<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 21, 1997
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
UNIFI COMMUNICATIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 7398 04-3097640
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
----------------
900 CHELMSFORD STREET
LOWELL, MASSACHUSETTS 01851
(508) 551-7500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
DOUGLAS J. RANALLI
CHAIRMAN OF THE BOARD OF DIRECTORS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
UNIFI COMMUNICATIONS, INC.
900 CHELMSFORD STREET
LOWELL, MASSACHUSETTS 01851
(508) 551-7500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
KIRK A. DAVENPORT, ESQ. Q. ELLIS TELFORD, ESQ.
LATHAM & WATKINS GENERAL COUNSEL AND SECRETARY
885 THIRD AVENUE UNIFI COMMUNICATIONS, INC.
NEW YORK, NEW YORK 10022 900 CHELMSFORD STREET
(212) 906-1267 LOWELL, MASSACHUSETTS 01851
(508) 551-7500
----------------
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 being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
TITLE OF EACH PROPOSED AGGREGATE AMOUNT OF
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER NOTE(1) PRICE(1) FEE
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
14% Senior Notes due
2004................... $175,000,000 100% $175,000,000 $60,345
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457.
----------------
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 THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
UNIFI COMMUNICATIONS, INC.
CROSS REFERENCE SHEET
PURSUANT TO RULE 404(A) AND ITEM 501(B) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS OF THE INFORMATION
REQUIRED BY PART I OF FORM S-4
<TABLE>
<S> <C>
1.Forepart of Registration
Statement and Outside Front
Cover Page of Prospectus..... Outside Front Cover Page; Cross Reference
Sheet; Inside Front Cover Page
2.Inside Front and Outside Back
Cover Pages of Prospectus.... Inside Front Cover Page; Outside Back Cover
Page
3.Risk Factors, Ratio of Earnings
to Fixed Charges and Other
Information.................. Prospectus Summary; Risk Factors; Selected
Financial Data
4.Terms of the Transaction....... The Exchange Offer; Certain Federal Income
Tax Considerations; Description of
Exchange Notes
5.Pro Forma Financial
Information.................. Prospectus Summary; Selected Consolidated
Financial Data
6.Material Contacts with the
Company Being Acquired....... Not Applicable
7.Additional Information Required
for Reoffering by Persons and
Parties Deemed to be
Underwriters................. Not Applicable
8.Interests of Named Experts and
Counsel...................... Not Applicable
9.Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities.................. Not Applicable
10.Information with Respect to S-3
Registrants.................. Not Applicable
11.Incorporation of Certain
Information by Reference..... Not Applicable
12.Information with Respect to S-2
or S-3 Registrants........... Not Applicable
13.Incorporation of Certain
Information by Reference..... Not Applicable
14.Information with Respect to
Registrants Other Than S-3 or
S-2 Registrants.............. Prospectus Summary; Capitalization;
Selected Consolidated Financial Data;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Acquisition of Fax
Business of SingCom (Australia);
Management; Principal Stockholders;
Certain Relationships and Related
Transactions; Description of Certain
Indebtedness; Description of Exchange
Notes; Consolidated Financial Statements
15.Information with Respect to S-3
Companies.................... Not Applicable
16.Information with Respect to S-2
or S-3 Companies............. Not Applicable
17.Information with Respect to
Companies Other Than S-2 or
S-3 Companies................ Not Applicable
18.Information if Proxies,
Consents or Authorizations
are to be Solicited.......... Not Applicable
19.Information if Proxies,
Consents or Authorizations
are not to be Solicited or in
an Exchange Offer............ Management; The Exchange Offer; Certain
Relationships and Related Transactions
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED , 1997
PROSPECTUS
, 1997
OFFER TO EXCHANGE
14% SENIOR NOTES DUE 2004
FOR ALL OUTSTANDING 14% SENIOR NOTES DUE 2004
OF
UNIFI COMMUNICATIONS, INC.
-----------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M, NEW YORK CITY TIME ON , 1997
UNLESS EXTENDED.
UNIFI Communications, Inc., a Delaware corporation (the "Company"), is hereby
offering (the "Exchange Offer"), upon the terms and subject to the conditions
set forth in this Prospectus and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), to exchange $1,000 principal amount of its 14% Senior
Notes due 2004 (the "Exchange Notes"), which exchange has been registered under
the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
registration statement of which this Prospectus is a part (the "Registration
Statement"), for each $1,000 principal amount of its outstanding 14% Senior
Notes due 2004 (the "Private Notes"), of which $175,000,000 in aggregate
principal amount was issued on February 21, 1997 and is outstanding as of the
date hereof. The Private Notes were originally issued (the "Private Offering")
as part of units (the "Units") consisting in the aggregate of $175,000,000 in
aggregate principal amount of Private Notes and 175,000 warrants (the
"Warrants") to purchase 4,816,818 shares of the Company's Common Stock, par
value $.01 per share. The form and terms of the Exchange Notes are the same as
the form and terms of the Private Notes except that (i) the exchange will have
been registered under the Securities Act, and, therefore, the Exchange Notes
will not bear legends restricting the transfer thereof and (ii) holders of the
Exchange Notes will not be entitled to certain rights of holders of the Private
Notes under the Registration Rights Agreement (as defined herein), which rights
will terminate upon the consummation of the Exchange Offer. The Exchange Notes
will evidence the same indebtedness as the Private Notes (which they replace)
and will be entitled to the benefits of an indenture dated as of February 21,
1997 governing the Private Notes and the Exchange Notes (the "Indenture"). The
Private Notes and the Exchange Notes are sometimes referred to herein
collectively as the "Notes." See "The Exchange Offer" and "Description of
Exchange Notes."
The Exchange Notes will bear interest at the same rate and on the same terms
as the Private Notes. Consequently, the Exchange Notes will bear interest at
the rate of 14% per annum and the interest thereon will be payable semi-
annually in arrears on March 1 and September 1 of each year, commencing
September 1, 1997. The Exchange Notes will bear interest from and including the
date of issuance of the Private Notes (February 21, 1997). Holders whose
Private Notes are accepted for exchange will be deemed to have waived the right
to receive any interest accrued on the Private Notes.
The Notes will be redeemable at the option of the Company, in whole or in
part, at any time on or after March 1, 2001 at the redemption prices set forth
herein plus accrued and unpaid interest, if any, to the date of redemption. In
addition, at the option of the Company, up to 33% of the aggregate principal
amount of Notes originally issued may be redeemed prior to March 1, 2000 at the
redemption price set forth herein, plus accrued and unpaid interest, if any, to
the redemption date with the proceeds of certain sales of capital stock of the
Company; provided however, that at least 67% of the aggregate principal amount
of Notes originally issued remain outstanding following such redemption. In the
event of a Change of Control (as defined), holders of the
(Continued on next page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-----------
<PAGE>
(Continued from previous page)
Notes will have the right to require the Company to purchase their Notes, in
whole or in part, at a price equal to 101% of the principal amount thereof
(determined as of the date of repurchase), plus accrued and unpaid interest,
if any, to the date of purchase.
The Notes will be senior unsecured obligations of the Company, will rank
pari passu in right of payment with all existing and future unsubordinated
indebtedness of the Company and will rank senior in right of payment to all
subordinated indebtedness of the Company. The Company conducts substantial
business through its subsidiaries and the Notes will be effectively
subordinated to all Indebtedness and other liabilities (including trade
payables) of the Company's subsidiaries. As of December 31, 1996, on a pro
forma basis after giving effect to the Private Offering and the application of
the proceeds therefrom, the Company's subsidiaries had approximately $5.7
million of liabilities. Such subsidiaries will be permitted to incur
additional indebtedness in the future.
The Company will accept for exchange any and all validly tendered Private
Notes not withdrawn prior to 5:00 p.m., New York City time, on , 1997,
unless the Exchange Offer is extended by the Company in its sole discretion
(the "Expiration Date"). Tenders of Private Notes may be withdrawn at any time
prior to the Expiration Date. Private Notes may be tendered only in integral
multiples of $1,000. The Exchange Offer is subject to certain customary
conditions. See "The Exchange Offer--Conditions."
Based on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, the Company believes that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Private Notes may be offered for resale, resold
and otherwise transferred by a holder thereof (other than (i) a broker-dealer
who purchases such Exchange Notes directly from the Company to resell pursuant
to Rule 144A or any other available exemption under the Securities Act or (ii)
a person that is an affiliate of the Company within the meaning of Rule 405
under the Securities Act), without compliance with the registration and
prospectus delivery provisions of the Securities Act; provided that the holder
is acquiring the Exchange Notes in the ordinary course of its business and is
not participating, and had no arrangement or understanding with any person to
participate, in the distribution of the Exchange Notes. Holders of Private
Notes wishing to accept the Exchange Offer must represent to the Company, as
required by the Registration Rights Agreement, that such conditions have been
met. Each broker-dealer that receives Exchange Notes for its own account in
exchange for Private Notes, where such Private Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. The Company believes that none of the
registered holders of the Private Notes is an affiliate (as such term is
defined in Rule 405 under the Securities Act) of the Company.
Prior to the Exchange Offer, there has been no public market for the Notes.
The Company does not intend to list the Exchange Notes on any securities
exchange, but the Private Notes are eligible for trading in the National
Association of Securities Dealers, Inc.'s Private Offerings, Resales and
Trading through Automatic Linkages (PORTAL) market. There can be no assurance
that an active market for the Notes will develop. To the extent that a market
for the Notes does develop, the market value of the Notes will depend on
market conditions (such as yields on alternative investments), general
economic conditions, the Company's financial condition and certain other
factors. Such conditions might cause the Notes, to the extent that they are
traded, to trade at a significant discount from face value. See "Risk
Factors--Absence of Public Market for the Notes; Restrictions on Transfer."
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Private Notes where
such Private Notes were acquired by such broker-
<PAGE>
dealer as a result of market-making activities or other trading activities.
The Company has indicated its intention to make this Prospectus (as it may be
amended or supplemented) available to any broker-dealer for use in connection
with any such resale for a period of 180 days after the Expiration Date. See
"Plan of Distribution."
The Company will not receive any proceeds from, and has agreed to bear the
expenses of, the Exchange Offer. No underwriter is being used in connection
with this Exchange Offer. See "The Exchange Offer."
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF PRIVATE NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
SEE "RISK FACTORS," BEGINNING ON PAGE 12, FOR A DISCUSSION OF CERTAIN
FACTORS THAT INVESTORS SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER
AND AN INVESTMENT IN THE EXCHANGE NOTES.
NO PERSON IS AUTHORIZED IN CONNECTION WITH THE EXCHANGE OFFER TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE
ACCOMPANYING LETTER OF TRANSMITTAL, NOR ANY EXCHANGE MADE HEREUNDER SHALL
UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1997 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
OFFERING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT PARTICIPATING IN
THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS IN CONNECTION
THEREWITH. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
The Exchange Notes will be available initially only in book-entry form. The
Company expects that the Exchange Notes issued pursuant to the Exchange Offer
will be issued in the form of one or more fully registered global notes that
will be deposited with, or on behalf of, the Depository Trust Company ("DTC"
or the "Depository") and registered in its name or in the name of Cede & Co.,
as its nominee. Beneficial interests in the global note representing the
Exchange Notes will be shown on, and transfers thereof will be effected only
through, records maintained by the Depository and its participants. After the
initial issuance of such global note, Exchange Notes in certificated form will
be issued in exchange for the global note only in accordance with the terms
and conditions set forth in the Indenture. See "The Exchange Offer--Book-Entry
Transfer" and "Book Entry; Delivery and Form."
----------------
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the consolidated financial statements (including the notes
thereto) appearing elsewhere in this Prospectus. As used in this Prospectus,
"UNIFI" or the "Company" refers to UNIFI Communications, Inc. and its
subsidiaries, except where the context requires otherwise.
THE COMPANY
OVERVIEW
The Company is a leading provider of international enhanced facsimile
transmission and delivery services. The Company has developed the Intelligent
Delivery Network, a system which combines highly efficient store-and-forward
network technology with a proprietary Delivery Expert System (as defined
herein) and a 24-hour multi-lingual fax delivery staff. The Intelligent
Delivery Network provides business customers with a facsimile delivery service
that is secure, easy to use, more efficient, more reliable and less expensive
than the direct dial services provided by the world's conventional long-
distance carriers.
UNIFI commenced operations in April 1992 by transmitting one-way facsimile
traffic exclusively from the United States to Japan. By December 1993, the
Company's monthly revenue from this single route had grown to approximately
$440,000, the equivalent of annualized "run-rate" revenue of $5.3 million. As a
result of these accomplishments, the Company was successful in attracting $80
million in total financing from several Asia/Pacific investors including the
Nichimen Corporation (Japan) ("Nichimen"), the ORIX Leasing Corporation (Japan)
("ORIX") and affiliates of Singapore Telecommunications Limited ("SingTel"), a
major provider of telecommunications services in Singapore. With a portion of
the proceeds from these financings, the Company (i) expanded its sales,
document delivery, network monitoring, research and development, and
administrative infrastructures and (ii) from December 1995 to December 1996
established operations, either directly or through SingTel or contractual
relationships with other parties, in seven additional countries to complement
its existing operations in the United States and Japan. As of February 28,
1997, the Company had approximately 9,117 corporate customers (excluding non-
revenue trial accounts and operations in China), of which approximately 721
were added in the first two months of 1997 and 1,238 were added in the fourth
quarter of 1996. UNIFI's revenues for the year ended December 31, 1995 were
approximately $10.7 million and revenues for the year ended December 31, 1996
were approximately $25.2 million.
According to the International Telecommunications Union, international
switched telecommunications traffic grew at an annual compound rate of 13.8%
from 28 billion minutes in 1989 to 53 billion minutes in 1994. Based on several
industry studies, the Company believes that fax transmissions represent
approximately 20-25% of all switched international minutes, and in 1995, the
market for international fax traffic totaled approximately $12 billion
worldwide. The Company expects the growth of the telecommunications market to
continue, particularly in emerging markets and in the Asia/Pacific region where
the Company believes that facsimile will continue to be a preferred business
communications technology. In order to capitalize on the technological trends
in developed markets such as the United States and Western Europe, the Company
has developed, and is actively testing product line extensions that will allow
customers to access the Intelligent Delivery Network for fax transmissions from
their PC-LAN environments, e-mail systems, and Internet software.
Over the past five years, the Company has developed four key competitive
elements which the management team believes are responsible for UNIFI's growth
in the market:
. Network Efficiency. The Intelligent Delivery Network's packet-switched
store-and-forward technology transmits fax documents up to 16 times more
efficiently than the circuit-switched technology utilized by the world's
long-distance carriers. This efficiency advantage allows UNIFI to offer
customers delivery rates that
1
<PAGE>
are significantly lower than the rates charged by long-distance carriers
while generating attractive gross margins from its on-net traffic (i.e.,
traffic terminating in a country where the Company has installed a network
node).
. Superior Service--The Intelligent Delivery Network. Unlike its competitors,
the Company provides end-users with a 24-hour, seven-day-a-week
personalized delivery service based on its proprietary Delivery Expert
System combined with a multi-lingual delivery staff that identifies,
analyzes and resolves fax delivery obstacles. The Company believes this
service is primarily responsible for the less than 1.5% monthly churn it
has experienced in each of the twelve months ending on February 28, 1997
(other than October 1996, during which the Company experienced a 2.3%
monthly churn due primarily to the recovery of FaxLinks from customers with
monthly usage below certain minimum thresholds). The Company further
believes that the Delivery Expert System provides a competitive advantage
that cannot be easily replicated given the Company's experience and
proprietary processes developed since 1992.
. Global Sales and Service Infrastructure. UNIFI has operations in the United
States, Japan, the United Kingdom, France, Germany, Hong Kong and Korea. In
addition, the Company conducts operations in China pursuant to a
partnership with a local entity and has a presence in Singapore and
Australia through its relationship with SingTel. UNIFI's investment in a
global sales and account management organization of 365 (as of February 28,
1997) people has created a competitive advantage by allowing the Company to
provide a consistent set of delivery services based on common service
standards and centralized billing. Long-distance carriers, the Company's
largest competitors, do not deploy a consistent set of global services due
to regulatory and other market forces which constrain them from maintaining
a global presence.
. Large, Established Corporate Customer Base. UNIFI has an existing (as of
February 28, 1997) base of approximately 9,117 customers (excluding non-
revenue trial accounts and operations in China). The Company's account base
grew by 762 in October 1996, 840 in November 1996, 558 in December 1996
(due to seasonality), 779 in January, 1997 and 827 in February 1997 (in
each case including a substantial number of non-revenue trial accounts).
However, the Company primarily handles its customers' international fax
transmission requirements (domestic fax services in the United States and
Canada were only recently added) which constitute only a small portion of
each customer's fax transmission needs. UNIFI has already begun to make
significant investments necessary to broaden its service offerings to
provide customers with a more complete set of fax delivery services through
direct connection to desktop messaging software packages.
The next phase of expansion for the Company involves increasing the size of
the Intelligent Delivery Network to accommodate projected traffic growth and
to increase the percentage of its traffic that is on-net, thereby decreasing
variable delivery costs and improving gross margins. In addition, the Company
intends to broaden its existing service offering to leverage its large
existing customer base.
GROWTH STRATEGY
UNIFI's goal is to rapidly increase both the number of worldwide customers
that it services and the total volume of fax traffic transported over its
Intelligent Delivery Network. UNIFI's strategy for achieving this goal is to
leverage its existing operational and strategic competitive advantages by
expanding the Intelligent Delivery Network into additional countries and by
increasing the number of ways that customers can gain access to its
Intelligent Delivery Network service.
. Leverage the Intelligent Delivery Network Cost Advantage by Expanding the
Network. In order to capitalize on the efficiency advantage that the
Intelligent Delivery Network provides with respect to on-net traffic, the
Company is in the process of installing network nodes in each of the
countries where the Company terminates a large number of fax minutes. The
Company currently accepts cross-border fax traffic from its customers for
delivery anywhere in the world. Traffic destined for termination outside of
the ten countries (including Singapore and Australia) where the Company
currently has Intelligent Delivery
2
<PAGE>
Network nodes ("off-net" traffic) is costly to deliver because the Company
must utilize conventional long-distance telephone networks to reach those
off-net locations. The Company's strategy is to significantly expand the
Intelligent Delivery Network, both geographically and in terms of
additional network nodes, to accommodate traffic growth and to leverage the
Intelligent Delivery Network on-net efficiency advantage. During February
1997, approximately 64% of the Company's total fax traffic was on-net; the
Company's goal is to significantly improve overall gross margin performance
by increasing the percentage of on-net traffic through this node expansion
program. There can be no assurance, however, that the Company will be
successful in achieving this goal.
. Grow the Customer Base by Leveraging the Existing Global Sales/Service
Infrastructure. The Company's goal is to further accelerate its customer
growth rate and traffic growth rate by establishing sales channels in
approximately two new countries in 1997 (bringing the total to 10 revenue
generating countries by the end of 1997). The Company plans to achieve this
goal by leveraging its existing global sales and service infrastructure by
expanding to new countries located adjacent to existing operating units.
The Company believes that revenue from additional countries can be
generated quickly and efficiently by providing general management,
technical support, administration and account management services to the
new markets via the existing country units. For example, Hong Kong will
provide support services to Taiwan, the United States will provide support
services to Canada and Mexico, and the Company's French and German
operations will provide support services to Belgium, The Netherlands and
Switzerland.
Grow Traffic Minutes by Leveraging the Company's Large, Corporate Customer
Base. UNIFI's revenue growth to date has been based on international
traffic originating solely from fax machines. UNIFI has an existing (as of
February 28, 1997) base of approximately 9,117 customers (excluding non-
revenue trial accounts and operations in China). The Company's account base
grew by 762 in October 1996, 840 in November 1996, 558 in December 1996
(due to seasonality), 779 in January 1997 and 827 in February 1997 (in each
case including a substantial number of non-revenue trial accounts).
However, the Company primarily handles its customers' international fax
transmission requirements (domestic fax services in the United States and
Canada were only recently added), which constitute only a small portion of
each customer's fax transmission needs. UNIFI has already begun to make the
investments necessary to broaden its service offering to provide customers
with a more complete set of fax delivery services through direct connection
to desktop messaging software packages. The following product line
extensions are in the process of being field tested and are currently
scheduled to be introduced commercially in 1997:
. Domestic fax service within the Japan and Germany. Provision of domestic
service is expected to open up additional substantial fax markets to
UNIFI inside these four countries.
. Domestic and international Intelligent Delivery Network service from the
desktop using e-mail and other LAN-based software. This service will
allow customers to send and receive fax documents from the desktop via
their existing e-mail or LAN-based systems.
. Internet accessible fax services. This product will allow customers to
send and receive fax documents via existing Internet connections
utilizing the Company's secure and reliable Intelligent Delivery
Network.
. Broadcast fax service (domestic and international).
The Company is currently providing LAN-based facsimile service from the
desktop to Union Bank of Switzerland's London office utilizing fax server
technology. UNIFI has also entered into a strategic relationship with Control
Data Systems ("CDS") to jointly develop an e-mail-to-fax outsourcing service
that will be designed to allow business customers to send and receive fax
documents from both LAN- and host-based e-mail systems. This new service will
be based on integrating CDS's X.400 messaging technology with the Company's
Intelligent Delivery Network. The Company expects that the joint product will
be marketed to CDS's existing customer base during 1997 and then extended to a
broader business audience in 1998. CDS's stated customer base includes
approximately 170 "Global 2000" companies and approximately 3.5-5.0 million
end users.
3
<PAGE>
The Company has also entered into definitive agreements or agreements in
principle to establish strategic relationships with three software companies
that are focused on providing LAN-based and Internet-based fax software
packages including, RedBox Holdings N.V. ("RedBox"), NetXchange Communications,
Inc., and PonyExpress, Inc. The Company expects to jointly develop software
products that will enable its customers to gain access to UNIFI's Intelligent
Delivery Network via a LAN-based or Internet-based connection utilizing a
standard fax server or browser interface. Each of those transactions is subject
to certain significant conditions, including definitive documentation, and
there can be no assurance that any such transaction will be consummated.
INTEGRATING SERVICES BEYOND FAX
Unified Mail Box Messaging Services. As computer and telephony applications
continue to converge, the Company believes that electronic messaging formats
such as e-mail and voice-mail will grow in importance in the more developed
markets. UNIFI believes that its service paradigm and transmission network is
equally applicable to these messaging environments. Further, UNIFI has
positioned itself to provide electronic messaging services in support of this
new unified mail-box environment. As part of its agreement to develop an e-
mail-to-fax outsourcing service with CDS, UNIFI has licensed CDS's X.400 e-mail
transport technology. UNIFI intends to utilize this technology to provide e-
mail messaging over its Intelligent Delivery Network.
The Company's growth plans are subject to numerous factors outside of its
control, including rapid regulatory and technological change and the activities
of its competitors. Although the Company's Intelligent Delivery Network is
currently operational, the Company has generated substantial operating losses
since its inception. The Company currently expects that the net proceeds of the
Private Offering will be sufficient to satisfy the Company's liquidity needs
through the first quarter of 1998; however, there can be no assurance to that
effect. The Company will be required to obtain substantial additional debt or
equity financing (which may include secured equipment financing) (the
"Additional Financing") which the Company believes (based on current
projections) is necessary to complete the build-out of the Intelligent Delivery
Network, to fund operating losses until the Company begins to earn positive net
cash flow from operations and to fund the Company's other liquidity needs.
There can be no assurance that the Company will be successful in introducing
new products and services, successfully implementing its growth strategy,
completing necessary additional financings or expanding the commercial
acceptance of its existing products and services. See "Risk Factors."
CORPORATE ORGANIZATION
The Company conducts its business in the United States directly and conducts
its business abroad through operating subsidiaries incorporated under the local
laws governing the markets in which they operate. All of the Company's foreign
operating subsidiaries, with the exception of Fax International Japan, Inc.
("Fax Japan") are 100% owned by the Company (except for nominal shares held by
certain officers of the Company in certain jurisdictions requiring more than
one shareholder). Fax Japan is 49% owned by Nichimen and ORIX.
THE EXCHANGE OFFER
The Exchange Offer...... The Company is hereby offering to exchange $1,000
principal amount of Exchange Notes for each $1,000
principal amount of Private Notes that are properly
tendered and accepted. The Company will issue
Exchange Notes on or promptly after the Expiration
Date. As of the date hereof, there is $175,000,000
aggregate principal amount of Private Notes
outstanding. See "The Exchange Offer."
4
<PAGE>
Based on an interpretation by the staff of the
Commission set forth in no-action letters issued to
third parties, the Company believes that the Exchange
Notes issued pursuant to the Exchange Offer in
exchange for Private Notes may be offered for resale,
resold and otherwise transferred by a holder thereof
(other than (i) a broker-dealer who purchases such
Exchange Notes directly from the Company to resell
pursuant to Rule 144A or any other available
exemption under the Securities Act or (ii) a person
that is an affiliate of the Company within the
meaning of Rule 405 under the Securities Act),
without compliance with the registration and
prospectus delivery provisions of the Securities Act;
provided that the holder is acquiring Exchange Notes
in the ordinary course of its business and is not
participating, and had no arrangement or
understanding with any person to participate, in the
distribution of the Exchange Notes. Each broker-
dealer that receives Exchange Notes for its own
account in exchange for Private Notes, where such
Private Notes were acquired by such broker-dealer as
a result of market-making activities or other trading
activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such
Exchange Notes. See "The Exchange Offer--Resale of
the Exchange Notes."
REGISTRATION RIGHTS The Private Notes were sold by the Company on
AGREEMENT............... February 21, 1997 to Smith Barney Inc. (the "Initial
Purchaser") pursuant to a Purchase Agreement, dated
February 14, 1997, by and among the Company and the
Initial Purchaser (the "Purchase Agreement") as part
of Units consisting in the aggregate of $175,000,000
in aggregate principal amount of Private Notes and
175,000 Warrants to purchase 4,816,818 shares of the
Company's Common Stock, par value $.01 per share.
Pursuant to the Purchase Agreement, the Company and
the Initial Purchaser entered into a Registration
Rights Agreement, dated as of February 21, 1997 (the
"Registration Rights Agreement"), which grants the
holders of the Private Notes certain exchange and
registration rights. The Exchange Offer is intended
to satisfy such rights, which will terminate upon the
consummation of the Exchange Offer. The holders of
the Exchange Notes will not be entitled to any
exchange or registration rights with respect to the
Exchange Notes. See "The Exchange Offer--Termination
of Certain Rights."
EXPIRATION DATE......... The Exchange Offer will expire at 5:00 p.m., New York
City time, on , 1997, unless the Exchange Offer is
extended by the Company in its sole discretion, in
which case the term "Expiration Date" shall mean the
latest date and time to which the Exchange Offer is
extended. See "The Exchange Offer--Expiration Date;
Extensions; Amendments."
ACCRUED INTEREST ON THE EXCHANGE
NOTES AND THE PRIVATE
NOTES...................
The Exchange Notes will bear interest from and
including the date of issuance of the Private Notes
(February 21, 1997). Holders whose Private Notes are
accepted for exchange will be deemed to have waived
the right to receive any interest accrued on the
Private Notes. See "The Exchange Offer--Interest on
the Exchange Notes."
5
<PAGE>
CONDITIONS TO THE
EXCHANGE OFFER..........
The Exchange Offer is subject to certain customary
conditions that may be waived by the Company. The
Exchange Offer is not conditioned upon any minimum
aggregate principal amount of Private Notes being
tendered for exchange. See "The Exchange Offer--
Conditions."
PROCEDURES FOR
TENDERING PRIVATE
NOTES................... Each holder of Private Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein and
therein, and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with such
Private Notes and any other required documentation to
Fleet National Bank, as exchange agent (the "Exchange
Agent"), at the address set forth herein. By
executing the Letter of Transmittal, the holder will
represent to and agree with the Company that, among
other things, (i) the Exchange Notes to be acquired
by such holder of Private Notes in connection with
the Exchange Offer are being acquired by such holder
in the ordinary course of its business, (ii) such
holder has no arrangement or understanding with any
person to participate in a distribution of the
Exchange Notes, (iii) that if such holder is a
broker-dealer registered under the Exchange Act or is
participating in the Exchange Offer for the purposes
of distributing the Exchange Notes, such holder will
comply with the registration and prospectus delivery
requirements of the Securities Act in connection with
a secondary resale transaction of the Exchange Notes
acquired by such person and cannot rely on the
position of the staff of the Commission set forth in
no-action letters (see "The Exchange Offer--Resale of
Exchange Notes"), (iv) such holder understands that a
secondary resale transaction described in clause
(iii) above and any resales of Exchange Notes
obtained by such holder in exchange for Private Notes
acquired by such holder directly from the Company
should be covered by an effective registration
statement containing the selling securityholder
information required by Item 507 or Item 508, as
applicable, of Regulation S-K of the Commission and
(v) such holder is not an "affiliate," as defined in
Rule 405 under the Securities Act, of the Company. If
the holder is a broker-dealer that will receive
Exchange Notes for its own account in exchange for
Private Notes that were acquired as a result of
market-making activities or other trading activities,
such holder will be required to acknowledge in the
Letter of Transmittal that such holder will deliver a
prospectus in connection with any resale of such
Exchange Notes; however, by so acknowledging and by
delivering a prospectus, such holder will not be
deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. See "The Exchange
Offer--Procedures for Tendering."
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS.......
Any beneficial owner whose Private Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
who wishes to tender such Private Notes in the
Exchange Offer should contact such registered holder
promptly and instruct such registered holder to
tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's own
behalf, such owner must, prior to completing and
executing the Letter of Transmittal and delivering
such
6
<PAGE>
owner's Private Notes, either make appropriate
arrangements to register ownership of the Private
Notes in such owner's name or obtain a properly
completed bond power from the registered holder. The
transfer of registered ownership may take
considerable time and may not be able to be completed
prior to the Expiration Date. See "The Exchange
Offer--Procedures for Tendering."
Guaranteed Delivery Holders of Private Notes who wish to tender their
Procedures.............. Private Notes and whose Private Notes are not
immediately available or who cannot deliver their
Private Notes, the Letter of Transmittal or any other
documentation required by the Letter of Transmittal
to the Exchange Agent prior to the Expiration Date
must tender their Private Notes according to the
guaranteed delivery procedures set forth under "The
Exchange Offer--Guaranteed Delivery Procedures."
Acceptance of the
Private Notes and
Delivery of the
Exchange Notes..........
Subject to the satisfaction or waiver of the
conditions to the Exchange Offer, the Company will
accept for exchange any and all Private Notes that
are properly tendered in the Exchange Offer prior to
the Expiration Date. The Exchange Notes issued
pursuant to the Exchange Offer will be delivered on
the earliest practicable date following the
Expiration Date. See "The Exchange Offer--Terms of
the Exchange Offer."
Withdrawal Rights....... Tenders of Private Notes may be withdrawn at any time
prior to the Expiration Date. See "The Exchange
Offer--Withdrawal of Tenders."
Certain Federal Income
Tax Considerations......
For a discussion of certain material federal income
tax considerations relating to the exchange of the
Exchange Notes for the Private Notes, see "Certain
Federal Income Tax Considerations."
Exchange Agent.......... Fleet National Bank is serving as the Exchange Agent
in connection with the Exchange Offer.
THE EXCHANGE NOTES
The Exchange Offer applies to $175,000,000 in aggregate principal amount of
the Private Notes. The form and terms of the Exchange Notes are the same as the
form and terms of the Private Notes except that (i) the exchange will have been
registered under the Securities Act and, therefore, the Exchange Notes will not
bear legends restricting the transfer thereof and (ii) holders of the Exchange
Notes will not be entitled to certain rights of holders of the Private Notes
under the Registration Rights Agreement, which rights will terminate upon
consummation of the Exchange Offer. The Exchange Notes will evidence the same
indebtedness as the Private Notes (which they replace) and will be issued
under, and be entitled to the benefits of, the Indenture. For further
information and for definitions of certain capitalized terms used below, see
"Description of Exchange Notes."
Notes Offered........... $175 million in aggregate principal amount of 14%
Senior Notes due 2004.
Maturity Dated.......... March 1, 2004.
Interest Payment March 1 and September 1 of each year, commencing
Dates................... September 1, 1997.
7
<PAGE>
Optional Redemption..... The Notes will be redeemable, in whole or in part, at
the option of the Company at any time on or after
March 1, 2001 at the redemption prices set forth
herein, plus accrued and unpaid interest, if any, to
the date of redemption. In addition, at any time
prior to March 1, 2000, the Company may redeem up to
33% of the aggregate principal amount of the Notes
originally issued with the net proceeds of one or
more Equity Offerings (as defined) at the redemption
price set forth herein; provided that not less than
67% of the Notes issued under the Indenture remained
outstanding immediately after giving effect to any
such redemption. See "Description of Exchange Notes--
Optional Redemption."
Change of Control....... Upon a Change of Control, each holder of the Notes
will have the right to require the Company to
repurchase such holder's Notes at 101% of the
principal amount thereof, plus accrued and unpaid
interest, if any, to the date of purchase. There can
be no assurance that the Company will have the
financial resources necessary to repurchase the Notes
upon a Change of Control. See "Description of
Exchange Notes--Change of Control."
Ranking................. The Notes will represent general unsecured senior
obligations of the Company. The Company conducts
substantial business through its subsidiaries. The
Notes will be effectively subordinated to all
Indebtedness and other liabilities of the Company's
subsidiaries (including trade payables). As of
December 31, 1996, on a pro forma basis after giving
effect to the consummation of the Private Offering
and the application of the proceeds thereof, the
Company's subsidiaries would have had approximately
$5.7 million of liabilities (including trade
payables) outstanding to which holders of the Notes
would have been effectively subordinated in right of
payment. The Indenture governing the Notes will
permit the Company and its subsidiaries to incur
additional indebtedness to fund the expansion of the
Company's network and for other permitted purposes
and to secure such indebtedness with liens on the
assets of the Company and its subsidiaries.
Escrow of Proceeds...... Concurrently with the closing of the Private
Offering, the Company deposited with the Escrow Agent
an amount of U.S. Government Securities that,
together with the proceeds from the investment
thereof, will be sufficient to pay when due the first
four interest payments on the Notes. Such funds will
be used to make the first four interest payments,
with any balance to be retained by the Company. See
"Description of Exchange Notes--Disbursement of
Funds--Escrow Account."
Certain Covenants....... The Indenture governing the Exchange Notes contains
certain covenants which, among other things, will
restrict the ability of the Company and its
Restricted Subsidiaries (as defined) to (i) incur
additional indebtedness; (ii) enter into sale and
leaseback transactions, (iii) pay dividends or make
distributions in respect of its capital stock or make
certain other restricted payments; (iv) create liens;
(v) enter into certain transactions with affiliates
or related persons; (vi) make certain asset sales; or
(vii) consolidate, merge or sell all or substantially
all of its assets. These covenants are subject to
important exceptions and qualifications. See
"Description of Exchange Notes--Certain Covenants."
8
<PAGE>
RISK FACTORS
An investment in the Exchange Notes involves a high degree of risk.
Accordingly, prospective purchasers of the Exchange Notes should carefully
consider the factors set forth under "Risk Factors" prior to making an
investment in the Exchange Notes and should be able to afford a complete loss
of their investment.
9
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The Summary Consolidated Statements of Operations Data for the years ended
December 31, 1994, 1995 and 1996 and the Summary Consolidated Balance Sheet
Data as of December 31, 1995 and 1996 set forth below, have been derived from
the Consolidated Financial Statements of UNIFI audited by Arthur Andersen LLP,
independent public accountants, and should be read in conjunction with such
Consolidated Financial Statements and the notes thereto included in this
Prospectus. The Summary Consolidated Statement of Operations Data for the years
ended December 31, 1992 and 1993 have been derived from audited Consolidated
Financial Statements of UNIFI that are not included in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1992 1993 1994 1995 1996
--------- --------- ---------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS
OF OPERATIONS DATA:
Revenues.............. $ 475 $ 3,943 $ 6,952 $ 10,664 $ 25,218
--------- --------- ---------- ---------- ----------
Costs and Expenses:
Cost of Revenues.... 957 2,979 4,656 7,840 27,599
Sales and Customer
Service............ 940 2,611 8,326 11,837 25,706
Research and
Development........ 679 1,381 1,656 4,810 11,620
General and
Administrative..... 610 1,496 1,800 2,676 4,165
Information
Systems............ -- -- 290 803 3,527
--------- --------- ---------- ---------- ----------
Total Costs and
Expenses........... 3,186 8,467 16,728 27,967 72,617
Loss From Operations.. (2,711) (4,524) (9,776) (17,302) (47,399)
Interest and Other
Income (Expense),
Net.................. (61) (209) (509) 165 (2,462)
--------- --------- ---------- ---------- ----------
Net Loss Before
Minority Interest.... (2,772) (4,733) (10,285) (17,137) (49,861)
Minority Interest(1).. -- -- 1,525 2,480 948
--------- --------- ---------- ---------- ----------
Net Loss.............. $ (2,772) $ (4,733) $ (8,760) $ (14,657) $ (48,913)
========= ========= ========== ========== ==========
Net Loss Per Common
Share(2)............. $ (0.85) $ (1.42) $ (2.64) $ (4.26) $ (13.04)
Weighted Average
Common Shares
Outstanding.......... 3,271 3,323 3,323 3,437 3,752
Pro Forma Net Loss Per
Common Share(2)...... (0.63) (0.66) (0.96) (0.96) (2.83)
Pro Forma Weighted
Common Average Shares
Outstanding.......... 4,392 7,225 9,148 15,291 17,267
OTHER FINANCIAL DATA:
EBITDA(3)............. $ (2,540) $ (4,006) $ (6,441) $ (12,016) $ (40,191)
Capital
Expenditures(4)...... 885 2,162 4,486 5,883 20,138
Interest Expense...... (62) (204) (602) (411) (2,499)
Ratio of Earnings to
Fixed Charges(5)..... -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA AS
ADJUSTED
DECEMBER 31,
DECEMBER 31, 1995 DECEMBER 31, 1996 1996
----------------- ----------------- ------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET
DATA:
Cash, Cash Equivalents and
Short-term Investments(6).. $11,124 $ 5,360 $157,491
Working Capital
(Deficiency)(6)............ 6,633 (25,936) 95,800
Total Assets................ 25,378 41,184 199,952
Long-term Debt(7)........... 9,703 46,613 213,425
Shareholders' Equity
(Deficit).................. 8,871 (42,507) (34,318)
</TABLE>
10
<PAGE>
- --------
(1) See Note 2(b) to the Company's Consolidated Financial Statements.
(2) See Note 2(k) to the Company's Consolidated Financial Statements.
(3) EBITDA means net loss plus interest expense, income tax expense,
depreciation and amortization expense and all other non-cash charges, less
any non-cash items which have the effect of increasing net income or
decreasing net income or decreasing net loss. Information with respect to
EBITDA is included herein because a similar measure will be used in the
Indenture (as defined) with respect to the computation of certain
covenants and because it is a widely accepted financial indicator of a
company's ability to service debt. EBITDA should not be considered in
isolation from, as a substitute for or as being more meaningful than net
income, cash flows from operating activities or other income or cash flow
statement data prepared in accordance with generally accepted accounting
principles and should not be construed as an indication of the Company's
operating performance or as a measure of liquidity. EBITDA, as presented
herein, may be calculated differently by other companies and, as such,
EBITDA amounts presented herein may not be comparable to other similarly
titled measure of other companies.
(4) Includes assets acquired under capital lease arrangements of approximately
$1,546,000, $2,545,000, $730,000 and $2,420,000 in 1993, 1994, 1995 and
1996, respectively.
(5) For the purpose of calculating the ratio of earnings to fixed charges,
earnings represent loss from continuing operations before income taxes
plus fixed charges. Fixed charges consist of interest expense on all
indebtedness plus the interest portion of rental expense on non-cancelable
leases and amortization of debt issuance costs and debt discount. The
Company's earnings have been inadequate to meet its fixed charges in 1992,
1993, 1994, 1995 and 1996 by $2,711,000, $4,528,000, $8,159,000,
$14,246,000, $8,077,000 and $44,900,000, respectively.
(6) Includes approximately $46 million of funds that will be deposited in the
escrow account pursuant to the Indenture and approximately $1 million of
restricted cash. See "Description of the Senior Notes--Disbursement of
Funds--Escrow Account."
(7) After December 31, 1996, the Company incurred $7.5 million of interim
financing of which approximately $0.7 million was outstanding after the
Private Offering, after giving effect to certain payments and to the
cancellation of a portion of such interim financing in exchange for 5,000
Units.
11
<PAGE>
RISK FACTORS
An investment in the Exchange Notes is subject to a number of risks,
including, but not limited to, those set forth below. The following factors,
together with the other information contained herein, should be considered
carefully by prospective investors in evaluating an investment in the Exchange
Notes offered hereby.
CAUTIONARY STATEMENTS WITH RESPECT TO FORWARD LOOKING STATEMENTS
This Prospectus includes "forward looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). Although the Company believes
that its plans, intentions and expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such plans,
intentions or expectations will be achieved. Important factors that could
cause actual results to differ materially from the Company's forward looking
statements are set forth below and elsewhere in this Prospectus. Furthermore,
the Company does not intend to update or revise the forward looking statements
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events. Prospective purchasers are cautioned not
to place undue reliance on any of the forward looking statements included
herein. All forward-looking statements attributable to the Company or persons
acting on its behalf are expressly qualified in their entirety by the
cautionary statements set forth below.
FAILURE TO EXCHANGE PRIVATE NOTES
Exchange Notes will be issued in exchange for Private Notes only after
timely receipt by the Exchange Agent of such Private Notes, a properly
completed and duly executed Letter of Transmittal and all other required
documentation. Therefore, holders of Private Notes desiring to tender such
Private Notes in exchange for Exchange Notes should allow sufficient time to
ensure timely delivery. Neither the Exchange Agent nor the Company is under
any duty to give notification of defects or irregularities with respect to
tenders of Private Notes for exchange. Private Notes that are not tendered or
are tendered but not accepted will, following consummation of the Exchange
Offer, continue to be subject to the existing restrictions upon transfer
thereof. In addition, any holder of Private Notes who tenders in the Exchange
Offer for the purpose of participating in a distribution of the Exchange Notes
will be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Private Notes, where such Private Notes were acquired by such
broker-dealer as a result of market-making activities or any other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. To the extent that Private Notes are
tendered and accepted in the Exchange Offer, the trading market for untendered
and tendered but unaccepted Private Notes could be adversely affected due to
the limited amount, or "float," of the Private Notes that are expected to
remain outstanding following the Exchange Offer. Generally, a lower "float" of
a security could result in less demand to purchase such security and could,
therefore, result in lower prices for such security. For the same reason, to
the extent that a large amount of Private Notes are not tendered or are
tendered and not accepted in the Exchange offer, the trading market for the
Exchange Notes could be adversely affected. See "Plan of Distribution" and
"The Exchange Offer."
HISTORICAL AND ANTICIPATED OPERATING LOSSES; NEGATIVE CASH FLOW FROM
OPERATIONS
Since inception, UNIFI has been primarily engaged in start-up activities and
the build-out of its network, both of which require substantial expenditures.
Consequently, UNIFI has reported operating losses before interest of
approximately $9.8 million, $17.3 million and $47.4 million during 1994, 1995
and 1996, respectively, and net cash outflow before financing of approximately
$10.5 million, $20.4 million and $43.2 million for the years ended December
31, 1994, 1995 and 1996, respectively. Further development of the Company's
business and the expansion of its network will require significant additional
expenditures and the Company expects that it will have significant operating
losses and will record significant net cash outflows before financing in the
near term. A substantial portion of the proceeds from the Private Offering
will be utilized to fund working capital losses. There can be no assurance
that the Company will have sufficient resources to complete such expenditures
and
12
<PAGE>
make principal or interest payments with respect to the Exchange Notes. See
"--Substantial Leverage; Ability to Service Indebtedness," "--Need for
Additional Financing" and "Management's Discussion and Analysis of Results of
Operations and Financial Condition--Liquidity and Capital Resources."
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE INDEBTEDNESS
The Company is highly leveraged. On a pro forma basis after giving effect to
the Private Offering and the use of the proceeds therefrom, the Company and
its subsidiaries would have had approximately $225.9 million in aggregate
principal face value amount of indebtedness (without discounting the face
value of the Notes for the value of the Warrants) outstanding at December 31,
1996. In addition, the Company has recorded a substantial deficiency of
earnings to fixed charges in all fiscal years since inception. The Indenture
permits the Company and its subsidiaries to incur additional indebtedness to
fund the expansion of the Company's network and for other permitted purposes
and to secure such indebtedness with liens on the assets of the Company and
its subsidiaries. See "Description of Exchange Notes--Certain Covenants." In
addition, the Company currently expects that the net proceeds of the Private
Offering will be sufficient to satisfy the Company's liquidity needs through
the first quarter of 1998 (although there can be no assurance to that effect).
The Company will be required to obtain substantial additional debt or equity
financing as soon as practicable following the Private Offering to complete
the build-out of the Intelligent Delivery Network, to fund operating losses
until the Company begins to earn positive net cash flow and to fund the
Company's other liquidity needs. Holders of secured indebtedness will have
priority in right of payment to the extent of the value of the assets securing
such indebtedness. The ability of the Company and its subsidiaries to make
scheduled payments with respect to such indebtedness will depend upon, among
other things, the Company's ability to complete the necessary financing and
the build-out of its network on a timely and cost-effective basis, the market
acceptance and customer demand for the Company's services and the future
operating performance of the Company. Each of these factors is, to a large
extent, subject to economic, financial, competitive, regulatory and other
factors, many of which are beyond the Company's control. If the Company does
not generate sufficient increases in cash flow from operations to repay the
Exchange Notes at maturity, it could attempt to refinance the Exchange Notes;
however, no assurance can be given that such a refinancing would be available
on terms acceptable to the Company, or at all. Any failure by the Company to
satisfy its obligations with respect to the Exchange Notes at maturity (with
respect to payments of principal) or prior thereto (with respect to payments
of interest or required repurchases) would constitute a default under the
Indenture and could cause a default under agreements governing other
indebtedness of the Company. In addition, there can be no assurance that the
Company will have available the financial resources necessary to repurchase
any or all Exchange Notes tendered upon a Change of Control. See "--Need for
Additional Financing," "--Historical and Anticipated Operating Losses;
Negative Cash Flow from Operations," "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources" and "Description of Exchange Notes--Certain Covenants--Limitation
on Incurrence of Additional Indebtedness."
The Company conducts substantial business operations through its
subsidiaries. The Exchange Notes will be effectively subordinated to all
existing and future indebtedness and other liabilities (including trade
payables) of the Company's subsidiaries since the Company's right to receive
any distribution from any such subsidiary upon its liquidation or
reorganization will be subject to the prior satisfaction of the claims of such
subsidiary's creditors (including trade creditors). As of December 31, 1996,
on a pro forma basis after giving effect to the Private Offering and the
application of the proceeds therefrom, the Company's subsidiaries had
approximately $5.7 million of total indebtedness and other liabilities
outstanding. The Company's subsidiaries are expected to incur additional
indebtedness in connection with the build-out of the Company's network,
working capital requirements and development costs. See "Management's
Discussion and Analysis of Financial Conditions and Results of Operations--
Liquidity and Capital Resources." The Indenture will limit, but not prohibit,
the ability of the Company and its subsidiaries to incur additional
indebtedness. The Company's obligations under the Exchange Notes will be
effectively subordinated to any such additional indebtedness of its
subsidiaries.
The degree to which the Company is leveraged could have important
consequences for holders of the Exchange Notes, including (i) making it more
difficult for the Company to satisfy its obligations with respect to
13
<PAGE>
the Exchange Notes, (ii) increasing the Company's vulnerability to general
adverse economic and industry conditions, (iii) limiting the Company's ability
to obtain additional financing to complete the build-out of its network, fund
future working capital, capital expenditures and other general corporate
purpose requirements, (iv) requiring the dedication of a substantial portion
of the Company's cash flow from operations to the payment of principal of, and
interest on, its indebtedness, thereby reducing the availability of such cash
flow to fund working capital, capital expenditures or other general corporate
purposes, (v) limiting the Company's flexibility in planning for, or reacting
to, changes in its business and the industry, and (vi) placing the Company at
a competitive disadvantage vis-a-vis less-leveraged competitors. In addition,
the Company's operating and financial flexibility is limited by covenants
contained in agreements governing the indebtedness of the Company, including
the Indenture. Among other things, these covenants limit or may limit the
ability of the Company and its subsidiaries to incur additional indebtedness,
pay dividends or make distributions to its stockholders or make certain other
restricted payments, create certain liens upon assets, apply the proceeds from
the dispositions of certain assets or enter into certain transactions with
affiliates. There can be no assurance that such covenants will not adversely
affect the Company's ability to finance its future operations or capital needs
or to engage in other business activities which may be in the interests of the
Company. See "Description of Exchange Notes--Certain Covenants" and
"Description of Certain Indebtedness."
DEVELOPMENT STAGE COMPANY; SHORT OPERATING HISTORY
The Company began operations by sending fax document transmissions from the
United States to Japan in April 1992 and is still developing. Moreover, the
Company only began originating fax document transmissions from Japan in
February 1995 and from its other markets during the first seven of months of
1996. Accordingly, the Company has a short operating history upon which an
evaluation of the Company's prospects in each of its markets can be made.
Since inception, the Company has been engaged in the provision of enhanced fax
services, the recruitment of key management and technical personnel and
raising capital to fund its operations and the development of the Intelligent
Delivery Network and its existing and planned electronic messaging services.
The Company's viability, profitability and growth depend upon successful
expansion of its network and implementation of its growth plan. There can be
no assurance that any of the Company's growth plans will be successful. The
prospects for the Company's success must be considered in light of the risks,
expenses and difficulties often encountered in the establishment of a new
business in a continually evolving industry subject to rapid technological and
price changes, and characterized by an increasing number of market
competitors. The risks, expenses and difficulties often encountered in
shifting from the research and development of prototype products to the
commercialization of new products based on innovative technology must also be
considered. See "Business."
DEPENDENCE ON NETWORK INFRASTRUCTURE
The Company's future success will depend to a significant degree upon the
capacity, reliability and security of its network infrastructure, and in
particular upon the ability of the Company to continue deploying network nodes
in different countries throughout the world. A network node is a group of
specially configured micro-computers and assorted telecommunications equipment
that allows the Company's systems to interface with telecommunications systems
operated by other companies, similar to what is commonly referred to in the
telecommunications industry as a "point of presence." The Company must
continue to expand and adapt its existing network infrastructure as the number
of customers and the volume of traffic they wish to transmit increase. The
Company must install additional network nodes in countries to which the
Company's customers direct significant portions of their transmissions in
order to improve operating results by reducing the use of expensive third-
party telecommunications carriers. The expansion and adaptation of the
Company's existing network infrastructure, and the addition of new nodes in
different countries, will require substantial financial, operational and
management resources. In addition, such activities are and will remain subject
to favorable political, economic and regulatory circumstances in host
countries. There can be no assurance that the Company will be able to expand,
adapt or add to its network infrastructure to meet additional demand on a
timely basis, or at a commercially reasonable cost, or at all. See "Business--
The Intelligent Delivery Network" and "--Regulation."
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RISKS ASSOCIATED WITH ANTICIPATED GROWTH
The Company has experienced rapid growth. As the Company's business develops
and expands, the Company will need to implement enhanced operational and
financial systems and will require additional employees and management,
operational and financial resources. Specifically, the Company's customer
service personnel currently require a high level of support from information
technology staff and the Company anticipates that it will need to continue to
provide training to customer service personnel involved in connecting new
customers and in providing new services. There can be no assurance that the
Company will successfully implement and maintain such operational and
financial systems or successfully obtain, integrate and utilize the employees
and management, operational and financial resources necessary to manage a
developing and expanding business in an evolving and increasingly competitive
industry. Failure to implement such systems successfully, hire and integrate
such employees or use such resources effectively could have a material adverse
effect on the Company.
NEED FOR ADDITIONAL FINANCING
From inception until December 31, 1996, the Company invested approximately
$115 million (in excess of revenues) to finance the development of the
Intelligent Delivery Network technology and to roll out and operate a portion
of its network. The Company expects to continue to make significant capital
outlays for the foreseeable future to fund the remaining cost of building and
operating its network prior to the time that it begins to generate positive
cash flows from operations and for the foreseeable future thereafter. The
Company currently expects that the net proceeds of the Private Offering will
be sufficient to satisfy the Company's liquidity needs through the first
quarter of 1998; however, there can be no assurance to that effect. If the
Company's plans or assumptions change, if its assumptions prove to be
inaccurate, if the Company experiences unanticipated costs or competitive
pressures or if the net proceeds from the Private Offering otherwise prove to
be insufficient, the Company may be required to seek additional capital sooner
than currently anticipated.
The Company will be required to obtain substantial additional debt or equity
financing (which may include secured equipment financing) (the "Additional
Financing") that the Company believes (based on current projections) is
necessary to complete the build-out of the Intelligent Delivery Network, to
fund operating losses after the first quarter of 1998 until the Company begins
to earn positive net cash flow and to fund the Company's other liquidity
needs. However, there can be no assurance that any such debt or equity
financing will be available to the Company on favorable items or at all or
that the Company will generate positive net cash flow from operations on a
timely basis and in an amount that will be sufficient to meet its liquidity
needs or at all. In the event that the Company is unable to obtain such
additional capital or generate cash flow from operations, the Company will be
required to delay or to reduce the scope of its currently anticipated
expansion of the Intelligent Delivery Network, or take other actions which
could materially adversely affect the Company's business, results of
operations and financial condition and its ability to compete, and the value
of the Securities. Any delay in the expansion of the Intelligent Delivery
Network will delay the projected date on which the Company expects to begin
generating positive net cash flow from operations, thereby increasing the need
for additional financing.
There can be no assurance that the Company's current projection of cash flow
from operations (which will depend upon numerous future factors and
conditions, many of which are outside of the Company's control) will be
accurate. Projections are merely estimates of future events and actual events
should be expected to vary from current estimates, possibly materially.
Furthermore, there can be no assurance that any additional financing will be
available to the Company. In addition, if customer demand exceeds current
expectations and if such demand can be accommodated without adversely
affecting the quality of the Company's service, the Company is likely to
attempt to accelerate its expansion. If the Company elects to accelerate its
build-out or introduce new products or services, its funding needs will
increase, possibly to a significant degree, and there can be no assurance that
such funding will be available on favorable terms, or at all, or that all or a
significant portion of such funding will not be in the form of additional
indebtedness. See "--Substantial Leverage; Ability to Service Indebtedness"
and "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Capital Resources."
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Because the Company's cost of expanding its network and operating its
business, as well as the Company's revenues, will depend on a variety of
factors (including the ability of the Company to meet its expansion schedules,
the number of customers and the services for which they subscribe, the nature
and penetration of new services that may be offered by the Company, regulatory
changes and changes in technology) actual costs and revenues may vary from
expected amounts, possibly to a material degree, and such variations are
likely to affect the Company's future capital requirements. Accordingly, there
can be no assurance that the Company will not be required to raise substantial
additional capital in the future or that its current projections will prove to
be accurate. If the Company's current projection of its future net operating
losses or of future cash flows from operations is inaccurate in any material
respect or if the Company is unable to obtain the additional financing it
requires, the Company's cash needs could be higher than currently anticipated
and exceed its cash availability, which would have a material adverse effect
on the Company. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business--Products and Services."
UNCERTAINTY OF MARKET ACCEPTANCE; POTENTIAL LACK OF CUSTOMER DEMAND
The Company's success is subject to a number of business, economic,
regulatory and competitive factors, many of which are beyond the Company's
control, including the extent to which prospective customers will switch from
their current fax service to the Company's. The Company's ability to service
its indebtedness, including the Notes, is subject to the successful
implementation of its growth strategy, which, in turn, is premised, among
other things, on the Company's expectation that demand for its current
services will increase significantly in its existing markets. The Company
began providing international fax-to-fax services in 1992. Moreover, the
Company has not commercially marketed any other electronic message delivery
services, such as broadcast fax service, LAN-to-fax services, domestic fax
services and e-mail and voice-mail services, and, therefore, the market
acceptance and customer demand for such services are uncertain. Certain of
these other services have not yet been beta tested or commercially introduced
and there can be no assurance that any of them will achieve market acceptance
or generate operating profits. Failure to gain market acceptance for current
or planned products and services would have a material adverse effect on the
Company's prospects. In addition, the Company has incurred and will continue
to incur significant operating expenses, has made, and will continue to make,
significant capital investments, has entered into operating leases, equipment
supply contracts and service arrangements, and is attempting to secure
financing, in each case based upon certain expectations as to the anticipated
market acceptance of, and customer demand for, the Company's services.
