payable as a result of such issuance
or sale; in each case, as reflected in an Officers' Certificate
delivered to the Trustee.
"Note Purchase Agreement" means the Note and Warrant Purchase
Agreement dated as of November 27, 1996 among the Company and the
purchasers of the Notes set forth on Schedule 2.2 thereto.
"Note Guarantee" means the Guaranty of the Notes on the terms
of Article Ten hereof, and any Guarantees of the Notes on the terms of
Article Ten hereof that may from <PAGE>
<PAGE>
time to time be executed and delivered pursuant to the terms of this
Indenture. Each such Note Guarantee shall be in the form prescribed in
this Indenture.
"Note Guarantor" means any Person that has issued a Note
Guarantee.
"Notes" means the Company's Senior Subordinated Notes Due 2003
issued under this Indenture in the original aggregate principal amount
of U.S.$20,000,000 which are issued and authenticated under this
Indenture and are then Outstanding.
"Offer Period" has the meaning set forth in Section 4.15(c).
"Officer" means the Chairman of the Board, Chief Executive
Officer, Chief Financial Officer, the President, any Vice President, the
Treasurer or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two
Officers.
"Opinion of Counsel" means a written opinion in form and
substance reasonably satisfactory to the Trustee from legal counsel who
is reasonably acceptable to the Trustee. The counsel may be an employee
of or counsel to the Company or the Trustee.
"Pari Passu Indebtedness" means any Indebtedness of the
Company or any Note Guarantor ranking pari passu with the Notes or the
---- -----
applicable Note Guarantee, as applicable.
"Paying Agent" has the meaning set forth in Section 2.04,
except that, for the purposes of Sections 4.18 and 4.19 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.
<PAGE>
<PAGE>
"Payment Blockage Period" shall have the meaning set forth in
Section 11.03(b).
"Payment Default" means any default in the payment when due
(whether at Stated Maturity, by acceleration or otherwise) of principal
of or interest on, or of unreimbursed amounts under drawn letters of
credit or fees relating to letters of credit constituting, any Senior
Indebtedness or Guarantor Senior Indebtedness, as applicable of the
Company or any Note Guarantor.
"Permitted Investment" means any of the following: (i)
Investments in Cash Equivalents, (ii) Investments in the Company or in
any Wholly-Owned Subsidiary of the Company (including any Person that
thereby becomes a Subsidiary of the Company), (iii) Investments in
existence on the Issue Date, (iv) receivables owing to the Company or
any Subsidiary of the Company, if created or acquired in the ordinary
course of business and payable or dischargeable in accordance with
customary trade terms,(v) Investments in securities of any Person
received pursuant to any plan of reorganization or similar arrangement
upon the bankruptcy or insolvency of such Person, (vi) Investments
received by the Company or its Subsidiaries as consideration for Asset
Sales effected in compliance with Section 4.15, and (vii) Interest Rate
Agreements designed to protect the Company or any Subsidiary against
fluctuations in interest rates in respect of Indebtedness of the Company
or any Subsidiary, and Currency Agreements designed to protect the
Company or any Subsidiary against fluctuations in foreign currency
exchange rates in respect of foreign exchange exposures incurred by the
Company or any Subsidiary in the ordinary course of business, in each
case permitted by Section 4.08.
"Permitted Junior Securities" means (a) for purposes of
Article Eleven (so long as the effect of any exclusion employing this
definition is not to cause the Notes to be treated in any case or
proceeding or similar event described in clauses (a), (b) or (c) of
Section 11.02 as part of the same class of claims as the Senior Indebt-
edness or any class of claims pari passu with, or senior to,
---- -----<PAGE>
<PAGE>
the Senior Indebtedness for purposes of any payment or distribution),
debt or equity securities of the Company or any successor Person
provided for by a plan of reorganization or readjustment that are
subordinated at least to the same extent that the Notes are subordinated
to the payment of all Senior Indebtedness; provided that (i) if a new
--------
Person results from such reorganization or readjustment, such Person
assumes any Senior Indebtedness not paid in full in cash or Cash
Equivalents in connection with such reorganization or readjustment and
(ii) the rights of the holders of such Senior Indebtedness are not,
without the consent of such holders, altered or impaired by such
reorganization or readjustment, and (b) for purposes of Article Ten, any
Guarantee by a Note Guarantor of a Permitted Junior Security of the
Company described in clause (a) above; provided that such Guarantee is
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subordinated to the payment of all Guarantor Senior Indebtedness at
least to the same extent that the Note Guarantees are subordinated to
the payment of all Guarantor Senior Indebtedness, and such Guarantee is
subject to provisions substantially similar to those set forth in
Article Ten.
"Permitted Lien" means (i) any Lien as existing on the Issue
Date and listed on Schedule 1 to this Indenture; (ii) any Lien on any
property or assets of a Subsidiary of the Company granted in favor of
the Company or any Subsidiary of the Company; (iii) any Lien securing
the Notes or any Note Guarantor; (iv) any Lien in favor of the Trustee
under this Indenture; and (v) any extension, renewal or replacement in
whole or in part, of any Lien described in the foregoing clauses (i)
through (v), provided that any such extension, renewal or replacement
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shall be no more restrictive in any material respect than the Lien so
extended, renewed or replaced and shall not extend to any additional
property or assets.
"Person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint-stock
company, trust, unincorporated organization, government or any agency or
political subdivision thereof, or any other entity.
<PAGE>
<PAGE>
"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", as applied to the Capital Stock of any
Person, means Capital Stock of any class or classes (however designated)
that is preferred as to the payment of dividends, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such Person, over shares of Capital Stock of any other
class of such Person.
"Public Equity Offering" means an underwritten public offering
of newly issued shares of common stock of the Company (whether alone or
in conjunction with any secondary public offering) which produces Net
Cash Proceeds for the Company of at least $25,000,000 and after which an
established public trading market exists for such common stock.
"Redeemable Capital Stock" means any class or series of
Capital Stock that, either by its terms, 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, or matures, on or prior to the 91st
day after any Stated Maturity of the Notes, or is redeemable at the
option of the holder thereof at any time on or prior to the 91st day
after any Stated Maturity of the Notes, or, at the option of the holder
thereof, is convertible into or exchangeable for Indebtedness or
Redeemable Capital Stock at any time on or prior to the 91st day after
any Stated Maturity of the Notes; it being understood and agreed that
the term "Redeemable Capital Stock" shall not include the Warrants.
<PAGE>
<PAGE>
"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 Note to be
redeemed, the price fixed for such redemption pursuant to the terms of
this Indenture and the Notes.
"Registration Rights Agreement" means the Registration Rights
Agreement attached as Exhibit A to the Warrants.
"Registrar" shall have the meaning set forth in Section 2.04.
"Related Business" means the businesses of the Company and its
Subsidiaries as conducted on the Issue Date, and any businesses
reasonably related, ancillary or complementary to such businesses.
"Restricted Payment" shall have the meaning set forth in
Section 4.09.
"Sale/Leaseback Transaction" means an arrangement relating to
property now owned or hereafter acquired by the Company or a Subsidiary
of the Company, whereby the Company or a Subsidiary of the Company
transfers such property to a Person and the Company or a Subsidiary of
the Company leases it from such Person.
"S&P" means Standard & Poor's Ratings Services (a division of
McGraw Hill Inc.) or any successor rating agency.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company
or any Subsidiary of the Company secured by a Lien.
<PAGE>
<PAGE>
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" means the principal of, premium, if any,
and interest (including any interest accruing subsequent to the filing
of a petition of bankruptcy at the rate provided for in the
documentation with respect thereto, whether or not such interest is an
allowed claim under applicable state, federal or foreign law) on and
other amounts due on or in connection with (including any fees,
premiums, expenses, including costs of collection, and indemnities) any
Indebtedness of the Company, whether 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.
Without limiting the generality of the foregoing, "Senior Indebtedness"
shall also include the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition
of bankruptcy at the rate provided for in the documentation with respect
thereto, whether or not such interest is an allowed claim under
applicable state, federal or foreign law) on, and all other amounts
owing in respect of, all Credit Agreement Obligations of the Company,
whether outstanding on the Issue Date or thereafter created, incurred or
assumed and including in respect of claims under guarantees, claims for
indemnity, claims in relation to expense reimbursement and fees.
Notwithstanding the foregoing, "Senior Indebtedness" shall not include
(a) Indebtedness evidenced by the Notes, (b) Indebtedness that is
pari passu with or expressly subordinated or junior in right of payment
---- -----
to any Senior Indebtedness of the Company, (c) Indebtedness which, when
incurred and without respect to any election under Section 1111(b) of
Title 11, United States Code, is by its terms without recourse to the
Company, (d) any repurchase, redemption or other obligation in respect
of Redeemable Capital Stock of the Company, (e) to the extent it might
constitute Indebtedness, amounts owing for goods, materials<PAGE>
<PAGE>
or services purchased in the ordinary course of business or consisting
of trade payables or other current liabilities (other than any current
liabilities owing under the Credit Agreement Obligations or the current
portion of any long-term Indebtedness which would constitute Senior
Indebtedness but for the operation of this clause (e)), (f) to the
extent it might constitute Indebtedness, amounts owed by the Company for
compensation to employees or for services rendered to the Company, (g)
to the extent it might constitute Indebtedness, any liability for
federal, state, local, foreign or other taxes owed or owing by the
Company, (h) Indebtedness of the Company to a Subsidiary of the Company
and (i) that portion of any Indebtedness of the Company which at the
time of Incurrence is Incurred in violation of this Indenture.
"Senior Representative" means the Bank Agent or any other
representatives of the holders of any class or issue of Senior
Indebtedness designated in writing to the Trustee; provided that, in the
--------
absence of a representative of the type described above, any holder or
holders of a majority of the principal amount outstanding of any class
or issue of Senior Indebtedness may collectively act as Senior
Representative for such class or issue.
"Senior Subordinated Indebtedness" means the Notes and any
other Indebtedness of the Company that specifically provides that such
Indebtedness is to rank pari passu with the Notes and is not
---- -----
subordinated by its terms to any Indebtedness or other obligation of the
Company that is not Senior Indebtedness.
"Senior Subordinated Note Obligations" means (i) any principal
of, premium, if any, and interest on, and any other amounts owing in
respect of, the Notes payable pursuant to the terms of the Notes or this
Indenture or upon acceleration of the Notes, including, without
limitation, amounts received upon the exercise of rights of rescission
or other rights of action (including claims for damages) or otherwise,
to the extent relating to the purchase price of the Notes or amounts
corresponding to such principal of,<PAGE>
<PAGE>
premium, if any, interest, or other amounts owing with respect to, the
Notes and (ii) in the case of any Note Guarantor, any obligations with
respect to the foregoing or otherwise under its Note Guarantee.
"Specified Indebtedness" means (i) any Indebtedness of the
Company or any Note Guarantor that is Pari Passu Indebtedness or
Subordinated Indebtedness or (ii) any Indebtedness of any Subsidiary of
the Company that is Subordinated Indebtedness, provided, however, that
Specified Indebtedness shall never include any Credit Agreement
Obligation otherwise constituting Guarantor Senior Indebtedness.
"Stated Maturity" means, when used with respect to any
security, the date specified in such security as the fixed date on which
the payment of principal of such security is due and payable, including
pursuant to any mandatory redemption provision (but excluding any
provision providing for the purchase of such security at the option of
the holder thereof upon the happening of any contingency beyond the
control of the issuer unless such contingency has occurred).
"Subordinated Indebtedness" means (i) any Indebtedness of the
Company or any Note Guarantor (whether outstanding on the Issue Date or
thereafter Incurred) that is subordinated or junior in right of payment
to the Notes or any Note Guarantee or (ii) Indebtedness of any
Subsidiary of the Company that is subordinated or junior in right of
payment to any other Indebtedness of such Subsidiary.
"Subsidiary" of any Person means any corporation, association,
partnership, limited liability company or other business entity of which
more than 50% of the total voting power of shares of Capital Stock
(including partnership or other equity interests) generally entitled
(without the incurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by (i) such Person or (ii) one or
more Subsidiaries of such Person.<PAGE>
<PAGE>
"Surviving Entity" has the meaning set forth in Section 5.01.
"TIA" means the Trust Indenture Act of 1939, as amended.
"Trust Officer" means any officer of the Trustee with direct
responsibility for the administration of this Indenture.
"Trustee" means the party named as such in this Indenture
until a successor replaces it and, thereafter, means the successor.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of
the United States of America (including any agency or instrumentality
thereof) for the payment of which the full faith and credit of the
United States of America is pledged and which are not callable or
redeemable at the issuer's option.
"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, stock of any other class or classes shall
have, or might have, voting power by reason of the happening of any
contingency).
"Warrant" means the warrants to purchase the Capital Stock of
the Company issued and sold to the purchasers of Notes pursuant to the
Note and Warrant Purchase Agreement.
"Wholly-Owned Subsidiary" means a Subsidiary of the Company
all the Capital Stock of which (other than nominal directors' qualifying
shares) is owned by the Company or another Wholly Owned Subsidiary of
the Company.
<PAGE>
<PAGE>
Section 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 notes" means the Notes and the Note Guarantees;
"indenture noteholder" 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 notes 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.
Section 1.03 Rules of Construction. For all purposes of
---------------------
this Indenture, except as otherwise expressly provided or unless the
context otherwise requires:
(a) a term has the meaning assigned to it;
(b) words in the singular include the plural, and words in
the plural include the singular;
(c) "or" is not exclusive;
(d) provisions apply to successive events and transactions;
<PAGE>
<PAGE>
(e) all accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with generally accepted
accounting principles, as in effect from time to time unless reference
to GAAP is made with respect to any specific accounting term; and
(f) 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.
ARTICLE TWO
THE NOTES
Section 2.01 Authorized Principal Amount of Notes;
------------------------------------
Conditions to Issuance of Notes. The Company shall execute and issue in
-------------------------------
accordance with Section 2.03 hereof, Notes in registered form in
substantially the form of Exhibit A hereto in an aggregate principal
amount of U.S.$20,000,000. The Notes so issued shall be subject to all
of the terms, conditions and benefits of this Indenture, with the
intent that all Notes shall rank pari passu with each other. No
---- -----
additional Notes (other than Notes issued upon registration of transfer
or exchange or upon appropriate indemnification to replace lost, stolen
or mutilated Notes) may be issued under this Indenture.
Section 2.02 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 iden-
tification 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.
<PAGE>
<PAGE>
The definitive Notes and Note Guarantees 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 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.
Section 2.03 Execution and Authentication. Two Officers of
----------------------------
the Company shall execute the Notes on behalf of the Company by either
manual or facsimile signature.
If an Officer of the Company 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 officer 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 and deliver Notes only upon
receipt by the Trustee of an Officer's Certificate and Opinion of
Counsel complying with Section 12.04 hereof with respect to satisfaction
of all conditions precedent contained in this Indenture to
authentication and delivery of such Notes.
Upon compliance by the Company with the provisions of the
previous paragraph, the Trustee shall, upon receipt of the written order
of the Company signed by any two <PAGE>
<PAGE>
Officers requesting such action, authenticate Notes in an aggregate
principal amount not to exceed $20,000,000. Such written order shall
specify the amount of Notes to be authenticated and shall further
provide instructions concerning registration, amount for each Holder and
delivery instructions.
With the 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 authen-
tication 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.
Section 2.04 Registrar and Paying Agent. The Company shall
--------------------------
maintain in New York City an office or agency where Notes may be
presented for registration of transfer or for exchange (the
"Registrar"), an office or agency where Notes may be presented for
payment (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 agent not a party to this Indenture. The agreement shall
implement the provisions of this Indenture that relate to such agent.
The Company shall notify the Trustee of the name and address of any such
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 <PAGE>
<PAGE>
entitled to appropriate compensation in accordance with Section 7.08.
The Company hereby initially appoints the Trustee as
Registrar, Paying Agent and agent for service of notices and demands in
connection with the Notes.
Section 2.05 Paying Agent to Hold Money in Trust. Each
-----------------------------------
Paying Agent shall hold in trust for the benefit of the Holders or the
Trustee all money held by the Paying Agent for the payment of principal
of, premium, if any, 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 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 a Subsidiary 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 or other Event of Default, 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 under the Notes
or any Note Guarantee) shall have no further liability for the money so
paid over to the Trustee.
Section 2.06 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 the Holders. 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.
<PAGE>
<PAGE>
Section 2.07 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 shall register the transfer or make the exchange as requested
if its requirements for such transfer or exchange are met; provided that
the Notes surrendered for registration of transfer or exchange shall be
duly endorsed or accompanied by a written instrument of transfer in form
satisfactory to the 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 request. No service charge shall
be made for any registration of transfer or exchange, 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 Section 2.03, 2.08, 2.11, 3.06, 4.15,
4.16 or 9.04). The Registrar shall not be required to register the
transfer of 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.
Section 2.08 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 Agent from any loss which any of
them may suffer if a Note is replaced. The Company and the Trustee may
charge such<PAGE>
<PAGE>
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.
Section 2.09 Outstanding Notes. Notes outstanding at any
-----------------
time are all the Notes that have been authenticated by the Trustee
except those cancelled by it, those delivered to it for cancellation,
those described in this Section 2.09 as not outstanding and those deemed
satisfied pursuant to Article Eight. 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 2.08 (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 2.08.
If on a Redemption Date or a Maturity Date the Paying Agent
(other than the Company or an Affiliate of the Company) holds cash suf-
ficient to pay all of the principal, premium, if any, and interest due
on the Notes payable on that date, and is not prohibited from paying
such cash 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.
Section 2.10 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 which a Trust Officer of
the Trustee knows are so owned shall be disregarded.
<PAGE>
<PAGE>
Section 2.11 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.
Section 2.12 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 registration of transfer, exchange or payment. The Trustee, or at
the direction of the Trustee, the Registrar or the Paying Agent (other
than the Company or a Subsidiary of the Company), and no one else, shall
cancel and, unless otherwise directed in writing by the Company, shall
dispose of all Notes surrendered for transfer, exchange, payment or
cancellation in accordance with its usual procedures. Subject to
Section 2.08, 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 2.12.
Section 2.13 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, to the Persons
who are Noteholders on a subsequent special record date, which date
shall be at least ten 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<PAGE>
<PAGE>
shall mail to each Noteholder 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.
The Company may make payment of any defaulted interest in any
other lawful manner not inconsistent with the requirements (if
applicable) of any securities exchange on which the Notes may be listed,
and upon such notice as may be required by such exchange, if, after
notice given by the Company to the Trustee of the proposed payment
pursuant to this paragraph, such manner of payment shall be deemed
practicable by the Trustee.
Section 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; provided that the Company may
make any such deposit in next day funds on or before the Business Day
before any Interest Payment Date or Maturity Date.
Section 2.15 Computation of Interest. Interest payable on
-----------------------
the Notes shall be computed on the basis of a 360-day year comprised of
twelve 30-day months.
ARTICLE THREE
REDEMPTION OF NOTES
Section 3.01 Notices to the Trustee. If the Company elects
----------------------
to redeem Notes pursuant to Paragraphs 4(a) or (b) of the Notes, it
shall notify the Trustee of the Redemption Date and principal amount of
Notes to be redeemed.
<PAGE>
<PAGE>
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 30 days
before the Redemption Date (unless a shorter notice period shall be
satisfactory to the Trustee).
Section 3.02 Selection of Notes to Be Redeemed. In the event
---------------------------------
that less than all of the Notes are to be redeemed at any time, selec-
tion of such Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities
exchange, if any, on which the Notes are listed or, if the Notes are not
then listed on a national securities exchange, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate;
provided that no Notes of an original principal amount of $1,000 or less
shall be redeemed in part.
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.
Section 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;<PAGE>
<PAGE>
(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 only, the portion
of the principal amount of such Note to be redeemed and that on and
after the Redemption Date, upon surrender for cancellation of such 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 Noteholder;
(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 or private placement number, if any, relating
to such Notes;
(g) the paragraph of the Notes pursuant to which the Notes
are being redeemed; and
(h) that no representation is made as to the accuracy or
correctness of the CUSIP or private placement number, if any, listed in
such notice or printed on the Notes.
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.
<PAGE>
<PAGE>
The notice, if mailed in the manner provided herein, shall be
conclusively presumed to have been given, whether or not the Holder
receives such notice. In any case, failure to give such notice by mail
or any defect in the notice shall not affect the validity of the
proceedings for the redemption of any Note.
Section 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 applicable Redemption Price (expressed
as percentages of principal amount). Upon surrender to the Paying
Agent, such Notes called for redemption shall be paid at the Redemption
Price, plus accrued interest, if any, to the Redemption Date, but
interest installments whose Stated 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.
Section 3.05 Deposit of Redemption Price. On or prior to
---------------------------
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 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 of and, to the
extent lawful, accrued interest thereon shall, until paid, bear interest
from the Redemption Date at the rate provided in the Notes.
<PAGE>
<PAGE>
Section 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, each Note Guarantor shall Guarantee and the
Trustee shall authenticate and deliver to the Holder of such Note
without service charge, a new Note or Notes (accompanied by a notation
of Note Guarantee, duly endorsed by each such Note Guarantor) 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
Section 4.01 Payment of Notes. The Company shall pay, or
----------------
cause to be paid, the principal of, premium, if any, 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 of any thereof)
holds on that date money designated for and sufficient to pay the
installment and is not prohibited from paying such money to the Holders
of the Notes pursuant to the terms of this Indenture.
The Company shall pay interest on overdue principal at the
rate and in the manner provided in the Notes. The Company shall pay
interest on overdue installments of interest at the same rate and in the
same manner, to the extent lawful.
Section 4.02 Maintenance of Office or Agency. The Company
-------------------------------
shall maintain in the Borough of Manhattan, The City of New York, an
office or agency where (i) the Notes and the Note Guarantees may be
surrendered for registration of transfer or exchange, (ii) the Notes and
the Note Guarantees may be presented for payment and (iii) notices<PAGE>
<PAGE>
and demands to or upon the Company or any Note Guarantor in respect of
the Notes, the Note Guarantees and this Indenture may be served. The
Company shall 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 the Trustee as set forth in Section 12.02.
The Company may also from time to time designate one or more
other offices or agencies where the Notes and the Note Guarantees may be
presented or surrendered for any or all such purposes and may from time
to time rescind such designations; provided 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 shall 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 the
Trustee maintained at 450 West 33rd Street, 15th Floor, New York, New
York, as such office of the Company in accordance with this Section
4.02.
Section 4.03 Corporate Existence. Subject to Article Five,
-------------------
the Company shall do or cause to be done all things necessary to and
shall cause each of its Subsidiaries to, preserve and keep in full force
and effect the corporate, partnership or limited liability company
existence and rights (charter and statutory), licenses and/or franchises
of the Company and each of its Subsidiaries; provided that the Company
--------
or any of its Subsidiaries shall not be required to preserve any such
existence (in the case of Subsidiaries), rights, licenses or franchises
if (x) the Company shall reasonably determine that the preservation
thereof is no longer desirable in the conduct of the business of the
Company and its Subsidiaries<PAGE>
<PAGE>
taken as a whole or (y) the loss thereof is not materially adverse to
the Company and its Subsidiaries taken as a whole or to the ability of
the Company to otherwise satisfy its obligations hereunder;
provided, further, however, that the foregoing shall not prohibit the
-------- ------- -------
sale, transfer or conveyance of a Subsidiary or any of its assets in
compliance with the terms of this Indenture.
Section 4.04 Payment of Taxes and Other Claims. The Company
---------------------------------
shall pay or discharge or cause to be paid or discharged, before any
penalty accrues from the failure to so pay or discharge, (a) all
material taxes, assessments and governmental charges levied or imposed
upon the Company or any Subsidiary of the Company or upon the income,
profits or property of the Company or any Subsidiary of the Company, and
(b) all material 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 except for Permitted Liens; 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 properly instituted and diligently conducted and
for which adequate provision (in the good faith judgment of management
of the Company) has been made or where the failure to effect such
payment or discharge is not adverse in any material respect to the
Holders or is not materially adverse to the Company and its Subsidiaries
taken as a whole or to the ability of the Company to otherwise satisfy
its obligations hereunder.
Section 4.05 Maintenance of Properties. The Company shall,
-------------------------
and shall cause each of its Subsidiaries to, cause all material
properties and assets to be maintained and kept in good condition,
repair and working order (ordinary 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 that nothing in this Section 4.05 shall prevent the
Company or<PAGE>
<PAGE>
any Subsidiary of the Company from discontinuing the operation and main-
tenance of any of its properties (x) if such discontinuance is, in the
judgment of the Company or of such Subsidiary, desirable in the conduct
of its business or (y) if such discontinuance or disposal is not
materially adverse to the Company and its Subsidiaries taken as a whole
or the ability of the Company to otherwise satisfy its obligations
hereunder.
Section 4.06 Compliance Certificate; Notice of Default.
------------------------------------------
(a) The Company shall deliver to the Trustee within 90 days after the
end of each fiscal year an Officers' Certificate stating whether or not
the signers know of any Default or Event of Default under this Indenture
that occurred during such fiscal period. If they do know of such a
Default or Event of Default, the certificate shall describe any such
Default or Event of Default and its status. One of the persons signing
the Officers' Certificate given pursuant to this Section 4.06 shall be
the principal executive, financial or accounting officer of the Company,
in compliance with TIA Section 314(a)(4).
(b) The Company shall deliver to the Trustee as soon as
possible, and in any event within 30 days after the Company becomes
aware or should reasonably have become aware of the occurrence of any
Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or
proposes to take with respect thereto.
Section 4.07 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)<PAGE>
<PAGE>
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.
Section 4.08 Limitation on Indebtedness. The Company shall
--------------------------
not, and shall not permit any Subsidiary of the Company to, Incur any
Indebtedness other than the following:
(i) Indebtedness of the Company under the Credit Agreement;
(ii) Indebtedness of the Company pursuant to the Notes and
Indebtedness of any Note Guarantor pursuant to its Note Guarantee;
(iii) Indebtedness of the Company or any Subsidiary
outstanding on the Issue Date and listed on Schedule 2 to this
Indenture (other than Indebtedness under or in respect of the
Credit Agreement);
(iv) Indebtedness of the Company owing to and held by any
Wholly-Owned Subsidiary or Indebtedness of a Wholly-Owned
Subsidiary owing to and held by the Company or any Wholly-Owned
Subsidiary; provided, however, that (x) any such Indebtedness is
made pursuant to an intercompany note, (y) any such Indebtedness of
the Company is Subordinated Indebtedness that is subordinated to
the Notes as provided in such intercompany note, and in any event
at least to the same extent as the Notes are subordinated to Senior
Indebtedness, and (z) any subsequent transfer of any such
Indebtedness (except to the Company or a Subsidiary of the Company)
will be deemed, in each case, to constitute the Incurrence of such
Indebtedness by the issuer thereof;
(v) Obligations of the Company or any Wholly-Owned Subsidiary
entered into in the ordinary course of<PAGE>
<PAGE>
business (A) under Interest Rate Agreements designed to protect
such Person against fluctuations in interest rates in respect of
Indebtedness of such Person permitted to be incurred under this
Indenture, which obligations do not exceed the aggregate principal
amount of such Indebtedness, and (B) under Currency Agreements
designed to protect such Person against fluctuations in foreign
currency exchange rates in respect of foreign exchange exposures
incurred by such Person;
(vi) Indebtedness of the Company or any Wholly-Owned
Subsidiary Incurred subsequent to a Public Offering to the extent
that, after giving effect to such Incurrence, the Consolidated
Coverage Ratio would be greater than 2.1;
(vii) Any renewals, extensions, substitutions, refinancings
or replacements (each, for purposes of this Section 4.08 and
Section 4.14(c), a "refinancing") of any Indebtedness described in
clause (i), (ii), (iii) or (iv) of this Section 4.08, including any
successive refinancings, so long as (A) any such new Indebtedness
shall be in principal amount that does not exceed the principal
amount (or, if such Indebtedness being refinanced provides for an
amount less than the principal amount thereof to be due and payable
upon a declaration of acceleration thereof, such lesser amount as
of the date of determination) so refinanced plus the lesser of (I)
the stated amount of any premium or other payment required to be
paid in connection with such a refinancing pursuant to the terms of
the Indebtedness being refinanced and (II) the amount of premium or
other payment actually paid at such time to refinance the
Indebtedness, plus, in either case, the amount of expenses of the
Company or a Subsidiary of the Company incurred in connection with
such refinancing; (B) in the case of any refinancing of Pari Passu
Indebtedness or Subordinated Indebtedness, such new Indebtedness is
made pari passu with or subordinate in right of payment to the
---- -----
Notes and the Note Guarantees, as applicable, at<PAGE>
<PAGE>
least to the same extent as the Indebtedness being refinanced; and
(C) such new Indebtedness has an Average Life equal to or longer
than the Average Life of the Indebtedness being refinanced and a
final Stated Maturity the same as or later than the final Stated
Maturity of the Indebtedness being refinanced,
provided, however, that the aggregate principal amount of all
-------- -------
Indebtedness permitted to be Incurred pursuant to clauses (i) and (iii)
of this Section 4.08, together with the aggregate principal amount of
any renewal, extension, substitution, refinancing or replacement
thereof, at any time outstanding shall not exceed $9.4 million.
Section 4.09 Limitation on Restricted Payments. The
---------------------------------
Company shall not, and shall not permit any Subsidiary of the Company
to, directly or indirectly:
(i) declare or pay any dividend or make any other
distribution or payment on or in respect of Capital Stock of the
Company (including any payment in connection with any merger or
consolidation involving the Company or any Subsidiary of the
Company ), or any other payment to the direct or indirect holders
of Capital Stock of the Company in their capacity as such, except
dividends or distributions payable solely in Capital Stock of the
Company (other than Redeemable Capital Stock);
(ii) declare or pay any dividend or make any other
distribution or payment on or in respect of Capital Stock of any
Subsidiary of the Company (including any payment in connection with
any merger or consolidation involving the Company or any Subsidiary
of the Company), or any other payment to the direct or indirect
holders of Capital Stock of any Subsidiary of the Company in their
capacity as such, except dividends or distributions payable solely
to the Company or any Wholly-Owned Subsidiary of the Company;
<PAGE>
<PAGE>
(iii) purchase, redeem, defease or otherwise acquire or retire
for value any Capital Stock of the Company or any Subsidiary of the
Company held by Persons other than the Company or a Subsidiary of
the Company, except from all holders of such Capital Stock of a
Subsidiary of the Company on a pro rata basis;
(iv) 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 or any Pari Passu Indebtedness of the Company or any
Subsidiary of the Company (other than in anticipation of satisfying
a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of such acquisition or
retirement); or
(v) make any Investment (other than any Permitted
Investment) in any Person (any such dividend, distribution,
purchase, redemption, repurchase, defeasance, other acquisition,
retirement or Investment being herein referred to as a "Restricted
Payment");
if at the time of and after giving effect to such Restricted Payment on
a pro forma basis, (1) a Default or Event of Default shall have occurred
and be continuing or would result therefrom; or (2) the Company could
not Incur at least $1.00 of additional Indebtedness under Section 4.08;
or (3) the aggregate amount of such Restricted Payment and all other
Restricted Payments declared or made from and after the Issue Date would
exceed, without duplication, the sum of:
(A) 50% of the Consolidated Net Income accrued during the
period (treated as one accounting period) from October 1, 1996 to
the end of the most recent fiscal quarter ending prior to the date
of such Restricted Payment for which consolidated financial
statements of the Company are available (or, if such<PAGE>
<PAGE>
Consolidated Net Income for such period would be a deficit, minus
100% of such deficit); and
(B) the aggregate Net Cash Proceeds received by the
Company either (x) as capital contributions in the form of common
equity to the Company after the Issue Date or (y) from the issuance
or sale of Capital Stock (other than Redeemable Capital Stock) of
the Company after the Issue Date, other than to a Subsidiary of the
Company.
Section 4.10 Limitation on Transactions with Affiliates.
------------------------------------------
(a) The Company shall not, and shall not permit any Subsidiary of the
Company to, directly or indirectly, conduct any business, enter into or
suffer to exist any transaction or series of related transactions
(including the purchase, sale, conveyance, disposition, lease or
exchange of any property, the rendering of any service or the making of
any loan or advance) with, or for the benefit of, any Affiliate of the
Company (an "Affiliate Transaction") unless (i) such Affiliate
Transaction is on terms no less favorable to the Company or such
Subsidiary than those that could be obtained at the time of such
Affiliate Transaction in a comparable arm's length transaction with a
Person who is not an Affiliate of the Company, and (ii) in the event
such an Affiliate Transaction (together with any one or more related
Affiliated Transaction) involves aggregate payments or value of $500,000
or greater, (x) a majority of the Board of Directors of the Company,
including a majority of the Disinterested Directors (if any), have
determined in good faith that the criteria set forth in clause (i) are
satisfied and have approved the relevant Affiliate Transaction, such
approval to be evidenced by a Board Resolution, and (iii) in the event
that such Affiliate Transaction occurs prior to the time when the
Company has appointed a Disinterested Director and such Affiliate
Transaction (together with all prior or contemporaneous Affiliate
Transactions) involves aggregate payments or value of $1,500,000 or
greater, the Company has obtained a written opinion of an investment
banking firm or an independent<PAGE>
<PAGE>
appraiser or accounting firm, in either case that is nationally
recognized in the United States of America, stating that the terms of
such Affiliate Transaction are fair to the Company and its Subsidiaries
from a financial point of view (a "Fairness Opinion"), and (iv) in the
event that such Affiliate Transaction occurs subsequent to the time when
the Company has appointed a Disinterested Director and such Affiliate
Transaction (together with any one or more related Affiliated
Transaction with the same Affiliate) involves aggregate payments or
value of $2,500,000 or greater, the Company has obtained a Fairness
Opinion, and (v) the Company has delivered to the Trustee an Officers'
Certificate certifying that such Affiliate Transaction complies with the
foregoing clause (i), and that, if required by the foregoing clause
(ii), (iii) or (iv), such Affiliate Transaction has been approved by the
Board of Directors (including a majority of the Disinterested Directors)
or the Company has obtained a Fairness Opinion with respect thereto,
together with copies of the relevant Board Resolution or Fairness
Opinion.
(b) The foregoing paragraph (a) will not apply to: (i) any
transaction permitted as a Restricted Payment pursuant to Section 4.09,
(ii) the payment of reasonable and customary regular fees to directors
of the Company and its Subsidiaries who are not employees of the Company
or its Subsidiaries, (iii) any transaction between the Company and a
Wholly Owned Subsidiary or between Wholly Owned Subsidiaries, (iv) any
transaction with an officer or member of the board of directors of the
Company or any Subsidiary of the Company in the ordinary course of
business involving indemnity arrangements, and (v) the payment of any
salary or other employee benefits by the Company or any of its
Subsidiaries during any fiscal year of the Company to any officer or
director of the Company or any of its Subsidiaries who is also an
Affiliate of the Company to the extent (and only to the extent) that the
aggregate amount of such salary and benefits paid in such fiscal year
does not exceed the Maximum Amount for such fiscal year.
<PAGE>
<PAGE>
Section 4.11 Limitation on Certain Liens. The Company shall
---------------------------
not, and shall not permit any Subsidiary of the Company to, directly or
indirectly, create, incur, assume or suffer to exist any Lien (other
than any Permitted Lien) on or with respect to any of its property or
assets (including any Capital Stock), whether held on the Issue Date or
thereafter acquired, or any income, profits or proceeds therefrom,
securing any Specified Indebtedness, unless effective provision is made
contemporaneously therewith to secure the Notes and the Note Guarantees,
as applicable, (i) in the case of a Lien securing Subordinated
Indebtedness, by a perfected Lien on such property, assets, income,
profits or proceeds that is senior in priority to such Lien securing
such Subordinated Indebtedness, or (ii) in the case of a Lien securing
any other Specified Indebtedness, equally and ratably with (or prior to)
such Lien securing such Indebtedness.
Section 4.12 Limitation on Other Senior Subordinated
---------------------------------------
Indebtedness. The Company shall not, and shall not permit any
------------
Subsidiary of the Company to, directly or indirectly, Incur any
Indebtedness that is subordinate or junior in right of payment in any
respect to any other Indebtedness, unless such Indebtedness is expressly
subordinate in right of payment to, or ranks pari passu with, the Notes,
in the case of the Company, or the Note Guarantees, in the case of a
Subsidiary.
Section 4.13 Limitation on the Sale or Issuance of Preferred
-----------------------------------------------
Stock of Subsidiaries. The Company shall not sell, and shall not permit
---------------------
any Subsidiary of the Company to, directly or indirectly, issue or sell,
any shares of Preferred Stock of any Subsidiary of the Company except
(i) to the Company or a Subsidiary of the Company, or to directors as
director's qualifying shares to the extent required by applicable law,
or (ii) if, immediately after giving effect to such issuance or sale,
such Subsidiary would no longer constitute a Subsidiary. The proceeds
of any sale of such Preferred Stock permitted by the preceding clause
(ii) will be treated as Net Cash Proceeds from an<PAGE>
<PAGE>
Asset Sale and must be applied in accordance with the terms of
Section 4.15.
Section 4.14 Limitation on Dividend and Other Payment
----------------------------------------
Restrictions Affecting Subsidiaries. The Company shall not, and shall
-----------------------------------
not permit any Subsidiary of the Company to, directly or indirectly,
create, incur, assume or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any
Subsidiary of the Company to (i) pay, directly or indirectly, dividends,
in cash or otherwise, or make any other distribution on or in respect of
its Capital Stock or any other interest or participation in, or measured
by, its profits, (ii) pay any Indebtedness owed to the Company or any
other Subsidiary of the Company, (iii) make loans or advances to the
Company or any other Subsidiary of the Company, (iv) transfer any of its
properties or assets to the Company or any other Subsidiary of the
Company (other than any customary restriction on transfers of property
subject to a Lien permitted under this Indenture that would not
adversely affect the Company's ability to satisfy its obligations
hereunder) or (v) 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 (a) applicable law, (b) the Credit
Agreement or (c) any agreement or other instrument of a Person acquired
by the Company or any Subsidiary of the Company in existence at the time
of such acquisition (but not created in contemplation thereof), or any
refinancing 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 property or assets of the Person, so acquired.
Section 4.15 Limitation on Disposition of Proceeds of Asset
----------------------------------------------
Sales. The Company shall not, and shall not permit any Subsidiary of
-----
the Company to, engage in any Asset Sale unless (i) such Asset Sale is
for not less than the Fair Market Value of the assets sold (as
determined, to the extent such Asset Sale involves a Fair Market Value
greater than $2,000,000, in good faith by the <PAGE>
<PAGE>
Board of Directors whose determination shall be conclusive and evidenced
by a Board Resolution) and (ii) at least 80% of the consideration
thereof received by the Company or such Subsidiary is in the form of
cash or Cash Equivalents (with Indebtedness of the Company or any
Subsidiary of the Company which is assumed by another Person in such
Asset Sale being counted as cash for such purpose if the Company and
each Subsidiary of the Company, as the case may be, is unconditionally
released from liability therefor). Net Cash Proceeds of any Asset Sale
may be applied to repay Senior Indebtedness (but only if the related
loan commitments (if any) or amounts available to be reborrowed (if any)
under such Senior Indebtedness are permanently reduced by the amount of
such payment). To the extent that such Net Cash Proceeds are not
applied as provided in the preceding sentence, the Company or a
Subsidiary of the Company, as the case may be, may apply the Net Cash
Proceeds from such Asset Sale, within 180 days of such Asset Sale, to an
investment in properties and assets to replace the properties and assets
that were the subject of such Asset Sale or in properties and assets
that will be used in the businesses of the Company or its Subsidiaries,
as the case may be, existing on the Issue Date or in any business or
businesses reasonably similar to such businesses. Any Net Cash Proceeds
from any Asset Sale not applied as provided in the preceding two
sentences, within 180 days of such Asset Sale, constitute "Excess
Proceeds" subject to disposition as provided below.
(b) When the aggregate amount of Excess Proceeds exceeds
$2,000,000 the Company shall make an offer to purchase (an "Excess
Proceeds Offer") from all Noteholders an aggregate principal amount of
Notes equal to such Excess Proceeds, at a purchase price (the "Excess
Proceeds Offer Price") in cash equal to 100% of the outstanding
principal amount thereof, plus accrued and unpaid interest, if any, to
the purchase date in respect of the Excess Proceeds Offer in accordance
with the procedures set forth in this Section 4.15. To the extent that
the aggregate principal amount of Notes tendered pursuant to an Excess
Proceeds Offer is less<PAGE>
<PAGE>
than the Excess Proceeds, the Company may use such deficiency for
general corporate purposes.
(c) (1) Within 15 Business Days after the Company becomes
obligated to make an Excess Proceeds Offer, the Company shall deliver to
the Trustee and send, by first-class mail to each Holder, a written
notice stating that the Holder may elect to have his Notes purchased by
the Company either in whole or in part (subject to prorating as
hereinafter described in the event the Excess Proceeds Offer is
oversubscribed) at the applicable purchase price. The notice shall
specify a purchase date not less than 30 days nor more than 60 days
after the date of such notice, or such later date as may be necessary
for the Company to comply with the requirements under the Exchange Act
(an "Excess Proceeds Purchase Date"), and shall contain such information
concerning the business of the Company which the Company in good faith
believes will enable such Holders to make an informed decision.
(2) Not later than the date upon which written notice of an
Excess Proceeds Offer is delivered to the Trustee as provided below, the
Company shall deliver to the Trustee an Officers' Certificate as to (i)
the amount of the aggregate Excess Proceeds Offer Price for the Notes,
(ii) the allocation of the Net Cash Proceeds from the Asset Sales
pursuant to which such Excess Proceeds Offer is being made and (iii) the
compliance of such allocation with the provisions of Section 4.15(a).
On or prior to the Excess Proceeds Purchase Date, the Company shall also
irrevocably deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own paying agent, segregate and hold in trust)
in Cash Equivalents an amount equal to the aggregate Excess Proceeds
Offer Price for the Notes to be held for payment in accordance with the
provisions of this Section 4.15. Upon the expiration of the period for
which the Excess Proceeds Offer remains open (the "Offer Period"), the
Company shall deliver to the Trustee for cancellation the Notes or
portions thereof which have been properly tendered to and are to be
accepted by the Company. The Trustee shall, on the Excess Proceeds
Purchase Date, mail or<PAGE>
<PAGE>
deliver payment to each tendering Holder in the amount of the purchase
price. In the event that the aggregate purchase price of the Notes
delivered by the Company to the Trustee is less than the aggregate
Excess Proceeds Offer Price for the Notes, the Trustee shall deliver the
excess to the Company promptly after the expiration of the Offer Period
for application in accordance with this Section 4.15.