Accordingly, any material miscalculation by the Company with respect to its
operating strategy or business plan could have a material adverse effect on
the Company. See "--Need for Additional Financing," and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
COMPETITION
The Company's success will depend on its ability to compete with a variety
of other telecommunications providers including, AT&T Corp. ("AT&T"), MCI
Communications Corp. ("MCI"), Sprint Corp. ("Sprint"), numerous national post,
telephone and telegraph companies ("PTTs") around the world (operators of
local public switched telephone networks ("PSTNs")), and other potential
competitors such as the regional Bell operating companies. The market is also
served by more specialized enhanced facsimile service providers that offer
basic store-and-forward services. The Company also faces potential competition
from Internet-based and other alternatives to fax services. Many of the
Company's competitors possess significantly greater financial, marketing,
technological and other resources than the Company and many offer enhanced
and/or basic fax communications services that would compete with those offered
by the Company. The Company cannot predict whether AT&T, MCI, Sprint, any PTTs
or any other competitor will expand its enhanced and/or basic fax
communications services business, and there can be no assurance that these or
other competitors will not commence or expand their fax businesses. If any of
the Company's competitors were to devote substantial resources to marketing
enhanced fax and other electronic messaging services to the Company's target
customer base, there could be an adverse effect on the Company's business. In
addition, certain of the Company's competitors may target discounts in the fax
market in order to gain an advantage in another market or with
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particular customers. The Company may be unable to compete with such discounts
on an economically feasible basis. The PTTs also generally have certain
competitive advantages that the Company and its other competitors do not have
due to their control over the intra-national transmission lines and connection
thereto, their ability to delay access to such lines and their relationship
with often protectionist regulatory authorities. If the PTT in any
jurisdiction uses its competitive advantages to their fullest extent, the
Company could be adversely affected.
The Company's receiving, queuing, routing and other systems hardware are
generally not proprietary to the Company and as a result, there can be no
assurance that such hardware will not be acquired or duplicated by the
Company's existing and potential competitors. Generally, the Company does not
have long-term agreements with its customers and there can be no assurance
that its customers will continue to transact business with the Company in the
future. In addition, even if there is continued growth in the use of enhanced
and/or basic fax services, there can be no assurance that potential customers
will not elect to use their own equipment and existing carriers to fulfill
their needs for enhanced and/or basic fax communications services. There also
can be no assurance that customers will not elect to use fax alternatives or
that companies offering such alternatives will not develop product features or
pricing policies which are more attractive to customers than those offered by
the Company. See "Business--Competition."
The provision of telecommunications services is and will continue to be
extremely competitive. Prices have decreased substantially over the last few
years in most of the markets in which the Company does business and prices are
expected to decline substantially over the next several years in all of the
markets where the Company does business or expects to do business. In
addition, substantially all of the Company's markets and expected future
markets were historically served by regulated or state run monopolies. As a
result, customers in many of these markets are not familiar with shopping for
fax services in a competitive marketplace and may be reluctant to use new
providers, such as the Company. The Company expects that competition will
increase in the future as the deregulation of telecommunications markets
world-wide accelerates.
Competition is based upon the type and quality of fax services offered,
customer service and price. The Company attempts to price its services below
the prices charged by the PTT and/or other major carriers in each of its
markets. The Company has no control over the prices set by its competitors and
some of the Company's larger competitors may be able to use their substantial
financial resources to create price competition in the countries in which the
Company operates. Although the Company does not believe that there is a
sufficiently strong economic incentive for the major carriers to pursue such a
pricing strategy or that such competitors are likely to engage in such a
course of action, there can be no assurance that vigorous price competition
will not occur. Any price competition could have a material adverse effect on
the Company's business, financial condition and results of operations. In
addition, certain of the Company's competitors will provide potential
customers with a broader range of services than the Company currently offers
or can offer due to regulatory restrictions. See "Business--Regulation."
In addition to these competitive factors, recent and pending deregulation in
each of the Company's markets may encourage new entrants.
RISKS ASSOCIATED WITH RAPIDLY CHANGING INDUSTRY
The electronic messaging and international telecommunications industry is
changing rapidly due to, among other things, deregulation, privatization of
PTTs, technological improvements, expansion of telecommunications
infrastructure, the globalization of the world's economies and free trade.
There can be no assurance that the Company will be able to compete effectively
under, or adjust its contemplated plan of development to meet, changing market
conditions or that the Company will be able to implement its strategy or that
its strategy will be successful in this rapidly evolving market.
This market is also marked by the introduction of new products and services
and increased satellite and fiber optic cable transmission capacity for
services similar to those provided by the Company, including
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utilization of the Internet for international voice and data communications.
Future technological advances in the telecommunications industry may result in
the availability of new product delivery services (or increase the efficiency
of existing services). If a delivery technology becomes available that is more
cost-effective, the Company may be unable to access such technology or its use
may involve substantial capital expenditures which the Company may be unable
to finance. There can be no assurance that existing, proposed or as yet
undeveloped technologies will not render the Company's technology less
profitable or less viable, or that the Company will have available the
financial and other resources to compete effectively against companies
possessing such technologies. The Company is unable to predict which of the
many possible future products and services will meet evolving industry
standards and consumer demands. There can be no assurance that the Company
will be able to adapt to such technological changes or offer such services on
a timely basis or establish or maintain a competitive positions.
TECHNOLOGY RISKS
The Company's international fax-to-fax service is currently being
commercially marketed. However, certain of its planned document delivery
services are in various stages of development. See "Business--Products and
Services." The Company's LAN-to-fax service is being network tested but the
Company does not expect such services to be commercially available until late
1997. The Company's e-mail-to-fax service is currently being laboratory and
network tested and the Company's e-mail and voice-mail services are only in
the initial stages of development. No assurance can be given that such
services will prove to be commercially viable or that the Company will not
experience operational problems with such services after commercial
introduction that could delay or defeat the ability of such services to
generate revenue or operating profits. Future operational problems or the
inability to obtain additional necessary financings could increase the cost
of, or delay the Company's business plan which, in turn, could materially
adversely affect the success of the Company and its ability to satisfy its
obligations with respect to its indebtedness, including the Notes.
DEPENDENCE ON THIRD-PARTY CARRIERS
Currently, the Company does not own any telecommunications lines and does
not intend to construct or acquire any of its own transmission facilities. All
of the faxes sent by the Company's customers are and will continue to be
connected, at least in part, through transmission lines or satellite links
that the Company leases from third-party carriers. The lessors of such
facilities are competitors of the Company, and include, or may include in the
future, AT&T, MCI, Teleglobe Canada, Inc., British Telecommunications PLC,
France Telecom, Deutsche Telekom and Mercury Communications PLC. The Company's
lines are either leased on a per-minute basis (some with minimum volume
commitments) or, where the Company anticipates higher volumes of traffic, on a
monthly or longer-term fixed cost basis. The negotiation of lease agreements
involves estimates regarding future supply and demand for transmission
capacity as well as estimates of the calling patterns and traffic levels of
the Company's existing and future customers. The deterioration or termination
of the Company's relationships with one or more of its carrier vendors could
have a material adverse effect upon the Company's business, financial
condition and results of operations.
In many jurisdictions in which the Company conducts business or plans to
conduct business, the only current provider of significant intra-national
transmission facilities is the PTT. Accordingly, prior to full deregulation,
there may be only one source of intra-national transmission lines in these
countries and the Company may be required to lease transmission capacity at
artificially high rates from a provider that occupies a monopoly or near
monopoly position. Such rates may be too high to allow the Company to generate
gross profit on intra-national calls or international calls routed to a
Company node by means of such intra-national lines. In addition, PTTs will not
necessarily be required by law to allow the Company to lease transmission
lines. To the extent that applicable law requires PTTs to lease transmission
lines to the Company, delays may nevertheless be encountered with respect to
the commencement of operations and extensive delays can be expected with
respect to the negotiation of leases and interconnection agreements. In
addition, disputes may arise with respect to pricing terms and other matters.
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RISK OF SYSTEM FAILURE; SECURITY RISKS
The Company's operations are dependent upon its ability to protect its
network from interruption by damage from fire, earthquake, power loss,
telecommunications failure, unauthorized entry, computer viruses or other
events beyond the Company's control. Although the Company currently locates
its computer hardware and other telecommunications equipment at many sites,
there can be no assurance that the Company's existing and planned precautions
of backup systems, regular data backups and other procedures will be adequate
to prevent significant damage, system failure or data loss. Despite the
implementation of security measures by the Company, its infrastructure may
also be vulnerable to computer viruses, hackers or similar disruptive problems
caused by forces outside of the Company. Persistent problems continue to
affect public and private data networks, including computer break-ins and the
misappropriation of confidential information. Such environmental and human-
caused disruptions may jeopardize the reliability and security of information
stored in and transmitted over the Company's network, which may result in
significant liability to the Company and also may deter potential customers
from using the Company's services. Any damage, failure or security breach that
causes interruption or data loss in the Company's operations or those of its
customers could have a material adverse effect on the Company's business,
financial condition and results of operations.
DEPENDENCE UPON SUPPLIERS; SOLE AND LIMITED SOURCES OF SUPPLY
The Company relies on third parties to supply key components of its network
infrastructure, including local and long-distance telecommunications services
and telecommunications node equipment, certain of which may be available only
from limited sources. In addition, LDDS Worldcom (USA), AT&T (USA), Viatel
(USA) and NTT (Japan) are the primary providers of telecommunications services
to the Company and accounted for 24%, 41%, 14% and 4%, respectively, of the
Company's expenditures on telecommunications services in February 1997. In
certain geographic markets, the market for telecommunications services is even
more concentrated due to the predominance of national PTTs. All of the
Company's fax traffic passes through long-distance lines, satellite links
and/or local loop telephone lines operated by firms other than the Company.
The Company has from time to time experienced interruptions of service from
its telecommunications carriers and there can be no assurance that the Company
will not experience such interruptions in the future. In addition, the
Company's contracts with its be no assurance that such telecommunications
providers will continue to provide services to the Company at attractive
rates, or at all, or that the Company will be able to obtain such services in
the future from these or other providers on the scale and within the time
frames required by the Company. Although the Company recently began to
implement satellite-based telecommunications services to supplement its land
lines of transmission, any failure to obtain such land-based
telecommunications services on a timely basis at an affordable cost, or any
significant delays or interruptions of service from such carriers, would have
a material adverse effect on the Company's business, financial condition and
results of operations.
All of the faxboards used in the Company's network nodes are supplied by
Brooktrout Technology, Inc. ("Brooktrout"). The Company purchases Brooktrout
faxboards on a non-exclusive basis pursuant to purchase orders issued by the
Company from time to time, carries a limited inventory of faxboards and has no
guaranteed supply arrangement with Brooktrout. In addition to faxboards,
certain other components used in the Company's network infrastructure are
supplied by limited sources on a non-exclusive, purchase order basis. There
can be no assurance that Brooktrout or the Company's other suppliers will not
enter into exclusive arrangements with the Company's competitors, or cease
selling these components to the Company at commercially reasonable prices, or
at all. The anticipated expansion of the Company's network infrastructure is
expected to place a significant demand on the Company's suppliers, some of
which have limited resources and production capacity. In addition, certain of
the Company's suppliers, in turn, rely on sole or limited sources of supply
for components included in their products. Failure of the company's suppliers
to adjust to meet such increasing demand may prevent them from continuing to
supply components and products in the quantities and the quality and at the
times required by the Company, or at all. The Company's inability to obtain
sufficient quantities of sole or limited source components or to develop
alternative sources if required could result in delays and increased costs in
the expansion of the Company's network infrastructure or the inability of the
Company to properly maintain its
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existing network infrastructure. Such occurrences would have a material
adverse effect on the Company's business, financial condition and results of
operations.
PROTECTION OF PROPRIETARY INFORMATION
The Company has applied for patent protection in the United States relating
to certain of its existing and proposed processes and services. There is no
assurance that any patents will be obtained. If obtained, there is no
assurance that any patents will afford the Company commercially significant
protection of its technologies or that the Company will have adequate
resources to enforce its patents. Patent applications in the United States are
maintained in secrecy until patents are issued, and since publication of
discoveries in the scientific or patent literature tends to lag behind actual
discoveries by several months, the Company cannot be certain that it will be
the first creator of inventions covered by any patent application it makes or
the first to file patent applications on such inventions.
Competitors in both the United States and foreign countries, many of which
have substantially greater resources and have made substantial investments in
competing technologies, may have applied for or obtained, or may in the future
apply for and obtain, patents that will prevent, limit or otherwise interfere
with the Company's ability to make and sell its products. The Company has not
conducted an independent review of patents issued to third parties. In
addition, because of the developmental stage of the Company, claims that the
Company's products infringe on the proprietary rights of others are more
likely to be asserted after commencement of commercial sales incorporating the
Company's technology. Although the Company believes that its products do not
infringe on the patents or other proprietary rights of third parties, there
can be no assurance that other parties will not assert infringement claims
against the Company or that such claims will not be successful. There can also
be no assurance that competitors will not infringe on any patents obtained by
the Company. Defense and prosecution of patent suits, even if successful, are
both costly and time consuming. An adverse outcome in the defense of a patent
suit could subject the Company to significant liabilities to third parties,
require disputed rights to be licensed from third parties or require the
Company to cease selling its products.
The Company also relies on unpatented proprietary technology and there can
be no assurance that others may not independently develop the same or similar
technology or otherwise obtain access to the Company's unpatented technology.
To protect its trade secrets and other proprietary information, the Company
requires employees, consultants, advisors and collaborators to enter into
confidentiality agreements. There can be no assurance that these agreements
will provide meaningful protection for the Company's trade secrets, know-how
or other proprietary information in the event of any unauthorized use,
misappropriation or disclosure of such trade secrets, know-how or other
proprietary information. If the Company is unable to maintain the proprietary
nature of its technologies, the Company could be materially adversely
affected.
REGULATION
The Company is not currently subject to direct communications regulation by
the United States federal or state governments of its international fax-to-fax
service. However, the Company is subject to certain registration and other
regulatory requirements in certain of the countries to which it now provides
service and it may become subject to additional foreign regulations in the
future. Although the Company has undertaken a review of and believes that it
is in material compliance with all foreign regulations applicable to it in
countries where 5% or more of its current international traffic terminates,
there can be no assurance that this is the case. The Company may be subject to
regulations in these or other countries (where it has conducted no review of
applicable law) that limit or restrict its ability to provide existing or
proposed services or that expose it to fines or other penalties.
Certain of the domestic services that the Company now plans to provide in
the United States may subject it to federal regulation by the Federal
Communications Commission (the "FCC") and state regulation by certain public
service commissions. As a result, the Company may be required to file tariffs
and complete certification processes. In addition, certain of the services may
be subject to state rate and/or quality of service regulation.
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Although the Company does not believe any such federal or state regulation
will prohibit it from offering any proposed domestic service, the Company has
not completed a review of all regulations that may be applicable to it and
there can be no assurance that the Company will be able to offer all proposed
services to all areas of the United States.
Moreover, with respect to both existing and proposed foreign and domestic
operations, there can be no assurance that changes in current or future laws
or regulations or future judicial intervention would not have a material
adverse effect on the Company. The Company is unable to predict the effect
that any future foreign or domestic legislation or regulation may have on its
existing or future business. See "Business--Regulation."
DEPENDENCE ON KEY PERSONNEL
The Company's business is managed by a number of key personnel, the loss of
which could have a material adverse effect on the Company. In addition, as the
expansion of the Company's network progresses and its business develops and
expands, the Company believes that its future success will depend greatly on
its continued ability to attract and retain highly skilled and qualified
personnel. Currently the Company has entered into an employment agreement with
Douglas J. Ranalli. There can be no assurance that key personnel will continue
to be employed by the Company or that the Company will be able to attract and
retain qualified personnel in the future. Failure by the Company to retain or
attract such key personnel could have a material adverse effect on the
Company. See "Management."
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
The Company's growth strategy involves expanding its operations to numerous
foreign jurisdictions and a significant portion of the Company's current
operations are conducted and located abroad. International operations and
business expansion plans are subject to numerous additional risks, including
the impact of foreign government regulations, currency fluctuations, political
uncertainties and differences in business practices. There can be no assurance
that foreign governments will not adopt regulations or take other actions that
would have a direct or indirect adverse impact on the business or market
opportunities of the Company within such governments' countries. Furthermore,
there can be no assurance that the political, cultural and economic climate
outside the United States will be favorable to the Company's operations and
growth strategy. See "Business--Growth Strategy," "--Marketing and Customer
Service" and "Acquisitions of Fax Business of SingCom (Australia)."
Although the Company's subsidiaries have attempted, and will continue to
attempt, to match costs and revenues and borrowings and repayments in terms of
their respective local currencies, payment for a majority of purchased
equipment has been, and may continue to be, required to be made in currencies,
including dollars, other than local currencies. In addition, the value of the
Company's investment in a subsidiary is partially a function of the currency
exchange rate between the dollar and the applicable local currency. In
general, the Company does not execute hedge transactions to reduce its
exposure to foreign currency exchange rate risks. Accordingly, the Company may
experience economic loss and a negative impact on earnings with respect to its
holdings solely as a result of foreign currency exchange rate fluctuations,
which include foreign currency devaluations against the dollar. The countries
in which the Company's subsidiaries now conduct business generally do not
restrict the removal or conversion of local or foreign currency; however,
there can be no assurance this situation will continue.
RISKS RELATED TO POTENTIAL FUTURE ACQUISITIONS
The Company has signed a letter of intent with respect to the acquisition of
the fax business of SingCom (Australia). Following the consummation of the
Private Offering, the Company commenced negotiation of definitive
documentation which it is attempting to finalize. Although management believes
that this acquisition is in the best interest of the Company, it involves
substantial expenditures and risks on the part of the Company and has resulted
in additional operating losses for the initial period. There can be no
assurance that this
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acquisition will be completed successfully or, if completed, will yield the
expected benefits to the Company or will not materially adversely affect the
Company's business, financial condition or results of operations. See
"Acquisition of Fax Business of SingCom (Australia)" and "Use of Proceeds."
The Company may in the future pursue acquisitions of complementary services
or product lines, technologies or business, although the Company has no
present understandings, commitments or agreements with respect to any such
acquisitions except as described above. Future acquisitions by the Company
could result in potentially dilutive issuances of equity securities, the
incurrence of debt and contingent liabilities and an increase in amortization
expenses related to goodwill and other intangible assets, which could
materially adversely affect the Company's business, financial condition and
results of operations. Acquisitions involve numerous risks, including
difficulties in the assimilation of the operations, technologies, services and
products of the acquired companies and the diversion of management's attention
from other business concerns. In the event that any such acquisition were to
occur, there can be no assurance that the Company's business, financial
condition and results of operations would not be materially adversely
affected.
SEASONALITY
The Company faces seasonal variations in demand. Fax traffic declines during
periods with lower numbers of business days. For example, fax traffic to and
from Western Europe declines in August, the traditional summer holiday period
in the region.
FRAUDULENT TRANSFER CONSIDERATIONS
Under applicable provisions of the United States Bankruptcy Code or
comparable provisions of state fraudulent transfer or conveyance law, if the
Company, at the time it issued the Private Notes, (a) incurred such
indebtedness with the intent to hinder, delay or defraud creditors, or (b) (i)
received less than reasonably equivalent value or fair consideration and (ii)
(A) was insolvent at the time of such incurrence, (B) was rendered insolvent
by reason of such incurrence (and the application of the proceeds thereof),
(C) was engaged or was about to engage in a business or transaction for which
the assets remaining with the Company constituted unreasonably small capital
to carry on its business, or (D) intended to incur, or believe that it would
incur, debts beyond its ability to pay such debts as they mature, then, in
each such case, a court of competent jurisdiction could avoid, in whole or in
part, the Notes or, in the alternative, subordinate the Notes to existing and
future indebtedness of the Company. The measure of the insolvency for purposes
of the foregoing would likely vary depending upon the law applied in such
case. Generally, however, the Company would be considered insolvent if the sum
of its debts, including contingent liabilities, was greater than all of its
assets at a fair valuation, or if the present saleable value of its assets was
less than the amount that would be required to pay the probably liabilities on
its existing debts, including contingent liabilities, as such debts become
absolute and matured. Management believes that, for purposes of the United
States Bankruptcy Code and state fraudulent transfer or conveyance laws, the
Private Notes were issued without the intent to hinder, delay or defraud
creditors and for proper purposes and in good faith, and that the Company will
receive reasonably equivalent value or fair consideration therefor, and that
after the issuance of the Private Notes and the application of the net
proceeds therefrom, the Company is solvent, will have sufficient capital for
carrying on its business and will be able to pay its debts as they mature.
However, there can be no assurance that a court passing on such issues would
agree with the determination of management.
ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON TRANSFER
As of the date hereof, the only registered holder of Private Notes is Cede &
Co., as the nominee of DTC. The Company believes that, as of the date hereof,
such holder is not an "affiliate" (as such term is defined in Rule 405 under
the Securities Act) of the Company. Prior to the Private Offering, there had
been no market for the Notes and there can be no assurance that such a market
will develop or, of such a market develops, as to the liquidity of such
market. The Exchange Notes will not be listed on any securities exchange, but
the Private Notes are eligible for trading in the National Association of
Securities Dealers, Inc.'s Private Offering, Resales and
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Trading through Automatic Linkages (PORTAL) market. The Exchange Notes are new
securities for which there is currently no market. The Exchange Notes may
trade at a discount from their initial offering price, depending upon
prevailing interest rates, the market for similar securities, the performance
of the Company and other factors. The Company has been advised by the Initial
Purchasers that they intend to make a market in the Exchange Notes, as well as
the Private Notes, as permitted by applicable laws and regulations; however,
the Initial Purchasers are not obligated to do so and any such market making
activities may be discontinued at any time without notice. In addition, such
market making activities may be limited during the Exchange Offer and the
pendency of the Shelf Registration Statement (as defined in the Registration
Rights Agreement). Therefore, there can be no assurance that an active market
for the Notes will develop. See "The Exchange Offer" and "Plan of
Distribution."
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Private Notes were sold by the Company on February 21, 1997 (the
"Closing Date") to the Initial Purchaser pursuant to the Purchase Agreement as
part of Units consisting of the Private Notes and 175,000 Warrants to purchase
in the aggregate 4,816,818 shares of the Company's Common Stock, $.01 par
value. The Initial Purchaser subsequently sold the Units (including the
Private Notes) to (i) "qualified institutional buyers" ("QIBs"), as defined in
Rule 144A under the Securities Act ("Rule 144A"), in reliance on Rule 144A. As
a condition to the sale of the Units (including the Private Notes), the
Company and the Initial Purchaser entered into the Registration Rights
Agreement on February 21, 1997. Pursuant to the Registration Rights Agreement,
the Company agreed that, unless the Exchange Offer is not permitted by
applicable law or Commission policy, it would (i) file with the Commission a
Registration Statement under the Securities Act with respect to the Exchange
Notes within 60 days after the Closing Date, (ii) use its best efforts to
cause such Registration Statement to become effective under the Securities Act
within 150 days after the Closing Date and (iii) use its best efforts to
consummate the Exchange Offer within 45 days after the date on which the
Registration Statement was declared effective by the Commission. A copy of the
Registration Rights Agreement has been filed as an exhibit to the Registration
Statement. The Registration Statement is intended to satisfy certain of the
Company's obligations under the Registration Rights Agreement and the Purchase
Agreement.
RESALE OF THE EXCHANGE NOTES
With respect to the Exchange Notes, based upon an interpretation by the
staff of the Commission set forth in certain no-action letters issued to third
parties, the Company believes that a holder (other than (i) a broker-dealer
who purchases such Exchange Notes directly from the Company to resell pursuant
to Rule 144A or any other available exemption under the Securities Act or (ii)
any such holder that is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act) who exchanges Private Notes for Exchange
Notes in the ordinary course of business and who is not participating, does
not intend to participate, and has no arrangement with any person to
participate, in a distribution of the Exchange Notes, will be allowed to
resell Exchange Notes to the public without further registration under the
Securities Act and without delivering to the purchasers of the Exchange Notes
a prospectus that satisfies the requirements of Section 10 of the Securities
Act. However, if any holder acquires Exchange Notes in the Exchange Offer for
the purpose of distributing or participating in the distribution of the
Exchange Notes or is a broker-dealer, such holder cannot rely on the position
of the staff of the Commission enumerated in certain no-action letters issued
to third parties and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction,
unless an exemption from registration is otherwise available. Each broker-
dealer that receives Exchange Notes for its own account in exchange for
Private Notes, where such Private Notes were acquired by such broker-dealer as
a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Notes received
in exchange for Private Notes where such Private Notes were acquired by such
broker-dealer as a result of market-making or other trading activities.
Pursuant to the Registration Rights Agreement, the Company has agreed to make
this Prospectus, as it may be amended or supplemented from time to time,
available to broker-dealers for use in connection with any resale for a period
of 180 days after the Expiration Date. See "Plan of Distribution."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Private
Notes validly tendered and not withdrawn prior to the Expiration Date. The
Company will issue $1,000 principal amount of Exchange Notes in exchange for
each $1,000 principal
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amount of outstanding Private Notes surrendered pursuant to the Exchange
Offer. Private Notes may be tendered only in integral multiples of $1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Private Notes except that (i) the exchange will be registered under the
Securities Act and, therefore, the Exchange Notes will not bear legends
restricting the transfer thereof and (ii) holders of the Exchange Notes will
not be entitled to any of the rights of holders of Private Notes under the
Registration Rights Agreement, which rights will terminate upon the
consummation of the Exchange Offer. The Exchange Notes will evidence the same
indebtedness as the Private Notes (which they replace) and will be issued
under, and be entitled to the benefits of, the Indenture, which also
authorized the issuance of the Private Notes, such that both series of Notes
will be treated as a single class of debt securities under the Indenture.
As of the date of this Prospectus, $175,000,000 in aggregate principal
amount of the Private Notes are outstanding and registered in the name of Cede
& Co., as nominee for DTC. Only a registered holder of the Private Notes (or
such holder's legal representative or attorney-in-fact) as reflected on the
records of the Trustee under the Indenture may participate in the Exchange
Offer. There will be no fixed record date for determining registered holders
of the Private Notes entitled to participate in the Exchange Offer.
Holders of the Private Notes do not have any appraisal or dissenters' rights
under the Indenture in connection with the Exchange Offer. The Company intends
to conduct the Exchange Offer in accordance with the provisions of the
Registration Rights Agreement and the applicable requirements of the
Securities Act, the Exchange Act and the rules and regulations of the
Commission thereunder.
The Company shall be deemed to have accepted validly tendered Private Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
of Private Notes for the purposes of receiving the Exchange Notes from the
Company.
Holders who tender Private Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Private
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See "Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time on ,
1997, unless the Company, in its sole discretion, extends the Exchange Offer,
in which case the term "Expiration Date" shall mean the latest date and time
to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will (i) notify the
Exchange Agent of any extension by oral or written notice, (ii) mail to the
registered holders an announcement thereof and (iii) issue a press release or
other public announcement which shall include disclosure of the approximate
number of Private Notes deposited to date, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date. Without limiting the manner in which the Company may choose to make a
public announcement of any delay, extension, amendment or termination of the
Exchange Offer, the Company shall have no obligation to publish, advertise, or
otherwise communicate any such public announcement, other than by making a
timely release to an appropriate news agency.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Private Notes, (ii) to extend the Exchange Offer or (iii) if any
conditions set forth below under "--Conditions" shall not have been satisfied,
to terminate the Exchange Offer by giving oral or written notice of such
delay, extension or termination to the Exchange Agent. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly
as practicable by oral or written notice thereof to the registered holders. If
the Exchange Offer is amended in a manner determined by the Company to
constitute a material change, the Company will promptly
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<PAGE>
disclose such amendment by means of a prospectus supplement that will be
distributed to the registered holders, and the Company will extend the
Exchange Offer for a period of five to ten business days, depending upon the
significance of the amendment and the manner of disclosure to the registered
holders, if the Exchange Offer would otherwise expire during such five to ten
business day period.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest at a rate equal to 14% per annum.
Interest on the Exchange Notes will be payable semi-annually in arrears on
each March 1 and September 1, commencing September 1, 1997. Holders of
Exchange Notes will receive interest on September 1, 1997 from the date of
initial issuance of the Exchange Notes, plus an amount equal to the accrued
interest on the Private Notes from the date of initial delivery to the date of
exchange thereof for Exchange Notes. Holders of Private Notes that are
accepted for exchange will be deemed to have waived the right to receive any
interest accrued on the Private Notes.
PROCEDURES FOR TENDERING
Only a registered holder of Private Notes may tender such Private Notes in
the Exchange Offer. To tender in the Exchange Offer, a holder of Private Notes
must complete, sign and date the Letter of Transmittal, or a facsimile
thereof, have the signatures thereon guaranteed if required by the Letter of
Transmittal, and mail or otherwise deliver such Letter of Transmittal or such
facsimile to the Exchange Agent at the address set forth below under "--
Exchange Agent" for receipt prior to the Expiration Date. In addition, either
(i) certificates for such Private Notes must be received by the Exchange Agent
along with the Letter of Transmittal, (ii) a timely confirmation of a book-
entry transfer (a "Book-Entry Confirmation") of such Private Notes, if such
procedure is available, into the Exchange Agent's account at the Depository
pursuant to the procedure for book-entry transfer described below, must be
received by the Exchange Agent prior to the Expiration Date or (iii) the
holder must comply with the guaranteed delivery procedures described below.
The tender by a holder that is not withdrawn prior to the Expiration Date
will constitute an agreement between such holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the
Letter of Transmittal.
THE METHOD OF DELIVERY OF PRIVATE NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR PRIVATE NOTES SHOULD
BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
Any beneficial owner(s) of the Private Notes whose Private Notes are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee and who wishes to tender should contact the registered holder
promptly and instruct such registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to tender on such owner's own
behalf, such owner must, prior to completing and executing the Letter of
Transmittal and delivering such owner's Private Notes, either make appropriate
arrangements to register ownership of the Private Notes in such owner's name
or obtain a properly completed bond power from the registered holder. The
transfer of registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "--Withdrawal of Tenders"), as the case may be, must be guaranteed
by an Eligible Institution (as defined below) unless the Private Notes
tendered pursuant thereto are tendered (i) by a registered holder who has not
completed the box titled "Special Delivery Instructions" on the Letter of
Transmittal or (ii) for the account of an Eligible
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Institution. In the event that signatures on a Letter of Transmittal or a
notice of withdrawal, as the case may be, are required to be guaranteed, such
guarantee must be made by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of
Rule 17Ad-15 under the Exchange Act which is a member of one of the recognized
signature guarantee programs identified in the Letter of Transmittal (an
"Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Private Notes listed therein, such Private Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Private
Notes.
If the Letter of Transmittal or any Private Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act
must be submitted with the Letter of Transmittal.
The Exchange Agent and the Depository have confirmed that any financial
institution that is a participant in the Depository's system may utilize the
Depository's Automated Tender Offer Program to tender Private Notes.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Private Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and
all Private Notes not properly tendered or any Private Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Private Notes. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Private Notes must be cured within such time as the
Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Private Notes, neither
the Company, the Exchange Agent nor any other person shall incur any liability
for failure to give such notification. Tenders of Private Notes will not be
deemed to have been made until such defects or irregularities have been cured
or waived.
While the Company has no present plan to acquire any Private Notes that are
not tendered in the Exchange Offer or to file a registration statement to
permit resales of any Private Notes that are not tendered pursuant to the
Exchange Offer, the Company reserves the right in its sole discretion to
purchase or make offers for any Private Notes that remain outstanding
subsequent to the Expiration Date or, as set forth below under "--Conditions,"
to terminate the Exchange Offer and, to the extent permitted by applicable
law, purchase Private Notes in the open market, in privately negotiated
transactions or otherwise. The terms of any such purchases or offers could
differ from the terms of the Exchange Offer.
By tendering, each holder of Private Notes will represent to the Company
that, among other things, (i) Exchange Notes to be acquired by such holder of
Private Notes in connection with the Exchange Offer are being acquired by such
holder in the ordinary course of business of such holder, (ii) such holder has
no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, (iii) such holder acknowledges and agrees
that any person who is a broker-dealer registered under the Exchange Act or is
participating in the Exchange Offer for the purposes of distributing the
Exchange Notes must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction of the Exchange Notes acquired by such person and cannot rely on
the position of the staff of the Commission set forth in certain no-action
letters, (iv) such holder understands that a secondary resale transaction
described in clause (iii) above and any resales of Exchange Notes obtained by
such holder in exchange for Private Notes acquired by such holder directly
from the Company should be covered by an effective registration statement
containing the selling securityholder information required by Item 507 or Item
508, as applicable, of
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Regulation S-K of the Commission and (v) such holder is not an "affiliate," as
defined in Rule 405 under the Securities Act, of the Company. If the holder is
a broker-dealer that will receive Exchange Notes for such holder's own account
in exchange for Private Notes that were acquired as a result of market-making
activities or other trading activities, such holder will be required to
acknowledge in the Letter of Transmittal that such holder will deliver a
prospectus in connection with any resale of such Exchange Notes; however, by
so acknowledging and by delivering a prospectus, such holder will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
RETURN OF PRIVATE NOTES
If any tendered Private Notes are not accepted for any reason set forth in
the terms and conditions of the Exchange Offer or if Private Notes are
withdrawn or are submitted for a greater principal amount than the holders
desire to exchange, such unaccepted, withdrawn or non-exchanged Private Notes
will be returned without expense to the tendering holder thereof (or, in the
case of Private Notes tendered by book-entry transfer into the Exchange
Agent's account at the Depository pursuant to the book-entry transfer
procedures described below, such Private Notes will be credited to an account
maintained with the Depository) as promptly as practicable.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Private Notes at the Depository for purposes of the Exchange Offer
within two business days after the date of this Prospectus, and any financial
institution that is a participant in the Depository's systems may make book-
entry delivery of Private Notes by causing the Depository to transfer such
Private Notes into the Exchange Agent's account at the Depository in
accordance with the Depository's procedures for transfer. However, although
delivery of Private Notes may be effected through book-entry transfer at the
Depository, the Letter of Transmittal or facsimile thereof, with any required
signature guarantees and any other required documents, must, in any case, be
transmitted to and received by the Exchange Agent at the address set forth
below under "--Exchange Agent" on or prior to the Expiration Date or pursuant
to the guaranteed delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Private Notes and (i) whose Private Notes
are not immediately available or (ii) who cannot deliver their Private Notes,
the Letter of Transmittal or any other required documents to the Exchange
Agent prior to the Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the Company (by
facsimile transmission, mail or hand delivery) setting forth the name and
address of the holder, the certificate number(s) of such Private Notes and
the principal amount of Private Notes tendered, stating that the tender is
being made thereby and guaranteeing that, within five New York Stock
Exchange trading days after the Expiration Date, the Letter of Transmittal
(or a facsimile thereof), together with the certificate(s) representing the
Private Notes in proper form for transfer or a Book-Entry Confirmation, as
the case may be, and any other documents required by the Letter of
Transmittal, will be deposited by the Eligible Institution with the
Exchange Agent; and
(c) Such properly executed Letter of Transmittal (or facsimile thereof), as
well as the certificate(s) representing all tendered Private Notes in
proper form for transfer and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within five New York Stock
Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Private Notes according to the
guaranteed delivery procedures set forth above.
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WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Private Notes may be
withdrawn at any time prior to the Expiration Date.
To withdraw a tender of Private Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to the Expiration Date. Any such
notice of withdrawal must (i) specify the name of the person having deposited
the Private Notes to be withdrawn (the "Depositor"), (ii) identify the Private
Notes to be withdrawn (including the certificate number or numbers and
principal amount of such Private Notes) and (iii) be signed by the holder in
the same manner as the original signature on the Letter of Transmittal by
which such Private Notes were tendered (including any required signature
guarantees). All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by the Company in its sole
discretion, whose determination shall be final and binding on all parties. Any
Private Notes so withdrawn will be deemed not to have been validly tendered
for purposes of the Exchange Offer and no Exchange Notes will be issued with
respect thereto unless the Private Notes so withdrawn are validly retendered.
Properly withdrawn Private Notes may be retendered by following one of the
procedures described above under "The Exchange Offer--Procedures for
Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange the Exchange Notes for, any
Private Notes, and may terminate the Exchange Offer as provided herein before
the acceptance of such Private Notes, if the Exchange Offer violates
applicable law, rules or regulations or an applicable interpretation of the
staff of the Commission.
If the Company determines in its sole discretion that any of these
conditions are not satisfied, the Company may (i) refuse to accept any Private
Notes and return all tendered Private Notes to the tendering holders,
(ii) extend the Exchange Offer and retain all Private Notes tendered prior to
the expiration of the Exchange Offer, subject, however, to the rights of
holders to withdraw such Private Notes (see "--Withdrawal of Tenders") or
(iii) waive such unsatisfied conditions with respect to the Exchange Offer and
accept all properly tendered Private Notes that have not been withdrawn. If
such waiver constitutes a material change to the Exchange Offer, the Company
will promptly disclose such waiver by means of a prospectus supplement that
will be distributed to the registered holders of the Private Notes, and the
Company will extend the Exchange Offer for a period of five to ten business
days, depending upon the significance of the waiver and the manner of
disclosure to the registered holders, if the Exchange Offer would otherwise
expire during such five to ten business day period.
TERMINATION OF CERTAIN RIGHTS
All rights under the Registration Rights Agreement (including registration
rights) of holders of the Private Notes eligible to participate in the
Exchange Offer will terminate upon consummation of the Exchange Offer except
with respect to the Company's continuing obligations (i) to indemnify such
holders (including any broker-dealers) and certain parties related to such
holders against certain liabilities (including liabilities under the
Securities Act), (ii) to provide, upon the request of any holder of a
transfer-restricted Private Note, the information required by Rule 144A(d)(4)
under the Securities Act in order to permit resales of such Private Notes
pursuant to Rule 144A, (iii) to use its best efforts to keep the Registration
Statement effective to the extent necessary to ensure that it is available for
resales of transfer-restricted Private Notes by broker-dealers for a period of
up to 180 days from the Expiration Date and (iv) to provide copies of the
latest version of the Prospectus to broker-dealers upon their request for a
period of up to 180 days after the Expiration Date.
ADDITIONAL INTEREST
In the event of a Registration Default (as defined in the Registration
Rights Agreement), the Company is required to pay as liquidated damages,
Additional Interest (as defined in the Registration Rights Agreement) to
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each holder of Transfer Restricted Securities (as defined below), during the
first 90-day period immediately following the occurrence of such Registration
Default in an amount equal to 0.50% per annum per $1,000 principal amount of
Private Notes constituting Transfer Restricted Securities held by such holder.
Such Additional Interest rate will increase by an additional 0.50% per annum
at the beginning of each subsequent 90-day period during which the
Registration Default continues. Transfer Restricted Securities shall mean each
Private Note until (i) the date on which such Private Note has been exchanged
for an Exchange Note in the Exchange Offer, (ii) the date on which such
Private Note has been effectively registered under the Securities Act and
disposed of in accordance with the Shelf Registration Statement (as defined in
the Registration Rights Agreement) or (iii) the date on which such Private
Note is distributed to the public pursuant to Rule 144(k) under the Securities
Act. The amount of the Additional Interest will increase by an additional
0.50% per annum per $1,000 principal amount of Private Notes constituting
Transfer Restricted Securities for each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum Additional Interest of
2.00% per annum per $1,000 principal amount of Private Notes constituting
Transfer Restricted Securities. Following the cure of all Registration
Defaults, the payment of Additional Interest will cease. The filing and
effectiveness of the Registration Statement of which this Prospectus is a part
and the consummation of the Exchange Offer will eliminate all rights of the
holders of Private Notes eligible to participate in the Exchange Offer to
receive damages that would have been payable if such actions had not occurred.
EXCHANGE AGENT
Fleet National Bank has been appointed as Exchange Agent of the Exchange
Offer. Questions and requests for assistance, requests for additional copies
of this Prospectus or of the Letter of Transmittal and requests for Notice of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
By Registered or Certified Mail: By Hand Delivery:
Fleet National Bank Corporation Fleet National Bank Corporation
Corporate Trust Department 5th Floor Corporate Trust Department 5th Floor
One Federal Street Boston, MA 02110 One Federal Street Boston, MA 02110
By Overnight Delivery: By Facsimile:
Fleet National Bank Corporation (617) 346-5501
Corporate Trust Department 5th Floor
One Federal Street Boston, MA 02110
Confirm by Telephone:
(617) 346-5498
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection
therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be approximately
$ . Such expenses include registration fees, fees and expenses of the Exchange
Agent and the Trustee, accounting and legal fees and printing costs, among
others.
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The Company will pay all transfer taxes, if any, applicable to the exchange
of Private Notes pursuant to the Exchange Offer. If, however, a transfer tax
is imposed for any reason other than the exchange of the Private Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with the Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
holder.
CONSEQUENCE OF FAILURES TO EXCHANGE
Participation in the Exchange Offer is voluntary. Holders of the Private
Notes are urged to consult their financial and tax advisors in making their
own decisions on what action to take.
The Private Notes that are not exchanged for the Exchange Notes pursuant to
the Exchange Offer will remain restricted securities. Accordingly, such
Private Notes may be resold only (i) to a person whom the seller reasonably
believes is a QIB in a transaction meeting the requirements of Rule 144A, (ii)
in a transaction meeting the requirements of Rule 144 under the Securities
Act, (iii) outside the United States to a foreign person in a transaction
meeting the requirements of Rule 904 under the Securities Act, (iv) in
accordance with another exemption from the registration requirements of the
Securities Act (and based upon an opinion of counsel if the Company so
requests), (v) to the Company or (vi) pursuant to an effective registration
statement and, in each case, in accordance with any applicable securities laws
of any state of the United States or any other applicable jurisdiction.
ACCOUNTING TREATMENT
For accounting purposes, the Company will recognize no gain or loss as a
result of the Exchange Offer. The expenses of the Exchange Offer will be
amortized over the term of the Exchange Notes.
31
<PAGE>
USE OF PROCEEDS
The Company will not receive proceeds from the Exchange Offer. The net
proceeds from the Private Offering, were approximately $163.1 million, after
deducting the Initial Purchaser's commission, the issuance of 5,000 Units as
payment for cancellation of a portion of the Interim Financing and other
expenses payable by the Company. The Company has deposited approximately $46
million of such net proceeds with the Escrow Agent to fund the Escrow Account.
See "Description of Exchange Notes--Disbursement of Funds--Escrow Account."
The Company plans to use up to $34.5 million of the remaining net proceeds to
fund the acquisition of hardware for the expansion of the Intelligent Delivery
Network (including the purchase of FaxLink autodialers for installation at
customer facilities), to finance the purchase of business systems to support
the anticipated growth in the size of the Company's business and to finance
the build-out of the Company's new headquarters facility in Lowell,
Massachusetts. In addition, approximately $6.0 million (Australian)
(approximately $4.5 million (U.S.) based upon the February 11, 1997 conversion
rate) will be used to fund the acquisition by the Company of certain assets
and liabilities, including the right to service the existing fax business
customer base, of SingCom (Australia) and the repayment of existing
indebtedness. See "Acquisition of Fax Business of SingCom (Australia)." In
addition, approximately $1.8 million of such net proceeds have been used to
repay a portion of the Interim Financing extended by SingTel. See "Description
of Other Indebtedness--Interim Financing." The remaining net proceeds of the
Private Offering have been or will be used to fund the working capital
requirements of the Company (including approximately $12 million of accrued
accounts payable which have been paid since the Private Offering) and for
general corporate purposes, including to finance substantial additional
operating losses. See "Risk Factors--Historical and Anticipated Operating
Losses; Negative Cash Flow from Operations" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations." Pending such uses,
the net proceeds of the Private Offering have been invested in investment
grade, interest bearing securities.
The Company currently expects that the net proceeds of the Private Offering
will be sufficient to satisfy the Company's liquidity needs through the first
quarter of 1998; however, there can be no assurance to that effect. If the
Company's plans or assumptions change, if its assumptions prove to be
inaccurate, if the Company experiences unanticipated costs or competitive
pressures or if the net proceeds from the Private Offering otherwise prove to
be insufficient, the Company may be required to seek additional capital sooner
than currently anticipated. The Company will be required to obtain substantial
additional debt or equity financing (which may include secured equipment
financing) (the "Additional Financing") which the Company believes (based on
current projections) is necessary to complete the build-out of the Intelligent
Delivery Network, to fund operating losses after the first quarter of 1998
until the Company begins to earn positive net cash flow from operations and to
fund the Company's other liquidity needs. However, there can be no assurance
that any such debt or equity financing will be available to the Company on
favorable terms or at all or that the Company will generate positive net cash
flow from operations on a timely basis and in an amount that will be
sufficient to meet its liquidity needs or at all. In the event that the
Company is unable to obtain such additional capital or generating cash flow
from operations, the Company will be required to delay or to reduce the scope
of its currently anticipated expansion of the Intelligent Delivery Network, or
take other actions which could materially adversely affect the Company's
business, results of operations and financial condition and its ability to
compete, and the value of the Securities. Any delay in the expansion of the
Intelligent Delivery Network will delay the projected date on which the
Company expects to begin generating positive net cash flow from operations,
thereby increasing the need for additional financing. See "Risk Factors--Need
For Additional Financing" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."
32
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1996 on a pro forma basis, as adjusted to reflect the issuance of
the Units and the application of the net proceeds therefrom. This table should
be read in conjunction with the Consolidated Financial Statements and notes
thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------
PRO FORMA
ACTUAL AS ADJUSTED(1)
------- --------------
(AMOUNTS IN THOUSANDS
EXCEPT SHARE AMOUNTS)
<S> <C> <C>
Cash, Cash Equivalents and Short-Term Investments(1)... $ 5,629 $157,491
Current Portion of Long-term Debt(1)................... 12,810 8,578
======= ========
Long-term Debt(3):
14% Senior Notes Due 2004(5)......................... -- $166,812
Capital Lease Obligations............................ 1,821 1,821
Senior Notes Payable................................. 3,433 3,433
Senior Notes Payable to SingTel(4)................... 41,359 41,359
------- --------
Total Long-term Debt............................... 46,613 213,425
------- --------
Stockholders' Equity (Deficit):
Convertible Preferred Stock, $1.00 Par Value
24,715,500 Shares Authorized, 13,515,030 Shares
Issued and Outstanding.............................. 13,515 13,515
Common Stock, $.01 Par Value, 50,000,000 Shares
Authorized, 3,786,025................................. 38 38
Shares Issued and Outstanding........................ 23,664 23,664
Additional Paid-in Capital........................... (80,286) (80,286)
Accumulated Deficit..................................
Common Stock Warrants(5)............................. -- 8,189
Cumulative Translation Adjustment.................... 562 562
Total Stockholder Equity (deficit)................. (42,507) (34,318)
------- --------
Total Capitalization............................... 4,106 179,107
======= ========
</TABLE>
- --------
(1) Pro forma as adjusted to reflect the issuance of the Units and the
application of the net proceeds therefrom as if such transactions
occurred on December 31, 1996 including the use of approximately $6.0
million (Australian) (approximately $4.5 million (U.S.) based upon the
February 11, 1997 conversion rate) to acquire certain assets and
liabilities of SingCom (Australia), including the right to service its
existing fax business customer base, of which approximately $4.2 million
(U.S.) is included in the Company's historical current portion of long-
term debt as of December 31, 1996, and the use of approximately $12.0
million for accrued accounts payable of the Company.
(2) Includes approximately $46 million to be used to purchase U.S. Government
Securities to be pledged to secure the Notes offered hereby and to be
held in escrow for payment of the first four interest payments on the
Notes.
(3) After December 31, 1996, the Company obtained interim financings of $7.5
million, of which approximately $0.7 million remains outstanding
following the Private Offering, after giving effect to certain payments
and to the cancellation of a portion of such interim financing in
exchange for 5,000 Units.
(4) These obligations will be contractually subordinated to the Notes. See
"Description of Certain Indebtedness."
(5) Includes the effects of the issuance of the Initial Warrants.
33
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The Summary Consolidated Statements of Operations Data for the years ended
December 31, 1994, 1995 and 1996 and the Summary Consolidated Balance Sheet
Data as of December 31, 1995 and 1996 set forth below, have been derived from
the Consolidated Financial Statements of UNIFI audited by Arthur Andersen LLP,
independent public accountants, and should be read in conjunction with such
Consolidated Financial Statements and the notes thereto included in this
Prospectus. The Summary Consolidated Statement of Operations Data for the
years ended December 31, 1992 and 1993 have been derived from audited
Consolidated Financial Statements of UNIFI that are not included in this
Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1992 1993 1994 1995 1996
--------- --------- --------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS
OF OPERATIONS DATA:
Revenues.............. $ 475 $ 3,943 $ 6,952 $ 10,664 $ 25,218
--------- --------- --------- ---------- ----------
Costs and Expenses:
Cost of Revenues.... 957 2,979 4,656 7,840 27,599
Sales and Customer
Service............ 940 2,611 8,326 11,837 25,706
Research and Devel-
opment............. 679 1,381 1,656 4,810 11,620
General and Adminis-
trative............ 610 1,496 1,800 2,676 4,165
Information Sys-
tems............... -- -- 290 803 3,527
--------- --------- --------- ---------- ----------
Total Costs and
Expenses......... 3,186 8,467 16,728 27,967 72,617
Loss From Operations.. (2,711) (4,524) (9,776) (17,302) (47,399)
Interest and Other
Income (Expense),
Net.................. (61) (209) (509) 165 (2,462)
--------- --------- --------- ---------- ----------
Net Loss Before
Minority Interest.... (2,772) (4,733) (10,285) (17,137) (49,861)
Minority Interest(1).. -- -- 1,525 2,480 948
--------- --------- --------- ---------- ----------
Net Loss.............. $ (2,772) $ (4,733) $ (8,760) $ (14,657) $ (48,913)
========= ========= ========= ========== ==========
Net Loss Per Common
Share(2)............. $ (0.85) $ (1.42) $ (2.64) $ (4.26) $ (13.04)
Weighted Average
Common Shares
Outstanding.......... 3,271 3,323 3,323 3,437 3,752
Pro Forma Net Loss Per
Common Share(2)...... (0.63) (0.66) (0.96) (0.96) (2.83)
Pro Forma Weighted
Common Average Shares
Outstanding.......... 4,392 7,225 9,148 15,291 17,267
OTHER FINANCIAL DATA:
EBITDA(3)............. $ (2,540) $ (4,006) $ (6,441) $ (12,016) $ (40,191)
Capital
Expenditures(4)...... 885 2,162 4,486 5,883 20,138
Interest Expense...... (62) (204) (602) (411) (2,499)
Ratio of Earnings to
Fixed Charges(5)..... -- -- -- -- --
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, DECEMBER 31, AS ADJUSTED
1995 1996 DECEMBER 31, 1996
--------------- --------------- -------------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Cash, Cash Equivalents
and Short-term Invest-
ments(6)............... $ 11,124 $ 5,360 $ 157,491
Working Capital (Defi-
ciency)(6)............. 6,633 (25,936) 95,800
Total Assets............ 25,378 41,184 199,952
Long-term Debt(7)....... 9,703 46,613 213,425
Shareholders' Equity
(Deficit).............. 8,871 (42,507) (34,318)
</TABLE>
- --------
(1) See Note 2(b) to the Company's Consolidated Financial Statements.
(2) See Note 2(k) to the Company's Consolidated Financial Statements.
(3) EBITDA means net loss plus interest expense, income tax expense,
depreciation and amortization expense and all other non-cash charges, less
any non-cash items which have the effect of increasing net income or
decreasing net income or decreasing net loss. Information with respect to
EBITDA is included herein because a similar measure will be used in the
Indenture (as defined) with respect to the computation of certain
covenants and because it is a widely accepted financial indicator of a
company's ability to service debt. EBITDA should not be considered in
isolation from, as a substitute for or as being more meaningful than net
income, cash flows from operating activities or other income or cash flow
statement data prepared in accordance with generally accepted accounting
principles and should not be construed as an indication of the Company's
operating performance or as a measure of liquidity. EBITDA, as presented
herein, may be calculated differently by other companies and, as such,
EBITDA amounts presented herein may not be comparable to other similarly
titled measure of other companies.
(4) Includes assets acquired under capital lease arrangements of approximately
$1,546,000, $2,545,000, $730,000 and $2,420,000 in 1993, 1994, 1995 and
1996, respectively.
(5) For the purpose of calculating the ratio of earnings to fixed charges,
earnings represent loss from continuing operations before income taxes
plus fixed charges. Fixed charges consist of interest expense on all
indebtedness plus the interest portion of rental expense on non-cancelable
leases and amortization of debt issuance costs and debt discount. The
Company's earnings have been inadequate to meet its fixed charges in 1992,
1993, 1994, 1995 and 1996 by $2,711,000, $4,528,000, $8,159,000,
$14,246,000, $8,077,000 and $44,900,000, respectively.
(6) Includes approximately $46 million of funds that will be deposited in the
escrow account pursuant to the Indenture and approximately $1 million of
restricted cash. See "Description of the Senior Notes--Disbursement of
Funds--Escrow Account."
(7) After December 31, 1996, the Company incurred $7.5 million of interim
financing of which approximately $0.7 million was outstanding after the
Private Offering, after giving effect to certain payments and to the
cancellation of a portion of such interim financing in exchange for 5,000
Units.
35
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
UNIFI is a rapidly growing multinational telecommunications company that
provides business-to-business international fax document delivery services.
The Company commenced operations in April 1992 and by the end of 1994 provided
its services to approximately 3,500 customers sending fax transmissions from
the United States to Japan. In February 1995, after receiving $10 million in
financing from ORIX and Nichimen, UNIFI expanded its network to provide its
services to customers originating fax documents in Japan. In April 1995
affiliates of SingTel provided UNIFI with a total of $70 million of debt and
equity financing consisting of $30 million in equity, $25 million in working
capital financing commitments and $15 million in equipment financing
commitments. In October 1996, the Company had utilized all of its borrowing
capacity under such financing commitment. See "Description of Certain
Indebtedness". Since October 1996, the Company has borrowed $15.35 million in
aggregate principal amount of indebtedness of which $13.35 million was
borrowed from SingTel and $2.0 million was borrowed from CDS. Of such amount,
approximately $6.8 million has been subsequently repaid to SingTel. The
Company's obligations under all such indebtedness are unsecured and rank pari
passu with the Company's obligations under the Senior Notes. See "Description
of Other Indebtedness--Interim Financing" and "Certain Relationships and
Related Transactions--Transactions with SingTel." UNIFI has utilized this
financing to expand the Intelligent Delivery Network to permit it to originate
fax document transmissions in six of the world's major telecommunications
markets (in addition to the United States and Japan), expand its
infrastructure to a level that it believes is sufficient to service its
current line of products and services over the expanded Intelligent Delivery
Network and to repurchase equity securities from early round investors and
repay certain existing indebtedness. By December 31, 1996, UNIFI had expanded
the Intelligent Delivery Network to provide its fax document delivery services
to businesses in the United Kingdom, France, Germany, Hong Kong, Korea and
China (the Company conducts operations in China through a joint venture with a
local entity). In addition, UNIFI has entered into agreements with SingTel
pursuant to which SingTel acquired the right to transmit fax documents over
the Intelligent Delivery Network from, to and through Singapore and the
Company agreed to install and maintain a node and other network support in
Singapore. See "Certain Relationships and Related Transactions--Transactions
with SingTel." As of February 28, 1997 UNIFI had approximately 9,117 customers
(excluding non-revenue trial accounts and operations in China), of which
approximately 5,700 were in the United States and Japan.
The Company derives its revenues primarily from monthly customer charges
based on the actual number of minutes (or fractions thereof) of international
fax document transmissions provided to customers. The Company also charges its
customers a monthly rental fee (and in some markets sells FaxLinks) for the
use of each FaxLink installed at the customers' offices. Additionally, SingTel
pays the Company license and network support fees. See "Certain Relationships
and Related Transactions--Transactions with SingTel." UNIFI does not require
its customers to enter into long-term contracts. However, UNIFI has
experienced monthly churn rates of less than approximately 1.5% (calculated on
a revenue-weighted basis) in each of the 12 months ending December 31, 1996
(other than October 1996, during which the Company experienced a 2.3% monthly
churn (due primarily to the recovery of FaxLinks from customers with monthly
usage below certain minimum thresholds). UNIFI attributes its low churn rate
primarily to the high value-added delivery services provided by the
Intelligent Delivery Network which, the Company believes, makes many of its
customers less sensitive to the competitive pricing in the market. However,
due to this competitive pricing, the Company has experienced, and expects to
continue to experience, declining revenue per minute, which UNIFI expects to
offset with increased volumes and decreasing transmission costs per minute,
although there can be no assurance to that effect.
The Company's principal operating costs are sales and customer service
personnel, fax document transmission costs and research and development
expense. As part of the expansion of its infrastructure, during 1995 and 1996
the number of employees and contractors has grown from 157 at December 31,
1994 to 653 at December 31, 1996, and operating expenses have increased from
$12.1 million in 1994 to $20.1 million in 1995 and to $45.0 million for 1996.
A significant part of that growth represented the opening of offices in the
United
36
<PAGE>
Kingdom, France, Germany, Hong Kong, Korea, and China and the expansion of the
Company's sales force and customer service staff from 92 at the end of 1994 to
151 at the end of 1995 and 367 as of December 31, 1996. Sales and customer
service expenses correspondingly increased from $8.3 million during 1994 to
$11.8 million during 1995 and $25.7 million for 1996. However, sales and
customer service expenses as a percentage of revenues have decreased from 120%
in 1994 to 111% in 1995 and to 102% for 1996.
UNIFI's fax document transmission costs consist of (i) local access cost of
transmitting a fax document from the customer's fax machine to the Intelligent
Delivery Network, (ii) the cost of providing UNIFI's 24-hour personalized fax
document delivery service, (iii) network support costs and (iv) the costs of
long-distance transmission and local delivery costs. Local access costs
represent the cost of a local telephone call from the customer's fax machine
to the nearest Intelligent Delivery Network node and from the Intelligent
Delivery Network node nearest the destination to the receiving fax machine.