(3) Holders electing to have a Note purchased will be
required to surrender the Note with an appropriate form duly completed,
to the Company at the address specified in the notice at least three
Business Days prior to the Excess Proceeds Purchase Date. Holders will
be entitled to withdraw their election to have a Note purchased pursuant
to this Section 4.15 if the Trustee or the Company receives not later
than one Business Day prior to the Excess Proceeds Purchase Date, a
telegram, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Note which was delivered for
purchase by the Holder, the certificate number of the Note in respect of
which such notice of withdrawal is being submitted and a statement that
such Holder is withdrawing his election to have such Note purchased. If
at the expiration of the Offer Period the aggregate principal amount of
Notes surrendered by Holders exceeds the aggregate Excess Proceeds Offer
Price for the Notes, the Company shall select the Notes to be purchased
on a pro rata basis. 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.
(4) At the time the Company delivers Notes to the Trustee
which are to be accepted for purchase, the Company shall also deliver an
Officers' Certificate stating the such Notes are to be accepted by the
Company pursuant to and in accordance with the terms of this Section
4.15. A Note shall be deemed to have been accepted for purchase at the
time the Trustee, directly or through an agent, mails or delivers
payment therefor to the surrendering Holder.
(d) The Company shall comply, to the extent applicable, with
the requirements of Section 14(e) of the<PAGE>
<PAGE>
Exchange Act and any other securities laws or regulations in connection
with the repurchase of Notes pursuant to this covenant. To the extent
that the provisions of any securities laws or regulations conflict with
provisions of this covenant, the Company shall comply with the
applicable securities laws and regulations and will not be deemed to
have breached its obligations under this paragraph by virtue thereof.
Section 4.16 Change of Control. Upon the occurrence of a
-----------------
Change of Control, each Noteholder shall have the right to require the
Company to repurchase all or any part of such Holder's Notes at a
purchase price in cash equal to 101% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the date of purchase
(subject to the right of Holders of record on the relevant record date
to receive interest due on the relevant interest payment date), in
accordance with the terms set forth in this covenant.
(b) A "Change of Control" means the occurrence of any of the
following events:
(i) prior to an initial Public Equity Offering, Fred
Gratzon and Clifford Rees cease collectively to be the Beneficial
Owners, directly or indirectly, of Voting Stock of the Company
representing more than 50% of the total voting power of the Voting
Stock of the Company (as a result of the acquisition or issuance of
securities, by merger or otherwise);
(ii) at any time after an initial Public Equity Offering,
any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), other than Fred Gratzon and
Clifford Rees, is or becomes (as the result of the acquisition or
issuance of securities, by merger or otherwise) the Beneficial
Owner, directly or indirectly, of (A) more than 50% of the common
stock of the Company or (B) more than 50% of the total voting power
of the Voting Stock of the Company;
<PAGE>
<PAGE>
(iii) the merger or consolidation of the Company with or into
another Person, or of another Person with or into the Company, or
the sale, assignment, conveyance, transfer, lease or other
disposition of all or substantially all the assets of the Company
to another Person, and, in the case of any such merger or
consolidation, the securities of the Company that are outstanding
immediately prior to such transaction and that represent 100% of
the aggregate voting power of the Voting Stock of the Company are
changed into or exchanged for cash, securities or property, unless
(x) pursuant to such transaction such securities are changed into
or exchanged for (A) Voting Stock (other than Redeemable Capital
Stock) of the surviving or transferee corporation or (B) cash,
securities and other property in an amount that could be paid by
the Company as a Restricted Payment under this Indenture, and
(y) immediately after giving effect to such transaction, the
Beneficial Owners of the Voting Stock of the Company immediately
prior to such transaction are or become (as the result of the
acquisition or issuance of securities, by merger or otherwise) the
Beneficial Owners, directly or indirectly, of more than 50% of the
total voting power of the Voting Stock of the surviving or
transferee corporation;
(iv) [Intentionally Omitted]; or
(v) prior to an initial Public Equity Offering, Clifford
Rees ceases to be the President and Chief Executive Officer and a
Director of the Company, or ceases or becomes unable to exercise
his duties as such for any consecutive 120 day period or for more
than 120 days in the aggregate during any consecutive 180 day
period (as a result of death or incapacity); or
(vi) prior to an initial Public Equity Offering, Clifford
Rees ceases to be the President and Chief Executive Officer and a
Director of the Company, or ceases or becomes unable to exercise
his duties as such for any consecutive 30 day period or for more
than 30<PAGE>
<PAGE>
days in the aggregate during any consecutive 120 day period (as a
result of termination, resignation or any other reason not
specified in Section 4.16(v) hereof.
(c) Prior to the mailing of the notice to Holders provided
for in paragraph (d) below, the Company shall have (x) terminated all
commitments and repaid in full all Indebtedness under the Credit
Agreement and all other Credit Agreement Obligations then due and owing,
or (y) obtained the requisite consents under the Credit Agreement to
permit the purchase of the Notes as provided for under this covenant.
If a notice has been mailed when such condition precedent has not been
satisfied, the Company shall have no obligation to (and shall not)
effect the purchase of Notes until such time as such condition precedent
is satisfied. Failure to mail the notice on the date specified below or
to have satisfied the foregoing condition precedent by the date that the
notice is required to be mailed shall in any event constitute a covenant
default under Section 6.01(iv).
(d) Within 30 days following any Change of Control (or at
the Company's option, prior to such Change of Control, in anticipation
of such Change of Control), the Company shall send by first class mail a
written notice to each Holder at its registered address with a copy to
the Trustee stating: (1) that a Change of Control has occurred (or will
occur) and that such Holder has the right to require the Company to
purchase such Holder's Notes at a purchase price in cash equal to 101%
of the principal amount thereof, plus accrued and unpaid interest, if
any, to date of repurchase (subject to the right of Holders of record on
a record date to receive interest on the relevant interest payment
date); (2) the circumstances and relevant facts and financial
information regarding such Change of Control; (3) the repurchase date
(which shall be no earlier than 30 days nor later than 60 days from the
date such notice is mailed); (4) the instructions determined by the
Company, consistent with this covenant, that a Holder must follow in
order to have its Notes purchased; and (5) that, if such offer is made
prior to such Change of Control, payment is conditioned on the
occurrence of such Change of Control.
<PAGE>
<PAGE>
(e) Holders electing to have a Note purchased will be
required to surrender the Note, with an appropriate form duly completed,
to the Company at the address specified in the notice at least three
Business Days prior to the repurchase date. Holders will be entitled to
withdraw their election if the Trustee or the Company receives not later
than two Business Days prior to the purchase date, a telegram, facsimile
transmission or letter setting forth the name of the Holder, the
principal amount of the Note which was delivered for purchase by the
Holder, the certificate number of the Note in respect of which such
notice of withdrawal is being submitted and a statement that such Holder
is withdrawing his election to have such Notes purchased.
(f) On the purchase date, all Notes purchased by the Company
under this Section shall be delivered to the Trustee for cancellation,
and the Company shall pay the purchase price plus accrued and unpaid
interest, if any, to the Holders entitled thereto.
(g) The Company shall comply, to the extent applicable, with
the requirements of Section 14(e) under the Exchange Act and any other
securities laws or regulations in connection with the repurchase of
Notes pursuant to this covenant. To the extent that the provisions of
any securities laws or regulations conflict with provisions of this
covenant, the Company shall comply with the applicable securities laws
and regulations and will not be deemed to have breached its obligations
under this paragraph by virtue thereof.
Section 4.17 Financial Statements and Reports. The Company
--------------------------------
will maintain, and will cause each of its Subsidiaries to maintain, a
system of accounting established and administered in accordance with
sound business practices to permit preparation of financial statements
in conformity with GAAP. The Company will deliver to the Trustee, and
to each Holder at its address appearing in the register of securities
maintained by the Registrar, the financial statements and other reports
described below:
<PAGE>
<PAGE>
(i) Monthly Financials. As soon as available and in any event
------------------
within 30 days after the end of each month ending after the Closing
Date: (A) copies of the internal financial reports, with respect to the
consolidated statements of income and stockholders' equity and cash flow
for such month and consolidated balance sheet balances at the end of
such month, delivered to members of the Company's management, and (B) a
schedule of the outstanding Indebtedness for borrowed money of the
Company and its Subsidiaries describing in reasonable detail each such
debt issue or loan outstanding and the principal amount (excluding
original issue discount) and amount of accrued and unpaid interest with
respect to each such debt issue or loan;
(ii) Quarterly Financials. As soon as available and in any event
--------------------
within 45 days after the end of each fiscal quarter (other than the last
quarter of any fiscal year): (A) the consolidated balance sheet of the
Company and its Subsidiaries as at the end of such fiscal quarter and
the related consolidated statements of income and stockholders' equity
and cash flows for such fiscal quarter and for the period from the
beginning of the then current fiscal year to the end of such fiscal
quarter, all in reasonable detail and certified by the chief financial
officer of the Company that they fairly present the financial condition
of the Company and its Subsidiaries as at the dates indicated and the
results of their operations and their cash flows for the periods
indicated, subject to changes resulting from audit and normal year-end
adjustments, and (B) a schedule of the outstanding Indebtedness for
borrowed money of the Company and its Subsidiaries describing in
reasonable detail each such debt issue or loan outstanding and the
principal amount (excluding original issue discount) and amount of
accrued and unpaid interest with respect to each such debt issue or
loan;
<PAGE>
<PAGE>
(iii) Year-End Financials. As soon as available and in any event
-------------------
within 90 days after the end of each fiscal year, the Company will
deliver: (A) the consolidated balance sheet of the Company and its
Subsidiaries as at the end of such fiscal year and the related
consolidated statements of income, shareholders' equity and cash flows
of the Company and its Subsidiaries for such fiscal year, (B) a
narrative report describing the operations of the Company and its
Subsidiaries in the form prepared for presentation to senior management
for such fiscal year, (C) a schedule of the outstanding Indebtedness for
borrowed money of the Company and its Subsidiaries describing in reason-
able detail each such debt issue or loan outstanding and the principal
amount (excluding original issue discount) of accrued and unpaid
interest with respect to each such debt issue or loan, and (D) in the
case of such consolidated financial statements, a report thereon of KPMG
Peat Marwick or other independent certified public accountants of
recognized national standing selected by the Company, which report shall
be unqualified, shall express no doubts about the ability of the Company
and its Subsidiaries to continue as a going concern, and shall state
that such consolidated financial statements fairly present the
consolidated financial position of the Company and its Subsidiaries as
of the dates indicated and the results of their operations,
shareholders' equity and their cash flows for the periods indicated in
conformity with GAAP applied on a basis consistent with prior years
(except as otherwise disclosed in such financial statements) and that
the examination by such accountants in connection with such consolidated
financial statements has been made in accordance with United States
generally accepted auditing standards;
(iv) Promptly upon receipt thereof, copies of any financial or
other report or notice delivered to, or received from, any holders of
Senior Indebtedness pursuant to the Credit Agreement (or any similar
provision contained in any successor agreements) or any<PAGE>
<PAGE>
other debt instrument not otherwise delivered to the Holders pursuant to
this Section 4.17;
(v) 30 days prior to each fiscal year, copies of monthly operation
projections for the succeeding fiscal year; and
(vi) such other financial or other information as from time to
time may be reasonably requested by the Trustee.
Section 4.18 Investment Company Act. Neither the Company
----------------------
nor any of its Subsidiaries shall become an investment company subject
to registration under the Investment Company Act of 1940, as amended.
Section 4.19 Insurance. The Company shall, and shall cause
---------
each of its Subsidiaries to, maintain liability, casualty, business
interruption and other insurance with a reputable insurer or insurers in
such amounts and against such risks as is carried by responsible
companies engaged in similar businesses and owning similar assets.
Section 4.20 Compliance with Laws; Maintenance of Licenses.
---------------------------------------------
The Company shall, and shall cause each of its Subsidiaries to, comply
with all statutes, ordinances, governmental rules and regulations,
judgments, orders and decrees (including all Environmental Laws) to
which any of them is subject, and maintain, obtain and keep in effect
all licenses, permits, franchises and other governmental authorizations
necessary to the ownership or operation of their respective properties
or the conduct of their respective businesses, except to the extent that
the failure to so comply or maintain, obtain and keep in effect could
not, singly or in the aggregate, be expected to have a Material Adverse
Effect.
Section 4.21 Information to Prospective Purchasers. The
-------------------------------------
Company shall, upon the request of any Holder, deliver to such Holder
and any prospective purchaser designated by such Holder promptly
following the request of<PAGE>
<PAGE>
such Holder or such prospective purchaser such information which such
Holder or such prospective purchaser may reasonably request in order to
comply with the information requirements of Rule 144A under the
Securities Act.
Section 4.22 Private Placement Number. The Company consents
------------------------
to the filing of copies of this Indenture with S&P to obtain a private
placement number and with the National Association of Insurance
Commissioners.
Section 4.23 Future Note Guarantors. (a) The Company
----------------------
shall, within thirty (30) days of the Issue Date, cause each of its
current Wholly-Owned Subsidiaries to execute and deliver to the Trustee
a supplemental indenture pursuant to which each such entity shall
guarantee payment of the Notes on substantially the same terms as set
forth in Article Ten of this Indenture. Each Note Guarantee shall be
limited to an amount not to exceed the maximum amount that can be
guaranteed by that Wholly-Owned Subsidiary without rendering the Note
Guarantee, as it relates to such Wholly-Owned Subsidiary, voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer
or similar laws affecting the rights of creditors generally.
(b) The Company shall, simultaneously to the formation or
acquisition of any Wholly-Owned Subsidiary in the future, cause such
Wholly-Owned Subsidiary to execute and deliver to the Trustee a
supplemental indenture pursuant to which such Wholly-Owned Subsidiary
shall guarantee payment of the Notes on substantially the same terms as
set forth in Article Ten of this Indenture with respect to the Note
Guarantee of each of the Company's Wholly-Owned Subsidiaries who are
executing and delivering Note Guarantees on the Issue Date. Each Note
Guarantee shall be limited to an amount not to exceed the maximum amount
that can be guaranteed by that Subsidiary without rendering the Note
Guarantee, as it relates to such Subsidiary, voidable under applicable
law relating to fraudulent conveyance or fraudulent transfer or similar
laws affecting the rights of creditors generally.
<PAGE>
<PAGE>
ARTICLE FIVE
SUCCESSOR CORPORATION
Section 5.01 Merger, Consolidation and Sale of Assets. The
----------------------------------------
Company shall not, in any transaction or series of related 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 shall not permit
any Subsidiary of the Company 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 of the Company and its Subsidiaries on a
consolidated basis to any other Person or Persons, unless at the time of
and immediately after giving effect thereto (i) either (A) if the
transaction or transactions is a merger or consolidation, the Company
shall be the surviving Person of such merger or consolidation, or (B)
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, substantially as an
entirety, are sold, assigned, transferred, leased or otherwise disposed
of (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 and substance satisfactory to the
Trustee and the holders of a majority in aggregate principal amount of
the Notes then outstanding, all the obligations of the Company under the
Notes and this Indenture, and in each case, this Indenture shall remain
in full force and effect; and (ii) immediately after giving effect to
such transaction or series of related 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<PAGE>
<PAGE>
of transactions), (x) no Default or Event of Default shall have occurred
and be continuing, (y) the Company or the Surviving Entity, as the case
may be, could Incur $1.00 of additional Indebtedness pursuant to
Section 4.08 and (z) the Consolidated Net Worth of the Surviving Entity
is greater than the Consolidated Net Worth of the Company prior to
giving effect to such transaction or series of related transactions.
In connection with any consolidation, merger, sale,
assignment, conveyance, transfer, lease or other disposition
contemplated hereby, the Company shall deliver, or cause to be
delivered, to the Trustee, in form and substance satisfactory to the
Trustee, an Officers' Certificate and an Opinion of Counsel, each
stating that such consolidation, merger, sale, assignment, conveyance,
transfer, lease or other disposition and the supplemental indenture in
respect thereof comply with the requirements under this Indenture. In
addition, each Note Guarantor, unless it is the other party to the
transaction, will be required to confirm, by supplemental indenture,
that its Note Guarantee will apply to the obligations of the Company or
the Surviving Entity under this Indenture.
Section 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 assets of the Company in
accordance with Section 5.01 in which the Company is not the continuing
obligor under this Indenture, the Surviving Entity shall succeed to, and
be substituted for, and may exercise every right and power of, the
Company under this Indenture with the same effect as if such successor
had been named as the Company herein, and thereafter the predecessor
Person shall be relieved of all obligations under this Indenture and the
Notes, except that the predecessor Person in the case of a transfer by
lease will not be released from the obligation to pay the principal of,
premium, if any, and interest on the Notes.
For all purposes of this Indenture and the Notes (including
the provision of this Section 5.02 and <PAGE>
<PAGE>
Sections 4.08, 4.09 and 4.11) all Indebtedness, and all Liens on
property or assets, of the Surviving Entity and its Subsidiaries (other
than Indebtedness, and Liens on property or assets, of the Company and
its Restricted Subsidiaries outstanding immediately prior to such
transaction or series of related transactions) shall be deemed to have
been Incurred upon such transaction or series of related transactions.
ARTICLE SIX
REMEDIES
Section 6.01 Events of Default. An "Event of Default" means
-----------------
any of the following events:
(i) default in the payment of principal of, or premium, if any,
when due and payable, on any of the Notes (at its Stated Maturity,
upon optional redemption, required repurchase, or otherwise); or
(ii) default in any payment of an installment of interest on
any of the Notes when due and payable, for 30 days; or
(iii) failure to perform or comply with Section 5.01; or
failure to offer to repurchase or to repurchase the Notes in the
event of a Change of Control in accordance with Section 4.16; or
(iv) the Company or any Note Guarantor shall fail to perform
or observe any other term, covenant or agreement contained in the
Notes, any Note Guarantee, the Warrants, the Registration Rights
Agreement or this Indenture (other than a Default specified in
clause (i), (ii) or (iii) of this Section 6.01) for a period of 45
days after written notice of such failure requiring the Company to
remedy the same shall have been given (x) to the Company by the
Trustee or (y) to the Company and the Trustee by the Holders of at
least <PAGE>
<PAGE>
25% in aggregate principal amount of the Notes then outstanding; or
(v) default or defaults under one or more 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 $1,000,000, individually or in the
aggregate, and either (a) such a principal amount of such
Indebtedness is already due and payable in full or (b) such default
or defaults have resulted in the acceleration of the maturity of
such Indebtedness; or
(vi) 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 $2,000,000, 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 either (a) any creditor
shall have commenced an enforcement proceeding upon such judgment,
order or decree or (b) 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
(vii) (A) any holder of at least $1,000,000 in aggregate
principal amount of Indebtedness of the Company or any Subsidiary
of the Company as to which a default has occurred and is continuing
shall commence judicial proceedings (which proceedings shall remain
unstayed for 5 Business Days) to foreclose upon assets of the
Company or any Subsidiary of the Company having an aggregate Fair
Market Value, individually or in the aggregate, in excess of
$1,000,000 or shall have exercised any right under applicable law
or applicable security documents to take ownership of any such
assets in lieu of foreclosure or (B) any action described in the
foregoing clause (A) shall result in any court of<PAGE>
<PAGE>
competent jurisdiction issuing any order for the seizure of such
assets; or
(viii) there shall have been the entry by a court of
competent jurisdiction of (a) a decree or order for relief in
respect of the Company or any Subsidiary of the Company in an
involuntary case or proceeding under any applicable Bankruptcy Law
or (b) a decree or order adjudging the Company or any Subsidiary of
the Company bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment or composition of or in respect of the
Company or any Subsidiary of the Company under any applicable
federal, state or foreign law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or any Subsidiary of the Company or of any
substantial part of their respective properties, or ordering the
winding up or liquidation of their affairs, and any such decree or
order for relief shall continue to be in effect, or any such other
decree or order shall be unstayed and in effect, for a period of 60
consecutive days; or
(ix) (a) the Company or any Subsidiary of the Company commences a
voluntary case or proceeding under any applicable Bankruptcy Law or
any other case or proceeding to be adjudicated bankrupt or
insolvent, (b) the Company or any Subsidiary of the Company
consents to the entry of a decree or order for relief in respect of
the Company or such Subsidiary in an involuntary case or proceeding
under any applicable Bankruptcy Law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, (c) the
Company or any Subsidiary of the Company files a petition or answer
or consent seeking reorganization or relief under any applicable
federal or state law, (d) the Company or any Subsidiary of the
Company (1) consents to the filing of such petition or the
appointment of, or taking possession by, a custodian, receiver,
liquidator, assignee, trustee, sequestrator or similar official of
the Company or such Subsidiary or of any substantial<PAGE>
<PAGE>
part of their respective properties, (2) makes an assignment for
the benefit of creditors or (3) admits in writing its inability to
pay its debts generally as they become due, or (e) the Company or
any Subsidiary of the Company takes any corporate action in
furtherance of any such actions in this paragraph (ix); or
(x) any representation or warranty made by the Company under the
Note Purchase Agreement, the Warrant or this Indenture, or by any
representative of the Company, in any document or certificate
furnished to the Trustee in connection with or pursuant to the Note
Purchase Agreement, the Warrants or this Indenture, shall prove at
any time to have been incorrect in any respect that would cause a
Material Adverse Effect as of the date made and such incorrectness
shall remain material and continue unremedied for a period of 45
days after written notice thereof has been given (x) to the Company
by the Trustee or (y) to the Company and the Trustee by the Holders
of at least 25% in aggregate principal amount of the Notes then
outstanding; or
(xi) any Note Guarantee ceases to be in full force and effect or
is declared null and void or any Note Guarantor denies that it has
any further liability under any Note Guarantee, or gives notice to
such effect (other than by reason of the termination of this
Indenture or the release of any such Note Guarantee in accordance
with this Indenture).
Section 6.02 Acceleration. If an Event of Default (other
------------
than an Event of Default specified in Section 6.01(viii) or (ix) with
respect to the Company) occurs and is continuing, the Holders of at
least 25% in aggregate principal amount of the Notes then outstanding,
by notice to the Trustee and the Company, may declare the principal of,
premium, if any, and accrued interest on all the Notes due and payable
immediately, upon which declaration all amounts payable in respect of
the Notes shall immediately be due and payable; provided that so long
--------<PAGE>
<PAGE>
as the Credit Agreement shall be in full force and effect, if an Event
of Default shall have occurred and be continuing (other than an Event of
Default specified in Section 6.01(viii) or (ix) with respect to the
Company), any such acceleration shall not be effective until the earlier
to occur of (x) five Business Days following delivery of a written
notice of such acceleration of the Notes to the Bank Agent under the
Credit Agreement and (y) the acceleration of any Indebtedness under the
Credit Agreement. If an Event of Default specified in Sec-
tion 6.01(viii) or (ix) with respect to the Company occurs and is
continuing, then the principal of, premium, if any, and interest on all
the Notes shall ipso facto become and be immediately due and payable
---- -----
without any declaration or other act on the part of the Trustees or any
Holder.
Notwithstanding the foregoing, in the event of a declaration
of acceleration in respect of the Notes because (x) an Event of Default
specified in Section 6.01(v) shall have occurred and be continuing, such
declaration of acceleration of the Notes and such Event of Default shall
be automatically annulled and rescinded and be of no further effect if
the Indebtedness that is the subject of such Event of Default has been
discharged or paid in full or such Event of Default shall have been
cured or waived by the holders of such Indebtedness and if such
Indebtedness has been accelerated, then the holders thereof have
rescinded their declaration of acceleration in respect of such
Indebtedness or (y) an Event of Default specified in Section 6.01(vii)
shall have occurred and be continuing, such declaration of acceleration
of the Notes and such Event of Default shall be automatically annulled
and rescinded and be of no further effect if the proceedings or
enforcement action with respect to the Indebtedness that is the subject
of such Event of Default is terminated or rescinded, or such
Indebtedness is paid in full and only so long as any holder of such
Indebtedness shall not have applied any assets referenced in
Section 6.01(vii) in satisfaction of such Indebtedness and, in the case
of both (x) and (y) of this paragraph, written notice of such discharge,
cure or waiver and rescission, as the case may be, shall have been given
to the Trustee within<PAGE>
<PAGE>
60 days after such declaration of acceleration in respect of the Notes
by the Company or by the requisite holders of such Indebtedness or a
trustee, fiduciary or agent for such holders or other evidence
satisfactory to the Trustee of such events is provided to the Trustee
and no other Event of Default shall have occurred which has not been
cured or waived during such 60-day period.
After a declaration of acceleration under this Indenture, but
before a judgment or decree for payment of 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 sums paid or advanced by the Trustee under this
Indenture 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 at the rate borne by the Notes
which has become due otherwise than by such declaration of
acceleration;
(b) the rescission would not conflict with any judgment or
decree of a court of competent jurisdiction; and
<PAGE>
<PAGE>
(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.
No such rescission shall affect any subsequent Default or
Event of Default or impair any right consequent thereon.
Section 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 Noteholder 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.
Section 6.04 Waiver of Past Defaults. 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 past Defaults or Events of Default and their
consequences, except a Default or Event of Default specified in Section
6.01(i) or (ii) or in respect of any covenant or provision hereof which
cannot be modified or amended without the consent of the Holder of each
Note outstanding. When a Default or Event of Default is so waived, it
shall be deemed cured and shall cease to exist.
<PAGE>
<PAGE>
Section 6.05 Control by Majority. The Holders of at least 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 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 indemnification
satisfactory to it in its sole discretion 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.
Section 6.06 Limitation on Suits. No Holder of any Notes
-------------------
shall have any right to institute any proceeding with respect to this
Indenture or any remedy thereunder, 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 within 30 days of the receipt of such notice;
(c) such Holder or Holders offer and, if requested, provide to
the Trustee reasonable indemnity, satisfactory to the Trustee
against any loss, liability or expense, to institute such
proceeding as Trustee under the Notes and this Indenture;
(d) the Trustee does not comply with the request within 30 days
after receipt of the notice and, if requested, provision of
indemnity; and
<PAGE>
<PAGE>
(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 the principal of,
premium, if any, or interest on, such Note held by such Holder on or
after the respective due dates set forth in such Note.
Section 6.07 Right of Holders to Receive Payment.
-----------------------------------
Notwithstanding any other provision in this Indenture, the right of any
Holder of Notes to receive payment of the principal of 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.
Section 6.08 Collection Suit by Trustee. If an Event of
--------------------------
Default specified in clause (i) or (ii) 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, any Note Guarantor 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, and
any other amounts due the Trustee under Section 7.08.
Section 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<PAGE>
<PAGE>
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 of the Holders allowed in any judicial
proceedings relative to the Company or any Note Guarantor (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.
Section 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 Eleven, 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 Eleven, to Holders for principal amounts
owing under the Notes, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes for prin-
cipal; and
<PAGE>
<PAGE>
Fourth: the balance, if any, to the Company or, to the extent the
Trustee collects any amount from any Note Guarantor, to such Note
Guarantor.
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.
Section 6.11 Undertaking for Costs. In any suit for the
---------------------
enforcement of any right or remedy under this Indenture or in any suit
against the Trustee for any action taken or omitted by it as Trustee, a
court 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 out-
standing Notes.
Section 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, any Note or any Note Guarantee 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, each Note Guarantor, 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.
<PAGE>
<PAGE>
ARTICLE SEVEN
TRUSTEE
Section 7.01 Duties. 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 shall use the same
degree of care and skill in their exercise, as a prudent Person would
exercise or use under the circumstances in the conduct of such Person's
own affairs.
(b) Except during the continuance of an Event of Default,
(1) the Trustee 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
(2) in the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and, if required by the terms of
this Indenture, conforming to the requirements of this Indenture;
but in the case of any such certificates or opinions which by
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:
(1) this paragraph does not limit the effect of paragraph
(b) of this Section 7.01;<PAGE>
<PAGE>
(2) the Trustee shall not be liable for any error of\
judgment made in good faith by a Trust Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts;
and
(3) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05.
(d) 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.
(f) The Trustee shall not be liable for interest on any
assets received by it except as the Trustee may agree in writing with
the Company. Assets held in trust by the Trustee need not be segregated
from other assets except to the extent required by law.
Section 7.02 Rights of Trustee. Subject to Section 7.01:
-----------------
(a) The Trustee may rely on any document 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<PAGE>
<PAGE>
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 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 willful
misconduct or 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>
<PAGE>
(h) The Trustee shall not be charged with knowledge of any
Default or Event of Default unless either (1) a Trust Officer of
the Trustee shall have actual knowledge of such Default or Event of
Default or (2) written notice of such Default or Event of Default
shall have been given to the Trustee by the Company or any Holder.
Section 7.03 Individual Rights of Trustee. The Trustee, any
----------------------------
Paying Agent, the 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 Sections 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.
Section 7.04 Trustee's Disclaimer. The Trustee makes no
--------------------
representations as to the validity or sufficiency of this Indenture or
the Notes or any Note Guarantee, 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.
Section 7.05 Notice of Default. If a Default or an Event of
-----------------
Default occurs and is continuing and if it is known to the Trustee, the
Trustee shall mail to each Holder notice of the Default or Event of
Default within 60 days after the occurrence thereof; provided that,
except in the case of a Default or Event of Default in the payment of
the principal of, premium, if any, or interest on any Note, the Trustee
may withhold the notice to the Holders of such Notes if a committee of
its Trust Officers in good faith determines that withholding the notice
is in the interests of the Holders.
Section 7.06 Money Held in Trust. All moneys received by
the Trustee shall, until used or applied as<PAGE>
<PAGE>
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.
Section 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 Section 313(a) 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 Section 313(a). The Trustee also
shall comply with TIA Sections 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 and of any delisting thereof.
Section 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, including
costs of collection. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents and
counsel, accountants and experts.
The Company shall indemnify the Trustee for, and hold it
harmless against, any loss, liability, claim or expense (including
reasonable attorneys' fees and expenses) incurred by it arising out of
or in connection with the administration of this trust and its rights or
duties<PAGE>
<PAGE>
hereunder, including the costs and expenses of defending itself against
any claim or liability in connection with the acceptance, 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. Failure by the Trustee to so notify
the Company shall not relieve the Company of its obligations hereunder.
The Company shall defend the claim and the Trustee 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 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(viii) or
(ix), 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.
Section 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 consent. The Company shall remove the Trustee if:<PAGE>
<PAGE>
(a) the Trustee fails to comply with Section 7.11;
(b) 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;
(c) a receiver or other public officer takes charge of the
Trustee or its property; or
(d) 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 appoint a successor Trustee to
replace the successor Trustee appointed by the Company. No retiring
Trustee shall have any obligation to provide to any successor Trustee
any form of indemnity or other financial assurances concerning the fees
and expenses of the successor Trustee.
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.
<PAGE>
<PAGE>
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.
Section 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 or assets 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 cor-
poration or national banking association is otherwise eligible
hereunder, be the successor Trustee.
In case at the time such successor or successors by
consolidation, merger, conversion or transfer to the Trustee shall
succeed to the trusts created by this Indenture any of the Notes shall
have been authenticated but not delivered, any such successor to the
Trustee may adopt the certificate of authentication of any predecessor
trustee, and deliver such Notes so authenticated; and in case at that
time any of the Notes shall not have been authenticated, any successor
to the Trustee may authenticate such Notes either in the name of any
predecessor hereunder or in the name of the successor to the Trustee;
and in all such cases such certificates shall have the full force which
it is anywhere in the Notes or in this Indenture provided that the
certificate of the Trustee shall have.
<PAGE>
<PAGE>
Section 7.11 Eligibility; Disqualification. There shall at
------------------------------
all times be a Trustee hereunder which shall be eligible to act as
Trustee under TIA Sections 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. The Trustee
shall comply with TIA Section 310(b); provided, however, that there
shall be excluded from the operation of TIA Section 310(b)(1) any
indenture or indentures under which other securities or certificates of
interest or participation in other securities of the Company or any Note
Guarantor are outstanding if the requirements for such exclusion set
forth in TIA Section 310(b)(1) are met.
Section 7.12 Preferential Collection of Claims Against
-----------------------------------------
Company. The Trustee shall comply with TIA Section 311(a), excluding
-------
any creditor relationship listed in TIA Section 311(b). If the present
or any future Trustee shall resign or be removed, it shall be subject to
TIA Section 311(a) to the extent provided therein.
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE
Section 8.01 Termination of the Company's Obligations. The
----------------------------------------
Company may terminate its obligations under the Notes and this
Indenture, and the obligations of any Note Guarantor shall terminate
except those obligations<PAGE>
<PAGE>
referred to in the penultimate paragraph of this Section 8.01, when:
(i) either (a) all the Notes previously authenticated and
delivered (except lost, stolen or destroyed Notes which have been
replaced or paid) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the
Trustee for cancellation (x) have become due and payable hereunder,
(y) will become due and payable at their Stated Maturity within one
year or (z) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice
of redemption by the Trustee in the name, and at the expense, of
the Company;
(ii) the Company shall have irrevocably deposited or caused to
be deposited with 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, cash in Dollars, U.S. Government Obligations, or a
combination thereof, in such amount as is sufficient without con
ideration of reinvestment of such interest, to pay and discharge
the entire indebtedness on the Notes (except lost, stolen or
destroyed Notes which have been replaced or paid) not theretofore
delivered to the Trustee for cancellation, including principal of,
premium, if any, and interest on the outstanding Notes at such
Stated Maturity or the relevant Redemption Date; 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 at such Stated Maturity or Redemption
Date; and, provided, further, that 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 Eleven;<PAGE>
<PAGE>
(iii) the Company shall have paid all other sums payable by it
hereunder; and
(iv) 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 2.06, 2.07, 2.08, 2.09, 4.01, 4.02 and 7.08 and
any Note Guarantor's obligations in respect thereof shall survive until
the Notes are no longer outstanding pursuant to the last paragraph of
Section 2.09. After the Notes are no longer outstanding, the Company's
obligations in Sections 7.08, 8.04 and 8.05 and any Note Guarantor's
obligations in respect thereof shall survive.
After such delivery or irrevocable deposit, the Trustee upon
request shall acknowledge in writing the discharge of the Company's and
any Note Guarantor's obligations under the Notes and this Indenture
except for those surviving obligations specified above.
Section 8.02 Defeasance and Covenant Defeasance. (a)The
----------------------------------
Company may, at its option by Board Resolution which shall be delivered
to the Trustee, at any time, with respect to the outstanding Notes and
the Note Guarantees, elect to have either paragraph (b) or paragraph (c)
below be applied to the outstanding Notes and the Note Guarantees 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), each of the Company and any
Note Guarantor shall be deemed to have been released and discharged from
its respective obligations with respect to the outstanding Notes and the
Note Guarantees on the date the conditions set forth below are satisfied
(hereinafter, "defeasance"). For this purpose,<PAGE>
<PAGE>
such defeasance means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by the then 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) of this paragraph, 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 the Note Guarantees 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 Eleven 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 2.07,
2.08 and 4.02, and, with respect to the Trustee, under Section 7.08 and
any Note Guarantor's obligations in respect thereof, (iii) the rights,
powers, trusts, duties, indemnities and immunities of the Trustee
hereunder and (iv) this Section 8.02 and Section 8.05. 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
Sections 4.03 through 4.20 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<PAGE>
<PAGE>
with such covenants, but shall continue to be deemed "outstanding" for
all other purposes hereunder and Holders of the Notes and the Note
Guarantees 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 or Guarantor Senior Indebtedness under Articles
Ten, Eleven or otherwise. For this purpose, such covenant defeasance
means that, with respect to the outstanding Notes, the Company and any
Note Guarantor 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 Article Six, but, except as specified above, the
remainder of this Indenture and such Notes shall be unaffected thereby.
In addition, in the event covenant defeasance occurs, the Events of
Default specified in Sections 6.01(v), (vi) or (vii) will no longer
constitute Events of Default with respect to the Notes.
(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 Dollars, or (y)
U.S. Government Obligations maturing as to principal, premium, if
any, and interest in such amounts of money 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 on the Stated<PAGE>
<PAGE>
Maturity or relevant Redemption Date of such principal or
installment of interest 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 on the Maturity Date or Redemption Date or otherwise in
accordance with the terms of this Indenture and of such Notes;
provided that the 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) 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, which ruling
must be referred to, or (y) since the Issue Date, 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
defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have
been the case if such defeasance had not occurred;
(iii) 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 sub
ject to Federal income tax on the same amounts, in the<PAGE>
<PAGE>
same manner and at the same times as would have been the case if
such covenantdefeasance had not occurred;
(iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or, insofar as Events of
Default specified in Section 6.01(viii) or (ix) are 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);
(v) such defeasance or covenant defeasance shall not cause
the Trustee to have a conflicting interest with respect to any
securities of the Company or any Note Guarantor;
(vi) such 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 agreement or instrument
to which the Company or any Note Guarantor is a party or by which
it is bound;
(vii) the Company shall have delivered to the trustee an
Opinion of Counsel stating that (A) the trust funds will not be
subject to any rights of holders of Senior Indebtedness, including,
without limitation, those arising under this Indenture, and
(B) after the 91st day following the deposit or after the date such
Opinion of Counsel is delivered, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights
generally; and
(viii) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each satisfactory
in form and substance to the Trustee, stating that all conditions
precedent provided for relating to either the defeasance under
paragraph<PAGE>
<PAGE>
(b) above or the covenant defeasance under paragraph (c) above, as
the case may be, have been complied with.
(e) All cash in Dollars 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, if any, 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 cash in Dollars 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.
Section 8.03 Application of Trust Money. The Trustee shall
--------------------------
hold in trust cash in Dollars or U.S. Government Obligations deposited
with it pursuant to<PAGE>
<PAGE>
Sections 8.01 and 8.02, and shall apply the deposited cash in Dollars
and U.S. Government Obligations in accordance with this Indenture to the
payment of principal of, premium, if any, and interest on the Notes.
Section 8.04 Repayment to Company or Note Guarantors.
---------------------------------------
Subject to Sections 7.08, 8.01 and 8.02, the Trustee shall promptly pay
to the Company, or if deposited with the Trustee by any Note Guarantor,
to such Note Guarantor, 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, or any Note Guarantor, as the case may be, 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; provided 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
or any Note Guarantor, as the case may be, 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.
Section 8.05 Reinstatement. If the Trustee or Paying Agent
-------------
is unable to apply any cash in Dollars 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
the Company's obligations under this Indenture and the Notes<PAGE>
<PAGE>
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 cash in Dollars or U.S. Government Obligations in
accordance with this Indenture; provided 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 cash in Dollars or U.S. Government Obligations held by
the Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.01 Without Consent of Holders. The Company, when
--------------------------
authorized by Board Resolutions of its Board of Directors, the Note
Guarantors 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, omission, defect or inconsistency;
(b) to comply with Article Five;
(c) to add Guarantees with respect to the Notes;
(d) to secure the Notes;
(e) to add to the covenants of the Company for the benefit of
the Holders;
(f) to surrender any right or power conferred upon the Company
or any Note Guarantor;
(g) to make any change that does not adversely affect the
rights of any Holder; or
<PAGE>
<PAGE>
(h) to comply with any requirements of the SEC in order to
effect or maintain the qualification of this Indenture under the
TIA.
After an amendment, supplement or waiver under this Section
9.01 becomes effective, the Company shall mail to the Holders, 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 supplemental indenture.
Section 9.02 With Consent of Holders. Subject to Section
-----------------------
6.04, the Company and the Note Guarantors when authorized by Board
Resolutions of their respective Boards of Directors, and the Trustee may
amend or modify 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 or any
Note Guarantor with any provision of this Indenture, the Notes or the
Note Guarantees, except a default in the payment of principal of,
premium, if any, or interest on the Notes.
Notwithstanding the provisions of this Section 9.02, without
the consent of each Holder affected, an amendment, modification or
waiver, including a waiver pursuant to Section 6.04, may not:
(a) reduce the principal amount outstanding of or extend the
Stated Maturity of any Note or alter the redemption provisions with
respect thereto;
(b) make the principal of, premium, if any, or interest on
any Note payable in money other than that stated in the Note;
(c) reduce the percentage in outstanding aggregate principal
amount of Notes the Holders of which<PAGE>
<PAGE>
must consent to an amendment, supplement or waiver of or consent to
take any action under any provision of this Indenture, the Notes or
any Note Guarantee;
(d) modify or change Section 4.12 or any provision of this
Indenture affecting the subordination of the Notes or any Note
Guarantee in a manner adverse to the Holders;
(e) impair the right of any Holder to receive payment of
principal of, premium, if any, and interest on such Holder's Notes
on or after the due dates therefor or to institute suit for the
enforcement of any payment on or with respect to the Notes;
(f) 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 or any Note
Guarantee (except for any waiver of a default in payment to the
extent resulting from a declaration of acceleration under this
Indenture, which declaration has been rescinded by the Holders as
contemplated by the third full paragraph under Section 6.02);
(g) following the occurrence of a Change of Control or an Asset
Sale, amend, change or modify the obligation of the Company to
offer to repurchase and to repurchase the Notes in the event of a
Change of Control or make and consummate the Excess Proceeds Offer
with respect to any Asset Sale, including by modifying any of the
provisions or definitions with respect thereto;
(h) reduce or change the rate or time for payment of interest
on the Notes;
(i) modify this Section 9.02 or Section 6.04 or Section 6.07;
or
<PAGE>
<PAGE>
(j) release any Note Guarantor from any of its obligations
under its Note Guarantee or this Indenture other than in compliance
with this Indenture.
Notwithstanding the foregoing, no amendment shall modify any
provision of this Indenture so as to affect adversely the rights of any
Senior Indebtedness or Guarantor Senior Indebtedness representing Credit
Agreement Obligations at the time outstanding which are entitled to the
benefits of subordination under this Indenture (or any group or
representative thereof authorized to give a consent) without the written
consent of such holders.
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 Holders, 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 supplemental indenture.
Section 9.03 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.
<PAGE>
<PAGE>
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 120 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 (i) 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.
Section 9.04 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.