The Company bears these local access costs only in a portion of the United
States market as a result of "1-800" service to its nodes. Customers bear the
local access costs directly in all other cases. The cost of providing UNIFI's
delivery service primarily represents the payment of salaries and benefits to
the Company's 24-hour delivery staff. Network support costs consist of the
costs of UNIFI's 24-hour network monitoring group and the costs of
configuring, installing and maintaining the Intelligent Delivery Network
globally.
There are two broad categories of fax document transmission and delivery
costs: (i) on-net costs which are the costs of transmission and delivery to
countries in which the Company has installed a network node and (ii) off-net
costs which are the costs of transmission and delivery to countries where the
Company has no network facilities. On-net costs include the cost of using the
Company's transmission facilities to the destination country and the cost of
delivering faxes from the ending network node to the final destination via the
local PSTN. All calls destined for countries that do not have a network node
(off-net traffic) are routed from a Company network node to one of several
international carriers with which the Company has contractual arrangements.
Off-net costs include the cost of using other carriers' long-distance
services. These long-distance charges are significantly higher than the
Company's on-net costs and, therefore, the Company's cost of delivering a
document varies significantly according to the destination country. Because
the Intelligent Delivery Network was only established in 1992 and has
historically had a limited number of nodes (two in 1992, three in 1993, four
in 1994, 10 in 1995 and 23 as of December 31, 1996) dependence on expensive
long-distance charges has adversely affected the Company's results of
operations. Approximately 36% of all fax deliveries for February 1997 were
off-net.
The Company's pending network build-out is expected to substantially reduce
off-net traffic and, as fax transmission volume increases, improve the
Company's gross margins by reducing variable costs. The Company's variable
costs per transmission and, therefore, gross margins are a function of the
proportion of total traffic that is carried on-net. For example, in 1994
virtually all of the Company's traffic was on-net and its gross margins were
33% despite the fact that it used less than half of its leased long-distance
carrying capacity. (The Company carried fax traffic only one-way from the
United States to Japan but leased long-distance lines, which are always two-
way.) On the other hand, after the Company expanded its service to deliver
faxes to all countries in 1995, the proportion of the Company's fax traffic
that was carried on-net fell to 88% by the end of 1995 and the Company's gross
margins declined to 26%, reflecting, among other things, the increase in off-
net traffic, low capacity utilization of the Company's leased two-way
telecommunications lines and the increased costs associated with the build-up
of the Company's global sales and service infrastructure. In December 1996,
approximately 64% of the Company's total fax traffic was on-net. This drop was
due, in part, to the increase in the number of countries served by the Company
that originate substantial amounts of traffic destined for countries that do
not have a network node. The Company's goal is to increase the proportion of
on-net traffic by increasing its number of network nodes. The Company believes
that this increased on-net traffic, combined with increased utilization of
two-way capacity, will substantially increase gross margins. However, there
can be no assurance that it will realize this goal. Furthermore, the Company
expects that the cost of leasing two-way long-distance lines will be largely
offset by the revenues produced by two-way traffic as volume grows for the new
routes created by the new nodes. There can be no assurance, however, that
revenues from locations with destination nodes will equal revenues from fax
traffic to such destinations.
37
<PAGE>
The Company has historically made significant expenditures related to the
design, development and build-out of the Intelligent Delivery Network. Since
1990, the Company has invested approximately $115 million in the development,
build-out and operation of the Intelligent Delivery Network and for product
development. The Company expects to continue to spend significant amounts to
expand its network and roll out additional products and services. See "--
Liquidity and Capital Resources" and "Business--Products and Services."
Because the Company has, to date, been engaged primarily in organizational and
start-up activities and investing in its infrastructure and the Intelligent
Delivery Network, the Company has incurred significant negative cash flows
since it commenced operations. The Company expects to continue to incur
substantial operating losses and net losses in the future. See "Risk Factors--
Historical and Anticipated Operating Losses; Negative Cash Flow from
Operations." UNIFI believes that its historical results of operations
discussed below are not indicative of the results of operations of UNIFI which
will follow the completion of the build-out of the Intelligent Delivery
Network and the marketing of UNIFI's full line of electronic document delivery
services. See "--Liquidity and Capital Resources" and "Risk Factors--
Development Stage Company; Short Operating History."
UNIFI conducts operations in the United States, the United Kingdom, France,
Germany, Hong Kong and Korea either directly or through wholly owned
subsidiaries. UNIFI's operations in Japan are conducted by Fax Japan, a 51%
owned subsidiary of UNIFI. In China, the Company's wholly owned subsidiary
operates through an intercompany operating agreement with a local entity.
Pursuant to the management agreement, UNIFI receives a portion (currently 80%)
of the operating income of the international fax business of the local entity
pursuant to an agreed upon formula. In Singapore, the Company granted to
SingTel an exclusive, perpetual and irrevocable license to use (but not
sublicense) the Company's network and technology for the transmission of fax
document transmissions to, from and through Singapore. The Company has also
agreed to maintain the network in Singapore, train SingTel's personnel and
provide user documentation to SingTel to enable SingTel to use the network for
such purposes. SingTel has agreed to pay to the Company 4% of SingTel's gross
revenues from providing fax document delivery services from Singapore on the
Company's network, and to pay certain other fees in exchange for the
maintenance and other services provided by the Company to SingTel.
RESULTS OF OPERATIONS
Year ended December 31, 1996 Compared to Year ended December 31, 1995
Revenues grew 136% to $25.2 million in 1996 from $10.7 million in 1995. This
increase was primarily a result of an increase in fax document traffic from
approximately 10.5 million minutes in 1995 to approximately 22.7 million
minutes in 1996. The increase in traffic was due to the increase in the number
of UNIFI's customers from approximately 4,300 at December 31, 1995 to
approximately 8,400 at December 31, 1996. The Company believes that
approximately 2,696 of such new customers were added as a result of the
introduction of fax document delivery service for documents originating in the
United Kingdom, France, Germany, Hong Kong and Korea in 1996.
Sales and customer service expenses increased 118% to $25.7 million in 1996
from $11.8 million in 1995. This increase was primarily the result of the
addition of 216 sales and customer service personnel in 1996 to support the
expansion of UNIFI's operations from two countries to eight countries. Sales
and customer service expenses as a percentage of revenue declined to 102% in
1996 from 111%.
Cost of revenues increased 254% to $27.6 million in 1996 from $7.8 million
in 1995. This increase resulted primarily from the increased level of
transmission activity (which increased the proportion of off-net traffic) in
1996 as well as the increase in the number of personnel in the document
delivery and network support groups to support the expansion of the Company's
services from two to eight countries. Cost of revenues as a percentage of
revenues increased to 109% in 1996 from 74% in 1995, as the cost of the build-
out of the Company's infrastructure exceeded sales growth over the period. In
addition gross margins were adversely impacted by the increase in the
percentage of off-net deliveries over the period.
38
<PAGE>
Research and development expenses increased 142% to $11.6 million in 1996
from $4.8 million in 1995. This increase resulted primarily from an increase
in research and development personnel from 43 at December 31, 1995 to 76 at
December 31, 1996 to support the simultaneous start-up of six new country
units and the development of additional new product lines. Research and
development expense as a percentage of revenues increased to 46% in 1996 from
45% in 1995.
General and administrative expenses increased 56% to $4.2 million in 1996
from $2.7 million in 1995. This increase resulted primarily from increased
administrative and overhead costs associated with UNIFI's expansion of the
Intelligent Delivery Network. General and administrative expenses as a
percentage of revenue decreased to 17% in 1996 from 25% in 1995.
Information systems expenses increased to $3.5 million in 1996 from $0.8
million in 1995. This increase resulted primarily from increased investment in
hardware and the cost of an additional 24 personnel in 1996 to support the
increase in the number of country operating units from two to eight.
Information systems expenses as a percentage of revenue increased to 14% in
1996 from 8.0% in 1995.
Interest income decreased to $0.2 million in 1996 from $0.7 million in 1995.
This decrease primarily resulted from the decrease in cash which was used in
operating activities and invested in hardware for the expansion of the
Intelligent Delivery Network.
Interest expense increased to $2.5 million in 1996 from $0.4 million in
1995. This increase primarily resulted from borrowings under the Company's
debt facility with SingTel (Netherlands Antilles) Pte. N.V., an affiliate of
SingTel ("SingTel N.V.") to fund its operations and the continuing expansion
of the Intelligent Delivery Network.
As a result of the foregoing, UNIFI incurred a net loss of $48.9 million in
1996, representing an increase of 232% over the net loss incurred in 1995 of
$14.7 million.
Year ended December 31, 1995 Compared to Year ended December 31, 1994
Revenues grew 53% to $10.7 million in 1995 from $7.0 million in 1994. This
increase was primarily a result of an increase in fax document traffic from
approximately 7.4 million minutes in 1994 to approximately 10.5 million
minutes in 1995. The increase in traffic was due to the increase in the number
of UNIFI's customers from approximately 3,500 at the end of 1994 to
approximately 4,300 at the end of 1995. Approximately 680 of such new
customers were in Japan and were added as a result of the introduction of fax
document delivery service for documents originating in Japan in February 1995.
Sales and customer service expenses increased 42% to $11.8 million in 1995
from $8.3 million in 1994. This increase was the result of the addition of 59
sales and customer service personnel in 1995 primarily due to the start-up of
the Company's Japanese operations. Sales and customer service expenses as a
percentage of revenue declined to 111% in 1995 from 120% in 1994 as a result
of the increase in revenues in 1995.
Cost of revenues increased 68% to $7.8 million in 1995 from $4.7 million in
1994. This increase resulted primarily from the increased level of
transmission activity in 1995 as well as the increase in the number of
personnel in the document delivery and network support groups. Cost of
revenues as a percentage of revenues increased to 74% in 1995 from 67% in
1994, as the cost of the build-out of the Company's infrastructure exceeded
sales growth over the period. As a result of the decrease in on-net traffic,
gross margins decreased over the period from 33% in 1994 to 26% in 1995.
Research and development expenses increased 191% to $4.8 million in 1995
from $1.7 million in 1994. This increase resulted primarily from investments
by UNIFI in the development of enhanced delivery services for the expanded
network including the development of multi-lingual customer action reports,
status reports and statements. Research and development expense as a
percentage of revenues increased to 45% in 1995 from 24% in 1994.
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General and administrative expenses increased 49% to $2.7 million in 1995
from $1.8 million in 1994. This increase resulted primarily from increased
administrative and overhead costs associated with UNIFI's expansion into Japan
originated fax document delivery. General and administrative expenses as a
percentage of revenue decreased to 25% in 1995 from 26% in 1994.
Information systems expenses increased 177% to $0.8 million in 1995 from
$0.3 million in 1994. This increase resulted primarily from increased
investment in server capacity and disk storage hardware and the depreciation
of hardware platforms installed to support UNIFI's global expansion.
Information systems expenses as a percentage of revenue increased to 8% in
1995 from 4% in 1994.
Interest and other income (expense), net decreased to $0.2 million in 1995
from ($0.6) million in 1994. This decrease primarily resulted from an increase
in the interest income earned on the proceeds received from SingTel N.V. as
well as a decrease in interest expense as a result of the repayment of debt
with the proceeds of the SingTel N.V. financing.
As a result of the foregoing, UNIFI incurred a net loss of $14.7 million in
1995, representing an increase of 67% over the net loss incurred in 1994 of
$8.8 million.
LIQUIDITY AND CAPITAL RESOURCES
UNIFI has incurred significant operating losses and negative cash flows in
each year since it commenced operations, due primarily to start-up costs, the
costs of developing and building the Intelligent Delivery Network and the cost
of developing, selling and providing UNIFI's products and services. As a
result of operating losses, cash used in operating activities amounted to
$22.5 million in 1996 and $14.4 million and $7.8 million in 1995, and 1994
respectively. Cash used in investing activities, largely consisting of the
purchase of equipment utilized in the build-out of the Intelligent Delivery
Network, was $20.7 million for 1996 and $6.0 million and $2.7 million, in 1995
and 1994 respectively. UNIFI has historically financed its cash requirements
for operations and investments primarily through private sales of equity
securities as well as equipment financing arrangements and other borrowings.
Cash flows from the sale of equity securities was $.06 million for 1996 and
$30.0 million and $14.6 million, 1995 and 1994 respectively. Cash flows from
borrowing was $39.6 million for 1996 and $13.6 million, and $1.7 million, in
1995 and 1994 respectively. In addition, in 1995, the Company repurchased
shares of Preferred Stock and outstanding warrants to purchase Common Stock
for $7.4 million. There is no further borrowing capacity under the Company's
existing loan agreements. For a summary of the terms and conditions of the
indebtedness issued by the Company during these periods, see "Description of
Certain Indebtedness."
The Company plans to undertake a significant expansion of the Intelligent
Delivery Network, both geographically and in terms of additional nodes,
thereby enabling the Company to capture a higher percentage of overall traffic
on-net. The Company plans to invest up to $34.5 million of net proceeds from
the Private Offering to fund the purchase of hardware for the expansion of the
Intelligent Delivery Network (including to purchase FaxLink autodialers for
installation at customer facilities), to finance the purchase of business
systems to support the anticipated growth in the size of the Company's
business and to finance the build-out of the Company's new headquarters
facility in Lowell, Massachusetts. The Company will be required to obtain
substantial additional debt or equity financing (which may include secured
equipment financing) that the Company believes (based on current projections)
is necessary to complete the build-out of the Intelligent Delivery Network, to
fund operating losses after the first quarter of 1998 until the Company begins
to earn positive net cash flow and to fund the Company's other liquidity
needs. However, there can be no assurance that any such debt or equity
financing will be available to the Company on favorable terms or at all or
that the Company will generate positive net cash flow from operations on a
timely basis and in an amount that will be sufficient to meet its liquidity
needs or at all. In the event that the Company is unable to obtain such
additional capital or generate cash flow from operations, the Company will be
required to delay or to reduce the scope of its currently anticipated
expansion of the Intelligent Delivery Network, or take other actions which
could materially adversely affect the Company's business, results of
operations and financial condition and its ability to compete, and the value
of the Securities. Any delay in the expansion of the Intelligent Delivery
Network will
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delay the projected date on which the Company expects to begin generating
positive net cash flow from operations, thereby increasing the need for
additional financing. See "Use of Proceeds."
In addition, approximately $6.0 million (Australian) (approximately $4.5
million (U.S.) based upon the February 11, 1997 conversion rate) will be used
to purchase certain assets and liabilities of SingCom (Australia), including
the right to service its fax business customer base, and to repay existing
indebtedness. See "Acquisition of Fax Business of SingCom (Australia)." In
addition, approximately $1.8 million of such net proceeds was used to repay a
portion of the Interim Financing extended by SingTel. See "Description of
Other Indebtedness--Interim Financing." The remaining net proceeds of the
Private Offering have been or will be used to fund the working capital
requirements of the Company (including approximately $12 million of accrued
accounts payable) and for general corporate purposes, including to finance
substantial additional operating losses. See "Risk Factors--Historical and
Anticipated Operating Losses; Negative Cash Flow from Operations" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
UNIFI does not have a significant source of liquidity other than the net
proceeds of the Private Offering (excluding the approximately $46 million of
U.S. Government Securities held in escrow that will be used to fund the first
four interest payments on the Notes). If the Company's current projection of
its future net operating losses or of future cash flows from operations is
inaccurate in any material respect, the Company's cash needs could exceed its
cash availability, which would have a material adverse effect on the Company.
See "Risk Factors--Need For Additional Financing; and--Substantial Leverage;
Ability to Service Indebtedness."
Pending application of the net proceeds of the Private Offering, the Company
has invested the funds from the Private Offering in short-term, interest
bearing investment grade securities until such funds are applied to the
capital investments and operating needs of the Company and its subsidiaries
and to fund operating losses. A portion of the net proceeds has been delivered
to the Escrow Agent in the form of U.S. Government Securities with maturities
as nearly as possible matching the first four interest payment dates on the
Notes in amounts sufficient to pay interest on the Notes on such dates. The
Company will make the first four interest payments on the Notes with the
proceeds of the U.S. Government Securities.
The Company is highly leveraged. The Indenture permits the Company and its
subsidiaries to incur additional indebtedness under certain circumstances to
fund the expansion of the Company's network, and for other permitted purposes
and, to a limited extent, to secure such indebtedness with liens on the assets
of the Company and its subsidiaries. See "Description of Exchange Notes--
Certain Covenants." Holders of secured indebtedness will have priority over
the holders of Notes in right of payment to the extent of the value of the
assets securing such indebtedness. The ability of the Company and its
subsidiaries to make scheduled payments with respect to indebtedness
(including the Notes) will depend upon, among other things, the Company's
ability to complete the necessary additional financing, the completion of its
network on a timely and cost-effective basis, the market acceptance and
customer demand for the Company's services and the future operating
performance of the Company. Each of these factors is, to a large extent,
subject to economic, financial, competitive, regulatory and other factors,
many of which are beyond the Company's control. If the Company does not
generate sufficient increases in cash flow from operations to repay the Notes
at maturity, it could attempt to refinance the Notes; however, no assurance
can be given that such a refinancing would be available on terms acceptable to
the Company, or at all. Any failure by the Company to satisfy its obligations
with respect to the Notes at maturity (with respect to payments of principal)
or prior thereto (with respect to payments of interest or required
repurchases) would constitute a default under the Indenture and could cause a
default under agreements governing other indebtedness, if any, of the Company.
See "Risk Factors--Historical and Anticipated Operating Losses; Negative Cash
Flow from Operations" and "--Need for Additional Capital" and "Description of
Exchange Notes--Certain Covenants" and "--Limitation on Incurrence of
Additional Indebtedness."
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BUSINESS
OVERVIEW
UNIFI is a leading provider of international enhanced facsimile transmission
and delivery services. The Company has developed the Intelligent Delivery
Network, a system which combines highly efficient store-and-forward network
technology with a proprietary Delivery Expert System and a 24-hour multi-
lingual fax delivery staff. The Intelligent Delivery Network provides business
customers with a facsimile delivery service that is secure, easy to use, more
efficient, more reliable and less expensive than the direct dial services
provided by the world's conventional long-distance carriers.
UNIFI commenced operations in April 1992 by transmitting one-way facsimile
traffic exclusively from the United States to Japan. By December 1993, the
Company's monthly revenue from this single route had grown to approximately
$440,000, the equivalent of annualized "run-rate" revenue of $5.3 million. As
a result of these accomplishments, the Company was successful in attracting
$80 million in total financing from several Asia/Pacific investors including
Nichimen, ORIX and affiliates of SingTel, a major provider of
telecommunications services in Singapore. With a portion of the proceeds from
these financings, the Company (i) expanded its sales, document delivery,
network monitoring, research and development, and administrative
infrastructures and (ii) from December 1995 to September 1996 established
operations, either directly or through SingTel or other contractual
relationships with other parties, in seven additional countries to complement
its existing operations in the United States and Japan. As of February 28,
1997, the Company had approximately 9,117 corporate customers (excluding non-
revenue trial accounts and operations in China), of which approximately 721
were added in the first two months of 1997 and 1,238 in the fourth quarter of
1996. UNIFI's revenues for the year ended December 31, 1995 were approximately
$10.7 million and revenues for the year ended December 31, 1996 were
approximately $25.2 million.
According to the International Telecommunications Union, international
switched telecommunications traffic grew at an annual compound rate of 13.8%
from 28 billion minutes in 1989 to 53 billion minutes in 1994. Based on
several industry studies, the Company believes that fax transmissions
represent approximately 20-25% of all switched international minutes, and in
1995, the market for international fax traffic totaled approximately $12
billion worldwide. The Company expects the growth of the telecommunications
market to continue, particularly in emerging markets and in the Asia/Pacific
region where the Company believes that facsimile will continue to be a
preferred business communications technology. In order to capitalize on the
technological trends in developed markets such as the United States and
Western Europe, the Company has developed, and is actively testing product
line extensions that will allow customers to access the Intelligent Delivery
Network for fax transmissions from their PC-LAN environments, e-mail systems,
and Internet software.
Over the past five years, the Company has developed four key competitive
elements which the management team believes are responsible for UNIFI's growth
in the market:
. Network Efficiency. The Intelligent Delivery Network's packet-switched
store-and-forward technology transmits fax documents up to 16 times more
efficiently than the circuit-switched technology utilized by the world's
long-distance carriers. This efficiency advantage allows UNIFI to offer
customers delivery rates that are significantly lower than the rates
charged by long-distance carriers while generating attractive gross
margins from its on-net traffic (i.e., traffic terminating in a country
where the Company has installed a network node).
. Superior Service--The Intelligent Delivery Network. Unlike its
competitors, the Company provides end-users with a 24-hour, seven-day-a-
week personalized delivery service based on its proprietary Delivery
Expert System combined with a multi-lingual delivery staff that
identifies, analyzes and resolves fax delivery obstacles. The Company
believes this service is primarily responsible for the less than
approximately 1.5% monthly churn it has experienced in each of the last
twelve months (other than October 1996, during which the Company
experienced a 2.3% monthly churn due primarily to the recovery of Fax
Links from customers with monthly usage below certain minimum
thresholds). The
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Company further believes that the Delivery Expert System provides a
competitive advantage that cannot be easily replicated given the Company's
experience and proprietary processes developed since 1992.
. Global Sales and Service Infrastructure. UNIFI has operations in the
United States, Japan, the United Kingdom, France, Germany, Hong Kong and
Korea. In addition, the Company conducts operations in China pursuant to
a partnership with a local entity and has a presence in Singapore and
Australia through its relationship with SingTel. UNIFI's investment in a
global sales and account management organization of 365 people has
created a competitive advantage by allowing the Company to provide a
consistent set of delivery services based on common service standards and
centralized billing. Long-distance carriers, the Company's largest
competitors, do not deploy a consistent set of global services due to
regulatory and other market forces which constrain them from maintaining
a global presence.
. Large, Established Corporate Customer Base. UNIFI has an existing
(February 28, 1997) base of approximately 9,117 customers (excluding non-
revenue trial accounts and operations in China). The Company's account
base grew by 762 in October 1996, 840 in November 1996, 558 in December
1996 (due to seasonality), 779 in January 1997 and 827 in February 1997
(in each case including a substantial number of non-revenue trial
accounts). However, the Company primarily handles its customers'
international fax transmission requirements (domestic fax services in the
United States and Canada were only recently added), which constitute only
a small portion of each customer's fax transmission needs. UNIFI has
already begun to make significant investments necessary to broaden its
service offerings to provide customers with a more complete set of fax
delivery services through direct connection to desktop messaging software
packages.
The next phase of expansion for the Company involves increasing the size of
the Intelligent Delivery Network to accommodate projected traffic growth and
to increase the percentage of its traffic that is on-net, thereby decreasing
variable delivery costs and improving gross margins. In addition, the Company
intends to broaden its existing service offering to leverage its large
existing customer base.
THE OPPORTUNITY
The Public Switched Telephone Network ("PSTN") has been designed to carry
real-time, two-way voice signals. This communication mode utilizes a 64,000
bits per second ("bps") capacity circuit to transport the required
information. Since the PSTN does not distinguish between voice and non-voice
calls, it allocates a full 64,000 bps circuit to each call, regardless of
whether the call is voice or fax. However, the conventional fax machine
generates data at an average rate of less than 7,000 bps (with a maximum rate
of 9,600 bps). Moreover, since voice traffic is two-way, the PSTN allocates
one 64,000 bps circuit in each direction regardless of whether a call is voice
or fax. Information flow in a fax transaction is largely one-directional; very
little information flows over the reverse circuit from the destination to the
source fax machine. As a result of this capacity allocation by the PSTN, the
conventional fax machine produces signals which occupy the entire two-way
voice channel on a PSTN but actually utilizes only about 5% of its capacity.
The Company has designed and constructed a store-and-forward network that
overcomes these transmission inefficiencies. The network operates parallel to,
and is accessed by, the PSTN. The network itself consists of a series of nodes
that are interconnected by dedicated communication circuits, either fiber
optic cables or satellite links which are leased from third-party providers.
The nodes interface directly with the PSTN and are the means by which customer
fax traffic enters and exits the Company's network. A fax transmission begins
with the customer dialing a destination fax number. The Company's FaxLink
autodialer attached to the fax machine telephone line intercepts the call and
screens the number. If the call is bound for a domestic destination, it is
allowed to pass through and be carried by the user's normal carrier. If,
however, the call is bound for a destination served by the Company, the
FaxLink autodialer dials the telephone number of the nearest Company node and
allows the attached fax machine to communicate with it once the connection is
made. As the node receives the fax, it converts the fax signal from its analog
format back into the original highly efficient "baseband" digital format
produced by the originating fax machine. This sending node then organizes the
fax file into a series of "packets" and transmits them to the destination
node. Because it is in its baseband digital
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form, the signal can be transmitted without the inefficiencies inherent in
digital format used by the PSTN networks. Incorporating the digital data into
packets and other overhead reduces the efficiency of the store-and-forward
network from a theoretical value of 20:1 to an actual value of approximately
16:1. That is, the Company can send approximately 16 faxes over the same size
circuit that the PSTN utilizes to send only one fax. Upon reaching the
destination node, the fax signal is reconverted to its original analog format;
the destination node then dials the destination fax machine and transfers the
fax to it. The Company's nodes are connected by long-distance transmission
systems, operated by third-party carriers, which form the arteries of the
Intelligent Delivery Network. The Company utilizes the Intelligent Delivery
Network to bypass the expensive international switched circuit facilities.
Traditional store-and-forward facsimile networks are characterized by a
common competitive disadvantage--slow feedback on the outcome of
transmissions. Traditional fax machine technology is activated when a user
dials the destination telephone number and obtains one of three principal
responses: busy, no-answer, or a connection with the destination. With the
first two, the user must attempt the call at a later time. With the third
response, provided a fax machine answers, the call is set-up and the scanned
image is transferred from the originating to the destination machine. This
process provides the user with instant notification of the call progress--
connection or no connection. Moreover, if a person answers, it is likely the
call was placed to a wrong number. The user can, if necessary, take immediate
corrective action. In contrast, a properly provisioned store-and-forward
network node will have a sufficient number of telephone lines such that a
customer never receives a busy signal. All calls are attended to immediately.
However, contact with the node does not equate to contact with a destination
fax machine. The destination may be busy, or may not answer, or the call may
be answered by a human voice. In any case, the customer is unaware of these
events, possibly for an extended period of time.
The Company's experience indicates that about 25% of international fax calls
fail on the first attempt. Store-and-forward faxes are no exception. However,
if a destination node does not succeed on its first call attempt, it is
programmed to repeat the attempt several times, typically every five minutes
for a period of half an hour. The typical store-and-forward network, failing
to deliver the document after several attempts, generates a nondeliverable
notice and sends it to the originating fax machine. The Company believes that
this unreliable delivery behavior undermines the efficiency advantage enjoyed
by store-and-forward networks.
THE INTELLIGENT DELIVERY NETWORK
To overcome the above deficiencies, the Company has created the Intelligent
Delivery Network, a system which combines highly efficient store-and-forward
technology with a personalized delivery system. The personalized delivery
system has two principal components: a proprietary Delivery Expert System
software and a 24-hour, 7-day-a-week Document Delivery Staff. These two
components work in conjunction to identify and resolve the vast majority of
obstacles encountered by the network as it attempts to deliver a fax document.
The computer-based Delivery Expert System is designed to automatically
overcome a large variety of delivery problems. If a network node fails to
deliver a fax on its first attempt, depending on the failure mode, it will
automatically redial the number several times over a fixed period of time. If
preliminary delivery attempts fail, the delivery attempt history is
automatically transferred to the Delivery Expert System for automated analysis
and resolution. For example, a very common problem with a fax machine is that
it does not answer a call when it runs out of paper. If this happens after
business hours or on a weekend, one or more days may pass before the machine
is operational once again. In this instance, the Delivery Expert System would
elect to defer delivery of the document until the beginning of the next
business day. The Delivery Expert System has been designed to recognize
standard holidays as well as weekends in all destination countries and takes
full account of these events in the decision process. Alternatively, where the
Delivery Expert System has been programmed to do so, it will route the call to
another fax machine. The Delivery Expert System was first installed in
September 1996 and is undergoing beta-testing.
If the Delivery Expert System fails to resolve a delivery problem, it
transfers the problem to the Document Delivery Staff for resolution through
human intervention. This Company's centralized facility in Lowell,
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Massachusetts, operates 24 hours a day, seven days a week; collectively,
members of the staff speak most of the major languages of the world.
Individuals in the Document Delivery Staff are responsible for contacting
either the sender or receiver of a fax document to resolve difficulties. In
the example cited above, a delivery analyst would call the sender to obtain
the telephone number of the recipient, an alternative fax number (if any) and
direction as well as authorization to manage future difficulties. All of this
information is ultimately incorporated into the database utilized by the
Delivery Expert System for automatic use in the future. Other activities of
this group range from rerouting traffic to circumvent natural disasters to
responding to constantly changing national dialing patterns.
The Company believes that its personalized delivery system is a cost-
effective method for overcoming many of the common fax delivery obstacles and
a significant service advantage over its unassisted store-and-forward
competitors. The Company further believes that its ability to provide
reliable, value-enhanced fax service is based upon its operational experience
and its accumulated knowledge and database of alternative fax numbers and
other delivery instructions. UNIFI believes that its experience in overcoming
fax delivery obstacles and its growing database of delivery solutions provides
it with a competitive advantage over new market entrants attempting to
duplicate the Company's specialized delivery capabilities.
THE UNIFI INTERNATIONAL STORE-AND-FORWARD NETWORK
The Intelligent Delivery Network consists of a series of nodes or "points-
of-presence" that are interconnected by dedicated long-haul telecommunication
facilities--either fiber cables or satellite links leased from third-party
carriers. Computers, which are based upon the IBM personal computer (PC)
standard, form the core of the equipment in a typical node. All are
inexpensive and generally available as off-the-shelf items from a number of
vendors. A node's computers can be divided into three separate categories
depending on their functionality: the fax concentrator, the traffic
administrator and the file server. The fax concentrator interfaces directly to
the PSTN and is the means by which customer faxes are reformatted and enter
and exit the network. A fax concentrator contains the specialized cards that
transform a fax from its analog to digital format. A single fax concentrator
accepts 5,000 minutes of traffic per day, interfaces with up to 24 telephone
lines and costs approximately $28,000. Fax concentrators were designed to be
added to the network in a modular fashion to accommodate increasing traffic. A
traffic administrator, again a PC-based instrument, controls the flow of
traffic across the network. The file server receives the customer fax in
digital format from the fax concentrator; it stores a copy of the fax until it
is delivered, thereby insuring that a customer document is never lost. Each
node also includes a router, which is also available off-the-shelf from a
number of vendors. Routers provide the connectivity between network nodes;
they transform data files into packets and route them to the proper
destination node. The above machines are replicated as required to provide
redundancy for reliability. A node also contains other ancillary equipment
related to reliability, maintenance and security.
Nodes have been designed to be extremely flexible so that the Company can
efficiently add or otherwise adjust capacity or configuration in response to
growing or changing traffic patterns. Nodes can be either one-way (for
destination use only) or two-way (send and receive). A one-way node would
typically be installed in a country to which a significant amount of traffic
flowed. However, without a sales presence in that country, the Company would
not originate fax traffic from that location. Such a node would also be less
expensive because of reduced equipment needs. The equipment cost of a basic
two-way and one-way node is approximately $176,000 and $40,000, respectively.
One-way nodes are connected to the network by two-way leased long-distance
lines or satellite links and do not, therefore, offer the same opportunity for
the higher gross margins obtainable where traffic flows in both directions.
However, given sufficient traffic, routes serviced by one-way nodes are more
efficient than routes that are completely off-net.
The modular format of the Company's nodes allows them to be easily converted
from one-way to two-way and further to be easily and inexpensively expanded to
increase capacity in tandem with increases in customer demand. In addition,
the simple and inexpensive nature of the node design means that the Company
can quickly deploy new nodes in response to demand in new locations. Finally,
nodes are compact and can be easily and inexpensively moved to new locations
should the Company encounter lower than expected traffic or other
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difficulties in a given market. The Company believes that the flexible nature
of its nodes will allow it to efficiently build-out its network in increments
and at a pace that is related to consumer demand.
The Company has standardized its node equipment and specifications and
limited the number of its suppliers to achieve cost efficiencies.
Substantially all of the Company's node components are readily available from
large, well-known suppliers. The Company continually evaluates new
developments in electronic document distribution technology in connection with
the design and enhancement of its system and development of services to be
offered to its customers.
The Company has made arrangements with standard telecommunication service
providers or similar agencies to house its network nodes. The housing is
typically located in a secure facility containing environmental and fire
control equipment with battery back-up power supplies to contend with power
failures. Where appropriate, earthquake resistant structures have been
utilized. The Company has also designed its nodes to be extremely reliable,
obviating the need for on-site Company personnel. Routine maintenance is
centrally performed from the Company's offices in Burlington; on-site
maintenance is purchased as required from the housing vendor.
The Company's nodes are interconnected by a variety of dedicated third-party
transmission systems including satellite links, leased fiber optic cables and
frame relay circuits. The Company believes that these third-party systems
provide secure, high quality connections and reliable throughput.
TELECOMMUNICATION SERVICE PROVIDERS
The Company requires two basic types of telecommunication services:
dedicated connectivity between nodes and switched services that allow customer
traffic to enter and exit the network.
The Company utilizes a variety of vendors and technology to provide
connectivity between and among its network nodes. Vendors are chosen based
upon reliability of service and price. For international connectivity, the
Company principally relies upon frame relay technology provided by AT&T under
its World Partners program. Frame relay service is typically less expensive
than conventional dedicated circuits while offering greater reliability
because of the built-in redundancy of these networks. Further, frame relay
circuits can be provisioned with forward and return paths having differing
capacities (hence lower costs), an important consideration when large
imbalances in traffic exist between two countries.
The Company has recently completed an agreement with Orion Atlantic, L.P.
("Orion") to provide satellite service between its nodes in the Eastern United
States and Western Europe. The service is currently operational between its
network nodes in Marlboro, Massachusetts and Frankfurt, Germany. The Company
expects to employ satellite linkages between other European cities in the near
future. Satellite service is advantageous to the Company because it eliminates
the need to provide costly land line connectivity between and among the many
important business centers in Europe. The Company believes that its
arrangement with Orion will allow it to efficiently and rapidly expand its
coverage of Western Europe and that similar satellite arrangements may become
available in other locations. This broadcast feature may allow the Company to
economically add new fax routes that might not be justifiable using standard
land lines. The contract with Orion is unlike that available with conventional
telecommunication circuit providers in that the cost is variable and based
upon the total traffic transmitted. This arrangement further decreases the
risk in installing network nodes in new locations in Western Europe.
Within any individual country, the Company attempts to contract with the
most reliable and least expensive carrier to provide switched service from the
node to the PSTN. Although UNIFI accepts fax traffic for delivery to any
country in the world, the Company currently maintains a presence in only nine
countries. Traffic destined for delivery outside of the ten countries
(including Singapore and Australia) where the Company has nodes must currently
be completed by costly, conventional long-distance carriers (so-called off-net
traffic). The Company's planned expansion of its network will increase the
volume of traffic that is on-net. The Company has made
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arrangements with a number of international switched service providers
including AT&T and LDDS WorldCom in the United States and Hong Kong Telecom to
carry off-net traffic. The network chooses the carrier based upon the lowest
cost to the required destination. For example, if AT&T is chosen as the
carrier for a particular fax, the associated file is routed to the network
node in Newark, New Jersey, which maintains dedicated circuits to that
carrier.
GROWTH STRATEGY
UNIFI's goal is to rapidly increase both the number of worldwide customers
that it services and the total volume of fax traffic transported over its
Intelligent Delivery Network. UNIFI's strategy for achieving this goal is to
leverage its existing operational and strategic competitive advantages by
expanding the Intelligent Delivery Network into additional countries and by
increasing the number of ways that customers can gain access to its
Intelligent Delivery Network service.
. Leverage the Intelligent Delivery Network Cost Advantage by Expanding the
Network. In order to capitalize on the efficiency advantage that the
Intelligent Delivery Network provides with respect to on-net traffic, the
Company is in the process of installing network nodes in each of the
countries where the Company terminates a large number of fax minutes. The
Company currently accepts cross-border fax traffic from its customers for
delivery anywhere in the world. Traffic destined for termination outside
of the ten countries (including Singapore and Australia) where the
Company currently has Intelligent Delivery Network nodes ("off-net"
traffic) is costly to deliver because the Company must utilize
conventional long-distance telephone networks to reach those off-net
locations. The Company's strategy is to significantly expand the
Intelligent Delivery Network, both geographically and in terms of
additional network nodes, to accommodate traffic growth and to leverage
the Intelligent Delivery Network on-net efficiency advantage. During
February 1997, approximately 64% of the Company's total fax traffic was
on-net; the Company's goal is to significantly improve overall gross
margin performance by increasing the percentage of on-net traffic through
this node expansion program. There can be no assurance, however, that the
Company will be successful in achieving this goal.
. Grow the Customer Base by Leveraging the Existing Global Sales/Service
Infrastructure. The Company's goal is to further accelerate its customer
growth rate and traffic growth rate by establishing sales channels in
approximately two new countries in 1997 (bringing the total to 10 revenue
generating countries by the end of 1997). The Company plans to achieve
this goal by leveraging its existing global sales and service
infrastructure by expanding to new countries located adjacent to existing
operating units. The Company believes that revenue from additional
countries can be generated quickly and efficiently by providing general
management, technical support, administration and account management
services to the new markets via the existing country units. For example,
Hong Kong will provide support services to Taiwan, the United States will
provide support services to Canada and Mexico, and the Company's French
and German operations will provide support services to Belgium, The
Netherlands and Switzerland.
. Grow Traffic Minutes by Leveraging the Company's Large, Corporate
Customer Base. UNIFI's revenue growth to date has been based on
international traffic originating solely from fax machines. UNIFI has an
existing (as of February 28, 1997) base of approximately 9,117 customers
(excluding non-revenue trial customers and operations in China). The
Company's account base grew by 762 in October 1996, 840 in November 1996,
and 558 in December 1996, 779 January 1997 and 827 in February 1997 (due
to seasonality) (in each case including a substantial number of non-
revenue trial accounts). However, the Company currently primarily handles
its customer's international fax transmission requirements (domestic fax
services in the United States and Canada were only recently added) which
constitute only a small portion of each customer's fax transmission
needs. UNIFI has already begun to make the investments necessary to
broaden its service offering to provide customers with a more complete
set of fax delivery services through direct connection to desktop
messaging software packages. The following
47
<PAGE>
product line extensions are in the process of being field tested and are
currently scheduled to be introduced commercially in 1997:
. Domestic fax service within Japan and Germany. Provision of Domestic
service is expected to open up additional substantial fax markets to
UNIFI inside these four countries.
. Domestic and international Intelligent Delivery Network service from
the desktop using e-mail and other LAN-based software. This service
will allow customers to send and receive fax documents from the
desktop via their existing e-mail or LAN-based systems.
. Internet accessible fax services. This product will allow customers to
send and receive fax documents via existing Internet connections
utilizing the Company's secure and reliable Intelligent Delivery
Network.
. Broadcast fax service (domestic and international).
The Company is currently providing LAN-based facsimile service from the
desktop to Union Bank of Switzerland's London office utilizing fax server
technology. UNIFI has also entered into a strategic relationship with CDS to
jointly develop an e-mail-to-fax outsourcing service that will be designed to
allow business customers to send and receive fax documents from both LAN- and
host-based e-mail systems. This new service will be based on integrating CDS's
X.400 messaging technology with the Company's Intelligent Delivery Network.
The Company expects that the joint product will be marketed to CDS's existing
customer base during 1997 and then extended to a broader business audience in
1998. CDS's stated customer base includes approximately 170 "Global 2000"
companies and approximately 3.5-5.0 million end users.
The Company has also entered into agreements in principle to establish
strategic relationships with three software companies that are focused on
providing LAN-based and Internet-based fax software packages: RedBox,
NetXchange Communications, Inc., and PonyExpress, Inc. The Company expects to
jointly develop software products that will enable its customers to gain
access to UNIFI's Intelligent Delivery Network System via a LAN-based or
Internet-based connection utilizing a standard fax servicer or browser
interface. Each of those transactions is subject to certain significant
conditions, including definitive documentation, and there can be no assurance
that any such transactions will be consummated.
PRODUCTS AND SERVICES
International Fax-to-Fax Services. The Company's Intelligent Delivery
Network combines the efficiencies of advanced store-and-forward technologies
with the reliability of sophisticated expert systems and a 24-hour delivery
staff. The Company believes that it provides a secure, low cost, reliable,
business-to-business, international fax service. The Company believes that its
system is a more reliable and less expensive fax service than what is
available from traditional long-distance telephone services. UNIFI currently
serves approximately 9,117 customers in eight countries. In addition, the
Company has granted to SingTel the right to transmit fax documents over the
Intelligent Delivery Network from, to and through Singapore. See "Certain
Relationships and Related Transactions--Transactions with SingTel."
Domestic Fax-to-Fax Services. The Intelligent Delivery Network is already
positioned to offer domestic fax-to-fax services in the markets in which the
network nodes are operational. The Company has initially targeted the United
States, Japan, Canada and Germany for the introduction of domestic fax
document services beginning in 1997 and has recently commenced domestic
service in the United States and Canada. While the Company expects that gross
margins will be lower on this service than on UNIFI's international fax-to-fax
service, the Company believes that it will significantly expand the number of
businesses to which the Intelligent Delivery Network will appeal, as well as
complement the services the Company offers to its existing customers. However,
since UNIFI's domestic fax-to-fax service in the United States will be a real
time, rather than store-and-forward service, it will be subject to regulation
in the United States. See "--Regulation."
LAN-to-Fax Services. The Company is developing LAN-to-fax services. The
Company's network architecture will allow customers to connect their local
area network ("LAN") based fax-server directly to the
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<PAGE>
Intelligent Delivery Network. This would give LAN users full faxing
capabilities with the same efficiencies and enhanced reliability realized in
the international fax-to-fax market without investing in fax server related
hardware and without adding new telephone lines. Recent studies indicate that
over 80% of business professionals that use a LAN infrastructure that is
capable of supporting a fax server currently send their faxes using stand-
alone machines. The Company believes that this statistic indicates a
significant growth opportunity.
The Company's LAN-to-fax service has undergone 14 months of beta-test at the
Union Bank of Switzerland's London office. During this test, the Intelligent
Delivery Network has delivered over 30,000 pages of fax documents in September
1996 alone. This extensive beta-test period has helped the Company to refine
its product, particularly the hardware requirements, prior to a full-scale
roll out.
The Company has also entered into an agreement with RedBox in the United
Kingdom to develop technology that would integrate the Company's fax delivery
service with RedBox's fax server. The goal of the RedBox project is to
integrate a feature into all RedBox fax servers that would forward all fax
transmissions routed to such servers to the Company's Intelligent Delivery
Network, providing another means of connecting LAN environments to the
Company's network. The resulting product would be jointly sold by UNIFI and
RedBox. RedBox has conducted extensive testing on this product and is
currently in the beta phase. Following completion of the beta-test, the
Company expects to commence commercial sales of RedBox fax servers
incorporating this new technology in the United Kingdom and France in 1997.
The Company is in discussions with several other fax server companies to make
the Company's LAN-to-fax service available in other markets.
In addition, the Company and CDS have entered into an agreement to jointly
develop an e-mail-to-fax outsourcing service that would allow CDS's customers
to send and receive fax documents from both LAN and host based e-mail systems
by integrating CDS's technology with the Intelligent Delivery Network. CDS
customer base includes 170 "Global 2000" companies using its e-mail
technology, and 3.5-5.0 million end-users that could potentially use this
service. CDS has provided financing to the company and currently holds a 3-
year convertible note for approximately $2.0 million and a warrant to purchase
56,406 shares of the Company's Common Stock. See "Description of Other
Indebtedness--Interim Financing."
E-mail and Voice-Mail Services. The Company also intends to broaden its
service offering in order to position itself as the obvious electronic message
carrier as the unified electronic desktop mailbox becomes a reality. The
Company believes that consumers are increasingly demanding a unified
electronic mailbox that would allow users to manage all forms of electronic
communications with a single desktop terminal. The Company's planned services
are expected to include e-mail and voice-mail as well as fax transmissions.
The Company has agreed to license CDS's X.400 message transport and X.500
directory technology which is a key component for multi-media messaging. This
technology base is expected to facilitate the Company's extension into e-mail,
voice-mail, and mixed media messaging services.
Broadcast Fax Services. The Company is planning to introduce broadcast fax
services in 1997. Broadcast fax services will enable customers to rapidly
distribute the same document to many recipients by a single transmission to
the Intelligent Delivery Network. The Company believes that this service will
allow customers to achieve significant savings on the cost of managing the fax
process and documenting fax deliveries to multiple locations.
Although the Company has plans to introduce new products in 1997 and
thereafter, there can be no assurance that any of such new products will be
introduced on the timetable currently contemplated, with the features
currently contemplated, or at all or that they will achieve commercial
success. See "Risk Factors."
MARKETING AND CUSTOMER SERVICE
Several factors make sales and marketing especially high priorities for
UNIFI. Foremost, the Company believes that because of the high level of fixed
costs of establishing, operating and maintaining its Intelligent Delivery
Network and the relatively low variable cost of running additional traffic
through it, it can significantly
49
<PAGE>
improve its operating margins by increasing sales volume. The Company also
believes that the rapid changes that are taking place in the computer and
telecommunications industries are creating a window of opportunity for
emerging companies like UNIFI to establish themselves as significant carriers.
Lastly, the Company reaps ongoing revenues from new customers because of its
low churn rate. Accordingly, the Company has spent and expects to continue to
spend substantial resources on its sales and marketing programs in an effort
to rapidly increase its customer base.
UNIFI has expanded its sales force and customer service staff from 92 at the
end of 1994, primarily located in the United States, to 365 as of February 28,
1997, located in eight countries worldwide. The Company has recruited
extensively in its local markets and believes that the local knowledge and
contacts of its largely indigenous sales force is a source of competitive
advantage. UNIFI believes that this heavy investment in local sales resources
makes UNIFI well-positioned for its planned geographic expansion and for the
roll-out of additional products as new electronic messaging formats emerge and
proliferate.
The Company's build-out plan has been designed to make the most of existing
Company resources. The Company plans to add nodes in some of the largest
business communications markets that it does not currently serve. The Company
expects to locate these nodes in areas where its customers are directing their
outgoing faxes. Fortunately many of these new markets are adjacent to markets
that the Company is already serving. Accordingly, the Company expects to serve
the majority of these new markets with its existing sales offices in
neighboring markets. The Company also plans to supplement its existing sales
force with local third-party sales agents located in the new markets.
The Company is also leveraging its existing resources by pursuing strategic
ventures with companies in related and complementary fields. For example, the
Company has entered into product development ventures with RedBox, a maker of
fax server hardware, and with CDS, an e-mail service company. See "--Growth
Strategy" and "--Products and Services." The Company believes that these and
similar ventures will help it to reach new customers by integrating its
existing services with products and services offered by other firms. The
Company also believes that such ventures will lead to new hybrid fax-based
products that will interface with emerging electronic messaging formats. The
Company expects to enter into additional strategic ventures in the future.
The Company markets its services primarily with a direct sales force of
Account Executives. The Company's 152 Account Executives are deployed globally
in the Company's 13 sales offices in eight countries. Each of the Company's
Account Executives is given primary marketing responsibility for a defined
geographic territory. The Account Executives focus their efforts on making in-
person and telephone sales calls to medium to large businesses that transmit
at least 15 pages of international facsimiles per day.
Once a customer has been signed up by an Account Executive, the customer
becomes the responsibility of a particular Account Manager. Account Managers
are the primary Company contact point for existing customers in their given
territory. They are responsible for helping new customers install FaxLinks and
training customers' personnel to use the Company's new services. The Company
encourages its Account Managers to make regular service and sales calls to
existing customers. The Company believes that Account Managers establish long-
term, service based relationships with their clients that often lead to high
account retention, additional FaxLink connections (and therefore greater
sales) and also will serve as the springboard for marketing new services, such
as e-mail and voice-mail, when the unified desktop electronic mailbox becomes
a reality.
The Company has recently started an independent sales agent and firm
partnering program. Under this program, the Company's local sales offices are
given a substantial degree of freedom to enter into customized arrangements
with local sales agents and firms with existing distribution networks that are
well suited for selling the Company's services. This program allows the
Company's sales offices to take advantage of the different sales resources and
channels in the various markets that they operate in around the world.
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The Company supports its Account Executives, Account Managers, independent
sale agents, partner firms and strategic ventures with an active head-office
marketing department. The marketing department is responsible for formulating
the Company's marketing strategies and priorities, conducting market research,
analyzing market competition and creating and disseminating advertising and
public relations materials.
COMPETITION
The global market for facsimile transmission services, broadly defined, is
highly competitive and the Company has recently observed increasing
competitive price pressures. This market is served primarily by large
telecommunications companies including AT&T, Sprint and MCI in the United
States and government run PTTs in much of the rest of the world. These
competitors have financial, marketing, technological and other resources far
in excess of the Company's and their historic market positions give them an
incumbency advantage. These companies offer basic and, in some cases, enhanced
fax communications services over networks that for the most part have been
specifically designed to carry voice signals and are based on "circuit
switched" technology. The global market for facsimile services is also served
by a group of low cost long-distance companies, such as Frontier, Worldcom
LDDS and Cable & Wireless. Most of these firms also have financial resources
far in excess of those of the Company. The Company believes that these firms
compete almost exclusively on price. These companies also operate networks
that have been specifically designed to carry voice signals and are based on
"circuit switched" technology.
The market is also served by more specialized facsimile service providers
that offer basic store-and-forward services such as, FaxSav Inc. These firms
operate store-and-forward networks that are specifically designed for
facsimile traffic. The Company also potentially competes with Xpedite Systems,
Inc. which currently operates a broadcast fax service and is adding a point-
to-point fax service. Some of these firms have financial resources in excess
of those of the Company. While, as mentioned above, a limited number of other
firms operate store-and-forward systems, none currently offer the same
monitoring and follow-up services that ensure that customers' facsimiles
overcome typical delivery obstacles. The Company believes that without such
services, the store-and-forward format offers no advantage, other than fax
document delivery cost, over traditional facsimile transmission over voice
networks.
The Company has chosen to serve a very specific segment of the facsimile
transmission service market. The Company expects the focused nature of its
market niche to reduce the chance of a direct competitive response from the
major telecommunications firms. Virtually all of the Company's customers are
acquired at the expense of other telecommunications firms, however, the
Company believes that because it currently provides primarily international
fax document delivery services (and now, domestic service in the United States
and Canada) the amount of sales taken from any one competitor is relatively
small. The Company's small size and focused services may also be an advantage
in gaining access to certain foreign markets. Many foreign telecommunications
markets are dominated by state run PTTs and telecommunications is often the
subject of national priorities. The Company believes that large, high profile
telecommunications companies would be more likely to face protectionist or
other exclusionary forces were they to attempt to replicate the Company's
services in such foreign markets. However, as the Company extends its product
line and grows, some or all of these various advantages will cease or
decrease.
As its facsimile traffic increases, the Company's believes that its
Intelligent Delivery Network should increase its competitive cost advantage
over traditional "circuit-switched" systems designed for voice transmission.
The Company converts its customers' facsimiles into a more efficient format
which reduces its variable cost of transmission. This cost based advantage
will grow as the Company increases its volume of facsimile traffic and expands
its network of international nodes.
The Company also believes that it has an early mover advantage over
potential competitors in its market niche. The Company believes that its
ability to provide effective value-enhancing document delivery services is
based on its operators' experience and its accumulated data base. The Company
has spent the past four years accumulating and refining its document delivery
procedures and accumulating a data base of alternative delivery
51
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procedures, fax numbers and other routing information that help it to overcome
delivery obstacles and get its customers' faxes to their final destination.
The Company believes that this "learning curve" could slow a potential
competitor's attempt to enter the Company's market niche.
While the Company believes that it enjoys certain competitive advantages in
its market niche, many of the Company's competitors have substantially greater
financial resources than the Company and there can be no assurance that the
Company will be able to compete effectively in a rapidly changing industrial
and technological environment. The Company is also dependent on certain
telecommunications infrastructure owned and operated by these competitors. See
"Risk Factors Dependence on Third-Party Carriers." In addition, the Company
cannot predict whether AT&T, MCI, Sprint or any other competitor will expand
their fax service businesses, cut prices, target the Company's customer base
or otherwise respond competitively to the Company's actual and planned
businesses. Mergers and acquisitions in the telecommunications industry, such
as tile recently announced agreement of merger between MCI and British
Telecom, may alter the competitive environment in a manner that is adverse to
the Company's interests. Lastly, the Company has little proprietary
technology, no exclusive contracts or any other Source of market controls.
Consequently, there can be no assurance that tile Company's services will not
be duplicated by existing or potential competitors. See "Risk Factors--
Competition."
EMPLOYEES
The Company considers its relationship with its employees to be good. The
Company employed 620 persons (including 28 contractors) as of February 28,
1997, substantially all of whom were full-time employees and none of whom was
covered by a collective bargaining arrangement. Of these employees, 365 were
engaged in sales and customer service; 146 in operations; 76 in research and
development; and 33 in general and administrative activities.
PATENTS AND PROPRIETARY INFORMATION
The Company regards certain of its computer software as proprietary and
seeks to protect such software with internal non-disclosure agreements and
other common law safeguards. The Company currently holds no United States or
foreign patents, but has several United States patent applications pending.
The Company does not believe that patent protection of any of its intellectual
property is material to its business.
REGULATION
Overview. Though the Company's current operations are not subject to federal
or state regulation, its proposed domestic services may subject the Company to
federal regulation by the FCC and state regulation by certain public service
commissions. In addition, the Company is subject to certain registration and
other regulatory requirements in certain of the countries to which it now
provides service and it may become subject to additional foreign regulations
in the future.
Existing Services. The Company believes that its international fax-to-fax
service constitutes an "enhanced service" according to FCC rules and
regulations and thus is not subject to regulation by United States federal or
state governments. However, the Company's international fax-to-fax service is
subject to certain registration and other regulatory requirements in certain
of the countries in which it provides such service. Although the Company has
undertaken a review of, and believes that it is in material compliance with,
foreign regulations applicable to it in each country where more than 5% of its
current international fax-to-fax service traffic terminates, there can be no
assurance that it is in compliance with all applicable regulations. The
Company has not reviewed regulations in other countries in which it provides
international fax-to-fax service. The Company may be subject to regulations in
such other countries that may limit or restrict its ability to provide
existing or proposed services.
Proposed Services. Certain of the domestic services that the Company plans
to provide may subject it to federal regulation by the FCC and state
regulation by certain public service commissions. As a result, the
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Company may be required to file tariffs and complete certification processes
with such state public service commissions. Such tariff filings may be subject
to challenge by third parties; responding to any challenges to such tariff
filings could divert the Company's resources from its operating business.
Although the Company does not believe any such federal or state regulation
will prohibit it from offering any proposed domestic services, the Company has
not completed its review of all such regulations that may be applicable to it,
and there can be no assurance that the Company will be able to offer all
proposed services to all areas of the United States.
In addition, while the Company believes that the passage of the
Telecommunications Act of 1996 (the "1996 Telcom Act") does not have an
adverse effect upon the Company's proposed services, the FCC has not completed
its implementation of the rules and regulations which are required by the 1996
Telcom Act, and there can be no assurance that such rules will not have a
material adverse effect upon the Company's existing or proposed services. In
addition, the 1996 Telcom Act is intended to foster competition in all sectors
of the communications industry and there can be no assurance that the Company
will not face substantially greater competition in providing both its existing
and proposed services. All federal, state, and foreign regulations affecting
the Company's existing and proposed services are subject to change and the
Company cannot predict the impact that such regulatory changes may have on the
Company's business.
PROPERTIES
UNIFI's principal offices are located at 900 Chelmsford Street, Lowell,
Massachusetts. The Company leases approximately 144,000 square feet pursuant
to a lease which expires on December 7, 2002.
UNIFI also maintains four branch offices in three states ranging in size
from 400-5,000 square feet. Additionally, the Company also maintains offices
for its subsidiaries in Japan, Hong Kong, China, the United Kingdom, France
and Germany. Each of the Company's foreign offices is approximately 5,000-
10,000 square feet. UNIFI believes that the Lowell facility will be adequate
for its currently projected needs.
LEGAL PROCEEDINGS
The Company is involved from time to time in routine legal matters
incidental to its business. Management believes that the resolution of such
matters will not have a material adverse effect on the Company's financial
position or results of operations.
ACQUISITION OF FAX BUSINESS OF SINGCOM (AUSTRALIA)
The Company has executed a letter of intent (the "SingCom (Australia) Letter
of Intent") with SingTel calling for the Company to purchase certain of the
assets (and to assume certain liabilities) of SingCom (Australia), a wholly
owned subsidiary of SingTel, including the right to service the fax business
customer base of SingCom (Australia). On April 1, 1996 UNIFI has assumed
operational control of SingCom (Australia). See Note 13 to the Company's
Consolidated Financial Statements. Following the consummation of the Private
Offering, the Company commenced negotiation of definitive documentation which
it is currently attempting to finalize, although there can be no assurance
that the documentation will be finalized on favorable terms or at all. The
aggregate purchase price for the acquisition of the facsimile business of
SingCom (Australia)'s assets and the repayment of existing indebtedness is
approximately $6.0 million (Australian) (approximately $4.5 million (U.S.)
based on the February 11, 1997 conversion rate), payable in full in cash at
closing. The Company intends to provide these funds out of the proceeds
received from the Private Offering. See "Use of Proceeds."
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below are the names, ages and positions of the directors and
executive officers of the Company. All directors hold office until the next
annual meeting of the stockholders of the Company and until their successors
are duly elected and qualified, and all executive officers hold office at the
pleasure of the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Douglas J. Ranalli*..... 35 Chairman of the Board of Directors, President and Chief Executive Officer
Thomas P. Sosnowski*.... 60 Director, Vice President of Strategic Projects
Robert A. Huebner....... 39 Vice President of Technology
Paula P. Litscher....... 37 Vice President of Corporate Finance
Timothy J. Martel....... 38 Vice President of Product Operations
Shae J. Plimley......... 32 Vice President of Product Management
Alvarado Stoddard**..... 41 Executive Vice President of Worldwide Customer Interaction
Chua Sock Koong***...... 39 Director
Lim Eng***.............. 41 Director
John B. Beinecke........ 57 Director
</TABLE>
- --------
* Designated as a director by Douglas J. Ranalli pursuant to the
Stockholders Agreement.
** Mr. Stoddard joined the Company in November 1996.
*** Designated as a director by SingTel pursuant to the Stockholders
Agreement.
Douglas J. Ranalli founded UNIFI (formerly Fax International, Inc.) in
September 1990 and has been the Chairman, President and CEO of the Company
since that time. Prior to starting UNIFI, Mr. Ranalli was the President and
Founder of Student Life Magazine. Mr. Ranalli founded Student Life in 1981 as
an undergraduate student at Cornell University. Within four years after
graduation, Mr. Ranalli expanded the circulation of the magazine to over
1,000,000 per issue and had given it national distribution. In 1987 Mr.
Ranalli sold the magazine to Time, Inc. Mr. Ranalli holds a B.S. in
Engineering from Cornell University and an M.B.A. from the Harvard Business
School. Mr. Ranalli is the spouse of Shae Plimley.
Thomas P. Sosnowski has been Vice President of Strategic Projects of the
Company since 1994. Prior to that time Dr. Sosnowski was the Vice President
and Director of Engineering of the Company beginning in 1991 when he joined
the Company. Prior to joining the Company, Dr. Sosnowski held various
management positions at GTE Laboratories from 1979 to 1983 and Eikonix, from
1983 to 1986, and a research position at Bell Laboratories from 1967 to 1979.
In 1986 he founded Sosnowski Associates, where he provided consulting services
in engineering management from 1986 to 1991. Dr. Sosnowski holds a B.S. in
Engineering Science from Pennsylvania State University, and a Ph.D. in
Engineering from Case-Western University. He is a senior member of Institute
of Electrical and Electronic Engineers, the author of more then 20 technical
publications and a holder of 10 patents.
Robert A. Huebner has been the Vice President of Technology since he joined
the Company in 1993. Prior to joining UNIFI, Mr. Huebner served as the
Director of Business Practices and Software Engineering at Fidelity Investment
from May 1992 to November 1993. Mr. Huebner has also held technology and
business management positions at McDonnell Douglas SI Company from May 1988 to
May 1992 and ISC International Technologies Group, Inc. from March 1985 to May
1988. He held an engineering position at Electronic Data Systems from June
1981 to March 1985. Mr. Huebner holds a B.S. in Business Administration from
Boston University and an MBA from Pennsylvania State University.
Paula P. Litscher has been Vice President of Corporate Finance of the
Company since she joined the Company in September, 1992. Prior to joining
UNIFI, Ms. Litscher owned and operated a restaurant from 1990
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to 1992 and prior thereto was Corporate Controller of Martignetti Companies
from 1987 to 1990. Ms. Litscher holds an MBA from Bentley College and a B.A.
from Holy Cross College.
Timothy J. Martel has been Vice President of Product Operations since August
1, 1996. Prior to such position, Mr. Martel served as Vice President of
Development since joining the Company in May 1995. Prior to joining the
Company, Mr. Martel held various management positions at PictureTel
Corporation beginning in March of 1985, most recently Director of Engineering.
Mr. Martel holds a B.S. in Computer Science from the University of
Massachusetts at Amherst.
Shae J. Plimley has been Vice President of Product Management since October
1996. Prior to such position, Ms. Plimley served as Vice President of Product
Operations from February 1995 to October 1995, and Director of Service from
January 1992 to January 1995. Prior to joining the Company in 1992, Ms.
Plimley served as a Captain in the United States Air Force. Ms. Plimley holds
a B.S. in Mechanical Engineering from Cornell University. Between October 1995
and September 1996, Ms. Plimley was on medical leave of absence from the
Company. Ms. Plimley is the spouse of Douglas J. Ranalli.
Alvarado Stoddard joined the Company as its Executive Vice President of
Worldwide Customer Interaction in November 1996. Prior to joining the Company,
Mr. Stoddard was the Vice President of U.S. Distribution for the Systems
Business Unit of Digital Equipment Corporation. From June 1993 to April 1995,
Mr. Stoddard was the Vice President of Workgroup Computing Services at
Synetics Corporation. From January 1992 to June 1993, Mr. Stoddard was Senior
Director, Business Partners (VARs) Sales and Marketing for Lotus Development
Corporation. Mr. Stoddard holds a B.S. from Rensselaer Polytechnic Institute
and an M.B.A. from the University of North Carolina at Chapel Hill.
Chua Sock Koong has been a director of the Company since 1995 and has been
the Senior Vice President (Corporate Affairs and Finance) of Singapore
Telecommunications Limited since July 1995. Ms. Chua has been with Singapore
Telecommunications Limited since 1989 and has also served as that company's
Treasurer and Vice President of Corporate Affairs. Ms. Chua holds a degree in
Accountancy (with honors) from the University of Singapore and is a Certified
Public Accountant and a Chartered Financial Analyst.
Lim Eng has been a Director of the Company since 1996 and has been the
Assistant Vice President of Singapore Telecommunications Limited since
February 1996. Mr. Lim has been with Singapore Telecommunications Limited
since 1980 and has served as that Company's Division Manager (International
Telephone Sales) and as Manager (Teleview). Mr. Lim holds an Electrical
Engineering degree from the University of Singapore and a Master of Science
degree in Management from the Massachusetts Institute of Technology.
John B. Beinecke has been a Director of the Company since 1994, and has
served as Vice President and Director of Antaeus Enterprises, Inc. for the
past 13 years. Mr. Beinecke holds a B.A. from Yale University.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid to the chief executive
officer and each of the other four most highly compensated executive officers
of the Company during 1996.
<TABLE>
<CAPTION>
OTHER RESTRICTED SECURITIES
NAME AND SALARY ANNUAL STOCK UNDERLYING LTIP ALL OTHER
PRINCIPAL POSITION ($) BONUS ($) COMPENSATION ($) AWARDS ($) OPTIONS (#) PAYOUTS ($) COMPENSATION ($)
------------------ -------- --------- ---------------- ---------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Douglas J. Ranalli,
President & Chief
Executive Officer...... $150,000 -- -- -- -- -- --
Robert A. Huebner, Vice
President--Technology.. $150,000 -- -- -- 4,511 -- --
Thomas P. Sosnowski,
Vice President--
Strategic Projects..... $150,000 $29,500 -- -- 4,254 -- --
Paula P. Litscher,
Vice President--
Corporate Finance...... $124,519 $20,749 -- -- 3,260 -- --
Timothy J. Martel,
Vice President of
Product Operations..... $120,000 -- -- -- 1,915 -- --
</TABLE>
The following table sets forth individual grants of stock options by the
Company during 1996 to the executive officers named above.
OPTION GRANTS FOR 1996
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE OR BASE EXPIRATION
NAME GRANTED (#) FISCAL YEAR PRICE ($/SH) DATE 5% ($) 10% ($)
---- ----------- ------------- ---------------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Douglas J. Ranalli...... -- -- -- -- -- --
Robert A. Huebner....... 4,511 1.0% $1.05 12/31/05 237 474
Thomas P. Sosnowski..... 4,254 1.0% $1.05 12/31/05 223 447
Paula P. Litscher....... 3,260 * $1.05 12/31/05 171 342
Timothy J. Martel....... 1,915 * $1.05 12/31/05 100 201
</TABLE>
- --------
* Less than 1%.
56
<PAGE>
The following table sets forth each exercise of options by the named
executive officers during 1996 and year-end value of stock options held by the
named executive officers.
AGGREGATED OPTION/EXERCISES IN THE LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT OPTIONS AT
SHARES FISCAL FISCAL YEAR-
ACQUIRED ON YEAR-END (#) END ($)
EXERCISE EXERCISABLE/ EXERCISABLE/
NAME (#) VALUE REALIZED ($) UNEXERCISABLE UNEXERCISABLE
---- ----------- ------------------ ---------------------- --------------
<S> <C> <C> <C> <C>
Douglas J. Ranalli...... 0 0 0/250,000 0/475,000
Robert A. Huebner....... 1,361 $ 952.70 27,932/ 1,533 33,518/ 1,840
Thomas P. Sosnowski..... 0 0 3,962/ 1,446 4,754/ 1,735
Paula P. Litscher....... 33,554 $23,487.80 46,591/ 1,108 69,906/ 1,330
Timothy J. Martel....... 0 0 41,277/ 20,638 49,532/ 24,766
</TABLE>
EMPLOYMENT AGREEMENT WITH MR. RANALLI
In connection with the SingTel Investment, Mr. Ranalli entered into an
employment agreement with the Company in April 1995. The agreement provides
that Mr. Ranalli will serve as Chairman of the Board of Directors, President
and Chief Executive Officer of the Company, subject to removal by the
Company's Board of Directors for any reason after April 2000. Under the
agreement, Mr. Ranalli is entitled to an annual salary of $150,000, which may
be increased by, and at the discretion of, the Board of Directors. In
addition, pursuant to the agreement, Mr. Ranalli was granted an option to
purchase 250,000 shares of the Company's common stock at a price of thirty-
five cents per share. Such option will vest 50% at such time as the Company's
common stock first attains a value of $7.00 per share and 100% at such time as
the Company's common stock first attains a value of $10.50 per share. The
agreement provides that such valuation be determined by the Board of Directors
using its best judgment and standard valuation techniques. Mr. Ranalli's
employment agreement also provides that if his employment is terminated prior
to April 2000 other than for "Cause" (as defined therein) or by reason of his
death or disability, Mr. Ranalli will receive a payment in an amount equal to
the salary which Mr. Ranalli would have earned under the agreement with
respect to the period remaining through April 2000.
STOCK OPTION PLANS
Amended and Restated 1993 Stock Option Plan
The Company's Amended and Restated 1993 Stock Option Plan, as amended (the
"1993 Plan"), was adopted by the Board of Directors and approved by the
shareholders of the Company on November 14, 1994. Of the 4,325,000 shares of
Common Stock authorized for grant under the 1993 Plan, 1,366,776 are currently
available for grant, as of December 31, 1996. The Company has allocated the
shares grantable under the 1993 Plan into two pools: one pool for special
grants, such as grants to new employees, and the other pool for the Company's
Long-Term Retention policy, which provides an annual grant to each employee as
of December 31 of each year based on the employee's base salary paid during
the year.
The 1993 Plan is administered by the Compensation Committee of the Board of
Directors or any other committee appointed by the Board of Directors with the
responsibility for administering the 1993 Plan or, in the absence of either
such committee, by the Board of Directors as a whole (the "Committee"). The
Committee has complete discretion to determine the employees and others to
whom options under the 1993 Plan are granted and the terms of any such option,
including the number of shares subject to the option and the exercise price
thereof, the duration of the option and the exercise date or dates of the
option. The 1993 Plan provides that certain restrictions shall apply to
options granted thereunder that are intended to qualify as incentive stock
57
<PAGE>
options under the Internal Revenue Code of 1986, as amended, including that
the exercise price of any such options shall be not less than 100% of the fair
market value of Common Stock on the date of grant (or, not less than 110% of
the fair market value of Common Stock on the date of grant if the recipient
owns stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company (a "Ten Percent Owner")) and that any such
option shall not be exercisable beyond the tenth anniversary of the date of
grant (or, in the case of a Ten Percent Owner, beyond the fifth anniversary of
the date of grant).
1994 Investor Incentive Stock Option Plan
The Company's 1994 Investor Incentive Stock Option Plan, as amended (the
"1994 Plan"), was approved by the Board of Directors and the stockholders of
the Company on March 11, 1994. The purpose of the 1994 Plan is to provide
incentives for investors to make debt and/or equity investments in the Company
or any of its subsidiaries or affiliates. Of the 7,856,818 shares of Common
Stock authorized for grant under the 1994 Plan, 71,329 shares were available
for grant, as of February 28, 1996. The 1994 Plan is administered by a
committee appointed by the Board of Directors with the responsibility for
administering the 1994 Plan or, in the absence of such a committee, by the
Board of Directors as a whole (the "Committee"). The Committee has complete
discretion to determine the investors or prospective investors to whom options
under the 1994 Plan are granted and the terms of any such option, including
the number of shares subject to the option and the exercise price thereof, the
duration of the option and the exercise date or dates of the option.
COMPENSATION OF DIRECTORS
The directors of the Company receive no separate compensation for serving as
directors of the Company.
COMPENSATION INTERLOCKS AND INSIDER PARTICIPATION
The Company has not in the past used a compensation committee to determine
executive officer compensation. Payments to Mr. Ranalli are made in accordance
with the terms of his employment agreement. All other executive compensation
decisions are made by Mr. Ranalli in consultation with the Board of Directors.
See "--Employment Agreement with Mr. Ranalli."
58
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of February 28, 1996
with respect to the beneficial ownership the Company's common stock by: (i)
each director of the Company; (ii) each executive officer of the Company;
(iii) each other person known to hold 5% or more of any class of the
outstanding capital stock of the Company; and (iv) all current executive
officers (regardless of salary and bonus level) and directors of the Company
as a group. Unless otherwise indicated, the persons listed in the table below
have sole beneficial ownership with respect to the shares indicated.
BENEFICIAL OWNER
<TABLE>
<CAPTION>
BENEFICIAL NUMBER OF SHARES NUMBER OF SHARES OF PERCENTAGE OWNERSHIP OF
OWNERSHIP(1) OF COMMON STOCK PREFERRED STOCK(2) VOTING STOCK(3)(4)(5)
------------ ---------------- ------------------- -----------------------
<S> <C> <C> <C>
SingTel Global Services
Pte. Ltd............... 2,000,000(6) 8,570,000(6) 38.5%
Douglas J. Ranalli...... 2,350,000(7) 314,769(8) 9.7%
Thomas P. Sosnowski..... 284,576(9) 135,269(10) 1.5%
Robert A. Huebner....... 154,465(11) -- * %
Paula P. Litscher....... 231,253(12) -- * %
Timothy J. Martel....... 61,915(13) -- * %
Shae J. Plimley......... 675,154(14) 22,500(15) 2.5%
Lim Eng................. 2,000,000(16) 8,570,000(17) 38.5%
Chua Sock Koong......... 2,000,000(16) 8,570,000(17) 38.5%
John B. Beinecke........ 173,955(18) 800,083(19) 3.6%
All executive officers
and directors as a
group (nine persons)... 5,931,318(20) 9,842,621(21) 57.5%
</TABLE>
- --------
* Less than one percent.
(1) The address of each person is c/o the Company, 900 Chelmsford Street,
Lowell MA.
(2) The Company has six series of Convertible Preferred Stock outstanding.
Each share of Convertible Preferred Stock is convertible into one share
of Common Stock, subject to certain adjustments. Holders of Convertible
Preferred Stock are entitled to vote on all matters to be voted on by the
stockholders of the Company as a single class with the holders of the
Company's Common Stock and are entitled to the number of votes equal to
the number of shares of Common Stock into which the Convertible Preferred
Stock is convertible.
(3) Assumes the conversion of the Convertible Preferred Stock into Common
Stock.
(4) Pursuant to the Stockholders Agreement, Mr. Ranalli and certain other
significant stockholders have agreed that two of the Company's five
directors shall be appointed by Mr. Ranalli and two of the Company's five
directors shall be appointed by SingTel. See "Certain Relationships and
Related Transactions."
(5) The number of shares of Common Stock deemed outstanding on February 28,
1997 includes: (i) 3,786,025 shares of Common Stock outstanding on such
date, (ii) assumed conversion of 13,515,030 shares of Convertible
Preferred Stock outstanding on such date, (iii) 7,717,813 shares of
Common Stock issuable pursuant to outstanding warrants to purchase Common
Stock exercisable within 60 days, and (iv) 2,438,350 shares of Common
Stock issuable pursuant to outstanding options.
(6) Represents 2,000,000 shares of Common Stock issuable pursuant to warrants
and 8,570,000 shares of Series G Convertible Preferred Stock representing
100% of the outstanding shares of such series.
(7) Includes 250,000 shares issuable pursuant to options that could become
exercisable within 60 days. Does not include shares owned beneficially
and of record by Shae J. Plimley, spouse of Mr. Ranalli and an executive
officer of the Company.
(8) Includes 70,000 shares of Series A Convertible Preferred Stock and
244,769 shares of Series B Convertible Preferred Stock representing 9%
and 18%, respectively, of the outstanding shares of such series. Does not
include shares owned beneficially and of record by Ms. Plimley.
(9) Includes 5,408 shares issuable pursuant to options that could become
exercisable within 60 days.
59
<PAGE>
(10) Includes 50,000 shares of Series A Convertible Preferred Stock and 81,000
shares of Series B Convertible Preferred Stock owned beneficially and of
record by Mary J. Sosnowski, spouse of Mr. Sosnowski Representing 7% and
6% of the outstanding shares of such series, respectively. Mr. Sosnowski
disclaims beneficial ownership of shares held by Ms. Sosnowski. Also
includes 1,500 shares of Series A Convertible Preferred Stock held by Mr.
Sosnowski's children.
(11) Includes 153,104 shares issuable pursuant to options that could become
exercisable within 60 days.
(12) Includes 197,699 shares issuable pursuant to options that could become
exercisable within 60 days.
(13) Represents 61,915 shares issuable pursuant to options that could become
exercisable within 60 days.
(14) Includes 191,684 shares issuable pursuant to options that could become
exercisable within 60 days. Does not include shares owned beneficially
and of record by Douglas J. Ranalli, spouse of Ms. Plimley and an
executive officer of the Company.
(15) Represents 22,500 shares of Series B Convertible Preferred Stock.
(16) Represents 2,000,000 shares issuable to SingTel Global pursuant to
warrants. Mr. Lim Eng and Ms. Chua Sock Koong, each a director of the
Company, are officers of SingTel and could be deemed to share voting
control of shares owned beneficially and of record by SingTel Global. Mr.
Lim Eng and Ms. Chua Sock Koong disclaim beneficial ownership of such
shares.
(17) Represents 8,570,000 shares owned beneficially and of record by SingTel
Global. Mr. Lim Eng and Ms. Chua Sock Koong, each a director of the
Company, are officers of SingTel and could be deemed to share voting
control of shares owned beneficially and of record by SingTel Global. Mr.
Lim Eng and Ms. Chua Sock Koong disclaim beneficial ownership of such
shares.
(18) Represents 35,000 shares issuable pursuant to warrants owned beneficially
and of record by Antaeus Enterprises, Inc., a Delaware corporation
("Antaeus"), and 71,955 shares issuable pursuant to warrants owned
beneficially and of record by 420 Associates, a New York General
Partnership. Mr. Beinecke is a Vice President and Director of Antaeus and
a general partner of 420 Associates, and may be deemed to share voting
and investment control with respect to shares in the Company held by each
such entity. Does not include 3,500 shares issuable pursuant to warrants
held beneficially or of record by certain trusts of which Mr. Beinecke is
an income beneficiary only.
(19) Includes 125,820 shares owned beneficially and of record by Antaeus and
674,262 shares owned beneficially and of record by 420 Associates, a New
York General Partnership. Does not include 434,185 shares held
beneficially or of record by certain trusts of which Mr. Beinecke is an
income beneficiary only.
(20) Represents 2,897,553 shares owned beneficially and of record, 2,173,955
shares issuable pursuant to warrants and 859,810 shares issuable pursuant
to options.
(21) Includes 761,615 shares of Series A Convertible Preferred Stock, 351,038
shares of Series B Convertible Preferred Stock, 8,570,000 shares of
Series G Convertible Preferred Stock, 34,285 shares of Series D
Convertible Preferred Stock and 125,682 Shares of Series F Convertible
Preferred Stock.
60
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH SINGTEL
On April 10, 1995, affiliates of SingTel agreed to make $70 million of
investments in the Company (the "SingTel Investment"), consisting of (i) a $25
million term loan, (ii) $15 million of equipment financing and (iii) the
purchase of 8,570,000 shares of the Company's Series G Convertible Preferred
Stock for $30 million. For a summary of the terms of such instruments, see
"Description of Certain Indebtedness." On October 31, 1996, these arrangements
were revised in contemplation of the Private Offering (the "Restructuring").
In connection with the Restructuring, the Company also granted SingTel Global
or its assigns a warrant to purchase up to 2 million additional shares of
Common Stock at $1.83 a share at any time or from time to time prior to March
1, 2007. Since October 31, 1996, SingTel has provided the Company with an
additional $13.35 million of debt financing, approximately $6.8 million of
which has subsequently been repaid. See "Use of Proceeds" and "Description of
Certain Indebtedness--SingTel Advances." The following is a summary of certain
arrangements entered into among the Company and its stockholders, on the one
hand, and SingTel and its affiliates, on the other hand.
SingTel and its affiliates do not guarantee the obligations of the Company
and are under no obligation to provide any financial support to the Company.
SingTel Global can be expected to exercise its rights with respect to the
Company in the interests of SingTel Global and its affiliates, which may
conflict with the interests of holders of the Notes and the Warrants.
The Stockholders Agreement
In connection with the SingTel Investment, the Company, SingTel Global,
Douglas J. Ranalli and certain other significant stockholders of the Company
entered into the Stockholders Agreement, which contains certain restrictions
with respect to the transferability of Mr. Ranalli's capital stock of the
Company, and provides for certain voting arrangements and other rights granted
by the parties with respect to their shares of capital stock of the Company.
The Stockholders Agreement provides that the Company's Board of Directors
shall be comprised of (i) seven directors if the holders of the Company's
Series D Convertible Preferred Stock are entitled to and have elected a
director and (ii) five directors at all other times. SingTel Global is
entitled to (i) appoint three directors if the Board of Directors is comprised
of seven directors and two of the directors if the Board of Directors is
comprised of five directors so long as it and its affiliates own at least six
million shares of common stock of the Company (or Convertible Preferred Stock
representing the right to acquire such shares) and (ii) appoint one director
so long as it and its affiliates own at least one million but less than six
million shares of the Company's common stock (or Convertible Preferred Stock
representing the right to acquire such shares). Douglas J. Ranalli is entitled
to appoint two of the directors and the stockholders which are unaffiliated
with SingTel Global, Mr. Ranalli or management of the Company are entitled to
appoint one director. In addition, if upon the death of Mr. Ranalli, SingTel
Global and its affiliates own more than 50% of the outstanding common stock of
the Company, SingTel Global will be entitled to appoint one additional
director (and the number of directors shall be increased to give effect to
such right). The Stockholders Agreement also provides that, subject to certain
exceptions, Mr. Ranalli may not sell any shares of capital stock of the
Company during the term of the Agreement. Currently, the Board of Directors is
comprised of 5 directors, two of whom are appointed by Mr. Ranalli and two of
whom are appointed by SingTel Global.
The Stockholders Agreement will terminate upon the earlier to occur of (i)
the consummation of a primary initial public offering of the Company's common
stock by the Company at any time if such public offering is approved by a
majority of the Board of Directors, has an aggregate price to the public of
$20 million or more, and such shares are listed on certain national stock
exchanges or NASDAQ (other than pursuant to the registration rights described
herein) (a "Primary Initial Public Offering"), (ii) at SingTel Global's
option, at any time that the stockholders party thereto (other than SingTel
Global and its affiliates) own in the aggregate less than one million shares
of common stock of the Company or (iii) the occurrence of certain events of
insolvency with respect to the Company.
61
<PAGE>
The InterCompany Operating Agreement
In connection with the SingTel Investment, the Company granted to SingTel an
exclusive, perpetual and irrevocable license to use (but not sublicense) the
Company's network and technology for the transmission of fax document
transmissions to, from and through Singapore. The Company has also agreed to
maintain the network in Singapore, train SingTel's personnel and provide user
documentation to SingTel to enable SingTel to use the network for such
purposes. SingTel has agreed to pay to the Company 4% of SingTel's gross
revenues from providing fax document delivery services from Singapore on the
Company's network, and to pay certain other fees in exchange for the
maintenance and other services provided by the Company to SingTel. During 1995
and 1996, SingTel incurred expenses payable to the Company in an aggregate of
approximately $.09 million and $3.4 million, respectively, pursuant to such
agreement. SingTel has also provided $13.35 million of advances under the
Intercompany Operating Agreement as Interim Financing since October 31, 1996.
See "Description of Other Indebtedness--Interim Financing."
The Stock Purchase Agreement
The stock purchase agreement pursuant to which SingTel Global purchased the
Company's Series G Convertible Preferred Stock (the "Stock Purchase
Agreement") contains significant operating restrictions on the Company. Among
other restrictions, the Stock Purchase Agreement provides that without the
approval of at least two-thirds of the Board of Directors, the Company will
not (subject to certain exceptions) (i) make, or permit any subsidiary to
make, any material change in the nature of its business, (ii) consolidate or
merge the Company with or into, or sell all or substantially all of its assets
to another entity, (iii) loan funds to or provide other credit support for any
borrowing by, any other person, (iv) redeem, purchase or otherwise acquire for
value any shares of its capital stock, (v) declare or pay a dividend or other
distribution, (vi) authorize or issue any capital stock senior to or on a
parity with the Series G Convertible Preferred Stock, (vii) liquidate,
voluntarily wind-up or dissolve the Company, (viii) issue, or grant any
registration rights in respect of, any equity or debt securities or rights,
options or warrants, to purchase any such securities, (ix) incur any
indebtedness for borrowed money, (x) invest in the equity of any other person,
(xi) make capital expenditures in excess of $50,000 per transaction or (xii)
amend the Company's Certificate of Incorporation or By-Laws. In addition, the
Company's annual budget must be approved by at least two-thirds of the Board
of Directors. Pursuant to the Stock Purchase Agreement, SingTel Global has the
right so long as it and its affiliates own at least six million shares of the
Company's Series G Convertible Preferred Stock (or shares of the Company's
Series I Convertible Preferred Stock or Common Stock into which such Series G
Shares are convertible) to appoint two members of the Company's executive
staff (vice president level, including the Chief Financial Officer and the
Chief Operating Officer) and up to three members of the Company's lower-tier
management. In addition, pursuant to the Stock Purchase Agreement, the Company
granted to SingTel Global (subject to certain exceptions) a right of first
refusal to acquire (on terms to be agreed to in good faith) a 49% interest in
any joint venture subsidiary established by the Company in either Australia or
the Philippines for the purpose of providing facsimile network transmission
services from those countries under an agreement similar to the agreement with
the minority interest in Fax Japan. The Company also granted a right of first
refusal to SingTel Global (subject to certain exceptions) with respect to an
interest in any joint venture subsidiary established by the Company. Most of
such restrictions (other than the rights of first refusal) terminate upon
termination of the Stockholders Agreement.
Pursuant to the Restructuring, the Stock Purchase Agreement was amended to
provide that a Primary Initial Public Offering may be approved by a simple
majority of the Board of Directors.
The Registration Rights Agreement
Pursuant to a registration rights agreement (the "Amended and Restated
Registration Rights Agreement") among the Company and certain significant
stockholders, holders of specified percentages of capital stock of the Company
(other than Doug Ranalli) may demand registration of their capital stock
subsequent to December 31, 1997 (subject to certain exceptions). The
registration rights agreement also provides such stockholders with incidental
registration rights with respect to such holders' shares of capital stock.
62
<PAGE>
CAPITAL STOCK REPURCHASES
From June 13, 1995 to July 7, 1995 the Company repurchased an aggregate of
1,738,440 shares of its Convertible Preferred Stock and warrants to purchase
543,149 shares of common stock for an aggregate cash purchase price of
$7,385,838 or $3.50 per share.
63
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
THE CREDIT AGREEMENT
In connection with the SingTel Investment, the Company and SingTel N.V. have
entered into a credit agreement (the "Credit Agreement") under which the
Company has borrowed the $25 million. Amounts drawn under the Credit Agreement
must be repaid on the later of (i) March 1, 2005 or (ii) the date on which the
Notes are paid, defeased, redeemed, repurchased or otherwise satisfied in full
(the "Note Payment Date") (provided that if the Note Payment Date is prior to
March 1, 2005, borrowings under the Credit Agreement will become due 91 days
after the Note Payment Date). Borrowings under the Credit Agreement accrue
interest at a rate equal to the five-year benchmark treasury rate (as defined)
on the applicable drawdown date plus 3% per annum (with a premium of 3% per
annum during the continuance of an event of default). Prior to the Note
Payment Date, interest will not be paid in cash but will be added to the
principal amount of the loan quarterly in arrears. Thereafter, interest shall
be paid quarterly in arrears. The Company's obligations under the Credit
Agreement are unsecured and subordinated to the Company's obligations under
the Notes.
The Credit Agreement contains significant operating restrictions on the
Company, including prohibitions on the Company's ability to (i) incur liens,
(ii) make investments, (iii) make asset sales outside the ordinary course of
business, (iv) purchase, lease or otherwise acquire assets outside the
ordinary course of business, (v) become a party to a sale-lease-back
transaction, (vi) pay dividends or make other distributions in respect of
capital stock, (vii) redeem, repurchase or otherwise acquire outstanding
capital stock or (viii) merge or consolidate with or into any other person.
The Credit Agreement contains customary events of default in addition to a
cross default to the Stock Purchase Agreement. See "Certain Relationships and
Related Transactions."
As of December 31, 1996, there was $25 million in aggregate principal amount
of indebtedness and approximately $1.4 million of accrued interest outstanding
under the Credit Agreement.
THE EQUIPMENT FINANCING AGREEMENT
The Company and SingTel N.V. have also entered into an equipment financing
agreement (the "Equipment Financing Agreement"), pursuant to which SingTel
N.V. has loaned the Company the maximum of $15 million to purchase equipment
provided for in the Company's annual budget, which annual budget is subject to
the approval of two-thirds of the Board of Directors pursuant to the Stock
Purchase Agreement. Amounts drawn under the Equipment Financing Agreement must
be repaid on the later of (i) March 1, 2005 or (ii) the Note Payment Date
(provided that if the Note Payment Date is prior to March 1, 2005, borrowings
under the Equipment Financing Agreement will become due 91 days after the
Senior Note Payment Date). Prior to the Note Payment Date, interest will not
be paid in cash but will be added to the principal amount of the loan
quarterly in arrears. Thereafter, interest shall be paid quarterly in arrears.
Borrowings under the Equipment Financing Agreement accrue interest at six
month United States Dollar LIBOR on the applicable drawdown date plus 2% per
annum (with a premium of 3% per annum during the continuance of an event of
default). The covenants and events of default provided for in the Equipment
Financing Agreement are substantially the same as those provided for in the
Credit Agreement. The Company's obligations under the Equipment Financing
Agreement are unsecured and subordinated to the Company's obligations under
the Notes.
As of December 31, 1996, there was approximately $15 million in aggregate
principal amount of indebtedness and approximately $0.2 million of accrued
interest outstanding under the Equipment Financing Agreement.
INTERIM FINANCING
SingTel Advances
Pursuant to a series of letter agreements, SingTel has made advances (the
"SingTel Advances") to the Company of $13.35 million under the Company's
InterCompany Operating Agreement with SingTel. See
64
<PAGE>
"Certain Relationships and Related Transactions--Transactions with SingTel--
The InterCompany Operating Agreement," Each such advance bears interest at a
rate per annum equal to the sum of (i) the one-year United States Treasury
rate in effect at the time the advance was made plus (ii) 5%. All such
interest is payable in cash monthly in arrears. Such advances will be applied
to the fees and other amounts payable by SingTel to the Company under the
Intercompany Operating Agreement. As of March 31, 1997, approximately $2.4
million of the SingTel Advances had been so applied. SingTel has canceled $6.8
million of such indebtedness in exchange for 5,000 Units and payment of $1.8
million in cash. In connection with such advances, among other things the
Company granted SingTel the right to appoint a second executive officer of the
Company (thereby giving SingTel the contractual right to appoint both the
Chief Operating Officer and Chief Financial Officer of the Company plus three
members of lower-tier management). See "Certain Related Transactions--
Transactions with SingTel--The Stock Purchase Agreement."
After December 1996 the Company has not made the required payments of
interest of approximately $250,000 on the Sing Tel Advances and the Term Loan
Agreement. Sing Tel has agreed to waive such defaults upon receipt of such
interest payments, which waiver is effective as of the consummation of the
Private Offering.
CDS Financing
In December 1996, the Company obtained $2.0 million of interim debt
financing (the "CDS Financing") from Control Data Systems, Inc. ("CDS"),
pursuant to a 10% convertible term note issued by the Company to CDS (the
"Original CDS Note"). As of April 1, 1997, the Company and CDS entered into an
agreement pursuant to which CDS exchanged the Original CDS Note for (i) the
Company's 14% Convertible Term Note (the "CDS Exchange Note:) in principal
amount equal to the original principal amount of the Original CDS Note plus
accrued interest thereon through March 31, 1997, and (ii) a warrant to
purchase up to 56,406 shares of the Company's Common Stock (the "CDS Warrant")
at an exercise price per share equal to $0.25. The terms of the CDS Exchange
Note provide that (i) such note shall mature three years from the date of
issuance thereof, (ii) interest thereon shall accrue and be paid semi-annually
in arrears on April 1 and October 1 in each year, commencing on October 1,
1997, (iii) CDS may redeem all (but not less than all) of the outstanding
principal and accrued and unpaid interest thereon at any time on or after
April 1, 1999 in the event the Company shall have completed an initial public
offering of Common Stock, convert all (but not less than all) of the
outstanding principal and accrued and unpaid interest thereon into shares of
Common Stock at a price per share equal to the lesser of (a) $15.0, or (b) the
price per share to the public of the shares of Common Stock sold by the
Company in such offering. The CDS Warrant is exercisable in whole or in part
for ten years form the date of issuance. The number of shares for which the
CDS Warrant is exercisable are subject to adjustment for certain events such
as stock splits, stock dividends, and certain issuances of Common Stock or
rights to acquire Common Stock.
STEELCASE FINANCING
The Company has entered into financing arrangements consisting of a loan to
the Company of $308,000 and lease financing of up to $2,500,000, in each case
from Steelcase Financial Services Inc. ("Steelcase"). Such lease is for work
stations and furniture for the Company's new headquarters facilities in
Lowell, MA, and such loan was made to enable the Company to discharge its
remaining obligations under a prior third-party equipment and furniture lease
and bears interest at a rate of 12% per annum. The Company has granted to
Steelcase a first-priority security interest in the workstations and furniture
financed by Steelcase as well as certain of the Company's accounts
receivables. Steelcase has agreed to release its security interests in such
accounts receivable upon receipt by Steelcase of a letter of credit or cash
collateral from the Company.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Latham & Watkins, counsel to the Company, the following
discussion describes the material federal income tax consequences expected to
result to holders whose Private Notes are exchanged for Exchange Notes in the
Exchange Offer. Such opinion is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), applicable Treasury
regulations, judicial authority and administrative rulings and practice. There
can be no assurance that the Internal Revenue Service (the "Service") will not
take a contrary view, and no ruling from the Service has been or will be
sought with respect to the Exchange Offer. Legislative, judicial or
administrative changes or interpretations may be forthcoming that could alter
or modify the statements and conclusions set forth herein. Any such changes or
interpretations may or may not be retroactive and could affect the tax
consequences to holders. Certain holders (including insurance companies, tax-
exempt organizations, financial institutions, broker-dealers, foreign
corporations and persons who are not citizens or residents of the United
States) may be subject to special rules not discussed below. EACH HOLDER OF
PRIVATE NOTES SHOULD CONSULT ITS OWN TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES OF EXCHANGING PRIVATE NOTES FOR EXCHANGE NOTES, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN LAWS.
The exchange of Private Notes for Exchange Notes will be treated as a "non-
event" for federal income tax purposes because the Exchange Notes will not be
considered to differ materially in kind or extent from the Private Notes. As a
result, no material federal income tax consequences will result to holders
exchanging Private Notes for Exchange Notes.
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DESCRIPTION OF EXCHANGE NOTES
The Exchange Notes will be issued under an indenture, dated as of February
21, 1997 (the "Indenture") between the Company and Fleet National Bank, as
Trustee (the "Trustee"). The Exchange Notes will evidence the same
indebtedness as the Private Notes (which they replace) and will be entitled to
the benefits of the Indenture. The form and terms of the Exchange Notes are
the same as the form and terms of the Private Notes except that (i) the
Exchange Notes will have been registered under the Securities Act, and,
therefore, the Exchange Notes will not bear legends restricting the transfer
thereof and (ii) Holders of the Exchange Notes will not be entitled to certain
rights of Holders of Private Notes under the Registration Rights Agreement,
which rights will terminate upon the consummation of the Exchange Offer. The
terms of the Exchange Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939
(the "TIA"), as in effect on the Date of the Indenture. The following summary
of the material provisions of the Indentures does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the
provisions of the Indenture and Escrow Agreement, including the definitions of
certain terms contained therein and those terms made a part of the Indenture
by reference to the TIA. The definitions of certain terms used in the
following summary are set forth below under "--Certain Definitions." As used
below in this "Description of Exchange Notes" section, the term "Company"
means UNIFI Communications, Inc., but not any of its Subsidiaries, unless the
context otherwise requires.
GENERAL
The Notes will be senior obligations of the Company. The Notes will be
collateralized by a first priority security interest in the Escrow Account
described under "Disbursement of Funds--Escrow Account." The Notes will be
effectively subordinated to all Indebtedness and other liabilities (including
trade payables) of the Subsidiaries of the Company. As of December 31, 1996,
after giving effect to the Private Offering and the consummation of the
transactions contemplated hereby, the Company would have had approximately
$55.2 million of indebtedness outstanding ranking subordinate to the Notes and
the Subsidiaries of the Company would have had approximately $5.7 million of
indebtedness and other liabilities outstanding ranking effectively senior to
the Notes.
The Notes will be issued only in registered form, without coupons, in
principal denominations of $1,000 and integral multiples thereof. Principal
of, premium, if any, and interest on the Notes will be payable, and the Notes
will be transferable, at the office of the Company's agent in the City of New
York located at the corporate trust office of the Trustee. In addition,
interest may be paid at the option of the Company, by check mailed to the
person entitled thereto as shown on the security register. No service charge
will be made for any transfer, exchange or redemption of Notes, except in
certain circumstances for any tax or other governmental charge that may be
imposed in connection therewith. Initially, the Trustee will act as paying
agent and registrar for the Notes. The Company may change any paying agent and
registrar without notice to the holders.
MATURITY, INTEREST AND PRINCIPAL
The Notes are limited to an aggregate principal amount of $175,000,000 and
will mature on March 1, 2004. Interest on the Notes will accrue at a rate of
14% per annum and will be payable semi-annually on each March 1 and September
1, commencing on September 1, 1997, to the persons who are registered holders
at the close of business on the February 15 and August 15 immediately
preceding the applicable interest payment date. The Company will pay interest
on overdue principal from time to time on demand at the rate of 2% per annum
in excess of the rate shown on the cover page of this Prospectus. The Company
shall, to the extent lawful, pay interest on overdue installments of interest
(without regard to any applicable grace periods) from time to time on demand
at the rate of 2% per annum in excess of the rate shown on the cover page of
this Prospectus. Interest on the Notes will accrue from and including the most
recent date to which interest has been paid or, if no interest has been paid,
from and including the Issue Date. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months, and, in the case of a partial
month, the actual number of days elapsed.
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Interest on the Notes may increase if the Company fails to fulfill its
obligations under the Notes Registration Rights Agreement. See "Exchange
Offer; Registration Rights."
The Notes will not be entitled to the benefit of any mandatory sinking fund.
OPTIONAL REDEMPTION
The Indenture provides that the Notes will not be redeemable (except as
provided below) prior to March 1, 2001. On and after March 1, 2001 the Notes
will be redeemable, at the option of the Company, in whole or in part, on not
less than 30 nor more than 60 days' prior notice, at the redemption prices
(expressed as percentages of principal amount) set forth below, plus accrued
and unpaid interest, if any, to the redemption date if redeemed during the 12-
month period beginning on March 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001............................................................ 114.000%
2002............................................................ 107.000%
2003 and thereafter............................................. 103.500%
</TABLE>
The Indenture provides that in the event that on or prior to March 1, 2000,
the Company consummates one or more Equity Offerings (as defined), the Company
may, at its option, redeem from the proceeds of such Equity Offerings no later
than 60 days following the consummation thereof 33% of the aggregate principal
amount of the Notes originally issued at a redemption price equal to 114% of
the aggregate principal amount thereof, plus accrued and unpaid interest, if
any, to the date of redemption; provided, however, that immediately after
giving effect to any such redemption, not less than 67% of the aggregate
principal amount of the Notes originally issued remains outstanding.
CHANGE OF CONTROL
The Indenture provides that upon the occurrence of a Change of Control, each
holder will have the right to require that the Company repurchase all or a
portion of such holder's Notes pursuant to the offer described below (the
"Change of Control Offer"), at a purchase price equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest, if any, to the
date of repurchase.
The Indenture provides that within 30 days following the date upon which a
Change of Control occurs, the Company must send, by first class mail, a notice
to each holder, with a copy to the Trustee, which notice shall govern the
terms of the Change of Control Offer. Such notice will state, among other
things, the purchase date, which must be not less than 30 days nor more than
45 days from the date such notice is mailed, other than as may be required by
law (the "Change of Control Payment Date"). Holders electing to have a Note
purchased pursuant to a Change of Control Offer will be required to surrender
the Note, properly endorsed for transfer together with such other customary
documents as the Company may reasonably request, to the paying agent at the
address specified in the notice prior to the close of business on the date the
Change of Control Offer expires.
The Indenture provides that the Company will comply with the requirements of
Rule 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations are applicable
in connection with the purchase of Notes pursuant to a Change of Control
Offer.
If a Change of Control were to occur, there can be no assurance that the
Company would have sufficient funds to pay the purchase price for all Notes
that the Company might be required to purchase. In the event that the Company
were required to purchase Notes pursuant to a Change of Control Offer, the
Company expects that it would need to seek third-party financing to the extent
it does not have available funds to meet its purchase obligations. However,
there can be no assurance that the Company would be able to obtain such
financing on favorable terms, if at all.
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With respect to the sale of assets referred to in the definition of Change
of Control, the phrase "all or substantially all" as used in such definition
varies according to the facts and circumstances of the subject transaction,
has no clearly established meaning under relevant law and is subject to
judicial interpretation. Accordingly, in certain circumstances there may be a
degree of uncertainty in ascertaining whether a particular transaction would
involve a disposition of "all or substantially all" of the assets of a person
and therefore it may be unclear whether a Change of Control has occurred and
whether the Notes are subject to a Change of Control Offer.
The foregoing provisions may not necessarily afford the holders of the Notes
protection in the event of a highly leveraged transaction, including a
reorganization, restructuring, merger or other similar transaction involving
the Company that may adversely affect the holders because such transactions
may not involve a shift in voting power or beneficial ownership or, even if
they do, may not involve a shift of the magnitude required under the
definition of Change of Control to trigger the provisions.
SELECTION AND NOTICE
The Indenture provides that 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 pro rata, by lot or by such method as the Trustee shall
deem fair and appropriate; provided, however, that if the Notes are redeemed
in part with the proceeds of an Equity Offering, the Trustee shall select the
Notes to be redeemed by prorating, as nearly as may be, the principal amount
of Notes to be redeemed among the holders of the Notes in proportion to the
principal amount of Notes registered in their respective names. In any
proration pursuant to an Equity Offering, the Trustee shall make such
adjustments, reallocations and eliminations as it shall deem proper to the end
that the principal amount of Notes so prorated shall be $1,000 or a multiple
thereof, by increasing or decreasing or eliminating the amount which would be
allocable to any holder on the basis of exact proportion by an amount not
exceeding $1,000. The Trustee in its discretion may determine the particular
Notes (if there are more than one) registered in the name of any holder which
are to be redeemed, in whole or in part. No Notes of a principal amount of
$1,000 or less shall be redeemed in part. 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 original Note. On and after the
redemption date, interest will cease to accrue on Notes or portions thereof
called for redemption, unless the Company defaults in the payment of the
redemption price therefor.
DISBURSEMENT OF FUNDS--ESCROW ACCOUNT
The Notes will be collateralized, pending disbursement pursuant to the
Escrow Agreement dated as of February 21, 1997, among the Company, the Trustee
and Fleet National Bank, as Escrow Agent (the "Escrow Agreement"), by a pledge
of the Escrow Account, which initially contained approximately $46 million of
the net proceeds from the sale of the Private Notes issued pursuant to the
Private Offering (the "Escrow Collateral"), representing funds that together
with the proceeds from the investment thereof will be sufficient to pay two
years' interest on the Notes.
The Company entered into the Escrow Agreement which provides for the grant
by the Company to the Trustee, for the benefit of the holders, of security
interests in the Escrow Collateral. All such security interests will
collateralize the payment and performance when due of certain of the
Obligations of the Company under the Indenture and the Notes, as provided in
the Escrow Agreement. The Liens created by the Escrow Agreement will be first
priority security interests in the Escrow Collateral. The ability of holders
to realize upon any such funds or securities may be subject to certain
bankruptcy law limitations in the event of the bankruptcy of the Company.
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Pursuant to the Escrow Agreement, immediately prior to an interest payment
date on the Notes, the Company may either deposit with the Trustee from funds
otherwise available to the Company cash sufficient to pay the interest on the
Notes scheduled to be paid on such date or the Company may direct the Escrow
Agent to release to the Note Trustee from the Escrow Account proceeds
sufficient to pay interest then due on the Notes. In the event that the
Company exercises the former option, the Escrow Agreement provides that the
Company may thereafter direct the Escrow Agent to release to the Company
proceeds or Escrow Collateral from the Escrow Account in like amount.
In the event that the funds or U.S. Government Securities (the "Available
Funds") held in the Escrow Account exceed the amount sufficient, in the
opinion of a nationally recognized firm of independent public accountants
selected by the Company or the Company's regular independent public
accountants, to provide for payment in full of the first four scheduled
interest payments due on the Notes (or, in the event an interest payment or
payments have been made, an amount sufficient to provide for payment in full
of any interest payments remaining, up to and including the fourth scheduled
interest payment), the Trustee will be permitted to release to the Company at
the Company's request any such excess amount.
Pending such disbursements, all funds contained in the Escrow Account will
be invested in U.S. Government Securities. Interest earned on the U.S.
Government Securities will be placed in the Escrow Account. Upon the
acceleration of the maturity of the Notes, the Escrow Agreement will provide
for the foreclosure by the Trustee upon the net proceeds of the Escrow
Account. Under the terms of the Indenture, the proceeds of the Escrow Account
shall be applied, first, to amounts owing to the Trustee in respect of fees
and expenses of the Trustee and second, to the Obligations under the Notes and
the Indenture. Under the Escrow Agreement, assuming that the Company makes the
first four scheduled interest payments on the Notes in a timely manner with
Available Funds (the "Available Funds"), all of the U.S. Government Securities
will be released from the Escrow Account.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants.
Limitation on Incurrence of Additional Indebtedness. The Indenture provides
that neither the Company nor any Restricted Subsidiary will, directly or
indirectly, create, incur, assume, guarantee, acquire or become liable,
contingently or otherwise, for (collectively "incur") any Indebtedness other
than Permitted Indebtedness. Notwithstanding the foregoing limitations, the
Company may incur Indebtedness (including, without limitation, any Acquired
Indebtedness) and Restricted Subsidiaries may incur Indebtedness under Vendor
Financing Arrangements if after giving pro forma effect to the incurrence of
such Indebtedness and the receipt and application of the proceeds therefrom
the Company's Leverage Ratio would be less than 5.0 to 1; provided, that if
prior to March 1, 1999, the Company has not consummated a primary underwritten
public offering (excluding any offering pursuant to Form S-8 under the
Securities Act or any other publicly registered offering pursuant to the
Securities Act pertaining to an issuance of shares of Common Stock or
securities exercisable therefor under any benefit plan, employee compensation
plan, or employee or director stock purchase plan) of Common Stock of the
Company pursuant to an effective registration statement under the Securities
Act resulting in gross proceeds to the Company of at least $35 million, such
ratio shall be reduced to 4.5 to 1 until such time as the Company completes
such an offering.
The Indenture provides that any Indebtedness of an entity existing at the
time it becomes a Restricted Subsidiary (whether by merger, consolidation,
acquisition of Capital Stock or otherwise) or is merged with or into the
Company or any Restricted Subsidiary shall be deemed to be incurred as of the
date such entity becomes a Restricted Subsidiary or the date of such merger.
The Indenture provides that the Company will not incur any Indebtedness that
is subordinate to any other Indebtedness of the Company unless such
Indebtedness is also expressly subordinated to the Notes; provided, however,
that no Indebtedness of the Company shall be deemed to be subordinate to any
other Indebtedness of
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the Company solely because such other Indebtedness is secured. Accretion of
accreted value and accrual of interest shall not be deemed to be an
"incurrence" for purposes of this covenant, nor shall the payment of interest
in the form of additional Indebtedness.
Limitation on Restricted Payments. The Indenture provides that neither the
Company nor any Restricted Subsidiary will, directly or indirectly:
(i) declare or pay any dividend or make any distribution (other than
dividends or distributions payable in Qualified Capital Stock of the
Company or payable to any Restricted Subsidiary of the Company) on shares
of the Capital Stock of the Company;
(ii) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Company or of any Restricted Subsidiary not owned or
held by the Company or a Restricted Subsidiary, or any warrants, rights or
options to acquire shares of any class of such Capital Stock, other than
(x) the exchange of such Capital Stock or any warrants, rights or options
to acquire shares of any class of such Capital Stock for Qualified Capital
Stock of the Company or warrants, rights or options to acquire Qualified
Capital Stock of the Company or (y) to the extent that such Capital Stock
or warrants, rights or options are owned by the Company or any Restricted
Subsidiary of the Company;
(iii) make any principal payment on, purchase, decrease, redeem, prepay,
defease or otherwise acquire or retire for value, prior to any scheduled
final maturity, scheduled repayment or scheduled sinking fund payment, any
Indebtedness that is subordinate or junior in right of payment to the Notes
(other than any such Indebtedness owing to the Company or any Restricted
Subsidiary of the Company); or
(iv) make any Investment (other than Permitted Investments) after the
Issue Date;
(each of the foregoing prohibited actions set forth in clauses (i), (ii),
(iii) and (iv) being referred to as a "Restricted Payment"), if at the time of
such Restricted Payment or immediately after giving effect thereto, (a) a
Default or an Event of Default under the Indenture shall have occurred and be
continuing or would result therefrom, (b) the Company is not, at such time,
able to incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) in compliance with the Leverage Ratio described under the
covenant "--Limitation on Incurrence of Additional Indebtedness" above, or (c)
the aggregate amount of Restricted Payments made subsequent to the Issue Date
(the amount expended for such purposes, if other than in cash, being the fair
market value of such property as determined in good faith by the Board of
Directors of the Company, whose determination shall be conclusive and
evidenced by a Board Resolution) exceeds or would exceed the sum of:
(A) Cumulative EBITDA since the Issue Date less the product of 2.0 times
Cumulative Interest Expense since the Issue Date, plus
(B) 100% of the aggregate net cash proceeds received by the Company from
any Person (other than a Restricted Subsidiary) from the issuance and sale
subsequent to the Issue Date of Qualified Capital Stock of the Company
(excluding net cash proceeds attributable to the equity securities
comprising a part of the Units), plus
(C) without duplication of any amounts included in the immediately
preceding subclause (B), 100% of the aggregate net proceeds (determined
pursuant to the penultimate paragraph of this covenant) received by the
Company from the issuance and sale (other than to any Restricted
Subsidiary) of any Qualified Capital Stock of the Company upon the
conversion of, or in exchange for, any Indebtedness of the Company or any
Restricted Subsidiary (other than Indebtedness under the SingTel Credit
Agreement and SingTel Equipment Financing Agreement and any other
subordinated Indebtedness outstanding immediately after the Issue Date),
plus
(D) an amount equal to the aggregate amount of cash dividends, repayments
of loans or advances in cash or other assets constituting Productive Assets
and valued at the fair market value thereof, or other transfers of cash, in
each case to the Company or to any Restricted Subsidiary of the Company
from Unrestricted Subsidiaries (but without duplication of any such amount
included in calculating Cumulative such amount included in calculating
Cumulative EBITDA of the Company), or the amount resulting from
redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries (in
each case valued as provided in
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the covenant described under "--Limitation on Restricted and Unrestricted
Subsidiaries" below), not to exceed, in the case of any Unrestricted
Subsidiary, the amount of Investments previously made by the Company or any
Restricted Subsidiary in such Unrestricted Subsidiary and which was treated
as a Restricted Payment under the Indenture, plus
(E) without duplication of the immediately preceding subclause (D), an
amount equal to (i) the lesser of the cost or net cash proceeds or other
assets constituting Productive Assets and valued at the fair market value
thereof received upon the sale or other disposition of any Investment made
after the Issue Date which had been treated as a Restricted Payment and
(ii) the cost of any Investment then outstanding in any Person (other than
an Unrestricted Subsidiary) at the time of a transaction whereby such
Person becomes a Restricted Subsidiary (but, in each case, without
duplication of any amount included in calculating Cumulative EBITDA of the
Company).
No amount determined under subclause (D) or (E) above shall be less than
zero for purposes of this covenant.
Notwithstanding the foregoing, these provisions do not prohibit:
(1) the payment of any dividend or the making of any distribution within
60 days after the date of its declaration if the dividend or distribution
would have been permitted on the date of declaration; or
(2) the acquisition of Capital Stock of the Company or any Restricted
Subsidiary or warrants, options or other rights to acquire such Capital
Stock through the application of the net proceeds of any capital
contribution (other than from a Restricted Subsidiary) or a substantially
concurrent sale for cash (other than to a Restricted Subsidiary) of
Qualified Capital Stock of the Company or warrants, options or other rights
to acquire Qualified Capital Stock of the Company; or
(3) the acquisition of Indebtedness of the Company that is subordinate or
junior in right of payment to the Notes, either (i) solely in exchange for
shares of Qualified Capital Stock of the Company (or warrants, options or
other rights to acquire Qualified Capital Stock of the Company) or for
Indebtedness of the Company which is subordinate or junior in right of
payment to the Notes, at least to the extent that the Indebtedness being
acquired is subordinated to the Notes, and has a Weighted Average Life to
Maturity no less than that of the Indebtedness being exchanged or (ii)
through the application of the net proceeds of any capital contribution or
a substantially concurrent sale for cash (other than to or from a
Restricted Subsidiary) of Qualified Capital Stock of the Company (or
warrants, options or other rights to acquire Qualified Capital Stock of the
Company) or Refinancing Indebtedness; or
(4) the repurchase of Capital Stock of the Company (including options,
warrants or other rights to acquire such Capital Stock) from employees or
former employees of the Company or any Restricted Subsidiary for
consideration which, when added to all loans made pursuant to clause (5)
below of this paragraph during the same fiscal year and then outstanding
(determined as provided in clause (5) below) does not exceed $500,000 in
the aggregate in any fiscal year plus the aggregate cash proceeds received
by the Company during such fiscal year from the sale of Capital Stock to
employees of the Company or any Restricted Subsidiary; or
(5) the making of loans and advances to employees of the Company or any
Restricted Subsidiary in an aggregate amount at any time outstanding
(including as outstanding any such loan or advance written off or forgiven)
which, when added to the aggregate consideration paid pursuant to clause
(4) of this paragraph during the same fiscal year, does not exceed $500,000
in any fiscal year plus the aggregate cash proceeds received by the Company
during such fiscal year from the sale of Capital Stock to employees of the
Company or any Restricted Subsidiary; or
(6) the redemption, repurchase or other acquisition of shares of Capital
Stock in satisfaction of indemnification or similar claims arising under
any merger, asset purchase, stock purchase, contribution, joint venture,
consolidation or similar acquisition agreement pursuant to which such
shares of Capital Stock were issued;
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(7) the purchase, redemption or other acquisition or retirement for value
of any Capital Stock of any Restricted Subsidiary from any person other
than an Affiliate; or
(8) the repurchase of the Warrant Shares pursuant to the terms of the
Warrant Agreement (as in effect on the Issue Date); or
provided, however, that in the case of the immediately preceding clauses (2),
(3), (4), (5) and (6), and in the case of clauses (vi), (x) and (xi) of the
definition of "Permitted Investment," no Default or Event of Default shall
have occurred or be continuing at the time of such Restricted Payment or
Permitted Investment, as the case may be, or would occur as a result thereof.
For purposes of clause (3) above, Indebtedness that is "subordinate or junior
in right of payment to the Notes" will qualify under subclauses (i) and (ii)
thereof if such Indebtedness provides that interest and other amounts are not
payable thereon prior to the times at which, and in the amounts of, interest
and other amounts may be paid upon the Indebtedness being acquired. For
purposes of clause (4) above, the proceeds of Capital Stock sold to employees
shall not be duplicative of any such proceeds credited under clause (B) above.