Section 9.05 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<PAGE>
<PAGE>
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 indemnity reasonably satisfactory to it and to receive, and
shall be fully protected in relying upon, in addition to the documents
required by Section 12.04, an Officers' Certificate and an Opinion of
Counsel, each 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
GUARANTEE OF NOTES
Section 10.01 Note Guarantee. Subject to the provisions of
--------------
this Article Ten, each Note Guarantor hereby absolutely, unconditionally
and irrevocably guarantees to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors and
assigns, as a primary obliger and not merely as a surety, that: (a) the
principal of, premium, if any, and interest on the Notes shall be duly
and punctually paid in full when due, whether at maturity, by
acceleration, by redemption or otherwise, and interest on the overdue
principal and (to the extent permitted by law) interest, if any, on the
Notes and all other obligations of the Company to the Holders or the
Trustee hereunder or thereunder (including fees and expenses, including
reasonable attorneys' fees and expenses) and all other Senior
Subordinated Note Obligations shall be promptly paid in full or
performed, all in accordance with the terms hereof and thereof; and (b)
in case of any extension of time of payment or renewal of any Notes or
any of such other Senior Subordinated Note Obligations, the same shall
be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, whether at Stated Maturity, by
acceleration, by redemption or otherwise. Failing payment when due of
any amount so guaranteed, or failing performance of any other obligation
<PAGE>
<PAGE>
of the Company to the Holders, for whatever reason, each Note Guarantor
shall be obligated to pay, or to perform or cause the performance of,
the same immediately. This Note Guarantee shall be a continuing
guarantee of payment, performance and compliance when due (and not a
guarantee of collection) in respect of all Senior Subordinated Note
Obligations and shall remain in full force and effect until the payment
in full of all Senior Subordinated Note Obligations. An Event of
Default under this Indenture or the Notes shall constitute an event of
default under this Note Guarantee, and shall entitle the Holders of
Notes to accelerate the obligations of each Note Guarantor hereunder in
the same manner and to the same extent as the obligations of the
Company.
Each Note Guarantor hereby agrees that its obligations
hereunder shall be absolute and unconditional, irrespective of the
validity, regularity or enforceability of the Notes or this Indenture,
any extension or renewal of this Indenture or the Notes, the absence of
any action to enforce the same, any waiver or consent by any Holder of
the Notes with respect to any provisions hereof or thereof, any release
of any other Note Guarantor, the recovery of any judgment against the
Company, any action to enforce the same, whether or not a Note Guarantee
is affixed to any particular Note, or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a
guarantor. Each Note Guarantor hereby waives the benefit of diligence,
presentment, demand of payment, filing of claims with a court in the
event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands
whatsoever and covenants that its Note Guarantee will not be discharged
except by complete performance of the obligations contained in the
Notes, this Indenture and this Note Guarantee. If any Holder or the
Trustee is required by any court or otherwise to return to the Company
or to any Note Guarantor, or any custodian, trustee, liquidator or other
similar official acting in relation to the Company or such Note
Guarantor, any amount paid by the Company or such Note Guarantor to the
Trustee or such Holder, this<PAGE>
<PAGE>
Note Guarantee, to the extent theretofore discharged, shall be
reinstated in full force and effect. Each Note Guarantor further
agrees that, as between it, on the one hand, and the Holders of Notes
and the Trustee, on the other hand, (a) subject to this Article Ten, the
maturity of the obligations guaranteed hereby may be accelerated as
provided in Article Six hereof for the purposes of this Note Guarantee,
notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations guaranteed hereby, and
(b) in the event of any acceleration of such obligations as provided in
Article Six hereof, such obligations (whether or not due and payable)
shall forthwith become due and payable by such Note Guarantor for the
purpose of this Note Guarantee.
This Note Guarantee shall remain in full force and effect and
continue to be effective should any petition be filed by or against the
Company for liquidation or reorganization, should the Company become
insolvent or make an assignment for the benefit of creditors or should a
receiver or trustee be appointed for all or any significant part of the
Company's assets, and shall, to the fullest extent permitted by law,
continue to be effective or be reinstated, as the case may be, if at any
time payment and performance of the Notes are, pursuant to applicable
law, rescinded or reduced in amount, or must otherwise be restored or
returned by any obligee on the Notes, whether as a "voidable pref-
erence," "fraudulent transfer" or otherwise, all as though such payment
or performance had not been made. In the event that any payment, or any
part thereof, is rescinded, reduced, restored or returned, the Notes
shall, to the fullest extent permitted by law, be reinstated and deemed
reduced only by such amount paid and not so rescinded, reduced, restored
or returned.
Any term or provision of this Indenture to the contrary
notwithstanding, the maximum aggregate amount of the obligations
guaranteed hereunder by any Note Guarantor shall not exceed the maximum
amount that can be hereby guaranteed without rendering this Indenture,
as it relates to any Note Guarantor, voidable under applicable law<PAGE>
<PAGE>
relating to fraudulent conveyance or fraudulent transfer or similar laws
affecting the rights of creditors generally.
Section 10.02 Execution and Delivery by Holding of Note
-----------------------------------------
Guarantee. To further evidence the Note Guarantee set forth in Section
--------
10.01, each Note Guarantor hereby agrees that a notation of such Note
Guarantee, substantially in the form included in the form of Note
included in Exhibit A hereto, shall be endorsed on each Note authen-
ticated and delivered by the Trustee after such Note Guarantee is
executed and executed by either manual or facsimile signature of an
Officer of such Note Guarantor. The validity and enforceability of any
Note Guarantee shall not be affected by the fact that it is not affixed
to any particular Note.
Each Note Guarantor hereby agrees that its Note Guarantee set
forth in Section 10.01 shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Note Guarantee.
If an Officer of any Note Guarantor whose signature is on this
Indenture or a Note no longer holds that office at the time the Trustee
authenticates such Note or at any time thereafter, such Note Guarantee
of such Note shall be valid nevertheless.
The delivery of any Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the
Note Guarantee set forth in this Indenture on behalf of each Note
Guarantor.
Section 10.03 Additional Note Guarantors. Each Subsidiary
--------------------------
that is required to become a Note Guarantor pursuant to Section 4.23
shall promptly (a) execute and deliver to the Trustee a supplemental
indenture in form and substance reasonably satisfactory to the Trustee,
which shall subject such Subsidiary to the provisions of this Indenture
as a Note Guarantor on substantially the same terms as set forth in this
Article Ten with respect to the Note Guarantee of the current Note
Guarantors, and (b) the<PAGE>
<PAGE>
Company shall deliver to the Trustee an Opinion of Counsel in form and
substance reasonably satisfactory to the Trustee stating that such
supplemental indenture has been duly authorized, executed and delivered
by such Subsidiary and that, subject to the applicable bankruptcy,
insolvency, fraudulent transfer, fraudulent conveyance, reorganization,
moratorium and other laws now or hereafter in effect affecting
creditors' rights generally and the general principles of equity
(including, without limitation, standards of materiality, good faith,
fair dealing and reasonableness), such supplemental indenture is a valid
and binding agreement of such Subsidiary, enforceable against such
Subsidiary in accordance with its terms.
Section 10.04 Note Guarantee Obligations Subordinated to
------------------------------------------
Guarantor Senior Indebtedness. Each Note Guarantor covenants and
------------------------------
agrees, and each Holder of a Note, by its acceptance thereof, likewise
covenants and agrees, that all payments pursuant to the Note Guarantee
made by or on behalf of such Note Guarantor are hereby expressly made
subordinate and, subject, in right of payment as provided in this
Article Ten, to the prior payment in full in cash or cash equivalents of
all amounts payable under all existing and future Guarantor Senior
Indebtedness of such Note Guarantor.
This Section 10.04 and the following Sections 10.05 through
10.17 of this Article Ten shall constitute a continuing offer to all
Persons who, in reliance upon such provisions, become holders of, or
continue to hold Guarantor Senior Indebtedness of such Note Guarantor;
and such provisions are made for the benefit of the holders of Guarantor
Senior Indebtedness of such Note Guarantor; and such holders (to such
extent) are made obligees hereunder and they or each of them may enforce
such provisions.
Section 10.05 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 any Note<PAGE>
<PAGE>
Guarantor or its assets, or (b) any liquidation, dissolution or other
winding-up of such Note Guarantor, whether voluntary or involuntary, or
(c) any assignment for the benefit of creditors or other marshalling of
assets or liabilities of such Note Guarantor, then and in any such
event:
(1) the holders of all Guarantor Senior Indebtedness of such
Note Guarantor shall be entitled to receive payment in full in cash
or cash equivalents, or provision acceptable to the requisite
holders of Guarantor Senior Indebtedness of such Note Guarantor
made for such payment, of all amounts due on or in respect of all
such Guarantor Senior Indebtedness before the Holders are entitled
to receive any payment or distribution, whether in cash, property
or securities (excluding Permitted Junior Securities) on account of
the Senior Subordinated Note Obligations or for the acquisition of
any of the Notes; and
(2) any payment or distribution of assets of such Note
Guarantor 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 subordination provisions of this Article Ten 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 Guarantor Senior Indebtedness of such Note Guarantor or
their representative or representatives or to the trustee or
trustees under any indenture under which any instruments evidencing
any of such Guarantor Senior Indebtedness may have been issued,
ratably according to the aggregate amounts remaining unpaid on
account of such Guarantor Senior Indebtedness held or represented
by each, to the extent necessary to make payment in full in cash or
cash equivalents of all such Guarantor Senior Indebtedness
remaining unpaid, after giving<PAGE>
<PAGE>
effect to any concurrent payment or distribution to the holders of
such Guarantor Senior Indebtedness; and
(3) in the event that, notwithstanding the foregoing provisions
of this Section 10.05, the Trustee or the Holder of any Note shall
have received any payment or distribution of assets of such Note
Guarantor of any kind or character, whether in cash, property or
securities, in respect of any Senior Subordinated Note Obligations
under this Note Guarantee before all Guarantor Senior Indebtedness
of such Note Guarantor is paid in full in cash or cash equivalents
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
such Note Guarantor for application to the payment of all such
Guarantor Senior Indebtedness remaining unpaid, to the extent
necessary to pay all of such Guarantor Senior Indebtedness in full
in cash or cash equivalents, after giving effect to any concurrent
payment or distribution to or for the holders of such Guarantor
Senior Indebtedness.
The consolidation of any such Note Guarantor with, or the
merger of such Note Guarantor with or into, another Person or the
liquidation or dissolution of such Note Guarantor following the
conveyance, transfer or lease of its properties and assets substantially
as an entirety to another Person shall not be deemed a dissolution,
winding-up, liquidation, reorganization, assignment for the benefit of
creditors or marshalling of assets and liabilities of such Note
Guarantor 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, assume the
Note Guarantee of such Note Guarantor.
<PAGE>
<PAGE>
Section 10.06 Suspension of Note Guarantee Obligations When
---------------------------------------------
Guarantor Senior Indebtedness in Default. Unless Section 10.05 shall
----------------------------------------
be applicable, after the occurrence of a Payment Default, no payment or
distribution of any assets of any Note Guarantor of any kind or
character shall be made by or on behalf of such Note Guarantor on
account of the Senior Subordinated Note Obligations or on account of the
purchase, redemption, defeasance or other acquisition of the Senior
Subordinated Note Obligations or any of the obligations of such Note
Guarantor under this Note Guarantee unless and until such Payment
Default shall have been cured or waived or shall have ceased to exist or
the 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 10.05 (if applicable), such Note Guarantor
shall resume making any and all required payments in respect of its
obligations under this Note Guarantee.
(b) Unless Section 10.05 shall be applicable, during any
Payment Blockage Period in respect of the Notes, no payment or
distribution of any assets of any Note Guarantor of any kind or
character shall be made by or on behalf of such Note Guarantor on
account of the Senior Subordinated Note Obligations or on account of the
purchase, redemption, defeasance or other acquisition of the Senior
Subordinated Note Obligations or on account of any of the other
obligations of such Note Guarantor under this Note Guarantee. Upon the
termination of any Payment Blockage Period, subject to Section 10.05 (if
applicable), such Note Guarantor shall resume making any and all
required payments in respect of its obligations under this Note
Guarantee.
(c) In the event that, notwithstanding the foregoing, the
Trustee or the Holder of any Note shall have received any payment from
any Note Guarantor prohibited by the foregoing provisions of this
Section 10.06, then and in such event such payment shall be paid over
and delivered forthwith to the Senior Representative initiating the
Payment Blockage Period, in trust for distribution to the<PAGE>
<PAGE>
holders of Guarantor Senior Indebtedness of such Note Guarantor or, if
no amounts are then due in respect of Guarantor Senior Indebtedness of
such Note Guarantor, prompt return to such Note Guarantor, or as a court
of competent jurisdiction shall direct.
Section 10.07 Release of Note Guarantee. (a) Concurrently
-------------------------
with the payment in full of all Senior Subordinated Note Obligations,
then each Note Guarantor shall be released from and relieved of its
obligations under this Article Ten. Upon the delivery by the Company to
the Trustee of an Officers' Certificate and, if requested by the
Trustee, an Opinion of Counsel stating that the transaction giving rise
to the release of this Note Guarantee was made by the Company in
accordance with the provisions of this Indenture and the Notes, the
Trustee shall execute any documents reasonably required in order to
evidence the release of such Note Guarantor from its obligations under
this Note Guarantee. If any of the Senior Subordinated Note Obligations
are revived and reinstated after the termination of this Note Guarantee,
then all of the obligations of such Note Guarantor under this Note
Guarantee shall be revived and reinstated as if this Note Guarantee had
not been terminated until such time as the Senior Subordinated Note
Obligations are paid in full, and such Note Guarantor shall enter into
an amendment to this Note Guarantee, reasonably satisfactory to the
Trustee, evidencing such revival and reinstatement.
(b) Each Subsidiary that becomes a Note Guarantor pursuant to
Section 4.23 shall be released from and relieved of its obligations
under its Note Guarantee upon payment in full of all Senior Subordinated
Note Obligations, subject to the terms thereof which in such respect
shall be substantially the same as set forth in the foregoing paragraph
(a) with respect to the other Note Guarantees.
Section 10.08 Waiver of Subrogation. Each Note Guarantor
---------------------
hereby irrevocably waives any claim or other rights which it may now or
hereafter acquire against the Company that arise from the existence,
payment, performance<PAGE>
<PAGE>
or enforcement of such Note Guarantor's obligations under this Note
Guarantee and this Indenture, including, without limitation, any right
of subrogation, reimbursement, exoneration, indemnification, and any
right to participate in any claim or remedy of any Holder of Notes
against the Company, whether or not such claim, remedy or right arises
in equity, or under contract, statute or common law. If any amount
shall be paid to such Note Guarantor in violation of the preceding
sentence and the Notes shall not have been paid in full, such amount
shall have been deemed to have been paid to such Note Guarantor for the
benefit of, and held in trust for the benefit of, the Holders of the
Notes, and shall, subject to the subordination provisions of this
Article and to Article Eleven, forthwith be paid to the Trustee for the
benefit of such Holders to be credited and applied upon the Notes,
whether matured or unmatured, in accordance with the terms of this
Indenture.
Section 10.09 Provisions Solely to Define Relative Rights.
-------------------------------------------
The subordination 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 Guarantor Senior Indebt-
edness of the Note Guarantors 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 any Note Guarantor, its
creditors other than holders of its Guarantor Senior Indebtedness and
the Holders of the Notes, the obligation of such Note Guarantor, which
is absolute and unconditional, to make payments to the Holders in
respect of its obligations under this Note Guarantee as and when the
same shall become due and payable in accordance with their terms; or (b)
affect the relative rights against such Note Guarantor of the Holders of
the Notes and creditors of such Note Guarantor other than the holders of
the Guarantor Senior Indebtedness<PAGE>
<PAGE>
of such Note Guarantor; or (c) prevent the Trustee or the Holder of any
Note from exercising all remedies otherwise permitted by applicable law
upon Default or an Event of Default under this Indenture, subject to the
rights, if any, under the subordination provisions of this Article Ten
of the holders of Guarantor Senior Indebtedness of Holding hereunder,
(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 such Note Guarantor referred to in Section
10.05, 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
10.06, to prevent any payment prohibited by such Section or enforce
their rights pursuant to Section 10.06(c).
The failure by any Note Guarantor to make a payment in respect
of its obligations under this Note Guarantee 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.
Section 10.10 Trustee to Effectuate Subordination. Each
-----------------------------------
Holder of a Note by his acceptance thereof authorizes and directs the
Trustee on his 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 any Note Guarantor whether in
bankruptcy, insolvency, receivership proceedings, or otherwise, the
timely filing of a claim for the unpaid balance of the indebtedness of
such Note Guarantor 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 Guarantor
Senior Indebtedness, or any Senior Representative, may file such a claim
on behalf of Holders of the Notes.
Section 10.11 No Waiver of Subordination Provisions.
-------------------------------------
(a) No right of any present or future holder of any Guarantor 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
<PAGE>
<PAGE>
on the part of the Company or any Note Guarantor or by any act or
failure to act, in good faith, by any such holder, or by any non-compliance
by the Company or such Note Guarantor 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 subsection (a) of this
Section 10.11, the holders of Guarantor 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 subordi-
nation provided in this Article Ten or the obligations hereunder of the
Holders of the Notes to the holders of such Guarantor 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, such Guarantor Senior Indebtedness or any Senior
Indebtedness as to which such Guarantor Senior Indebtedness relates or
any instrument evidencing the same or any agreement under which such
Guarantor Senior Indebtedness or such Senior Indebtedness is
outstanding; (2) sell, exchange, release or otherwise deal with any
property pledged, mortgaged or otherwise securing such Guarantor Senior
Indebtedness or any Senior Indebtedness as to which such Guarantor
Senior Indebtedness relates; (3) release any Person liable in any manner
for the collection or payment of such Guarantor Senior Indebtedness or
any Senior Indebtedness as to which such Guarantor Senior Indebtedness
relates; and (4) exercise or refrain from exercising any rights against
any Note Guarantor and any other Person; provided 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.
Section 10.12 Notice to Trustee. (a) The Company and each
-----------------
Note Guarantor shall give prompt written<PAGE>
<PAGE>
notice to the Trustee of any fact known to such Note Guarantor which
would prohibit the making of any payment to or by the Trustee in respect
of the Notes. Notwithstanding the subordination provisions of this
Article 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 at its Corporate Trust Office from the Company, any Note
Guarantor or a holder of any Guarantor Senior Indebtedness or from any
representative, trustee, fiduciary or agent therefor; and, prior to the
receipt of any such written notice, the Trustee, subject to the
provisions of this Section 10.12, shall be entitled in all respects to
assume that no such facts exist; provided that if the Trustee shall not
--------
have received the notice provided for in this Section 10.12 at least two
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 or interest on any
Note), then, anything herein contained to the contrary notwithstanding
but without limiting the rights and remedies of the holders of such
Guarantor Senior Indebtedness or any representative, 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 two 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 pre-
venting 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, by a Person representing himself to be a holder of
Guarantor Senior Indebtedness (or a representative, trustee, fiduciary
or agent therefor). In the event that the Trustee determines in good
faith that<PAGE>
<PAGE>
further evidence is required with respect to the right of any Person as
a holder of Guarantor 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 Guarantor 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.
Section 10.13 Reliance on Judicial Order or Certificate of
--------------------------------------------
Liquidating Agent Regarding Dissolution, etc. Upon any payment or
--------------------------------------------
distribution of assets of any Note Guarantor referred to in this Article
Ten, the Trustee, subject to the provisions of Section 7.01, 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 Guarantor Senior Indebtedness
and other Indebtedness of such Note Guarantor, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and
all other facts pertinent thereto or to this Article Ten; provided that
--------
the foregoing shall apply only if such court has been fully apprised of
the provisions of this Article Ten. The Trustee is not responsible for
determining whether or not the court has been fully apprised of the
provisions of this Article Ten.
<PAGE>
<PAGE>
Section 10.14 Rights of Trustee as a Holder of Guarantor
------------------------------------------
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 Guarantor Senior Indebtedness which
may at any time be held by the Trustee, to the same extent as any other
holder of such Guarantor 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.
Section 10.15 Article Ten 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 Ten 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 that Section 10.14
shall not apply to the Company or any Affiliate of the Company if it or
such Affiliate acts as Paying Agent.
Section 10.16 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 Guarantor Senior Indebtedness.
Section 10.17 Trustee's Relation to Guarantor Senior
--------------------------------------
Indebtedness. With respect to the holders of Guarantor 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 in Article Eleven with respect to Senior Indebtedness),
and no implied covenants or obligations with respect to the holders of
Guarantor Senior Indebtedness shall be read into this Indenture against
the Trustee. The<PAGE>
<PAGE>
Trustee shall not be deemed to owe any fiduciary duty to the holders of
Guarantor Senior Indebtedness and the Trustee shall not be liable to any
holder of Guarantor Senior Indebtedness if it shall mistakenly in the
absence of gross negligence or willful misconduct pay over or deliver to
Holders, any note Guarantor or any other Person moneys or assets to
which any holder of Guarantor Senior Indebtedness shall be entitled by
virtue of this Article Ten or otherwise.
Section 10.18 Subrogation. Upon the payment in full in cash
-----------
or cash equivalents of all amounts payable under or in respect of
Guarantor Senior Indebtedness of any Note Guarantor, the Holders shall
be subrogated to the rights of the holders of such Guarantor Senior
Indebtedness to receive payments or distributions of assets of such Note
Guarantor made on such Guarantor Senior Indebtedness until all amounts
due under this Note Guarantee shall be paid in full; and for the
purposes of such subrogation, no payments or distributions to holders of
such Guarantor Senior Indebtedness of any cash, property or securities
to which Holders of the Notes would be entitled except for the
provisions of this Article Ten, and no payment pursuant to the
provisions of this Article Ten to holders of such Guarantor Senior
Indebtedness by the Holders, shall, as among such Note Guarantor, its
creditors other than holders of such Guarantor Senior Indebtedness and
the Holders, be deemed to be a payment by such Note Guarantor to or on
account of such Guarantor Senior Indebtedness) it being understood that
the provisions of this Article Ten are solely for the purpose of
defining the relative rights of the holders of such Guarantor Senior
Indebtedness, on the one hand, and the Holders, on the other hand.
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 Guarantor Senior
Indebtedness, then and in such case, the Holders shall be entitled to
receive from the holders of such Guarantor <PAGE>
<PAGE>
Senior Indebtedness at the time outstanding any payments or
distributions received by such holders of Guarantor Senior Indebtedness
in excess of the amount sufficient to pay all amounts payable under or
in respect of such Guarantor Senior Indebtedness in full.
ARTICLE ELEVEN
SUBORDINATION OF NOTES
Section 11.01 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 Eleven, the
Indebtedness represented by the Notes and the payment of the Senior
Subordinated Note Obligations are 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 of all amounts payable under
all existing and future Senior Indebtedness.
This Article Eleven 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 pro-
visions.
Section 11.02 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, or (c) any
assignment for the benefit of creditors or other marshalling of assets
or liabilities of the Company, then and in any such event:
<PAGE>
<PAGE>
(1) the holders of Senior Indebtedness shall be entitled to
receive payment in full in cash or cash equivalents or provision
acceptable to the requisite holders of Senior Indebtedness made for
such payments, of all amounts due on or in respect of Senior
Indebtedness before the Holders are entitled to receive any payment
or distribution, whether in cash, property or securities (excluding
Permitted Junior Securities) on account of Senior Subordinated Note
Obligations or for the acquisition of any of the Notes; and
(2) 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 of
all Senior Indebtedness remaining unpaid, after giving effect to
any concurrent payment or distribution to the holders of such
Senior Indebtedness; and
(3) in the event that, notwithstanding the foregoing
provisions of this Section 11.02, the Trustee or the Holder of any
Note shall have received any payment or distribution of properties
or assets of the Company of any kind or character, whether in cash,
property or securities, by set off or otherwise in respect of any
Senior Subordinated Note Obligations before all Senior Indebtedness
is paid or provided for in full in cash or<PAGE>
<PAGE>
cash equivalents, 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, after giving effect to any
concurrent payment or distribution to or for the 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 marshalling 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.
Section 11.03 Suspension of Payment When Senior Indebtedness
----------------------------------------------
in Default. Unless Section 11.02 shall be applicable, upon the
----------
occurrence of a Payment Default, no direct or indirect payment or
distribution of any assets of the Company of any kind or character shall
be made by or on behalf of the Company on account of the Senior
Subordinated Note Obligations or on account of the purchase or
redemption or other acquisition of any Senior Subordinated Note Obli-
gations unless and until such Payment Default shall have been cured or
waived or shall have ceased to exist or such Senior Indebtedness shall
have been discharged or paid in<PAGE>
<PAGE>
full in Cash or Cash Equivalents, after which, subject to Section 11.02
(if applicable), the Company shall resume making any and all required
payments in respect of the Notes and the other Senior Subordinated Note
Obligations, including any missed payments.
(b) Unless Section 11.02 shall be applicable, upon (1) the
occurrence of a Non-payment Default and (2) receipt by the Trustee and
the Company from a Senior Representative of written notice of such
occurrence stating that such notice is a Payment Blockage Notice
pursuant to Section 11.03(b) of this Indenture, no payment or
distribution of any assets of the Company of any kind or character shall
be made by or on behalf of the Company on account of any Senior
Subordinated Note Obligations or on account of the purchase or
redemption or other acquisition of Senior Subordinated Note Obligations
for a period ("Payment Blockage Period") commencing on the date of
receipt by the Trustee of such notice unless and until the earlier to
occur of the following events (subject to any blockage of payments that
may then be in effect under Section 11.02 or subsection (a) of this
Section 11.03): (i) 179 days shall have elapsed since receipt of such
notice, (ii) the date on which such Non-payment Default is cured or
waived or ceases to exist (provided that no other Payment Default or
Non-payment Default has occurred or is then continuing after giving
effect to such cure or waiver), (iii) the date on which such Senior
Indebtedness is discharged or paid in full in cash or cash equivalents
or (iv) the date on which such Payment Blockage Period shall have been
terminated by express written notice to the Company or the Trustee from
the Senior Representative initiating such Payment Blockage Period, after
which, subject to Section 11.02 (if applicable), the Company shall
promptly resume making any and all required payments in respect of the
Senior Subordinated Note Obligations, including any missed payments.
Notwithstanding any other provision of this Indenture, only one Payment
Blockage Period with respect to the Notes, any Note Guarantee or the
Notes and the Note Guarantees collectively may be commenced within any
360 consecutive day period. No Non-payment<PAGE>
<PAGE>
Default with respect to Senior Indebtedness that existed or was
continuing on the date of the commencement of any Payment Blockage
Period with respect to the Senior Indebtedness initiating such Payment
Blockage Period (other than any such Non-payment Default which was not
and could not reasonably be expected to have been known by the holders
or the Senior Representative) will be, or can be, made the basis for the
commencement of a second Payment Blockage Period, whether or not within
a period of 360 consecutive days, unless such default has been cured or
waived for a period of not less than 90 consecutive days (it being
acknowledged that any subsequent action, or any breach of any financial
covenant for a period commencing after the date of commencement of such
Payment Blockage Period, that, in either case, would give rise to a
Non-payment Default pursuant to any provision under which a Non-payment
Default previously existed or was continuing shall constitute a new
Non-payment Default for this purpose; provided that, in the case of a breach
of a particular financial covenant, the Company shall have been in com-
pliance for at least one full period commencing after the date of
commencement of such Payment Blockage Period). In no event shall a
Payment Blockage Period extend beyond 179 days from the date of the
receipt by the Trustee of the notice referred to in clause (2) hereof
and there must be a 181 consecutive day period in any 360 day period
during which no Payment Blockage Period is in effect pursuant to this
Section 11.03(b).
(c) In the event that, notwithstanding the foregoing, the
Trustee or the Holder of any Note shall have received any payment or
distribution prohibited by the foregoing provisions of this Section
11.03, then and in such event such payment or distribution 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.
<PAGE>
<PAGE>
Section 11.04 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 Eleven (and in
Article 10 with respect to any Guarantor Senior Indebtedness), 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, any Note Guarantor or any other Person moneys or
assets to which any holder of Senior Indebtedness shall be entitled by
virtue of this Article Eleven or otherwise.
Section 11.05 Subrogation to Rights of Holders of Senior
------------------------------------------
Indebtedness. Upon the payment in full in Cash or Cash Equivalents 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 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 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
Eleven shall have been applied, pursuant to the provisions of this
Article Eleven, to the<PAGE>
<PAGE>
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 in cash
or cash equivalents.
Section 11.06 Provisions Solely to Define Relative Rights.
-------------------------------------------
The provisions of this Article Eleven 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 Eleven 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 Eleven 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
marshalling of assets and liabilities of the Company referred to in
Section 11.02, 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 11.03, to prevent any payment prohibited by such Section or
enforce their rights pursuant to Section 11.03(c).
<PAGE>
<PAGE>
The failure to make a payment on account of any Senior
Subordinated Note Obligations by reason of any provision of this Article
Eleven shall not be construed as preventing the occurrence of a Default
or an Event of Default hereunder.
Section 11.07 Trustee to Effectuate Subordination. Each
------------------------------------
Holder of a Note by his acceptance thereof authorizes and directs the
Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article
Eleven 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.
Section 11.08 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 subsection (a) of this
Section 11.08, 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 sub<PAGE>
<PAGE>
ordination provided in this Article Eleven 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 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.
Section 11.09 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
Eleven 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 11.09, shall be entitled in all respects to assume that no
such facts exist; provided that if the Trustee shall not have received
the notice provided for in this Section 11.09 at least two 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),<PAGE>
<PAGE>
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 two 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 by a Person representing himself to be a holder of Senior
Indebtedness (or a representative, trustee, fiduciary or agent therefor)
to establish that such notice has been given by a holder of Senior
Indebtedness (or a representative, 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 Eleven, 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 Eleven, 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.
Section 11.10 Reliance on Judicial Order or Certificate of
--------------------------------------------
Liquidating Agent. Upon any payment or distribution of assets of the
-----------------
Company referred to in this Article Eleven, the Trustee, subject to the
provisions of Section 7.01, and the Holders, shall be entitled to rely
<PAGE>
<PAGE>
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; provided that the foregoing shall apply only if such court has
been fully apprised of the provisions of this Article Eleven. The
Trustee is not responsible for determining whether or not the court has
been fully apprised of the provisions of this Article Eleven.
Section 11.11 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 Eleven 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 Eleven shall
apply to claims of, or payments to, the Trustee under or pursuant to
Section 7.08.
Section 11.12 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 Eleven in addition to or
in place of the Trustee; provided that Section 11.11 shall not apply to
the Company or any Affiliate of the Company if it or such Affiliate acts
as Paying Agent.
<PAGE>
<PAGE>
Section 11.13 No Suspension of Remedies. Nothing contained
-------------------------
in this Article Eleven 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 Eleven of the holders, from time to time, of Senior
Indebtedness.
ARTICLE TWELVE
MISCELLANEOUS
Section 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.
Section 12.02 Notices. Any notice or communication shall be
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sufficiently given if in writing and delivered in person or mailed by
first class mail, postage prepaid, addressed as follows:
If to the Company or any Note Guarantor to:
Telegroup, Inc.
2098 Nutmeg Avenue
Fairfield, Iowa 52556
Attention: Douglas Neish
Telecopy: (515) 469-4610
<PAGE>
<PAGE>
With a copy to:
Swidler & Berlin
3000 K Street, N.W.
Suite 300
Washington, D.C. 20007-5116
Attention: John J. Klusaritz, Esq.
Telecopy: (202) 424-7645
If to the Trustee to:
450 West 33rd Street
15th Floor
New York, New York 10001
Attention: Global Trust Securities
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 Section
310(b), TIA Section 313(c), TIA Section 314(a) and TIA Section 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.
Section 12.03 Communication by Holders with Other Holders.
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Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes.
The Company, the<PAGE>
<PAGE>
Trustee, the Registrar and any other Person shall have the protection of
TIA Section 312(c).
Section 12.04 Certificate and Opinion as to Conditions
----------------------------------------
Precedent. Upon any request or application by the Company to the
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Trustee to take or refrain from taking any action under this Indenture,
the Company shall furnish to the Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with;
and
(2) an Opinion of Counsel in form and substance satisfactory to
the Trustee stating that, in the opinion of such counsel, all such
conditions precedent have been complied with.
Section 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:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has
made such examination or investigation as is reasonably necessary
to enable him to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
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(4) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been complied with; provided
that with respect to matters of fact an Opinion of Counsel may rely
on an Officers' Certificate or certificates of public officials.
Section 12.06 Rules by Trustee, Paying Agent, Registrar.
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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.
Section 12.07 Legal Holiday. "Legal Holiday" is a Saturday,
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a Sunday or a day on which banking institutions are not required to be
open in the State of New York. If a payment date is a Legal Holiday,
payment shall be made on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period. If a
regular record date is a Legal Holiday, the record date shall not be
affected.
Section 12.08 Governing Law. THIS INDENTURE AND THE NOTES
-------------
SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.
Section 12.09 No Recourse Against Others. No director,
--------------------------
officer, employee, incorporator or stockholder, as such, of the Company,
any Subsidiary of the Company or any Note Guarantor shall have any
liability for any obligations of the Company under the Notes or this
Indenture or of a Note Guarantor under any Note Guarantee 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.
Section 12.10 Successors. All agreements of the Company and
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the Note Guarantors in this Indenture, the Notes and the Note Guarantees
shall bind their successors. All agreements of the Trustee in this
Indenture shall bind its successors.
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Section 12.11 Multiple Originals. The parties may sign any
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number of copies of this Indenture. Each signed copy shall be an
original, but all such executed copies together represent the same
agreement. One signed copy is enough to prove this Indenture.
Section 12.12 Separability. In case any provision in this
------------
Indenture, the Notes or any Note Guarantee shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired
thereby.
Section 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.
Section 12.14 Benefits of Indenture. 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 except to holders of Senior Indebtedness and
Guarantor Senior Indebtedness.<PAGE>
This Indenture may be signed in
any number of counterparts
with the same effect as if the signatures to each counterpart were upon
a single instrument, and all such counterparts together shall be deemed
an original of this Indenture.
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the day and year first above
written.
TELEGROUP, INC.
By:
--------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK,
as Trustee
By:
--------------------------------
Name:
Title:
<PAGE>
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SCHEDULE 1
Existing Liens
<PAGE>
<PAGE>
SCHEDULE 2
Existing Indebtedness
US$-Equivalent
Indebtedness
Company Bank Currency Outstanding
------- ---- -------- ------------
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<PAGE>
EXHIBIT A
[FORM OF FACE OF NOTE]
12% Senior Subordinated Note due 2003
PPN
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 $ on November 27, 2003, at
the office or agency of the Company referred to below, and to pay
interest thereon on May 27 and November 27, in each year, commencing on
May 27, 1997, accruing from November 27, 1996 or from the most recent
Interest Payment Date to which interest has been paid or duly provided
for, at the rate of 12% per annum, until the principal hereof is paid or
duly provided for. Interest shall be computed on the basis of a 360-day
year comprised 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 27 or October 27 (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
<PAGE>
<PAGE>
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 the 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 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 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 Note register
maintained by the Registrar, subject to Section 2.14 of the Indenture.
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, this Note shall not be entitled to any benefit under the
Indenture, or be valid or obligatory for any purpose.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed.
Dated: TELEGROUP, INC.
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
<PAGE>
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred to in the within-mentioned
Indenture.
THE CHASE MANHATTAN BANK,
as Trustee
By:
----------------------------
Authorized Officer
<PAGE>
<PAGE>
[Form of Reverse of Note]
1. Indenture. This Note is one of a duly authorized issue of
---------
Notes of the Company designated as its 12% Senior Subordinated Notes due
2003, limited in aggregate principal amount to $20,000,000, which may be
issued under an indenture (herein called the "Indenture") dated as of
November 27, 1996, between Telegroup, Inc., an Iowa corporation, as
issuer (together with its successors, the "Company"), and The Chase
Manhattan Bank, as trustee (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, any Note Guarantor, 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 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 absolute or
unconditional obligation of the Company and any Note Guarantor 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. Note Guarantees. This Note is entitled to a certain
---------------
senior subordinated Note Guarantee made for the benefit of the Holders.
Reference is hereby made to Article Ten of the Indenture for terms
relating to the Note Guarantors.
3. 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 and Guarantor
Senior Indebtedness 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
<PAGE>
<PAGE>
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 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 7 below.
4. Redemption.
----------
(a) Optional Redemption. The Notes are subject to
-------------------
redemption, at the option of the Company, as a whole or in part, at any
time on or after November 27, 1999 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 on November 27 of the years indicated below:
REDEMPTION
YEAR PRICE
------------------------- --------------------
1999.................................... 110.000%
2000.................................... 106.667%
2001.................................... 103.333%
2002 and thereafter..................... 100.000%
plus accrued and unpaid interest, if any, to the Redemption Date, all as
provided in the Indenture.
(b) Optional Redemption Upon Public Equity Offering. In
-----------------------------------------------
addition, at any time and from time to time on or prior to January 1,
1998, the Company may redeem in the aggregate all, but not less than
all, of the original principal amount of the Notes with the proceeds of
its initial Public Equity Offering at a redemption price equal to 107%
of the principal amount thereof plus accrued and unpaid interest, if
any, to the Redemption Date. In order to effect the foregoing
redemption with the proceeds of an initial Public Equity Offering, the
redemption must be made within 60 days of the date of the consummation
of any such initial Public Equity Offering.
<PAGE>
<PAGE>
(c) 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
relevant 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.
(d) 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.
5. Offers to Purchase. Sections 4.15 and 4.16 of the
------------------
Indenture provide that following any Asset Sale and, upon the occurrence
of a Change of Control, 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.
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 on 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 Indenture at any time by the Company, any Note
Guarantor 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
<PAGE>
<PAGE>
amount of the Notes at the time outstanding, on behalf of the Holders of
all the Notes, to waive compliance by the Company and any Note Guarantor
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.
9. Denominations, Transfer and Exchange. The Notes are
------------------------------------
issuable only in registered form without coupons. 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 Note 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.
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 pur-
poses, whether or not this Note shall be overdue, and neither
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<PAGE>
the Company, the Trustee nor any agent shall be affected by notice to
the contrary.
11. Governing Law. THIS NOTE SHALL BE GOVERNED BY THE LAWS
-------------
OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS
OF LAW THEREOF.
12. Selection and Notice. In the event that less than all of
--------------------
the Notes are to be redeemed at any time, selection of such Notes for
redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on
which the Notes are listed or, if the Notes are not then listed on a
national securities exchange, on a pro rata basis, by lot or by such
method as the Trustee shall deem fair and appropriate. Notice of
redemption shall be mailed by first-class mail at least 30 but not more
than 60 days before the redemption date to each Holder of Notes to be
redeemed at its registered address. If any Note is to be redeemed in
part only, the notice of redemption that relates to such Note shall
state the portion of the principal amount thereof to be redeemed. A new
Note in a principal amount equal to the unredeemed portion thereof will
be issued in the name of the Holder thereof upon surrender for
cancellation of the Note called for redemption. On and after the
redemption date, interest will cease to accrue on Notes or portions
thereof called for redemption and accepted for payment.
13. Abbreviations. The following abbreviations, when used in
-------------
the inscription on the face of this Note, shall be construed as though
they were written out in full according to applicable laws or
regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as
tenants in common
UNIF GIFT
MIN ACT - ___________Custodian___________
(Cust) (Minor)
under Uniform Gifts to Minors
Act_____________________
(State)
Additional abbreviations may also be used though not in the above list.