The Indenture provides that in determining the aggregate amount of
Restricted Payments made subsequent to the Issue Date, amounts expended
pursuant to clauses (1), (2), (3) (but only to the extent that Indebtedness is
acquired in exchange for, or with the net proceeds from, the issuance of
Qualified Capital Stock of the Company or warrants, options or other rights to
acquire Qualified Capital Stock of the Company), (4), (5) and (6) of the
immediately preceding paragraph, and clauses (vi), (x) (except, if at the time
of such Investment, WorldVoice, Inc. shall be a Restricted Subsidiary) and
(xi) of the definition of "Permitted Investment," shall be included in such
calculation.
The Indenture provides that for purposes of calculating the net proceeds
received by the Company from the issuance or sale of its Capital Stock either
upon the conversion of, or exchange for, Indebtedness of the Company or any
Restricted Subsidiary, such amount will be deemed to be an amount equal to the
difference of (a) the sum of (i) the principal amount or accreted value
(whichever is less) of such Indebtedness on the date of such conversion or
exchange and (ii) the additional cash consideration, if any, received by the
Company upon such conversion or exchange, less any payment on account of
fractional shares, minus (b) all expenses incurred in connection with such
issuance or sale. In addition, for purposes of calculating the net proceeds
received by the Company from the issuance or sale of its Capital Stock upon
the exercise of any options or warrants of the Company, such amount will be
deemed to be an amount equal to the difference of (a) the additional cash
consideration, if any, received by the Company upon such exercise, minus (b)
all expenses incurred in connection with such issuance or sale.
The Indenture provides that not later than the date of making any Restricted
Payment, the Company shall deliver to the Trustee an Officers' Certificate
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required by this covenant were computed, which
calculation may be based on the Company's latest financial statements.
Limitation on Asset Sales. The Indenture provides that neither the Company
nor any Restricted Subsidiary will, directly or indirectly, consummate any
Asset Sale unless:
(i) the Company or the applicable Restricted Subsidiary, as the case may
be, receives consideration at the time of such Asset Sale at least equal to
the fair market value of the assets sold or otherwise disposed of;
(ii) at least 80% of the consideration received by the Company or the
Restricted Subsidiary, as the case may be, from such Asset Sale is cash or
Cash Equivalents and is received at the time of such disposition; provided,
that, for purposes of this covenant "cash" shall include the amount of any
liabilities of the Company or a Restricted Subsidiary that are assumed by
the transferee of assets in such Asset Sale (excluding any liability
incurred in connection with or in anticipation of such Asset Sale), but
only to the extent that such assumption is without further recourse to the
Company and the Restricted Subsidiaries; and
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(iii) the Company applies, or causes such Restricted Subsidiary to apply,
or enters into, or causes such Restricted Subsidiary to enter into, a
binding commitment to apply, any Net Cash Proceeds within 270 days of
receipt thereof (it being understood that any binding commitment to so
apply must be consummated within 360 days of such receipt) either (A) to
reinvest in Productive Assets, or (B) to repay or prepay Indebtedness
(other than non-recourse Indebtedness) of any Restricted Subsidiary, or (C)
to repay or prepay any Indebtedness of the Company that is secured by a
Lien permitted to be incurred pursuant to "--Limitation on Liens" below, or
(immediately preceding clauses (A), (B) or (C), pro rata (based on the
aggregate principal amount of the Notes and such other Indebtedness then
outstanding) to (I) the repayment or prepayment of any Indebtedness of the
Company (other than the Notes, and any Indebtedness subordinated to the
Notes) that is at the time redeemable or prepayable (and is so redeemed or
prepaid) and (II) purchase Notes tendered to the Company for purchase at a
price equal to 100% of the principal amount thereof, plus in each case
accrued and unpaid interest, if any, to the date of purchase pursuant to an
offer to purchase made by the Company as set forth below (an "Asset Sale
Offer"); provided, however, that if at any time any non-cash consideration
received by the Company or any Restricted Subsidiary, as the case may be,
in connection with any Asset Sale is converted into or sold or otherwise
disposed of for cash, then such conversion or disposition shall be deemed
to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof
shall be applied in accordance with this clause (iii); provided, further,
however, that the Company may defer making an Asset Sale Offer until the
aggregate Net Cash Proceeds from Asset Sales to be applied equal or exceed
$5,000,000.
The Indenture provides that each notice of an Asset Sale Offer will be
mailed, by first class mail, to holders of Notes as shown on the applicable
register of holders of Notes. Such notice will specify, among other things,
the purchase date (which will be not less than 30 days nor more than 45 days
from the date such notice is mailed, except as otherwise required by law) and
the amount of Net Cash Proceeds available to repurchase Notes and will
otherwise comply with the procedures set forth in the Indenture. Upon
receiving notice of the Asset Sale Offer, holders of Notes may elect to tender
their Notes in whole or in part in integral multiples of $1,000 in principal
amount. To the extent holders properly tender Notes with an aggregate
principal amount exceeding the Net Cash Proceeds available to repurchase Notes
in the Asset Sale Offer, Notes of tendering holders will be repurchased on a
pro rata basis (based upon the aggregate principal amount tendered). To the
extent that the aggregate principal amount of Notes tendered pursuant to a
Asset Sale Offer is less than the amount of Net Cash Proceeds available
therefor, the Company may use any remaining portion of such available Net Cash
Proceeds not required to fund the repurchase of tendered Notes for any
purposes otherwise permitted by the Indenture. Upon the consummation of any
Asset Sale Offer, the amount of Net Cash Proceeds from the Asset Sale in
question to be the subject of future Asset Sale Offers shall be deemed to be
zero.
The Indenture provides that the Company will comply with the requirements of
Rule 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations are applicable
in connection with the repurchase of Notes pursuant to an Asset Sale Offer.
Limitations on Transactions with Affiliates. The Indenture provides that
neither the Company nor any Restricted Subsidiary will, directly or
indirectly, enter into or amend any transaction (including, without
limitation, the purchase, sale, lease or exchange of any property, the
guaranteeing of any Indebtedness or the rendering of any service) with or for
the benefit of any of its Affiliates (an "Affiliate Transaction"), other than
any Affiliate Transaction or Affiliate Transactions that are on terms that are
no less favorable to the Company than those that might reasonably have been
obtained at such time in a comparable transaction by the Company on an arm's-
length basis from a Person that is not an Affiliate; provided, however, that
for a transaction or series of related transactions involving value of
$1,000,000 or more, such determination will be made in good faith by a
majority of the disinterested members of the Board of Directors of the
Company, if any; provided, further, however, that for a transaction or series
of related transactions involving value of $5,000,000 or more, the Board of
Directors of the Company shall have received, prior to the consummation
thereof, an opinion from a nationally recognized investment banking,
accounting or appraisal firm that such Affiliate Transaction is fair, from a
financial point of view, to the holders of Notes. The foregoing provisions
shall not prohibit or restrict
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(a) transactions between the Company and a Restricted Subsidiary of the
Company or among Restricted Subsidiaries of the Company, (b) Restricted
Payments and Permitted Investments made in accordance with the covenant
described under "--Limitation on Restricted Payments" above, (c) the payment
of reasonable and customary fees to directors of the Company who are not
employees of the Company and the payment of reasonable and customary
compensation for director and Board of Director observer fees, meeting
expenses, insurance premiums and indemnities, to the extent permitted by law,
(d) making loans or advances to officers, employees or consultants of the
Company and the Restricted Subsidiaries (including travel and moving expenses)
in the ordinary course of business for bona fide business purposes of the
Company or such Restricted Subsidiary, (e) any employment or option agreement
entered into by the Company or any Restricted Subsidiary in the ordinary
course of business that is approved by the Board of Directors of the Company,
(f) Affiliate Transactions in existence, or for which rights or agreements are
in existence, on the Issue Date, in each case as in effect on the Issue Date
and as amended thereafter as long as such amendment is not materially adverse
to the interests of the holders of the Notes as determined in good faith by
the Board of Directors, (g) the issuance of stock options (and shares of stock
upon the exercise thereof) pursuant to any stock option plan approved by the
Board of Directors and shareholders of the Company, and (h) Affiliate
Transactions pursuant to or contemplated by the SingTel Documents, in each
case as in effect on the Issue Date and as amended thereafter as long as such
amendment is not materially adverse to the interests of the holders of the
Notes as determined in good faith by the Board of Directors.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Indenture provides that neither the Company nor any
Restricted Subsidiary will, directly or indirectly, create or otherwise cause
or permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to: (a) pay dividends or make any other
distributions on its Capital Stock; (b) make loans or advances or to pay any
Indebtedness or other obligation owed to the Company or any Restricted
Subsidiary; (c) guarantee any Indebtedness or any other obligation of the
Company or any Restricted Subsidiary; or (d) transfer any of its property or
assets to the Company or any Restricted Subsidiary (each of the foregoing
restrictions, a "Payment Restriction"), except for such encumbrances or
restrictions existing under or by reason of: (1) applicable law; (2) the
Indenture; (3) customary non-assignment provisions of any lease or other
agreement of the Company or any Restricted Subsidiary; (4) any instrument
governing Acquired Indebtedness, which encumbrance or restriction was not
incurred in connection with, as a result of, or in anticipation of the
incurrence of such Indebtedness and 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; (5) instruments governing Indebtedness of
Restricted Subsidiaries in respect of Vendor Financing Arrangements incurred
in accordance with the terms of the Indenture; (6) agreements existing on the
Issue Date as such agreements are from time to time in effect; provided,
however, that any amendments or modifications of such agreements which affect
the encumbrances or restrictions of the types subject to this covenant shall
not result in such encumbrances or restrictions being less favorable to the
Company in any material respect, as determined in good faith by the Board of
Directors of the Company, than the provisions as in effect before giving
effect to the respective amendment or modification; (7) an agreement effecting
a refinancing, replacement or substitution of Indebtedness issued, assumed or
incurred pursuant to an agreement described in clause (4), (5) or (6) of this
covenant; provided, however, that the provisions relating to such encumbrance
or restriction contained in any such refinancing, replacement or substitution
agreement are not less favorable to the Company in any material respect as
determined in good faith by the Board of Directors of the Company than the
provisions relating to such encumbrance or restriction contained in agreements
referred to in such clause (4), (5) or (6) of this covenant; (8) Liens
permitted under the Indenture to the extent that such Liens restrict the
transfer of the asset or assets subject thereto; and (9) with respect to
clause (d) above, purchase money obligations for property acquired in the
ordinary course of business pursuant to ordinary business terms.
Limitation on Restricted and Unrestricted Subsidiaries. The Indenture
provides that the Board of Directors of the Company may (subject to the
penultimate paragraph of this covenant), if no Default or Event of Default
shall have occurred and be continuing or would arise therefrom, designate an
Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that
(i) any such redesignation shall be deemed to be an incurrence as
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of the date of such redesignation by the Company and the Restricted
Subsidiaries of the Indebtedness (if any) of such redesignated Subsidiary for
purposes of the covenant described under "--Limitation on Incurrence of
Additional Indebtedness" above; and (ii) unless such redesignated Subsidiary
shall not have any Indebtedness outstanding, other than Indebtedness which
would be Permitted Indebtedness, no such designation shall be permitted if
immediately after giving effect to such redesignation and the incurrence of
any such additional Indebtedness the Company could not incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to the
Leverage Ratio of the covenant described under "--Limitation on Incurrence of
Additional Indebtedness" above. The Board of Directors of the Company also
may, if no Default or Event of Default shall have occurred and be continuing
or would arise therefrom, designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if (i) such designation is at that time permitted
under the covenant described under "--Limitation on Restricted Payments" above
and (ii) immediately after giving effect to such designation, the Company
could incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to the Leverage Ratio of the covenant described under
"--Limitation on Incurrence of Additional Indebtedness" above. Any such
designation by the Board of Directors of the Company shall be evidenced to the
Trustee by the filing with the Trustee of a certified copy of the resolution
of the Company's Board of Directors giving effect to such designation or
redesignation and an Officers' Certificate certifying that such designation or
redesignation complied with the foregoing conditions and setting forth in
reasonable detail the underlying calculations.
The Indenture provides that for purposes of the covenant described under "--
Limitation on Restricted Payments" above, (i) an "Investment" shall be deemed
to have been made at the time any Restricted Subsidiary is designated as an
Unrestricted Subsidiary in an amount (proportionate to the Company's equity
interest in such Subsidiary) equal to the net worth of such Restricted
Subsidiary at the time that such Restricted Subsidiary is designated as an
Unrestricted Subsidiary; (ii) at any date the aggregate of all Restricted
Payments made as Investments since the Issue Date shall exclude and be reduced
by an amount (proportionate to the Company's equity interest in such
Subsidiary) equal to (A) the amount of Investments in any Unrestricted
Subsidiary that becomes a Restricted Subsidiary after the date of such
Investment or (B) the net worth of any Unrestricted Subsidiary at the time
that such Unrestricted Subsidiary is designated a Restricted Subsidiary, not
to exceed, in the case of any such redesignation of an Unrestricted Subsidiary
as a Restricted Subsidiary, the amount of Investments previously made by the
Company and the Restricted Subsidiaries in such Unrestricted Subsidiary that
were treated as Restricted Payments under the Indenture (in each case (i) and
(ii) "net worth" to be calculated based upon the fair market value of the
assets of such Subsidiary as of any such date of designation); and (iii) any
property transferred to or from an Unrestricted Subsidiary shall be valued at
its fair market value at the time of such transfer.
The Indenture provides that notwithstanding the foregoing, the Board of
Directors of the Company may not designate any Subsidiary of the Company to be
an Unrestricted Subsidiary if, after such designation, (a) the Company or any
other Restricted Subsidiary (i) provides credit support for, or a guarantee
of, any Indebtedness of such Subsidiary (including any undertaking, agreement
or instrument evidencing such Indebtedness) or (ii) is directly or indirectly
liable for any Indebtedness of such Subsidiary, (b) a default with respect to
any Indebtedness of such Subsidiary (including any right which the holders
thereof may have to take enforcement action against such Subsidiary) would
permit (upon notice, lapse of time or both) any holder of any other
Indebtedness of the Company or any Restricted Subsidiary to declare a default
on such other Indebtedness or cause the payment thereof to be accelerated or
payable prior to its final scheduled maturity or (c) such Subsidiary owns any
Capital Stock of, or owns or holds any Lien on any property of, any Restricted
Subsidiary which is not a Subsidiary of the Subsidiary to be so designated.
The Indenture provides that Subsidiaries of the Company that are not
designated by the Board of Directors as Restricted or Unrestricted
Subsidiaries will be deemed to be Restricted Subsidiaries. Notwithstanding any
provisions of this covenant, all Subsidiaries of an Unrestricted Subsidiary
will be Unrestricted Subsidiaries.
Limitation on Preferred Stock of Restricted Subsidiaries. The Indenture
provides that the Company will not permit any Restricted Subsidiary to,
directly or indirectly, issue any Preferred Stock (other than to the Company
or to a Restricted Subsidiary of the Company) or permit any Person (other than
the Company or a
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Subsidiary of the Company) to own any Preferred Stock of any Restricted
Subsidiary; provided, however, that this covenant shall not prevent the
issuance of or be violated by reason of (i) Preferred Stock of Restricted
Subsidiaries to the extent that such Preferred Stock is outstanding on the
Issue Date; (ii) Preferred Stock issued by a Person prior to the time that (a)
such Person becomes a Restricted Subsidiary, (b) such Person merges with or
into a Restricted Subsidiary or (c) another Person merges with or into such
Person in a transaction in which such Person becomes a Restricted Subsidiary,
in each case only if such Preferred Stock was not issued in anticipation of or
in connection with or as a result of such transaction; and (iii) Preferred
Stock issued in exchange for, or the proceeds of which are used to refinance,
Preferred Stock referred to in the foregoing clauses (i) or (ii) (other than
Preferred Stock which by its terms (or by the terms of any security into which
it is convertible or for which it is exchangeable) is redeemable at the option
of the holder thereof or is otherwise redeemable, pursuant to sinking fund
obligations or otherwise, prior to that date of redemption or maturity of the
Preferred Stock being so refinanced); provided, further, however, that (a) the
liquidation value of such Preferred Stock so issued shall not exceed the
liquidation value of the Preferred Stock so refinanced and (b) the Preferred
Stock so issued (I) shall have a stated maturity not earlier than the stated
maturity of the Preferred Stock being refinanced and (II) shall have a
Weighted Average Life to Maturity equal to or greater than the remaining
Weighted Average Life to Maturity of the Preferred Stock being refinanced.
Limitation on Liens. The Indenture provides that neither the Company nor any
Restricted Subsidiary will, directly or indirectly, create, incur, assume or
suffer to exist any Liens upon any of their respective property or assets or
on any income or profits therefrom, or assign or otherwise convey any right to
receive income or profits thereon, whether owned on the date of the Indenture
or thereafter acquired, unless (x) in the case of Liens securing Indebtedness
subordinate to the Notes, the Notes are secured by a valid, perfected Lien on
such property, assets or proceeds that is senior in priority to such Liens and
(y) in all other cases, the Notes are equally and ratably secured; provided,
however, that the foregoing shall not prohibit or restrict, and the Company
need not equally and ratably secure the Notes as a result of, Permitted Liens.
Limitation on Sale and Leaseback Transactions. The Indenture provides that
neither the Company nor any Restricted Subsidiary will, directly or
indirectly, enter into any Sale and Leaseback Transaction, except that the
Company or any Restricted Subsidiary may enter into a Sale and Leaseback
Transaction if (i) after giving effect to such Sale and Leaseback Transaction
(the Indebtedness thereunder being equivalent to the Attributable Value
thereof) (A) the Company could incur at least $1.00 of additional Indebtedness
in compliance with the Leverage Ratio of the covenant described under "--
Limitation on Incurrence of Additional Indebtedness" above provided, that in
the case of a Restricted Subsidiary, the Indebtedness incurred in such Sale
and Leaseback Transaction was Indebtedness in respect of a Vendor Financing
Arrangement, or (B) the Indebtedness incurred in such Sale and Leaseback could
have been incurred as (and shall be deemed incurred as) Permitted Indebtedness
under clauses (v), (vi), or (vii) thereof, and (ii) the Sale and Leaseback
Transaction is effected in accordance with the requirements of the covenant
described under "--Limitation on Asset Sales" above.
Limitation on Line of Business. The Indenture provides that for so long as
any Notes are outstanding, the Company and the Restricted Subsidiaries will
engage in all material respects in the business of (i) communications
services, including facsimile transmission and delivery services and voice,
video or data transmission and delivery services, (ii) utilizing their
facilities for any commercial purpose permitted by applicable regulation, and
(iii) evaluating, participating or pursuing any other activity or opportunity
that is ancillary or related to those identified in (i) or (ii) above
(including pursuant to acquisitions of entities or divisions or lines of
business of entities in the foregoing business) (together, the "Electronic
Messaging Business"); notwithstanding the foregoing, however, ownership by the
Company or any Restricted Subsidiary of stock in any Unrestricted Subsidiary,
or any other entity which is not a Restricted Subsidiary, shall not be deemed
to violate this covenant.
Merger, Consolidation and Sale of Assets. The Indenture provides that the
Company will not, in any transaction or series of transactions, merge or
consolidate with or into, or sell, assign, convey, transfer, lease or
otherwise dispose of all or substantially all of its properties and assets as
an entirety to, any Person or Persons, and the Company will not permit any
Restricted Subsidiary to enter into any such transaction or series of related
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transactions if such transaction or series of transactions, in the aggregate,
would result in a direct or indirect sale, assignment, conveyance, transfer,
lease or other disposition of all or substantially all of the properties and
assets of the Company or the Company and the Restricted Subsidiaries, taken as
a whole, to any other Person or Persons, unless at the time of and after
giving effect thereto (a) either (i) if the transaction or series of
transactions is a merger or consolidation involving the Company, the Company
shall be the surviving Person of such merger or consolidation, or (ii) the
Person formed by such consolidation or into which the Company is merged or to
which the properties and assets of the Company or such Restricted Subsidiary,
as the case may be, are sold, assigned, conveyed, transferred, leased or
otherwise disposed of (including, with respect to the Restricted Subsidiaries,
by merger or consolidation) (any such surviving Person or Persons of such
merger or consolidation or to whom such sale, assignment, conveyance, lease or
other disposition has been made 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 supplemental indentures executed and delivered to the Trustee, in
form reasonably satisfactory to the Trustee, all the obligations of the
Company under the Notes, the Indenture and, if then in effect, the Notes
Registration Rights Agreement, and the Escrow Agreement, and in each case, the
Indenture and, if then in effect, the Notes Registration Rights Agreement, and
the Escrow Agreement shall remain in full force and effect; (b) immediately
before and immediately after giving effect to such transaction or series of
transactions on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction or series of transactions), no Default or Event of
Default shall have occurred and be continuing and the Company or the Surviving
Entity, as the case may be, after giving effect to such transaction or series
of transactions on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction or series of transactions), could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to the
Leverage Ratio in the covenant described under "--Limitation on Incurrence of
Additional Indebtedness" above; and (c) immediately after giving effect to
such transaction or series of transactions on a pro forma basis (including,
without limitation, any Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction or series of transactions),
the Consolidated Net Worth of the Company or the Surviving Entity, as the case
may be, is at least equal to the Consolidated Net Worth of the Company
immediately before such transaction or series of transactions.
The Indenture provides that 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 reasonably satisfactory to the Trustee, an
officer's certificate and an opinion of counsel, each stating that such
consolidation, merger, transfer, lease, assignment or other disposition and
the supplemental indenture in respect thereof complies with the requirements
under the Indenture.
The Indenture provides that upon any consolidation or merger or any sale,
assignment, conveyance, transfer, lease or other disposition of all or
substantially all of the assets of the Company in accordance with the
foregoing, in which the Company is not the continuing corporation, the
successor corporation formed by such a consolidation or into which the Company
is merged or to which such transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
the Indenture with the same effect as if such successor corporation had been
named as the Company therein, and thereafter, except in the case of a lease,
the predecessor corporation shall be relieved of all obligations and covenants
under the Indenture, the Notes, and if then in effect, the Notes Registration
Rights Agreement; provided, however, that solely for purposes of calculating
Cumulative EBITDA in connection with the covenant described under "--
Limitation on Restricted Payments" above, any such successor Person shall only
be deemed to have succeeded to and be substituted for the Company with respect
to periods subsequent to the effective time of such merger, consolidation or
sale, assignment, conveyance, transfer, lease or other disposition of assets.
The Indenture provides that for all purposes of the Indenture and the Notes
(including the provisions of this covenant and the covenants described under
"--Limitation on Incurrence of Additional Indebtedness," "--Limitation on
Restricted and Unrestricted Subsidiaries" and "--Limitation on Liens"),
Subsidiaries of any Surviving Entity will, upon such transaction or series of
transactions, become Restricted Subsidiaries or
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Unrestricted Subsidiaries as provided pursuant to the covenant described under
"--Limitation on Restricted and Unrestricted Subsidiaries" and all
Indebtedness, and all Liens on property or assets, of the Company and the
Restricted Subsidiaries immediately prior to such transaction or series of
transactions will be deemed to have been incurred upon such transaction or
series of transactions.
Issuance of Contingent Warrants. The Indenture provides that the Company
will be obligated to issue to holders of the Notes the Contingent Warrants,
exercisable for 8.0% of the Common Stock of the Company on a fully-diluted
basis as of the date of such issuance after giving effect to the issuance of
such warrants, in the event that the Company does not effect a primary
underwritten public offering (excluding any offering pursuant to Form S-8
under the Securities Act or any other publicly registered offering pursuant to
the Securities Act pertaining to an issuance of shares of Common Stock or
securities exercisable therefor under any benefit plan, employee compensation
plan, or employee or director stock purchase plan) of Common Stock of the
Company pursuant to an effective registration statement under the Securities
Act on or prior to September 1, 1999 resulting in gross proceeds to the
Company of at least $35.0 million. Such Warrants will be issued pursuant to
the Warrant Agreement and holders will have the benefits of the Warrant Shares
Registration Rights Agreement.
Any Contingent Warrants issued shall be issued to the holders of the
outstanding Notes as of September 1, 1999 pro rata, based upon the aggregate
principal amount of Notes held by such holders as of August 15, 1999.
EVENTS OF DEFAULT
The Indenture provides that the following events constitute "Events of
Default:"
(i) the failure to pay interest on the Notes when the same becomes due
and payable and the Default continues for a period of 30 days;
(ii) the failure to pay the principal of any Note when such principal
becomes due and payable, at maturity, upon acceleration, redemption,
pursuant to a required offer to purchase or otherwise;
(iii) a default in the observance or performance of any other covenant or
agreement contained in the Notes, the Indenture or the Escrow Agreement
which default continues for a period of 60 days after the Company receives
written notice thereof from the Trustee specifying the default and stating
that such notice is a "Notice of Default" under the Indenture or the
Company and the Trustee receive such notice from holders of at least 25% in
aggregate principal amount of the outstanding Notes;
(iv) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any Material Subsidiary
(or the payment of which is guaranteed by the Company or any Material
Subsidiary), whether such Indebtedness or guarantee now exists, or is
created after the Issue Date, which default (a) is caused by a failure to
pay principal, at the final stated maturity thereof, on such Indebtedness
(which failure continues beyond any applicable grace period) (a "Payment
Default") or (b) results in the acceleration of such Indebtedness prior to
its express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $5,000,000 or more and with
respect to such clauses (a) and (b) such Payment Default or acceleration
has not been rescinded or annulled or such Indebtedness discharged or paid
in full in cash within 20 days;
(v) one or more judgments in an aggregate amount in excess of $5,000,000
(unless covered by insurance by a reputable insurer as to which the insurer
has acknowledged coverage) being rendered against the Company or any of its
Material Subsidiaries and such judgments remain undischarged or unstayed
for a period of 60 days after such judgment or judgments become final and
non-appealable;
(vi) certain events of bankruptcy, insolvency or reorganization affecting
the Company or any of its Material Subsidiaries; or
(vii) any holder or holders of at least $5,000,000 in aggregate principal
amount of Indebtedness of the Company or any Material Subsidiary shall
foreclose upon assets of the Company or any Material Subsidiary
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having an aggregate fair market value, individually or in the aggregate, of
at least $5,000,000 or shall have otherwise taken ownership of such assets
pursuant to any right under applicable law or applicable security documents
in lieu of foreclosure.
The Indenture provides that upon the happening of any Event of Default
specified in the Indenture, the Trustee may, or the holders of at least 25% in
principal amount of outstanding Notes may, declare the principal amount of,
and accrued but unpaid interest, if any, on all the Notes to be due and
payable by notice in writing to the Company and the Trustee specifying the
respective Event of Default and that it is a "notice of acceleration" (the
"Acceleration Notice") and upon such declaration the same shall become
immediately due and payable, notwithstanding anything contained in the Notes,
or the Indenture to the contrary. If an Event of Default with respect to
bankruptcy or similar proceedings relating to the Company occurs and is
continuing, then such amount will ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
holder of the Notes. Holders of the Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitation,
holders of not less than a majority in aggregate principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or
power. If a Default or an Event of Default occurs and is continuing and is
known to the Trustee, Trustee shall mail to each holder of the Notes notice of
the Default or Event of Default within 30 days after obtaining knowledge
thereof. The Trustee may withhold from holders of the Notes notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest or a failure to comply with
the covenants and provisions described under "--Change of Control," "--Certain
Covenants--Limitation on Asset Sales" and "--Merger, Consolidation and Sale of
Assets" above) if it determines that withholding notice is in their interest.
The Indenture provides that, at any time after a declaration of acceleration
with respect to the Notes as described in the preceding paragraph but before a
judgment or decree of money due in respect of the Notes has been obtained, the
holders of not less than a majority in principal amount of the Notes then
outstanding by written notice to the Company and the Trustee may rescind such
declaration and its consequences 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 the 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 and overdue principal at the rate provided for in 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 (c) all Events of Default, other than the non-
payment of principal of, premium, if any, and interest on the Notes, as the
case may be, that have become due solely by such declaration of acceleration,
have been cured or waived. Prior to the declaration of acceleration of the
Notes, the holders of not less than a majority in principal amount of the
Notes, may waive any existing Default or Event of Default under the Indenture,
and its consequences, except a default in the payment of the principal of or
interest on any Notes, or any default in respect of any covenant which cannot
be amended without the consent of each holder affected.
The Indenture provides that no holder of any of the Notes has any right to
institute any proceeding with respect to the Indenture or the Notes or any
remedy thereunder, unless the holders of at least 25% in aggregate principal
amount of the outstanding Notes, have made written request, and offered
reasonable indemnity, to the Trustee to institute such proceeding as Trustee
under the Notes, and the Indenture, the Trustee has failed to institute such
proceeding within 30 days after receipt of such notice, request and offer of
indemnity and the applicable Trustee, within such 30-day period, has not
received directions inconsistent with such written request by holders of not
less than a majority in aggregate principal amount of the outstanding Notes.
Such limitations do not apply, however, to a suit instituted by a holder of a
Note for the enforcement of the payment of the principal of, premium, if any,
or interest on such Note on or after the respective due dates expressed or
provided for in such Note.
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During the existence of an Event of Default, the Trustee is required to
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, whether or not an Event of Default shall occur and be continuing, the
Trustee under the Indenture is not under any obligation to exercise any of its
rights or powers under such Indenture at the request or direction of any of
the holders unless such holders shall have offered to the Trustee reasonable
security or indemnity. Subject to certain provisions concerning the rights of
the Trustee, the holders of not less than a majority in aggregate principal
amount of the outstanding Notes, have the right to direct the time, method and
place of conducting any proceeding for any remedy available to such Note, or
exercising any trust or power conferred on such Trustee under the Indenture.
The Company is required to furnish to the Trustee annual and quarterly
statements as to the performance by the Company of its obligations under the
Indentures and as to any default in such performance. The Company is also
required to notify the Trustee within ten days of any event which is, or after
notice or lapse of time or both would become, an Event of Default.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Indenture provides that the Company may, at its option and at any time,
terminate the obligations of the Company with respect to the outstanding
Notes, ("defeasance"). Such defeasance means that the Company shall be deemed
to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, except for (i) the rights of holders of outstanding Notes
to receive payment in respect of the principal of, premium, if any, and
interest on such Notes, when such payments are due, (ii) the Company's
obligations to issue temporary Notes, register the transfer or exchange of any
Notes, replace mutilated, destroyed, lost or stolen Notes and maintain an
office or agency for payments in respect of the Notes, (iii) the rights,
powers, trusts, duties and immunities of the Trustee and (iv) the defeasance
provisions of the Indenture. In addition, the Company may, at its option and
at any time, elect to terminate the obligations of the Company with respect to
certain covenants that are set forth in the Indenture, some of which are
described under "--Certain Covenants" above (including the covenant described
under "--Change of Control" above) and any subsequent failure to comply with
such obligations shall not constitute a Default or Event of Default with
respect to the Notes or ("covenant defeasance").
The Indenture provides that in order to exercise either defeasance or
covenant defeasance, (i) the Company must irrevocably deposit with the
Trustee, in trust, for the benefit of the holders of the Notes, cash in United
States dollars, U.S. Government Obligations (as defined in the Indenture), or
a combination thereof, in such amounts as will be sufficient, in the opinion
of a nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the outstanding Notes, to
redemption or maturity (except lost, stolen or destroyed Notes, which have
been replaced or paid); (ii) 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 defeasance or covenant defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such defeasance or covenant defeasance
had not occurred (in the case of defeasance, such opinion must refer to and be
based upon a ruling of the Internal Revenue Service or a change in applicable
federal income tax laws); (iii) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit (other than a Default
or Event of Default relating to the incurrence of Indebtedness to finance such
defeasance); (iv) such defeasance or covenant defeasance shall not cause the
Trustee to have a conflicting interest with respect to any securities of the
Company; (v) such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement
or instrument to which the Company is a party or by which it is bound (other
than the Indenture); (vi) the Company shall have delivered to the Trustee an
opinion of counsel to the effect that after the 91st day following the
deposit, the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally; and (vii) the Company shall have delivered to the Trustee an
officers' certificate and
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an opinion of counsel, each stating that all conditions precedent under the
Indenture to either defeasance or covenant defeasance, as the case may be,
have been complied with.
SATISFACTION AND DISCHARGE
The Indenture provides that such Indenture will be discharged and will cease
to be of further effect (except as to surviving rights or registration of
transfer or exchange of the Notes, as expressly provided for in the Indenture)
as to all outstanding Notes, when (i) either (a) all the Notes, theretofore
authenticated and delivered (except lost, stolen or destroyed Notes, which
have been replaced or repaid, Notes for whose payment money has theretofore
been deposited in trust or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such trust) have been
delivered to the Trustee for cancellation or (b) all Notes such not
theretofore delivered to the Trustee for cancellation (except lost, stolen or
destroyed Notes, which have been replaced or paid) have been called for
redemption pursuant to the terms of the Notes, or have otherwise become due
and payable and the Company has irrevocably deposited or caused to be
deposited with the Trustee funds in an amount sufficient to pay and discharge
the entire indebtedness on the Notes, not theretofore delivered to the Trustee
for cancellation, for principal of, premium, if any, and interest on the Notes
to the date of deposit together with irrevocable instructions from the Company
directing the Trustee to apply such funds to the payment thereof at maturity
or redemption, as the case may be; (ii) the Company has paid all other sums
payable under such Indenture by the Company; (iii) there exists no Default or
Event of Default under such Indenture; and (iv) the Company has delivered to
the Trustee an officers' certificate and an opinion of counsel stating that
all conditions precedent under such Indenture relating to the satisfaction and
discharge of such Indenture have been complied with.
REPORTS TO HOLDERS
The Indenture provides that the Company shall deliver to the Trustee, within
15 days after it files them with the Commission, copies of its annual report
and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may by rules and
regulations prescribe) which the Company is required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act within the time
periods prescribed under such rules and regulations. Notwithstanding that the
Company may not be required to remain subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act or otherwise report on an annual and
quarterly basis on forms provided for such annual and quarterly reporting
pursuant to rules and regulations promulgated by the Commission, the Indenture
requires the Company, following consummation of the Exchange Offer
contemplated by the Registration Rights Agreement to file with the Commission
and provide to the Trustee such annual and interim reports on Forms 10-K and
10-Q, respectively, as the Company would be required to file were it subject
to such reporting requirements within the time periods prescribed under such
rules and regulations. Upon qualification of the Indenture under the TIA, the
Company shall also comply with the provisions of TIA Sec. 314(a). The Company
shall not be obligated to file any such reports with the Commission if the
Commission does not permit such filings but shall remain obligated to provide
such reports to the Trustee and the holders within the periods of time
referred to in the preceding sentence. The Company shall provide to any holder
of Notes, any information reasonably requested by such holder concerning the
Company (including financial statements) consistent with the requirements of
Rule 144A(d)(4) promulgated under the Securities Act necessary in order to
permit such holder to sell or transfer Notes, in accordance with Rule 144A
promulgated under the Securities Act.
MODIFICATION OF THE INDENTURE
The Indenture provides that the Company, when authorized by a Board
Resolution, and the Trustee may amend, waive or supplement the Indenture or
the Notes without notice to or consent of any holder: (a) to cure any
ambiguity, defect or inconsistency; (b) to comply with "--Certain Covenants--
Merger, Consolidation, and Sale of Assets" above; (c) to provide for
uncertificated Notes in addition to certificated Notes; (d) to comply with any
requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the TIA; (e) to provide for issuance of
the Exchange Notes (which will have terms substantially identical in all
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material respects to the Notes except that the transfer restrictions contained
in the Notes will be modified or eliminated, as appropriate), and which will
be treated together with any outstanding Notes, as a single issue of
securities; or (f) to make any change that would provide any additional
benefit or rights to the holders or that does not adversely affect the rights
of any holder. Other modifications, amendments and waivers of each Indenture
or the Notes may be made with the consent of the holders of not less than two-
thirds in aggregate principal amount of the then outstanding Notes except
that, without the consent of each holder of the Notes affected thereby, no
modification, amendment or waiver may, directly or indirectly: (i) reduce the
amount of Notes whose holders must consent to any amendment, modification or
waiver; (ii) reduce the rate of or change the time for payment of interest,
including defaulted interest or special interest, additional interest, on any
Notes; (iii) reduce the principal amount outstanding of, or change the fixed
maturity of, any Notes or change the date on which any Notes may be subject to
redemption, or reduce the redemption price therefor; (iv) make any Notes
payable in money other than that stated in the Notes; (v) make any change in
provisions of such Indenture protecting the right of each holder of a Note to
receive payment of principal of, premium, if any, or interest on such Note on
or after the date thereof or to bring suit to enforce any payment on or with
respect to the Notes; (vi) waive a default in the payment of the principal of,
premium, if any, or interest on, or redemption with respect to, any Note
(except a rescission of acceleration of the Notes by two-thirds of the holders
for non-payment defaults and a waiver of the consequences of such
acceleration); (vii) subordinate in right of payment, or otherwise
subordinate, the Notes to any other Indebtedness or obligation of the Company;
(viii) upon or following the occurrence of a Change of Control, amend, alter,
change or modify the obligation of the Company to make and consummate a Change
of Control Offer with respect to such Change of Control or waive any Default
in the performance of any such offer or modify any of the provisions or
definitions with respect to any such offer; or (ix) directly or indirectly
release the liens on the Escrow Collateral except as permitted by the Escrow
Agreement.
TRANSFER AND EXCHANGE
A holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note
selected for redemption. Also, the Company is not required to transfer or
exchange any Note for a period of 15 days before a selection of Notes to be
redeemed.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee thereunder will perform only such duties as are
specifically set forth in the Indenture. If an Event of Default has occurred
and is continuing, the Trustee will exercise such rights and powers vested in
it under such Indenture and use the same degree of care and skill in its
exercise as a prudent person would exercise under the circumstances in the
conduct of such person's own affairs.
The Indenture and provisions of the Trust Indenture Act of 1939, as amended,
incorporated by reference therein contain limitations on the rights of the
Trustee thereunder, should it become a creditor of the Company, to obtain
payment of claims in certain cases or to realize on certain property received
by it in respect of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions; provided, however, that if it
acquires any conflicting interest (as defined in such Act) it must eliminate
such conflict or resign.
GOVERNING LAW
The Indenture, the Notes and the Escrow Agreement will be governed by the
laws of the State of New York, without regard to the principles of conflicts
of law.
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CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary
or at the time it merges or consolidates with the Company or any Restricted
Subsidiary or assumed in connection with the acquisition of assets from such
Person, including any such Indebtedness incurred by such Person in connection
with, or in anticipation or contemplation of, such Person's becoming a
Restricted Subsidiary or such acquisition, merger or consolidation.
"Affiliate" means a Person who, directly or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common control
with, the Company or any Restricted Subsidiary. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise. Notwithstanding the
foregoing, the term "Affiliate" shall not, with respect to the Company,
include any Restricted Subsidiary of the Company.
"Asset Acquisition" means (a) an Investment by the Company or any Restricted
Subsidiary in any other Person pursuant to which such Person shall become a
Subsidiary of the Company, or shall be merged with or into the Company or any
Restricted Subsidiary, (b) the acquisition by the Company or any Restricted
Subsidiary of the assets of any Person which constitute all or substantially
all of the assets of such Person, (c) the acquisition by the Company or any
Restricted Subsidiary of any division or line of business of any Person or (d)
any other asset acquisition by the Company or a Restricted Subsidiary which
permits or requires pro forma financial information prepared in accordance
with Rule 11-01 under Regulation S-X promulgated under the Securities Act.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease, assignment or other transfer or disposition for value (for
purposes of this definition, each, a "disposition") by the Company or any
Restricted Subsidiary (including, without limitation, pursuant to any Sale and
Leaseback Transaction or any merger or consolidation of any Subsidiary of the
Company with or into another Person (other than the Company or any Restricted
Subsidiary of the Company) whereby such Subsidiary shall cease to be a
Restricted Subsidiary) to any Person of (i) any Capital Stock of any
Restricted Subsidiary (other than in respect of director's qualifying shares
or investments by foreign nationals mandated by applicable law); (ii) all or
substantially all of the properties and assets of any division or line of
business of the Company or any Restricted Subsidiary; or (iii) any other
properties or assets of the Company or any Restricted Subsidiary, other than
in the ordinary course of business; provided, however, that for purposes of
the covenant described under "--Certain Covenants--Limitation on Asset Sales"
above, Asset Sales shall not include: (a) a transaction or series of related
transactions for which the Company or the applicable Restricted Subsidiary
receives aggregate consideration of less than $1,000,000 in any fiscal year;
(b) transactions complying with the covenant described under "--Certain
Covenants--Merger, Consolidation and Sale of Assets" above; (c) any
disposition to the Company; (d) any disposition to a Restricted Subsidiary of
the Company; (e) any Lien securing Indebtedness to the extent that such Lien
is granted in compliance with the covenant described under "--Certain
Covenants--Limitation on Liens" above; (f) any Restricted Payment (or
Permitted Investment) permitted by the covenant described under "--Certain
Covenants--Limitation on Restricted Payments" above; and (g) any disposition
of assets or property in the ordinary course of business and on ordinary
business terms to the extent such property or assets are obsolete, worn out or
no longer useful in the Company's or any Restricted Subsidiary's business.
"Attributable Value" means, as to any particular lease under which any
Person is at the time liable other than a Capitalized Lease Obligation, and at
any date as of which the amount thereof is to be determined, the total net
amount of rent required to be paid by such Person under such lease during the
initial term thereof as determined in accordance with GAAP, discounted from
the last date of such initial term to the date of determination at a rate per
annum equal to the discount rate which would be applicable to a Capitalized
Lease
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Obligation with a like term in accordance with GAAP. The net amount of rent
required to be paid under any such lease for any such period shall be the
aggregate amount of rent payable by the lessee with respect to such period
after excluding amounts required to be paid on account of insurance, taxes,
assessments, utility, operating and labor costs and similar charges. In the
case of any lease which is terminable by the lessee upon the payment of a
penalty, such net amount shall also include the amount of such penalty, but no
rent shall be considered as required to be paid under such lease subsequent to
the first date upon which it may be so terminated. "Attributable Value" means,
as to a Capitalized Lease Obligation under which any Person is at the time
liable and at any date as of which the amount thereof is to be determined, the
capitalized amount thereof that would appear on the face of a balance sheet of
such Person in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated) of capital stock, including each class of common stock and
Preferred Stock of such Person and (ii) with respect to any Person that is not
a corporation, any and all partnership or other equity interests of such
Person.
"Capitalized Lease Obligation" means any obligation under a lease of (or
other agreement conveying the right to use) any property (whether real,
personal or mixed) that is required to be classified and accounted for as a
capital lease obligation under GAAP, and, for purposes of the Indenture, the
amount of any such obligation at any date shall be the capitalized amount
thereof at such date, determined in accordance with GAAP.
"Cash Equivalents" means, at any time, (i) any evidence of Indebtedness with
a maturity of 180 days or less issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality
thereof (provided that the full faith and credit of the United States of
America is pledged in support thereof); (ii) certificates of deposit or
acceptances with a maturity of 180 days or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $500,000,000; (iii)
certificates of deposit with a maturity of 180 days or less of any financial
institution that is organized under the laws of the United States, any state
thereof or the District of Columbia that are rated at least A-1 by S&P or at
least P-1 by Moody's or at least an equivalent rating category of another
nationally recognized securities rating agency; (iv) repurchase agreements and
reverse repurchase agreements relating to marketable direct obligations issued
or unconditionally guaranteed by the government of the United States of
America or issued by any agency thereof and backed by the full faith and
credit of the United States of America, in each case maturing within 180 days
from the date of acquisition; provided that the terms of such agreements
comply with the guidelines set forth in the Federal Financial Agreements of
Depository Institutions With Securities Dealers and Others, as adopted by the
Comptroller of the Currency on October 31, 1985.
"Change of Control" means the occurrence of one or more of the following
events:
(i) any sale, lease, exchange, transfer or other disposition (in one
transaction or a series of related transactions) of all or substantially
all of the assets of the Company and the Restricted Subsidiaries, taken as
a whole, to any Person or group of related Persons for purposes of Section
13(d) of the Exchange Act (a "Group") (whether or not otherwise in
compliance with the provisions of the Indenture) other than a Permitted
Holder, in any such event pursuant to a transaction in which, immediately
after the consummation thereof the Person or Persons owning a majority of
the voting power of the Voting Stock of the Company immediately prior to
the consummation of such transaction, shall not own directly or indirectly,
a majority of the voting power of the Voting Stock of the Person to whom
such sale, lease, exchange, transfer or other disposition has been made; or
(ii) during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors who were nominated by a Permitted Holder
or whose election to such Board of Directors or whose nomination for
election by the stockholders of the Company was approved by a vote of a
majority of the directors of the Company then still in office who were
either directors at the beginning of such period or whose election or
nomination
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for election was previously so approved) cease for any reason to constitute
a majority of the Board of Directors of the Company then in office; or
(iii) any Person or Group (other than a Permitted Holder) is or becomes,
by purchase, tender offer, exchange offer, open market purchases, privately
negotiated purchases or otherwise, the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, whether or not applicable,
except that a Person shall be deemed to have "beneficial ownership" of all
securities that such Person has the right to acquire, whether such right is
exercisable immediately or after the passage of time only), directly or
indirectly, of more than 50% of the total then outstanding voting power of
the Voting Stock of the Company (for the purpose of this clause (iii), such
Person or Group will be deemed to "beneficially own" (determined as
aforesaid) the voting power of the Voting Stock of a corporation (the
"specified corporation") held by any other corporation (the "parent
corporation") if such Person or Group "beneficially owns," directly or
indirectly, a majority of the voting power of the Voting Stock of such
parent corporation); or
(iv) the Company consolidates with or merges into another Person and the
stockholders immediately prior to such merger or consolidation hold less
than a majority of the voting power of the Voting Stock of the resulting
entity.
"Closing Price" means on any Trading Day with respect to the per share price
of any shares of Capital Stock the last reported sale price regular way or, in
case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices regular way, in either case on the New
York Stock Exchange or, if such shares of Capital Stock are not listed or
admitted to trading on such exchange, on the principal national securities
exchange on which such shares are listed or admitted to trading or, if not
listed or admitted to trading on any national securities exchange, on Nasdaq
or, if such shares are not listed or admitted to trading on any national
securities exchange or quoted on such automated quotation system but the
issuer is a Foreign Issuer (as defined in Rule 3b-4(b) under the Exchange Act)
and the principal securities exchange on which such shares are listed or
admitted to trading is a Designated Offshore Securities Market (as defined in
Rule 902(a) under the Securities Act), the average of the reported closing bid
and asked prices regular way on such principal exchange or, if such shares are
not listed or admitted to trading on any national securities exchange or
quoted on such automated quotation system and the issuer and principal
securities exchange do not meet such requirements, the average of the closing
bid and asked prices in the over-the-counter market as furnished by any New
York Stock Exchange member firm that is selected from time to time by the
Company for that purpose.
"Consolidated EBITDA" means, with respect to any Person, for any period, the
sum (without duplication) of (i) Consolidated Net Income of such Person, plus
(ii) to the extent such Consolidated Net Income has been reduced thereby, (A)
all income taxes of such Person and its Restricted Subsidiaries paid or
accrued in accordance with GAAP for such period (other than income taxes
attributable to extraordinary or nonrecurring gains or losses), (B)
Consolidated Interest Expense of such Person and (C) without duplication of
any amount included in subclause (A) or (B) of this clause (ii), Consolidated
Non-Cash Charges of such Person, all as determined on a consolidated basis for
such Person and its Restricted Subsidiaries in conformity with GAAP, less
(iii) (A) all non-cash items increasing such Consolidated Net Income for such
period and (B) all cash payments during such period relating to non-cash
charges that were added back in determining Consolidated EBITDA in any prior
period, all as determined on a consolidated basis for such Person and its
Restricted Subsidiaries in conformity with GAAP.
"Consolidated Interest Expense" means, with respect to any Person for any
period, without duplication, the sum of (i) the interest expense of such
Person and its Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP, including, without limitation, (a)
any amortization of debt discount, (b) the net cost under Interest Swap
Obligations (including any amortization of discounts), (c) the interest
portion of any deferred payment obligation, (d) all commissions, discounts and
other fees and charges owed with respect to letters of credit, bankers'
acceptance financing or similar facilities, and (e) all accrued interest and
(ii) the interest component of Capitalized Lease Obligations paid or accrued
by such Person and its Restricted Subsidiaries during such period as
determined on a consolidated basis in accordance with GAAP.
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"Consolidated Net Income" means, with respect to any Person, for any period,
the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided, however, that there shall be excluded therefrom, without
duplication, (a) gains and losses from sales or other dispositions of assets
of such Person or any Restricted Subsidiary of such Person or of Capital Stock
of any Restricted Subsidiary of such Person or abandonments or reserves
relating thereto and the related tax effects according to GAAP, (b) items
classified as extraordinary or nonrecurring gains and losses, and the related
tax effects according to GAAP, (c) the net income of any Unrestricted
Subsidiary and Persons (other than Restricted Subsidiaries) accounted for by
such Person using the equity method of accounting, except to the extent of
cash dividends or distributions actually paid in cash to such Person or any
Restricted Subsidiary (in the case of any such payment to a Restricted
Subsidiary, subject to the limitations set forth in clause (e) of this
definition), (d) the net income (or loss) of any Person acquired in a "pooling
of interests" transaction accrued prior to the date it becomes a Restricted
Subsidiary of such first referred to Person or is merged or consolidated with
such Person or any of its Restricted Subsidiaries, (e) the net income (but not
loss) of any Restricted Subsidiary of such Person for such period to the
extent that the declaration of dividends or similar distributions by that
Restricted Subsidiary of that income is restricted by charter, contract (other
than, for purposes of the "Limitation on Incurrance of Additional
Indebtedness" covenant, any such payment restrictions set forth in any Vendor
Financing Arrangement permitted to be incurred under the Indenture), operation
of law or otherwise (regardless of any waiver), and (f) any gain or loss
realized upon the termination of any employee benefit plan, on an after-tax
basis.
"Consolidated Net Worth" means, with respect to any Person, at any date, the
consolidated stockholders' equity of such Person and its Restricted
Subsidiaries, as determined on a consolidated basis in accordance with GAAP,
less any amounts attributable to Disqualified Capital Stock of such Person and
any Preferred Stock of any of its Restricted Subsidiaries (other than to the
extent held by such Person or any of its Restricted Subsidiaries).
"Consolidated Non-Cash Assets" means, with respect to any Person on any date
of determination, the total assets of such Person and its Restricted
Subsidiaries less all cash and Cash Equivalents (including restricted cash) of
such Person and its Restricted Subsidiaries on such date determined on a
consolidated basis in accordance with GAAP. For purposes of the preceding
sentence, the "date of determination" shall be the last day of the fiscal
quarter immediately preceding the date of determination.
"Consolidated Non-Cash Charges" means, with respect to any Person for any
period, the aggregate depreciation, amortization and other non-cash expenses
of such Person and its Restricted Subsidiaries reducing Consolidated Net
Income of such Person and its Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP (excluding any such
charges constituting an extraordinary or nonrecurring item and net of any cash
payments made in such period in respect of any such non-cash expense).
"Consolidated Total Indebtedness" means, with respect to any Person, on any
date, without duplication, the aggregate outstanding principal amount of
Indebtedness of such Person and its Restricted Subsidiaries.
"Contingent Warrants" means warrants issued to the holders of the Notes,
exercisable for 8.0% of the Common Stock of the Company on a fully-diluted
basis as of the date of such issuance after giving effect to the issuance of
such Contingent Warrants in the event that the Company does not effect a
primary underwritten public offering (excluding any offering pursuant to Form
S-8 under the Securities Act or any other publicly registered offering
pursuant to the Securities Act pertaining to an issuance of shares of Common
Stock or securities exercisable therefor under any benefit plan, employee
compensation plan, or employee or director stock purchase plan) of Common
Stock of the Company pursuant to an effective registration statement under the
Securities Act on or prior to September 1, 1999 resulting in gross proceeds to
the Company of at least $35.0 million, issued pursuant to the terms of the
Warrant Agreement.
"Cumulative EBITDA" means the cumulative Consolidated EBITDA of the Company
from and after the first day of the first fiscal quarter beginning after the
Issue Date to the end of the fiscal quarter immediately
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preceding the date of determination ending not more than 135 days prior to the
date of determination, or, if such cumulative Consolidated EBITDA for such
period is negative, minus the amount by which such cumulative Consolidated
EBITDA is less than zero.
"Cumulative Interest Expense" means the aggregate amount of Consolidated
Interest Expense of the Company paid or accrued by the Company from and after
the first day of the first fiscal quarter beginning after the Issue Date to
the end of the fiscal quarter immediately preceding the date of determination
ending not more than 135 days prior to the date of determination.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of
Default.
"Determination Date" shall have the meaning set forth in the definition of
Leverage Ratio.
"Disqualified Capital Stock" means any Capital Stock which, by its terms (or
by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures (excluding any
maturity as the result of an optional redemption by the issuer thereof) or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof (except, in each case,
upon the occurrence of a Change of Control), in whole or in part, on or prior
to the final maturity date of the Notes.
"Electronic Messaging Business" shall have the meaning set forth in the
"Limitations on Line of Business" covenant.
"Eligible Institution" means a commercial banking institution that has
combined capital and surplus of not less than $500 million or its equivalent
in foreign currency, whose debt is rated "A" (or higher) according to S&P or
Moody's at the time as of which any investment or rollover therein is made.
"Equity Offering" means an underwritten primary public offering of Qualified
Capital Stock of the Company pursuant to a registration statement filed with
and declared effective by the Commission in accordance with the Securities
Act.
"Exchange Notes" means the Series B 14% Senior Notes due 2004 of the Company
issued in exchange for the Notes pursuant to the Notes Registration Rights
Agreement.
"fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for
cash, between an informed and willing seller and an informed and willing and
able buyer, neither of whom is under undue pressure or compulsion to complete
the transaction. Except as provided in the TIA, and except with respect to
non-cash Investments not exceeding $5,000,000, fair market value shall be
determined (I) with respect to any Asset Sale involving consideration of less
than $5,000,000, by management of the Company and (II) in all other cases
(whether or not involving an Asset Sale), by the Board of Directors of the
Company acting in good faith and shall be evidenced by a board resolution
(certified by the Secretary or Assistant Secretary of the Company) delivered
to the Trustee; provided, however, that if (A) the aggregate non-cash
consideration to be received by the Company or any Restricted Subsidiary from
any Asset Sale shall reasonably be expected to exceed $25,000,000 or (B) if
the net worth of any Restricted Subsidiary to be designated as an Unrestricted
Subsidiary shall reasonably be expected to exceed $25,000,000, then fair
market value shall be determined by a nationally recognized investment banking
firm.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States of America, which are applicable from time to
time and are consistently applied.
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"guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of
any other Person and, without limiting the generality of the foregoing, 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 other Person (whether arising by
virtue of partnership arrangements, or by agreement to keep-well, to purchase
assets, goods, securities or services, to 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) (but if in part, only to the extent
thereof); provided, however, that the term "guarantee" shall not include
(A) endorsements for collection or deposit in the ordinary course of business
and (B) guarantees (other than guarantees of Indebtedness) by the Company in
respect of assisting one or more Subsidiaries in the ordinary course of their
respective businesses, including without limitation guarantees of trade
obligations and operating leases, on ordinary business terms. The term
"guarantee" used as a verb has a corresponding meaning.
"incur" shall have the meaning set forth in "--Certain Covenants--Limitation
on Incurrence of Additional Indebtedness" above; and "incurrence" and
"incurred" shall have meanings correlative to the foregoing.
"Indebtedness" means with respect to any Person, without duplication, any
liability of such Person or such Person's Restricted Subsidiaries (i) for
borrowed money, (ii) evidenced by bonds, debentures, notes or other similar
instruments, (iii) constituting Capitalized Lease Obligations, (iv) incurred
or assumed as the deferred purchase price of property, or pursuant to
conditional sale obligations and title retention agreements (but excluding
trade accounts payable arising in the ordinary course of business), (v) for
the reimbursement of any obligor on any letter of credit, banker's acceptance
or similar credit transaction, (vi) for Indebtedness of others guaranteed by
such Person, (vii) for Interest Swap Obligations, (viii) for the higher of the
voluntary liquidation preference, involuntary liquidation preference, fixed
redemption price or repurchase price of all Disqualified Capital Stock and
(ix) for Indebtedness of any other Person of the type referred to in clauses
(i) through (viii) which is secured by any Lien on any property or asset of
such first referred to Person, whether or not such Indebtedness is assumed by
such Person or is not otherwise such Person's legal liability; provided,
however, that if the obligations so secured have not been assumed by such
Person or are otherwise not such Person's legal liability, the amount of such
Indebtedness for the purposes of this definition shall be limited to the
lesser of the amount of such Indebtedness secured by such Lien or the fair
market value of the assets or property securing such Lien. The amount of
Indebtedness of any Person at any date shall be the outstanding principal
amount of all unconditional obligations described above, to the extent that
such amount would be reflected on a balance sheet prepared in accordance with
GAAP, and the maximum liability at such date of such Person for any contingent
obligations described above. For purposes of this definition, the issuance of
any Warrants shall not constitute the incurrence of Indebtedness.
"Interest Swap Obligations" means the obligations of any Person under any
interest rate protection agreement, interest rate future, interest rate
option, interest rate swap, interest rate cap or other interest rate hedge or
arrangement.