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OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company
pursuant to Section 4.15 or 4.16 of the Indenture, check the appropriate
box:
Section 4.15 [ ]
Section 4.16 [ ]
If you wish to have a portion of this Note purchased by the
Company pursuant to Section 4.15 or 4.16 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>
<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)
----------------
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----------------------------------------------------------------------
----------------------------------------------------------------------
(Print or type assignee's name, address and zip code) and irrevocably
appoint
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agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
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Date: Your Signature:
------------------------------ -----------------
(Sign exactly as your name appears
on the other side of this Note)
Signature Guarantee:
-------------------------<PAGE>
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------------
Telegroup, Inc., as Issuer
and
The Chase Manhattan Bank, as Trustee
---------------
INDENTURE
Dated as of November 27, 1996
---------------
$20,000,000
12% Senior Subordinated Notes due 2003
<PAGE>
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE ONE DEFINITIONS AND OTHER
PROVISIONS OF GENERAL APPLICATION
Section 1.01. Definitions.............................................1
Section 1.02. Incorporation by Reference of Trust Indenture Act......24
Section 1.03. Rules of Construction..................................24
ARTICLE TWO
THE NOTES
Section 2.01. Authorized Principal Amount of Notes;
Conditions to Issuance of Notes........................25
Section 2.02. Forms and Dating.......................................25
Section 2.03. Execution and Authentication...........................26
Section 2.04. Registrar and Paying Agent.............................26
Section 2.05. Paying Agent to Hold Money in Trust....................27
Section 2.06. Noteholder Lists.......................................28
Section 2.07. Transfer and Exchange..................................28
Section 2.08. Replacement Notes......................................28
Section 2.09. Outstanding Notes......................................29
Section 2.10. Treasury Notes.........................................29
Section 2.11. Temporary Notes........................................29
Section 2.12. Cancellation...........................................30
Section 2.13. Defaulted Interest.....................................30
Section 2.14. Deposit of Moneys......................................30
Section 2.15. Computation of Interest................................31
ARTICLE THREE
REDEMPTION OF NOTES
Section 3.01. Notices to the Trustee.................................31
Section 3.02. Selection of Notes to Be Redeemed......................31
Section 3.03. Notice of Redemption...................................32
Section 3.04. Effect of Notice of Redemption.........................33
Section 3.05. Deposit of Redemption Price............................33
Section 3.06. Notes Redeemed or Purchased in Part....................34
<PAGE>
<PAGE>
ARTICLE FOUR
COVENANTS
Section 4.01. Payment of Notes......................................34
Section 4.02. Maintenance of Office or Agency.......................34
Section 4.03. Corporate Existence...................................35
Section 4.04. Payment of Taxes and Other Claims.....................35
Section 4.05. Maintenance of Properties.............................36
Section 4.06. Compliance Certificate; Notice of Default.............36
Section 4.07. Waiver of Stay, Extension or Usury Laws...............37
Section 4.08. Limitation on Indebtedness............................37
Section 4.09. Limitation on Restricted Payments.....................39
Section 4.10. Limitation on Transactions with Affiliates............40
Section 4.11. Limitation on Certain Liens...........................42
Section 4.12. Limitation on Other Senior Subordinated Indebtedness..42
Section 4.13. Limitation on the Sale or Issuance of Preferred
Stock of Subsidiaries................................42
Section 4.14. Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries..................43
Section 4.15. Limitation on Disposition of Proceeds of Asset Sales..43
Section 4.16. Change of Control.....................................46
Section 4.17. Financial Statements and Reports......................49
Section 4.18. Investment Company Act................................51
Section 4.19. Insurance.............................................51
Section 4.20. Compliance with Laws; Maintenance of Licenses.........51
Section 4.21. Information to Prospective Purchasers.................52
Section 4.22. Private Placement Number..............................52
Section 4.23. Future Note Guarantors...............................52
ARTICLE FIVE
SUCCESSOR CORPORATION
Section 5.01. Merger, Consolidation and Sale of Assets..............53
Section 5.02. Successor Substituted.................................54
ARTICLE SIX
REMEDIES
Section 6.01. Events of Default.....................................54
Section 6.02. Acceleration..........................................57
Section 6.03. Other Remedies........................................59
<PAGE>
<PAGE>
Section 6.04. Waiver of Past Defaults...............................60
Section 6.05. Control by Majority...................................60
Section 6.06. Limitation on Suits...................................60
Section 6.07. Right of Holders to Receive Payment...................61
Section 6.08. Collection Suit by Trustee............................61
Section 6.09. Trustee May File Proofs of Claims.....................61
Section 6.10. Priorities............................................62
Section 6.11. Undertaking for Costs.................................62
Section 6.12. Restoration of Rights and Remedies....................63
ARTICLE SEVEN
TRUSTEE
Section 7.01. Duties................................................63
Section 7.02. Rights of Trustee.....................................64
Section 7.03. Individual Rights of Trustee..........................66
Section 7.04. Trustee's Disclaimer..................................66
Section 7.05. Notice of Default.....................................66
Section 7.06. Money Held in Trust...................................66
Section 7.07. Reports by Trustee to Holders.........................66
Section 7.08. Compensation and Indemnity............................67
Section 7.09. Replacement of Trustee................................68
Section 7.10. Successor Trustee by Merger, etc......................69
Section 7.11. Eligibility; Disqualification.........................70
Section 7.12. Preferential Collection of Claims Against Company.....70
ARTICLE EIGHT SATISFACTION
AND DISCHARGE OF INDENTURE
Section 8.01. Termination of the Company's Obligations..............70
Section 8.02. Defeasance and Covenant Defeasance....................72
Section 8.03. Application of Trust Money............................76
Section 8.04. Repayment to Company or Note Guarantors...............76
Section 8.05. Reinstatement.........................................77
ARTICLE NINE AMENDMENTS,
SUPPLEMENTS AND WAIVERS
Section 9.01. Without Consent of Holders............................77
Section 9.02. With Consent of Holders...............................78
Section 9.03. Revocation and Effect of Consents.....................80
Section 9.04. Notation on or Exchange of Notes......................81
Section 9.05. Trustee May Sign Amendments, etc......................81
<PAGE>
<PAGE>
ARTICLE TEN GUARANTEE
OF NOTES
Section 10.01. Note Guarantee...................................... 81
Section 10.02. Execution and Delivery by Holding of Note Guarantee..83
Section 10.03. Additional Note Guarantors...........................84
Section 10.04. Note Guarantee Obligations Subordinated
to Guarantor Senior Indebtedness....................84
Section 10.05. Payment Over of Proceeds upon Dissolution, etc.......85
Section 10.06. Suspension of Note Guarantee Obligations When
Guarantor Senior Indebtedness in Default...........87
Section 10.07. Release of Note Guarantee............................88
Section 10.08. Waiver of Subrogation................................88
Section 10.09. Provisions Solely to Define Relative Rights..........89
Section 10.10. Trustee to Effectuate Subordination. ...............89
Section 10.11. No Waiver of Subordination Provisions................90
Section 10.12. Notice to Trustee....................................91
Section 10.13. Reliance on Judicial Order or Certificate of
Liquidating Agent Regarding Dissolution, etc. .....92
Section 10.14. Rights of Trustee as a Holder of Guarantor Senior
Indebtedness; Preservation of Trustee's Rights.....92
Section 10.15. Article Ten Applicable to Paying Agents..............93
Section 10.16. No Suspension of Remedies............................93
Section 10.17. Trustee's Relation to Guarantor Senior Indebtedness..93
Section 10.18. Subrogation..........................................93
ARTICLE ELEVEN SUBORDINATION
OF NOTES
Section 11.01. Notes Subordinate to Senior Indebtedness............94
Section 11.02. Payment over of Proceeds upon Dissolution, etc......95
Section 11.03. Suspension of Payment When Senior Indebtedness
in Default........................................96
Section 11.04. Trustee's Relation to Senior Indebtedness...........98
Section 11.05. Subrogation to Rights of Holders of Senior
Indebtedness......................................99
Section 11.06. Provisions Solely to Define Relative Rights.........99
Section 11.07. Trustee to Effectuate Subordination............... 100
Section 11.08. No Waiver of Subordination Provisions..............100
Section 11.09. Notice to Trustee..................................101
Section 11.10. Reliance on Judicial Order or Certificate of
Liquidating Agent.................................102
Section 11.11. Rights of Trustee as a Holder of Senior
Indebtedness; Preservation of Trustee's Rights....103
Section 11.12. Article Applicable to Paying Agents................103
Section 11.13. No Suspension of Remedies..........................103
<PAGE>
<PAGE>
ARTICLE TWELVE
MISCELLANEOUS
Section 12.01. Trust Indenture Act of 1939..........................103
Section 12.02. Notices..............................................104
Section 12.03. Communication by Holders with Other Holders..........105
Section 12.04. Certificate and Opinion as to
Conditions Precedent...............................105
Section 12.05. Statements Required in Certificate or Opinion........105
Section 12.06. Rules by Trustee, Paying Agent, Registrar............106
Section 12.07. Legal Holiday........................................106
Section 12.08. Governing Law........................................106
Section 12.09. No Recourse Against Others...........................106
Section 12.10. Successors...........................................106
Section 12.11. Multiple Originals...................................106
Section 12.12. Separability.........................................107
Section 12.13. Table of Contents, Headings, etc.....................107
Section 12.14. Benefits of Indenture................................107
SIGNATURES...........................................................108
SCHEDULE 1 Existing Liens
SCHEDULE 2 Existing Indebtedness
EXHIBIT A Form of Note
Exhibit 10.1
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement"), made as of the 28th day of
--------
March, 1997, by and between AMERICAN NATIONAL BANK AND TRUST COMPANY OF
CHICAGO (the "Bank"), a national banking association with its principal place
of business at 33 North LaSalle Street, Chicago, Illinois 60690, and
Telegroup, Inc. (the "Borrower"), an Iowa corporation with its principal place
of business at 2098 Nutmeg Avenue, Fairfield, Iowa 52556, has reference to the
following facts and circumstances:
R E C I T A L S:
Pursuant to the Borrower's request, the Bank, in the event it accepts
this Agreement in writing, will lend monies to the Borrower pursuant hereto.
This Agreement restates the borrowing relationship between the Borrower
and the Bank.
A G R E E M E N T:
NOW, THEREFORE, in consideration of the promises set forth herein, the
Borrower agrees to borrow monies from the Bank, and the Bank agrees to lend
monies to the Borrower, upon the following terms and conditions:
1. DEFINITIONS AND TERMS
1.1 Defined Terms. The following words, terms and/or phrases shall
have the meanings set forth thereafter and such meanings shall be applicable
to the singular and plural form thereof, giving effect to the numerical
difference; whenever the context so requires, the use of "it" in reference to
the Borrower shall mean the Borrower as identified at the beginning of this
Agreement.
A. "Affiliate" means as to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control
with, that Person. For purposes of this definition, "control"
means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of
any Person, whether through the ownership of voting securities or
by contract or otherwise.
B. "Borrower's Liabilities" means all obligations and liabilities of
the Borrower to the Bank (including without limitation all debts,
claims, and indebtedness) whether primary, secondary, direct,
contingent, fixed or otherwise, heretofore, now and/or from time
to time hereafter owing, due or payable, however evidenced,
created,<PAGE>
<PAGE>
incurred, acquired or owing and however arising, whether
under this Agreement or the "Other Agreements" (hereinafter
defined) or operation of law or otherwise.
C. "Business Day" means any day of the year on which the Bank is open
for business in Chicago, Illinois.
D. "Charges" means all national, federal, state, county, city,
municipal and/or other governmental (or any instrumentality,
division, agency, body or department thereof, including without
limitation the Pension Benefit Guaranty Corporation) taxes,
levies, assessments, charges, liens, claims or encumbrances upon
and/or relating to Borrower's Liabilities, Borrower's business,
Borrower's ownership and/or use of any of its assets, and/or
Borrower's income and/or gross receipts.
E. "Eurodollar Advance" means any draw, advance or Revolving Credit
Loan made pursuant to or outstanding under this Agreement, or
pursuant to or under the Revolving Note, as defined below, or any
portion thereof, for which the Loan Rate (as defined in Paragraph
2.4 below) is based on the Libor Rate, whether or not Bank obtains
Eurodollars equal to all or any portion of such Eurodollar
Advance. Eurodollar Advances shall be in minimum amounts of
$500,000 and in integral multiples of $100,000 in excess of such
minimum amount.
F. "Eurobanking Day" means any Business Day on which banks in London,
England are generally open for business.
G. "Generally Accepted Accounting Principles (GAAP)" means sound and
generally accepted accounting principles consistently applied and
maintained in all material respects throughout the period
indicated and consistent with the prior financial practice of
Borrower, except for changes mandated by the Financial Accounting
Standards Board or any similar accounting authority of comparable
standing. In the event that any such change shall materially
affect the application of any provision of this Agreement, the
parties shall, at the request of Bank or Borrower, endeavor in
good faith to agree upon appropriate modifications of such
provision, so that the effect of such provision as between the
parties to this Agreement shall be the same as if such change had
not been mandated.
H. "Hazardous Substance" means any hazardous substance, hazardous
waste, pollutant, contaminant, or toxic substance or compound
within the meaning of or as defined or regulated by any federal,
state or local law, statute, regulation or ordinance.
I. "Indebtedness" means (i) indebtedness for borrowed money or for
the deferred purchase price of property or services; (ii)
obligations as lessee under leases which shall have been or
should be, in accordance with generally accepted accounting<PAGE>
<PAGE>
principles, recorded as capital leases; (iii) obligations under
direct or indirect guaranties in respect of, and obligations
(contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of,
indebtedness or obligations of others of the kinds referred to in
clauses (i) or (ii) above; and (iv) liabilities in respect of
unfunded vested benefits under plans covered by Title IV of the
Employee Retirement Income Security Act of 1974, as the same may
be amended and in effect from time to time.
J. "Interest Period" means the period commencing on the date
specified in any Libor Rate Election Notice (as defined in
Paragraph 2.5 below) and ending one (1), two (2), or three (3)
months thereafter (but not later than the Termination Date);
provided that (a) any Interest Period which would otherwise end
on a day which is not a Business Day shall be extended to the
next succeeding Business Day unless such Business Day falls in
another calendar month, in which case such Interest Period shall
end on the next preceding Business Day; (b) if an Interest
Period begins on the last Business Day of a calendar month, it
shall end on the last Business Day of a calendar month; and (c)
any Interest Period which begins on a day for which there is no
numerically corresponding date in the calendar month at the end
of such Interest Period shall end on the last Business Day of
such calendar month.
K. "Libor Rate" means the daily rate equivalent of one and one half
percent (1.25%) in excess of the rate per annum quoted to Bank
in accordance with Bank's normal practice in the London
Interbank Eurodollar market for U.S. Dollar deposits, at
approximately 11:00 a.m. (Chicago time) two (2) Eurobanking Days
before the first day of any Interest Period, in an amount
approximately equal to the principal amount of the Eurodollar
Advance of Bank to which such Interest Period is to apply and
for a period of time comparable to such Interest Period, divided
by a number equal to 1.00 minus the maximum reserve requirement
percentage (expressed as a decimal) as specified in Regulation D
of the Board of Governors of the Federal Reserve System, which
Bank determines would be applicable on the first day of such
Interest Period in respect of the Eurodollar Advance.
L. "Maximum Availability" means seven million five hundred thousand
dollars ($7,500,000.00).
M. "Obligor" means any Person who is and/or may become obligated to
Borrower under or on account of "Accounts" (as hereinafter
defined).
N. "Other Agreements" means all agreements, instruments and
documents, including without limitation guaranties, mortgages,
deeds of trust, notes, pledges, powers of attorney, consents,
assignments, contracts, notices, security agreements, leases,
financing statements and all other written matter heretofore,
<PAGE>
<PAGE>
now and/or from time to time hereafter executed by and/or on
behalf of the Borrower and delivered to the Bank including,
without limitation of the foregoing, the Revolving Note (as
hereinafter defined).
O. "Persons" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust,
unincorporated organization, association, corporation,
institution, entity, party or government (whether national,
federal, state, county, city, municipal or otherwise, including
without limitation, any instrumentality, division, agency, body
or department thereof).
P. "Prime Rate" means the per annum rate of interest announced or
published publicly from time to time by Bank as its prime or
equivalent rate of interest. During any time period for which
the Prime Rate is the applicable Loan Rate the rate of interest
to be charged shall fluctuate from time to time during said
time concurrently with and in an amount equal to each increase
or decrease in the Prime Rate. The Prime Rate is not
necessarily the best rate offered by the Bank to its best
customers.
Q. "Subsidiary" means any corporation at least 50% of whose
outstanding Voting Stock shall at the time be owned directly or
indirectly by another Person or by one or more Subsidiaries or
by the such Person and one or more Subsidiaries.
R. "Termination Date" shall mean June 30, 1998; provided, however,
that if (1) the Borrower shall fail to deliver to the Bank
audited financial statements for the fiscal year ended December
31, 1996 of the type required by Section 6.5(a) of this
Agreement (the "1996 Financials") on or before May 30, 1997 or
(2) the 1996 Financials when compared to the draft financial
statements for the fiscal year ended December 31, 1996
previously delivered to the Bank, reflect, either in the
aggregate or with respect to any element, a materially adverse
change in the financial condition of the Borrower, as
determined by the Bank in its sole and unfettered discretion,
then the Bank may, by written notice to the Borrower, change
the Termination Date to June 30, 1997; further provided that
such notice must be given by the Bank prior to the earlier of
(a) the date 45 days after the date the 1996 Financials are
delivered to the Bank and (b) June 20, 1997.
S. "Voting Securities" as applied to the securities of any
corporation, means securities of any class or classes (however
designated) having ordinary voting power for the election of a
majority of the members of the Board of Directors (or other
governing body) of such corporation, other than securities
having such power only by reason of the happening of a
contingency.
<PAGE>
<PAGE>
2. LOANS
A. REVOLVING CREDIT LOAN FACILITY.
-------------------------------
2.1 Revolving Loan Facility. The Bank hereby agrees to lend
-----------------------
to the Borrower from time to time until the Termination Date, such sums
("Revolving Credit Loans") as the Borrower may request as provided in Section
----------------------
2.3 below; provided, however, that (i) the aggregate principal amount of all
-------- -------
Revolving Credit Loans outstanding to Borrower at one time shall not exceed an
amount equal to (a) the Maximum Availability, less (b) the sum of the
aggregate undrawn face amount of all Letters of Credit (as hereinafter
defined) outstanding at any time (the "LC Amount"); and (ii) the Bank shall
have no obligation to make a Revolving Credit Loan if the amount of such
Revolving Credit Loan would cause the aggregate of the principal amount of the
Revolving Credit Loans then outstanding to exceed the difference of the
Maximum Availability less the LC Amount.
2.2 Revolving Note. At the time of the making of this Agreement,
--------------
the Borrower shall execute and deliver to the Bank a promissory note, dated
the date hereof, (the "Revolving Note") in the principal amount of the Maximum
Availability, which Revolving Note shall evidence the Revolving Credit Loans.
The Revolving Note shall mature on the Termination Date. The Borrower's
Liabilities under the Revolving Note shall bear interest from the date of
disbursement until paid, at the rate provided pursuant to Section 2.4 hereof;
provided, however, that in the event that any of Borrower's Liabilities are
- -------- -------
not paid when due, the unpaid amount of Borrower's Liabilities shall bear
interest after the due date until paid at a rate equal to three and
three-quarters percent (3.75%) in excess of the Prime Rate. Accrued interest
shall
be payable by Borrower to Bank on the last Business Day of each month, and at
maturity, commencing with the last Business Day of March, 1997, at Bank's
principal place of business, or at such other place as Bank may designate from
time to time hereafter. After maturity, accrued interest on all of Borrower's
Liabilities shall be payable on demand.
2.3 Manner of Borrowing Revolving Credit Loans. Borrowings under the
------------------------------------------
credit facility established pursuant to paragraph 2.1 shall be as follows:
(a) A request for a Revolving Credit Loan shall be made, or
shall be deemed to be made, in the following manner: (i) the Borrower
shall give the Bank notice of its intention to borrow, in which notice
the Borrower shall specify the amount of the proposed borrowing and the
proposed borrowing date, which notice, in the case of Eurodollar
Advances, shall be in conformity with Section 2.5 hereof; (ii) an amount
of interest that is required to be paid under the Revolving Note being
due shall be deemed irrevocably to constitute a request for a Revolving
<PAGE>
<PAGE>
Credit Loan on the due date of such amount in the amount so owed the
Bank; and (iii) the amount of any other of Borrower's Liabilities which
become due shall be deemed irrevocably to constitute a request for a
Revolving Credit Loan on the due date in the amount then so owed to the
Bank; and
(b) The Borrower hereby irrevocably authorizes the Bank to
disburse the proceeds of each Revolving Credit Loan requested, or deemed
to be requested, pursuant to this paragraph 2.3 as follows: (i) the
proceeds of each Revolving Credit Loan requested under subparagraph
2.3(a)(i) shall be disbursed by the Bank in lawful money of the United
States of America in immediately available funds to the Borrower's
operating account maintained with the Bank and (ii) the proceeds of each
Revolving Credit Loan requested under subparagraphs 2.3(a)(ii) or (iii)
shall be disbursed by the Bank by way of direct payment of the relevant
Borrower's Liability.
(c) Except as specifically hereinafter provided, Borrower may
from time to time prepay, in whole or in part, Borrower's Liabilities at
any time, without premium. All prepayments of Borrower Liabilities shall
include accrued interest to the date of prepayment. Revolving Credit
Loans arising under Paragraph 2.1 above and paid or prepaid may be
reborrowed subject to the terms and conditions of this Agreement and the
Revolving Note. Anything in this Agreement or the Note to the contrary
notwithstanding, Borrower hereby agrees to indemnify Bank upon demand
against any cost or expense which Bank shall sustain or incur as a
consequence of any prepayment of a Eurodollar Advance for which Borrower
has elected the Libor Rate as the applicable Loan Rate, arising out of or
in connection with:
(i) Bank's obtaining or maintaining an Eurodollar loan the Bank
deems necessary to enable Borrower to maintain or make use of, its
option to elect the Libor Rate as the Loan Rate applicable for such
Eurodollar Advance; or
(ii) any failure of Borrower to maintain the principal balance
of such Eurodollar Advance through the last day of the Interest
Period for any such Eurodollar Advance which Borrower has elected
the Libor Rate as the applicable Loan Rate.
Said cost or expense, if any, shall be determined and calculated by
Bank and shall be deemed conclusive and binding upon Borrower in the
absence of manifest error, and such liability shall become part of
Borrower's Liabilities. Upon the written request of the Borrower,
Bank shall provide to Borrower at the time of any such prepayment
(or at the time such prepayment is proposed) a reasonable estimate
in writing of the cost or expense that will be or has been incurred,
if any. In the event of a prepayment of a Eurodollar Advance, Bank
may demand that such estimated amount be paid by Borrower at the
time of such prepayment, subject to adjustment at such time as the
actual cost or expense of Bank can be determined.
<PAGE>
<PAGE>
Such indemnification for such cost or expense shall be due and
payable notwithstanding the cause of a prepayment of a Eurodollar
Advance, including without limitation of the foregoing, a prepayment
of a Eurodollar Advance caused by the acceleration of Borrower's
Liabilities upon the occurrence of an Event of Default, as defined
below.
2.4 Loan Rate. The principal portion of Borrower's Liabilities unpaid
---------
from time to time shall bear interest (the "Loan Rate") from the date advanced
or disbursed at a daily rate equal to the daily rate equivalent of the Prime
Rate, unless, at Borrower's option, the Libor Rate is elected as the Loan Rate
for any Eurodollar Advance for any Interest Period as provided in this
Agreement; provided however, that in the event that any of Borrower's
Liabilities are not paid when due, the unpaid amount of Borrower's Liabilities
shall bear interest after the due date until paid at a rate equal to three and
three-quarters percent (3.75%) in excess of the Prime Rate. The Loan Rate
shall be computed on the basis of a 360-day year and actual days elapsed.
2.5 Election of Libor Rate. In the event that Borrower desires to elect
----------------------
the Libor Rate as the Loan Rate with respect to any draw, advance or Revolving
Credit Loan made pursuant to this Agreement or portion thereof, Borrower shall
give Bank written notice of such election (a "Libor Rate Election Notice"),
--------------------------
which notice shall set forth the length of the Interest Period applicable to
each Eurodollar Advance and specify the dollar amount of the Eurodollar
Advance for which the Libor Rate shall be the Loan Rate during such Interest
Period.
B. LETTERS OF CREDIT.
-----------------
2.6 Letters of Credit. If requested to do so by the Borrower,
-----------------
the Bank shall issue or cause to be issued one or more letters of credit
("Letters of Credit"); provided that the LC Amount shall not exceed the
Maximum Availability, less the aggregate principal amount of Revolving Credit
Loans then outstanding. Any amounts paid by the Bank in connection with any
Letter of Credit issued for the benefit of the Borrower shall constitute a
Revolving Credit Loan under the Borrower's Revolving Note.
2.7 Letter of Credit Fees. As additional consideration for the
---------------------
Bank's issuing its (a) Standby Letters of Credit for the Borrower's account,
the Borrower agrees to pay the Bank fees equal to one and one-half percent
(1.50%) per annum of the aggregate face amount of the Standby Letters of
Credit outstanding from time to time plus the Bank's standard costs and
charges for issuance and administration thereof, and for issuing its (b)
Documentary Letters of Credit for the Borrower's account, the Borrower agrees
to pay the Bank's standard costs and charges for issuance and administration
thereof. The foregoing fees shall be payable monthly in arrears and shall be
deemed fully earned upon issuance of each Letter of Credit, and shall not be
subject to rebate or proration upon the termination of this Agreement for any
reason.
<PAGE>
<PAGE>
C. GENERAL.
-------
2.8 Termination of Loans and Issuance of Letters of Credit. Bank's
------------------------------------------------------
commitment to loan additional amounts under this Agreement or to issue Letters
of Credit shall expire on the earlier of (i) the Termination Date; or (ii) the
occurrence of the Event of Default (as hereinafter defined) or any event or
condition, which with notice, lapse of time or both would constitute an Event
of Default.
2.9 Additional Conditions of Borrowing. The Bank shall not make any
----------------------------------
advances or issue Letters of Credit hereunder unless Bank shall have received,
in form and substance satisfactory to Bank, all certificates, orders,
authorities, consents, affidavits, schedules, instruments, security
agreements, financing statements, mortgages and other documents which Bank may
reasonably request from time to time for purposes of giving effect to this
Agreement or obtaining information with respect to the Borrower, its business,
operations or assets.
2.10 Costs. All costs, fees and expenses payable hereunder or under
-----
the Other Agreements, shall be payable by the Borrower to the Bank on demand,
at the Bank's principal place of business or such other place as the Bank
shall specify in writing to the Borrower.
2.11 Conditions to Draws. Each loan made by Bank to Borrower pursuant
-------------------
to this Agreement or the Other Agreements shall constitute an automatic
warranty and representation by Borrower to Bank that there does not then exist
an Event of Default or any event or condition, which with notice, lapse of
time or both would constitute an Event of Default and that the making of such
loan would not cause or constitute an Event of Default. Notwithstanding
anything contained herein, no loan shall be made hereunder, if an Event of
Default then exists or would be created thereby, or any event which with
notice or lapse of time or both would constitute an Event of Default then
exists or would be created thereby.
2.12 Payment of Bank's Legal Expenses. As soon as practical after the
--------------------------------
acceptance of this Agreement by the Bank, the Borrower shall reimburse the
Bank for all reasonable expenses incurred by the Bank as attorneys' fees and
expenses, as well as filing and recording fees for releases of prior liens or
duplication costs incurred in connection with the negotiation and
documentation of this Agreement, and the Other Agreements required by the Bank
as a condition to the acceptance of this Agreement.
2.13 Termination. This Agreement shall be in effect until all of
-----------
Borrower's Liabilities have been paid in full and any and all commitments of
the Bank to make loans have terminated. On the proposed date of termination of
this Agreement, the Bank may, at its option, require the Borrower to deposit
with the Bank funds equal to the then outstanding LC Amount at such time in
order for such termination to become effective. Any such deposits shall be
held by the Bank as a reserve to fund future drawings against Letters of
Credit then outstanding.
<PAGE>
<PAGE>
3. COLLATERAL
----------
3.1 Collateral. To secure the prompt payment to Bank of Borrower's
----------
Liabilities and the prompt, full and faithful performance by Borrower of all
of the provisions to be kept, observed or performed by Borrower under this
Agreement and/or the Other Agreements, Borrower grants to Bank a security
interest in and to, and collaterally assigns to Bank, all of Borrower's
property, now or at any time or times hereafter in the possession, or under
the control of Bank or its bailee.
3.2 Application of Funds and Setoff. Regardless of the adequacy of any
-------------------------------
collateral securing Borrower's Liabilities hereunder, any deposits or other
sums at any time credited by or payable or due from Bank to Borrower, or any
monies, cash, cash equivalents, securities, instruments, documents or other
assets of Borrower in possession or control of Bank or its bailee for any
purpose may, upon an Event of Default or event or condition which with notice
or lapse of time would constitute an Event of Default, be reduced to cash and
applied by Bank to or setoff by Bank against Borrower's Liabilities hereunder
and under the Other Agreements.
4. PRIOR AGREEMENTS
----------------
4.1 Prior Loan Agreement. This Agreement amends and restates the
---------------------
Loan and Security Agreement ("Prior Loan Agreement"), dated as of February 22,
--------------------
1996, between the Bank and the Borrower.
4.2 Termination of Prior Security Agreements. The following
----------------------------------------
agreements in favor of the Bank are hereby terminated:
Guaranty by First Global Net Management Company, in favor of the Bank
dated as of February 22, 1996, as amended.
Guaranty of Clifford Rees in favor of the Bank dated as of February 22,
1996, as amended.
Guaranty of Fred Gratzon in favor of the Bank dated as of February 22,
1996, as amended.
Guaranty of Shelley Gratzon in favor of the Bank dated as of February
22, 1996, as amended.
Pledge Agreement of Shelley Gratzon in favor of the Bank dated as of
February 22, 1996, as amended ("Pledge Agreement").
----------------
<PAGE>
<PAGE>
Assignment of Lockbox Agreement ("Assignment of Lockbox Agreement"),
-------------------------------
dated February 22, 1996, among the Bank, the Borrower and Firstar Bank
Cedar Rapids, N.A. ("Firstar").
-------
4.3 Release of Security Agreements. Promptly after the execution of
------------------------------
this Agreement by the Bank, the Bank shall (i) release all UCC-1 financing
statements filed against the Borrower by the Bank, (ii) return to Shelly
Gratzon the stock pledged under the Pledge Agreement, and (iii) inform Firstar
of the termination of the Assignment of Lockbox Agreement.
5. WARRANTIES, REPRESENTATIONS AND COVENANTS: INSURANCE AND TAXES
5.1 Insurance. Borrower, at its sole cost and expense, shall keep and
---------
maintain: (a) its assets insured for the full insurable value against all
hazards and risks ordinarily insured against by other owners or users of such
properties in similar businesses; and (b) public liability and property damage
relating to Borrower's ownership and use of its assets. All such policies of
insurance shall be in form, with insurers and in such amounts as may be
satisfactory to Bank. Borrower shall deliver to Bank the original (or
certified) copy of each policy of insurance, or a certificate of insurance,
and evidence of payment of all premiums for each such policy.
5.2 Charges. Borrower shall pay promptly when due, all of the charges,
-------
and shall not permit the Charges to arise, or to remain and will promptly
discharge the same.
6. WARRANTIES, REPRESENTATIONS AND COVENANTS: GENERAL
6.1 Corporate and Financial Status. Borrower warrants and represents
------------------------------
to and covenants with Bank that: (a) Borrower is and all times hereafter
shall be a corporation, duly organized, existing and in good standing under
the laws of the State of Iowa and qualified to do business in all states where
the failure to so qualify would have a material and adverse affect on its
business; (b) Borrower has the right, power and capacity and is duly
authorized and empowered to enter into, execute, deliver and perform this
Agreement and Other Agreements; (c) the execution, delivery and/or performance
by Borrower of this Agreement and Other Agreements shall not, by the lapse of
time, the giving of notice or otherwise, constitute a violation of any
applicable law or a breach of any provision contained in Borrower's Articles
of Incorporation, By-Laws, or similar document, or contained in any agreement,
instrument or document to which Borrower is now or hereafter a party or by
which it is or may be bound; (d) This Agreement and the Revolving Note, when
duly executed and delivered, will be legal, valid and binding obligations of
Borrower enforceable against Borrower in accordance with their respective
terms, subject to bankruptcy, insolvency and other similar laws relating to or
affecting the enforceability of creditor's rights generally and general
principles of equity; (e) Borrower is now and at all times hereafter, shall be
solvent and generally paying its debts as they mature and Borrower now owns
and shall at all times hereafter own property which, at a fair valuation, is
greater than the sum of <PAGE>
<PAGE>
its debts; (f) Borrower is not and will not be during the term hereof in
violation of any applicable foreign, federal, state or local statute,
regulation or ordinance, in any respect materially and adversely affecting its
business, property, assets, operations or condition, financial or otherwise;
(g) Borrower is duly qualified to do business and has such other licenses and
permits as it needs or are required to operate its business as it is now
operated in all states and to the best of knowledge, after reasonable
investigation, foreign countries where it now operates; (h) Borrower is not in
default with respect to any indenture, loan agreement, mortgage, deed or other
similar agreement relating to the borrowing of monies to which it is a party
or by which it is bound; (i) Except as previously disclosed in writing to the
Bank, there are no legal, governmental, arbitration or other actions or
proceedings pending or threatened against Borrower which reasonably may result
in any material adverse change in its financial condition, results of
operations or business, or which reasonably may materially and adversely
affect its property or assets; (j) Except as disclosed to Bank in the
Financials most recently delivered to Bank in connection with this Agreement
and the $20,000,000 in aggregate original principal amount of 12% Senior
Subordinated Notes issued under an Indenture dated as of November 27, 1996
between the Borrower and Chase Manhattan Bank, N.A., as trustee for the
benefit of the holders of the Notes (the "Subordinated Debt"), Borrower has no
indebtedness or other liabilities other than trade payables arising in the
ordinary course of its business; (k) Borrower is not a party to (or subject to
any renegotiation of) any contract or agreement, or subject to any charge,
restriction, judgment, decree, or order, which materially and adversely
affects its financial condition, results of operations or business or its
property or assets or otherwise; (l) All Financials of Borrower furnished to
Bank by Borrower prior to or concurrently with the execution and delivery of
this Agreement in all material respects fairly and accurately present the
financial condition and results of operations of Borrower as of and for the
period ending on the date as of which such Financials are presented, and have
been prepared in accordance with Generally Accepted Accounting Principles; (m)
To the best knowledge of Borrower, after reasonable investigation, no
Hazardous Substances are stored or otherwise located on, under or about any
property owned, operated or leased by Borrower, and no part of such property,
including the groundwater upon or under such property, is contaminated by any
Hazardous Substance; (n) There has been no material and adverse change in the
assets, liabilities or financial condition of Borrower since the date of the
most recent Financials furnished to Bank; and (o) Borrower is in full
compliance with all of its covenants under this Agreement and there does not
exist any Event of Default or any event which with notice or lapse of time or
both would constitute an Event of Default.
6.2 Repayment. The Borrower warrants and represents to and covenants
---------
with the Bank that the Borrower shall not, without Bank's prior written
consent thereto enter into any transaction not in the ordinary course of
business which materially and adversely affects Borrower's ability to repay
Borrower's Liabilities or Indebtedness.
6.3 Banking Relationships. The Borrower shall maintain primary banking
---------------------
relationships, including all its deposit accounts with the Bank (except for
(i) the Foreign Collection Accounts and (ii) the payroll and petty cash
account which balance shall not exceed $25,000,<PAGE>
<PAGE>
identified as Account Number 4232801, and the lockbox account which accounts
are both located at Firstar). The Borrower will maintain free balances in
each of its deposit accounts at the Bank in an amount sufficient to offset the
monthly service fees charged against each of Borrower's deposit account. In
the event that the Bank gives written notification to the Borrower that the
balance in any deposit account is insufficient to cover the payment of service
fees as charged by the Bank, the Borrower shall promptly thereafter remit to
the Bank, for deposit in any such account, an amount sufficient to cure such
shortfall.
6.4 Dividends and Redemptions. The Borrower shall not (a) declare or
--------------------------
pay any dividends, or make any other distributions with respect to its capital
stock, except for dividends payable in capital stock, (b) make any payment on
account of the purchase, redemption or retirement of any of the capital stock
of any class of Borrower or of any Subsidiary of Borrower or (c) make an
investment in or loan to any Subsidiary of Borrower if such dividend,
distribution, purchase, redemption, retirement, investment or loan (i) would
result in an Event of Default, (ii) is reasonably likely to result in the
Borrower being in breach of Section 6.7, 6.8, 6.9, 6.10 or 6.11 hereof or
(iii) is an event or causes a condition which with notice or lapse of time
would constitute an Event of Default.
6.5 Financial Statements. The Borrower covenants with the Bank that
--------------------
Borrower shall furnish to Bank:
(a) as soon as available but not later than ninety (90) days after
the close of each fiscal year of Borrower, financial statements of the
Borrower as of such year-end prepared in accordance with Generally
Accepted Accounting Principles, consistently applied, certified by a firm
of independent certified public accountants of nationally recognized
standing selected by the Borrower or otherwise reasonably acceptable to
the Bank;
(b) as soon as available but not later than forty-five (45)
days after the end of each month hereafter, financial statements of
Borrower certified by the chief financial officer of the Borrower to be
prepared in accordance with Generally Accepted Accounting Principles,
consistently applied, and to present fairly the financial position and
results of operations of Borrower for such period;
(c) as soon as possible, but not later than ten (10) days after
the end of each calendar month, a summary aged trial balance of Accounts
or, if requested by the Bank upon five (5) business days' notice to the
Borrower, a detailed aged trial balance of Accounts, and an aged schedule
of accounts payable in a form satisfactory to the Bank;
(d) as soon as available and in any event within 30 days after
the filing or transmittal thereof, copies of (i) each final prospectus
included in, and prospectus supplements relating to, any registration
statement filed with the Securities and Exchange Commission which becomes
effective under the Securities Act of 1933, as amended, (other<PAGE>
<PAGE>
than registration statements relating solely to employee benefit plans or
dividend reinvestment or common stock purchase plans) covering an
offering of securities by the Borrower or any Subsidiary of the Borrower,
(ii) all financial statements, proxy statements and reports sent to the
holders of any class or series of securities of the Borrower or any
subsidiary of the Borrower, and (iii) each annual report on Form 10-K,
quarterly report on Form 10-Q and current report on Form 8-K (or any
corresponding forms hereafter adopted) filed by the Borrower or any
subsidiary of the Borrower with the Securities and Exchange Commission;
and
(e) such other data and information (financial and otherwise) as
the Bank, from time to time, may reasonably request, bearing upon or
related to the Borrower's assets, the Borrower's financial condition or
results of operations, including, without limitation, federal income tax
returns of the Borrower, accounts payable ledgers, and bank statements.
6.6 Compliance Certificates. Concurrently with the delivery of the
-----------------------
financial statements described above in clauses 6.5(a) and 6.5(b), the
Borrower shall cause to be prepared and furnished to the Bank a certificate
from the chief financial officer of the Borrower, certifying to the Bank that
to the best of his knowledge, the Borrower has kept, observed, performed and
fulfilled each and every covenant, obligation and agreement binding upon the
Borrower in this Agreement and all related documents (and specifically
including a calculation showing compliance with the financial covenants
contained in Sections 6.7, 6.8, 6.9, 6.10 and 6.11 hereof) and that no Default
or Event of Default has occurred, or, if such Default or Event of Default has
occurred, specifying the nature thereof.
6.7 Tangible Net Worth. The Borrower represents to the Bank that the
------------------
Borrower's Taxable Net Worth (as hereinafter defined) is greater than
$15,000,000 as of the date hereof. The Borrower covenants with the Bank that
the Borrower shall maintain its "Tangible Net Worth" at an amount greater than
$15,000,000 at all times hereafter.
"Tangible Net Worth" shall mean:
(a) the book net worth of the Borrower; plus
----
(b) Indebtedness of the Borrower subordinated to the Indebtedness owed
to the Bank, provided that such subordination is evidenced by a
subordination agreement reasonably acceptable to the Bank (which
subordinated Indebtedness includes, without limitation of the foregoing,
the Subordinated Debt); minus
(c) goodwill, prepaid expenses, deferred charges (including without
limitation unamortized debt discount, and expenses, organizational
expenses and experimental and developmental expenses), franchises,
licenses, patents, trademarks,<PAGE>
<PAGE>
tradenames, copyrights, brand names, any surplus resulting from the any
writeup of assets and the cost of any treasury shares of the Borrower's
common stock.
6.8 Ratio of Total Indebtedness to Tangible Net Worth. Commencing
-------------------------------------------------
December 31, 1997, the Borrower shall maintain as of such date and at all
times thereafter a ratio of total Indebtedness (excluding the Subordinated
Debt) to Tangible Net Worth of less than 1.10 to 1.0.
6.9 Cash Flow Covenant. The Borrower shall maintain a "Cash Flow
------------------
Coverage Ratio" (as defined below) for each three (3) month period ending on
the last day of each fiscal quarter of the Borrower, commencing with the
fiscal quarter ending March 31, 1997, of not less than 1.25 to 1.00.
"Cash Flow Coverage Ratio" means, for any period, the ratio of (a) the
sum of net earnings before taxes and interest expense plus depreciation
and amortization minus capital expenditures to the extent not financed by
long term indebtedness (which indebtedness shall not include Revolving
Credit Loans), for such period to (b) the sum of interest expense plus
current maturities of long-term indebtedness for such period (including
without limitation all amounts due with respect to the Subordinated
Debt), plus payments under capital leases plus all other amounts payable
with respect to Indebtedness of the Borrower plus the Taxes (as defined
below) of the Borrower applicable to such period.
"Taxes" means for any period, an amount, not less than $0.00, sufficient
to pay all taxes due with respect to the consolidated earning of the
Borrower for such period, or if greater, the allocable portion of all
taxes due with respect to the estimated consolidated earnings of the
Borrower for the fiscal year containing such period, where taxes for such
year are allocated evenly across the entire year.
6.10 Current Ratio Covenant. The Borrower shall maintain at all
-----------------------
times during the term hereof a Current Ratio, as defined below, of greater
than 1.15 to 1.00.
"Current Ratio" means the ratio of the amount of Current Assets to the
amount of Current Liabilities of Borrower measured at the end of each
fiscal quarter of Borrower.
"Current Assets" means the cash (and cash equivalents), inventory and
trade accounts receivable of Borrower as shall be determined in
accordance with Generally Accepted Accounting Principles.
"Current Liabilities" means such liabilities of the Borrower as shall be
determined in accordance with Generally Accepted Accounting Principles,
or with Bank's ordinary and customary requirements of its borrowers, to
constitute current liabilities.
<PAGE>
<PAGE>
6.11 Annual Line Cleanup. Notwithstanding that during the term of
-------------------
this Agreement, subject to the limitations contained herein, the Borrower may
obtain Revolving Credit Loans up to the Maximum Availability, commencing with
the Loan Year commencing on July 1, 1997, the Borrower shall have at least one
period of 30 consecutive days during each Loan Year in which the Borrower's
Revolving Credit Loans outstanding on each day of such period do not exceed
$2,500,000 in aggregate principal amount. "Loan Year" shall mean for purposes
of this Section 6.11 the period of one year commencing on July 1, and ending
on June 30 of the following calendar year.
6.12 Regulation U. No part of the proceeds of any loan hereunder will
------------
be used to purchase or carry, or to extend credit to others for the purpose of
purchasing or carrying, any "margin stock," as such term is defined in
Regulation U of the Board of Governors of the Federal Reserve System. The
Borrower is not engaged principally, or as one of its activities, in the
business of extending credit for the purpose of purchasing or carrying any
such "margin stock."
6.13 Borrower's Negative Covenants. Borrower covenants and agrees with
-----------------------------
Bank that so long as this Agreement shall remain in effect or any of
Borrower's Liabilities shall remain outstanding, Borrower shall not, without
Bank's prior written consent, which Bank may or may not give in its sole
discretion, concurrently or hereafter:
(a) Sell, assign, lease or otherwise dispose of or transfer, whether
by sale, merger, consolidation or otherwise, any of Borrower's assets, except
in the ordinary course of Borrower's business;
(b) Allow, suffer or cause to exist any lien, claim, security
interest or encumbrance on Borrower's property or assets (including, without
limitation, any lien or encumbrance of any governmental entity or agency with
respect to any taxes or debts owed thereto) except (i) to the extent that
Borrower shall be contesting, in good faith, with reasonable diligence and
through appropriate proceedings, the validity of any such lien, encumbrance or
claim, but only if none of the assets or property of Borrower is subject to
sale or foreclosure during such contest, and the Borrower shall promptly pay
any judgment rendered against it in connection with such contest and (ii)
purchase money security interests in equipment where the security interest
only secures the Indebtedness incurred to purchase such equipment;
(c) Incur any Indebtedness whether for borrowed money or otherwise,
except for (i) Borrower's Liabilities and any other indebtedness owed to Bank,
(ii) renewals or extensions of existing Indebtedness and interest thereon,
(iii) trade payables arising in the ordinary course of business, (iv) the
Subordinated Debt, (v) Indebtedness which is unsecured and is to persons who
execute and deliver to Bank (in form and substance acceptable to Bank and its
counsel) subordination agreements subordinating their claims against Borrower
therefor to the payment of Borrower's Liabilities, (vi) indebtedness incurred
to purchase additional equipment, and if secured, secured solely by the
equipment; and (vii) Indebtedness that (a) is not described in clauses
(i)-(vi) of this Section 6.13(c) and (b) does not to exceed $1,000,000 in the
aggregate;
<PAGE>
<PAGE>
(d) Guarantee or otherwise become liable, in any way, with respect
to the obligations, indebtedness or liabilities of any other Person except by
endorsement of instruments or items of payment for deposit to the general
account of Borrower or for delivery to Bank on account of Borrower's
Liabilities;
(e) Merge or consolidate with any other Person;
(f) Directly or indirectly, or through any Subsidiary, purchase the
stock, indebtedness or other securities or assets of any other Person or by
loan, advance, capital contribution, or otherwise make an investment in any
other Person unless immediately following such purchase or investment, (i) the
Borrower shall not be in violation of any of its representations, warranties
or covenants contained in this Article 6 and (ii) Shelley Gratzon and Clifford
Rees shall own at least 51% of the common stock of the Borrower and hold
through their ownership of Borrower stock at least 51% of the combined voting
power of all classes of the Company's capital stock;
(g) Make any material change in Borrower's capital structure or in
any of Borrower's business objectives, purposes or operations which might in
any way adversely affect its ability to repay Borrower's Liabilities;
(h) Permit or suffer any receiver, trustee or assignee for the
benefit of creditors to be appointed to take possession of any of Borrower's
property or assets; or
(i) Enter into or be a party to any transaction or arrangement
with any Affiliate (including, without limitation, the purchase from, or sale
to or exchange of property with, or the rendering of any service by or for,
any Affiliate), except in the ordinary course of and pursuant to the
reasonable requirements of Borrower's business and upon fair and reasonable
terms no less favorable to Borrower than would obtain in a comparable
arms-length transaction with a Person other than an Affiliate.