"Investment" by any Person means any direct or indirect (i) loan, advance or
other extension of credit or capital contribution (by means of transfers of
cash or other property (valued at the fair market value thereof as of the date
of transfer) to others or payments for property or services for the account or
use of others, or otherwise), (ii) purchase or acquisition of Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness
issued by any other Person (whether by merger, consolidation, amalgamation or
otherwise and whether or not purchased directly from the issuer of such
securities or evidences of Indebtedness) and (iii) guarantee or assumption of
the Indebtedness of any other Person (except for an assumption of Indebtedness
for which the assuming Person receives consideration with a fair market value
at least equal to the principal amount of the Indebtedness assumed).
Investments shall exclude extensions of trade credit and advances to customers
and suppliers to the extent made in the ordinary course of business on
ordinary business terms. The amount of any non-cash Investment shall be the
fair market value of such Investment, as determined conclusively in good faith
by management of the Company unless the fair market value of such Investment
exceeds
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$5,000,000, in which case the fair market value shall be determined
conclusively in good faith by the Board of Directors of the Company at the
time such Investment is made. Notwithstanding the foregoing, the purchase or
acquisition of any securities of any other Person to the extent effected with
Qualified Capital Stock of the Company shall not be deemed to be an
Investment. The amount of any Investment shall not be adjusted for increases
or decreases in value, or write-ups, write-downs or write-offs with respect to
such Investment.
"Issue Date" means the actual date of original issuance of the Notes.
"Leverage Ratio" means, as to any Person, the ratio of (i) the Consolidated
Total Indebtedness of such Person as of the date of the transaction or event
giving rise to the need to calculate the Leverage Ratio (the "Determination
Date") on a consolidated basis in accordance with GAAP to (ii) the product of
(A) the Consolidated EBITDA of such Person for the full fiscal quarter for
which financial information is available ending immediately prior to the
Determination Date (such fiscal quarter, the "Measurement Period") and
(B) four.
For purposes of this definition, the Consolidated Total Indebtedness of the
Person as of the Determination Date shall be adjusted as if the Indebtedness
giving rise to the need to perform such calculation had been incurred and the
proceeds therefrom had been applied on the first day of the Measurement
Period. For purposes of calculating Consolidated EBITDA of the Company for the
Measurement Period immediately prior to the relevant Determination Date, (I)
any Person that is a Restricted Subsidiary on such Determination Date (or
would become a Restricted Subsidiary on such Determination Date in connection
with the transaction that requires the determination of such ratio) will be
deemed to have been a Restricted Subsidiary at all times during such
Measurement Period, (II) any Person that is not a Restricted Subsidiary on
such Determination Date (or would cease to be a Restricted Subsidiary on such
Determination Date in connection with the transaction that requires the
determination of such ratio) will be deemed not to have been a Restricted
Subsidiary at any time during such Measurement Period and (III) if the Company
or any Restricted Subsidiary shall have in any manner (x) acquired (including
through an Asset Acquisition or the commencement of activities constituting
such operating business) or (y) disposed of (including by way of an Asset Sale
or the termination or discontinuance of activities constituting such operating
business) any operating business during the Measurement Period or after the
end of such Measurement Period and on or prior to the Determination Date, such
calculation will be made on a pro forma basis in accordance with GAAP as if,
in the case of an Asset Acquisition or the commencement of activities
constituting such operating business, all such transactions had been
consummated on the first day of such Measurement Period and, in the case of an
Asset Sale or termination or discontinuance of activities constituting such
operating business, all such transactions had been consummated prior to the
first day of such Measurement Period.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof and any option or
other agreement to sell, and any filing of or any agreement to give, any
security interest).
"Material Subsidiary" means, at any date of determination, any one or more
Restricted Subsidiaries that, (i) for the most recent fiscal year of the
Company accounted for more than 10% of the consolidated revenues of the
Company (exclusive of all Unrestricted Subsidiaries) or (ii) as of the end of
such fiscal year, was the owner of more than 10% of the consolidated assets of
the Company (exclusive of all Unrestricted Subsidiaries), all as set forth on
the most recently available consolidated financial statements of the Company
and its consolidated Restricted Subsidiaries for such fiscal year prepared in
conformity with GAAP.
"Measurement Period" shall have the meaning set forth in the definition of
Leverage Ratio.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents (including payments in respect of
deferred payment obligations when received in the form of cash
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or Cash Equivalents) received by the Company or any Restricted Subsidiary from
such Asset Sale net of (i) reasonable out-of-pocket expenses and fees relating
to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees and sales commissions, recording fees, title insurance
premiums, appraisers' fees and costs reasonably incurred in preparation of any
asset or property for sale), (ii) taxes paid or reasonably estimated to be
payable (calculated based on the combined state, federal and foreign statutory
tax rates applicable to the Company or the Restricted Subsidiary consummating
such Asset Sale), (iii) repayment of Indebtedness secured by assets subject to
such Asset Sale, (iv) appropriate amounts to be provided by the Company or any
Restricted Subsidiary as a reserve, in accordance with GAAP against any
liabilities associated with such assets and retained by the Company or any
Restricted Subsidiary after such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities and liabilities related
to environmental matters and the after-tax cost of any indemnification
payments (fixed or contingent) attributable to the seller's indemnities to the
purchaser undertaken by the Company or any Restricted Subsidiary in connection
with any such Asset Sale (but excluding any payments which, by the terms of
the indemnities will not, under any circumstances, be made during the term of
the Notes) and (v) all distributions and other payments required to be made to
minority interests holders in Restricted Subsidiaries or joint ventures as a
result of such Asset Sale; provided, however, that if the instrument or
agreement governing such Asset Sale requires the transferor to maintain a
portion of the purchase price in escrow (whether as a reserve for adjustment
of the purchase price or otherwise) or to provide for indemnification of the
transferee for specified liabilities in a maximum specified amount, the
portion of the cash or Cash Equivalents that is actually placed in escrow or
segregated and set aside by the transferor for such indemnification
obligations shall not be deemed to be Net Cash Proceeds until the escrow
terminates or the transferor ceases to segregate and set aside such funds, in
whole or in part, and then only to the extent of the proceeds released from
escrow to the transferor or that are no longer segregated and set aside by the
transferor.
"Payment Restriction" shall have the meaning set forth in "--Certain
Covenants--Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries" above.
"Permitted Holder" means any of (i) Douglas J. Ranalli, any spouse or lineal
descendant thereof, any trust the beneficiaries of which are any of the
foregoing or any affiliate of any of the foregoing, and (ii) SingTel and its
affiliates.
"Permitted Indebtedness" means, without duplication, each of the following:
(i) the Notes, and the Exchange Notes;
(ii) Indebtedness of a Restricted Subsidiary of the Company owed to and
held by the Company or another Restricted Subsidiary of the Company, in
each case which is not subordinated in right of payment to any Indebtedness
of such Restricted Subsidiary, except that (x) any transfer of such
Indebtedness by the Company or a Restricted Subsidiary of the Company
(other than to the Company or to a Restricted Subsidiary of the Company)
and (y) the sale, transfer or other disposition by the Company or any
Restricted Subsidiary of Capital Stock of a Restricted Subsidiary of the
Company which is owed Indebtedness of another Restricted Subsidiary of the
Company such that it ceases to be a Restricted Subsidiary of the Company
shall, in each case, be an incurrence of Indebtedness by such Restricted
Subsidiary subject to the other provisions of the covenant described under
"--Certain Covenants--Limitation on Incurrence of Additional Indebtedness"
above;
(iii) Refinancing Indebtedness;
(iv) Interest Swap Obligations; provided, however, that such Interest
Swap Obligations are entered into to protect the Company from fluctuations
in interest rates of its Indebtedness, to the extent the notional principal
amount of such Interest Swap Obligations do not exceed the principal amount
of the Indebtedness to which such Interest Swap Obligations relate;
(v) Indebtedness of the Company or any Restricted Subsidiary incurred
under Vendor Financing Arrangements in an aggregate principal amount at any
one time outstanding not to exceed the lesser of (x) $40,000,000 or (y)
100% of the cost of the goods purchased from the vendor;
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(vi) Indebtedness of Fax International Japan, Inc. not to exceed
$5,000,000 principal amount in the aggregate at any one time outstanding;
(vii) Indebtedness incurred by the Company, not to exceed $25,000,000
principal amount in the aggregate at any one time outstanding provided that
such indebtedness is unsecured and subordinated, pursuant to a written
agreement, to the Company's obligations under the Indenture and the Notes;
(viii) Indebtedness of the Company or any Restricted Subsidiary
represented by letters of credit for the account of the Company or such
Restricted Subsidiary, as the case may be, in order to provide security for
workers' compensation claims, payment obligations in connection with self-
insurance or similar requirements in the ordinary course of business
pursuant to ordinary business terms;
(ix) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently (except
in the case of daylight overdrafts) drawn against insufficient funds in the
ordinary course of business; provided, however, that such Indebtedness is
extinguished within two business days of incurrence;
(x) Indebtedness outstanding on the Issue Date less any prepayments or
repayments in respect thereof including any indebtedness issued in lieu of
interest in respect of any indebtedness outstanding on the Issue Date;
(xi) Acquired Indebtedness of any corporation that becomes a Restricted
Subsidiary after the Issue Date which Indebtedness is existing at the time
such corporation becomes a Restricted Subsidiary; provided, however, that
(A) immediately after giving effect to such corporation becoming a
Restricted Subsidiary the Company could incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in accordance with the
Leverage Ratio of the covenant described under "--Certain Covenants--
Limitation on Incurrence of Additional Indebtedness" above, (B) such
Indebtedness is without recourse to the Company or to any Restricted
Subsidiary or to any of their respective properties or assets other than
the Person becoming a Restricted Subsidiary or its properties and assets
and (C) such Indebtedness was not incurred as a result of or in connection
with or in contemplation of such entity becoming a Restricted Subsidiary;
(xii) Indebtedness of the Company or any of its Restricted Subsidiaries
in an aggregate principal amount (or accreted value, as applicable) not to
exceed $15.0 million as of the date of any incurrence; and
(xiii) Indebtedness of the Company not to exceed (A) the aggregate cash
proceeds received by the Company after the Issue Date from the sale or
issuance of Qualified Capital Stock less (B) the portion of such proceeds
utilized to make, or anticipated to be used to make, Restricted Payments or
Permitted Investments described in clauses (iv), (x) or (xi) of the
definition of "Permitted Investments", after the Issue Date; provided that
(x) such Indebtedness shall have a final maturity which is later than the
final maturity of the Senior Notes and (y) the Weighted Average Life to
Maturity of such Indebtedness is greater than the Weighted Average Life to
Maturity of the Notes.
"Permitted Investment" means, without duplication, each of the following:
(i) Investments by the Company or any Restricted Subsidiary of the
Company in any Restricted Subsidiary of the Company (whether existing on
the Issue Date or created thereafter) or any Person that after such
Investment and, as a result thereof, becomes a Restricted Subsidiary of the
Company and Investments in the Company by any Subsidiary of the Company;
(ii) Cash and Cash Equivalents;
(iii) Loans or advances to directors, officers and employees made in the
ordinary course of business;
(iv) Investments by the Company or any Subsidiary of the Company for
which the sole consideration provided is Qualified Capital Stock;
(v) Investments arising as a result of the receipt by the Company or any
Restricted Subsidiary of non-cash consideration for an Asset Sale effected
in compliance with "--Certain Covenants--Limitation on Asset Sales" above;
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(vi) Investments in an aggregate amount (with each such Investment being
valued as of the date made and without giving effect to subsequent changes
in value) not to exceed the aggregate net proceeds, including the fair
market value of property other than cash (as determined in good faith by
the Board of Directors), received by the Company after the Issue Date from
the issuance and sale of its Capital Stock (other than Disqualified Stock)
to a Person who is not a Restricted Subsidiary of the Company, or from the
issuance to a Person who is not a Restricted Subsidiary of the Company of
any options, warrants or other rights to acquire Capital Stock of the
Company (in each case, exclusive of any Disqualified Stock or any options,
warrants or other rights that are redeemable at the option of the holder,
or are required to be redeemed prior to the Stated Maturity of the Notes,
less the aggregate net proceeds used to make or committed to be used to
make any Restricted Payments or any other Permitted Investments);
(vii) advances to customers made in the ordinary course of business;
(viii) Investments in Currency Agreements and Interest Rate Agreements;
(ix) Investments in evidences of Indebtedness, securities or other
property received by the Company or any Restricted Subsidiary from another
Person in connection with any bankruptcy proceedings or by reason of a
composition, restructuring or readjustment of debt or a reorganization of
such Person or as a result of foreclosure, perfection or enforcement of any
Lien;
(x) Investments in WorldVoice, Inc. (or any successor thereof) in an
aggregate amount not to exceed (A) $5,000,000 million and (B) an additional
$10,000,000 from and after April 1, 1997, in each case on a basis
consistent with the letters of intent relating thereto in effect as of the
Closing Date; and
(xi) other Investments (with each such Investment being valued as of the
date made and without giving effect to subsequent changes in value) in an
aggregate amount not to exceed $15,000,000 at any one time outstanding;
provided that not more than $5,000,000 of the Investments pursuant to this
clause (xi) is invested directly or indirectly within any one country.
"Permitted Liens" means, without duplication, each of the following:
(i) Liens in favor of the Trustee in its capacity as trustee for the
Holders;
(ii) Liens existing on the Issue Date as in effect on such date;
(iii) Liens on property of the Company or a Restricted Subsidiary
securing Indebtedness incurred pursuant to (A) the Leverage Ratio to the
extent the Indebtedness is incurred pursuant to a Vendor Financing
Agreement, (B) clauses (v), (vi) or (xii) of Permitted Indebtedness, and
(C) Liens on Capital Stock of Unrestricted Subsidiaries;
(iv) Liens on property existing on the date of acquisition thereof;
provided, however, that such Liens are not incurred as a result of, or in
connection with or in anticipation of, such transaction and such Liens
relate solely to the property so acquired;
(v) Liens to secure the payment of all or a part of the purchase price or
construction cost of acquired or constructed property which is to be used
by the Company exclusively in the Electronic Messaging Business, including
related activities and services, after the Issue Date; provided, however,
that the Indebtedness secured by such Liens shall not exceed 100% of the
cost of such property and such Liens shall not extend to any other property
or assets of the Company or of any Restricted Subsidiary other than the
property or assets so acquired;
(vi) Liens for taxes, assessments and governmental charges to the extent
not required to be paid under the Indenture;
(vii) statutory Liens of landlords and carriers, warehousemen, mechanics,
suppliers, materialmen, repairmen or other like Liens to the extent not
required to be paid under the Indenture;
(viii) pledges or deposits to secure lease obligations or nondelinquent
obligations under workers' compensation, unemployment insurance or similar
legislation (other than the Employee Retirement Income Security Act of
1974, as amended from time to time ("ERISA"));
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(ix) Liens to secure the performance of public statutory obligations that
are not delinquent, performance bonds or other obligations of a like nature
(other than for borrowed money), in each case incurred in the ordinary
course of business pursuant to ordinary business terms;
(x) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances incurred
in the ordinary course of business pursuant to ordinary business terms not
interfering in any material respect with the business of the Company or any
Restricted Subsidiary;
(xi) Liens upon specific items of inventory or other goods and proceeds
of any Person securing such Person's obligations in respect of letters of
credit or bankers' acceptances issued or created for the account of such
Person to facilitate the purchase, shipment or storage of such inventory or
other goods in the ordinary course of business pursuant to ordinary
business terms;
(xii) judgment and attachment Liens not giving rise to an Event of
Default;
(xiii) leases or subleases granted to others in the ordinary course of
business pursuant to ordinary business terms and consistent with past
practice not interfering in any material respect with the business of the
Company or any Restricted Subsidiary;
(xiv) any interest or title of a lessor in the property subject to any
lease, whether characterized as capitalized or operating other than any
such interest or title resulting from or arising out of a default by the
Company or any Restricted Subsidiary of its obligations under such lease;
(xv) Liens arising from filing UCC financing statements for precautionary
purposes in connection with true leases of personal property that are
otherwise permitted under the Indenture and under which the Company or any
Restricted Subsidiary is a lessee;
(xvi) Liens with respect to Acquired Indebtedness incurred in accordance
with the covenant described under "--Certain Covenants--Limitation of
Incurrence of Additional Indebtedness" above; provided, however, that (A)
such Liens secured such Acquired Indebtedness at the time of and prior to
the incurrence of such Acquired Indebtedness by the Company and were not
granted as a result of, in connection with, or in anticipation of, the
incurrence of such Acquired Indebtedness by the Company and (B) such Liens
do not extend to or cover any property or assets of the Company or of any
Restricted Subsidiary other than the property or assets that secured the
Acquired Indebtedness prior to the time such Indebtedness became Acquired
Indebtedness of the Company and are no more favorable to the lienholders
than those securing the Acquired Indebtedness prior to the incurrence of
such Acquired Indebtedness by the Company;
(xvii) Liens to secure Capitalized Lease Obligations to the extent
arising from transactions consummated in compliance with "--Certain
Covenants--Limitation on Incurrence of Additional Indebtedness" and "--
Limitation on Sale and Leaseback Transactions" above; provided, however,
that such Liens do not extend to or cover any property or assets of the
Company or of any Restricted Subsidiary, other than the property or assets
subject to such Capitalized Lease Obligation;
(xviii) any Lien to secure the refinancing of any Indebtedness described
in the foregoing clauses; provided, however, that to the extent any such
clause limits the amount secured or the asset subject to such Liens, no
refinancing shall increase the assets subject to such Liens or the amount
secured thereby beyond the assets or amounts set forth in such clauses;
(xix) Liens securing Indebtedness under the Steelcase Financing Documents
as in effect on the Issue Date and replacements thereof as permitted by the
Steelcase Financing Documents as in effect on the Issue Date; and
(xx) any Lien arising by operation of law.
"Person" means an individual, partnership, corporation, limited liability
company, unincorporated organization, trust or joint venture, or a
governmental agency or political subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
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"Productive Assets" means assets of a kind used or usable by the Company and
the Restricted Subsidiaries in Electronic Messaging Business or businesses
reasonably related thereto.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"refinance" means, in respect of any security or Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a
security or Indebtedness in exchange or replacement for, such security or
Indebtedness in whole or in part; "refinanced" and "refinancing" shall have
correlative meanings.
"Refinancing Indebtedness" means any refinancing by the Company of
Indebtedness of the Company or of any Restricted Subsidiaries existing on the
Issue Date or incurred in accordance with "--Certain Covenants--Limitation on
Incurrence of Additional Indebtedness" above (other than pursuant to clauses
(ii), (iv), (v), (vi), (viii) and (ix) of the definition of Permitted
Indebtedness); provided, however, that such Indebtedness so incurred to
refinance such other Indebtedness (the "Existing Indebtedness") (1) is not in
an aggregate principal amount as of the date of the consummation of such
proposed refinancing in excess of (or if such Indebtedness being incurred to
refinance the Existing Indebtedness is issued with original issue discount, at
an original issue price not in excess of) the sum of (i) the aggregate
principal amount outstanding of the Existing Indebtedness (provided that (a)
if such Existing Indebtedness was issued with original issue discount, in
excess of the accreted amount of such Existing Indebtedness (as determined in
accordance with GAAP) as of the date of such proposed refinancing, (b) if such
Existing Indebtedness was incurred pursuant to a revolving credit facility or
any other agreement providing a commitment for subsequent borrowings, with a
maximum commitment under the agreement governing the Indebtedness proposed to
be incurred not in excess of the maximum commitment amount under such Existing
Indebtedness and (c) any amount of such Existing Indebtedness owned or held by
the Company or any of its Subsidiaries shall not be deemed to be outstanding
for the purposes hereof) as of the date of such proposed refinancing, plus
(ii) the amount of any reasonable premium paid with respect to such Existing
Indebtedness and plus (iii) the amount of reasonable expenses incurred by the
Company in connection with such refinancing and (2) does not have (I) a
Weighted Average Life to Maturity that is less than the Weighted Average Life
to Maturity of the Existing Indebtedness or (II) a final maturity earlier than
the final maturity of the Existing Indebtedness; provided, further, however,
that (y) if such Existing Indebtedness is subordinate or junior to the Notes,
then such Indebtedness proposed to be incurred to refinance the Existing
Indebtedness shall be subordinate to the Notes at least to the same extent and
in the same manner as the Existing Indebtedness and (z) such Indebtedness
proposed to be incurred to refinance the Existing Indebtedness is not incurred
more than three months prior to the complete retirement or defeasance of the
Existing Indebtedness with the proceeds thereof. With respect to any
Refinancing of Indebtedness under the SingTel Credit Agreement and the SingTel
Equipment Financing Agreement, in addition to the foregoing, no Indebtedness
incurred to refinance such SingTel Indebtedness shall provide for any payment
of interest or other amounts thereon prior to the times at which, and not in
excess of the amount of, interest and other amounts are payable on the SingTel
Indebtedness.
"Restricted Payment" shall have the meaning set forth in the covenant
described under "--Certain Covenants--Limitation on Restricted Payments"
above.
"Restricted Subsidiary" means any present or future Subsidiary of the
Company which, as of the determination date, is not an Unrestricted
Subsidiary.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party providing for the
leasing to the Company or a Restricted Subsidiary of any property, whether
owned by the Company or any Restricted Subsidiary at the Issue Date or later
acquired, which has been or is to be sold or transferred by the Company or
such Restricted Subsidiary to such Person or to any other Person from whom
funds have been or are to be advanced by such Person on the security of such
property.
"SingTel" means Singapore Telecommunications Limited, its successors and
assigns.
95
<PAGE>
"SingTel Credit Agreement" means the Credit Agreement dated as of April 10,
1995 between the Company and SingTel N.V. (as amended) as in effect on the
issue date.
"SingTel Documents" means each of the agreements between SingTel or any of
its affiliates, on the one hand, and the Company or any Restricted Subsidiary,
on the other hand, in each case as in effect on the Closing Date.
"SingTel Equipment Financing Agreement" means the Term Loan Agreement--
Equipment dated as of April 10, 1995 between the Company and SingTel N.V. (as
amended) as in effect on the Issue Date.
"Stated Maturity," when used with respect to a Note or any installment of
interest thereon, means the date specified in such Note as the fixed date on
which the principal of such Note or such installment of interest is due and
payable.
"Subsidiary," with respect to any Person, means (i) any corporation of which
at least a majority of the outstanding Voting Stock shall at the time be
owned, directly or indirectly, by such Person or (ii) any other Person of
which at least a majority of the outstanding Voting Stock is at the time,
directly or indirectly, owned by such Person.
"Surviving Entity" shall have the meaning set forth in the covenant
described under "--Certain Covenants--Merger, Consolidation and Sale of
Assets."
"Trading Day" means with respect to a securities exchange or automated
quotation system, a day on which such exchange or system is open for a full
day of trading.
"Unrestricted Subsidiary" means a Subsidiary of the Company so designated by
a resolution adopted by the Board of Directors of the Company in accordance
with the covenant described under "--Certain Covenants--Limitation on
Restricted and Unrestricted Subsidiaries" above.
"U.S. Government Securities" means securities that are (x) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (y) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States
of America, the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America, which, in either case,
are not callable or redeemable at the option of the issuer thereof, and shall
also include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act) as custodian with respect to any such U.S.
Government obligation or a specific payment of principal of or interest on any
such U.S. Government obligation held by such custodian for the account of the
holder of such depository receipt; provided that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depository receipt from any amount received by the
custodian in respect of the U.S. Government obligation or the specific payment
of principal of or interest on the U.S. Government obligation evidenced by
such depository receipt.
"Vendor Financing Arrangements" means any Indebtedness (including
Indebtedness under any credit facility entered into with any vendor or
supplier or any financial institution acting on behalf of such vendor or
supplier); provided that such Indebtedness is incurred solely for the purpose
of financing the cost (including the cost of design, development, improvement,
construction or integration) of assets used or usable in the Electronic
Messaging Business.
"Voting Stock" means, with respect to any Person, securities of any class or
classes of Capital Stock in such Person entitling the holders thereof (whether
at all times or only so long as no senior class of stock has voting power by
reason of any contingency) to vote in the election of members of the Board of
Directors of such Person.
96
<PAGE>
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
or Preferred Stock at any date, the number of years obtained by dividing (a)
the then outstanding aggregate principal amount or liquidation preference of
such Indebtedness or Preferred Stock into (b) the total of the product
obtained by multiplying (i) the amount of each then remaining installment,
sinking fund, serial maturity or other required payment of principal or
liquidation preference, including payment at final maturity, in respect
thereof, by (ii) the number of years (calculated to the nearest one-twelfth)
which will elapse between such date and the making of such payment.
97
<PAGE>
BOOK-ENTRY; DELIVERY AND FORM
Except as set forth in the next paragraph, the Notes will be represented by
one or more permanent global certificates in fully registered form (each a
"Global Note" or a "Global Certificate"). Each Global Note will be deposited
with, or on behalf of, DTC and registered in the name of a nominee of DTC.
Notes (i) originally purchased by or transferred to Institutional
"Accredited Investors" (as defined in Rule 501(a)(1), (2), (3) or (7)
promulgated under the Securities Act) who are not QIBs or (ii) held by QIBs
who elect to take physical delivery of their certificates instead of holding
their interest through the Global Certificates (and which are thus ineligible
to trade through DTC) (collectively referred to herein as the "Non-Global
Purchasers") will be issued, in registered form, without interest coupons,
"Certificated Notes" ("Certificated Securities"). Upon the transfer to a QIB
of such Certificated Securities initially issued to a Non-Global Purchaser,
such Certificated Securities will, unless the transferee requests otherwise or
the Global Certificates have previously been exchanged in whole for such
Certificated Securities, be exchanged for an interest in the applicable Global
Certificates.
THE GLOBAL CERTIFICATES
The Company expects that pursuant to procedures established by DTC (i) upon
deposit of the Global Notes, DTC or its custodian will credit, on its internal
system, portions of the Global Notes to the respective accounts of persons who
have accounts with such depository and (ii) ownership of the Notes will be
shown on, and the transfer of ownership thereof will be effected only through,
records maintained by DTC or its nominee (with respect to interests of
participants) and the records of participants (with respect to interests of
persons other than participants). Such accounts initially will be designated
by or on behalf of the Initial Purchaser and ownership of beneficial interests
in the Global Notes will be limited to persons who have accounts with DTC
("participants") or persons who hold interests through participants. QIBs may
hold their interests in the Global Certificates directly through DTC if they
are participants in such system, or indirectly through organizations which are
participants in such system.
So long as DTC, or its nominee, is the registered owner or holder of the
Notes, DTC or such nominee will be considered the sole owner or holder of the
Notes represented by the applicable Global Certificate for all purposes under
the Indenture. No beneficial owner of an interest in the Global Certificates
will be able to transfer such interest except in accordance with DTC's
applicable procedures in addition to those provided for under the Indenture
with respect to the Exchange Notes.
Payments of the principal of, premium (if any) and interest (including
Additional or Special Interest) on, the Global Notes will be made to DTC or
its nominee, as the case may be, as the registered owner thereof. None of the
Company, the Trustee or any paying agent will have any responsibility or
liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in the Global Notes or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
the principal of, premium (if any) and interest (including Additional on
Special Interest) on, the Global Notes, will credit participants' accounts
with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Note, as shown on the records
of DTC or its nominee. The Company also expects that payments by participants
to owners of beneficial interests in any such Global Certificates held through
such participants will be governed by standing instructions and customary
practice, as is now the case with securities held for the accounts of
customers registered in the names of nominees for such customers. Such
payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in clearinghouse funds. If a
holder requires physical delivery of a Certificated Security for any reason,
including to sell Units, Notes, or Warrants to persons in states which require
physical delivery of
98
<PAGE>
such securities or to pledge such securities, such holder must transfer its
interest in the applicable Global Certificate in accordance with the normal
procedures of DTC, and including, with respect to the Exchange Notes and the
Warrants, in accordance with the procedures set forth in the Indenture.
DTC has advised the Company that DTC will take any action permitted to be
taken by a holder of Notes, (including the presentation of Notes for exchange
as described below) only at the direction of one or more participants to whose
account the DTC interests in the applicable Global Certificate is credited and
only in respect of such portion of Notes, the aggregate principal amount of
Notes, as to which such participant or participants has or have given such
direction. However, if there is an Event of Default under the Indenture, DTC
will exchange the applicable Global Certificate for Certificated Securities,
which it will distribute to its participants.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such
as banks, brokers, dealers and trust companies that clear through or maintain
a custodial relationship with a participant, either directly or indirectly
("indirect participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Certificates among participants of DTC,
it is under no obligation to perform such procedures, and such procedures may
be discontinued at any time. None of the Company or the Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
CERTIFICATED SECURITIES
If DTC is at any time unwilling or unable to continue as a depository for
any Global Certificate and a successor depository is not appointed by the
Company within 90 days, the Company will issue Certificated Securities in
exchange for the Global Certificates.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This Prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer
in connection with the resales of Exchange Notes received in exchange for
Private Notes where such Private Notes were acquired as a result of market-
making activities or other trading activities. The Company has agreed that for
a period of up to 180 days after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer that
requests such document in the Letter of Transmittal for use in connection with
any such resale.
The Company will not receive any proceeds from any sale of Exchange Notes by
broker-dealers or any other persons. Exchange Notes received by broker-dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive
99
<PAGE>
compensation in the form of commissions or concessions from any such broker-
dealer and/or the purchasers of any such Exchange Notes. Any broker-dealer
that resells Exchange Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Notes may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on any such resale of
Exchange Notes and any commissions or concessions received by any such persons
may be deemed to be underwriting compensation under the Securities Act. The
Letter of Transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incident to the Company's
performance of, or compliance with, the Registration Rights Agreement and will
indemnify the holders of Private Notes (including any broker-dealers), and
certain parties related to such holders, against certain liabilities,
including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the Exchange Notes offered hereby will
be passed upon for the Company by Latham & Watkins, New York, New York.
EXPERTS
The Financial Statements of the Company included in this Prospectus have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports appearing herein.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 under the Securities Act with respect to the Exchange Notes offered
hereby. As permitted by the rules and regulations of the Commission, this
Prospectus omits certain information, exhibits and undertakings contained in
the Registration Statement. For further information with respect to the
Company and the Exchange Notes offered hereby, reference is made to the
Registration Statement, including the exhibits thereto and the financial
statements, notes and schedules filed as a part thereof. As a result of the
Exchange Offer, the Company will become subject to the informational
requirements of the Exchange Act. The Registration Statement (and the exhibits
and schedules thereto), as well as the periodic reports and other information
filed by the Company with the Commission, may be inspected and copied at the
Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of the
Commission located at Room 1400, 75 Park Place, New York, New York 10007 and
Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago,
Illinois 6061-2511. Copies of such materials may be obtained from the Public
Reference Section of the Commission, Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and its public reference facilities in
New York, New York and Chicago, Illinois at the prescribed rates. Statements
contained in this Prospectus as to the contents of any contract or other
document are not necessarily complete, and in each instance reference is made
to the copy of such contract or document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
Pursuant to the Indenture, the Company has agreed to furnish to the Trustee
and to registered holders of the Exchange Notes, without cost to the Trustee
or such registered holders, copies of all reports and other information that
would be required to be filed by the Company with the Commission under the
Exchange Act, whether or not the Company is then required to file reports with
the Commission. As a result of this Exchange Offer, the Company will become
subject to the periodic reporting and other informational requirements of the
Exchange Act. In the event that the Company ceases to be subject to the
informational requirements of the
100
<PAGE>
Exchange Act, the Company has agreed that, so long as any Notes remain
outstanding, it will file with the Commission (but only if the Commission at
such time is accepting such voluntary filings) and distribute to holders of
the Private Notes or the Exchange Notes, as applicable, copies of the
financial information that would have been contained in such annual reports
and quarterly reports, including a "Management's Discussion and Analysis of
Financial Condition and Results of Operations," that would have been required
to be filed with the Commission pursuant to the Exchange Act. The Company will
also furnish such other reports as it may determine or as may be required by
law.
The principal address of the Company is 900 Chelmsford Street, Lowell
Massachusetts, and the Company's telephone number is (508) 551-7500.
101
<PAGE>
GLOSSARY OF TERMS
Account Executive--UNIFI employee responsible for selling the UNIFI service
to the customer.
Account Manager--UNIFI employee responsible for maintaining the relationship
with the customer after the sale has been consummated.
Analog--A transmission method employing a continuous (rather than pulsed or
digital) electric signal that varies in amplitude or frequency in response to
change in sound impressed upon a transducer in the sending device.
Beta test--A test period during which a new product or service is utilized
by a group of select customers to test quality, reliability, and other
features or qualities before being released to the general public.
bit--A bit, representing the binary digits 0 or 1, is the smallest quantity
of information processed by a computer.
bps--An abbreviation for bits per second, it represents an information flow
rate.
Broadcast Fax--A fax document which is transmitted to a network once, and is
then sent to a number of destinations.
Churn--The lost revenue associated with lost customers, expressed as a
percent of total revenue for the measurement period.
Circuit-Switched Network--The type of circuit used by the PSTN that permits
a real-time connection necessary for voice traffic. A call placed on a
circuit-switched network results in an end-to-end connection which remains
linked for the duration of the call.
Country Unit--With respect to each country, the UNIFI sales and service
force in that country.
Customer--A billing entity. A single company may have two subsidiaries which
are billed separately, in which case it would be represented as two customers.
Customer Action Report--A report faxed to a customer which details delivery
status of a fax document as well as actions taken by UNIFI to resolve
difficulties encountered in attempting to deliver a fax document.
Dedicated Lines--Telecommunication lines dedicated or reserved for use
exclusively by particular subscribers along predetermined routes.
Delivery Expert System--Proprietary software developed by the Company which
automatically resolves a wide range of common fax document delivery obstacles.
Digital--A method of storing, processing and transmitting information
through the use of distinct electronic or optical pulses that represent the
binary digits 0 and 1. Digital transmission/switching technologies employ a
series of discrete distinct pulses to represent information, as opposed to the
continuously variable analog signal.
Document Delivery Staff--The Company's 24-hour, multi-lingual staff of
analysts based in a centralized facility at corporate headquarters that is
responsible for resolving obstacles that prevent the delivery of a fax
document.
FaxLink--The Company's device that is attached to each customer's fax
machine and transparently routes appropriate fax traffic to the UNIFI network.
FCC--Federal Communication Commission.
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Fiber Optics--Fiber optic cable is the medium of choice for the
telecommunication and cable industries. Fiber is immune to electrical
interference and environmental factors that affect copper wire and satellite
transmissions. Fiber optic technology involves sending laser light pulses
across glass strands in order to transmit digital information.
Frame Relay--Frame relay is a high-speed data packet switching service used
to transmit data between computers. Frame relay supports data packets of
variable lengths at access speeds ranging from 56 kbps to 1500 kbps.
Intelligent Delivery Network--The Company's transmission network and value-
added customer support services that consist of nodes, leased fiber optic
cables and satellite links connecting the nodes, the Delivery Expert System
software and the Document Delivery Staff.
kbps--An abbreviation representing 1000 bits per second flow rate.
LAN--Local Area Network, a mechanism to provide connectivity and allow
communication among a number of personal computers. Typically a LAN
encompasses a single building or small group of buildings.
LAN-to-Fax Service--Fax service whereby the sender transmits the fax from a
desktop PC over a LAN to a fax server, which then transmits the fax over a
PSTN or a specialized network such as the Company's.
Local Exchange--A telephone switching center, operated by a local telephone
company, which provides for the connection of all telephones in the vicinity
to the PSTN.
Local Loop--The telephone circuits used to connect customer premise
equipment (e.g., a telephone) to the regional local exchange of the PSTN.
Long-haul Circuit--Long distance communication links that carry information
between and among local exchanges and other telephone switching centers.
Network Efficiency--The relative cost associated with the transport of
information from one location to another.
Node--A group of specially configured microcomputers and associated
telecommunications equipment that provides the interface between a PSTN and
the Company's network.
Off-net--Traffic which enters the Company's network but is transferred to a
third party carrier for delivery because the Company does not have a node in
the destination country.
On-net--Traffic carried over the Company's network to a destination country
in which the Company has a node.
One-Way Node--A network node capable of delivering a fax document to the
destination customer. One-way nodes cannot accept fax documents for delivery
to another destination.
Packet-Switched Network--A network which transmits digital information that
has been arranged into packets, each containing a header which includes the
address of the destination. Typically, the network provides for a variety of
paths to reach the destination. As each packet encounters a node, the address
header is evaluated to determine the optimum path to a destination.
personal delivery service--The Delivery Expert System and the Document
Delivery Staff.
PSTN--The Public Switched Telephone Network (i.e., ordinary telephone
lines).
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PTT--Authorities (usually government) which control postal, telephone and
telegraph services within a country.
real-time connection--A circuit which allows continuous interaction between
the source and the destination, as required in voice calls.
Store-and-Forward Network--A transmission network in which the data is
uploaded and briefly stored before being transmitted to the destination.
Because of the information storage mechanism, such networks do not support
real-time interactive sessions (i.e., voice traffic).
Two-Way Node--A network node capable of both delivering a fax document to
the destination customer and accepting fax documents for delivery to another
destination.
X.400--A telecommunications network standard designed to facilitate the flow
of messaging traffic.
104
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UNIFI COMMUNICATIONS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consolidated Financial Statements of UNIFI Communications, Inc.
Report of Independent Public Accountants................................ F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996............ F-3
Consolidated Statements of Operations for Each of the Three Years in the
Period Ended December 31, 1996......................................... F-4
Consolidated Statements of Stockholders' Equity (Deficit) for Each of
the Three Years in the Period Ended December 31, 1996.................. F-5
Consolidated Statements of Cash Flows for Each of the Three Years in the
Period Ended December 31, 1996......................................... F-6
Notes to Consolidated Financial Statements.............................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of Unifi Communications, Inc. and
Subsidiaries:
We have audited the accompanying consolidated balance sheets of Unifi
Communications, Inc. (a Delaware corporation) and subsidiaries as of December
31, 1995 and 1996, and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for each of the three years in
the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Unifi
Communications, Inc. and subsidiaries as of December 31, 1995 and 1996, and
the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
February 24, 1997
F-2
<PAGE>
UNIFI COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
ASSETS
<TABLE>
<CAPTION>
PRO FORMA
1995 1996 NOTE 2(Q)
----------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................ $11,123,620 $ 4,538,343 $110,042,636
Restricted cash.......................... -- 1,091,484 1,091,484
Accounts receivable, less reserves of
approximately $184,000 and $18,000 in
1995 and 1996, respectively............. 1,801,044 4,700,403 4,700,403
Accounts receivable from principal stock-
holder.................................. 100,343 -- --
Prepaid expenses and other current as-
sets.................................... 411,900 811,374 811,374
----------- ----------- ------------
Total current assets................... 13,436,907 11,141,604 116,645,897
----------- ----------- ------------
Property and Equipment, net............... 7,765,337 24,824,329 24,824,329
----------- ----------- ------------
Restricted Cash........................... -- -- 46,357,109
----------- ----------- ------------
Minority Interest in Fax Japan............ 51,690 1,000,000 1,000,000
----------- ----------- ------------
Deferred Financing Costs, net............. 2,844,593 2,764,152 9,670,402
----------- ----------- ------------
Other Assets, net......................... 1,279,656 1,454,323 1,454,323
----------- ----------- ------------
$25,378,183 $41,184,408 $199,952,060
=========== =========== ============
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<S> <C> <C> <C>
CURRENT LIABILITIES:
Current portion of notes payable.... $ 484,121 $ 2,776,753 $ 2,776,753
Current portion of note payable to
principal stockholder.............. -- 4,232,348 --
Current portion of capital lease ob-
ligations.......................... 1,731,973 1,483,413 1,483,413
Advances from principal stockhold-
er................................. -- 4,317,563 4,317,563
Accounts payable.................... 2,435,030 13,659,604 1,659,604
Accrued expenses.................... 2,153,200 10,608,224 10,608,224
------------ ------------ ------------
Total current liabilities......... 6,804,324 37,077,905 20,845,557
------------ ------------ ------------
LONG-TERM DEBT:
Senior Notes payable................ -- -- 166,811,409
Capital lease obligations, net of
current portion.................... 620,796 1,821,074 1,821,074
Notes payable, net of current por-
tion............................... 532,533 3,433,020 3,433,020
Notes payable to principal stock-
holder............................. 8,549,616 41,359,176 41,359,176
------------ ------------ ------------
Total long-term debt.............. 9,702,945 46,613,270 213,424,679
------------ ------------ ------------
COMMITMENTS (Note 11)
STOCKHOLDERS' EQUITY (DEFICIT):
Convertible preferred stock, $1.00
par value-
Authorized--24,715,500 shares
Issued and outstanding--13,515,030
shares in 1995 and 1996
(preference in liquidation of
$41,029,394 at December 31,
1996).............................. 13,515,030 13,515,030 13,515,030
Common stock, $.01 par value--
Authorized--50,000,000 shares
Issued and outstanding--3,697,289
shares in 1995 and 3,786,025
shares in 1996..................... 36,973 37,856 37,856
Additional paid-in capital.......... 25,993,484 23,664,373 23,664,373
Accumulated deficit................. (31,373,582) (80,286,448) (80,286,448)
Common stock warrants............... -- -- 8,188,591
Cumulative translation adjustment... 699,009 562,422 562,422
------------ ------------ ------------
Total stockholders' equity (defi-
cit)............................. 8,870,914 (42,506,767) (34,318,176)
------------ ------------ ------------
$ 25,378,183 $ 41,184,408 $199,952,060
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
UNFI COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
1994 1995 1996
----------- ------------ ------------
<S> <C> <C> <C>
REVENUES............................. $ 6,952,406 $ 10,664,913 $ 25,217,766
COSTS AND EXPENSES:
Cost of revenues................... 4,655,995 7,839,687 27,598,721
Sales and customer service......... 8,326,013 11,837,635 25,706,514
Research and development........... 1,655,776 4,810,459 11,620,245
General and administrative......... 1,800,554 2,676,369 4,165,170
Information systems................ 289,787 802,847 3,526,542
----------- ------------ ------------
Total costs and expenses......... 16,728,125 27,966,997 72,617,192
------------
Loss from operations............. (9,775,719) (17,302,084) (47,399,426)
INTEREST INCOME...................... 16,093 720,746 154,812
INTEREST EXPENSE..................... (601,711) (411,287) (2,498,807)
OTHER INCOME (EXPENSE)............... 76,287 (144,438) (117,755)
----------- ------------ ------------
Loss before minority interest.... (10,285,050) (17,137,063) (49,861,176)
MINORITY INTEREST IN FAX JAPAN....... 1,524,607 2,479,955 948,310
----------- ------------ ------------
Net loss............................. $(8,760,443) $(14,657,108) $(48,912,866)
=========== ============ ============
NET LOSS PER COMMON SHARE............ $ (2.64) $ (4.26) $ (13.04)
=========== ============ ============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING......................... 3,328,800 3,437,464 3,752,089
=========== ============ ============
PRO FORMA NET LOSS PER COMMON SHARE.. $ (.96) $ (.96) $ (2.83)
=========== ============ ============
PRO FORMA WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING.................. 9,148,425 15,290,986 17,267,119
=========== ============ ============
</TABLE>
- --------
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
UNFI COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK
----------------------- -------------------
TOTAL
ADDITIONAL CUMULATIVE STOCKHOLDERS'
NUMBER $.01 NUMBER $.01 PAID-IN ACCUMULATED DEFERRED TRANSLATION EQUITY
OF SHARES PAR VALUE OF SHARES PAR VALUE CAPITAL DEFICIT COMPENSATION ADJUSTMENT (DEFICIT)
---------- ----------- --------- --------- ----------- ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER
31, 1993........ 4,294,038 $ 4,294,038 3,323,800 $33,238 $ 469,909 $ (7,956,031) $(14,427) $ -- $ (3,173,273)
Compensation
expense from
vesting of
restricted
stock.......... -- -- -- -- -- -- 12,377 -- 12,377
Sale of Series D
convertible
preferred
stock, net of
issuance costs
of $685,348.... 2,013,157 2,013,157 -- -- 4,995,318 -- -- -- 7,008,475
Increase in
cumulative
translation
adjustment..... -- -- -- -- -- -- -- 360,524 360,524
Gain related to
sale of Fax
Japan stock.... -- -- -- -- 3,660,573 -- -- -- 3,660,573
Net loss........ -- -- -- -- -- (8,760,443) -- -- (8,760,443)
---------- ----------- --------- ------- ----------- ------------ -------- -------- ------------
BALANCE, DECEMBER
31, 1994........ 6,307,195 6,307,195 3,323,800 33,238 9,125,800 (16,716,474) (2,050) 360,524 (891,767)
Compensation
expense from
vesting of
restricted
stock.......... -- -- -- -- -- -- 2,050 -- 2,050
Sale of Series G
convertible
preferred
stock, net of
issuance costs
of $74,700..... 8,570,000 8,570,000 -- -- 21,350,300 -- -- -- 29,920,300
Repurchase of
convertible
preferred stock
and common
stock
warrants....... (1,738,440) (1,738,440) -- -- (5,647,398) -- -- -- (7,385,838)
Conversion of
subordinated
debentures to
stockholders... 376,275 376,275 -- -- 1,037,794 -- -- -- 1,414,069
Exercise of
stock options.. -- -- 373,489 3,735 126,988 -- -- -- 130,723
Increase in
cumulative
translation
adjustment..... -- -- -- -- -- -- -- 338,485 338,485
Net loss........ -- -- -- -- -- (14,657,108) -- -- (14,657,108)
---------- ----------- --------- ------- ----------- ------------ -------- -------- ------------
BALANCE, DECEMBER
31, 1995........ 13,515,030 13,515,030 3,697,289 36,973 25,993,484 (31,373,582) -- 699,009 8,870,914
Exercise of
stock options
and warrants... -- -- 88,736 883 64,173 -- -- -- 65,056
Deemed dividend
on acquisition
of SingCom from
principal
stockholder.... -- -- -- -- (2,393,284) -- -- -- (2,393,284)
Decrease in
cumulative
translation
adjustment..... -- -- -- -- -- -- -- (136,587) (136,587)
Net loss........ -- -- -- -- -- (48,912,866) -- -- (48,912,866)
---------- ----------- --------- ------- ----------- ------------ -------- -------- ------------
BALANCE, DECEMBER
31, 1996........ 13,515,030 $13,515,030 3,786,025 $37,856 $23,664,373 $(80,286,448) $ - $562,422 $(42,506,767)
========== =========== ========= ======= =========== ============ ======== ======== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
UNFI COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
1994 1995 1996
----------- ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................. $(8,760,443) $(14,657,108) $(48,912,866)
Adjustments to reconcile net loss to
net cash used in operating
activities--
Depreciation and amortization........ 1,717,539 2,229,789 6,377,569
Minority interest in Fax Japan....... (1,524,607) (2,479,955) (948,310)
Compensation expense from issuance
of common stock..................... 12,377 2,050 --
Changes in assets and liabilities,
net of effects from the acquisition
of SingCom--
Accounts receivable................ (171,769) (1,092,533) (2,459,448)
Accounts receivable from
stockholder....................... -- (100,343) 100,343
Prepaid expenses and other current
assets............................ (224,670) (173,897) 323,521
Accounts payable................... 1,149,378 431,811 10,249,072
Accrued expenses................... 25,457 1,428,043 8,424,359
Advances from stockholder.......... -- -- 4,317,563
----------- ------------ ------------
Net cash used in operating
activities...................... (7,776,738) (14,412,143) (22,528,197)
----------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment.. (1,941,191) (5,153,314) (20,137,531)
Cash acquired in purchase of
SingCom............................. -- -- 162,004
Increase in other assets............. (773,190) (803,943) (680,433)
----------- ------------ ------------
Net cash used in investing
activities...................... (2,714,381) (5,957,257) (20,655,960)
----------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital lease
obligations......................... (1,087,747) (1,309,143) (1,468,647)
Proceeds from issuance of convertible
subordinated debentures to
stockholders........................ 718,400 810,000 --
Repayment of convertible subordinated
debentures to stockholders.......... (325,000) (1,777,579) --
Proceeds from notes payable to
stockholders........................ 5,000 1,000,000 --
Repayments on notes payable to
stockholders........................ -- (1,010,000) --
Proceeds from issuance of notes
payable............................. 200,000 3,057,802 6,785,551
Repayments on notes payable.......... (536,690) (2,241,148) --
Proceeds from borrowings under notes
payable with principal stockholder.. -- 8,357,480 32,809,560
Deferred financing costs............. -- (2,844,592) --
Proceeds from borrowings under line
of credit with a bank............... -- 350,000 --
Repayment on revolving line of credit
with a bank......................... -- (350,000) --
Payments for repurchase of
convertible preferred stock and
common stock warrants............... -- (7,385,838) --
Proceeds from the exercise of stock
options and warrants................ -- 130,723 65,056
Proceeds from sale of convertible
preferred stock..................... 7,008,475 29,920,300 --
Proceeds from sale/leaseback of
property and equipment.............. 800,883 -- --
Proceeds from sale of Fax Japan
stock............................... 7,613,444 -- --
----------- ------------ ------------
Net cash provided by financing
activities...................... 14,396,765 26,708,005 38,191,520
----------- ------------ ------------
NET EFFECT OF FOREIGN CURRENCY
TRANSLATION.......................... 360,524 338,485 (501,156)
----------- ------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS..................... 4,266,170 6,677,090 (5,493,793)
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR.............................. 180,360 4,446,530 11,123,620
----------- ------------ ------------
CASH AND CASH EQUIVALENTS, END OF
YEAR................................. $ 4,446,530 $ 11,123,620 $ 5,629,827
=========== ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
UNFI COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(1) OPERATIONS
Unifi Communications, Inc. (formerly Fax International, Inc.) and
subsidiaries (the Company) was incorporated on September 20, 1990. The Company
provides international enhanced facsimile transmission and delivery services.
The Company is subject to a number of risks common to companies in similar
stages of development, including dependence on key individuals, competition
from substitute services and larger companies, the need for adequate financing
to fund future operations, the continued successful development and marketing
of its services and the attainment of profitable operations. Although the
Company has completed a significant financing as described in Note 17, the
Company continues to fund significant operating losses while seeking
additional capital.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements reflect the application
of certain significant accounting policies as described below and elsewhere in
the notes to consolidated financial statements.
(a) Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of the Company, its wholly owned subsidiaries and majority-owned Fax
International Japan, Ltd. (FIJ) (51% owned). All material intercompany
accounts and transactions of the consolidated companies have been
eliminated in consolidation.
(b) Minority Interest
In March 1994, the Company sold 196 shares of the common stock of its
subsidiary, FIJ, to two Japanese corporations for approximately $7,600,000.
These shares represent 49% of the voting interest of FIJ, and as long as
the Company owns greater than 50% of the voting interest of FIJ, the
Company has control of the Board of Directors. The accounts of FIJ are
consolidated, and the 49% ownership is treated as a minority interest.
Accordingly, the accompanying consolidated balance sheets and statements of
operations reflect 49% of FIJ's loss as a minority interest. At December
31, 1995 and 1996, the cumulative losses allocated to the minority interest
exceeded the minority interest's investment. The minority interest has
agreed to fund losses up to an additional $1,000,000 through the guarantee
of debt. Therefore, the minority interest balance as of December 31, 1995
and 1996 is presented as an asset to the extent cumulative losses allocated
to the minority interests exceed the basis of their investments. The debt
will not be repaid until the minority interests basis is recovered. For the
year ended December 31, 1996, the 49% loss of FIJ exceed the $1,000,000
guaranteed debt, therefore, the Company recorded an additional minority
loss of approximately $148,000 in the consolidated statement of operations.
The Company also entered into an operating agreement with FIJ that
requires the Company to perform certain services for FIJ in exchange for a
management fee equal to 5% of FIJ's gross revenues. A stockholders'
agreement was also executed with the two Japanese corporations. The
agreement requires the two Japanese corporations to provide loans of up to
approximately $2,000,000 to FIJ, if requested by FIJ. In connection with
this financing, the Company issued warrants to purchase 125,000 shares of
the Company's $.01 par value common stock at an exercise price of $.40 per
share to the two Japanese corporations. No value was ascribed to these
warrants as the amount would not be material to the financial statements.
The stockholders' agreement provides the Company with four of seven Board
of Directors' seats. Certain significant transactions, such as borrowings
greater than $100,000, issuance of equity securities,
F-7
<PAGE>
UNIFI COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31,1996
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
consolidations and mergers, liquidations and other events, as defined,
require a 2/3 Board approval. This agreement also provides the two Japanese
corporations that own 49% of FIJ with special stockholder rights, including
appointment of the President; commissions with respect to new customers
sold by the respective stockholder, as defined; right of first refusal on
asset-based lease financings for FIJ; right of first refusal on equity
financings for FIJ; and certain rights in the event the Company has a
change in control, including a put option to the Company and a call option
by the Company, as defined in the stockholders' agreement. The agreement
also restricts the sale of FIJ's stock by all stockholders and provides a
special exit right to the 49% stockholder group to sell all, but not less
than all, of the stock owned to the other stockholders pro rata, as
defined.
(c) Cash and Cash Equivalents
Cash and cash equivalents are stated at cost, which approximates market.
The Company considers highly liquid investments purchased with original
maturities at the date of acquisition of three months or less to be cash
equivalents. Cash equivalents consist primarily of money market funds that
are readily convertible to cash.
(d) Depreciation and Amortization
The Company provides for depreciation and amortization by charges to
operations in amounts estimated to allocate the cost of property and
equipment over their estimated useful lives on the straight-line basis, as
follows:
<TABLE>
<CAPTION>
ESTIMATED
ASSET CLASSIFICATION USEFUL LIFE
-------------------- -------------
<S> <C>
Equipment.................................................... 3-6 Years
Equipment under capital lease................................ Life of lease
Furniture and fixtures....................................... 3-15 Years
Leasehold improvements....................................... Life of lease
</TABLE>
The Company charged to operations depreciation and amortization of
$1,655,000, $2,153,000 and $5,721,000 for the years ended December 31,
1994, 1995 and 1996, respectively.
Effective January 1, 1996, the Company changed the estimated useful life
of certain equipment from five to three years. This change in estimate,
which has been recorded prospectively, increased depreciation expense by
approximately $1,553,000 in the year ended December 31, 1996.
(e) Deferred Financing Costs
Deferred financing costs consists of the following:
<TABLE>
<CAPTION>
PRO FORMA
1995 1996 1996
---------- ---------- ----------
<S> <C> <C> <C>
Deferred financing costs................. $3,282,222 $3,282,222 $3,282,222
Deferred senior note offering costs...... -- 576,004 7,482,254
---------- ---------- ----------
3,282,222 3,858,226 10,764,476
Less--Accumulated amortization........... 437,629 1,094,074 1,094,074
---------- ---------- ----------
$2,844,593 $2,764,152 $9,670,402
========== ========== ==========
</TABLE>
F-8
<PAGE>
UNIFI COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31,1996
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
(e) Deferred Financing Costs (Continued)
Deferred financing costs resulted from securing the Singapore
Telecommunications financing described in Note 3. Deferred Senior Note
offering costs resulted from the Senior Note offering described in Note 17.
These costs are being amortized over five years and seven years,
respectively.
(f) Revenue Recognition
Revenues are recorded in the period in which the related service is
provided.
(g) Research and Development Costs
The Company charges research and development costs to operations as
incurred.
(h) Foreign Currency Translation
Assets and liabilities of foreign subsidiaries were translated using the
exchange rate in effect at the balance sheet date in accordance with
Statement of Financial Standards (SFAS) No. 52, Foreign Currency
Translation. Revenue and expense accounts were translated using a weighted
average of exchange rates in effect during the year. The resulting
translation adjustments are excluded from net income and are accumulated as
a separate component of stockholders' equity. Foreign currency transaction
gains or losses are reflected in operations and are not material.
(i) Management Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(j) Financial Instruments
SFAS No. 107, Disclosures About Fair Value of Financial Instruments,
requires disclosure about fair value of financial instruments. Financial
instruments consist of cash equivalents, accounts receivable and notes
payable. The estimated fair value of these financial instruments
approximates their carrying value.
(k) Net Loss and Pro Forma Net Loss per Common Share
Net loss per common share is based on the weighted average number of
common shares outstanding. Shares of stock issuable pursuant to stock
options, warrants and upon the conversion of the subordinated debentures
have not been considered, as their effect would be antidilutive. Pro forma
net loss per share assumes the weighted average conversion of all shares of
convertible preferred stock outstanding for each year.
(l) Concentrations of Credit Risk
SFAS No. 105, Disclosure of Information About Financial Instruments with
Off-Balance-Sheet Risk and Financial Instruments with Concentrations of
Credit Risk, requires disclosure of any significant off-
F-9
<PAGE>
UNIFI COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31,1996
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
balance-sheet and credit risk concentrations. Financial instruments, which
potentially subject the Company to concentrations of credit risk, are
principally cash and cash equivalents and accounts receivable. The Company
places its investments in highly rated institutions. Concentrations of
credit risk with respect to accounts receivable are limited to certain
customers to whom the Company makes substantial sales. To reduce risk, the
Company routinely assesses the financial strength of its customers and, as
a consequence, believes that its accounts receivable credit risk exposure
is limited. The Company maintains an allowance for potential credit losses
but historically has not experienced any significant losses related to
individual customers or groups of customers in any particular industry or
geographic area.
(m) Postretirement Benefits
The Company has no obligations under SFAS No. 106, Employers' Accounting
for Postretirement Benefits Other Than Pensions, as it does not currently
offer such benefits.