7. DEFAULT
7.1 Event of Default. The occurrence of any one of the following
----------------
Events shall constitute a default ("Event of Default") by Borrower under this
----------------
Agreement: (a) if Borrower fails or neglects to perform, keep or observe any
term, provision, condition, covenant, warranty or representation contained in
this Agreement or in the Other Agreements, which is required to be performed,
kept or observed by Borrower (other than the failure to pay any of Borrower's
Liabilities or a breach of Section 6.7, 6.8, 6.9, 6.10 or 6.11 hereof), and
such failure continues for a period of 30 days if such default is capable of
being cured; (b) if Borrower is in default with respect to Section 6.7, 6.8,
6.9, 6.10 or 6.11 hereof; (c) if Borrower fails to pay any of Borrower's
Liabilities, when due and payable or declared due and payable; (d) if any of
Borrower's assets are attached, seized, subjected to a writ of distress
warrant, or are levied upon, or become subject to any lien, or come within the
possession of<PAGE>
<PAGE>
any receiver, trustee, custodian or assignee for the benefit of creditors, and
if such has occurred without Borrower's consent or acquiescence, the same are
not removed or released within 30 days thereafter; (e) if Borrower becomes
insolvent or generally fails to pay, or admits in writing its inability to
pay, debts as they become due, if a petition under title 11, United States
Code or any similar law or regulation shall be filed by or against Borrower,
or if Borrower shall make an assignment for the benefit of its creditors or if
any case or proceeding is filed by or against Borrower for its dissolution or
liquidation, or if Borrower is enjoined, restrained or in any way prevented by
court order from conducting all or any material part of its business affairs;
(f) if a notice of lien, levy or assessment is filed of record or given to
Borrower with respect to all or any material portion of Borrower's assets by
any foreign, federal, state or local department or agency; (g) if a
contribution failure occurs with respect to any pension plan maintained by
Borrower or any corporation, trades or business that is, along with Borrower,
a member of a controlled group of corporations or controlled group of trades
or businesses (as described in Section 414(b) and (c) of the Internal Revenue
Code of 1986 or Section 4001, of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")) sufficient to give rise to a lien under Section
-----
302(f) of ERISA; (h) if Borrower is in default in the payment of any material
obligations, indebtedness or other liabilities to any third parties and such
default is declared and is not cured within the time, if any, specified
therefor in any agreement governing the same; (i) the appointment of a
conservator for all or any portion of Borrower's assets; (j) the occurrence of
a default or an Event of Default under any of the Other Agreements and such
default or Event of Default is not cured within the time, if any, specified
therefore in such agreement; (k) the reasonable insecurity of Bank; or (l)
Shelley Gratzon and Clifford Rees shall not hold at least 51% of the common
stock of the Borrower and at least 51% of the combined voting power of all
classes of the Company's capital stock.
7.2 Cumulative Remedies. All of Bank's rights and remedies under
-------------------
this Agreement and the Other Agreements are cumulative and non-exclusive.
7.3 Limitation on Credit. Upon an Event of Default or the
--------------------
occurrence of any one of the events described in Paragraph 7.1, without notice
by Bank to or demand by Bank of Borrower, Bank shall have no further
obligation to and may then forthwith cease advancing monies or extending
credit or issuing letters of credit to or for the benefit of Borrower under
this Agreement and the Other Agreements. Upon an Event of Default, without
notice by Bank to or demand by Bank of Borrower, Borrower's Liabilities shall
be due and payable, forthwith.
7.4 Remedies. Upon an Event of Default, Bank, in its sole and
--------
absolute discretion, may exercise any one or more of the rights and remedies
accruing pursuant to applicable law upon default by a debtor or as provided
hereunder.
<PAGE>
<PAGE>
8. GENERAL
8.1 Application of Payments. The Borrower waives the right to direct
-----------------------
the application of any and all payments at any time or times hereafter
received by the Bank on account of Borrower's Liabilities and Borrower agrees
that the Bank shall have the continuing exclusive right to apply and re-apply
any and all such payments in such manner as the Bank may deem advisable,
notwithstanding any entry by the Bank upon any of its books and records.
8.2 Continuation of Covenants, Warranties and Representations. The
---------------------------------------------------------
Borrower covenants, warrants and represents to the Bank that all
representations and warranties of the Borrower contained in this Agreement and
the Other Agreements shall be true from the time of Borrower's execution of
this Agreement to the end of the original term and each renewal term hereof.
All of Borrower's warranties, representations, undertakings, and covenants
contained in this Agreement or the Other Agreements shall survive the
termination or cancellation of the same.
8.3 Entire Agreement. The terms and provisions of this Agreement
-----------------
and the Other Agreements shall supersede any prior agreement or understanding
of the parties hereto, and contain the entire agreement of the parties hereto
with respect to the matters covered hereby. This Agreement and the Other
Agreements may not be modified, altered, or amended except by an agreement in
writing signed by Borrower and Bank. Except for the provisions of Section 2
hereof which shall terminate as provided in paragraph 2.8, this Agreement
shall continue in full force and effect so long as any portion or component of
Borrower's Liabilities shall be outstanding. Should a claim ("Recovery
Claim") be made upon the Bank at any time for recovery of any amount received
by the Bank in payment of Borrower's Liabilities (whether received from
Borrower or otherwise) and should the Bank repay all or part of said amount by
reason of (1) any judgment, decree or order of any court or administrative
body having jurisdiction over Bank or any of its property; or (2) any
settlement or compromise of any such Recovery Claim effected by the Bank with
the claimant (including Borrower), this Agreement and the security interests
granted Bank hereunder shall continue in effect with respect to the amount so
repaid to the same extent as if such amount had never originally been received
by the Bank, notwithstanding any prior termination of this Agreement, the
return of this Agreement to Borrower, or the cancellation of any note or other
instrument evidencing Borrower's Liabilities. Borrower may not sell, assign
or transfer this Agreement, or the Other Agreements or any portion thereof.
8.4 No Waiver. Bank's failure to require strict performance by
---------
Borrower of any provision of this Agreement shall not waive, affect or
diminish any right of Bank thereafter to demand strict compliance and
performance therewith. Any suspension or waiver by Bank of an Event of
Default by Borrower under this Agreement or the Other Agreements shall not
suspend, waive or affect any other Event of Default by Borrower under this
Agreement or the Other Agreements, whether the same is prior or subsequent
thereto and whether of the same or of a different type. None of the
undertakings, agreements, warranties, covenants and<PAGE>
<PAGE>
representations of Borrower contained in this Agreement or the Other
Agreements and no Event of Default by Borrower under this Agreement or the
Other Agreements shall be deemed to have been suspended or waived by Bank
unless such suspension or waiver is by an instrument in writing signed by an
officer of Bank and directed to Borrower specifying such suspension or waiver.
8.5 Severability. If any provision of this Agreement or the Other
------------
Agreements or the application thereof to any Person or circumstance is held
invalid or unenforceable, the remainder of this Agreement and the Other
Agreements and the application of such provision to other Persons or
circumstances will not be affected thereby and the provisions of this
Agreement and the Other Agreements shall be severable in any such instance.
8.6 Successors and Assigns. This Agreement and the Other Agreements
----------------------
shall be binding upon and inure to the benefit of the successors and assigns
of Borrower and Bank. This provision, however, shall not be deemed to modify
Paragraph 8.3 hereof.
8.7 Attorney-in-Fact. Borrower hereby appoints Bank as Borrower's
----------------
agent and attorney-in-fact for the purpose of, after an Event of Default,
carrying out the provisions of this Agreement and taking any action and
executing any agreement, instrument or document which Bank may reasonably deem
necessary or advisable to accomplish the purposes hereof which appointment is
irrevocable and coupled with an interest. All monies paid for the purposes
herein, and all costs, fees and expenses paid or incurred in connection
therewith, shall be part of Borrower's Liabilities, payable by Borrower to
Bank on demand.
8.8 Conflict of Agreements. Except as otherwise provided in the
----------------------
Other Agreements, if any provision contained in this Agreement is in conflict
with, or inconsistent with any provision in the Other Agreements, the
provision contained in this Agreement shall govern and control.
8.9 Borrower's Waiver of Notice. Except as otherwise specifically
---------------------------
provided in this Agreement, Borrower waives any and all notice or demand which
Borrower might be entitled to receive by virtue of any applicable statute or
law, and waives presentment, demand and protest and notice of presentment,
protest, default, dishonor, non-payment, maturity, release, compromise,
settlement, extension or renewal of any and all agreements, instruments or
documents at any time held by Bank on which Borrower may in any way be liable.
8.10 Agents of Borrower. Until Bank is notified by Borrower to the
------------------
contrary in writing by registered or certified mail directed to Bank's
principal place of business, the signature upon this Agreement or upon any of
the Other Agreements of any officer, manager, employee or agent of the
Borrower, or of any other Person designated in writing to Bank by any of the
foregoing, shall bind Borrower and be deemed to be the duly authorized act of
Borrower.
<PAGE>
<PAGE>
8.11 Governing Law. This Agreement and the Other Agreements shall be
-------------
governed and controlled by the laws of the State of Illinois.
8.12 Bank's Use of Counsel. If at anytime or times after an Event of
---------------------
Default or an event or condition which with notice or lapse of time would
constitute an Event of Default, Bank: (a) employs counsel for advice or other
representation (i) with respect to this Agreement, the Other Agreements or the
administration of Borrower's Liabilities, (ii) to represent Bank in any
litigation, arbitration, contest, dispute, suit or proceeding or to commence,
defend or intervene or to take any other action in or with respect to any
litigation, arbitration, contest, dispute, suit or proceeding (whether
instituted by Bank, Borrower or any other Person) in any way or respect
relating to this Agreement, the Other Agreements, or Borrower's affairs, or
(iii) to enforce any rights of Bank against Borrower or any other Person which
may be obligated to Bank by virtue of this Agreement or the Other Agreements,
including, without limitation, any Obligor; (b) takes any action with respect
to administration of Borrower's Liabilities; and/or (c) attempts to or
enforces any of Bank's rights or remedies under this Agreement or the Other
Agreements, the reasonable costs and expenses incurred by Bank in any manner
or way with respect to the foregoing, shall be part of Borrower's Liabilities,
payable by Borrower to Bank on demand. The Borrower shall pay to the Bank the
reasonable costs and expenses incurred by the Bank in employing counsel with
respect to advice regarding or the preparation of any amendment or proposed
amendment to this Agreement or any of the Other Agreements or the preparation
of any additional Other Agreements.
8.13 Notices. Any notices or consents required or permitted by this
-------
Agreement shall be in writing and shall be deemed delivered on the next
Business Day after delivery if delivered in person, or if sent by certified
mail, postage prepaid, return receipt requested, shall be deemed delivered
five Business Days thereafter, if addressed as follows, unless such address is
changed by written notice hereunder:
If to the Borrower:
Telegroup, Inc.
2098 Nutmeg Avenue
Fairfield, Iowa 52556
Attn: Chief Financial Officer
<PAGE>
<PAGE>
and to its attorneys,
Telegroup, Inc.
2098 Nutmeg Avenue
Fairfield, IA 52556
Attn: General Counsel
If to the Bank:
American National Bank and Trust
Company of Chicago
33 North LaSalle Street,
Chicago, Illinois 60690
Attn: Mr. Arthur W. Murray
and to its attorneys,
Sugar, Friedberg & Felsenthal
30 North LaSalle Street, Suite 2600
Chicago, Illinois 60606
Attn: Etahn M. Cohen, Esq.
8.14 Section Headings. Section headings used in this Agreement are for
----------------
convenience only and shall not affect the construction or interpretation of
this Agreement.
8.15 Marshalling; Recapture. The Bank shall be under no obligation to
----------------------
marshall any assets in favor of the Borrower, or any other party or against or
in payment of any or all of the Borrower's Liabilities. To the extent the
Bank receives any payment by or on behalf of the Borrower, which payment or
any part thereof is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to the Borrower or its
estate, trustee, receiver, custodian or any other party under any bankruptcy
law, state or federal law, common law or equitable cause, then to the extent
of such payment or repayment, the obligations or part thereof which has been
paid, reduced or satisfied by the amount so repaid shall be included within
the obligations of the Borrower to the Bank as of the date such initial
payment, reduction or satisfaction occurred.
8.16 Indemnification. The Borrower agrees to defend, protect,
---------------
indemnify and hold harmless the Bank and each and all of its respective
officers, directors, employees, attorneys and agents ("Indemnified Parties")
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including without limitation
the reasonable fees and disbursements of counsel for the Indemnified Parties
in connection with any investigative,<PAGE>
<PAGE>
administrative or judicial proceedings, whether or not the Indemnified Parties
shall be designated a party thereto), which may be imposed on, incurred by, or
asserted against any Indemnified Party (whether direct, indirect or
consequential and whether based on any federal or state laws or other
statutory regulations, including without limitation securities, environmental
and commercial laws and regulations, under common law or at equitable cause,
or on contract or otherwise) in any manner relating to or arising out of this
Agreement, or any act, event or transaction related or attendant thereto, the
making and the management of the loans hereunder or the use or intended use of
the proceeds of the loans hereunder; provided, that the Borrower shall not
have any obligation to any Indemnified Party hereunder with respect to matters
caused by or resulting from the willful misconduct or gross negligence of such
Indemnified Party. To the extent that the undertaking to indemnify, pay and
hold harmless set forth in the preceding sentence may be unenforceable because
it is violative of any law or public policy, the Borrower shall contribute the
maximum portion which it is permitted to pay and satisfy under applicable law,
to the payment and satisfaction of all amounts incurred by the Indemnified
Parties. The provisions of and undertakings and indemnifications set out in
this section shall survive the satisfaction and payment of the Borrower's
Liabilities and termination of this Agreement.
8.17 SITUS OF PROCEEDINGS. BORROWER IRREVOCABLY AGREES THAT, SUBJECT
--------------------
TO BANK'S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS IN ANY WAY,
MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, OR THE
OTHER AGREEMENTS SHALL BE LITIGATED ONLY IN COURTS HAVING SITUS WITHIN THE
CITY OF CHICAGO, STATE OF ILLINOIS. BORROWER HEREBY CONSENTS AND SUBMITS TO
THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID CITY
AND STATE. BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE
THE VENUE OF ANY LITIGATION BROUGHT AGAINST BORROWER BY BANK IN ACCORDANCE
WITH THIS PARAGRAPH.
8.19 WAIVER OF JURY TRIAL. BORROWER HEREBY IRREVOCABLY WAIVES ANY
--------------------
RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR PROCEEDING (I) TO
ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE
OTHER AGREEMENTS, OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR
THEREWITH, OR (II) ARISING FROM ANY DISPUTE OR CONTROVERSY ARISING<PAGE>
<PAGE>
IN CONNECTION WITH OR RELATED TO THIS AGREEMENT, THE OTHER AGREEMENTS, OR ANY
SUCH AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT, AND AGREES THAT ANY SUCH
ACTION, SUIT, COUNTERCLAIM OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year specified at the beginning hereof.
TELEGROUP, INC.
Attest:
By:
- ------------------------------ ---------------------------------
Charles Johanson, Secretary, Clifford Rees, President
Telegroup, Inc.
Accepted this day of March, 1997, at Bank's principal place of
-----
business in the City of Chicago, State of Illinois.
AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO
By:
-------------------------------------
Its:
--------------------------------
<PAGE>
STATE OF IOWA }
COUNTY OF JEFFERSON }
I, the undersigned, a Notary Public, in and for the County and State
aforesaid, DO HEREBY CERTIFY, that Clifford Rees and Charles Johanson,
personally known to me to be President and Secretary of Telegroup, Inc., an
Iowa corporation, and personally known to me to be the same persons whose
names are subscribed to the foregoing instrument, appeared before me this day
in person and severally acknowledged that as such President and Secretary
signed and delivered the said instrument as President and Secretary of said
corporation, pursuant to authority, given by the Board of Directors of said
corporation as their free and voluntary act, and as the free and voluntary act
and deed of said corporation, for the uses and purposes therein set forth.
Given under my hand and official seal this day of March, 1997.
-----
------------------------------------
Notary Public
My commission expires:
-------------
Exhibit 10.2
FORM OF TELEGROUP, INC.
AMENDED AND RESTATED 1996 STOCK OPTION PLAN
1. PURPOSE
-------
This Amended and Restated 1996 Stock Option Plan for Telegroup, Inc.
(the "Company") is intended to provide incentive to directors, officers, key
employees, and agents of the Company and its Subsidiaries by providing those
persons with opportunities to purchase shares of the Company's Common Stock
under (a) Incentive Stock Options and (b) other stock options.
2. DEFINITIONS
-----------
Except as otherwise expressly provided herein or unless the context
otherwise requires, as used in this Plan, the following words and phrases
shall have the meanings set forth in this Section 2.
(a) "BOARD" shall mean the Board of Directors of the Company.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(c) "COMMON STOCK" shall mean the Common Stock, no par value, of the
Company.
(d) "COMPANY" shall mean Telegroup, Inc., the employer which has
established this Plan.
(e) "DISINTERESTED" shall mean disinterested within the meaning of
any applicable regulatory requirements, including Rule 16b-3, as
amended from time to time, as promulgated by the Securities and
Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended from time to time.
(f) "FAIR MARKET VALUE" per share as of a particular date shall mean
(i) the closing sales price per share of Common Stock on the
principal national securities exchange, if any, on which the
Common Stock shall then be listed for the last preceding date on
which there was a sale of such Common Stock on such exchange, or
(ii) if the Common Stock is not then listed on a national
securities exchange, the last sales price per share of Common
Stock entered on a national inter-dealer quotation system for the
last preceding date on which there was a sale of such Common
Stock on such national inter-dealer quotation system, or (iii) if
no closing or last sales price per share of Common Stock is
entered on a national inter-dealer quotation system, the average
of the closing bid and asked prices for the Common Stock in the
over-the-counter market for the last preceding date on which
there was a quotation for such Common Stock in such market or
(iv) if no price can be determined under the preceding
alternatives, then the price per share as determined by the
Committee in good faith.<PAGE>
<PAGE>
(g) "INCENTIVE STOCK OPTION" shall mean one or more options to
purchase Common Stock which, at the time such options are granted
under this Plan or any other such plan of the Company, qualify as
incentive stock options under Section 422 of the Code.
(h) "IPO" shall mean the initial public offering of the Company's
Common Stock.
(i) "NON-INCENTIVE STOCK OPTION" shall mean any option or options
that are not Incentive Stock Options.
(j) "OPTION" shall mean any option, including any Incentive Stock
Option or other option issued pursuant to this Plan.
(k) "OPTIONEE" shall mean any person to whom an Option is granted
under this Plan.
(l) "PARENT" shall mean any corporation (other than the Company) in
an unbroken chain of corporations ending with the Company if, at
the time of granting an Option, each of the corporations other
than the Company owns stock possessing fifty-one percent (51%) or
more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
(m) "PLAN" shall mean this Amended and Restated 1996 Stock Option
Plan.
(n) "RELIANCE PERIOD TERMINATION DATE" shall mean the date that is
the earlier of:
(1) The date of expiration or termination of the Plan;
(2) The date of any material modification of the Plan,
within the meaning of Treasury Regulation section
1.162-27(h)(1)(iii);
(3) The first date as of which all Options provided
for under the Plan have been issued; and
(4) The date of the first meeting of shareholders of
the Company at which Directors are to be elected
that occurs after the year 2000.
(o) "SUBSIDIARY" shall mean any corporation (other than the Company)
in an unbroken chain of corporations beginning with the Company
if, at the time of granting an Option, each of the corporations
other than the last corporation in the unbroken chain owns stock
possessing fifty-one percent (51%) or more of the total combined
voting power of all classes of stock in one of the other
corporations in such chain.
<PAGE>
<PAGE>
(p) "TEN PERCENT SHAREHOLDER" shall mean an Optionee who, at the time
an Option is granted, owns directly or indirectly (within the
meaning of Section 424(d) of the Code) stock possessing more than
ten percent (10%) of the total combined voting power of all
classes of stock of the Company, its Parent or a Subsidiary.
3. GENERAL ADMINISTRATION
----------------------
(a) The Plan shall be administered by the Compensation Committee
(the "Committee"), consisting of not less than two members of the Board. From
and after the consummation of the IPO, no person may serve as a member of the
Committee unless such person is both a Disinterested person as well as an
"outside director" within the meaning of Treasury Regulation section
1.162-27(e)(3)(i).
(b) The Committee shall have the authority in its discretion, subject
to the terms and conditions hereof, to administer this Plan and to exercise
all the powers and authorities either specifically granted to it hereunder or
that are necessary or that are advisable in the administration of the Plan,
including, without limitation, the authority to grant Options; to determine
the purchase price of shares of Common Stock covered by each Option (the
"OPTION PRICE"); to determine the persons to whom, and the time or times at
which, Options shall be granted; to determine the number of shares of Common
Stock to be covered by each Option; to interpret the Plan; to prescribe, amend
and rescind rules and regulations relating to the Plan; and to determine the
terms and provisions of the Option agreements (which need not be identical)
entered into in connection with Options granted under the Plan ("OPTION
AGREEMENTS").
(c) The Board shall fill all vacancies, however caused, in the
Committee. The Board may from time to time appoint additional members to the
Committee and may at any time, under the terms and conditions of the Company's
Bylaws, remove one or more Committee members and substitute others.
(d) No member of the Board or Committee shall be liable for any
action taken or determination made in good faith with respect to this Plan or
any Option granted hereunder.
4. RESTRICTIONS ON GRANTS TO COMMITTEE MEMBERS
-------------------------------------------
From and after the IPO, directors serving on the Committee are not
eligible to receive Options pursuant to the Plan.
5. GRANTING OF OPTIONS
-------------------
Options may be granted under this Plan at any time prior to April 1,
2007.
<PAGE>
<PAGE>
6. ELIGIBILITY
-----------
(a) Subject to Section 4, Options may be granted to any director,
officer, key employee or agent of the Company or any Subsidiary, however,
incentive stock options will be available only to employees of the Company.
In determining from time to time the directors, officers, employees and agents
to whom Options shall be granted and the number of shares of Common Stock to
be covered by each Option, the Committee shall consider the duties of the
respective directors, officers, employees and agents, their present and
potential contributions to the success of the Company and its Subsidiaries and
such other factors as the Committee shall deem relevant in connection with
accomplishing the purposes of the Plan.
(b) At the time each Option is granted under the Plan the Committee
shall determine whether such Option is to be designated as an Incentive Stock
Option. Incentive Stock Options shall not be granted to a director who is not
an employee of the Company.
(c) An Option designated an Incentive Stock Option can, prior to its
exercise, be changed to a non-incentive Option if the Optionee consents to
amend his Option Agreement to provide that the exercise period of such Option
will be governed by Section 8(e)(2) hereof.
7. STOCK
-----
(a) The stock subject to the Options shall be shares of Common Stock.
Such shares may, in whole or in part, be authorized but unissued shares
contributed directly by the Company or shares which shall have been or which
may be acquired by the Company. The aggregate number of shares of Common
Stock for which Options may be granted from time to time under this Plan shall
be eleven and one-quarter million (11.25 million) shares (determined after the
Company's planned split in connection with the IPO), subject to adjustment as
provided in Section 8(h) hereof. The maximum number of shares of Common Stock
for which any one person may be granted Options under the Plan is one million
eight-hundred seventy-five thousand (1.875 million) shares (determined after
the Company's planned split in connection with the IPO), subject to adjustment
as provided in Section 8(h) hereof.
(b) If any outstanding Option under the Plan for any reason expires
or is terminated without having been exercised in full, the shares of Common
Stock allocable to the unexercised portion of such Option shall (unless this
Plan shall have been terminated) become available for subsequent grants of
Options hereunder.
8. TERMS AND CONDITIONS OF OPTIONS
-------------------------------
Each Option granted pursuant to this Plan shall be evidenced by one or
more Option Agreements in such forms as the Committee may from time to time
approve. Options shall comply with and be subject to the following terms and
conditions:<PAGE>
<PAGE>
(a) INCENTIVE STOCK OPTION PRICE. Each Incentive Stock Option shall
----------------------------
state the Option Price, which, shall be not less than one hundred percent
(100%) of the Fair Market Value of the shares of Common Stock on the date of
grant of the Option; provided, however, in the case of an Incentive Stock
Option granted to a Ten Percent Shareholder, the Option Price shall not be
less than one hundred ten percent (110%) of such Fair Market Value. The
Option Price shall be subject to adjustment as provided in Section 8(h)
hereof. The date on which the Committee adopts a resolution expressly
granting an Option shall be considered the day on which such Option is
granted.
(b) NON-INCENTIVE STOCK OPTION PRICE. Each Option that is not an
---------------------------------
Incentive Stock Option shall state the Option Price. In the case of
Non-Incentive Stock Options granted on or before the Reliance Period
Termination
Date, the Option Price shall not be less than fifty percent (50%) of the Fair
Market Value of the shares of Common Stock on the date of grant of the Option.
In the case of Non-Incentive Stock Options granted after the Reliance Period
Termination Date, the Option Price shall not be less than one hundred percent
(100%) of the Fair Market Value of the shares of Common Stock on the date of
grant of the Option. The Option Price shall be subject to adjustment as
provided in Section 8(h) hereof. The date on which the Committee adopts a
resolution expressly granting an Option shall be considered the day on which
such Option is granted.
(c) RESTRICTIONS. Any Common Stock issued under this Plan may
------------
contain restrictions and limitations including, but not limited to,
limitations on transferability that may constitute substantial risks of
forfeiture, as the Committee may determine.
(d) VALUE OF SHARES. Options may be granted to any eligible person
---------------
for shares of Common Stock of any value, provided that the aggregate Fair
Market Value (determined at the time the Option is granted) of the Common
Stock with respect to which Incentive Stock Options are exercisable for the
first time by the Optionee during any calendar year (under all the plans of
the Company, its Parent and its Subsidiaries) shall not exceed $100,000.
(e) MEDIUM AND TIME OF PAYMENT. The Option Price shall be paid in
--------------------------
full, at the time of exercise, in cash or, with the approval of the Committee,
in shares of Common Stock having a Fair Market Value in the aggregate equal to
such Option Price or in a combination of cash and such shares.
<PAGE>
<PAGE>
(f) TERM AND EXERCISE OF OPTIONS.
-----------------------------
(1) INCENTIVE STOCK OPTIONS. Incentive Stock Options shall
-----------------------
be exercisable over the exercise period specified by the Committee in an
Option Agreement, but in no event shall such period exceed ten (10) years from
the date of the grant of each such Incentive Stock Option; provided, however,
that in the case of an Incentive Stock Option granted to a Ten Percent
Shareholder, the exercise period shall not exceed five (5) years from the date
such Option is granted. An Incentive Stock Option may be exercised, as to any
or all full shares of Common Stock as to which the Incentive Stock Option has
become exercisable, by giving written notice of such exercise to the
Committee; provided, that an Incentive Stock Option may not be exercised at
any one (1) time for less than one hundred (100) shares of Common Stock (or
such number of shares as to which the Incentive Stock Option is then
exercisable if such number of shares is less than 100).
(2) NON-INCENTIVE STOCK OPTIONS. Options which have not been
----------------------------
designated by the Committee as Incentive Stock Options shall be exercisable
over a period of ten (10) years.
<PAGE>
<PAGE>
(g) NONTRANSFERABILITY OF OPTIONS. Options granted under this Plan
-----------------------------
are not transferable other than by will or by the laws of descent and
distribution, and, during Optionee's lifetime, Options may be exercised only
by the Optionee.
(h) Effect of Certain Changes.
(1) If there is any change in the number of shares of
Common Stock through the declaration of stock dividends,
recapitalization resulting in stock splits, or combinations or
exchanges of such shares, then the number of shares of Common
Stock available for Options, the number of such shares covered by
outstanding Options, and the Option Price of such Options shall
be proportionately adjusted to reflect any increase or decrease
in the number of issued shares of Common Stock; provided,
however, that any fractional shares resulting from such
adjustment shall be eliminated.
(2) In the event of a proposed dissolution or liquidation
of the Company, each Option granted under this Plan shall
terminate as of a date to be fixed by the Committee, provided,
however, that each Optionee shall have the right, immediately
prior to such termination, to exercise the Options as to all or
any part of the shares of Common Stock covered thereby, including
shares as to which such Options would not otherwise be
exercisable.
(3) In the event of any merger, consolidation or
reorganization of the Company, the Committee shall promptly make
an appropriate adjustment to the number and class of shares of
Common Stock available for Options, and to the amount and kind of
shares or other securities or property receivable upon exercise
of any outstanding Options after the effective date of such
transaction, and the price thereof (subject to the limitations of
Section 424 of the Code), to preserve each Optionee's propor
ionate interest therein and to preserve unchanged the aggregate
Option Price.
(4) In the event of a change in the Common Stock as
presently constituted, which is limited to a change of all of its
authorized shares without par value into the same number of
shares with a par value or, if such shares have a par value, then
with a different par value, the shares resulting from any such
change shall be deemed to be Common Stock within the meaning of
the Plan.
<PAGE>
<PAGE>
(5) To the extent that the foregoing adjustments relate
to stock or securities of the Company, such adjustments shall be
made by the Committee, whose determination in that respect shall
be final, binding and conclusive, provided that each Option
granted pursuant to this Plan and designated an Incentive Stock
Option shall not be adjusted in a manner that causes the Option
to fail to continue to qualify as an Incentive Stock Option
within the meaning of Section 422 of the Code.
(6) Except as expressly provided in this Section 8(h), the
Optionee shall have no rights by reason of any subdivision or
consolidation of shares of stock of any class or the payment of
any stock dividend or any other increase or decrease in the
number of shares of stock of any class or by reason of any
dissolution, liquidation, merger, or consolidation, and any issue
by the Company of shares of stock of any class, or securities
convertible into or exchangeable for shares of stock of any
class, shall not affect, and no adjustment by reason thereof
shall be made with respect to, the number or Option Price of
shares of Common Stock subject to an Option. The grant of an
Option pursuant to this Plan shall not affect in any way the
right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or
business structure or to merge, consolidate, or dissolve,
liquidate, sell or transfer all or any part of its business or
assets.
(i) Rights as a Shareholder. An Optionee or a transferee of an
-----------------------
Option shall have no rights as a shareholder with respect to any shares
covered by an Option until the date of the issuance of a stock certificate to
such Optionee for such shares. No adjustments shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the date
such stock certificate is issued, except as expressly provided in Section 8(h)
hereof.
(j) Other Provisions. The Option Agreements authorized under this
----------------
Plan shall contain such other provisions, including, without limitation, (i)
the imposition of restrictions upon the exercise of an Option and (ii) the
inclusion of any condition not inconsistent with such Option qualifying as an
Incentive Stock Option, as the Committee shall deem advisable, including
provisions with respect to compliance with federal and applicable state
securities laws.
9. Agreement by Optionee Regarding Withholding Taxes
-------------------------------------------------
(a) No later than the date of exercise of any Option granted
hereunder, the Optionee will pay to the Company or make arrangements
satisfactory to the Committee regarding payment of any federal, state and/or
local taxes of any kind required by law to be withheld upon the exercise of
such Option, and<PAGE>
<PAGE>
(b) The Company shall, to the extent permitted or required by law,
have the right to deduct from any payment of any kind otherwise due to the
Optionee any federal, state and/or local taxes of any kind required by law to
be withheld upon the exercise of such Option.
10. Term of Plan
------------
Options may be granted pursuant to this Plan from time to time within a
period of ten (10) years from the date on which this Plan is adopted by the
Board, provided that no Options granted under this Plan shall become
exercisable unless and until this Plan shall have been approved by the
Company's shareholders.
11. Savings Clause
--------------
Notwithstanding any other provision hereof, this Plan is intended to
qualify as a plan pursuant to which Incentive Stock Options may be issued
under Section 422 of the Code. If this Plan or any provision of this Plan
shall be held to be invalid or to fail to meet the requirements of Section 422
of the Code or the regulations promulgated thereunder, such invalidity or
failure shall not affect the remaining parts of this Plan, but rather it shall
be construed and enforced as if the Plan or the affected provision thereof, as
the case may be, complied in all respects with the requirements of Section 422
of the Code.
12. Amendment and Termination of the Plan
-------------------------------------
The Committee may at any time and from time to time suspend, terminate,
modify or amend this Plan, provided that any amendment that would increase the
aggregate number of shares of Common Stock as to which Options may be granted
under this Plan or the maximum number that may be granted to any individual
person shall be subject to the approval of the holders of a majority of the
Common Stock issued and outstanding, except that any such increase or
modification that may result from adjustments authorized by Section 8(h)
hereof shall not require such approval. Except as provided in Section 8
hereof, no suspension, termination, modification or amendment of this Plan may
adversely affect any Option previously granted unless the written consent of
the Optionee is obtained.
Adopted by the Board of Directors on , 1997.
------------
Attest:
-----------------------------
Secretary
Exhibit 10.3
FORM OF EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT") is entered into as of the
7th day of April, 1997 between Telegroup, Inc., an Iowa corporation (the
"Company"), and Fred Gratzon (the "EXECUTIVE").
W I T N E S S E T H :
WHEREAS, the Company desires to employ the Executive, and the Executive
desires to be employed by the Company, on the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises herein contained,
the parties agree as follows:
1. EMPLOYMENT.
----------
(a) The Company hereby employs the Executive as Chairman of
the Board and the Executive hereby accepts such employment,
on the terms and subject to the conditions hereinafter set forth. The
Company will use its best efforts to include Executive in its slate of
candidates for membership on the Company's Board of Directors (the
"Board") and the Executive Committee, if any.
(b) Executive shall report directly to the Board, and shall
perform such duties consistent with his position as Chairman of the
Board pursuant to the direction of the Board.
(c) Attention and Effort. The Executive shall be required to
---------------------
devote his full business time, attention and effort to the Company's
business and affairs except for vacation time and reasonable periods of
absence due to sickness, personal injury or other disability and shall
perform diligently such duties as are customarily performed by executives
in similar positions with companies similar in character or size to the
Company, all subject to the direction of the Board, together with such
other duties as may be reasonably requested from time to time by the
Board, which duties shall be consistent with his positions as set forth
above. The Executive agrees to use all of his skills and business
judgment and render services to the best of his ability to serve the
interests of the Company. Subject to the terms of Section 6, this shall
not preclude Executive from serving on community and civic boards,
participating in industry associations, pursuing his personal financial
and legal affairs, or otherwise engaging in other activities, so long as
such activities do not unreasonably interfere with his duties to the
Company.
(d) Support Services. The Executive shall be entitled to all of
----------------
the administrative, operational and facility support<PAGE>
<PAGE>
customary for a similarly situated executive. This support shall
include, without limitation, a suitably appointed private office, a
secretary or administrative assistant, and payment of or reimbursement
for reasonable cellular telephone expenses, business, travel and
entertainment expenses, expenses of the Executive maintaining his
professional license and standing and any and all other business expenses
reasonably incurred on behalf of or in the course of performing duties
for the Company, all in accordance with the expense reimbursement
policies established from time to time by the Company. The Executive
agrees to provide such documentation of these expenses as may be
reasonably required.
2. Term. Subject to the provisions for termination
----
hereinafter provided, the Term shall begin on the date hereof, shall continue
through December 31, 2000.
3. Compensation.
------------
Throughout the Term the Company shall pay or provide, as the case may be,
to the Executive the compensation and other benefits and rights set forth in
this Section 3.
(a) The Company shall pay to the Executive a "Base Salary,"
payable in accordance with the Company's usual pay practices (and in any
event no less frequently than monthly), of $500,000.00 per annum. The
Board shall annually review Executive's Base Salary in light of the Base
Salaries paid to other executives of the Company and the performance of
the Executive and the Company and may, in its discretion, increase such
Base Salary by an amount it determines is appropriate. Once Executive's
Base Salary is increased, it shall not thereafter be reduced.
(b) The Company shall pay to the Executive bonus compensation for
each fiscal year, or part thereof that he is employed by the Company, in
the amount of $500,000 as provided in the Indenture document with
Greenwich Partners dated November 27, 1996, and additional compensation
to be determined at the discretion of the Board, provided that such bonus
shall be commensurate with other bonuses paid to employees of the Company
and shall take into account the total compensation paid to executives of
other companies which would be competitive for Executive's services.
(c) The Company shall provide medical, hospitalization,
disability and dental insurance for Executive, his spouse and eligible
family members, subject to and in accordance with the Company's policy,
the proportion of the cost thereof to be borne by the Company and the
Executive to be in accordance with such policy.
(d) The Executive shall participate in all retirement and other
benefit plans of the Company generally available from time to time to
employees of the Company and for which the Executive qualifies under the
terms thereof (and nothing in this Agreement shall, or shall be deemed
to, in any way affect the Executive's right and benefits thereunder
except as expressly provided herein).<PAGE>
<PAGE>
(e) The Executive shall be entitled to at least twenty two (22)
days of vacation allowance each year and a sick leave allowance as
provided under the Company's vacation and sick leave policy for executive
officers.
(f) The Executive shall be entitled to participate in any equity
or other employee benefit plan that is generally available to senior
executive officers, as distinguished from general management, of the
Company, at the highest level provided for any employee. The Executive's
participation in and benefits under any such plan shall be on the terms
and subject to the conditions specified in the governing document of the
particular plan.
4. Permanent Disability.
--------------------
(a) For purposes of this Agreement, the Executive's "Permanent
Disability" shall be deemed to have occurred one day after one hundred
eighty (180) days in the aggregate during any consecutive twelve (12)
month period, or one day after one hundred twenty (120) consecutive days,
during which one hundred eighty (180) or one hundred twenty (120) days,
as the case may be, the Executive, by reason of his physical or mental
disability or illness, shall have been unable to discharge fully his
duties under this Agreement.
(b) If either the Company or the Executive, after receipt of
notice of the Executive's Permanent Disability from the other, disputes
that the Executive's Permanent Disability shall have occurred, the
Executive shall promptly submit to a physical examination by the chief of
medicine of any major accredited hospital in the metropolitan Chicago,
Illinois area, and, unless such physician shall issue his written
statement to the effect that, in his opinion, based on his diagnosis, the
Executive is capable of resuming his employment and devoting his full
time and energy to discharging fully his duties hereunder within thirty
(30) days after the date of such statement, such Permanent Disability
shall be deemed to have occurred on the day above specified.
5. Termination.
-----------
(a) The Executive's employment under this Agreement and the
Term shall be terminated immediately on the death of the Executive and
may be terminated by the Board, with the concurrence of the Chairman of
the Board (or the Vice Chairman of the Board):
(i) at any time after the Permanent Disability of the
Executive;
(ii) at any time for "Cause" (as defined below); or
(iii) at any time without Cause.
<PAGE>
<PAGE>
For purposes hereof, Cause shall mean:
(A) Active participation by the Executive in fraudulent
conduct against the Company, a felony involving
moral turpitude, an act or series of deliberate
acts which were not taken in good faith by
Executive and which, in the reasonable judgment of
the Board, results or will likely result in
material injury to the business, operations or
business reputation of the Company, or an act or
series of acts constituting willful malfeasance or
gross misconduct or the Executive's continued
willful failure to perform any of his duties under
this Agreement.
(B) A substantial and continual refusal by Executive in
breach of this Agreement to perform the duties,
responsibilities or obligations assigned to
Executive pursuant to the terms hereof, which
breach has not been cured (if it is of a nature
that can be cured) to the Board's reasonable
satisfaction within ten (10) days after the Company
gives written notice thereof to the Executive;
(C) Excessive absenteeism by the Executive; provided
that absenteeism (i) related to illness or
otherwise covered by Section 4(a) hereof, (ii)
required to be permitted under applicable federal
or state laws, or (iii) permitted under Company
policy, shall not be deemed to be excessive; or
(D) The voluntary resignation of the Executive without
Good Reason (as defined below) and without the
prior consent of the Board.
Executive shall be permitted to respond and defend himself before the
Board within thirty (30) days after delivery to Executive of written
notification of any proposed termination for Cause which specifies in detail
the reasons for such termination. If the majority of the members of the Board
(excluding Executive) do not confirm that the Company had grounds for a
"Cause" termination, Executive shall have the option to treat his employment
as not having terminated or as having been terminated pursuant to a
termination without Cause.
(b) TERMINATION BY DEATH. If the Executive's employment is
---------------------
terminated by death, the Executive's estate shall be entitled to receive (i)
life insurance benefits pursuant to any life insurance purchased by the
Company, (ii) a pro rata portion of the bonus applicable to the calendar year
in which such termination occurs, payable when and as such bonus is determined
under Section 3(b) but no less than a pro rata portion of Executive's bonus
for the prior year, (iii) other benefits, payable within ninety (90) days
after the date of death, accrued by him hereunder up to and including the date
<PAGE>
<PAGE>
of Executive's death and (iv) reimbursement for all expenses incurred by
Executive pursuant to Section 1(d) prior to his death.