(n) Noncash Investing and Financing Activities
The following table summarizes the supplemental disclosures of the
Company's noncash transactions for the periods indicated below:
<TABLE>
<CAPTION>
1994 1995 1996
---------- ---------- -----------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF NONCASH
TRANSACTIONS:
In connection with the acquisition of
SingCom (Note 15)-
Fair value of assets acquired......... $ -- $ -- $(1,255,032)
Deemed dividend....................... -- -- (2,393,285)
Liabilities assumed................... -- -- 1,060,721
Issuance of promissory note........... -- -- 2,749,600
---------- ---------- -----------
Cash acquired..................... $ -- $ -- $ 162,004
---------- ---------- -----------
Conversion of convertible
subordinated debentures to Series D
and Series F convertible preferred
stock................................ $ -- $1,414,069 $ --
---------- ---------- -----------
Conversion of accrued interest to
convertible subordinated debentures
to stockholders...................... $ 39,000 $ -- $ --
---------- ---------- -----------
Gain related to sale of Fax Japan
stock................................ $3,660,573 $ -- $ --
---------- ---------- -----------
Acquisition of property and equipment
under capital lease obligations...... $2,544,576 $ 729,752 $ 2,420,365
========== ========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest................ $ 387,208 $ 570,037 $ 351,803
========== ========== ===========
</TABLE>
(o) Restricted Cash
The Company has approximately $1,091,000 of restricted cash at December 31,
1996. The restricted cash consists of cash equivalents, which FIJ and the
Company's China subsidiary is required to maintain as a condition of certain
loans that mature during 1997.
(p) New Accounting Standards
In March 1995, the Financial Accounting Standards Board (FASB) issued SFAS
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets To Be Disposed Of, which is effective for fiscal years beginning after
December 15, 1995. The Company elected early adoption of SFAS No. 121,
effective
F-10
<PAGE>
UNIFI COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31,1996
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
January 1, 1996. The adoption of this standard did not have a material
effect on the Company's financial position or results of operations. The
Company evaluated its long-lived assets and determined that no material
adjustment was required.
In 1997, the FASB issued SFAS No. 128, Earnings per Share. SFAS No. 128
establishes standards for computing and presenting earnings per share and
applies to entities with publicly held common stock or potential common
stock. This statement is effective for fiscal years ending after December
15, 1997 and early adoption is not permitted. When adopted, the statement
will require restatement of prior years' earnings per share. The Company
will adopt this statement for its fiscal year ended December 31, 1997. The
Company believes that the adoption of SFAS No. 128 will not have a material
effect on its financial statements.
(q) Pro Forma Balance Sheet Presentation
The pro forma balance sheet at December 31, 1996 gives effect to the sale
of the Senior Notes, as described in Note 17. Pro forma adjustments have
been made to record the Senior Notes at their discounted amount of
$166,811,409, to record the value of the warrants of $8,188,591, and to
record net proceeds of cash received by the Company of $105,504,293, after
deducting working capital requirements of $12,000,000, offering costs of
$6,906,250, payments for the purchase of SingCom for $4,232,348 (see Note
15), and the required escrowed interest payments of $46,357,109.
(r) Reclassifications
Certain prior-year account balances have been reclassified to be
consistent with the current year's presentation.
(3) SINGAPORE TELECOMMUNICATIONS FINANCING
On April 10, 1995, the Company sold to SingTel Global Services Pte Ltd.
(SingTel Global) 8,570,000 shares of Series G convertible preferred stock for
$3.50 per share for aggregate gross proceeds of approximately $30,000,000. The
rights, preferences and privileges of the Series G Preferred Stock are
described in Note 10(a). As part of a stockholders' agreement, SingTel Global
has the right to initiate a call offer for certain outstanding shares of the
Company's capital stock, prior to the fifth anniversary of the stockholders'
agreement, as defined. The call price, as defined, shall not exceed $20.00 per
share. The founder and major stockholder of the Company has agreed to sell his
shares in the event of such a call offer. In addition, in the event of a call
offer, SingTel Global has the obligation to purchase all shares offered for
sale under this call option.
In connection with the sale of Series G convertible preferred stock and debt
financing, certain third-party individuals were issued options to purchase
90,000 shares of common stock at $.35 per share. No value was ascribed to
these options as the amount would not be material to the financial statements.
In conjunction with the Series G preferred stock investment, SingTel
(Netherlands Antilles) Pte N.V. (SingTel NA) provided the Company with a five-
year credit facility, under which the Company may borrow up to a maximum of
$25,000,000. All amounts drawn under the credit facility are due five years
after the final drawdown date or, if earlier, a final maturity date of April
10, 2003. The Company paid a facility fee of $1,968,750 upon execution of this
credit facility. This amount has been capitalized as a deferred financing cost
and is being amortized over five years. Borrowings will accrue interest at 1%
over the five-year benchmark U.S. Treasury bond rate, as defined, and will be
compounded annually. After a 30-month interest payment moratorium period,
measured from the date of the first drawdown, interest will be due on a
quarterly basis. At SingTel NA's option, 50% of the debt, up to $12,500,000,
and accrued interest may be converted into the Company's Series H
F-11
<PAGE>
UNIFI COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31,1996
(3) SINGAPORE TELECOMMUNICATIONS FINANCING--(CONTINUED)
preferred stock at a price of $10.50 per share. In the event of a public
offering, SingTel NA has the option to convert all principal and accrued
interest into common stock at the public offering price. At December 31, 1996,
the Company had reached the maximum borrowing capacity of $25,000,000 and
approximately $1,359,000 of accrued interest was also payable.
SingTel NA has also provided the Company with $15,000,000 of financing to
purchase certain types of fixed assets at an interest rate equal to the six-
month LIBOR rate. Principal payments are due three years subsequent to the
financing drawdown date, as defined, with interest payable quarterly. The
equipment financing availability expires on April 10, 2000. In consideration
of the asset-based financing, the Company has paid a $1,181,250 facility fee
upon execution of the agreement. This amount has been capitalized as a
deferred financing cost and is being amortized over five years. The Company
had $15,000,000 of principal and approximately $200,000 of accrued interest
outstanding at December 31, 1996 under this facility.
On February 14, 1997, the Company entered into a debt restructuring
agreement with SingTel (the Debt Restructuring Agreement). Under the terms of
the Debt Restructuring Agreement, the Company's credit facility and asset
facility with SingTel NA were amended to provide for a final maturity under
each of such facilities on the later of (i) March 1, 2005, or (ii) the date on
which the Senior Notes discussed in Note 17, are paid, defeased, redeemed or
otherwise satisfied in full (the Senior Note Payment Date) (provided that if
the Senior Note Payment Date is prior to March 1, 2005, borrowings under the
credit and asset facilities will become due 91 days after the Senior Note
Payment Date). The interest rate under the credit facility was also increased
to 3% over the five-year benchmark U.S. Treasury bond rate, as defined, on the
applicable drawdown date. Interest under the credit facility shall accrue and
be added to the outstanding principal balance on a quarterly basis until the
Senior Note Payment Date. Thereafter, interest shall be paid quarterly, in
arrears. Under the Debt Restructuring Agreement, the borrowings under the
credit facility will no longer be convertible into the Company's Series H
preferred stock. The amendment to the asset facility provides for a new
interest rate equal to the six-month LIBOR rate on the applicable drawdown
date plus 2%. Interest under the asset facility shall accrue and be added to
the outstanding principal balance on a quarterly basis until the Senior Note
Payment Date. Thereafter, interest shall be paid quarterly, in arrears.
Pursuant to the Debt Restructuring Agreement, SingTel NA's commitments under
the credit facility and asset facility have expired. Also, as part of the Debt
Restructuring Agreement, the Company granted SingTel Global a warrant to
purchase 2,000,000 shares of the Company's common stock at a price of $1.83
per share. The value of these warrants using the Black-Scholes valuation
formula is approximately $0.87 per share, which will result in discounting the
related debt and in additional interest expense being charged to operations
over the remaining life of the debt of approximately $1,740,000.
(4) RELATED PARTY TRANSACTIONS
The Company has entered into agreements with certain stockholders, which
provide debt financing and provide for license fees, royalties and
transmission and management fees to be paid to the Company. The Company
believes that the terms of these transactions are on terms no less favorable
to the Company than could be obtained from unaffiliated third parties. In
addition, the Company has issued warrants to certain stockholders in
connection with certain debt and equity financing. See Notes 2b, 3, 6 and 15
for the terms of these transactions.
During 1995, the Company initiated a Stock Buyback Program, whereby the
Company purchased various preferred stock and warrantholders rights for $3.50
per share (see Note 10).
The Company has licensed the rights to its technology for use in Singapore
to SingTel in exchange for a license fee based upon a percentage of the future
gross revenue generated in Singapore. SingTel also has the
F-12
<PAGE>
UNIFI COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31,1996
(4) RELATED PARTY TRANSACTIONS--(CONTINUED)
right to purchase 49% of the equity in companies to be established by the
Company in Australia and the Philippines based on defined terms and
conditions.
The Company has entered into a letter of intent to acquire certain of the
assets of SingCom, a wholly owned subsidiary of SingTel (see Note 15).
(5) ADVANCES FROM PRINCIPAL STOCKHOLDER
Pursuant to a series of letter agreements, SingTel has made advances to the
Company of $11.8 million under the Company's intercompany operating agreement
with SingTel through February 6, 1997 of which $4,317,563 was outstanding as
of December 31, 1996 and approximately $7.5 million was advanced subsequent to
December 31, 1996. Each such advance bears interest at a rate per annum equal
to the sum of (i) the one-year United States Treasury rate in effect at the
time the advance was made plus (ii) 5%. All such interest is payable in cash
monthly in arrears. Such advances will be applied to the fees and other
amounts payable by SingTel to the Company under the intercompany operating
agreement. SingTel has canceled approximately $6.8 million of such
indebtedness in exchange for 5,000 Senior Note units and the payment of $1.8
million in cash upon the closing of the Senior Note offering discussed in Note
17.
(6) NOTES PAYABLE
On August 2, 1996, the Company entered into a promissory note for $1,500,000
with its landlord for the financing of leasehold improvements. The note bears
interest at 13%, payable monthly beginning December 1996. Principal shall be
paid monthly beginning on December 1, 1996, based on a seven-year
amortization. All outstanding principal and interest is payable in full on
June 1, 1998. At December 31, 1996, the outstanding balance was approximately
$1,470,000. The Company has the option of extending the maturity of the note
by an additional six months. If the Company elects this extension, the Company
agrees to sell to the lessor 10,000 shares of common stock at $.01 per share.
In addition, the Company issued to the landlord a warrant to purchase 30,000
shares of common stock at $.01 per share, which was exercised immediately. No
value was ascribed to these warrants as the amount would not be material to
the financial statements.
On December 31, 1996, the Company entered into a note payable for $2,000,000
with a company. The note bears interest at 10% per annum. All outstanding
principal and accrued interest is due on December 31, 1998. The noteholder has
the right to convert all of the entire unpaid principal and accrued interest
into shares of common stock at a conversion price of $15.00 per share. Upon
the closing of the Senior Note offering (see Note 17), the note payable holder
shall have the right to demand payment of all outstanding principal and
accrued interest thereon and has the right to convert the unpaid principal and
accrued interest into Senior Notes. During 1996, the Company purchased $2.6
million of equipment from this company. The equipment has been capitalized and
will be depreciated over three years.
In September 1995, the Company issued notes payable totaling $3,057,802 to
two Japanese banks. The notes are guaranteed by the minority interest of FIJ
and certain cash investments of the Company. Principal and interest are
repayable in Japanese yen. The notes mature through June 1998 and bear
interest at rates ranging from 1.06% to 1.6%. At December 31, 1996, there is
approximately $2,764,000 in notes payable outstanding.
The maturities of notes payable as of December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997.............................................................. $4,232,348
1998.............................................................. 3,433,020
----------
$7,665,368
==========
</TABLE>
F-13
<PAGE>
UNIFI COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31,1996
(7) CAPITAL LEASES
The Company has certain capital leases for property and equipment. The lease
terms are for two to three years and expire at various dates through December
1999. The future minimum lease payments under capital lease obligations for
respective years ending at December 31 are as follows:
<TABLE>
<S> <C>
1997............................................................. $1,517,346
1998............................................................. 959,176
1999............................................................. 912,458
----------
Total minimum payments......................................... 3,388,980
Less--Amount representing interest............................... 84,493
----------
Present value of minimum lease payments........................ 3,304,487
Less--Current portion of capital lease obligations............... 1,483,413
----------
Long-term capital lease obligations, net of current portion.... $1,821,074
==========
</TABLE>
In connection with certain capital leases, the Company has issued warrants,
to the lessors, exercisable for 10 years for the purchase of common stock. The
Company granted warrants for the purchase of 200,781 shares of common stock at
prices of $1.50 and $3.50 per share in 1994. In 1995 and 1996, no warrants
were issued relating to capital leases. No value was ascribed to these
warrants as the amount would not be material to the financial statements.
(8) PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1995 and 1996 consisted of the
following:
<TABLE>
<CAPTION>
1995 1996
---------- -----------
<S> <C> <C>
Equipment............................................ $5,924,116 $23,900,524
Equipment under capital lease........................ 5,158,993 7,572,083
Furniture and fixtures............................... 415,446 693,064
Leasehold improvements............................... 518,583 2,639,745
---------- -----------
12,017,138 34,805,416
Less--Accumulated depreciation and amortization...... 4,251,801 9,981,087
---------- -----------
$7,765,337 $24,824,329
========== ===========
</TABLE>
(9) INCOME TAXES
The Company follows SFAS No. 109, Accounting for Income Taxes, by providing
for income taxes under the liability method. Deferred taxes are determined
based on the difference between the financial statement and tax bases of
assets and liabilities, as measured by the current tax rates. The principal
differences between assets and liabilities for financial reporting and tax
return purposes result primarily from the timing of certain expenditures for
income tax purposes.
At December 31, 1996, the Company has available net operating loss
carryforwards in the United States of approximately $55,200,000 for financial
reporting purposes, expiring at various dates through 2010. Prior to August
21, 1991, the Company was a Subchapter S corporation under the Internal
Revenue Code. Accordingly, the net operating losses generated prior to this
date cannot be utilized and is therefore not included in the
F-14
<PAGE>
UNIFI COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31,1996
(9) INCOME TAXES--(CONTINUED)
Company's net operating loss carryforwards by the Company. The Company also
has available United States federal tax credit carryforwards of approximately
$263,000 expiring through the year 2010.
In addition, FIJ has available net operating loss carryforwards of
approximately $8,200,000 for Japanese tax purposes at December 31, 1996,
expiring at various dates through 2002. The Company also has foreign net
operating loss carryforwards in France, Germany, United Kingdom, Hong Kong,
China and Korea of approximately $2,500,000, $2,700,000, $2,600,000,
$3,300,000, $280,000 and $1,200,000, respectively, at December 31, 1996.
The United States Tax Reform Act of 1986 contains provisions that may limit
the Company's net operating loss and credit carryforwards available to be used
in any given year in the event of significant changes in the ownership
interests of significant stockholders. As a result of the changes in ownership
caused by the Company's issuance of Series G convertible preferred stock in
1995, approximately $15,000,000 of the Company's federal and state net
operating loss is subject to an annual limitation of approximately $1,245,000.
The components of the deferred tax asset are as follows:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Depreciation....................................... $ 17,000 $ 793,000
Accrued expenses................................... 125,000 888,000
Bad debt loss carryforwards........................ 7,000 39,000
Net operating loss carryforwards................... 10,400,000 30,100,000
Credit carryforwards............................... 187,000 263,000
----------- -----------
10,736,000 32,083,000
----------- -----------
Less--Valuation allowance.......................... (10,736,000) (32,083,000)
----------- -----------
Net deferred tax asset........................... $ -- $ --
=========== ===========
</TABLE>
The Company has recorded a full valuation allowance against its deferred tax
asset due to uncertainties surrounding the realization of this asset.
(10) STOCKHOLDERS' EQUITY (DEFICIT)
(a) Convertible Preferred Stock
<TABLE>
<CAPTION>
PAR VALUE
-----------------------
1995 1996
----------- -----------
<S> <C> <C>
Series A, $1,00 par value--authorized--975,500
shares issued and outstanding--743,000 in 1995 and
1996.............................................. $ 743,000 $ 743,000
Series B, $1.00 par value--authorized--2,700,000
shares issued and outstanding--1,381,038 in 1995
and 1996.......................................... 1,381,038 1,381,038
Series C, $1.00 par value--authorized--650,000
shares issued and outstanding--481,560 in 1995 and
1996.............................................. 481,560 481,560
Series D, $1.00 par value--authorized--2,600,000
shares issued and outstanding--2,145,220 in 1995
and 1996.......................................... 2,145,220 2,145,220
Series F, $1.00 par value--authorized--500,000
shares issued and outstanding--194,212 in 1995 and
1996.............................................. 194,212 194,212
Series G, $1.00 par value--authorized--8,750,000
shares issued and outstanding--8,750,000 in 1995
and 1996.......................................... 8,570,000 8,570,000
----------- -----------
$13,515,030 $13,515,030
=========== ===========
</TABLE>
F-15
<PAGE>
UNIFI COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31,1996
(10) STOCKHOLDERS' EQUITY (DEFICIT)--(CONTINUED)
The Company has authorized the issuance of up to 24,715,500 shares of
convertible preferred stock (the Preferred Stock), $1.00 par value.
The rights, preferences and privileges of the Series A, Series B, Series C,
Series D, Series F, Series G and Series I Preferred Stock are listed below.
CONVERSION
The Preferred Stock is convertible into common stock at the rate of
one share of common stock for each share of Preferred Stock, adjustable
for certain dilutive events. Conversion is at the option of the
preferred stockholder and may be required by the Company upon the
closing of an initial public offering of the Company's common stock, as
defined.
VOTING RIGHTS
The holders of the Preferred Stock shall be entitled to vote on all
matters and shall be entitled to the number of votes equal to the
number of shares of common stock into which the Preferred Stock is
convertible.
DIVIDENDS
The holders of the Preferred Stock shall be entitled to receive
dividends when and if declared by the Board of Directors. In addition,
the holders of the Preferred Stock shall be entitled to receive a
dividend equal to any dividend paid on common stock.
LIQUIDATION PREFERENCE
The holders of the Preferred Stock have preference in the event of
any voluntary or involuntary liquidation, dissolution or winding up of
the Company. The holders of the Series A and Series B Preferred Stock
are entitled to a preference of $1.00 per share ($2,124,038 in
aggregate at December 31, 1996) plus any declared but unpaid dividends.
The holders of the Series C Preferred Stock are entitled to a
preference of $1.50 per share ($722,340 in aggregate at December 31,
1996) plus any declared but unpaid dividends. The holders of the Series
D, Series F, Series G and Series I Preferred Stock are entitled to a
preference of $3.50 per share ($38,183,016 in aggregate at December 31,
1996, plus any declared but unpaid dividends). Each series of Preferred
Stock ranks in parity with regard to liquidation preference.
REVOCABLE VOTING PROXY
The Series C preferred stockholders have signed a revocable proxy
whereby the president of the Company votes on all matters on the Series
C preferred stockholders' behalf. The proxy has a five-year term, which
began on May 31, 1993.
(b) Common Stock
At December 31, 1996, 24,912,275 shares of common stock were reserved for
the conversion of the Company's Preferred Stock based on a conversion ratio
of one share of Preferred Stock in exchange for one share of common stock,
the exercise of common stock options and warrants.
F-16
<PAGE>
UNIFI COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31,1996
(10) STOCKHOLDERS' EQUITY (DEFICIT)--(CONTINUED)
(c) Stock Options
In 1994, the Company established the 1993 Stock Option Plan (the Plan),
which provides for the granting of incentive stock options and nonqualified
stock options. Options granted under the Plan vest over various periods and
upon the achievement of certain milestones, as defined, and expire no later
than 10 years from the date of grant. The number of shares of common stock
reserved for issuance under the Plan is 4,325,000 shares.
During 1994, the Company adopted an executive compensation plan whereby
the officers of the Company may receive up to 900,000 incentive stock
options based on the increase in the Company's per share value, as defined.
In 1994, 900,000 options were granted to certain officers under this plan
at an exercise price of $.35 per share, the then fair market value of the
Company's common stock as determined by the Board of Directors.
Stock option activity is summarized as follows for the three years ended
December 31, 1996:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF OPTION AVERAGE
SHARES PRICE OPTION PRICE
--------- ----------- ------------
<S> <C> <C> <C>
Outstanding, December 31, 1993........... -- $ -- $ --
Granted................................ 1,585,863 .35 .35
Canceled............................... (31,243) .35 .35
--------- ----------- -----
Outstanding, December 31, 1994........... 1,554,620 .35 .35
Granted................................ 1,271,584 .35-1.05 .51
Canceled............................... (116,714) .35 .35
Exercised.............................. (373,489) .35 .35
--------- ----------- -----
Outstanding, December 31, 1995........... 2,336,001 .35-1.05 .38
Granted................................ 425,590 1.05 -2.25 1.34
Canceled............................... (176,856) .35-2.25 .95
Exercised.............................. (53,236) .35-1.05 .48
--------- ----------- -----
Outstanding, December 31, 1996........... 2,531,499 $ .35-$2.25 $ .81
========= =========== =====
Exercisable, December 31, 1996........... 960,172 $ .35-$1.05 $ .62
========= =========== =====
</TABLE>
During 1995, the FASB issued SFAS No. 123, Accounting for Stock-Based
Compensation, which defines a fair value based method of accounting for an
employee stock option or similar equity instrument and encourages all
entities to adopt that method of accounting for all of their employee stock
compensation plans. However, it also allows an entity to continue to
measure compensation cost for those plans using the method of accounting
prescribed in APB No. 25. Entities electing to remain with the accounting
required by APB No. 25 must make pro forma disclosures of net income and,
if presented, earnings per share, as if the fair value based method of
accounting defined in the statement had been applied.
The Company has elected to continue to account for its stock-based
compensation plans under APB No. 25. However, the Company has computed, for
pro forma disclosure purposes only, the value of all options granted during
1995 and 1996 using the Black-Scholes option-pricing model as prescribed by
SFAS No. 123, using the following weighted average assumptions for grants
in 1995 and 1996:
F-17
<PAGE>
UNIFI COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31,1996
(10) STOCKHOLDERS' EQUITY (DEFICIT)--(CONTINUED)
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Risk-free interest rate............................ 5.63%-6.95% 5.63%-6.95%
Expected dividend yield............................ -- --
Expected life...................................... 7 Years 7 Years
Expected volatility................................ -- --
Weighted average value of grants................... $.32 $.36
Weighted average remaining contractual life of
options outstanding............................... 8.09 Years 8.70 Years
Weighted average exercise price of 562,855 and
960,172 options exercisable at December 31, 1995
and 1996, respectively............................ $.62 $.54
</TABLE>
The total value of options granted during 1995 and 1996 would be
amortized on a pro forma basis over the vesting period of the options.
Options generally vest equally over three years. If the Company had
accounted for these plans in accordance with SFAS No. 123, the Company's
net loss and net loss per share would have increased as reflected in the
following pro forma amounts:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1995 1996
------------ ------------
<S> <C> <C>
NET LOSS--
As reported...................................... $(14,657,108) $(48,912,966)
Pro forma........................................ (14,781,417) (49,088,786)
NET LOSS PER COMMON SHARE--
As reported...................................... (4.26) (13.23)
Pro forma........................................ (4.30) (13.28)
PRO FORMA NET LOSS PER COMMON SHARE--
As reported...................................... (.96) (2.83)
Pro forma........................................ (.97) (2.84)
</TABLE>
(d) Warrants to Purchase Common Stock
The Company issues warrants pursuant to the 1994 Investor Incentive Stock
Option Plan (the Warrant Plan). The Company has outstanding warrants for
the purchase of common stock that vest immediately and are exercisable for
a five- to ten-year period. The following table summarizes warrant activity
for the three-year period ended December 31, 1996:
<TABLE>
<CAPTION>
EXERCISE WEIGHTED
NUMBER PRICE AVERAGE
OF SHARES PER SHARE PRICE
--------- --------- --------
<S> <C> <C> <C>
Outstanding, December 31, 1993................. 573,205 $.30-1.00 .71
Warrants issued.............................. 615,887 .35-3.50 1.04
--------- --------- ----
Outstanding, December 31, 1994................. 1,189,092 .35-3.50 .88
Warrants issued.............................. 286,552 .35 .35
Warrants canceled............................ (574,149) .30-1.50 1.04
--------- --------- ----
Outstanding, December 31, 1995................. 901,495 .30-3.50 .50
Warrants issued.............................. 30,000 .01 .01
Warrants exercised .......................... (35,500) .01-.35 .29
Warrants canceled............................ (20,000) 1.00 1.00
--------- --------- ----
Outstanding, December 31, 1996................. 875,995 $.30-3.50 .59
========= ========= ====
</TABLE>
F-18
<PAGE>
UNIFI COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31,1996
(10) STOCKHOLDERS' EQUITY (DEFICIT)--(CONTINUED)
The warrants may be exercised at any time after issuance and expire at
various dates through 2005. The warrants are subject to certain
antidilution provisions that allow the holders of these warrants to
participate in property and security dividends issued by the Company to
common stockholders and to participate in any common stock dividends or
splits.
In addition to the warrants granted under the Warrant Plan described
above, on February 14, 1997, the Company granted a warrant to purchase
2,000,000 shares of common stock at a price of $1.83 per share to SingTel
in connection with the Debt Restructuring Agreement, as described in Note 3
(the SingTel Warrant).
Also, on February 14, 1997, the Company granted a warrant for the
purchase of 4,816,818 shares of common stock at an exercise price of $.25
to the senior noteholders in connection with the Senior Note offering, as
described in Note 17 (the Senior Note Warrant).
The Company has valued both the SingTel and the Senior Note Warrants
using the Black-Scholes method and will record additional interest expense
beginning in 1997 for these warrants.
(e) Stock Buyback
Subsequent to the SingTel financing described in Note 3, the Company
initiated a stock buyback program. In connection with this program, the
Company repurchased 1,738,440 shares of the Company's Series A, B, C and D
Preferred Stock for $3.50 per share and 543,149 warrants to purchase common
stock at $3.50 per warrant. The cash paid for the buyback was $7,385,838.
The shares and warrants repurchased in the stock buyback program were
subsequently canceled.
(11) COMMITMENTS
The Company and its subsidiaries lease office facilities under operating
leases that expire at various dates through 2003. Rent expense for all
operating leases charged to operations in the years ended December 31, 1994,
1995 and 1996 amounted to approximately $690,000, $838,000 and $2,600,000,
respectively.
The minimum rental payments under the lease agreements for respective years
ending December 31 are approximately as follows:
<TABLE>
<S> <C>
1997............................................................ $ 4,037,000
1998............................................................ 4,030,000
1999............................................................ 1,849,000
2000............................................................ 1,679,000
2001............................................................ 1,584,000
Thereafter...................................................... 2,341,000
-----------
Total minimum payments........................................ $15,520,000
===========
</TABLE>
F-19
<PAGE>
UNIFI COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31,1996
(12) ACCRUED EXPENSES
Accrued expenses consisted of the following as of December 31, 1995 and
1996:
<TABLE>
<CAPTION>
1995 1996
---------- -----------
<S> <C> <C>
Accrued payroll and related costs.................... $ 567,247 $ 1,765,283
Accrued telecommunication costs...................... -- 3,211,231
Accrued equipment costs.............................. -- 1,675,181
Accrued other........................................ 1,585,953 3,956,529
---------- -----------
Total.............................................. $2,153,200 $10,608,224
========== ===========
</TABLE>
(13) EMPLOYEE BENEFIT PLAN
On October 10, 1991, the Company adopted an employee benefit plan under
Section 401(k) of the Internal Revenue Code. The Fax International 401(k) Plan
(the 401(k) Plan) allows employees to make pretax contributions up to the
maximum allowable amount set by the Internal Revenue Service. Under the 401(k)
Plan, the Company may match a portion of the employee contribution up to a
defined maximum. The Company made no contributions to the 401(k) Plan for the
years ended December 31, 1994, 1995 and 1996. The Company may, but is not
obligated to, provide profit sharing to employees. No profit sharing
contributions were awarded in 1994, 1995 or 1996.
(14) GEOGRAPHIC SEGMENT INFORMATION
A summary of the Company's operations by geographic location for the years
ended December 31, 1994, 1995 and 1996 is as follows:
<TABLE>
<CAPTION>
UNITED STATES EUROPE PACIFIC RIM ELIMINATIONS TOTAL
------------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
December 31, 1994
Revenues.............. $ 6,952,406 $ -- $ -- $ -- $ 6,952,406
============= ============ ============ ============= =============
Loss from operations.. $ (6,633,276) $ -- $ (3,142,443) $ -- $ (9,775,719)
============= ============ ============ ============= =============
Identifiable assets... $ 5,152,583 $ -- $ 5,902,139 $ (1,073,904) $ 9,980,818
============= ============ ============ ============= =============
December 31, 1995
Revenues.............. $ 8,092,916 $ 1,313 $ 2,570,684 $ -- $ 10,664,913
============= ============ ============ ============= =============
Loss from operations.. $ (11,811,935) $ (371,366) $ (5,118,783) $ -- $ (17,302,084)
============= ============ ============ ============= =============
Identifiable assets... $ 25,318,584 $ 441,820 $ 3,054,992 $ (3,437,213) $ 25,378,183
============= ============ ============ ============= =============
December 31, 1996
Revenues.............. $ 21,799,184 $ 1,272,647 $ 10,260,331 $ (8,114,396) $ 25,217,766
============= ============ ============ ============= =============
Loss from operations.. $ (31,782,016) $ (7,206,450) $ (8,410,960) $ -- $ (47,399,426)
============= ============ ============ ============= =============
Identifiable assets... $ 64,385,911 $ 3,136,134 $ 8,299,699 $ (34,637,336) $ 41,184,408
============= ============ ============ ============= =============
</TABLE>
F-20
<PAGE>
UNIFI COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31,1996
(15) ACQUISITION OF SINGCOM
Under the terms of an agreement with the Company's principal stockholder,
SingTel Global, the Company acquired certain of the assets of SingCom
(Australia), a wholly owned subsidiary of SingTel Global, consisting primarily
of certain computer and office equipment and the right to service SingCom's
customer base, effective April 1, 1996. The aggregate purchase price for these
assets is $5.5 million (Australian), payable in full in cash at closing. In
addition, SingTel Global loaned to SingCom operating capital through the
closing of the acquisition at which time the Company will repay in full, the
outstanding principal balance and all accrued but unpaid interest thereon
under the working capital line of credit provided by SingTel Global. At
December 31, 1996, the total amount due to SingTel Global for the acquisition
of SingCom is approximately $4,230,000 and is included in current portion of
notes payable to principal stockholder in the accompanying balance sheet. The
Company obtained effective control of the operations of SingCom as of April 1,
1996, and therefore, the operations of SingCom are included in the
consolidated financial statements beginning April 1, 1996. The purchase has
been accounted for on a book value basis due to the related party nature of
the transaction, and is consistent with entities under common control. The
excess of the purchase price over the book value of the assets acquired has
been charged to stockholders equity as a deemed dividend to the Company's
principal stockholder, SingTel Global. Pro forma financial information has not
been presented as such information is not material.
(16) LOANS TO WORLDVOICE
The Company has made unsecured loans to WorldVoice Inc. (a development stage
company) for the funding of operations of WorldVoice of $450,000 as of
December 31, 1996. The Company will account for the loans to WorldVoice as
development funding, and accordingly, the Company will charge to operations
the loans to WorldVoice as the funds are utilized by WorldVoice. Included in
research and development expenses for the year ended December 31, 1996 is the
$450,000.
(17) SENIOR NOTE OFFERING
On February 14, 1997, the Company sold 175,000 units each consisting of
$1,000 principal amount of 14% Senior Notes due March 1, 2004 for
$175,000,000. Attached to each unit is one warrant to purchase 27.52 shares of
common stock at $.25 per share. A total of 4,816,818 warrants were issued.
Interest is due semiannually on March 1 and September 1 beginning September 1,
1997. The notes represent general unsecured senior obligations of the Company.
The offering resulted in net proceeds to the Company of approximately
$105,000,000, after offering expenses and the payment of certain obligations
including approximately $46 million, which has been escrowed for certain
senior note interest payments.
The notes are redeemable, in whole or in part, at the option of the Company
at any time on or after March 1, 2001 at the redemption price, as defined,
plus any accrued interest. Upon a change of control, each noteholder will have
the right to require the Company to repurchase the notes at 101%, plus accrued
interest. The notes contain certain restrictive operating covenants including
precluding the payment of dividends, additional indebtedness, mergers and sale
of the Company and its assets.
The Company is required to file a registration statement with the SEC to
offer to exchange the notes for senior notes with terms substantially
identical to the notes within 60 days of the issue date. In addition, the
Company must use its best efforts to cause the registration statement to
become effective under the Securities Act within 90 days after the initial
filing.
Each warrant is exercisable at a price of $.25 per share and becomes
exercisable on or after the earlier of (i) one year from the date of issuance
and (ii) the occurrence of another exercise event, as defined. Unless
exercised, the warrants will automatically expire in 10 years on March 1,
2007. In addition, in the event that the Company does not consummate an
initial public offering (IPO) with gross proceeds of at least $35 million, by
September
F-21
<PAGE>
UNIFI COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31,1996
(17) SENIOR NOTE OFFERING--(CONTINUED)
1, 1999 the Company will be obligated to issue additional warrants to the
noteholders exercisable for 8% of the common stock of the Company on a fully
diluted basis. If an IPO has not occurred on or prior to March 1, 2002, the
Company will be required to repurchase the warrants at the then fair market
value, as determined by an independent third-party. The Company has valued
these warrants using the Black-Scholes method and has reduced the face
carrying amount of the Senior Notes by $8,188,591, which represents the
aggregate fair value of these warrants. The Company will record additional
interest expense of $8,188,591 over the term of the Senior Notes.
F-22
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PRO-
SPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION AND REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECU-
RITIES DESCRIBED HEREIN BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING THE OFFER OR SO-
LICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. UNDER NO CIRCUMSTANCES SHALL THE DELIVERY
OF THIS PROSPECTUS OR ANY SALE MADE PURSUANT TO THIS PROSPECTUS, CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.
-----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 1
Risk Factors............................................................. 12
The Exchange Offer....................................................... 24
Use of Proceeds.......................................................... 32
Capitalization........................................................... 33
Selected Consolidated Financial Data..................................... 34
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 36
Business................................................................. 42
Acquisition of Fax Business of SingCom (Australia)....................... 53
Management............................................................... 54
Principal Stockholders................................................... 59
Certain Relationships and Related Transactions........................... 61
Description of Certain Indebtedness...................................... 64
Certain Federal Income Tax Considerations................................ 66
Description of Exchange Notes............................................ 67
Book-Entry; Delivery and Form............................................ 98
Plan of Distribution..................................................... 99
Legal Matters............................................................ 100
Experts.................................................................. 100
Available Information.................................................... 100
Glossary of Terms........................................................ 102
Index to Consolidated Financial Statements............................... F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$175,000,000
UNIFI COMMUNICATIONS, INC.
OFFER TO EXCHANGE ITS
14% SENIOR NOTES DUE 2004
WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS
AMENDED, FOR ANY AND ALL OF
ITS OUTSTANDING 14% SENIOR NOTES
DUE 2004
-----------------
PROSPECTUS
-----------------
, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The By-Laws of the Company provide for the indemnification by the Company of
each director, officer, employee and agent of the Company to the fullest
extent permitted by the Delaware General Corporation Law, as the same exists
or may hereafter be amended. Section 145 of the Delaware General Corporation
Law provides in relevant part that a corporation may indemnify any person who
was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the corporation) 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, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe such person's conduct
was unlawful.
In addition, Section 145 provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor 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 the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection with the defense or settlement of such action or suit if
such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the corporation and
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Delaware Court of Chancery
or the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Delaware Court of Chancery or such other
court shall deem proper. Delaware law further provides that nothing in the
above-described provisions shall be deemed exclusive of any other rights to
indemnification or advancement of expenses to which any person may be entitled
under any bylaw, agreement, vote of stockholders or disinterested directors or
otherwise.
The Certificate of Incorporation of the Company further provides that a
Director of the Company shall not be personally liable to the Company or its
stockholders for monetary damages for any breach of fiduciary duty as a
Director. Section 102(b)(7) of the Delaware General Corporation Law provides
that a provision so limiting the personal liability of a director shall not
eliminate or limit the liability of a director for, among other things: breach
of the duty of loyalty, acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law; unlawful payment of
dividends; and transactions from which the director derived an improper
personal benefit.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
3.1 --Certificate of Incorporation, as amended, of UNIFI Communications,
Inc.
3.2 --By-Laws of UNIFI Communications, Inc.
4.1 --Indenture, dated as of February 21, 1997, between UNIFI
Communications. Inc. and Fleet National Bank, as trustee, relating to
$175,000,000 in aggregate principal amount of 14% Senior Notes due
2004.
4.2 --Specimen Certificate of 14% Senior Notes due 2004 (the "Private
Notes") (included in Exhibit 4.1 hereto).
4.3 --Specimen Certificate of 14% Senior Notes due 2004 (the "Exchange
Notes") (included in Exhibit 4.1 hereto).
4.4 --Registration Rights Agreement, dated as of February 21, 1997,
between UNIFI Communications, Inc. and Smith Barney Inc.
4.5 --Unit Agreement, dated as of February 21, 1997, between UNIFI
Communications, Inc. and Fleet National Bank, as unit agent.
4.6 --Escrow Agreement, dated as of February 21, 1997, between UNIFI
Communications, Inc. and Fleet National Bank, as escrow agent.
* 5.1 --Opinion of Latham & Watkins regarding the validity of the Exchange
Notes.
10.1 --Credit Agreement, dated as of April 10, 1995, among UNIFI
Communications, Inc. and SingTel (Netherlands Antilles) Pte N.V.
10.2 --Amendment, dated as of February 21, 1997, to the Credit Agreement,
dated as of April 10, 1995, among UNIFI Communications, Inc. and
SingTel (Netherlands Antilles) Pte N.V.
10.3 --Term Loan Agreement-Equipment, dated as of April 10, 1995, among
UNIFI Communications, Inc. and SingTel (Netherlands Antilles) Pte
N.V.
10.4 --Amendment, dated as of February 21, 1997, to the Term Loan
Agreement-Equipment, dated as of April 10, 1995, among UNIFI
Communications, Inc. and SingTel (Netherlands Antilles) Pte N.V.
*10.5 --Intercompany Operating Agreement, dated as of April 10, 1995,
between UNIFI Communications, Inc. and Singapore Telecommunications
Limited, as amended by Amendment No. 1 dated as of September 30, 1996
(the "Intercompany Operating Agreement").
*10.6 --Letter Agreement, dated February 5, 1997, among UNIFI
Communications, Inc. Singapore Telecommunications Limited & SingTel
Global Services Pte Ltd. and certain individuals named therein,
providing, and among other things for a $4,000,000 advanced payment
under the Intercompany Operating Agreement and an amendment to the
Series G Convertible Preferred Stock Purchase Agreement, dated as of
April 10, 1995, between UNIFI Communications, Inc. and SingTel Global
Services Pte Ltd.
*10.7 --Amendment, dated as of February 21, 1997, to the Intercompany
Operating Agreement, dated as of April 10, 1995, among Unifi
Communications, Inc. and Singapore Telecommunications Limited.
10.8 --Series G Convertible Preferred Stock Purchase Agreement, dated as of
April 10, 1995, among UNIFI Communications, Inc., SingTel Global
Services Pte Ltd.
*10.9 --Amendment, dated as of February 5, 1997 to the Series G Convertible
Preferred Stock Purchase Agreement, dated as of April 10, 1995,
between UNIFI Communications, Inc. and SingTel Global Services Pte
Ltd. (contained within LetterAgreement dated February 5, 1997 filed
as Exhibit 10.14 to this Registration Statement).
10.10 --Second Amendment, dated as of February 21, 1997, of the Series G
Convertible Preferred Stock Purchase Agreement, dated as of April 10,
1995, among UNIFI Communications, Inc., SingTel Global Services Pte
Ltd, as amended.
10.11 --Amended and Restated Registration Rights Agreement, dated as of
April 10, 1995 among UNIFI Communications, Inc. and various investors
named therein.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.12 --Amendment, dated as of February 21, 1997, to the Amended and
Restated Registration Rights Agreement, dated as of April 10, 1995
among UNIFI Communications, Inc. and various investors named
therein.
10.13 --Consent and Waiver, dated as of February 20, 1997, of the Amended
and Restated Registration Rights Agreement, dated as of April 10,
1995 among UNIFI Communications, Inc. and various investors named
therein.
*10.14 --Stockholders Agreement, dated as of April 10, 1995, among UNIFI
Communications, Inc. and the stockholders named therein.
*10.15 --First Amendment to the Stockholders Agreement, dated February 21,
1997, among UNIFI Communications, Inc., SingTel Global Services Pte
Ltd and certain stockholders named therein
*10.16 --Employment Agreement, dated as of April 10, 1995, among UNIFI
Communications, Inc. and Douglas J. Ranalli.
10.17 --Warrant to purchase 2,000,000 shares of the Company's Common Stock,
issued to SingTel Global Services Pte Ltd, dated February 21, 1997.
10.18 --Warrant Agreement, dated as of February 21, 1997, between UNIFI
Communications. Inc. and Fleet National Bank, as warrant agent.
10.19 --Specimen Warrant Certificate (included in Exhibit 10.25 hereto).
10.20 --Warrant Shares Registration Rights Agreement, dated as of February
21, 1997, between UNIFI Communications. Inc. and Smith Barney Inc.
10.21 --Lease dated August 2, 1996 between UNIFI Communications, Inc. and
Cross Point Limited Partnership.
10.22 --Agreement dated August 2, 1996 between UNIFI Communications, Inc.
and Cross Point Limited Partnership (included in exhibit 10.21
hereto).
10.23 --Subordination Agreement dated August 2, 1996 between UNIFI
Communications, Inc., Cross Point Limited Partnership and SingTel
(Netherland Antilles) Pte N.V. (included in exhibit 10.21 hereto)
*10.24 --Software License and Service Agreement dated September 20, 1996
between UNIFI Communications, Inc. and Control Data Systems, Inc.
10.25 --$ 2,049,315 Convertible Term Note, dated as of April 1, 1997, of
UNIFI Communications, Inc. in favor of Control Data Systems, Inc.
10.26 --Warrant to purchase up to 56,406 shares of Common Stock of UNIFI
Communications, Inc., dated as of April 1, 1997, issued to Control
Data Systems, Inc.
*10.27 --Amendment No. 1 to the Intercompany Operating Agreement dated
September 30, 1996 between UNIFI Communications, Inc. and Singapore
Telecommunications Limited.
*12.1 --Statement of Computation of Ratio of Earnings to Fixed Charges.
21.1 --Subsidiaries of UNIFI Communications, Inc.
*23.1 --Consent of Latham & Watkins (included in their opinion filed as
Exhibit 5.1).
23.2 --Consent of Arthur Anderson L.L.P.
24.1 --Power of Attorney of UNIFI Communications, Inc. (included on
signature page to this Registration Statement on Form S-4).
*25.1 --Statement of Eligibility and Qualification (Form T-1) under the
Trust Indenture Act of 1939 of Fleet National Bank.
*27.1 --Financial Data Schedule.
*99.1 --Form of Letter of Transmittal and related documents to be used in
conjunction with the Exchange Offer.
</TABLE>
(b) Financial Statement Schedules:
Schedule II. Valuation of Qualifying Accounts.
- --------
* To be filed by amendment.
II-3
<PAGE>
SCHEDULES OMITTED
Schedules not listed above are omitted because of the absence of the
conditions under which they are required or because the information required
by such omitted schedules is set forth in the financial statements or the
notes thereto.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that insofar as
indemnification for liabilities arising under the Securities Act of 1933, as
amended (the "Act"), may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim of
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred by the Registrant in the successful defense of
any action, suit paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into this prospectus pursuant to
Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(d) (1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement; (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) to
reflect in the prospectus any facts or events arising after the effective date
of the Registration Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration Statement; (iii) to
include any material information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any material change to
such information in the Registration Statement;
(2) That, for purposes of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF LOWELL, COMMONWEALTH OF
MASSACHUSETTS ON APRIL 18, 1997.
UNIFI COMMUNICATIONS, INC.
/s/ Douglas J. Ranalli
By: _________________________________
DOUGLAS J. RANALLI
CHAIRMAN OF THE BOARD OF
DIRECTORS, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned officers and
directors of UNIFI Communications, Inc., a Delaware corporation (the
"Company"), for himself and not for one another, does hereby constitute and
appoint Paula P. Litscher and Q. Ellis Telford, each of them, a true and
lawful attorney in his name, place and stead, in any and all capacities, to
sign his name to any and all amendments, including post-effective amendments,
to this registration statement with respect to the proposed issuance, sale and
delivery by the Company of 14% Senior Notes due 2004, and to cause the same to
be filed with the Securities and Exchange Commission, granting unto said
attorneys and each of them full power and authority to do and perform any act
and thing necessary and proper to be done in the premisses, as fully to all
intents and purposes as the undersigned could do if personally present, and
each of them shall lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND AS OF THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Douglas J. Ranalli Chairman of the April 18, 1997
- ------------------------------------- Board of Directors,
DOUGLAS J. RANALLI President and Chief
Executive Officer
(Principal
Executive Officer)
/s/ Paula P. Litscher Vice President of April 18, 1997
- ------------------------------------- Corporate Finance
PAULA P. LITSCHER (Principal
Financial and
Accounting Officer
/s/ Thomas P. Sosnowski Director April 18, 1997
- -------------------------------------
THOMAS P. SOSNOWSKI
/s/ Chua Sock Koong Director April 18, 1997
- -------------------------------------
CHUA SOCK KOONG
/s/ Lim Eng Director April 18, 1997
- -------------------------------------
LIM ENG
/s/ John Beinecke Director April 18, 1997
- -------------------------------------
JOHN BEINECKE
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To Unifi Communications, Inc.
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements of Unifi Communications, Inc. included
in this registration statement and have issued our report thereon dated
February 24, 1997. Our audit was made for the purpose of forming an opinion on
the basic financial statements taken as a whole. The schedule listed in Item
16(b) is the responsibility of the Company's management and is presented for
purposes of complying with the Securities and Exchange Commission's rules and
is not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, fairly states, in all material
respects, the financial data required to be set forth therein, in relation to
the basic financial statements taken as a whole.
Arthur Andersen LLP
Boston, Massachusetts
February 24, 1997
S-1
<PAGE>
SCHEDULE II
UNIFI COMMUNICATIONS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO DEDUCTIONS BALANCE AT
BEGINNING COSTS AND FROM END OF
OF PERIOD EXPENSES RESERVES PERIOD
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts:
December 31, 1994................ $ 23,000 $ -- $ -- $ 23,000
December 31, 1995................ 23,000 -- 5,000 18,000
December 31, 1996................ 18,000 66,000 -- 184,000
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
3.1- Certificate of Incorporation, as amended, of UNIFI Communications, Inc.
3.2- By-Laws of UNIFI Communications, Inc.
4.1- Indenture, dated as of February 21, 1997, between UNIFI Communications.
Inc. and Fleet National Bank, as trustee, relating to $175,000,000 in
aggregate principal amount of 14% Senior Notes due 2004.
4.2- Specimen Certificate of 14% Senior Notes due 2004 (the "Private Notes")
(included in Exhibit 4.1 hereto).
4.3- Specimen Certificate of 14% Senior Notes due 2004 (the "Exchange Notes")
(included in Exhibit 4.1 hereto).
4.4- Registration Rights Agreement, dated as of February 21, 1997, between
UNIFI Communications, Inc. and Smith Barney Inc.
4.5- Unit Agreement, dated as of February 21, 1997, between UNIFI
Communications, Inc. and Fleet National Bank, as unit agent.
4.6- Escrow Agreement, dated as of February 21, 1997, between UNIFI
Communications, Inc. and Fleet National Bank, as escrow agent.
*5.1- Opinion of Latham & Watkins regarding the validity of the Exchange Notes.
10.1- Credit Agreement, dated as of April 10, 1995, among UNIFI Communications,
Inc. and SingTel (Netherlands Antilles) Pte N.V.
10.2- Amendment, dated as of February 21, 1997, to the Credit Agreement, dated
as of April 10, 1995, among UNIFI Communications, Inc. and SingTel
(Netherlands Antilles) Pte N.V.
10.3- Term Loan Agreement-Equipment, dated as of April 10, 1995, among UNIFI
Communications, Inc. and SingTel (Netherlands Antilles) Pte N.V.
10.4- Amendment, dated February 21, 1997, to the Term Loan Agreement-Equipment,
dated April 10, 1995, among UNIFI Communications, Inc. and SingTel
(Netherlands Antilles) Pte N.V.
*10.5-Intercompany Operating Agreement, dated as of April 10, 1995, between
UNIFI Communications, Inc. and Singapore Telecommunications Limited.
*10.6-Letter Agreement, dated February 5, 1997, among UNIFI Communications,
Inc. Singapore Telecommunications Limited & SingTel Global Services Pte
Ltd. and certain individuals named therein, providing, and among other
things for a $4,000,000 advanced payment under the Intercompany Operating
Agreement and an amendment to the Series G Convertible Preferred Stock
Purchase Agreement, dated as of April 10, 1995, between UNIFI
Communications, Inc. and SingTel Global Services Pte Ltd.
*10.7-Amendment, dated February 21, 1997, to the Intercompany Operating
Agreement, dated April 10, 1995, among Unifi Communications, Inc. and
Singapore Telecommunications Limited
10.8- Series G Convertible Preferred Stock Purchase Agreement, dated as of
April 10, 1995, among UNIFI Communications, Inc., SingTel Global Services
Pte Ltd.
*10.9-Amendment, dated as of February 5, 1997 to the Series G Convertible
Preferred Stock Purchase Agreement, dated as of April 10, 1995, between
UNIFI Communications, Inc. and SingTel Global Services Pte Ltd.
(contained within Letter Agreement dated February 5, 1997 filed as
Exhibit 10.6 to this Registration Statement).
10.10-Second Amendment, dated as of February 21, 1997, of the Series G
Convertible Preferred Stock Purchase Agreement, dated as of April 10,
1995, among UNIFI Communications, Inc., SingTel Global Services Pte Ltd,
as amended.
10.11-Amended and Restated Registration Rights Agreement, dated as of April 10,
1995 among UNIFI Communications, Inc. and various investors named
therein.
<PAGE>
10.12-Amendment, dated as of February 21, 1997, to the Amended and Restated
Registration Rights Agreement, dated as of April 10, 1995 among UNIFI
Communications, Inc. and various investors named therein.
10.13-Consent and Waiver, dated as of February 20, 1997, of the Amended and
Restated Registration Rights Agreement, dated as of April 10, 1995 among
UNIFI Communications, Inc. and various investors named therein.
*10.14-Stockholders Agreement, dated as of April 10, 1995, among UNIFI
Communications, Inc. and the stockholders named therein.
*10.15-First Amendment to the Stockholders Agreement, dated February 21, 1997,
among UNIFI Communications, Inc., SingTel Global Services Pte Ltd and
certain stockholders named therein
*10.16-Employment Agreement, dated as of April 10, 1995, among UNIFI
Communications, Inc. and Douglas J. Ranalli.
10.17-Warrant to purchase 2,000,000 shares of the Company's Common Stock,
issued to SingTel Global Services Pte Ltd, dated February 21, 1997.
10.18-Warrant Agreement, dated as of February 21, 1997, between UNIFI
Communications. Inc. and Fleet National Bank, as warrant agent.
10.19-Specimen Warrant Certificate (included in Exhibit 10.18 hereto).
10.20-Warrant Shares Registration Rights Agreement, dated as of February 21,
1997, between UNIFI Communications. Inc. and Smith Barney Inc.
10.21-Lease dated August 2, 1996 between UNIFI Communications, Inc. and Cross
Point Limited Partnership.
10.22-Agreement dated August 2, 1996 between UNIFI Communications, Inc. and
Cross Point Limited Partnership (included in Exhibit 10.21 hereto).
10.23-Subordination Agreement dated August 2, 1996 between UNIFI
Communications, Inc., Cross Point Limited Partnership and SingTel
(Netherland Antilles) Pte N.V. (included in Exhibit 10.21 hereto).
*10.24-Software License and Service Agreement dated September 20, 1996 between
UNIFI Communications, Inc.and Control Data Systems, Inc.
10.25-$2,049,315 Convertible Term Note, dated as of April 1, 1997, of UNIFI
Communications, Inc. in favor of Control Data Systems, Inc.
10.26-Warrant to purchase up to 56,406 shares of Common Stock of UNIFI
Communications, Inc., dated as of April 1, 1997, issued to Control Data
Systems, Inc.
*10.27-Amendment No. 1 to the Intercompany Operating Agreement dated September
30, 1996 between UNIFI Communications, Inc. and Singapore
Telecommunications Limited.
*12.1 -Statement of Computation of Ratio of Earnings to Fixed Charges.
21.1 -Subsidiaries of UNIFI Communications, Inc.
*23.1 -Consent of Latham & Watkins (included in their opinion filed as Exhibit
5.1).
23.2 -Consent of Arthur Anderson L.L.P.
24.1 -Power of Attorney of UNIFI Communications, Inc. (included on signature
page to this Registration Statement on Form S-4).
*25.1 -Statement of Eligibility and Qualification (Form T-1) under the Trust
Indenture Act of 1939 of Fleet National Bank.
*27.1 -Financial Data Schedule.
*99.1 -Form of Letter of Transmittal and related documents to be used in
conjunction with the Exchange Offer.
______________
* To be filed by amendment
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
FAX INTERNATIONAL, INC.
****
1. The name of the Corporation is FAX International, Inc.
2. The address of its registered office in the State of Delaware is 1209
Orange Street, in the City of Wilmington, County of New Castle. The name of its
registered agent at such address is The Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted is:
To engage in any lawful act or activity for which Corporations may be
organized under the General Corporation Law of Delaware.
4. The total number of shares of stock which the Corporation shall have
authority to issue is one million (1,000,000) shares, all of which shall be
Common Stock, of the par value of One Cent ($.01) per share, amounting in the
aggregate to Ten Thousand and 00/100 Dollars ($10,000.00).
Additional designations and powers, preferences and rights and
qualifications, limitations or restrictions thereof of the shares of stock shall
be determined by the Board of Directors of the Corporation from time to time.
5. The name and mailing address of the Corporation's incorporator is
Douglas J. Ranalli, 80 Wendell Street, 6, Cambridge, Massachusetts #02138.
6. The name and address of the person who is to serve as the director
until the first annual meeting of the stockholders or until his successor is
elected and qualified is Douglas J. Ranalli, 30 Wendell Street, Cambridge,
Massachusetts 02138.
7. The Corporation is to have perpetual existence.
8. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
<PAGE>
To make, alter or repeal the bylaws of the Corporation.
To authorize and cause to be executed mortgages and liens upon the real and
personal property of the Corporation.
To set apart out of any of the funds of the Corporation available for
dividends a reserve or reserves for any proper purpose and to abolish any such
reserve in the manner in which it was created.
By a majority of the whole board, to designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. The bylaws may provide that in the absence or disqualification of a
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the board of directors to act at the
meeting in the place of any such agent or disqualified member. Any such
committee, to the extent provided in the resolution of the board of directors,
or in the bylaws of the Corporation, shall have and may exercise all the powers
and authority of the board of directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to amending the certificate of incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease, or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or amending the
bylaws of the Corporation; and, unless the resolution or bylaws expressly so
provide, no such committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock.
When and as authorized by the stockholders in accordance with statute, to
sell, lease or exchange all or substantially all of the property and assets of
the Corporation, including its goodwill and its corporate franchises, upon such
terms and conditions and for such consideration, which may consist in
2
<PAGE>
whole or in part of money or property, including shares of stock in, and/or
other securities of, any other Corporation or Corporation, as its board of
directors shall deem expedient and for the best interests of the Corporation.
9. To the maximum extent permitted by Section 102(b)(7) of the General
Corporation Law of Delaware, a director of this Corporation shall not be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit.
10. Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court or equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 or Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement to any
reorganization of this Corporation as consequences of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
3
<PAGE>
stockholders or class of stockholders of this Corporation, as the case may be,
and also on this Corporation.
11. Meetings of the stockholders may be held within or without the State
of Delaware, as the bylaws may provide. The books of the Corporation may be
kept (subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the bylaws of the corporation. Elections of directors
need not be by written ballot unless the bylaws of the corporation shall so
provide.
12. The Corporation reserves the right, to amend, alter, change, or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
THE UNDERSIGNED, being the incorporator named hereinbefore, for the
purposes of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, does make this certificate, hereby declaring and certifying
that this is his act and deed and the facts herein stated are true, and
accordingly, has hereunto set his hand this 19th day of September 1990.
/s/ Douglas J. Ranalli
---------------------------------
Douglas J. Ranalli
4
<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
) ss.:
COUNTY OF MIDDLESEX )
BE IT REMEMBERED that on this 19th day of September, 1990, personally
came before me, a Notary Public for the Commonwealth of Massachusetts, Douglas
S. Ranalli, the party to the foregoing Certificate of Incorporation, known to
me personally to be such, and acknowledged the said certificate to be his act
and deed and that the facts stated therein are true.
GIVEN under my hand and seal of office the day and year aforesaid.
/s/ Janet M. Davenport
--------------------------------
Janet M. Davenport
Notary Public
My commission expires:
5
<PAGE>
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
FAX INTERNATIONAL, INC.