(c) TERMINATION FOR CAUSE. If the Executive's employment is
---------------------
terminated by the Company for Cause, the Company shall not have any other or
further obligations to the Executive under this Agreement (except (i) as may
be provided in accordance with the terms of retirement and other benefit plans
pursuant to Section 3(d), (ii) as to that portion of any unpaid Base Salary
and other benefits accrued and earned under this Agreement through the date of
such termination, (iii) as to benefits, if any, provided by any insurance
policies in accordance with their terms, and (iv) reimbursement for all
expenses incurred by Executive pursuant to Section 1(d) prior to his
termination). In addition, if the Executive's employment is terminated by the
Company for Cause at any time during the Term, the Executive shall immediately
forfeit any and all other unvested stock rights and stock options and other
such unvested incentives or awards previously granted to him by the Company.
The foregoing sentence shall be in addition to, and not in lieu of, any and
all other rights and remedies which may be available to the Company under the
circumstances, whether at law or in equity.
(d) TERMINATION WITHOUT CAUSE. If the Executive's employment is
--------------------------
terminated by the Company without Cause, the Executive shall be entitled to
receive (i) severance compensation equal to what would have been his Base
Salary under Section 3(a), payable at such times as his Base Salary would have
been paid if his employment had not been terminated (or, at the election of
the Executive, in a lump sum without discount), for the longer of one (1) year
or the remainder of what would have been the Term (but not longer than two (2)
years, (ii) other benefits, payable within ninety (90) days after the date of
such termination, accrued by him hereunder up to and including the date of
such termination, (iii) continuation of the insurance provided by the Company
pursuant to Section 3(c) for the longer of one (1) year or the remainder of
the Term (but not longer than two (2) years), or if not available a lump sum
payment of an amount equal to the fair value of such insurance, (iv) a pro
rata portion of the bonus applicable to the calendar year in which such
termination occurs, payable when and as such bonus is determined under Section
3(b), but no less than a pro rata portion of Executive's bonus for the
preceding calendar year, and (v) reimbursement for all expenses incurred by
Executive pursuant to Section 1(d) prior to his termination.
(e) TERMINATION FOR PERMANENT DISABILITY. If the Executive's
-------------------------------------
employment is terminated by the Company for Permanent Disability, the
Executive shall be entitled to receive (i) severance compensation equal to
what would have been his Base Salary under Section 3(a) for the longer of one
(1) year or the remainder of what would have been the Term (but not longer
than two (2) years), payable at such times as his Base Salary would have been
paid if his employment had not been terminated (or, at the election of the
Executive, a lump sum without discount), less any disability insurance
benefits pursuant to any disability insurance provided by the Company or
purchased by Executive, the cost of which is reimbursed by the Company,<PAGE>
<PAGE>
which are payable in respect of the period after such termination, (ii) other
benefits, payable within ninety (90) days after termination for Permanent
Disability, accrued by him hereunder up to and including the date of
termination for Permanent Disability, (iii) continuation of the insurance
provided by the Company pursuant to Section 3(c) for the longer of one (1)
year and the remainder of the Term (but not longer than two (2) years), or if
not available a lump sum payment of an amount equal to the fair value of such
insurance, (iv) a pro rata portion of the bonus applicable to the calendar
year in which such termination occurs, payable when and as such bonus is
determined under Section 3(b), but no less than a pro rata portion of
Executive's bonus for the preceding calendar year, and (v) reimbursement for
all expenses incurred by Executive pursuant to Section 1(d) prior to his
termination.
(f) TERMINATION BY EXECUTIVE FOR GOOD REASON. If the Executive
----------------------------------------
terminates his employment for "Good Reason", the Executive shall be entitled
to receive (i) severance compensation equal to what would have been his Base
Salary under Section 3(a), payable at such times as his Base Salary would have
been paid if his employment had not been terminated (or, at the election of
the Executive, in a lump sum without discount), for the longer of one (1) year
and the remainder of what would have been the Term (but not longer than two
(2) years), (ii) a pro rata portion of the bonus applicable to the calendar
year in which such termination occurs, payable when and as such bonus is
determined under Section 3(b), but no less than a pro rata portion of
Executive's bonus for the preceding calendar year, (iii) other benefits,
payable within ninety (90) days after the date of such termination, accrued by
him hereunder up to and including the date of such termination and (iv)
reimbursement for all expenses incurred by Executive pursuant to Section 1(d)
prior to his termination. "Good Reason" means a termination of Executive's
employment by Executive within ninety (90) days following (i) a reduction in
Executive's annual Base Salary or incentive compensation or equity
participation opportunity, (ii) a material reduction in Executive's positions,
duties and responsibilities or reporting lines from those described in Section
1 hereof, (iii) a change in the location of the Company's headquarters or of
the office of the Executive from the Fairfield, Iowa area or (iv) a material
breach of this Agreement by the Company. Notwithstanding the foregoing, a
termination shall not be treated as a termination for Good Reason (i) if
Executive shall have consented in writing to the occurrence of the event
giving rise to the claim of termination for Good Reason or (ii) unless
Executive shall have delivered a written notice to the Board within thirty
(30) days of his having actual knowledge of the occurrence of one of such
events stating that he intends to terminate his employment for Good Reason and
specifying the factual basis for such termination, and such event, if capable
of being cured, shall not have been cured within ten (10) days of the receipt
of such notice.
(g) MITIGATION. The Executive is not required to mitigate the amount
----------
of any payments to be made by the Company pursuant to this Agreement following
his termination by seeking other employment or otherwise. In addition, the
<PAGE>
<PAGE>
amount of any post-termination payments provided for in this Agreement shall
not be reduced by any remuneration earned by the Executive during the period
following the termination of his employment as a result of employment by
another employer or otherwise after the date of termination of his employment
with the Company.
6. COVENANTS AND CONFIDENTIAL INFORMATION.
---------------------------------------
(a) The Executive acknowledges the Company's reliance on and
expectation of the Executive's continued commitment to performance of his
duties and responsibilities during the Term. In light of such reliance
and expectation on the part of the Company, during the applicable period
hereafter specified in Section 6(b), the Executive shall not, directly or
indirectly, do or suffer either of the following:
(i) Own, manage, control or participate in the ownership,
management or control of, or be employed or engaged by or
otherwise affiliated or associated as a consultant,
independent contractor or otherwise with, any other
corporation, partnership, proprietorship, firm, association
or other business entity engaged in the business of, or
otherwise engage in the business of, marketing or providing
telecommunication services within the United States in
competition with the Company; provided, however, that the
beneficial and/or record ownership of not more than four and
nine-tenths percent (4.9%) of any class of publicly traded
securities of any entity shall not be deemed a violation of
this covenant; or
(ii) Disclose, divulge, discuss, copy or otherwise use or suffer
to be used in any manner, other than in accordance with the
Executive's duties hereunder, any confidential or
proprietary information relating to the Company's business,
prospects, finances, operations, properties or otherwise to
its particular business or other trade secrets of the
Company, it being acknowledged by the Executive that all
such information regarding the business of the Company
compiled or obtained by, or furnished to, the Executive
while the Executive shall have been employed by or
associated with the Company is confidential and/or
proprietary information and the Company's exclusive
property; provided, however, that the foregoing restrictions
shall not apply to the extent that such information:
<PAGE>
<PAGE>
(A) is clearly obtainable in the public domain;
(B) becomes obtainable in the public domain, except by
reason of the breach by the Executive of the terms
hereof or by another person barred by a similar duty
of confidentiality; or
(C) is required to be disclosed by rule of law or by
order of a court or governmental body or agency.
(b) The applicable periods shall be: (i) so long as the Executive is
an employee of the Company; (ii) as to clause (ii) of Section 6(a), at any
time after the Executive is no longer an employee of the Company; and (iii) as
to clause (i) of Section 6(a), upon the payment by the Company to the
Executive of $1,000,000 in cash as severance (which shall be paid at
termination) in addition to payments otherwise required under this Agreement,
for a period of one year after termination of employment for Cause or for
Permanent Disability or without Good Reason.
(c) The Executive agrees and understands that the remedy at law for
any breach by him of this Section 6 will be inadequate and that the damages
flowing from such breach are not readily susceptible to being measured in
monetary terms. Accordingly, it is acknowledged that the Company shall be
entitled to immediate injunctive relief and may obtain a temporary order
restraining any threatened or further breach. Nothing in this Section 6 shall
be deemed to limit the Company's remedies at law or in equity for any breach
by the Executive of any of the provisions of this Section 6 which may be
pursued or availed of by the Company.
(d) THE EXECUTIVE HAS CAREFULLY CONSIDERED THE NATURE AND EXTENT OF
THE RESTRICTIONS UPON HIM AND THE RIGHTS AND REMEDIES CONFERRED UPON THE
COMPANY UNDER THIS SECTION 6, AND HEREBY ACKNOWLEDGES AND AGREES THAT THE SAME
ARE REASONABLE IN TIME AND TERRITORY, ARE DESIGNED TO ELIMINATE COMPETITION
WHICH OTHERWISE WOULD BE UNFAIR TO THE COMPANY, DO NOT STIFLE THE INHERENT
SKILL AND EXPERIENCE OF THE EXECUTIVE, WOULD NOT OPERATE AS A BAR TO THE
EXECUTIVE'S SOLE MEANS OF SUPPORT, ARE FULLY REQUIRED TO PROTECT THE
LEGITIMATE INTERESTS OF THE COMPANY AND DO NOT CONFER A BENEFIT UPON THE
COMPANY DISPROPORTIONATE TO THE DETRIMENT TO THE EXECUTIVE.
(e) The Executive acknowledges that the Executive's obligations under
this Section 6 shall survive in accordance with paragraph (b) above regardless
of whether the Executive's employment by the Company is terminated,
voluntarily or involuntarily, by the Company or the Executive, with Cause or
without Cause, or the Executive with or without Good Reason.
7. INDEMNIFICATION. During the Term, the Company shall indemnify
----------------
Executive and hold Executive harmless from and against any claim, loss or
cause of action arising from or out of Executive's performance as an officer,
director or employee of the Company or any of its subsidiaries or in any other
capacity, including any fiduciary capacity, in which Executive serves at the
<PAGE>
<PAGE>
request of the Company to the maximum extent permitted by applicable law. If
any claim is asserted hereunder with respect to which Executive reasonably
believes in good faith he is entitled to indemnification, the Company shall
pay Executive legal expenses (or cause such expenses to be paid) on a monthly
basis, provided that Executive shall reimburse the Company for such amounts if
Executive shall be found by a court of competent jurisdiction not to have been
entitled to indemnification. In addition, the Company agrees to provide
Executive with coverage under a directors and officers liability insurance
policy.
8. MISCELLANEOUS.
-------------
(a) The Executive represents and warrants that he is not a
party to any agreement, contract or understanding, whether employment or
otherwise, which would restrict or prohibit him from undertaking or
performing employment in accordance with the terms and conditions of this
Agreement.
(b) The provisions of this Agreement are severable and if any
one or more provisions may be determined to be illegal or otherwise
unenforceable, in whole or in part, the remaining provisions and any
partially unenforceable provision to the extent enforceable in any
jurisdiction nevertheless shall be binding and enforceable.
(c) The rights and obligations of the Company under this
Agreement shall inure to the benefit of, and shall be binding on, the
Company and, if in connection with a transfer of substantially all of its
business, its successors and assigns, and the rights and obligations
(other than obligations to perform services) of the Executive under this
Agreement shall inure to the benefit of, and shall be binding upon, the
Executive and his heirs, personal representatives and assigns.
(d) Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by mediation, and if
not settled within 14 days of the submission to mediation, by arbitration
in accordance with the Voluntary Labor Arbitration Rules of the American
Arbitration Association, and the arbitration shall be held in the
metropolitan Kansas City area. The arbitrator shall be acceptable to
both the Company and Executive. If the parties cannot agree on an
acceptable arbitrator, the dispute shall be heard by a panel of three (3)
arbitrators, one appointed by each of the parties and the third appointed
by the other two arbitrators. Judgment upon the award rendered by the
arbitrator or arbitrators may be entered in any court having jurisdiction
thereof. The arbitrator or arbitrators shall be deemed to possess the
powers to issue mandatory orders and restraining orders in connection
with such arbitration; provided, however, that nothing in this Section
8(d) shall be construed so as to deny the Company the right and power to
seek and obtain injunctive relief in a court of equity for any breach or
threatened breach by the Executive of any of his covenants contained in
Section 6 of this Agreement.
<PAGE>
<PAGE>
(e) All notices and other communications required or permitted
under this Agreement shall be in writing, and shall be deemed properly
given if delivered personally, mailed by registered or certified mail in
the United States mail, postage prepaid, return receipt requested, sent
by facsimile, or sent by Express Mail, Federal Express or other
nationally recognized express delivery service, as follows:
If to the Company or the Board:
The Corporation System
2222 Grand Avenue
Des Moines, Iowa 50312
With a copy to:
Clifford Rees
Telegroup, Inc.
2098 Nutmeg Avenue
Fairfield, Iowa 52556
If to the Executive:
Fred Gratzon
____________________________
Fairfield, Iowa 52556
With a copy to:
____________________________
____________________________
____________________________
____________________________
Notice given by hand, certified or registered mail, or by Express
Mail, Federal Express or other such express delivery service, shall be
effective upon actual receipt. Notice given by facsimile transmission
shall be effective upon actual receipt if received during the recipient's
normal business hours, or at the beginning of the recipient's next
business day after receipt if not received during the recipient's normal
business hours. All notices by facsimile transmission shall be confirmed
promptly after transmission in writing by certified mail or personal
delivery.
Any party may change any address to which notice is to be given to
it by giving notice as provided above of such change of address.
(f) The failure of either party to enforce any provision or
provisions of this Agreement shall not in any way be construed as a
waiver of any such provision or provisions as to any future violations
<PAGE>
<PAGE>
thereof, nor prevent that party thereafter from enforcing each and every
other provision of this Agreement. The rights granted the parties herein
are cumulative and the waiver of any single remedy shall not constitute a
waiver of such party's right to assert all other legal remedies available
to it under the circumstances.
(g) This Agreement supersedes all prior agreements and
understandings between the parties as to the subject hereof and may not
be modified or terminated orally. No modification or attempted waiver
shall be valid unless in writing and signed by the party against whom the
same is sought to be enforced.
(h) This Agreement shall be governed by, and construed in
accordance with the provisions of, the law of the State of Iowa, without
reference to provisions that refer a matter to the law of any other
jurisdiction. Each party hereto hereby irrevocably submits itself to the
non-exclusive personal jurisdiction of the federal court sitting in Des
Moines, Iowa and state courts sitting in Jefferson County, Iowa;
accordingly, subject to the provisions for mediation and arbitration
provided in Section 8(d), any justiciable matters involving the Company
and the Executive with respect to this Agreement may be adjudicated only
in a federal or state court sitting in the aforementioned jurisdictions.
(i) All payments required to be made by the Company hereunder to
the Executive shall be subject to the withholding of such amounts
relating to taxes and other government assessments as the Company may
reasonably determine it should withhold pursuant to any applicable law,
rule or regulation.
(j) Captions and section headings used herein are for
convenience and are not a part of this Agreement and shall not be used in
construing it.
(k) Where necessary or appropriate to the meaning hereof, the
singular and plural shall be deemed to include each other, and the
masculine, feminine and neuter shall be deemed to include each other.
(l) If the Company fails to make any payment to Executive within
ten (10) days of the date due, the payment shall be made with interest
from the date due to the date of payment, at the rate, compounded
annually, from time to time specified as its prime rate by Citibank, N.A.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first set forth above.
Telegroup, Inc.,
an Iowa corporation
By:
------------------------------
Name: Fred Gratzon
Title: Chairman of the Board
- -------------------------
Fred Gratzon
Exhibit 10.4
FORM OF EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT") is entered into as of the
7th day of April, 1997 between Telegroup, Inc., an Iowa corporation (the
"Company"), and Clifford Rees (the "EXECUTIVE").
W I T N E S S E T H :
WHEREAS, the Company desires to employ the Executive, and the Executive
desires to be employed by the Company, on the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises herein contained,
the parties agree as follows:
1. EMPLOYMENT.
----------
(a) The Company hereby employs the Executive as Chief Executive
Officer and President and the Executive hereby accepts such employment,
on the terms and subject to the conditions hereinafter set forth. The
Company will use its best efforts to include Executive in its slate of
candidates for membership on the Company's Board of Directors (the
"Board") and the Executive Committee, if any.
(b) Executive shall report directly to the Board, and shall
perform such duties consistent with his positions as Chief Executive
Officer and President pursuant to the direction of the Board.
(c) Attention and Effort. The Executive shall be required to
---------------------
devote his full business time, attention and effort to the Company's
business and affairs except for vacation time and reasonable periods of
absence due to sickness, personal injury or other disability and shall
perform diligently such duties as are customarily performed by executives
in similar positions with companies similar in character or size to the
Company, all subject to the direction of the Board, together with such
other duties as may be reasonably requested from time to time by the
Board, which duties shall be consistent with his positions as set forth
above. The Executive agrees to use all of his skills and business
judgment and render services to the best of his ability to serve the
interests of the Company. Subject to the terms of Section 6, this shall
not preclude Executive from serving on community and civic boards,
participating in industry associations, pursuing his personal financial
and legal affairs, or otherwise engaging in other activities, so long as
such activities do not unreasonably interfere with his duties to the
Company.
(d) Support Services. The Executive shall be entitled to all of
----------------
the administrative, operational and facility support<PAGE>
<PAGE>
customary for a similarly situated executive. This support shall
include, without limitation, a suitably appointed private office, a
secretary or administrative assistant, and payment of or reimbursement
for reasonable cellular telephone expenses, business, travel and
entertainment expenses, expenses of the Executive maintaining his
professional license and standing and any and all other business expenses
reasonably incurred on behalf of or in the course of performing duties
for the Company, all in accordance with the expense reimbursement
policies established from time to time by the Company. The Executive
agrees to provide such documentation of these expenses as may be
reasonably required.
2. Term. Subject to the provisions for termination
----
hereinafter provided, the Term shall begin on the date hereof, shall continue
through December 31, 2000.
3. Compensation.
------------
Throughout the Term the Company shall pay or provide, as the case may be,
to the Executive the compensation and other benefits and rights set forth in
this Section 3.
(a) The Company shall pay to the Executive a "Base Salary,"
payable in accordance with the Company's usual pay practices (and in any
event no less frequently than monthly), of $500,000.00 per annum. The
Board shall annually review Executive's Base Salary in light of the Base
Salaries paid to other executives of the Company and the performance of
the Executive and the Company and may, in its discretion, increase such
Base Salary by an amount it determines is appropriate. Once Executive's
Base Salary is increased, it shall not thereafter be reduced.
(b) The Company shall pay to the Executive bonus compensation for
each fiscal year, or part thereof that he is employed by the Company, in
the amount of $500,000 as provided in the Indenture document with
Greenwich Partners dated November 27, 1996, and additional compensation
to be determined at the discretion of the Board, provided that such bonus
shall be commensurate with other bonuses paid to employees of the Company
and shall take into account the total compensation paid to executives of
other companies which would be competitive for Executive's services.
(c) The Company shall provide medical, hospitalization,
disability and dental insurance for Executive, his spouse and eligible
family members, subject to and in accordance with the Company's policy,
the proportion of the cost thereof to be borne by the Company and the
Executive to be in accordance with such policy.
(d) The Executive shall participate in all retirement and other
benefit plans of the Company generally available from time to time to
employees of the Company and for which the Executive qualifies under the
terms thereof (and nothing in this Agreement shall, or shall be deemed
to, in any way affect the Executive's right and benefits thereunder
except as expressly provided herein).<PAGE>
<PAGE>
(e) The Executive shall be entitled to at least twenty two (22)
days of vacation allowance each year and a sick leave allowance as
provided under the Company's vacation and sick leave policy for executive
officers.
(f) The Executive shall be entitled to participate in any equity
or other employee benefit plan that is generally available to senior
executive officers, as distinguished from general management, of the
Company, at the highest level provided for any employee. The Executive's
participation in and benefits under any such plan shall be on the terms
and subject to the conditions specified in the governing document of the
particular plan.
4. Permanent Disability.
--------------------
(a) For purposes of this Agreement, the Executive's "Permanent
Disability" shall be deemed to have occurred one day after one hundred
eighty (180) days in the aggregate during any consecutive twelve (12)
month period, or one day after one hundred twenty (120) consecutive days,
during which one hundred eighty (180) or one hundred twenty (120) days,
as the case may be, the Executive, by reason of his physical or mental
disability or illness, shall have been unable to discharge fully his
duties under this Agreement.
(b) If either the Company or the Executive, after receipt of
notice of the Executive's Permanent Disability from the other, disputes
that the Executive's Permanent Disability shall have occurred, the
Executive shall promptly submit to a physical examination by the chief of
medicine of any major accredited hospital in the metropolitan Chicago,
Illinois area, and, unless such physician shall issue his written
statement to the effect that, in his opinion, based on his diagnosis, the
Executive is capable of resuming his employment and devoting his full
time and energy to discharging fully his duties hereunder within thirty
(30) days after the date of such statement, such Permanent Disability
shall be deemed to have occurred on the day above specified.
5. Termination.
-----------
(a) The Executive's employment under this Agreement and the
Term shall be terminated immediately on the death of the Executive and
may be terminated by the Board, with the concurrence of the Chairman of
the Board (or the Vice Chairman of the Board):
(i) at any time after the Permanent Disability of the
Executive;
(ii) at any time for "Cause" (as defined below); or
(iii) at any time without Cause.
<PAGE>
<PAGE>
For purposes hereof, Cause shall mean:
(A) Active participation by the Executive in fraudulent
conduct against the Company, a felony involving
moral turpitude, an act or series of deliberate
acts which were not taken in good faith by
Executive and which, in the reasonable judgment of
the Board, results or will likely result in
material injury to the business, operations or
business reputation of the Company, or an act or
series of acts constituting willful malfeasance or
gross misconduct or the Executive's continued
willful failure to perform any of his duties under
this Agreement.
(B) A substantial and continual refusal by Executive in
breach of this Agreement to perform the duties,
responsibilities or obligations assigned to
Executive pursuant to the terms hereof, which
breach has not been cured (if it is of a nature
that can be cured) to the Board's reasonable
satisfaction within ten (10) days after the Company
gives written notice thereof to the Executive;
(C) Excessive absenteeism by the Executive; provided
that absenteeism (i) related to illness or
otherwise covered by Section 4(a) hereof, (ii)
required to be permitted under applicable federal
or state laws, or (iii) permitted under Company
policy, shall not be deemed to be excessive; or
(D) The voluntary resignation of the Executive without
Good Reason (as defined below) and without the
prior consent of the Board.
Executive shall be permitted to respond and defend himself before the
Board within thirty (30) days after delivery to Executive of written
notification of any proposed termination for Cause which specifies in detail
the reasons for such termination. If the majority of the members of the Board
(excluding Executive) do not confirm that the Company had grounds for a
"Cause" termination, Executive shall have the option to treat his employment
as not having terminated or as having been terminated pursuant to a
termination without Cause.
(b) TERMINATION BY DEATH. If the Executive's employment is
---------------------
terminated by death, the Executive's estate shall be entitled to receive (i)
life insurance benefits pursuant to any life insurance purchased by the
Company, (ii) a pro rata portion of the bonus applicable to the calendar year
in which such termination occurs, payable when and as such bonus is determined
under Section 3(b) but no less than a pro rata portion of Executive's bonus
for the prior year, (iii) other benefits, payable within ninety (90) days
after the date of death, accrued by him hereunder up to and including the date
<PAGE>
<PAGE>
of Executive's death and (iv) reimbursement for all expenses incurred by
Executive pursuant to Section 1(d) prior to his death.
(c) TERMINATION FOR CAUSE. If the Executive's employment is
---------------------
terminated by the Company for Cause, the Company shall not have any other or
further obligations to the Executive under this Agreement (except (i) as may
be provided in accordance with the terms of retirement and other benefit plans
pursuant to Section 3(d), (ii) as to that portion of any unpaid Base Salary
and other benefits accrued and earned under this Agreement through the date of
such termination, (iii) as to benefits, if any, provided by any insurance
policies in accordance with their terms, and (iv) reimbursement for all
expenses incurred by Executive pursuant to Section 1(d) prior to his
termination). In addition, if the Executive's employment is terminated by the
Company for Cause at any time during the Term, the Executive shall immediately
forfeit any and all other unvested stock rights and stock options and other
such unvested incentives or awards previously granted to him by the Company.
The foregoing sentence shall be in addition to, and not in lieu of, any and
all other rights and remedies which may be available to the Company under the
circumstances, whether at law or in equity.
(d) TERMINATION WITHOUT CAUSE. If the Executive's employment is
--------------------------
terminated by the Company without Cause, the Executive shall be entitled to
receive (i) severance compensation equal to what would have been his Base
Salary under Section 3(a), payable at such times as his Base Salary would have
been paid if his employment had not been terminated (or, at the election of
the Executive, in a lump sum without discount), for the longer of one (1) year
or the remainder of what would have been the Term (but not longer than two (2)
years, (ii) other benefits, payable within ninety (90) days after the date of
such termination, accrued by him hereunder up to and including the date of
such termination, (iii) continuation of the insurance provided by the Company
pursuant to Section 3(c) for the longer of one (1) year or the remainder of
the Term (but not longer than two (2) years), or if not available a lump sum
payment of an amount equal to the fair value of such insurance, (iv) a pro
rata portion of the bonus applicable to the calendar year in which such
termination occurs, payable when and as such bonus is determined under Section
3(b), but no less than a pro rata portion of Executive's bonus for the
preceding calendar year, and (v) reimbursement for all expenses incurred by
Executive pursuant to Section 1(d) prior to his termination.
(e) TERMINATION FOR PERMANENT DISABILITY. If the Executive's
-------------------------------------
employment is terminated by the Company for Permanent Disability, the
Executive shall be entitled to receive (i) severance compensation equal to
what would have been his Base Salary under Section 3(a) for the longer of one
(1) year or the remainder of what would have been the Term (but not longer
than two (2) years), payable at such times as his Base Salary would have been
paid if his employment had not been terminated (or, at the election of the
Executive, a lump sum without discount), less any disability insurance
benefits pursuant to any disability insurance provided by the Company or
purchased by Executive, the cost of which is reimbursed by the Company,<PAGE>
<PAGE>
which are payable in respect of the period after such termination, (ii) other
benefits, payable within ninety (90) days after termination for Permanent
Disability, accrued by him hereunder up to and including the date of
termination for Permanent Disability, (iii) continuation of the insurance
provided by the Company pursuant to Section 3(c) for the longer of one (1)
year and the remainder of the Term (but not longer than two (2) years), or if
not available a lump sum payment of an amount equal to the fair value of such
insurance, (iv) a pro rata portion of the bonus applicable to the calendar
year in which such termination occurs, payable when and as such bonus is
determined under Section 3(b), but no less than a pro rata portion of
Executive's bonus for the preceding calendar year, and (v) reimbursement for
all expenses incurred by Executive pursuant to Section 1(d) prior to his
termination.
(f) TERMINATION BY EXECUTIVE FOR GOOD REASON. If the Executive
----------------------------------------
terminates his employment for "Good Reason", the Executive shall be entitled
to receive (i) severance compensation equal to what would have been his Base
Salary under Section 3(a), payable at such times as his Base Salary would have
been paid if his employment had not been terminated (or, at the election of
the Executive, in a lump sum without discount), for the longer of one (1) year
and the remainder of what would have been the Term (but not longer than two
(2) years), (ii) a pro rata portion of the bonus applicable to the calendar
year in which such termination occurs, payable when and as such bonus is
determined under Section 3(b), but no less than a pro rata portion of
Executive's bonus for the preceding calendar year, (iii) other benefits,
payable within ninety (90) days after the date of such termination, accrued by
him hereunder up to and including the date of such termination and (iv)
reimbursement for all expenses incurred by Executive pursuant to Section 1(d)
prior to his termination. "Good Reason" means a termination of Executive's
employment by Executive within ninety (90) days following (i) a reduction in
Executive's annual Base Salary or incentive compensation or equity
participation opportunity, (ii) a material reduction in Executive's positions,
duties and responsibilities or reporting lines from those described in Section
1 hereof, (iii) a change in the location of the Company's headquarters or of
the office of the Executive from the Fairfield, Iowa area or (iv) a material
breach of this Agreement by the Company. Notwithstanding the foregoing, a
termination shall not be treated as a termination for Good Reason (i) if
Executive shall have consented in writing to the occurrence of the event
giving rise to the claim of termination for Good Reason or (ii) unless
Executive shall have delivered a written notice to the Board within thirty
(30) days of his having actual knowledge of the occurrence of one of such
events stating that he intends to terminate his employment for Good Reason and
specifying the factual basis for such termination, and such event, if capable
of being cured, shall not have been cured within ten (10) days of the receipt
of such notice.
(g) MITIGATION. The Executive is not required to mitigate the amount
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of any payments to be made by the Company pursuant to this Agreement following
his termination by seeking other employment or otherwise. In addition, the
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<PAGE>
amount of any post-termination payments provided for in this Agreement shall
not be reduced by any remuneration earned by the Executive during the period
following the termination of his employment as a result of employment by
another employer or otherwise after the date of termination of his employment
with the Company.
6. COVENANTS AND CONFIDENTIAL INFORMATION.
---------------------------------------
(a) The Executive acknowledges the Company's reliance on and
expectation of the Executive's continued commitment to performance of his
duties and responsibilities during the Term. In light of such reliance
and expectation on the part of the Company, during the applicable period
hereafter specified in Section 6(b), the Executive shall not, directly or
indirectly, do or suffer either of the following:
(i) Own, manage, control or participate in the ownership,
management or control of, or be employed or engaged by or
otherwise affiliated or associated as a consultant,
independent contractor or otherwise with, any other
corporation, partnership, proprietorship, firm, association
or other business entity engaged in the business of, or
otherwise engage in the business of, marketing or providing
telecommunication services within the United States in
competition with the Company; provided, however, that the
beneficial and/or record ownership of not more than four and
nine-tenths percent (4.9%) of any class of publicly traded
securities of any entity shall not be deemed a violation of
this covenant; or
(ii) Disclose, divulge, discuss, copy or otherwise use or suffer
to be used in any manner, other than in accordance with the
Executive's duties hereunder, any confidential or
proprietary information relating to the Company's business,
prospects, finances, operations, properties or otherwise to
its particular business or other trade secrets of the
Company, it being acknowledged by the Executive that all
such information regarding the business of the Company
compiled or obtained by, or furnished to, the Executive
while the Executive shall have been employed by or
associated with the Company is confidential and/or
proprietary information and the Company's exclusive
property; provided, however, that the foregoing restrictions
shall not apply to the extent that such information:
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(A) is clearly obtainable in the public domain;
(B) becomes obtainable in the public domain, except by
reason of the breach by the Executive of the terms
hereof or by another person barred by a similar duty
of confidentiality; or
(C) is required to be disclosed by rule of law or by
order of a court or governmental body or agency.
(b) The applicable periods shall be: (i) so long as the Executive is
an employee of the Company; (ii) as to clause (ii) of Section 6(a), at any
time after the Executive is no longer an employee of the Company; and (iii) as
to clause (i) of Section 6(a), upon the payment by the Company to the
Executive of $1,000,000 in cash as severance (which shall be paid at
termination) in addition to payments otherwise required under this Agreement,
for a period of one year after termination of employment for Cause or for
Permanent Disability or without Good Reason.
(c) The Executive agrees and understands that the remedy at law for
any breach by him of this Section 6 will be inadequate and that the damages
flowing from such breach are not readily susceptible to being measured in
monetary terms. Accordingly, it is acknowledged that the Company shall be
entitled to immediate injunctive relief and may obtain a temporary order
restraining any threatened or further breach. Nothing in this Section 6 shall
be deemed to limit the Company's remedies at law or in equity for any breach
by the Executive of any of the provisions of this Section 6 which may be
pursued or availed of by the Company.
(d) THE EXECUTIVE HAS CAREFULLY CONSIDERED THE NATURE AND EXTENT OF
THE RESTRICTIONS UPON HIM AND THE RIGHTS AND REMEDIES CONFERRED UPON THE
COMPANY UNDER THIS SECTION 6, AND HEREBY ACKNOWLEDGES AND AGREES THAT THE SAME
ARE REASONABLE IN TIME AND TERRITORY, ARE DESIGNED TO ELIMINATE COMPETITION
WHICH OTHERWISE WOULD BE UNFAIR TO THE COMPANY, DO NOT STIFLE THE INHERENT
SKILL AND EXPERIENCE OF THE EXECUTIVE, WOULD NOT OPERATE AS A BAR TO THE
EXECUTIVE'S SOLE MEANS OF SUPPORT, ARE FULLY REQUIRED TO PROTECT THE
LEGITIMATE INTERESTS OF THE COMPANY AND DO NOT CONFER A BENEFIT UPON THE
COMPANY DISPROPORTIONATE TO THE DETRIMENT TO THE EXECUTIVE.
(e) The Executive acknowledges that the Executive's obligations under
this Section 6 shall survive in accordance with paragraph (b) above regardless
of whether the Executive's employment by the Company is terminated,
voluntarily or involuntarily, by the Company or the Executive, with Cause or
without Cause, or the Executive with or without Good Reason.
7. INDEMNIFICATION. During the Term, the Company shall indemnify
----------------
Executive and hold Executive harmless from and against any claim, loss or
cause of action arising from or out of Executive's performance as an officer,
director or employee of the Company or any of its subsidiaries or in any other
capacity, including any fiduciary capacity, in which Executive serves at the
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request of the Company to the maximum extent permitted by applicable law. If
any claim is asserted hereunder with respect to which Executive reasonably
believes in good faith he is entitled to indemnification, the Company shall
pay Executive legal expenses (or cause such expenses to be paid) on a monthly
basis, provided that Executive shall reimburse the Company for such amounts if
Executive shall be found by a court of competent jurisdiction not to have been
entitled to indemnification. In addition, the Company agrees to provide
Executive with coverage under a directors and officers liability insurance
policy.
8. MISCELLANEOUS.
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(a) The Executive represents and warrants that he is not a
party to any agreement, contract or understanding, whether employment or
otherwise, which would restrict or prohibit him from undertaking or
performing employment in accordance with the terms and conditions of this
Agreement.
(b) The provisions of this Agreement are severable and if any
one or more provisions may be determined to be illegal or otherwise
unenforceable, in whole or in part, the remaining provisions and any
partially unenforceable provision to the extent enforceable in any
jurisdiction nevertheless shall be binding and enforceable.
(c) The rights and obligations of the Company under this
Agreement shall inure to the benefit of, and shall be binding on, the
Company and, if in connection with a transfer of substantially all of its
business, its successors and assigns, and the rights and obligations
(other than obligations to perform services) of the Executive under this
Agreement shall inure to the benefit of, and shall be binding upon, the
Executive and his heirs, personal representatives and assigns.
(d) Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by mediation, and if
not settled within 14 days of the submission to mediation, by arbitration
in accordance with the Voluntary Labor Arbitration Rules of the American
Arbitration Association, and the arbitration shall be held in the
metropolitan Kansas City area. The arbitrator shall be acceptable to
both the Company and Executive. If the parties cannot agree on an
acceptable arbitrator, the dispute shall be heard by a panel of three (3)
arbitrators, one appointed by each of the parties and the third appointed
by the other two arbitrators. Judgment upon the award rendered by the
arbitrator or arbitrators may be entered in any court having jurisdiction
thereof. The arbitrator or arbitrators shall be deemed to possess the
powers to issue mandatory orders and restraining orders in connection
with such arbitration; provided, however, that nothing in this Section
8(d) shall be construed so as to deny the Company the right and power to
seek and obtain injunctive relief in a court of equity for any breach or
threatened breach by the Executive of any of his covenants contained in
Section 6 of this Agreement.
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(e) All notices and other communications required or permitted
under this Agreement shall be in writing, and shall be deemed properly
given if delivered personally, mailed by registered or certified mail in
the United States mail, postage prepaid, return receipt requested, sent
by facsimile, or sent by Express Mail, Federal Express or other
nationally recognized express delivery service, as follows:
If to the Company or the Board:
The Corporation System
2222 Grand Avenue
Des Moines, Iowa 50312
With a copy to:
Fred Gratzon
Telegroup, Inc.
2098 Nutmeg Avenue
Fairfield, Iowa 52556
If to the Executive:
Clifford Rees
____________________________
Fairfield, Iowa 52556
With a copy to:
____________________________
____________________________
____________________________
____________________________
Notice given by hand, certified or registered mail, or by Express
Mail, Federal Express or other such express delivery service, shall be
effective upon actual receipt. Notice given by facsimile transmission
shall be effective upon actual receipt if received during the recipient's
normal business hours, or at the beginning of the recipient's next
business day after receipt if not received during the recipient's normal
business hours. All notices by facsimile transmission shall be confirmed
promptly after transmission in writing by certified mail or personal
delivery.
Any party may change any address to which notice is to be given to
it by giving notice as provided above of such change of address.
(f) The failure of either party to enforce any provision or
provisions of this Agreement shall not in any way be construed as a
waiver of any such provision or provisions as to any future violations
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thereof, nor prevent that party thereafter from enforcing each and every
other provision of this Agreement. The rights granted the parties herein
are cumulative and the waiver of any single remedy shall not constitute a
waiver of such party's right to assert all other legal remedies available
to it under the circumstances.
(g) This Agreement supersedes all prior agreements and
understandings between the parties as to the subject hereof and may not
be modified or terminated orally. No modification or attempted waiver
shall be valid unless in writing and signed by the party against whom the
same is sought to be enforced.
(h) This Agreement shall be governed by, and construed in
accordance with the provisions of, the law of the State of Iowa, without
reference to provisions that refer a matter to the law of any other
jurisdiction. Each party hereto hereby irrevocably submits itself to the
non-exclusive personal jurisdiction of the federal court sitting in Des
Moines, Iowa and state courts sitting in Jefferson County, Iowa;
accordingly, subject to the provisions for mediation and arbitration
provided in Section 8(d), any justiciable matters involving the Company
and the Executive with respect to this Agreement may be adjudicated only
in a federal or state court sitting in the aforementioned jurisdictions.
(i) All payments required to be made by the Company hereunder to
the Executive shall be subject to the withholding of such amounts
relating to taxes and other government assessments as the Company may
reasonably determine it should withhold pursuant to any applicable law,
rule or regulation.
(j) Captions and section headings used herein are for
convenience and are not a part of this Agreement and shall not be used in
construing it.
(k) Where necessary or appropriate to the meaning hereof, the
singular and plural shall be deemed to include each other, and the
masculine, feminine and neuter shall be deemed to include each other.
(l) If the Company fails to make any payment to Executive within
ten (10) days of the date due, the payment shall be made with interest
from the date due to the date of payment, at the rate, compounded
annually, from time to time specified as its prime rate by Citibank, N.A.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first set forth above.
Telegroup, Inc.,
an Iowa corporation
By:
------------------------------
Name: Fred Gratzon
Title: Chairman of the Board
_______________________________________
Clifford Rees
Exhibit 10.5
FORM OF INDEMNIFICATION AGREEMENT
This Indemnification Agreement (this "Agreement"), effective as of
April , 1997, between Telegroup, Inc., an Iowa corporation (the
-----
"Company"), and (the "Indemnitee").
-------------
Whereas, Indemnitee is a director or officer of the Company;
Whereas, both the Company and Indemnitee recognize the increased risk of
litigation and other claims being asserted against directors and officers of
public companies;
Whereas, the Company's Second Restated Articles of Incorporation (the
"Articles") and Amended and Restated ByLaws ("ByLaws") require the Company to
indemnify its directors and officers to the full extent permitted by law and
Indemnitee serves as a director or officer of the Company in reliance on such
Articles and ByLaws;
Whereas, in recognition of Indemnitee's need for substantial protection
against personal liability in order to enhance Indemnitee's continued service
to the Company in an effective manner, and Indemnitee's reliance on the
aforesaid Articles and ByLaws, and to provide Indemnitee with specific
contractual assurance that the protection afforded by such Articles and ByLaws
will be available to Indemnitee (regardless of, among other things, any
amendment to or revocation of such Articles or ByLaws or any change in the
composition of the Board of Directors of the Company (the "Board") or
acquisition transaction relating to the Company), the Company wishes to
provide in this Agreement for the indemnification of and the advancing of
expenses to Indemnitee to the full extent (whether partial or complete)
permitted by law and as set forth in this Agreement, and, to the extent
insurance is maintained, for the continued coverage of Indemnitee under the
Company's directors' and officers' liability insurance policies;
Now, therefore, in consideration of the premises and of Indemnitee's
service to the Company, directly or indirectly, and intending to be legally
bound hereby, the parties hereto agree as follows:
1. Certain Definitions
(a) Approved Legal Counsel: shall mean any law firm having
100 or more attorneys and rated "av" by Martindale-Hubbell Law Directory;
provided that such law firm shall not, for a five-year period prior to the
Indemnifiable Event, have been engaged by the Company, the Acquiring Person or
the Indemnitee.
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(b) Change in Control: shall be deemed to have occurred if
(i) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than
(x) Clifford Rees, Fred Gratzon, and Shelley Gratzon (collectively, the
"Principals"), or (y) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company in substantially the same proportions as
their ownership of common stock of the Company, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 50% or more of the
combined voting power of the Company's then outstanding Voting Securities
(such person being referred to herein as an "Acquiring Person"), or (ii)
during any period of two consecutive years, individuals who at the beginning
of such period constitute the Board and any new director whose election by the
Board or nomination for election by the Company's stockholders was approved by
a vote of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof, or (iii) the shareholders of the Company
approve a merger or consolidation of the Company with any other corporation,
partnership, unincorporated association or other entity, other than a merger
or consolidation which would result in the Voting Securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 80% of the combined voting power of the Voting
Securities of the Company or such surviving entity outstanding immediately
after such merger or consolidation, or (iv) the shareholders of the Company
approve a plan of complete liquidation of the Company or an agreement for the
sale or disposition by the Company (in one transaction or a series of
transactions) of all or substantially all the Company's assets.
(c) Claim: shall mean any threatened, pending or completed
action, suit or proceeding, or any inquiry or investigation, whether conducted
by the Company or any other party, that Indemnitee in good faith believes
might lead to any such action, suit or proceeding, whether civil, criminal,
administrative, investigative or otherwise and whether formal or informal.
(d) Expenses: shall include attorneys' fees and all other
costs, expenses and obligations paid or incurred by Indemnitee in connection
with investigating, preparing for and defending, responding to or
participating in the defense of or response to (including an appeal) any Claim
relating to any Indemnifiable Event actually and reasonably incurred by
Indemnitee.
(e) Indemnifiable Event: shall mean any event or occurrence
related to the fact that Indemnitee is or was a director, officer, employee,
agent or fiduciary of the Company, or is or was serving at the request of the
Company as a director, officer, partner, employee, trustee, agent or fiduciary
of another foreign or domestic corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, or by reason of anything done or
not done by Indemnitee in any such capacity.
(f) IBCA: shall mean the Iowa Business Corporation Act.
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(g) Potential Change In Control: shall be deemed to have
occurred if (i) the Company enters into an agreement, the consummation of
which would result in the occurrence of a Change in Control; (ii) any person
(including the Company) publicly announces an intention to take or to consider
taking actions which if consummated would constitute a Change in Control;
(iii) any person, other than the Principals or a trustee or other fiduciary
holding securities under an employee benefit plan of the Company, who is or
becomes the beneficial owner, directly or indirectly, of securities of the
Company representing 50% or more of the combined voting power of the Company's
then outstanding Voting Securities, increases his beneficial ownership of such
securities by five percentage points (5%) or more over the percentage so owned
by such person; or (iv) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has occurred.
(h) Reviewing Party: shall be (i) the Board acting by quorum
consisting of directors who are not parties to the particular Claim with
respect to which Indemnitee is seeking indemnification, or (ii), if such a
quorum is not obtainable or, even if obtainable, if a quorum of disinterested
directors so directs, (A) the Board upon the written opinion of independent
legal counsel that indemnification is proper in the circumstances because the
applicable standard of conduct set forth in Section 490.851 of the IBCA has
been met by the Indemnitee or (B) the shareholders upon a finding that the
Indemnitee has met the applicable standard of conduct referred to in clause
(ii)(A) of this definition.
(i) Voting Securities: shall mean, with respect to a
corporation, securities of any class or series generally entitled to vote on
the election of its directors and, with respect to any other entity, any
equity interest generally entitled to vote on the election of the governing
body of such entity.
2. Indemnification. In the event Indemnitee was, is or becomes a
party to, or a witness or other participant in, or is threatened to be made a
party to, or a witness or other participant in, a Claim by reason of (or
arising in part out of) an Indemnifiable Event, the Company shall indemnify
Indemnitee and hold Indemnitee harmless, to the full extent permitted by law
as soon as practicable but in any event no later than ten days after written
demand is presented to the Company, from and against any and all Expenses,
judgments, fines, (including, excise taxes assessed Indemnitee with respect to
an employee benefit plan) penalties and amounts paid in settlement (including
all interest, assessments and other charges paid or payable in connection with
or in respect of such judgments, fines or penalties) of such Claim.
3. Expense Advances. If so requested by Indemnitee, the Company
shall advance (within four days after written demand is presented to the
Company) any and all such Expenses to Indemnitee; provided, however, that if,
when and to the extent the Reviewing Party determines that Indemnitee would
not be permitted to be so indemnified under applicable law, the Company shall
be entitled to be reimbursed by Indemnitee (who hereby agrees and undertakes
to reimburse the Company to the full extent required by Section 490.853 of the
IBCA) for all such amounts theretofore paid and the Company shall cease to
advance Expenses (unless Indemnitee has commenced or thereafter commences
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legal proceedings in a court of competent jurisdiction to secure a
determination that Indemnitee should be indemnified under applicable law, in
which event Indemnitee shall be entitled to have his Expenses advanced and
shall not be required to so reimburse the Company until a final judicial
determination requiring such reimbursement is made with respect thereto as to
which all rights of appeal therefrom have been exhausted or lapsed).
4. Payment. Notwithstanding the provisions of Section 2 hereof, the
obligations of the Company under Section 2 shall be subject to the condition
that the Reviewing Party shall have determined in the specific case that
indemnification of Indemnitee is proper under the applicable standard of
conduct set forth in applicable law. The Company shall promptly call a
meeting of the Board with respect to a Claim relating to an Indemnifiable
Event and agrees to use its best efforts to facilitate a prompt determination
by the Reviewing Party with respect to any such Claim. Indemnitee shall be
afforded the opportunity to make submissions to the Reviewing Party with
respect to any such Claim. If, by the expiration of the applicable written
demand periods set forth in Sections 2 and 3 hereof, Indemnitee has not been
indemnified or received Expense advances or the Reviewing Party determines
that Indemnitee would not be permitted to be indemnified or be entitled to
Expense advances in whole or in part under applicable law, Indemnitee shall
have the right to commence litigation seeking from the court a finding that
Indemnitee is entitled to indemnification and Expense advances or enforcement
of Indemnitee's entitlement to indemnification and Expense advances or
challenging any determination by the Reviewing Party or any aspect thereof
that Indemnitee is not entitled to be indemnified or receive Expense advances;
any determination by the Reviewing Party otherwise shall be conclusive and
binding on the Company and Indemnitee. Indemnitee agrees to bring any such
litigation in any court in the State of Iowa having subject matter
jurisdiction thereof and in which venue is proper, and the Company hereby
consents to service of process and to appear in any such proceeding.
5. Change in Control. The Company agrees that if there is a Change
in Control of the Company (other than a Change in Control which has been
approved by a majority of the Board who were directors immediately prior to
such Change in Control) then all determinations by the Company concerning the
rights of Indemnitee to indemnity payments and Expense advances under this
Agreement or any other agreement or the Articles or ByLaws now or hereafter in
effect relating to Claims for Indemnifiable Events: (i) arising prior to or
concurrently with such Change in Control shall be made pursuant to subsections
(2)(a), (b) or (c) of Section 490.855 of the IBCA; and (ii) arising after such
Change in Control shall be made pursuant to subsection (2)(c) of Section
490.855 of the IBCA. In the event that the Company elects or is required
(pursuant to this Section 5) to make an indemnification determination pursuant
to subsection (2)(c) of Section 490.855 of the IBCA, the Company (and the
Board) shall seek legal advice from (and only from) special, independent
counsel selected by Indemnitee and approved by the Company (which approval
shall not be unreasonably withheld or delayed). Unless Indemnitee has
selected counsel pursuant to this Section 5 and such counsel has been approved
by the Company (which approval shall not be unreasonably withheld or delayed),
the Approved Legal Counsel shall be deemed to satisfy the requirements set
forth above. Such counsel, among other things, shall determine whether and to
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what extent Indemnitee is permitted to be indemnified, is entitled to Expense
advances under applicable law, or is obligated to reimburse the Company for
Expenses advanced and shall render its written opinion to the Company and
Indemnitee to such effect. The Company agrees to pay the reasonable fees and
expenses of the special, independent counsel referred to above and to fully
indemnify such counsel and hold such counsel harmless from and against any and
all expenses (including attorneys' fees), claims, liabilities and damages
arising out of or relating to this Agreement or its engagement pursuant hereto
except for willful misconduct or gross negligence.
6. Potential Change in Control. In the event of a Potential Change
in Control which has not ceased to exist, the Company shall, upon written
request by Indemnitee, create a trust for the benefit of Indemnitee and from
time to time upon written request of Indemnitee shall fund such trust in an
amount sufficient to satisfy any and all Expenses reasonably anticipated at
the time of each such request to be incurred in connection with investigating,
preparing for, responding to, defending or participating in the defense of or
response to any Claim relating to an Indemnifiable Event, and any and all
judgments, fines, penalties and settlement amounts of any and all Claims
relating to an Indemnifiable Event from time to time actually paid or claimed,
reasonably anticipated or proposed to be paid. The amount or amounts to be
deposited in the trust pursuant to the foregoing funding obligation shall be
determined by the Reviewing Party, in any case in which the independent legal
counsel referred to above is involved. The terms of the trust shall provide
that upon a Change in Control (i) the trust shall not be revoked or the
principal thereof invaded, without the express prior written consent of
Indemnitee, (ii) the trustee shall advance, within four days of a request by
Indemnitee, any and all Expenses to Indemnitee (and Indemnitee hereby agrees
to reimburse the trust under the circumstances under which Indemnitee would be
required to reimburse the Company under Section 3 of this Agreement), (iii)
the trust shall continue to be funded by the Company in accordance with the
funding obligation set forth above, (iv) the trustee shall promptly pay to
Indemnitee amounts for which Indemnitee shall be entitled to indemnification
pursuant to this Agreement or otherwise, and (v) all unexpended funds in such
trust shall revert to the Company upon a final determination by the Reviewing
Party or a court of competent jurisdiction, as the case may be, that
Indemnitee has been fully indemnified under the terms of this Agreement. The
trustee shall be a bank organized under the laws of the United States of
America or of any state and having a combined capital surplus of at least
$50,000,000 and shall be chosen by Indemnitee. Nothing in this Section 6
shall relieve the Company of any of its obligations under this Agreement.
7. Assumption of Defense. In the event the Company shall be
obligated hereunder to pay Expenses of any action, suit or proceeding against
or otherwise involving or affecting Indemnitee, the Company shall be entitled
to assume the defense thereof, with counsel approved by Indemnitee (such
approval not to be unreasonably withheld or delayed) upon the delivery to
Indemnitee of written notice of its election to do so. After delivery of such
notice, approval of such counsel by Indemnitee and the retention of such
counsel by the Company, the Company will not be liable to Indemnitee under
this Agreement for any fees or expenses of counsel subsequently incurred by
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Indemnitee with respect to the same matter; provided that (i) Indemnitee
shall have the right to employ separate counsel in any such proceeding at
Indemnitee's expense and (ii) if (A) the employment of counsel by Indemnitee
has been previously authorized by the Company, (B) Indemnitee shall have
reasonably concluded, upon the advice of independent legal counsel, that there
may be a conflict of interest between the Company and Indemnitee in the
conduct of any such defense or (C) the Company shall not, in fact, have
employed counsel to assume the defense of such proceeding, then the Company
shall pay the reasonable fees and expenses of Indemnitee's counsel; provided
that the Company's obligation shall be limited to the fees and expenses of one
law firm for Indemnitee.
8. Indemnification of Additional Expenses. The Company shall
indemnify Indemnitee and hold Indemnitee harmless from and against any and all
expenses (including reasonable attorneys' fees and expenses) and, if requested
by Indemnitee, shall (within four days of such request) advance such expenses
to Indemnitee, which are incurred by Indemnitee in connection with any claim
asserted or action brought by Indemnitee for (i) indemnification or advance
payment of Expenses by the Company under this Agreement or any other agreement
or the Articles or ByLaws now or hereafter in effect relating to Claims for
Indemnifiable Events and/or (ii) recovery under any directors' and officers'
liability insurance policies maintained by the Company, regardless of whether
the Indemnitee ultimately is determined to be entitled to such
indemnification, advance payment of Expenses or insurance recovery, as the
case may be.
9. Partial Indemnity. If Indemnitee is entitled under any provision
of this Agreement to indemnification by the Company for some or a portion of
the Expenses, judgments, fines, penalties and amounts paid in settlement of a
Claim but not, however, for all of the total amount thereof, the Company shall
nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee
is entitled. Moreover, notwithstanding any other provision of this Agreement,
to the extent that Indemnitee has been successful on the merits or otherwise
in defense of any or all Claims relating in whole or in part to an
Indemnifiable Event or in defense of any issue or matter therein, including
dismissal without prejudice, Indemnitee shall be indemnified and held harmless
from and against all Expenses incurred in connection therewith. In connection
with any determination by the Reviewing Party or otherwise as to whether
Indemnitee is entitled to be indemnified hereunder the burden of proof shall
be on the Company to establish that Indemnitee is not so entitled.
10. No Presumption. For purposes of this Agreement, the termination
of any Claim by judgment, order, settlement (whether with or without court
approval) or conviction, or upon a plea of nolo contendere, or its equivalent,
shall not create a presumption that Indemnitee did not meet any particular
standard of conduct or have any particular belief or that a court has
determined that Indemnitee is not entitled to indemnification or expense
advances or that indemnification or expense advances are not permitted by
applicable law. In addition, neither the failure of the Reviewing Party to
have made a determination as to whether Indemnitee has met any particular
standard of conduct or had any particular belief, nor an actual determination
<PAGE>
<PAGE>
by the Reviewing Party that Indemnitee has not met such standard of conduct or
did not have such belief, prior to the commencement of legal proceedings by
Indemnitee to secure a judicial determination that Indemnitee should be
indemnified under applicable law, shall be a defense to Indemnitee's claim or
create a presumption that Indemnitee has not met any particular standard of
conduct or did not have any particular belief.
11. Nonexclusivity. The rights of Indemnitee hereunder shall be in
addition to any other rights Indemnitee may have under the Company's Articles
or ByLaws as in effect on the date of this Agreement or the IBCA or otherwise.
To the extent a change in the IBCA (whether by statute or judicial decision)
permits greater indemnification by agreement than would be afforded currently
under the Company's Articles, ByLaws and this Agreement, it is the intent of
the parties hereto that Indemnitee shall enjoy by this Agreement the greater
benefits so afforded by such change.
12. Notification; Period of Limitations. Indemnitee shall promptly
notify the Company in writing of the institution of any action, suit,
proceeding, inquiry or investigation that is or may be subject to this
Agreement. Indemnitee shall give the Company such information and cooperation
as it may reasonably require and as shall be within Indemnitee's power. No
legal action under this Agreement shall be brought and no cause of action
under this Agreement shall be asserted by or in the right of the Company
against Indemnitee, Indemnitee's spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Company under
this Agreement shall be extinguished and deemed released unless asserted by
the timely filing of a legal action within such two-year period; provided,
however, that, if any shorter period of limitations is otherwise applicable to
any such cause of action, such shorter period shall govern.
13. Liability Insurance. To the extent the Company maintains an
insurance policy or policies providing directors' and officers' liability
insurance, Indemnitee shall be covered by such policy or policies, in
accordance with its or their terms, to the maximum extent of the coverage
available for any Company director or officer.
14. Amendments. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by both of the parties
hereto. No waiver of any of the provisions of this Agreement shall be deemed
or shall constitute a waiver of any other provisions hereof (whether or not
similar) nor shall such waiver constitute a continuing waiver.
15. Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the
execution of such documents necessary to enable the Company effectively to
bring suit to enforce such rights.
<PAGE>
<PAGE>
16. No Duplication of Payments. The Company shall not be liable
under this Agreement to make any payment in connection with any claim made
against Indemnitee to the extent Indemnitee has otherwise actually received
payment (under any insurance policy, the Company's Articles or ByLaws or
otherwise) of the amounts otherwise indemnifiable hereunder.
17. Specific Performance. The Company recognizes that if any
provision of this Agreement is violated by the Company, Indemnitee may be
without an adequate remedy at law. Accordingly, in the event of any such
violation, the Indemnitee shall be entitled, if Indemnitee so elects, to
institute proceedings, either in law or at equity, to obtain damages, to
enforce specific performance, to enjoin such violation, or to obtain any
relief or any combination of the foregoing as Indemnitee may elect to pursue.
18. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the parties hereto and their
respective successors, assigns, including any direct or indirect successor by
purchase, merger, consolidation or otherwise to all or substantially all of
the business and/or assets of the Company, spouses, heirs, executors and
personal and legal representatives. This Agreement shall continue in effect
regardless of whether Indemnitee continues to serve as an officer or director
of the Company or of any other enterprise at the Company's request.
19. Severability. The provisions of this Agreement shall be
severable in the event that any of the provisions hereof (including any
provision within a single section, paragraph or sentence) are held by a court
of competent jurisdiction to be invalid, void or otherwise unenforceable, and
the remaining provisions shall remain enforceable to the fullest extent
permitted by law.
20. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Iowa applicable to
contracts made and to be performed exclusively in such state, but excluding
any conflicts of law, rule or principle which might refer such governance,
construction or enforcement to the laws of another state or country.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Company and Indemnitee have caused this
Agreement to be executed as of the date first above written.
TELEGROUP, INC.
By:
-------------------------------
Name:
------------------------------
Title:
-----------------------------
INDEMNITEE
By:
--------------------------------
Name:
------------------------------
Title:
----------------------------
Exhibit 10.6
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
among
TELEGROUP, INC.
GREENWICH STREET CAPITAL PARTNERS, L.P.
GREENWICH STREET CAPITAL OFFSHORE FUND, LTD.
TRV EMPLOYEES FUND, L.P.
THE TRAVELERS INSURANCE COMPANY
and
THE TRAVELERS LIFE AND ANNUITY COMPANY
Dated as of November 27, 1996
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
<PAGE>
<PAGE>
TABLE OF CONTENTS
Page
1. Registrations Upon Request..................................1
1.1. Requests.............................................1
1.2. Registration Statement Form...........................3
1.3. Expenses..............................................3
1.4. No Company Initiated Registration.....................3
2. Incidental Registrations....................................4
3. Registration Procedures.....................................6
4. Underwritten Offerings.....................................12
4.1. Underwriting Agreement...............................12
4.2. Selection of Underwriters............................13
5. Holdback Agreements........................................13
6. Preparation; Reasonable Investigation......................14
7. [Intentionally Omitted]....................................15
8. Indemnification............................................15
8.1. Indemnification by the Company.......................15
8.2. Indemnification by the Sellers.......................16
8.3. Notices of Claims, etc...............................17
8.4. Other Indemnification................................18
8.5. Indemnification Payments.............................18
8.6. Other Remedies.......................................19
9. Definitions................................................19
10. Miscellaneous..............................................22
10.1. Rule 144 etc........................................22
10.2. Successors, Assigns and Transferees.................23
10.3. Stock Splits, etc...................................23
10.4. Amendment and Modification..........................23
10.5. GOVERNING LAW.......................................23
10.6. Invalidity of Provision.............................24<PAGE>
<PAGE>
10.7. Notices.............................................24
10.8. Headings; Execution in Counterparts.................25
10.9. Injunctive Relief...................................26
10.10. Further Assurances.................................26
10.11. Entire Agreement...................................26
10.12. Term...............................................26
<PAGE>
<PAGE>
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT, dated as of November 27, 1996,
among Telegroup, Inc., an Iowa corporation (the "Company"),
-------
Greenwich Street Capital Partners, L.P., a Delaware limited partnership,
Greenwich Street Capital Offshore Fund, Ltd., a British Virgin Islands
corporation, TRV Employees Fund, L.P., a Delaware limited partnership, The
Travelers Insurance Company, a Connecticut corporation, and The Travelers Life
and Annuity Company, a Connecticut corporation
(collectively, the "Holders" and each a "Holder"). Capitalized terms
------- ------
used herein without definition are defined in Section 9.
1. Registrations Upon Request.
--------------------------
1.1 Requests. At any time during each one of the two years
--------
following an initial public offering of the Company's securities, the Majority
Holders shall have the right to make one request per year that the Company
effect the registration under the Securities Act of any of the Registrable
Securities of the Holders, each such request to specify the intended method or
methods of disposition thereof, provided that (a)
--------
in no event shall either such request cover less than 20% of the aggregate
number of shares of Common Stock purchasable on the Issue Date upon the
exercise of all Warrants, as adjusted from time to time pursuant to the terms
thereof, and (b) the Company shall not be required to effect a registration
pursuant to this Section 1.1 until a period of 90 days shall have elapsed from
the effective date of the most recent registration previously effected by the
Company, provided, further, that
-------- -------
(i) if the registration statement relating to any such request is not declared
effective within 90 days of the date such registration statement is first
filed with the Commission or (ii) if, within 180 days after the registration
relating to any such request has become effective, such registration is inter-
fered with by any stop<PAGE>
<PAGE>
order, injunction or other order or requirement of the Commission or other
governmental agency or court for any reason and the Company fails to have such
stop order, injunction or other order or requirement removed, withdrawn or
resolved to the reasonable satisfaction of the Holders within 45 days or (iii)
the conditions to closing specified in the indemnity agreement entered into in
connection with the registration relating to any such request are not
satisfied (other than as a result of a default or breach thereunder by the
Holders), then such request
shall not be counted for purposes of the request limitations of the Holders
set forth above. Upon any such request, the Company will promptly, but in any
event within 15 days, give written notice of such request to all holders of
Registrable Securities and Warrants and thereupon the Company will, subject to
the last paragraph of this Section 1.1, use its reasonable best efforts to
effect the prompt registration under the Securities Act of:
(A) the Registrable Securities which the Company has
been so requested to register by the Majority Holders, and
(B) all other Registrable Securities which the Company
has been requested to register by the holders thereof by
written request given to the Company within 20 days after the
giving of such written notice by the Company,
all to the extent reasonably required to permit the disposition of the Reg-
istrable Securities so to be registered in accordance with the intended method
or methods of disposition of each seller of such Registrable Securities.
Notwithstanding the foregoing, but subject to the rights of holders
of Registrable Securities under Section 2, (a) if the Board determines in its
good faith judgment, after consultation with a firm of nationally recognized
underwriters, that there will be an adverse effect on a then<PAGE>
<PAGE>
contemplated public offering of the Company's equity securities, the Company
may defer the filing (but not the preparation) of the registration statement
which is required to effect any registration pursuant to this Section 1.1,
during the period starting with the 30th day immediately preceding the date of
anticipated filing by the Company of, and ending on a date 60 days following
the effective date of, the registration statement relating to such public
offering, provided that
--------
at all times the Company is in good faith using all reasonable efforts to
cause such registration statement to be filed as soon as possible and
provided, further, that such period shall end on such earlier date as
- -------- -------
may be permitted by the underwriters of such underwritten public offering and
(b) if the Company shall at any time furnish to each seller of the Registrable
Securities to be registered a certificate signed by the President of the
Company stating that the Company has pending or in process a material
transaction, the disclosure of which would, in the good faith judgment of the
Board, materially and adversely affect the Company, the Company may defer the
filing (but not the preparation) of a registration statement for up to 60 days
(but the Company shall use its best efforts to resolve the transaction and
file the registration statement as soon as possible).
1.2 Registration Statement Form. The registration
---------------------------
requested pursuant to Section 1.1 shall be effected by the filing of a
registration statement on any form selected by the Company for which the
Company then qualifies.
1.3 Expenses. The Company will pay all Registration
--------
Expenses in connection with any registrations requested under Section 1.1.
1.4 No Company Initiated Registration. After receipt of
---------------------------------
notice of a requested registration pursuant to Section 1.1, the Company shall
not initiate, without the consent of the Majority Holders, a registration of
any of its securities for its own account until such registration has been
effected or such registration has been terminated.<PAGE>
<PAGE>
2. Incidental Registrations. If the Company at any time
------------------------
proposes to register any of its Common Stock under the Securities Act (other
than pursuant to Section 1 or a registration on Form S-4 or S-8 or any
successor form), and the registration form to be used may be used for the
registration of Registrable Securities, it will give prompt written notice to
all holders of Registrable Securities and Warrants of its intention to do so.
Upon the written request of any such holder made within 30 days after the
receipt of any such notice (which request shall specify the number of
Registrable Securities intended to be disposed of by such holder and the
intended method or methods of disposition thereof), the Company will use its
reasonable best efforts to effect the registration under the Securities Act of
all such Registrable Securities in accordance with such intended method or
methods of disposition, provided that:
(a) if, at any time after giving written notice of its
intention to register any such securities and prior to the
effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason
not to register such securities, the Company may, at its election,
give written notice of such determination to each holder of
Registrable Securities and Warrants and, thereupon, shall not be
obligated to register any Registrable Securities in connection with
such registration (but shall nevertheless pay the Registration
Expenses in connection therewith), without prejudice, however, to
the rights of the Holders to request that a registration be
effected under Section 1; and
(b) if a registration pursuant to this Section 2 involves an
underwritten offering, and the managing underwriter (or, in the
case of an offering that is not underwritten, a nationally
recognized investment banking firm) shall advise the Company in
writing (with a copy to each holder of Registrable Securities
requesting registration thereof) that, in its opinion,<PAGE>
<PAGE>
the number of securities requested and otherwise proposed to be
included in such registration exceeds the number which can be sold
in such offering without materially and adversely affecting the
offering price, the Company, (A) in the case of any initial public
offering of the Company's securities, will include in such
registration to the extent of the number which the Company is so
advised can be sold in such offering without such material adverse
effect, first, the securities, if any, being sold by the Company,
-----
second, the Registrable Securities proposed to be registered in
------
such offering by all holders of Registrable Securities, up to a cap
of 50% of all Registrable Securities then held by such holders,
third, all such other securities proposed to be registered in such
-----
offering by the Company for the accounts of each other Person, up
to a cap of the number of shares of Common Stock equal to the then
Applicable Percentage of all of the Common Stock issued and
outstanding on the date hereof on a fully diluted basis, and
fourth, the remaining Registrable Securities proposed to be
------
registered in such offering by all holders of Registrable
Securities and the remaining securities proposed to be registered
in such offering by the Company for the accounts of all other
Persons, pro rata among such holders of such Registrable Securities
--- ----
and such other Persons on the basis of the Inclusion Ratio, (B) in
the case of all other underwritten offerings, will include in such
registration to the extent of the number which the Company is so
advised can be sold in such offering without such material adverse
effect, first, the securities, if any, being sold by the Company,
-----
and second the Registrable Securities proposed to be registered in
------
such offering by all holders of Registrable Securities and all such
other securities proposed to be registered in such offering by the
Company for the accounts of all other Persons, pro rata among such
--- ----
holders of such Registrable Securities and such other Persons on
the basis of the number of securities requested to be included by
such holders and<PAGE>
<PAGE>
such other Person and (C) in the case of all other
offerings, will include in such registration to the extent of the
number which the Company is so advised can be sold in such offering
without such material adverse effect, first, the securities, if
-----
any, being sold by the Company, second, all securities proposed to
------
be registered in such offering by the Company for the accounts of
Persons other than the holders of Registrable Securities pursuant
to the exercise of demand registration rights if such securities
must be included prior to the Registrable Securities to prevent a
breach of any applicable registration rights agreement between the
Company and such other Persons, but only in such amount and to the
extent required by such agreement, and third, the Registrable
-----
Securities proposed to be registered in such offering by all
holders of such Registrable Securities and all such other
securities proposed to be registered in such offering by the
Company for the accounts of each other Person (not included in
those securities to be registered pursuant to clause second above),
------
pro rata among such holders of such Registrable Securities and all
such other Persons on the basis of the number of securities
requested to be included by such holders and such other Person.
The Company will pay all Registration Expenses in connection with
each registration of Registrable Securities requested pursuant to this Sec-
tion 2. No registration effected under this Section 2 shall relieve the
Company from its obligation to effect a registration under Section 1.
3. Registration Procedures. Subject to the restrictions set
-----------------------
forth in this Agreement, if and whenever the Company is required to use its
reasonable best efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in Sections 1 and 2, the
Company will promptly:
<PAGE>
<PAGE>
(a) prepare, and as soon as practicable, but in any event
within 60 days thereafter file with the Commission, a registration
statement with respect to such Registrable Securities, make all
required filings with the NASD and use its reasonable best efforts
to cause such registration statement to become effective;
(b) prepare and promptly file with the Commission such
amendments and post-effective amendments and supplements to such
registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement
effective for so long as is required to comply with the provisions
of the Securities Act and to complete the disposition of all
securities covered by such registration statement in accordance
with the intended method or methods of disposition thereof, but in
no event for a period of more than four months after such
registration statement becomes effective;
(c) furnish to counsel selected by the Majority Holders
copies of all documents proposed to be filed with the Commission in
connection with such registration;
(d) furnish to each seller of Registrable Securities, without
charge, such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in
each case including all exhibits and documents filed therewith) and
such number of copies of the prospectus included in such registra
ion statement (including each preliminary prospectus and any
summary prospectus) and any other prospectus filed under Rule 424
under the Securities Act, in conformity with the requirements of
the Securities Act, and such other documents, as such seller may
reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such seller in accordance with the
intended method or methods of disposition thereof;
<PAGE>
<PAGE>
(e) use its reasonable best efforts to register or qualify
such Registrable Securities covered by such registration statement
under the securities or blue sky laws of such jurisdictions as each
seller shall reasonably request, and do any and all other acts and
things which may be necessary or advisable to enable such seller to
consummate the disposition of such Registrable Securities in such
jurisdictions in accordance with the intended method or methods of
disposition thereof, provided that the Company shall not for any
such purpose be required to qualify generally to do business as a
foreign corporation in any jurisdiction wherein it is not so
qualified, subject itself to taxation in any jurisdiction wherein
it is not so subject, or take any action which would subject it to
general service of process in any jurisdiction wherein it is not so
subject;
(f) use its reasonable best efforts to cause all Registrable
Securities covered by such registration statement to be registered
with or approved by such other governmental agencies, authorities
or self-regulatory bodies as may be necessary by virtue of the
business and operations of the Company to enable the seller or
sellers thereof to consummate the disposition of such Registrable
Securities in accordance with the intended method or methods of
disposition thereof;
(g) furnish to each seller of Registrable Securities a signed
counterpart, addressed to the sellers, of
(i) an opinion of counsel for the Company experienced in
securities law matters, dated the effective date of the
registration statement (and, if such registration includes an
underwritten public offering, the date of the closing under
the underwriting agreement), and
<PAGE>
<PAGE>
(ii) a "comfort" letter (unless the registration is
pursuant to Section 2 and such a letter is not otherwise being
furnished to the Company), dated the effective date of such
registration statement (and if such registration includes an
underwritten public offering, dated the date of the closing
under the underwriting agreement), signed by the independent
public accountants who have issued an audit report on the
Company's financial statements included in the registration
statement,
covering such matters as are customarily covered in opinions of
issuer's counsel and in accountants' letters delivered to the
underwriters in underwritten public offerings of securities and
such other matters as the Majority Holders may reasonably request;
(h) notify each seller of any Registrable Securities covered
by such registration statement at any time when the Company has
knowledge that a prospectus relating thereto is required to be de
ivered under the Securities Act of the happening of any event or
existence of any fact as a result of which the prospectus included
in such registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances
then existing, and, as promptly as is practicable, prepare and
furnish to such seller a reasonable number of copies of a sup
lement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such securities,
such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in light
of the circumstances then existing;
<PAGE>
<PAGE>
(i) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the Commission, and make
available to its security holders, as soon as reasonably
practicable, an earnings statement of the Company (in form
complying with the provisions of Rule 158 under the Securities Act)
covering the period of at least 12 months, but not more than 18
months, beginning with the first month after the effective date of
the registration statement;
(j) notify each seller of any Registrable Securities covered
by such registration statement (i) when the prospectus or any
prospectus supplement or post-effective amendment has been filed,
and, with respect to such registration statement or any
post-effective amendment, when the same has become effective,
(ii) of any request by the Commission for amendments or supplements
to such registration statement or to amend or to supplement such
prospectus or for additional information, (iii) of the issuance by
the Commission of any stop order suspending the effectiveness of
such registration statement or the initiation of any proceedings
for that purpose of which the Company has knowledge and (iv) of the
suspension of the qualification of such securities for offering or
sale in any jurisdiction, or of the institution of any proceedings
for any of such purposes of which the Company has knowledge;
(k) use every reasonable effort to obtain the lifting of any
stop order that might be issued suspending the effectiveness of
such registration statement at the earliest possible moment;
(l) use its reasonable best efforts (i) (A) to list such
Registrable Securities on any securities exchange on which the
equity securities of the Company are then listed or, if no such
equity securities are then listed, on an exchange selected by the
Company, if such listing is then permitted under the rules of such
<PAGE>
<PAGE>
exchange, or (B) if such listing is not practicable, to secure
designation of such securities as a NASDAQ "national market system
security" within the meaning of Rule 11Aa2-1 under the Exchange Act
or, failing that, to secure NASDAQ authorization for such
Registrable Securities, and, without limiting the foregoing, to
arrange for at least two market makers to register as such with re
pect to such Registrable Securities with the NASD, and (ii) to
provide a transfer agent and registrar for such Registrable
Securities not later than the effective date of such registration
statement;
(m) enter into such agreements and take such other actions as
the sellers of Registrable Securities or the underwriters
reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities, including, without
limitation, to the extent that the offering in question is an
underwritten offering, preparing for, and participating in, such
number of "road shows" and all such other customary selling efforts
as the underwriters reasonably request in order to expedite or
facilitate such disposition; and
(n) use its reasonable best efforts to take all other steps
necessary to effect the registration of such Registrable Securities
contemplated hereby.
The Company may require each seller of any Registrable Securities as
to which any registration is being effected to furnish to the Company such
information regarding such seller, including, without limitation, its
ownership of Registrable Securities and the disposition of such Registrable
Securities, as the Company may from time to time reasonably request in writing
and as shall be required by law in connection therewith. Each such holder
agrees to furnish promptly to the Company all information required to be
disclosed in order to make the information previously furnished to the Company
by such holder not materially misleading.
<PAGE>
<PAGE>
The Company agrees not to file or make any amendment to any
registration statement with respect to any Registrable Securities, or any
amendment of or supplement to the prospectus used in connection therewith,
which refers to any seller of any Registrable Securities covered thereby by
name, or otherwise identifies such seller as the holder of any Registrable
Securities, without the consent of such seller, such consent not to be
unreasonably withheld, unless such disclosure is required by law.
By acquisition of Registrable Securities, each holder of such
Registrable Securities shall be deemed to have agreed that upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 3(h), such holder will promptly discontinue such holder's disposition
of Registrable Securities pursuant to the registration statement covering such
Registrable Securities until such holder's receipt of the copies of the sup-
plemented or amended prospectus contemplated by Section 3(h). If so directed
by the Company, each holder of Registrable Securities will deliver to the
Company (at the Company's expense) all copies, other than permanent file
copies, in such holder's possession of the prospectus covering such
Registrable Securities at the time of receipt of such notice. In the event
that the Company shall give any such notice, the period mentioned in Section
3(b) shall be extended by the number of days during the period from and
including the date of the giving of such notice to and including the date when
each seller of any Registrable Securities covered by such registration
statement shall have received the copies of the supplemented or amended
prospectus contemplated by Section 3(h).
4. Underwritten Offerings.
----------------------
4.1 Underwriting Agreement. If the Registrable Securities
----------------------
which are being sold pursuant to a registration requested under Section 1 are
being sold in an underwritten offering, the Company shall enter into an
underwriting agreement with the underwriters for such offering, such<PAGE>
<PAGE>
agreement to be reasonably satisfactory in substance and form to the
underwriters and to contain such representations and warranties by the Company
and such other terms and provisions as are customarily contained in agreements
of this type, including, without limitation, indemnities to the effect and to
the extent provided in Section 8. The holders of Registrable Securities to be
distributed by such underwriters shall be parties to such underwriting
agreement and may, at their option, require that any or all of the repre-
sentations and warranties by, and the agreements on the part of, the Company
to and for the benefit of such underwriters be made to and for the benefit of
such holders of Registrable Securities and that any or all of the conditions
precedent to the obligations of such underwriters under such underwriting
agreement shall also be conditions precedent to the obligations of such
holders of Registrable Securities. No underwriting agreement (or other
agreement in connection with such offering) shall require any holder of
Registrable Securities to make any representations or warranties to or
agreements with the Company or the underwriters other than representations,
warranties or agreements regarding such holder, the ownership of such holder's
Registrable Securities and such holder's intended method or methods of
disposition and any other representation required by law or to furnish any
indemnity to any Person which is broader than the indemnity furnished by such
holder in Section 8.2.
4.2 Selection of Underwriters. If the Company at any time
-------------------------
proposes to register any of its securities under the Securities Act for sale
for its own account pursuant to an underwritten offering, the Company will
have the right to select the managing underwriter (which shall be of nation-
ally recognized standing) to administer the offering.
5. Holdback Agreements. If and whenever the Company
-------------------
proposes to register any of its Common Stock under the Securities Act for its
own account (other than on Form S-4 or S-8 or any successor form) or is
required to use its reasonable best efforts to effect the registration of any
Registrable Securities under the Securities Act pursuant to<PAGE>
<PAGE>
Section 1, each holder of Registrable Securities agrees by acquisition of such
Registrable Securities not to effect any public sale or distribution,
including any sale pursuant to Rule 144 under the Securities Act, of any
Registrable Securities within seven days prior to and 90 days (unless advised
in writing by the managing underwriter that a longer period, not to exceed 180
days, is required, or such shorter period as the managing underwriter for any
underwritten offering may agree) after the effective date of the registration
statement relating to such registration, except as part of such registration.
(b) The Company agrees not to effect any public sale or
distribution of its Common Stock or securities convertible into or
exchangeable or exercisable for any of such securities within seven days prior
to and 90 days (unless advised in writing by the managing underwriter that a
longer period, not to exceed 180 days, is required, or such shorter period as
the managing underwriter for any underwritten offering may agree) after the
effective date of any registration statement (except as part of such registra-
tion or pursuant to a registration on Form S-4 or S-8 or any successor form)
covering Registrable Securities. In addition, the Company shall use its best
efforts to cause each holder of its equity securities or any securities
convertible into or exchangeable or exercisable for any of such securities,
whether outstanding on the date of this Agreement or issued at any time after
the date of this Agreement (other than any such securities acquired in a
public offering), to agree not to effect any such public sale or distribution
of such securities during such period, except as part of any such registration
if permitted, and to cause each such holder to enter into a similar agreement
to such effect with the Company.
6. Preparation; Reasonable Investigation. In connection
-------------------------------------
with the preparation and filing of each registration statement registering
Registrable Securities under the Securities Act, the Company will give the
holders of such Registrable Securities so to be registered and their<PAGE>
<PAGE>
underwriters, if any, and their respective counsel and accountants the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Commission, and each
amendment thereof or supplement thereto, and will give each of them such
access to the financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries and such opportunities to
discuss the business of the Company with its officers and the independent
public accountants who have issued audit reports on its financial statements
as shall be reasonably requested by such holders in connection with such reg-
istration statement.
7. [Intentionally Omitted]
-----------------------
8. Indemnification.
---------------
8.1 Indemnification by the Company. In the event of any
------------------------------
registration of any Registrable Securities pursuant to this Agreement, the
Company will indemnify and hold harmless (a) the seller of such Registrable
Securities, (b) the directors, officers, partners, employees, agents and
Affiliates of such seller, (c) each Person who participates as an underwriter
in the offering or sale of such securities and (d) each person, if any, who
controls (with the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act) any of the foregoing against any and all losses, claims,
damages or liabilities (or actions or proceedings in respect thereof), joint
or several, directly or indirectly based upon or arising out of (i) any untrue
statement or alleged untrue statement of a fact contained in any registration
statement under which such Registrable Securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or summary pro-
spectus contained therein or used in connection with the offering of
securities covered thereby, or any amendment or supplement thereto, or
(ii) any omission or alleged omission to state a fact required to be stated
therein or necessary to make the statements therein not misleading; and the
Company will reimburse each such indemnified party for any<PAGE>
<PAGE>
legal or any other expenses reasonably incurred by them in connection with
enforcing its rights hereunder or under the underwriting agreement entered
into in connection with such offering or investigating, preparing, pursuing or
defending any such loss, claim, damage, liability, action or proceeding,
except insofar as any such loss, claim, damage, liability, action, proceeding
or expense arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in such registration
statement, any such preliminary prospectus, final prospectus, summary prospec-
tus, amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such seller expressly for use in the
preparation thereof. Such indemnity shall remain in full force and effect,
regardless of any investigation made by such indemnified party and shall
survive the transfer of such Registrable Securities by such seller. The
indemnity agreement contained in this Section 8.1 shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability, action or
proceeding if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld).
8.2 Indemnification by the Sellers. The Company may require,
------------------------------
as a condition to including any Registrable Securities in any registration
statement filed pursuant to Section 1 or 2, that the Company shall have
received an undertaking satisfactory to it from each of the prospective
sellers of such Registrable Securities to indemnify and hold harmless,
severally, not jointly, in the same manner and to the same extent as set forth
in Section 8.1, the Company, its directors, officers, each person, if any, who
controls (within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act) the Company, each underwriter and any of the other
sellers of securities in such offering with respect to any statement or
alleged statement in or omission or alleged omission from such registration
statement, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, if such statement
or<PAGE>
<PAGE>
alleged statement or omission or alleged omission was made in reliance upon
and in conformity with written information furnished to the Company by such
seller expressly for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement. Such indemnity shall remain in full force and effect, regardless
of any investigation made by or on behalf of the Company or any such other
indemnified Person, officer or controlling Person and shall survive the
transfer of such Registrable Securities by such seller. The indemnity
agreement contained in this Section 8.2 shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, action or proceeding if
such settlement is effected without the consent of such seller (which consent
shall not be unreasonably withheld). The indemnity provided by each seller of
Registrable Securities under this Section 8.2 shall be limited in amount to
the net amount of proceeds actually received by such seller from the sale of
Registrable Securities pursuant to such registration statement.
8.3 Notices of Claims, etc. Promptly after receipt by an
----------------------
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding paragraphs of this Section 8,
such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to the latter of the
commencement of such action or proceeding, provided
--------
that the failure of any indemnified party to give notice as provided herein
shall not relieve the indemnifying party of its obligations under the
preceding paragraphs of this Section 8, except to the extent that the
indemnifying party is materially prejudiced by such failure to give notice.
In case any such action is brought against an indemnified party, the
indemnifying party will be entitled to participate therein and to assume the
defense thereof, jointly with any other indemnifying party similarly notified,
to the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such indem-
nified party<PAGE>
<PAGE>
of its election so to assume the defense thereof, the indemnifying party will
not be liable to such indemnified party for any legal or other expenses subse-
quently incurred by the latter in connection with the defense thereof except
for the reasonable fees and expenses of any counsel retained by such
indemnified party to monitor such action or proceeding. Notwithstanding the
foregoing, if such indemnified party and the indemnifying party reasonably
determine, based upon advice of their respective independent counsel, that a
conflict of interest may exist between the indemnified party and the
indemnifying party with respect to such action and that it is advisable for
such indemnified party to be represented by separate counsel, such indemnified
party may retain other counsel, reasonably satisfactory to the indemnifying
party, to represent such indemnified party, and the indemnifying party shall
pay all reasonable fees and expenses of such counsel. No indemnifying party,
in the defense of any such claim or litigation, shall, except with the consent
of such indemnified party, which consent shall not be unreasonably withheld,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
of such claim or litigation.
8.4. Other Indemnification. Indemnification similar to that
---------------------
specified in the preceding paragraphs of this Section 8 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration (other than under the
Securities Act) or other qualification of such Registrable Securities under
any federal or state law or regulation of any governmental authority.
8.5. Indemnification Payments. Any indemnification required
------------------------
to be made by an indemnifying party pursuant to this Section 8 shall be made
by periodic payments to the indemnified party during the course of the action
or proceeding, as and when bills are received by such indemnifying party with
respect to an indemnifiable loss,<PAGE>
<PAGE>
claim, damage, liability or expense incurred by such indemnified party.
8.6. Other Remedies. If for any reason the foregoing
--------------
indemnity is unavailable, or is insufficient to hold harmless an indemnified
party, other than by reason of the exceptions provided therein, then the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such losses, claims, damages, liabilities,
actions, proceedings or expenses in such proportion as is appropriate to
reflect the relative benefits to and faults of the indemnifying party on the
one hand and the indemnified party on the other in connection with the offer-
ing of Registrable Securities (taking into account the portion of the proceeds
of the offering realized by each such party) and the statements or omissions
or alleged statements or omissions which resulted in such loss, claim, damage,
liability, action, proceeding or expense, as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by reference to, among other things,
whether the untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statements or
omissions. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to con-
tribution from any person who was not guilty of such fraudulent misrepresen-
tation. No party shall be liable for contribution under this Section 8.6
except to the extent and under such circumstances as such party would have
been liable to indemnify under this Section 8 if such indemnification were en-
forceable under applicable law.
9. Definitions. For purposes of this Agreement, the
-----------
following terms shall have the following respective meanings:
<PAGE>
<PAGE>
"Affiliate": A Person that directly, or indirectly through
---------
one or more intermediaries, controls, or is controlled by, or is under common
control with, the Person specified.
"Applicable Percentage" means (i) in the event that the
Company's initial Public Offering (as defined in the Warrants) occurs prior to
July 1, 1997, 4%, (ii) in the event the Company's initial Public Offering
occurs on or subsequent to July 1, 1997 but prior to January 1, 1998, 4.5% and
(iii) in the event the Company's initial Public Offering occurs at any time on
or subsequent to January 1, 1998, 5%.
"Board": The Board of Directors of the Company
"Commission": The Securities and Exchange Commission.
----------
"Class A Common Stock": The Company's Class A Common Stock,
--------------------
no par value per share.
"Exchange Act": The Securities Exchange Act of 1934, as
------------
amended, or any successor federal statute, and the rules and regulations
thereunder which shall be in effect from time to time.
"Inclusion Ratio" means, with respect to any shares to be
---------------
included by the holders of Registrable Securities and all other Persons
pursuant to the "cut-back" provisions of Section 2 of this Agreement, 33.3%,
in the case of the holders of Registrable Securities, and 66.6%, in the case
of all such other Persons.
"Issue Date" means the date upon which the Warrants are
----------
originally issued.
"Majority Holders": The Holders of Warrants exercisable for
----------------
more than 50% of the aggregate number of<PAGE>
<PAGE>
shares of Class A Common Stock then purchasable upon exercise of all such
Warrants.
"NASD": National Association of Securities Dealers, Inc.
----
"NASDAQ": The Nasdaq National Market.
------
"Person": An individual, corporation, partnership, joint
------
venture, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Registrable Securities": The shares of Class A or Class B
----------------------
Common Stock beneficially owned (within the meaning of Section 13d-3 of the
Exchange Act) by the Holders or any other Person made a party hereto pursuant
to Section 10.2, including all the shares of Class A Common Stock into which
the Warrants are exercisable pursuant to the terms of the Warrants, together,
in all cases, with any securities issued or distributed in respect of any such
Class A Common Stock by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization, reorganization,
merger, consolidation, or otherwise. As to any particular Registrable Securi-
ties, such securities shall cease to be Registrable Securities when (i) a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement, (ii) they shall
have been sold to the public pursuant to Rule 144 under the Securities Act,
(iii) such securities shall have been otherwise transferred and subsequent
disposition of them shall not require registration or qualification of them
under the Securities Act or any similar state law then in force or (iv) they
shall have ceased to be outstanding, provided, that a transfer of a Warrant or
Warrants pursuant
--------
to the terms thereof shall not cause the shares of Class A Common Stock into
which such Warrant or Warrants are exercisable to cease to be Registrable
Securities.
<PAGE>
<PAGE>
"Registration Expenses": All expenses incident to the
---------------------
Company's performance of or compliance with any registration pursuant to this
Agreement, including, without limitation, (i) registration, filing and NASD
fees, (ii) fees and expenses of complying with securities or blue sky laws,
(iii) fees and expenses associated with listing securities on an exchange or
NASDAQ, (iv) word processing, duplicating and printing expenses, (v) messenger
and delivery expenses, (vi) transfer agents', trustees', depositories',
registrars' and fiscal agents' fees, (vii) fees and disbursements of counsel
for the Company and of its independent public accountants, including the
expenses of any special audits or "cold comfort" letters, (viii) reasonable
fees and disbursements of any one counsel retained by the sellers of
Registrable Securities, which counsel shall be designated by the Majority
Holders, and (ix) any fees and disbursements of underwriters customarily paid
by issuers or sellers of securities, but excluding underwriting discounts and
commissions and transfer taxes, if any.
"Securities Act": The Securities Act of 1933, as amended, or
--------------
any successor federal statute, and the rules and regulations thereunder which
shall be in effect from time to time.
"Warrant" or "Warrants": The Company's warrants (Nos. 1-5) to
------- --------
purchase Class A Common Stock issued to the Holders and all warrants issued
upon transfer, division or combination of, or in substitution for, thereof.
10. Miscellaneous.
-------------
10.1. Rule 144 etc. If the Company shall have filed a
------------
registration statement pursuant to the requirements of Section 12 of the
Exchange Act or a registration statement pursuant to the requirements of the
Securities Act relating to any class of equity securities, the Company will
file the reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the Commission there-
under, and will take<PAGE>
<PAGE>
such further action as any holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such holder to
sell Registrable Securities without registration under the Securities Act
within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such rule may be amended from time to time, or (b) any
successor rule or regulation hereafter adopted by the Commission. Upon the
request of any holder of Registrable Securities, the Company will deliver to
such holder a written statement as to whether it has complied with such
requirements.
10.2. Successors, Assigns and Transferees. This Agreement
-----------------------------------
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns. In addition, and provided
that an express assignment shall have been made, a copy of which shall have
been delivered to the Company, the provisions of this Agreement that are for
the benefit of a holder of Registrable Securities shall be for the benefit of
and enforceable by any subsequent holder of any Registrable Securities or
Warrants.
10.3.Stock Splits, etc. Each holder of Registrable Securities
-----------------
agrees that it will vote to effect a stock split or combination with respect
to any Registrable Securities in connection with any registration of such
Registrable Securities hereunder, or otherwise, if the managing underwriter
shall advise the Company in writing (or, in connection with an offering that
is not underwritten, if an investment banker shall advise the Company in
writing) that in its opinion such a stock split or combination would
facilitate or increase the likelihood of success of the offering. The Company
shall cooperate in all reasonable respects in effecting any such stock split
or combination.
10.4. Amendment and Modification. This Agreement may be
--------------------------
amended, modified or supplemented by the Company with the written consent of
the Majority Holders, provided that
--------<PAGE>
<PAGE>
all Holders shall be notified of such amendment, modification or supplement.
10.5. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES HEREUNDER AND THE PERSONS SUBJECT HERETO SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PRINCIPLES
THEREOF.
10.6. Invalidity of Provision. The invalidity or
-----------------------
unenforceability of any provision of this Agreement in any jurisdiction shall
not affect the validity or enforceability of the remainder of this Agreement
in that jurisdiction or the validity or enforceability of this Agreement,
including that provision, in any other jurisdiction.
10.7. Notices. All notices, requests, demands, letters,
-------
waivers and other communications required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been duly given if
(a) delivered personally, (b) mailed, certified or registered mail with
postage prepaid, (c) sent by next-day or overnight mail or delivery or
(d) sent by telecopy or telegram, as follows:
(i) If to the Company, to it at:
Telegroup, Inc.
2098 Nutmeg Avenue
Fairfield, Iowa 52556
Attention: Douglas Neish
Telecopy: (515) 469-4610
<PAGE>
<PAGE>
with a copy to:
Swidler & Berlin
3000 K Street
Suite 300
Washington, D.C. 20007-5116
Attention: John Klusaritz, Esq.
Telecopy No.: (202) 424-7643
(ii) If to Greenwich Street Capital Partners, L.P., to it at:
Greenwich Street Capital Partners, L.P.
388 Greenwich Street
36th Floor
New York, New York 10013
Attention: Robert Hamwee
Telecopy: (212) 816-0166
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Andrew L. Sommer, Esq.
Telecopy: (212) 909-6836
(iii) If to any other Holder, to the address of such Holder as
set forth in the books and records of the Company
or to such other person or address as any party shall specify by notice in
writing to the Company. All such notices, requests, demands, letters, waivers
and other communications shall be deemed to have been received (w) if by
personal delivery on the day after such delivery, (x) if by certified or
registered mail, on the fifth business day after the mailing thereof, (y) if
by next-day or overnight mail or delivery, on the day delivered or (z) if by
telecopy or telegram, on the next day following the day on which such<PAGE>
<PAGE>
telecopy or telegram was sent, provided that a copy is also sent by certified
or registered mail.
10.8.Headings; Execution in Counterparts. The headings and
-----------------------------------
captions contained herein are for convenience and shall not control or affect
the meaning or construction of any provision hereof. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original and which together shall constitute one and the same instrument.
10.9. Injunctive Relief. Each of the parties recognizes and
-----------------
agrees that money damages may be insufficient and, therefore, in the event of
a breach of any provision of this Agreement the aggrieved party may elect to
institute and prosecute proceedings in any court of competent jurisdiction to
enforce specific performance or to enjoin the continuing breach of this
Agreement. Such remedies shall, however, be cumulative and not exclusive, and
shall be in addition to any other remedy which such party may have.
10.10 Further Assurances. Subject to the specific terms of
------------------
this Agreement, each of the Company and the Holders shall make, execute,
acknowledge and deliver such other instruments and documents, and take all
such other actions, as may be reasonably required in order to effectuate the
purposes of this Agreement and to consummate the transactions contemplated
hereby.
10.11. Entire Agreement. This Agreement is intended by the
----------------
parties hereto as a final expression of their agreement and intended to be a
complete and exclusive statement of their agreement and understanding in
respect of the subject matter contained herein. This Agreement supersedes all
prior or contemporaneous agreements and understandings between the parties
with respect to such subject matter.
10.12. Term. This Agreement shall be effective as of the date
----
hereof and shall continue in effect<PAGE>
<PAGE>
thereafter until the earlier of (a) its termination by the consent of the
parties hereto or their respective successors in interest and (b) the date on
which no Registrable Securities remain outstanding.
[Rest of Page Intentionally Left Blank]<PAGE>
<PAGE>
IN WITNESS WHEREOF, this Agreement has been signed by each of the
parties hereto, effective as of the date first written above.
TELEGROUP, INC.
By:
------------------------------
Name:
Title:
GREENWICH STREET CAPITAL
PARTNERS, L.P.
By:Greenwich Street Investments, L.P. Inc, its
general partner
By:Greenwich Street Investments, Inc., General
Partner
By:
--------------------------------
Name:
Title:
GREENWICH STREET CAPITAL OFFSHORE
FUND, LTD.
By:Greenwich Street Capital Partners, Inc., as
Manager
By:
----------------------------------------
Name:
Title:
<PAGE>
<PAGE>
TRV EMPLOYEES FUND, L.P.
By:TRV Employees Investments, Inc., its general
partner
By:
---------------------------------------
Name:
Title:
THE TRAVELERS INSURANCE COMPANY
By:
---------------------------------------
Name:
Title:
THE TRAVELERS LIFE AND ANNUITY
COMPANY
By:
----------------------------------------
Name:
Title:
Exhibit 10.7
REGISTRATION RIGHTS AGREEMENT
between
TELEGROUP, INC.
and
THE HOLDERS NAMED HEREIN
Dated as of April 9, 1997
<PAGE>
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of April 9, 1997, between
Telegroup, Inc., an Iowa corporation (the "Company"), and the holders of
certain shares of Common Stock and certain options to purchase Common Stock
(the "Stock Options") set forth in Exhibit A attached hereto (collectively,
the "Holders" and each a "Holder"). Capitalized terms used herein without
definition are defined in Section 8.
1. Registrations Upon Request.
1.1 Requests. From the S-3 Eligiblity Date until the date which is the
second anniversary of the S-3 Eligibility Date, the Holders shall have the
right to make one request per year that the Company effect the registration
under the Securities Act of any of the Registrable Securities of the Holders,
each such request to specify the intended method or methods of disposition
thereof, provided that (a) in no event shall either such request cover less
than 20% of the aggregate number of shares of Registrable Securities, and (b)
the Company shall not be required to effect a registration pursuant to this
Section 1.1 until a period of 90 days shall have elapsed from the effective
date of the most recent registration previously effected by the Company,
provided, further, that (i) if the registration statement relating to any such
request is not declared effective within 90 days of the date such registration
statement is first filed with the Commission or (ii) if, within 180 days after
the registration relating to any such request has become effective, such
registration is interfered with by any stop order, injunction or other order
or requirement of the Commission or other governmental agency or court for any
reason and the Company fails to have such stop order, injunction or other
order or requirement removed, withdrawn or resolved to the reasonable
satisfaction of the Holders within 45 days or (iii) the conditions to closing
specified in the underwriting agreement entered into in connection with the
registration relating to any such request are not satisfied (other than as a
result of a default or breach thereunder by the Holders), then such request
shall not be counted for purposes of the request limitations of the Holders
set forth above. Upon any such request, the Company will promptly, but in any
event within 15 days, give written notice of such request to all holders of
Registrable Securities and thereupon the Company will, subject to the last
paragraph of this Section 1.1, use its reasonable best efforts to effect the
prompt registration under the Securities Act of:
(A) the Registrable Securities which the Company has been so
requested to register by the Holders, and
<PAGE>
<PAGE>
(B) all other Registrable Securities which the Company has been
requested to register by the holders thereof by written request given to
the Company within 20 days after the giving of such written notice by
the Company,
all to the extent reasonably required to permit the disposition of the
Registrable Securities to be registered in accordance with the intended method
or methods of disposition of each seller of such Registrable Securities.
Notwithstanding the foregoing, (a) if the Board (or any executive
committee thereof) determines in its good faith judgment, that there will be
an adverse effect on a then contemplated public offering of the Company's
equity securities, the Company may defer the filing (but not the preparation)
of the registration statement which is required to effect any registration
pursuant to this Section 1.1, during the period starting with the 30th day
immediately preceding the date of anticipated filing by the Company of, and
ending on a date 60 days following the effective date of, the registration
statement relating to such public offering, provided that at all times the
Company is in good faith using all reasonable efforts to cause such other
registration statement to be filed as soon as possible and (b) if the Company
shall at any time furnish to each seller of the Registrable Securities to be
registered a certificate signed by the President of the Company or other
authorized officer stating that the Company has pending or in process a
material transaction, the disclosure of which would, in the good faith
judgment of the Board, materially and adversely affect the Company, the
Company may defer the filing (but not the preparation) of a registration
statement for up to 75 days (but the Company shall use its best efforts to
resolve the transaction and file the registration statement as soon as
possible).
1.2 Registration Statement Form. The registration requested
pursuant to Section 1.1 shall be effected by the filing of a registration
statement on any form selected by the Company for which the Company then
qualifies.
1.3 Expenses. The Company will pay all Registration Expenses in
connection with any registrations requested under Section 1.1. All other
expenses shall be paid by the selling securityholders.
2. Incidental Registrations. If the Company at any time proposes
to register any of its Common Stock under the Securities Act (other than
pursuant to Section 1 or a registration on Form S-4 or S-8 or any successor
form), and the registration form to be used may be used for the registration
of Registrable Securities, it will give prompt written notice to all holders
of Registrable Securities of its intention to do so. Upon the written request
of any such holder made within 15 days after the receipt of any such notice
(which request shall specify the number of Registrable Securities intended to
<PAGE>
<PAGE>
be disposed of by such holder and the intended method or methods of
disposition thereof), the Company will use its reasonable best efforts to
effect the registration under the Securities Act of all such Registrable
Securities in accordance with such intended method or methods of disposition,
provided that:
(a) if, at any time after giving written notice of its intention to
register any such securities and prior to the effective date of the
registration statement filed in connection with such registration, the
Company shall determine for any reason not to register such securities,
the Company may, at its election, give written notice of such
determination to each holder of Registrable Securities and, thereupon,
shall not be obligated to register any Registrable Securities in
connection with such registration (but shall nevertheless pay the
Registration Expenses in connection therewith) in accordance with the
terms hereof, without prejudice, however, to the rights of the Holders to
request that a registration be effected under Section 1; and
(b) if a registration pursuant to this Section 2 involves an
underwritten offering, and the managing underwriter (or, in the case of
an offering that is not underwritten, a nationally recognized investment
banking firm) shall advise the Company in writing that, in its opinion,
the number of securities requested and otherwise proposed to be included
in such registration exceeds the number which can be sold in such
offering without materially and adversely affecting the offering price,
the Company, (A) in the case of any underwritten primary registration on
behalf of the Company, will include in such registration to the extent of
the number which the Company is so advised can be sold in such offering
without such material adverse effect, first, the securities being sold by
the Company, and second the Registrable Securities proposed to be
registered in such offering by all holders of Registrable Securities and
all such other securities proposed to be registered in such offering by
the Company for the accounts of all other Persons, pro rata among such
holders of such Registrable Securities and such other Persons on the
basis of the number of securities requested to be included by such
holders and such other Persons and (B) in the case of an underwritten
secondary registration on behalf of the holders of the Company's
securities other than the holders of Registrable Securities, will include
in such registration to the extent of the number which the Company is so
advised can be sold in such offering without such material adverse
effect, first, all securities proposed to be registered in such offering
by the Company for the accounts of Persons other than the holders of
Registrable Securities pursuant to the exercise of demand registration
rights if such securities must be included prior to the Registrable
Securities to prevent a breach of any applicable registration rights<PAGE>
<PAGE>
agreement between the Company and such other Persons, but only in such
amount and to the extent required by such agreement, and, second, the
Registrable Securities proposed to be registered in such offering by all
holders of such Registrable Securities and all such other securities
proposed to be registered in such offering by the Company for the
accounts of each other Person (not included in those securities to be
registered pursuant to clause first above), pro rata among such holders
of such Registrable Securities and all such other Persons on the basis of
the number of securities requested to be included by such holders and
such other Persons.
The Company will pay the Registration Expenses in connection with
each registration of Registrable Securities requested pursuant to this
Section 2. All other expenses shall be paid by the selling securityholders.
No registration effected under this Section 2 shall relieve the Company from
its obligation to effect a registration under Section 1.
3. Registration Procedures. Subject to the restrictions set forth
in this Agreement, if and whenever the Company is required to use its
reasonable best efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in Sections 1 and 2, the
Company will promptly:
(a) prepare, and as soon as practicable, file with the Commission a
registration statement with respect to such Registrable Securities, make
all required filings with the NASD and use its reasonable best efforts to
cause such registration statement to become effective;
(b) prepare and promptly file with the Commission such amendments
and post-effective amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for so long as is
required to comply with the provisions of the Securities Act and to
complete the disposition of all securities covered by such registration
statement in accordance with the intended method or methods of
disposition thereof;
(c) furnish to counsel selected by the holder of a majority of the
Registrable Securities included in such registration copies of all
documents proposed to be filed with the Commission in connection with
such registration;
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<PAGE>
(d) furnish to each seller of Registrable Securities, without
charge, such number of conformed copies of such registration statement
and of each such amendment and supplement thereto (in each case including
all exhibits and documents filed therewith) and such number of copies of
the prospectus included in such registration statement (including each
preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 under the Securities Act, in conformity
with the requirements of the Securities Act, and such other documents, as
such seller may reasonably request in order to facilitate the disposition
of the Registrable Securities owned by such seller in accordance with the
intended method or methods of disposition thereof;
(e) use its reasonable best efforts to register or qualify such
Registrable Securities covered by such registration statement under the
securities or blue sky laws of such jurisdictions as each seller shall
reasonably request, and do any and all other acts and things which may be
necessary or advisable to enable such seller to consummate the
disposition of such Registrable Securities in such jurisdictions in
accordance with the intended method or methods of disposition thereof,
provided that the Company shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified, subject itself to taxation
in any jurisdiction wherein it is not so subject, or take any action
which would subject it to general service of process in any jurisdiction
wherein it is not so subject;
(f) use its reasonable best efforts to cause all Registrable
Securities covered by such registration statement to be registered with
or approved by such other governmental agencies, authorities or self-
regulatory bodies as may be necessary by virtue of the business and
operations of the Company to enable the seller or sellers thereof to
consummate the disposition of such Registrable Securities in accordance
with the intended method or methods of disposition thereof;
(g) furnish to each seller of Registrable Securities a signed
counterpart, addressed to the sellers, of
(i) an opinion of counsel for the Company experienced in
securities law matters, dated the effective date of the registration
statement (and, if such registration includes an underwritten public
offering, the date of the closing under the underwriting agreement),
and
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(ii) a "comfort" letter (unless the registration is pursuant to
Section 2 and such a letter is not otherwise being furnished to the
Company), dated the effective date of such registration statement
(and if such registration includes an underwritten public offering,
dated the date of the closing under the underwriting agreement),
signed by the independent public accountants who have issued an
audit report on the Company's financial statements included in the
registration statement,
covering such matters as are customarily covered in opinions of issuer's
counsel and in accountants' letters delivered to the underwriters in
underwritten public offerings of securities and such other matters as the
Holders of a majority of the Registrable Securities included in such
registration may reasonably request;
(h) notify each seller of any Registrable Securities covered by
such registration statement at any time when the Company has knowledge
that a prospectus relating thereto is required to be delivered under the
Securities Act of the happening of any event or existence of any fact as
a result of which the prospectus included in such registration statement,
as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing, and, as promptly as is practicable, prepare
and furnish to such seller a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the
circumstances then existing;
(i) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make available to
its security holders, as soon as reasonably practicable, an earnings
statement of the Company (in form complying with the provisions of Rule
158 under the Securities Act) covering the period of at least 12 months,
but not more than 18 months, beginning with the first month after the
effective date of the registration statement;
(j) notify each seller of any Registrable Securities covered by
such registration statement (i) when the prospectus or any prospectus
supplement or post-effective amendment has been filed, and, with respect
to such registration statement or any post-effective amendment, when the
same has become effective, (ii) of any request by the Commission for
<PAGE>
<PAGE>
amendments or supplements to such registration statement or to amend or
to supplement such prospectus or for additional information, (iii) of the
issuance by the Commission of any stop order suspending the effectiveness
of such registration statement or the initiation of any proceedings for
that purpose of which the Company has knowledge and (iv) of the
suspension of the qualification of such securities for offering or sale
in any jurisdiction, or of the institution of any proceedings for any of
such purposes of which the Company has knowledge;
(k) use its reasonable best efforts to obtain the lifting of any
stop order that might be issued suspending the effectiveness of such
registration statement at the earliest possible moment;
(l) use its reasonable best efforts (i) (A) to list such
Registrable Securities on any securities exchange on which the equity
securities of the Company are then listed or, if no such equity
securities are then listed, on an exchange selected by the Company, if
such listing is then permitted under the rules of such exchange, or
(B) if such listing is not practicable, to secure designation of such
securities as a NASDAQ "national market system security" within the
meaning of Rule 11Aa2-1 under the Exchange Act or, failing that, to
secure NASDAQ authorization for such Registrable Securities, and (ii) to
provide a transfer agent and registrar for such Registrable Securities
not later than the effective date of such registration statement;
(m) enter into such agreements and take such other actions as the
sellers of Registrable Securities or the underwriters reasonably request
in order to expedite or facilitate the disposition of such Registrable
Securities, including, without limitation, to the extent that the
offering in question is an underwritten offering, preparing for, and
participating in, such number of "road shows" and all such other
customary selling efforts as the underwriters reasonably request in order
to expedite or facilitate such disposition; and
(n) use its reasonable best efforts to take all other steps
necessary to effect the registration of such Registrable Securities
contemplated hereby.
The Company may require each seller of any Registrable Securities as
to which any registration is being effected to furnish to the Company such
information regarding such seller, including, without limitation, its
ownership of Registrable Securities and the disposition of such Registrable
Securities, as the Company may from time to time reasonably request in writing
and as shall be required by law in connection therewith. Each such holder
agrees to furnish promptly to the Company all information required to be
disclosed in order to make the information previously furnished to the Company
by such holder not materially misleading.
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<PAGE>
The Company agrees not to file or make any amendment to any
registration statement with respect to any Registrable Securities, or any
amendment of or supplement to the prospectus used in connection therewith,
which refers to any seller of any Registrable Securities covered thereby by
name, or otherwise identifies such seller as the holder of any Registrable
Securities, without the consent of such seller (such consent not to be
unreasonably withheld), unless such disclosure is required by law.
By acquisition of Registrable Securities, each holder of such
Registrable Securities shall be deemed to have agreed that upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 3(h), such holder will promptly discontinue such holder's disposition
of Registrable Securities pursuant to the registration statement covering such
Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(h). If so
directed by the Company, each holder of Registrable Securities will deliver to
the Company (at the Company's expense) all copies, other than permanent file
copies, in such holder's possession of the prospectus covering such
Registrable Securities at the time of receipt of such notice. In the event
that the Company shall give any such notice, the period mentioned in Section
3(b) shall be extended by the number of days during the period from and
including the date of the giving of such notice to and including the date when
each seller of any Registrable Securities covered by such registration
statement shall have received the copies of the supplemented or amended
prospectus contemplated by Section 3(h).
4. Underwritten Offerings.
4.1 Underwriting Agreement. If the Registrable Securities which are
being sold pursuant to a registration requested under Section 1 are being sold
in an underwritten offering, the Company shall enter into an underwriting
agreement with the underwriters for such offering, such agreement to be
reasonably satisfactory in substance and form to the underwriters and to
contain such representations and warranties by the Company and such other
terms and provisions as are customarily contained in agreements of this type,
including, without limitation, indemnities to the effect and to the extent
provided in Section 7. The holders of Registrable Securities to be
distributed by such underwriters shall be parties to such underwriting
agreement and may, at their option, require that any or all of the
representations and warranties by, and the agreements on the part of, the
Company to and for the benefit of such underwriters be made to and for the
benefit of such holders of Registrable Securities and that any or all of the
conditions precedent to the obligations of such underwriters under such
underwriting agreement shall also be conditions precedent to the obligations
of such holders of Registrable Securities. No underwriting agreement (or
other agreement in connection with such offering) shall require any holder of
Registrable Securities to make any representations or warranties to or <PAGE>
<PAGE>
agreements with the Company or the underwriters other than representations,
warranties or agreements regarding such holder, the ownership of such holder's
Registrable Securities and such holder's intended method or methods of
disposition and any other representation required by law or to furnish any
indemnity to any Person which is broader than the indemnity furnished by such
holder in Section 7.2.
4.2 Selection of Underwriters. If the Company at any time proposes
to register any of its securities under the Securities Act for sale for its
own account pursuant to an underwritten offering, the Company will have the
right to select the managing underwriter to administer the offering.
5. Holdback Agreements. (a) If and whenever the Company proposes
to register any of its Common Stock under the Securities Act for its own
account (other than on Form S-4 or S-8 or any successor form) or is required
to use its reasonable best efforts to effect the registration of any
Registrable Securities under the Securities Act pursuant to Section 1, each
holder of Registrable Securities agrees by acquisition of such Registrable
Securities not to effect any public sale or distribution, including any sale
pursuant to Rule 144 under the Securities Act, of any Registrable Securities
within seven days prior to and 90 days (unless advised in writing by the
managing underwriter that a longer period, not to exceed 180 days, is
required, or such shorter period as the managing underwriter for any
underwritten offering may agree) after the effective date of the registration
statement relating to such registration, except as part of such registration.
(b) The Company agrees not to effect any public sale or
distribution of its Common Stock or securities convertible into or
exchangeable or exercisable for any of such securities within seven days prior
to and 90 days (unless advised in writing by the managing underwriter that a
longer period, not to exceed 180 days, is required, or such shorter period as
the managing underwriter for any underwritten offering may agree) after the
effective date of any registration statement (except as part of such
registration or pursuant to a registration on Form S-4 or S-8 or any successor
form) covering Registrable Securities.
6. Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement registering Registrable
Securities under the Securities Act, the Company will give the holders of such
Registrable Securities so to be registered and their underwriters, if any, and
their respective counsel and accountants the opportunity to participate in the
preparation of such registration statement, each prospectus included therein
or filed with the Commission, and each amendment thereof or supplement
thereto, and will give each of them such access to the financial and other
records, pertinent corporate documents and properties of the Company and its
subsidiaries and such opportunities to discuss the business of the Company
with its officers and the independent public accountants who have issued audit
<PAGE>
<PAGE>
reports on its financial statements as shall be reasonably requested by such
holders in connection with such registration statement.
7. Indemnification.
7.1 Indemnification by the Company. In the event of any
registration of any Registrable Securities pursuant to this Agreement, to the
extent permitted by law. the Company will indemnify and hold harmless (a) the
seller of such Registrable Securities, (b) any directors, officers and general
partners of such seller, and (c) each person, if any, who controls (with the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
such seller against any and all losses, claims, damages or liabilities (or
actions or proceedings in respect thereof), joint or several, directly or
indirectly based upon or arising out of (i) any untrue statement or alleged
untrue statement of a fact contained in any registration statement under which
such Registrable Securities were registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus contained
therein or used in connection with the offering of securities covered thereby,
or any amendment or supplement thereto, or (ii) any omission or alleged
omission to state a fact required to be stated therein or necessary to make
the statements therein not misleading; and the Company will reimburse each
such indemnified party for any legal or any other expenses reasonably incurred
by them in connection with enforcing its rights hereunder or under the
underwriting agreement entered into in connection with such offering or
investigating, preparing, pursuing or defending any such loss, claim, damage,
liability, action or proceeding, except insofar as any such loss, claim,
damage, liability, action, proceeding or expense arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
seller expressly for use in the preparation thereof. Such indemnity shall
remain in full force and effect, regardless of any investigation made by such
indemnified party and shall survive the transfer of such Registrable
Securities by such seller. The indemnity agreement contained in this Section
7.1 shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability, action or proceeding if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably withheld).
7.2 Indemnification by the Sellers. The Company may require, as a
condition to including any Registrable Securities in any registration
statement filed pursuant to Section 1 or 2, that the Company shall have
received an undertaking satisfactory to it from each of the prospective
sellers of such Registrable Securities to indemnify and hold harmless,
severally, not jointly, in the same manner and to the same extent as set forth
in Section 7.1, the Company, its directors, officers, each person, if any, who
<PAGE>
<PAGE>
controls (within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act) the Company, each underwriter and any of the other
sellers of securities in such offering with respect to any statement or
alleged statement in or omission or alleged omission from such registration
statement, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, if such statement
or alleged statement or omission or alleged omission was made in reliance upon
and in conformity with written information furnished to the Company by such
seller expressly for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement. Such indemnity shall remain in full force and effect, regardless
of any investigation made by or on behalf of the Company or any such other
indemnified Person, officer or controlling Person and shall survive the
transfer of such Registrable Securities by such seller. The indemnity
agreement contained in this Section 7.2 shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, action or proceeding if
such settlement is effected without the consent of such seller (which consent
shall not be unreasonably withheld). The indemnity provided by each seller of
Registrable Securities under this Section 7.2 shall be limited in amount to
the net amount of proceeds actually received by such seller from the sale of
Registrable Securities pursuant to such registration statement.
7.3 Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding paragraphs of this Section 7,
such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to the latter of the
commencement of such action or proceeding, provided that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding paragraphs of this
Section 7, except to the extent that the indemnifying party is materially
prejudiced by such failure to give notice. In case any such action is brought
against an indemnified party, the indemnifying party will be entitled to
participate therein and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof except for the reasonable fees
and expenses of any counsel retained by such indemnified party to monitor such
action or proceeding. Notwithstanding the foregoing, if such indemnified
party and the indemnifying party reasonably determine, based upon advice of
their respective independent counsel, that a conflict of interest may exist
between the indemnified party and the indemnifying party with respect to such
action and that it is advisable for such indemnified party to be represented
by separate counsel, such indemnified party may retain other counsel, <PAGE>
<PAGE>
reasonably satisfactory to the indemnifying party, to represent such
indemnified party, and the indemnifying party shall pay all reasonable fees
and expenses of such counsel. No indemnifying party, in the defense of any
such claim or litigation, shall, except with the consent of such indemnified
party, which consent shall not be unreasonably withheld, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim or
litigation. An indemnifying party who is not entitled to, or elects not to,
assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may exist between
such indemnified party and any other of such indemnified parties with respect
to such claim.
7.4 Other Indemnification. Indemnification similar to that
specified in the preceding paragraphs of this Section 7 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration (other than under the
Securities Act) or other qualification of such Registrable Securities under
any federal or state law or regulation of any governmental authority.
7.5 Indemnification Payments. Any indemnification required to be
made by an indemnifying party pursuant to this Section 7 shall be made by
periodic payments to the indemnified party during the course of the action or
proceeding, as and when bills are received by such indemnifying party with
respect to an indemnifiable loss, claim, damage, liability or expense incurred
by such indemnified party.
7.6 Other Remedies. If for any reason the foregoing indemnity is
unavailable, or is insufficient to hold harmless an indemnified party, other
than by reason of the exceptions provided therein, then the indemnifying party
shall contribute to the amount paid or payable by the indemnified party as a
result of such losses, claims, damages, liabilities, actions, proceedings or
expenses in such proportion as is appropriate to reflect the relative benefits
to and faults of the indemnifying party on the one hand and the indemnified
party on the other in connection with the offering of Registrable Securities
(taking into account the portion of the proceeds of the offering realized by
each such party) and the statements or omissions or alleged statements or
omissions which resulted in such loss, claim, damage, liability, action,
proceeding or expense, as well as any other relevant equitable considerations.
The relative fault of the indemnifying party and of the indemnified party
shall be determined by reference to, among other things, whether the untrue
statement of a material fact or the omission to state a material fact relates
to information supplied by the indemnifying party or by the indemnified party
and the parties' relative intent, knowledge, access to information and <PAGE>
<PAGE>
opportunity to correct or prevent such statements or omissions. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. No party shall be liable for
contribution under this Section 7.6 except to the extent and under such
circumstances as such party would have been liable to indemnify under this
Section 7 if such indemnification were enforceable under applicable law.
8. Definitions. For purposes of this Agreement, the following terms
shall have the following respective meanings:
"Board": The Board of Directors of the Company.
"Commission": The Securities and Exchange Commission.
"Common Stock": The Company's Common Stock, no par value per share.
"Exchange Act": The Securities Exchange Act of 1934, as amended, or
any successor federal statute, and the rules and regulations thereunder which
shall be in effect from time to time.
"NASD": National Association of Securities Dealers, Inc.
"NASDAQ": The Nasdaq National Market.
"Person": An individual, corporation, partnership, joint venture,
association, trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
"Registrable Securities": The shares of Common Stock (i)
beneficially owned (within the meaning of Section 13d-3 of the Exchange Act)
by the Holders or any other Person made a party hereto pursuant to Section
9.2, including Common Stock issued or issuable pursuant to the Stock Options
held by the Holders as of the date hereof, together with any securities issued
or distributed in respect of any such Common Stock by way of replacement,
stock dividend, stock split or conversion or in connection with a combination
of shares, recapitalization, reorganization, merger, consolidation, or
otherwise. As to any particular Registrable Securities, such securities shall
cease to be Registrable Securities when (i) a registration statement with
respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of in accordance
with such registration statement, (ii) they shall have been sold to the public
pursuant to Rule 144 under the Securities Act (or any similar rule then in
force), (iii) such securities shall have been otherwise transferred and
subsequent disposition of them shall not require registration or qualification
of them under the Securities Act or any similar state law then in force or
(iv) they shall have ceased to be outstanding. For purposes of this <PAGE>
<PAGE>
Agreement, a Person will be deemed to be a holder of Registrable Securities
whenever such Person has the right to acquire directly or indirectly such
Registrable Securities (upon conversion or exercise in connection with a
transfer of securities or otherwise, but disregarding any restrictions or
limitations upon the exercise of such right), whether or not such acquisition
has actually been effected. Holders of Stock Options shall be entitled to
exercise the rights granted hereunder with respect to the registration of
Registrable Securities without having first to exercise the Stock Options. No
such exercise of Stock Options shall be required by the Company until the
registration of the Common Stock into which the Stock Options are exercisable
shall have been declared or ordered "effective" by the Commission and the
holder of the Stock Options shall have elected to sell such Common Stock
pursuant to such registration.
"Registration Expenses": Except for Selling Securityholder
Expenses, all expenses incident to the Company's performance of or compliance
with any registration pursuant to this Agreement, including, without
limitation, all registration and filing fees, fees and expenses of compliance
with securities or blue sky laws, printing expenses, messenger and delivery
expenses, and fees and disbursements of counsel for the Company and all
independent certified public accountants and other Persons retained by the
Company in connection with such registration .
"S-3 Eligibility Date": The date on which the Company becomes
eligible to register its securities by means of a registration statement on
Form S-3.
"Securities Act": The Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations thereunder which
shall be in effect from time to time.
"Selling Securityholder Expenses ": The selling securityholders
will be responsible for payment of their own legal fees, underwriting fees and
brokerage discounts, commissions and other sales expenses incident to any
registration hereunder, with any such expenses which are common to the selling
securityholders divided among such securityholders (including the Company and
holders of the Company's securities other than Registrable Securities, to the
extent that securities are being registered on behalf of such Persons) pro
rata on the basis of the number of shares being registered on behalf of each
such securityholder, or as such securityholders may otherwise agree.
9. Miscellaneous.
9.1. Rule 144 etc. If the Company shall have filed a registration
statement pursuant to the requirements of Section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act
relating to any class of equity securities, the Company will file the reports
required to be filed by it under the Securities Act and the Exchange Act and
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<PAGE>
the rules and regulations adopted by the Commission thereunder, and will take
such further action as any holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such holder to
sell Registrable Securities without registration under the Securities Act
within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such rule may be amended from time to time, or (b) any
successor rule or regulation hereafter adopted by the Commission. Upon the
request of any holder of Registrable Securities, the Company will deliver to
such holder a written statement as to whether it has complied with such
requirements.
9.2. Successors, Assigns and Transferees. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns. In addition, and provided that
an express assignment shall have been made, a copy of which shall have been
delivered to the Company, the provisions of this Agreement that are for the
benefit of a holder of Registrable Securities shall be for the benefit of and
enforceable by any subsequent holder of any Registrable Securities.
9.3. Stock Splits, etc. Each holder of Registrable Securities
agrees that it will vote to effect a stock split or combination with respect
to any Registrable Securities in connection with any registration of such
Registrable Securities hereunder, or otherwise, if the managing underwriter
shall advise the Company in writing (or, in connection with an offering that
is not underwritten, if an investment banker shall advise the Company in
writing) that in its opinion such a stock split or combination would
facilitate or increase the likelihood of success of the offering. The Company
shall cooperate in all reasonable respects in effecting any such stock split
or combination.
9.4. Amendment and Modification. This Agreement may be amended,
modified or supplemented by the Company with the written consent of the
holders of a majority of the Registrable Securities, provided that all Holders
shall be notified of such amendment, modification or supplement.
9.5. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER AND THE PERSONS SUBJECT HERETO SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
IOWA, WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PRINCIPLES THEREOF.
9.6. Invalidity of Provision. The invalidity or unenforceability
of any provision of this Agreement in any jurisdiction shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of this Agreement, including
that provision, in any other jurisdiction.
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9.7. Notices. All notices, requests, demands, letters, waivers and
other communications required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given if
(a) delivered personally, (b) mailed, certified or registered mail with
postage prepaid, (c) sent by next-day or overnight mail or delivery or
(d) sent by telecopy or telegram, as follows:
(i) If to the Company, to it at:
Telegroup, Inc.
2098 Nutmeg Avenue
Fairfield, Iowa 52556
Attention: Douglas Neish
Telecopy: (515) 469-4610
with a copy to:
Swidler & Berlin, Chartered
3000 K Street, N.W.
Suite 300
Washington, D.C. 20007-5116
Attention: Morris F. Defeo, Jr., Esq.
Telecopy No.: (202) 424-7643
(ii) If to any Holder, to the address of such Holder as set
forth in the books and records of the Company
or to such other person or address as any party shall specify by notice in
writing to the Company. All such notices, requests, demands, letters, waivers
and other communications shall be deemed to have been received (w) if by
personal delivery on the day after such delivery, (x) if by certified or
registered mail, on the fifth business day after the mailing thereof, (y) if
by next-day or overnight mail or delivery, on the day delivered or (z) if by
telecopy or telegram, on the next day following the day on which such telecopy
or telegram was sent, provided that a copy is also sent by certified or
registered mail.
9.8. Headings; Execution in Counterparts. The headings and
captions contained herein are for convenience and shall not control or affect
the meaning or construction of any provision hereof. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original and which together shall constitute one and the same instrument.
9.9. Injunctive Relief. Each of the parties recognizes and agrees
that money damages may be insufficient and, therefore, in the event of a
breach of any provision of this Agreement the aggrieved party may elect to
institute and prosecute proceedings in any court of competent jurisdiction to
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enforce specific performance or to enjoin the continuing breach of this
Agreement. Such remedies shall, however, be cumulative and not exclusive, and
shall be in addition to any other remedy which such party may have.
9.10. Further Assurances. Subject to the specific terms of this
Agreement, each of the Company and the Holders shall make, execute,
acknowledge and deliver such other instruments and documents, and take all
such other actions, as may be reasonably required in order to effectuate the
purposes of this Agreement and to consummate the transactions contemplated
hereby.
9.11. Entire Agreement. This Agreement is intended by the parties
hereto as a final expression of their agreement and intended to be a complete
and exclusive statement of their agreement and understanding in respect of the
subject matter contained herein. This Agreement supersedes all prior or
contemporaneous agreements and understandings between the parties with respect
to such subject matter.
9.12. Term. This Agreement shall be effective as of the date
hereof and shall continue in effect thereafter until the earlier of (a) its
termination by the consent of the parties hereto or their respective
successors in interest and (b) the date on which no Registrable Securities
remain outstanding.
[REST OF PAGE INTENTIONALLY LEFT BLANK]<PAGE>
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IN WITNESS WHEREOF, this Agreement has been signed by each of the
parties hereto, effective as of the date first written above.
TELEGROUP, INC.
By:
---------------------------
Name:
-------------------------
Title:
------------------------
THE HOLDERS WHOSE SIGNATURES ARE
ATTACHED HERETO
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EXHIBIT A
HOLDERS
------------------------
Clifford Rees
-------------------------
Shelley Gratzon
------------------------
Ronald B. Stakland