FAX INTERNATIONAL, INC. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: That by written consent of the sole director of the Corporation,
a resolution was duly adopted setting forth a proposed amendment of the
Certificate of Incorporation of the Corporation, declaring said amendment to be
advisable. The resolution setting forth the proposed amendment is as follows:
RESOLVED: That it be advisable for the Corporation to amend its Certificate
of Incorporation by changing the Article numbered "4" so that, as amended
said Article 4 shall be and read as follows:
"4. The total number of shares of stock which the Corporation shall have
authority to issue is seven million five hundred thousand (7,500,000)
shares: six million (6,000,000) of which shall be Common Stock, of the par
value of One Cent ($.01) per share; and one million five hundred thousand
(1,500,000) of which shall be Convertible Preferred Stock, of the par value
of One Dollar ($1.00) per share, amounting in the aggregate to One Million
Five Hundred Sixty Thousand and 00/100 Dollars ($1,560,000.00).
Additional designations and powers, preferences and rights and
qualifications, limitations or restrictions thereof of the shares of stock
shall be determined by the Board of Directors of the Corporation from time
to time."
SECOND: That thereafter, pursuant to resolution of its sole director, the
majority stockholder voted in favor of the amendment and written notice of such
consent will be given to all stockholders who have not consented in writing to
said amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said FAX International, Inc. has caused this
certificate to be signed by Douglas J. Ranalli, its President and Secretary,
this 6th of August, 1991.
BY: /s/ Douglas J. Ranalli
-----------------------------
Douglas J. Ranalli
President
ATTEST: /s/ Douglas J. Ranalli
------------------------------
Douglas J. Ranalli
Secretary
6
<PAGE>
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
OF
FAX INTERNATIONAL, INC.
FAX INTERNATIONAL, INC. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: That by written consent of all of the directors of the
Corporation, a resolution was duly adopted setting forth a proposed amendment of
the Certificate of Incorporation of the Corporation, declaring said amendment to
be advisable. The resolution setting forth the proposed amendment is as follows:
RESOLVED: That it be advisable for the Corporation to amend its Certificate
of Incorporation by changing the Article numbered "4" so that, as amended,
said Article 4 shall be and read as follows:
"4. The total number of shares of stock which the Corporation shall have
authority to issue is twelve million six hundred seventy-five thousand five
hundred (12,675,500) shares: nine million (9,000,000) of which shall be
Common Stock, of the par value of One Cent ($.01) per share; nine hundred
seventy-five thousand five hundred (975,500) of which shall be Series A
Convertible Preferred stock, of the par value of One Dollar ($1.00) per
share; and two million seven hundred thousand (2,700,000) of which shall be
Series B Convertible Preferred Stock, of the par value of One Dollar
($1.00) per share, amounting in the aggregate to Three Million Seven
Hundred Sixty-Five Thousand Five Hundred and 00/100 Dollars
($3,765,500.00).
Additional designations and powers, preferences and rights and
qualifications, limitations or restrictions thereof of the shares of stock
shall be determined by the Board of Directors of the corporation from time
to time."
SECOND: That thereafter, pursuant to resolution of all of the
Corporation's directors, the majority stockholders voted in favor of the
amendment and written notice of such consent will be given to all stockholders
who have not consented in writing to said amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said Fax International, Inc. has caused this
certificate to be signed by Douglas J. Ranalli, its President and Secretary,
this 28th of September 1992.
By: /s/ Douglas J. Ranalli
---------------------------
Douglas J. Ranalli
President
ATTEST: /s/ Douglas J. Ranalli
--------------------------
Douglas J. Ranalli
Secretary
7
<PAGE>
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
OF
FAX INTERNATIONAL, INC.
FAX INTERNATIONAL, INC. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: That by written consent of all of the directors of the
corporation, a resolution was duly adopted setting forth a proposed amendment of
the Certificate of Incorporation of the Corporation, declaring said amendment to
be advisable. The resolution setting forth the proposed amendment is as follows:
RESOLVED: That it be advisable for the Corporation to amend its Certificate
of Incorporation by changing the Article numbered "4" so that, as amended,
said Article 4 shall be and read as follows:
4. The total number of shares of stock which the Corporation shall have
authority to issue is thirteen million three hundred twenty-five thousand
five hundred (13,325,500) shares: nine million (9,000,000) of which shall
be Common Stock, of the par value of One Cent ($.01) per share; nine
hundred seventy-five thousand five hundred (975,500) of which shall be
Series A Convertible Preferred Stock, of the par value of One Dollar
($1.00) per share; two million seven hundred thousand (2,700,000) of which
shall be Series B Convertible Preferred Stock, of the par value of One
Dollar ($1.00) per share; and six hundred fifty thousand (650,000) of which
shall be Series C Convertible Preferred Stock, of the par value of One
Dollar ($1.00) per share, amounting in the aggregate to Four Million Four
Hundred Fifteen Thousand Five Hundred and 00/100 Dollars ($4,415,500.00).
Additional designations and powers, preferences and rights and
qualifications, limitations or restrictions thereof of the shares of stock
shall be determined by the Board of Directors of the Corporation from time
to time."
SECOND: That thereafter, pursuant to resolution of all of the
Corporation's directors, the majority stockholders voted in favor of the
amendment and written notice of such consent will be given to all stockholders
who have not consented in writing to said amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said Fax International, Inc. has caused this
certificate to be signed by Douglas J. Ranalli, its President and Secretary,
this _____ of May, 1993.
By: /s/ Douglas J. Ranalli
---------------------------
Douglas J. Ranalli
President
ATTEST: /s/ Douglas J. Ranalli
---------------------------
Douglas J. Ranalli
Secretary
8
<PAGE>
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
OF
FAX INTERNATIONAL, INC.
FAX INTERNATIONAL, INC. (the "Corporation"), a Delaware corporation, DOES
HEREBY CERTIFY:
FIRST: That by written consent of all of the directors of the
Corporation, a resolution was duly adopted setting forth a Proposed amendment of
the Certificate of Incorporation of the Corporation and declaring such proposed
amendment to be advisable, and that such amendment was approved by the written
consent of holders of a majority of the capital stock entitled to vote thereon.
The resolution setting forth the proposed amendment is as follows.
RESOLVED: That it is advisable that Article 4 of the Corporation's
Certificate of Incorporation, as amended, be amended to read in its
entirety as follows; and that such Article 4 of the Corporation's
Certificate of Incorporation, as amended, accordingly be amended to read in
its entirety as follows:
4. The total number of shares of stock that the Corporation shall have
authority to issue is sixty-nine million six hundred forty-five thousand
five hundred (69,645,500) shares, fifty million (50,000,000) of which shall
be Common Stock, of the par value of One Cent ($0.0 1) per share, nine
hundred seventy-five thousand five hundred (975,500) of which shall be
Series A Convertible Preferred Stork, of the par value of One Dollar
($1.00) per share; two million seven hundred thousand (2,700,000) of which
shall be Series B Convertible Preferred Stock, of the par value of One
Dollar ($1.00) per share; six hundred fifty thousand (650,000) of which
shall be Series C Convertible Preferred Stock, of the par value of One
Dollar ($1.00) per share; two million six hundred thousand (2,600,000) of
which shall be Series D Convertible Preferred Stock, of the par value of
One Dollar ($1.00) per share; one hundred fifty thousand (150,000) of which
shall be Series E Convertible Preferred Stock, of the par value of One
Dollar ($1.00) per share; five hundred thousand (500,00) of which shall be
Series F Convertible Preferred Stock, of the par value of One Dollar
($1.00) per share. eight million five hundred seventy thousand (8,570,000)
of which shall be Series G Convertible Preferred Stock, of the par value of
One Dollar ($1.00) per share; and three million five hundred thousand
(3,500,000) of which shall be Series H Convertible Preferred Stock, of the
par value of One Dollar ($1.00) per share, amounting in the aggregate to
twenty million one hundred forty-five thousand five hundred dollars
($20,145,500).
Additional designations and power, preferences and rights of the
shares of stock and qualifications, limitations or restrictions thereof
shall be determined by the Board of Directors of the Corporation from time
to time.
SECOND: That written notice of such consent and approval will be given to
all stockholders who have not consented in writing to such amendment.
THIRD: That such amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
9
<PAGE>
IN WITNESS WHEREOF, Fax International, has caused this certificate to be
executed by Douglas J. Ranalli, its President and Secretary, this ____ day of
April, 1995.
By: /s/ Douglas J. Ranalli
-----------------------------
Douglas J. Ranalli,
President
ATTEST: /s/ Douglas J. Ranalli
--------------------------
Douglas J. Ranalli,
Secretary
10
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
FAX INTERNATIONAL, INC.
-----------------------
Pursuant to Section 242 of the Delaware General Corporation Law, it is
HEREBY CERTIFIED THAT:
1. The name of the corporation (hereinafter called the "corporation") is
FAX INTERNATIONAL, INC.
2. The Certificate of Incorporation of the corporation is hereby amended
by striking out Article FIRST thereof and by substituting in lieu of said
Article the following new Article:
Article FIRST: The name of the Corporation is
UNIFI COMMUNICATIONS, INC.
3. The amendment of the Certificate of incorporation herein certified has
been duty adopted in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware.
Signed on October 30, 1996
/s/ Douglas J. Ranalli
------------------------------
Douglas J. Ranalli
President and Secretary
Attest:
- ------
/s/ Paula Litscher
- ------------------------
Paula Litscher
Vice President
11
<PAGE>
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
OF
UNIFI COMMUNICATIONS, INC.
UNIFI COMMUNICATIONS, INC. (the "Corporation"), a Delaware corporation,
DOES HEREBY CERTIFY:
FIRST: That by written consent of all of the directors of the Corporation,
a resolution was duly adopted setting forth a proposed amendment of the
Certificate of Incorporation of the Corporation and declaring such proposed
amendment to be advisable, and that such amendment was approved by the written
consent of holders of a majority of the capital stock entitled to vote thereon.
The resolution setting forth the proposed amendment is as follows:
RESOLVED: That it is advisable that Article 4 of the Corporation's
--------
Certificate of Incorporation, as amended, be amended to read in
its entirety as follows; and that such Article 4 of the
Corporation's Certificate of Incorporation, as amended,
accordingly be amended to read in its entirety as follows:
4. The total number of shares of stock that the Corporation shall
have authority to issue is seventy-four million seven hundred and
fifteen thousand five hundred (74,715,500) shares, fifty million
(50,000,000) of which shall be Common Stock, of the par value of
One Cent ($0.01) per share, nine hundred seventy-five thousand
five hundred (975,500) of which shall be Series A Convertible
Preferred Stock, of the par value of One Dollar ($1.00) per
share; two million seven hundred thousand (2,700,000) of which
shall be Series B Convertible Preferred Stock, of the par value
of One Dollar ($1.00) per share; six hundred fifty thousand
(650,000) of which shall be Series C Convertible Preferred Stock,
of the par value of One Dollar ($1.00) per share; two million six
hundred thousand (2,600,000) of which shall be Series D
Convertible Preferred Stock, of the par value of One Dollar
($1.00) per share; one hundred fifty thousand (150,000) of which
shall be Series E Convertible Preferred Stock, of the par value
of One Dollar ($1.00) per share; five hundred thousand (500,000)
of which shall be Series F Convertible Preferred Stock, of the
par value of One Dollar ($1.00) per share; eight million five
hundred seventy thousand (8,570,000) of which shall be Series G
Convertible Preferred Stock, of the par value of One Dollar
($1.00) per share; and eight million five hundred seventy
thousand (8,570,000) of which shall be Series I Convertible
Preferred Stock of the par value of One Dollar ($1.00) per share
amounting in the aggregate to twenty five million two hundred and
fifteen thousand and five hundred dollars ($25,215,500).
SECOND: That written notice of such consent and approval will be given to
all stockholders who have not consented in writing to such amendment.
THIRD: That such amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
12
<PAGE>
IN WITNESS WHEREOF, UNIFI Communications, Inc. has caused this certificate
to be executed by Q. Ellis Telford, its Assistant Secretary and Corporate
Counsel, the 21st day of February, 1997.
By: /s/ Q. Ellis Telford
--------------------------
Q. Ellis Telford
Assistant Secretary and
Corporate Counsel
13
<PAGE>
UNIFI COMMUNICATIONS, INC.
CERTIFICATE OF DESIGNATION
OF
SERIES A, B, C, D, E, F, G AND H
CONVERTIBLE PREFERENCE STOCK,
FIXING POWERS, PREFERENCES
AND RIGHTS OF SUCH STOCK
______________________________
Pursuant to Section 151 of the
General Corporation Law
of the State of Delaware
______________________________
UNIFI Communications, Inc. (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, certifies:
SERIES A
FIRST: That in accordance with the provisions of Section 151 of the General
Corporation Law of the State of Delaware, the Board of Directors of the
Corporation by unanimous written consent dated April 28, 1993 duly approved and
adopted the following resolution which resolution remains in full force and
effect on the date hereof:
RESOLVED: That 975,500 shares of the Corporation's Preferred Stock be, and
--------
hereby are, designated as Series A Convertible Preferred Stock
with such rights and preferences as designated in the form
attached hereto;
RESOLVED: That the officers of the Corporation, or any of them, be, and
--------
hereby are, authorized, empowered and directed to take any and
all actions and to execute and deliver any and all documents and
instruments, in the name and on behalf of the Corporation, and
under its corporate seal or otherwise, and to do any and all
things they deem necessary or advisable to carry out the intent
of the foregoing resolutions;
SECOND: That said Certificate of Designation of Series A Convertible Preferred
Stock is attached hereto as ANNEX A.
-------
14
<PAGE>
SERIES B
THIRD: That in accordance with the provisions of Section 151 of the General
Corporation Law of the State of Delaware, the Board of Directors of the
Corporation by unanimous written consent dated April 28, 1993 duly approved and
adopted the following resolution which resolution remains in full force and
effect on the date hereof:
FURTHER
RESOLVED: That 2,700,000 shares of the Corporation's Preferred Stock be,
--------
and hereby are, designated as Series B Convertible Preferred
Stock with such rights and preferences as designated in the form
attached hereto;
RESOLVED: That the officers of the Corporation, or any of them, be, and
--------
hereby are, authorized, empowered and directed to take any and
all actions and to execute and deliver any and all documents and
instruments, in the name and on behalf of the Corporation, and
under its corporate seal or otherwise, and to do any and all
things they deem necessary or advisable to carry out the intent
of the foregoing resolutions;
FOURTH: That said Certificate of Designation of Series B Convertible Preferred
Stock is attached hereto as ANNEX B.
-------
SERIES C
FIFTH: That in accordance with the provisions of Section 151 of the General
Corporation Law of the State of Delaware, the Board of Directors of the
Corporation by unanimous written consent dated May 4, 1993 duly approved and
adopted the following resolution which resolution remains in full force and
effect on the date hereof:
FURTHER
RESOLVED: That 650,00 shares of the Corporation's Preferred Stock be, and
--------
hereby are, designated as Series C Convertible Preferred Stock
with such rights and preferences as designated in the form
annexed hereto;
FURTHER
RESOLVED: That the officers of the Corporation, or any of them, be, and
--------
hereby are, authorized, empowered and directed to take any and
all actions and to
15
<PAGE>
execute and deliver any and all documents and instruments in the
name and on behalf of the Corporation, and under its corporate
seal or otherwise, and to do any and all things they deem
necessary or advisable to carry out the intent of the foregoing
resolutions;
SIXTH: That said Certificate of Designation of Series C Convertible Preferred
Stock is attached hereto as ANNEX C.
-------
SERIES D
SEVENTH: That in accordance with the provisions of Section 151 of the General
Corporation Law of the State of Delaware, the Board of Directors of the
Corporation by unanimous written consent dated January 7, 1994 duly approved and
adopted the following resolution which resolution remains in full force and
effect on the date hereof:
RESOLVED: That the two millon six hundred thousand shares of the
--------
Corporation's Preferred Stock, shall have the powers,
preferences, and rights set forth on the Certificate of
Designation of Series D Convertible Preferred Stock, Fixing
Powers, Preferences, and Rights of Such Stock attached hereto;
RESOLVED: That the appropriate officers of the Corporation be, and they
--------
hereby are, authorized, empowered, and directed to take any and
all actions and to execute and deliver any and all documents and
instruments, in the name and on behalf of the Corporation, and
under its corporate seal or otherwise, and to do any and all
things they deem necessary or advisable, including without
limitation filing a Certificate of Amendment of the Certificate
of Incorporation of the Corporation, as previously amended, to
carry out the intent of the foregoing resolutions;
EIGHTH: That said Certificate of Designation of Series D Convertible Preferred
Stock is attached hereto as ANNEX D.
-------
16
<PAGE>
SERIES E
NINTH: That in accordance with the provisions of Section 151 of the General
Corporation Law of the State of Delaware, the Board of Directors of the
Corporation by unanimous written consent dated May 11, 1994 duly approved and
adopted the following resolution which resolution remains in full force and
effect on the date hereof:
FURTHER
RESOLVED: That the one hundred thirty-five thousand shares of the
--------
Corporation's Preferred Stock, shall have the powers,
preferences, and rights set forth on the Certificate of
Designation of Series E Convertible Preferred Stock, Fixing
Powers, Preferences, and Rights of Such Stock attached hereto;
FURTHER
RESOLVED: That the appropriate officers of the Corporation be, and they
--------
hereby are, authorized, empowered and directed to take any and
all actions and to execute and deliver any and all documents and
instruments, in the name and on behalf of the Corporation, and
under its corporate seal or otherwise, and to do any and all
things they deem necessary or advisable, including without
limitation filing a Certificate of Amendment of the Certificate
of Incorporation of the Corporation, as previously amended, to
carry out the intent of the foregoing resolutions;
TENTH: That said Certificate of Designation of Series E Convertible Preferred
Stock is attached hereto as ANNEX E.
-------
SERIES F
ELEVENTH: That in accordance with the provisions of Section 151 of the General
Corporation Law of the State of Delaware, the Board of Directors of the
Corporation by unanimous written consent dated May 11, 1994 duly approved and
adopted the following resolution which resolution remains in full force and
effect on the date hereof:
FURTHER
RESOLVED: That the five hundred thousand shares of the Corporation's
--------
Preferred Stock, shall have the powers, preferences, and rights
set forth on the Certificate of Designation of Series F
Convertible Preferred Stock, Fixing Powers, Preferences, and
rights of Such Stock attached hereto;
17
<PAGE>
TWELFTH: That said Certificate of Designation of Series F Convertible Preferred
Stock is attached hereto as ANNEX F.
-------
18
<PAGE>
SERIES G
THIRTEENTH: That in accordance with the provisions of Section 151 of the
General Corporation Law of the State of Delaware, the Board of Directors of the
Corporation by unanimous written consent dated March 31, 1995 duly approved and
adopted the following resolution which resolution remains in full force and
effect on the date hereof:
FURTHER
RESOLVED: That the eight million five hundred seventy thousand shares of
--------
the Corporation's Preferred Stock, shall have the powers,
preferences, and rights set forth on the Certificate of
Designation of Series G Preferred Stock, Fixing Powers,
Preferences, and Rights of Such Stock attached hereto;
FURTHER
RESOLVED: That the appropriate officers of the Corporation be, and they
--------
hereby are, authorized, empowered and directed to take any and
all actions and to execute and deliver any and all documents and
instruments, in the name and on behalf of the Corporation, and
under its corporate seal or otherwise, and to do any and all
things they deem necessary or advisable, including, without
limitation, filing a Certificate of Amendment to the
Corporation's Certificate of Incorporation, as previously
amended, to carry out the intent of the foregoing resolutions;
FOURTEENTH: That said Certificate of Designation of Series G Convertible
Preferred Stock is attached hereto as ANNEX G.
-------
19
<PAGE>
SERIES H
FIFTEENTH: That in accordance with the provisions of Section 151 of the General
Corporation Law of the State of Delaware, the Board of Directors of the
Corporation by unanimous written consent dated March 31, 1995 duly approved and
adopted the following resolution which resolution remains in full force and
effect on the date hereof:
FURTHER
RESOLVED: That the three million five hundred thousand shares of the
--------
Corporation's Preferred Stock, shall have the powers,
preferences, and rights set forth on the Certificate of
Designation of Series H Preferred Stock, Fixing Powers,
Preferences, and Rights of Such Stock attached hereto;
FURTHER
RESOLVED: That the appropriate officers of the Corporation be, and they
--------
hereby are, authorized, empowered and directed to take any and
all actions and to execute and deliver any and all documents and
instruments, in the name and on behalf of the Corporation, and
under its corporate seal or otherwise, and to do any and all
things they deem necessary or advisable, including, without
limitation, filing a Certificate of Amendment to the
Corporation's Certificate of Incorporation, as previously
amended, to carry out the intent of the foregoing resolutions;
SIXTEENTH: That said Certificate of Designation of Series H Convertible
Preferred Stock is attached hereto as ANNEX H.
-------
20
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
duly executed by Q. Ellis Telford, Assistant Secretary and Corporate Counsel on
this 21st day of February, 1997.
UNIFI Communications, Inc.
By /s/ Q. Ellis Telford
---------------------------
Q. Ellis Telford
Assistant Secretary and
Corporate Counsel
21
<PAGE>
ANNEX A
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UNIFI COMMUNICATIONS, INC.
CERTIFICATE OF DESIGNATION
OF
SERIES A CONVERTIBLE PREFERRED STOCK,
FIXING POWERS, PREFERENCES
AND RIGHTS OF SUCH STOCK
The preferences, voting powers, qualifications, special or relative rights
or privileges of the Series A Convertible Preferred Stock, $1.00 par value per
share (the "Preferred Stock"), shall be as follows:
1. Dividends. The Board of Directors of the Company shall not declare or
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pay a dividend for any share of the Common Stock unless the Board of Directors
shall first have declared and paid a dividend for every share of the Preferred
Stock. In no event shall the Board of Directors declare or pay a dividend for
any share of the Common Stock that is greater than an amount equal to the
dividend declared or paid for any share of the Preferred Stock divided by the
Conversion Ratio, as hereinafter defined. Any such dividends paid to shares of
the Common Stock or the Preferred Stock shall be declared by the Company's Board
of Directors when and if, in the sole judgment of said Board, there are
sufficient funds available from which such dividends may be properly paid.
2. Liquidation. Upon any liquidation, dissolution or winding up of the
-----------
Company, whether voluntary or involuntary, each holder of the Preferred Stock
then outstanding shall be entitled, before any distribution or payment is made
upon any shares of the Company's Common Stock, to be paid the amount of $1.00
for each share of Preferred Stock held by him, plus the aggregate of any then
unpaid dividends prior to the date of payment with respect to the Preferred
Stock, such amount being hereinafter sometimes referred to as "the Liquidation
Payment". Such holders shall not be entitled to any further payment. If upon
such liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, the assets to be distributed among holders of the Preferred Stock
shall be insufficient to permit payment to the holders of the Preferred Stock of
the amount distributable as aforesaid, then all of the assets of the Company to
be distributed shall be paid ratably among the holders of the Preferred Stock.
Upon any such liquidation, dissolution, or winding up of the Company, after the
holders of the Preferred Stock shall have been paid in full the amount to which
they shall be entitled, the remaining net assets of the Company may be
distributed to the holders of the Company's Common Stock. Written notice of any
such liquidation, dissolution or winding up of the Company, stating (i) the
payment date, (ii) the amount of the Liquidation Payment, (iii) the place where
such amount shall be payable, and (iv) the conversion right set forth in Section
3 hereof, shall be given by certified mail, postage prepaid, not less than
thirty (30) days prior to the payment date stated therein to the holders of
record of the Preferred Stock addressed to each such holder at such holder's
post office address as shown on the books of
<PAGE>
the Company. The merger or consolidation of the Company into or with another
corporation (except if the shareholders of the Company beneficially own more
than fifty percent (50%) of the capital stock of the surviving entity), or the
sale of all or substantially all the assets of the Company (except if all or
substantially all of the assets are transferred to a subsidiary of the Company),
shall be deemed to be a liquidation, dissolution or winding up of the Company
for purposes of this Section 2.
3. Conversion. Each issued and outstanding share of the Preferred Stock
----------
may, at the option of the holder thereof by written notice to the Company at any
time following issuance of such share, be converted into such number of fully-
paid and non-assessable shares of the Company's Common Stock, $.01 Par value per
share, as is determined by dividing $1.00 by the Conversion Price, as defined
herein (the "Conversion Ratio"), in effect at the time of the conversion. The
conversion price at which shares of the Common Stock shall be deliverable upon
conversion of the Company's Preferred Stock without the payment of additional
consideration by the holder thereof (the "Conversion Price") shall initially be
$1.00.
In the event that, for the fiscal year ended December 31, 1994, the
Company's total revenues (the "Revenues") are less than $5,000,000 and the
Company's net income after tax (excluding extraordinary expense) (the "Net
Income") is less than $500,000, then such initial Conversion Price shall be
$0.67.
In the event that, for the fiscal year ended December 31, 1994, the
Company's Revenues are at least $5,000,000 but less than $10,000,000 or the
Company's Net Income is less than $1,000,000, then such initial Conversion Price
shall be $0.80.
Such initial Conversion Price, and the rate at which shares of Preferred
Stock may be converted into shares of Common Stock, shall be subject to
adjustment as provided. A holder's right to convert as aforesaid shall
terminate if the holder's option to convert is not exercised prior to the
payment date of the Liquidation Payment referred to in Section 2 above. A
holder's right to convert as aforesaid, if exercised;'must be applied to all
shares of-the Preferred Stock of the holder.
The Company, by majority vote of its Board of Directors, shall have the
right to require the conversion of all, but not less than all, of the then
issued and outstanding shares of the Preferred Stock at the Conversion Price
into the company's Common Stock, $0.01 par value per share, upon the following
terms and conditions or upon the occurrence of the following event:
If there is an underwritten offering and sale of the Company s Common
Stock, registered under the Securities Act of 1933, as amended (the "Act") ,
having a maximum aggregate offering price of $5,000,000 or greater, then the
Company may require the conversion, at the Applicable Conversion Rate, of all,
but not less than all, of the then issued and outstanding shares of the
Preferred Stock to Common Stock, $0.01 par value per share, of the company
immediately prior to the effective date of the Registration Statement filed with
the Securities and Exchange Commission in connection with such offering.
Notwithstanding the above, such conversion shall be rescinded in the event the
closing of such offering does not occur within thirty (30) days of such
effective date or the Company does not receive net proceeds of at least
$5,000,000.
2
<PAGE>
4. Voting.
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General. At every meeting of the stockholders and except as is
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otherwise required by law or herein, on all matters to be voted on by the
stockholders of the Corporation, the holders of shares of Common Stock and of
the Preferred Stock shall vote together as a single class with each holder of
shares of Common Stock being entitled to one vote per share and each holder of
shares of the Preferred Stock being entitled to the number of votes equal to the
number of shares of Common Stock into which the shares of Preferred Stock held
by such holder are convertible (as adjusted from time to time pursuant to
Section 3, 5 and 6 hereof). In the event the matter to be voted upon involves
the sale of all or substantially all of the Company's assets, such matter shall
be determined by a vote of a two-thirds majority of the shares present in person
or represented by proxy and voting on such matter.
Notwithstanding the foregoing, the holders of the Preferred Stock shall be
entitled, voting as a single class and to the exclusion of the vote of any other
class or series of stock, (i) to approve any change in any of the powers,
designations, preferences and relative, participating, optional or other special
rights of such series, and (ii) to approve any change in any of the powers,
designations, preferences and relative, participating, optional or other special
rights of any other existing class or series of stock that would be adverse to
the holders of the Preferred Stock. In the event any such change is voted upon,
such matter shall be determined by a vote of a majority of the shares present in
person or represented by proxy and voting on such matter.
5. Adjustments. In case the Company shall at any time after the date
-----------
hereof (i) declare a dividend payable in shares of the Common Stock of the
Company (other than dividends paid to the holders of Preferred Stock); (ii)
issue any shares of Common Stock in subdivision of outstanding shares of the
Common Stock of the Company by reclassification or otherwise; or (iii) combine
outstanding shares of the Common Stock of the Company by reclassification or
otherwise; the number of shares of Common Stock to which the holder of then
issued and outstanding shares of the Preferred Stock shall be entitled upon
conversion under Section 3 hereof shall be increased or decreased, as the case
may be, in proportion to such increase or decrease in the then issued and
outstanding shares of Common Stock at the time of such stock dividend,
subdivision or combination as aforesaid.
In addition, if there is any such stock dividend, subdivision or
combination as aforesaid, the voting rights of a holder of the Preferred Stock
under Section 4 hereof shall be similarly adjusted to provide that each then
issued and outstanding share of the Preferred Stock will be entitled to cast as
many votes as such holder would be entitled to cast if, immediately before
casting such vote, such holder had elected to convert, at the Conversion Price,
such holder's Preferred Stock to Common Stock of the Company.
6. Adjustment of Conversion Price (Ratchet Provision). In the event the
--------------------------------------------------
Company shall issue any shares of Common stock, Options (as hereinafter
defined), Convertible Securities (as hereinafter defined), or any shares of
Additional Shares of Preferred Stock (as hereinafter defined), without
consideration or for a consideration per share less than the Conversion Price,
as adjusted, then and in such event, such Conversion Price shall be reduced,
concurrently with such issue to a price (calculated to the nearest cent)
determined by multiplying such conversion Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
3
<PAGE>
prior to such issue plus the number of shares of Common Stock which the
aggregate consideration received by the Company for the total number of
Additional Shares of Preferred Stock, shares of Common Stock, Convertible
Securities or options so issued would purchase at such Conversion Price; and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issue plus the number of shares of Common Stock into
which or for which such Additional Shares of Preferred Stock, shares of Common
Stock, Convertible Securities or Options so issued are convertible or
exercisable; provided, however, that in the event the Company, without receiving
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any consideration, declares a dividend on the Preferred Stock payable in
Preferred Stock or effects a subdivision of the outstanding shares of Preferred
Stock into a greater or lesser number of shares of Preferred Stock, the
Conversion Price in effect immediately prior to such stock dividend or
subdivision shall be increased or decreased proportionately.
For purposes of this Section 6, all shares of Common Stock issuable upon
conversion or exercise of shares of Preferred Stock, Convertible Securities or
options outstanding immediately prior to such issue shall be deemed to be
outstanding.
For purposes of this Section 6 and of Section 8, the following definitions
shall apply:
(a) "Additional Shares of Preferred Stock" shall mean all shares of
Preferred Stock issued by the Company after September 9, 1992, other than shares
of Preferred Stock issued or issuable as a dividend or distribution on the
Preferred Stock, or by reason of a dividend, stock split, split-up or other
distribution on shares of Preferred Stock.
(b) "Convertible Securities" shall mean any evidences of
indebtedness, shares (other than Common Stock) or other securities directly or
indirectly convertible into or exchangeable for Common Stock.
(c) "Options" shall mean rights, options or warrants to subscribe
for, purchase or otherwise acquire Common Stock or Convertible Securities.
Notwithstanding the foregoing, this provision shall not apply to any
issuance of Common Stock made upon (i) exercise by a holder of Preferred
Stock,of the conversion rights described in Section 3, (ii) exercise by a holder
of the Company's Series B Convertible Preferred Stock of the conversion rights
accorded such Series B Convertible Preferred Stock; (iii) exercise of an
incentive or nonqualified stock option pursuant to the Company's 1993 Stock
Option Plan or pursuant to any stock option plan ratified and adopted by
majority vote, on a fully converted basis of the Company's stockholders and by
vote of a majority of the Company's Board of Directors who are not officers of
the Company; or (iv) exercise by a warrantholder or optionholder of any Warrant
or non-qualified stock option issued or granted by the Company as of April 7,
1993.
For purposes of this Section 6, the consideration received by the
Corporation for the issue of any Additional Shares of Common Stock shall be
computed as follows:
(A) Cash and Property: Such consideration:
------------------
(I) insofar as it consists of cash, shall be computed at the aggregate
of cash received by the Corporation;
4
<PAGE>
(II) insofar as it consists of property other than cash, shall be
computed at the fair market value thereof at the time of such issue, as
determined in good faith by the Board of Directors.
(B) Options and Convertible Securities. The consideration per share
----------------------------------
received by the Corporation for shares of Common Stock relating to Options and
Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received or receivable by the Corporation as
consideration for the issue of such Options or Convertible Securities, plus the
minimum aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision contained therein
for a subsequent adjustment of such consideration) payable to the Corporation
upon the exercise of such options or the conversion or exchange of such
Convertible Securities, or in the case of options for Convertible Securities,
the exercise of such options for Convertible Securities and the conversion or
exchange of such Convertible Securities by
(y) the maximum number of shares of Common Stock (as set forth in the
instruments relating thereto, without regard to any provision contained therein
for a subsequent adjustment for such number) issuable upon the exercise of such
Options or the conversion or exchange of such Convertible securities.
The Company shall reserve for issuance and keep available, as necessary
from time to time, the number of shares of Common Stock into which or for which
the shares of Preferred Stock, Convertible Securities or options are convertible
or exercisable.
7. Rights of Co-Sale. Until such time as the Company effects an
-----------------
underwritten offering and sale of the Company's Common Stock, resulting in net
proceeds to the Company of at least $5,000,000, if any holder of shares of
Preferred Stock, or of Common Stock into which such Preferred Stock has been
converted in accordance with the provisions of the Certificate of Designation of
Series A Convertible Preferred Stock, dated as of April 27, 1993 (hereinafter
referred to in this Section 7 as the "Selling Stockholder"), proposes to
transfer more than 100,000 shares of Common Stock or Preferred Stock owned by
him, then he shall afford the other holders of shares of Common Stock or
Preferred Stock (hereinafter referred to in this Section 7 as the "Other
Stockholders") the right to transfer the shares of Common Stock or Preferred
Stock held by them as follows:
The Selling Stockholder shall give written notice to the other
Stockholders, at least thirty (30) days prior to any proposed transfer of any
such shares, specifying the number of such shares which he desires to transfer,
the percentage which such shares represent of the total number of shares held by
him, on a fully converted and fully-exercised basis (the "Sales Percentage"),
the identity of the proposed transfer of such shares, and the time within which
and the price and all other material terms and conditions upon which the Selling
Stockholder proposes to sell such shares.
Each of the Other Stockholders shall notify the Company in writing, within
fifteen (15) days after such notice, whether such Other Stockholder desires to
sell any such shares of Common Stock or Preferred Stock held by such other
stockholder concurrently with the selling Stockholder in accordance with the
terms and provisions of this section 7. Failure to provide such written notice
within said fifteen-day period after receipt of notice from the Selling
Stockholder, for the purpose
5
<PAGE>
hereof, shall be deemed to constitute a refusal by such other stockholder to
sell any of such other Stockholder's shares of Common Stock or Preferred Stock
concurrently with the Selling Stockholder.
Concurrently with the delivery of the notice referred to above, the Selling
Stockholder shall offer each of the Other Stockholders the opportunity to sell
to the proposed purchaser or purchasers of the shares that percentage of the
shares of Common Stock or Preferred Stock then held by the Other Stockholder, on
a fully-converted and fully-exercised basis, which is equal to the Sales
Percentage. It is agreed and understood that the Selling Stockholder shall
obtain the same agreements and commitments from the proposed purchaser or
purchasers in respect of the Preferred Stock to be sold by each of the Other
Stockholders as he has obtained from such purchaser or purchasers in respect of
the shares proposed to be sold by him, including the time of purchase, the
purchase price and,,the other terms and conditions upon which the purchase of
the Selling Stockholder's shares is to be made.
In the event the Selling Stockholder cannot obtain agreements or
commitments from the proposed purchaser or purchasers to purchase that
percentage of the shares of Common Stock or Preferred Stock held by each of the
Other Stockholders which is equal to the Sales Percentage of the shares, then
the Selling Stockholder shall reduce the number of shares which the Selling
Stockholder proposes to sell so that both the Selling Stockholder and each of
the Other Stockholders shall be entitled to sell an identical percentage (as
nearly as possible, with the number of shares being sold by the Selling
Stockholder and each of the Other Stockholders being rounded to the nearest
whole share) of the shares of Common Stock or Preferred Stock then held by each
of them, respectively, or such lesser percentage as the Other Stockholders in
their sole discretion may elect, which decrease shall not require a
proportionate decrease in the percentage sold by the Selling Stockholder.
None of the Other Stockholders shall be obligated to sell any shares of
Common Stock or Preferred Stock pursuant to any notice furnished by the Selling
Stockholder in accordance with the provisions of this Section 7.
Any and all sales of common Stock or Preferred Stock by the Other
Stockholders pursuant to the terms of this Section 7 shall be made either
concurrently with or prior to the sale of the shares by the Selling Stockholder.
Notwithstanding the foregoing, the provisions of this section sale of
shares by the selling 7 shall not apply to any proposed Stockholder to either
(i) an immediate family member of the Selling Stockholder's; (ii) a trust of
which the selling Stockholder is a trustee and/or a beneficiary; or (iii) a
corporation of which the Selling Stockholder holds more than fifty percent (50%)
of the capital stock; or (iv) a sale pursuant to an effective registration
statement including the Selling Stockholder's shares in accordance with the
exercise of registration rights pursuant to a Registration Rights Agreement
among certain stockholders and the Company.
8. Right to Purchase Shares of an Additional Series or class of Stock.
------------------------------------------------------------------
In the event the Company proposes to issue and sell any shares of Common Stock,
Additional Shares of Preferred Stock, Convertible Securities or Options
(collectively, the "Additional Stock") to one or more investors, then the
Company shall afford the holders of Preferred Stock the right to purchase
certain shares of the Additional Stock as follows:
6
<PAGE>
The Company shall give written notice to all the holders of Preferred
Stock, at least thirty (30) days prior to any proposed issuance and sale of
Additional Stock at a price less than the equivalent of $1.50 per share of
Common Stock (determined in accordance with the principles of section 6), as
adjusted, specifying the number of such shares to be issued and sold, the time
within which and the price and all other material terms and conditions upon
which the Company proposes to sell such shares.
Each holder of the Preferred Stock shall notify the Company in writing,
within fifteen (15) days after such notice, whether such stockholder desires to
purchase any such shares of Additional Stock in accordance with the terms and
provisions of this Section 8 and, if so, the number of shares he desires to
purchase. Failure to provide such written notice within said fifteen-day period
after receipt of notice from the Company, for the purpose hereof, shall be
deemed to constitute a refusal by such holder of Preferred Stock to purchase any
such shares of Additional Stock. No holder of Preferred Stock shall be entitled
to purchase pursuant to the terms of this Section 8 a percentage of the
Additional Stock which exceeds the percentage of Common Stock, on a fully-
converted and fully-exercised basis, owned by such holder.
Notwithstanding the foregoing, this provision shall not apply to any
issuance of Common Stock made upon (i) exercise by a holder of Preferred Stock
of the conversion rights described in Section 3, (ii) exercise by a holder of
the Company's Series B Convertible Preferred Stock issued and outstanding as of
March 31, 1993, of the conversion rights accorded such Series B Convertible
Preferred Stock; (iii) exercise of an incentive or non-qualified stock option
pursuant to the Company's 1993 Stock option Plan or pursuant to any stock option
plan ratified and adopted by majority vote, on a fully converted basis, of the
Company's stockholders and by vote of a majority of the company's Board of
Directors who are not officers of the Company; or (iv) exercise by a
warrantholder or optionholder of any Warrant or non-qualified stock option
issued or granted by the Company as of April 7, 1993.
9. Amendments. No provision of these terms of the Series A Convertible
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Preferred Stock may be amended, modified, or waived without the written consent
or affirmative vote of the holders of at least a majority of the then
outstanding shares of Series A Convertible Preferred Stock.
7
<PAGE>
ANNEX B
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UNIFI COMMUNICATIONS, INC.
CERTIFICATE OF DESIGNATION
OF
SERIES B CONVERTIBLE PREFERRED STOCK,
FIXING POWERS, PREFERENCES
AND RIGHTS OF SUCH STOCK
The preferences, voting powers, qualifications, special or relative rights
or privileges of the Series B Convertible Preferred Stock, $1.00 par value per
share (the "Preferred Stock"), shall be as follows:
1. Dividends. The Board of Directors of the Company shall not declare or
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pay a dividend for any share of the Common Stock unless the Board of Directors
shall first have declared and paid a dividend for every share of the Preferred
Stock. In no event shall the Board of Directors declare or pay a dividend for
any share of the Common Stock that is greater than an amount equal to the
dividend declared or paid for any share of the Preferred Stock divided by the
Conversion Ratio, as hereinafter defined. Any such dividends paid to shares of
the Common Stock or the Preferred Stock shall be declared by the Company's Board
of Directors when and if, in the sole judgment of said Board, there are
sufficient funds available from which such dividends may be properly paid.
2. Liquidation. Upon any liquidation, dissolution or winding up of the
-----------
Company, whether voluntary or involuntary, each holder of the Preferred Stock
then outstanding shall be entitled, before any distribution or payment is made
upon any shares of the Company's Common Stock, to be paid the amount of $1.00
for each share of Preferred Stock held by him, plus the aggregate of any then
unpaid dividends prior to the date of payment with respect to the Preferred
Stock, such amount being hereinafter sometimes referred to as "the Liquidation
Payment". Such holders shall not be entitled to any further payment. If upon
such liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, the assets to be distributed among holders of the Preferred Stock
shall be insufficient to permit payment to the holders of the Preferred Stock of
the amount distributable as aforesaid, then all of the assets of the Company to
be distributed shall be paid ratably among the holders of the Preferred Stock.
Upon any such liquidation, dissolution, or winding up of the Company, after the
holders of the Preferred Stock shall have been paid in full the amount to which
they shall be entitled, the remaining net assets of the Company may be
distributed to the holders of the Company's Common Stock. Written notice of any
such liquidation, dissolution or winding up of the Company, stating (i) the
payment date, (ii) the amount of the Liquidation Payment, (iii) the place where
such amount shall be payable, and (iv) the conversion right set forth in Section
3 hereof, shall be given by certified mail, postage prepaid, not less than
thirty (30) days prior to the payment date stated therein to the holders of
record of the Preferred Stock addressed to each such holder at such holder's
post office address as shown on the books of the Company. The merger or
consolidation of the Company into or with another corporation (except
<PAGE>
if the shareholders of the Company beneficially own more than fifty percent
(50%) of the capital stock of the surviving entity), or the sale of all or
substantially all the assets of the Company (except if all or substantially all
of the assets are transferred to a subsidiary of the company), shall be deemed
to be a liquidation, dissolution or winding up of the Company for purposes of
this Section 2.
3. Conversion. Each issued and outstanding share of the Preferred Stock
----------
may, at the option of the holder thereof by written notice to the Company at any
time following issuance of such share, be converted into such number of fully-
paid and non-assessable shares of the Company's Common Stock, $.01 par value per
share, as is determined by dividing $1.00 by the conversion Price, as defined
herein (the "Conversion Ratio"), in effect at the time of the conversion. The
conversion price at which shares of the Common Stock shall be deliverable upon
conversion of the Company's Preferred Stock without the payment of additional
consideration by the holder thereof (the "Conversion Price") shall initially be
$1.00. Such initial conversion Price, and the rate at which shares of Preferred
Stock may be converted into shares of Common Stock, shall be subject to
adjustment as provided. A holder's right to convert as aforesaid shall
terminate if the holder's option to convert is not exercised prior to the
payment date of the Liquidation Payment referred to in Section 2 above. A
holder's right to convert as aforesaid, if exercised, must be applied to all
shares of the Preferred Stock of the holder.
The company, by majority vote of its Board of Directors, shall have the
right to require the conversion of all, but not less than all, of the then
issued and outstanding shares of the Preferred Stock at the Conversion Price
into the Company's Common Stock, $0.01 par value per share, upon the following
terms and conditions or upon the occurrence of the following event:
If there is an underwritten offering and sale of the Company's Common
Stock, registered under the Securities Act of 1933, as amended (the "Act"),
having a maximum aggregate offering price of $5,000,000 or greater, then the
Company may require the conversion, at the Applicable conversion Rate, of all
but not less than all of the then issued and outstanding shares of the Preferred
Stock to Common Stock, $0.01 par value per share, of the Company immediately
prior to the effective date of the Registration Statement filed with the
Securities and Exchange Commission in connection with such offering.
Notwithstanding the above, such conversion shall be rescinded in the event the
closing of such offering does not occur within thirty (30) days of such
effective date or the Company does not receive net proceeds of at least
$5,000,000.
4. Voting.
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General. At every meeting of the stockholders and except as is otherwise
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required by law or herein, on all matters to be voted on by the stockholders of
the Corporation, the holders of shares of Common Stock and of the Preferred
Stock shall vote together as a single class with each holder of shares of Common
Stock being entitled to one vote per share and each holder of shares of the
Preferred Stock being entitled to the number of votes equal to the number of
shares of Common Stock into which the shares of Preferred Stock held by such
holder are convertible (as adjusted from time to time pursuant to Section 3, 5
and 6 hereof). In the event the matter to be voted upon involves the sale of
all or substantially all of the Company's assets, such matter shall be
determined by a vote of a two-thirds majority of the shares present in person or
represented by proxy and voting on such matter.
2
<PAGE>
Notwithstanding the foregoing, the holders of the Preferred Stock shall be
entitled, voting as a single class and to the exclusion of the vote of any other
class or series of stock, (i) to approve any change in any of the powers,
designations, preferences and relative, participating, optional or other special
rights of such series, and (ii) to approve any change in any of the powers,
designations, preferences and relative, participating, optional or other special
rights of any other existing class or series of stock that would be adverse to
the holders of the Preferred Stock. In the event any such change is voted upon,
such matter shall be determined by a vote of a majority of the shares present in
person or represented by proxy and voting on such matter.
5. Adjustments. In case the Company shall at any time after the date
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hereof (i) declare a dividend payable in shares of the Common Stock of the
Company (other than dividends paid to the holders of Preferred Stock); (ii)
issue any shares of Common Stock in subdivision of outstanding shares of the
Common Stock of the Company by reclassification or otherwise; or (iii) combine
outstanding shares of the Common Stock of the Company by reclassification or
otherwise; the number of shares of Common Stock to which the holder of then
issued and outstanding shares of the Preferred Stock shall be entitled upon
conversion under Section 3 hereof shall be increased or decreased, as the case
may be, in proportion to such increase or decrease in the then issued and
outstanding shares of Common Stock at the time of such stock dividend,
subdivision or combination as aforesaid.
In addition, if there is any such stock dividend, subdivision or
combination as aforesaid, the voting rights of a holder of the Preferred Stock
under Section 4 hereof shall be similarly adjusted to provide that each then
issued and outstanding share of the Preferred Stock will be entitled to cast as
many votes as such holder would be entitled to cast if, immediately before
casting such vote, such holder had elected to convert, at the Conversion Price,
such holder's Preferred Stock to Common Stock of the Company.
6. Adjustment of Conversion Price (Ratchet Provision). In the event the
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Company shall issue any shares of Common Stock, options (as hereinafter
defined), Convertible Securities (as hereinafter defined), or any shares of
Additional Shares of Preferred Stock (as hereinafter defined), without
consideration or for a consideration per share less than the Conversion Price,
as adjusted, then and in such event, such conversion Price shall be reduced,
concurrently with such issue to a price (calculated to the nearest cent)
determined by multiplying such Conversion Price by a fraction the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issue plus the number of shares of Common Stock which the
aggregate consideration received by the Company for the total number of
Additional Shares of Preferred Stock, shares of Common Stock, Convertible
Securities or options so issued would purchase at such Conversion Price; and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issue plus the number of shares of Common Stock into
which or for which such Additional Shares of Preferred Stock, shares of Common
Stock, convertible securities or Options so issued are convertible or
exercisable; provided, however, that in the event the Company, without receiving
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any consideration, declares a dividend on the Preferred Stock payable in
Preferred Stock or effects a subdivision of the outstanding shares of Preferred
Stock into a greater or lesser number of shares of Preferred Stock, the
Conversion Price in effect immediately prior-to such stock dividend or
subdivision shall be increased or decreased proportionately.
3
<PAGE>
For purposes of this Section 6, all shares of Common Stock issuable upon
conversion or exercise of shares of Preferred Stock, Convertible Securities or
options outstanding immediately prior to such issue shall be deemed to be
outstanding.
For purposes of this Section 6 and of Section 8, the following definitions
shall apply:
(a) "Additional Shares of Preferred Stock" shall mean all shares of
Preferred Stock issued by the Company after March 31, 1993, other than shares of
Preferred Stock issued or issuable as a dividend or distribution on the
Preferred Stock, or by reason of a dividend, stock split, split-up or other
distribution on shares of Preferred Stock.
(b) "Convertible Securities" shall mean any evidences of
indebtedness, shares (other than Common Stock) or other securities directly or
indirectly convertible into or exchangeable for Common Stock.
(c) "Options" shall mean rights, options or warrants to subscribe
for, purchase or otherwise acquire Common Stock or convertible Securities.
Notwithstanding the foregoing, this provision shall not apply to any
issuance of Common Stock made upon (i) exercise by a holder of Preferred Stock
of the conversion rights described in Section 3, (ii) exercise by a holder of
the Company's Series A Convertible Preferred Stock of the conversion rights
accorded such Series A Convertible Preferred Stock; (iii) exercise of an
incentive or nonqualified stock option pursuant to the Company's 1993 Stock
Option Plan or pursuant to any stock option plan ratified and adopted by
majority vote, on a fully converted basis of the Company's stockholders and by
vote of a majority of the Company's Board of Directors who are not officers of
the Company; or (iv) exercise by a warrantholder or optionholder of any Warrant
or non-qualified stock option issued or granted by the Company as of April 7,
1993.
For purposes of this Section 6, the consideration received by the
Corporation for the issue of any Additional Shares of Common Stock shall be
computed as follows:
(A) Cash and Property: Such consideration:
-----------------
(I) insofar as it consists of cash, shall be computed at the aggregate
of cash received by the Corporation;
(II) insofar as it consists of property other than cash, shall be
computed at the fair market value thereof at the time of such issue, as
determined in good faith by the Board of Directors.
(B) Options and Convertible Securities. The consideration per share
----------------------------------
received by the Corporation for shares of Common Stock relating to Options and
Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received or receivable by the
Corporation as consideration for the issue of such options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration) payable to
the
4
<PAGE>
Corporation upon the exercise of such Options or the conversion or exchange
of such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities by
(y) the maximum number of shares of Common Stock (as set forth in the
instruments relating thereto, without regard to any provision contained therein
for a subsequent adjustment for such number) issuable upon the exercise of such
options or the conversion or exchange of such Convertible Securities.
The Company shall reserve for issuance and keep available, as necessary
from time to time, the number of shares of Common Stock into which or for which
the shares of Preferred Stock, Convertible Securities or Options are convertible
or exercisable.
7. Rights of Co-Sale. Until such time as the Company effects an
-----------------
underwritten offering and sale of the Company's Common Stock, resulting in net
proceeds to the Company of at least $5,000,000, if any holder of shares of
Preferred Stock, or of Common Stock into which such Preferred Stock has been
converted in accordance with the provisions of the Certificate of Designation of
Series B Convertible Preferred Stock, dated as of April 27, 1993 (hereinafter
referred to in this Section 7 as the "Selling Stockholder"), proposes to
transfer more than 100,000 shares of Common Stock or Preferred Stock owned by
him, then he shall afford the other holders of shares of Common Stock or
Preferred Stock (hereinafter referred to in this Section 7 as the "Other
Stockholders") the right to transfer the shares of Common Stock or Preferred
Stock held by them as follows:
The Selling Stockholder shall give written notice to the Other
Stockholders, at least thirty (30) days prior to any proposed transfer of any
such shares, specifying the number of such shares which he desires to transfer,
the percentage which such shares represent of the total number of shares held by
him, on a fully converted and fully-exercised basis, (the "Sales Percentage"),
the identity of the proposed transferee of such shares, and the time within
which and the price and all other material terms and conditions upon which the
Selling Stockholder proposes to sell such shares.
Each of the Other Stockholders shall notify the Company in writing, within
fifteen (15) days after such notice, whether such other Stockholder desires to
sell any such shares of Common Stock or Preferred Stock held by such other
Stockholder concurrently with the Selling Stockholder in accordance with the
terms and provisions of this Section 7. Failure to provide such written notice
within said fifteen-day period after receipt of notice from the selling
Stockholder, for the purpose hereof, shall be deemed to constitute a refusal by
such Other Stockholder to sell any of such Other Stockholder's shares of Common
Stock or Preferred Stock concurrently with the Selling Stockholder.
Concurrently with the delivery of the notice referred to above, the Selling
Stockholder shall offer each of the Other Stockholders the opportunity to sell
to the proposed purchaser or purchasers of the shares that percentage of the
shares of Common Stock or Preferred Stock then held by the other Stockholder, on
a fully-converted and fully-exercised basis, which is equal to the Sales
Percentage. It is agreed and understood that the Selling Stockholder shall
obtain the same agreements and commitments from the proposed purchaser or
purchasers in respect of the Preferred Stock to be sold by each of the Other
Stockholders as he has obtained from such purchaser or purchasers in respect of
the shares proposed to be sold by him, including the time of purchase, the
5
<PAGE>
purchase price and the other terms and conditions upon which the purchase of the
Selling Stockholder's shares is to be made.
In the event the Selling Stockholder cannot obtain agreements or
commitments from the proposed purchaser or purchasers to purchase that
percentage of the shares of Common Stock or Preferred Stock held by each of the
Other Stockholders which is equal to the Sales Percentage of the shares, then
the Selling Stockholder shall reduce the number of shares which the Selling
Stockholder proposes to sell so that both the Selling Stockholder and each of
the other Stockholders shall be entitled to sell an identical percentage (as
nearly as possible, with the number of shares being sold by the Selling
Stockholder and each of the Other Stockholders being rounded to the nearest
whole share) of the shares of Common Stock or Preferred Stock then held by each
of them, respectively, or such lesser percentage as the Other Stockholders in
their sole discretion may elect, which decrease shall not require a
proportionate decrease in the percentage sold by the Selling Stockholder.
None of the Other Stockholders shall be obligated to sell any shares of
Common Stock or Preferred Stock pursuant to any notice furnished by the Selling
Stockholder in accordance with the provisions of this Section 7.
Any and all sales of Common Stock or Preferred Stock by the Other
Stockholders pursuant to the terms of this Section 7 shall be made either
concurrently with or prior to the sale of the shares by the Selling Stockholder.
Notwithstanding the foregoing, the provisions of this section 7 shall not
apply to any proposed sale of shares by the Selling Stockholder to either (i) an
immediate family member of the Selling Stockholder's; (ii) a trust of which the
Selling Stockholder is a trustee and/or a beneficiary; or (iii) a corporation of
which the Selling Stockholder holds more than fifty percent (50%) of the capital
stock; or (iv) a sale pursuant to an effective registration statement including
the Selling Stockholder's shares in accordance with the exercise of registration
rights pursuant to a Registration Rights Agreement among certain stockholders
and the Company.
8. Right to Purchase Shares of an Additional Series or Class of Stock.
------------------------------------------------------------------
In the event the Company proposes to issue and sell any shares of Common Stock,
Additional Shares of Preferred Stock, Convertible Securities or Options
(collectively, the "Additional Stock") to one or more investors, then the
Company shall afford the holders of Preferred Stock the right to purchase
certain shares of the Additional Stock as follows:
The Company shall give written notice to all the holders of Preferred
Stock, at least thirty (30) days prior to any proposed issuance and sale of
Additional Stock at a price less than the equivalent of $1.50 per share of
Common Stock (determined in accordance with the principles of Section 6), as
adjusted, specifying the number of such shares to be issued and sold, the time
within which and the price and all other material terms and conditions upon
which the Company proposes to sell such shares.
Each holder of the Preferred Stock shall notify the Company in writing,
within fifteen (15) days after such notice, whether such stockholder desires to
purchase any such shares of Additional Stock in accordance with the terms and
provisions of this Section 8 and, if so, the number of shares he desires to
purchase. Failure to provide such written notice within said fifteen-day period
after
6
<PAGE>
receipt of notice from the Company, for the purpose hereof, shall be deemed to
constitute a refusal by such holder of Preferred Stock to purchase any such
shares of Additional Stock. No holder of Preferred Stock shall be entitled to
purchase pursuant to the terms of this Section 8 a percentage of the Additional
Stock which exceeds the percentage of Common Stock, on a fully-converted and
fully-exercised basis, owned by such holder.
Notwithstanding the foregoing, this provision shall not apply to any
issuance of Common Stock made upon (i) exercise by a holder of Preferred Stock
of the conversion rights described in section 3, (ii) exercise by a holder of
the Company's Series A Convertible Preferred Stock issued and outstanding as of
September 9, 1992, of the conversion rights accorded such Series A Convertible
Preferred Stock; (iii) exercise of an incentive or non-qualified stock option
pursuant to the Company's 1993 Stock option Plan or pursuant to any stock option
plan ratified and adopted by majority vote, on a fully converted basis, of the
Company's stockholders and by vote of a majority of the Company's Board of
Directors who are not officers of the Company; or (iv) exercise by a
warrantholder or optionholder of any Warrant or non-qualified stock option
issued or granted by the Company as of April 7, 1993.
9. Amendments. No provision of these terms of the Series B Convertible
----------
Preferred Stock may be amended, modified, or waived without the written consent
or affirmative vote of the holders of at least a majority of the then
outstanding shares of Series B Convertible Preferred Stock.
7
<PAGE>
ANNEX C
-------
UNIFI COMMUNICATIONS, INC.
CERTIFICATE OF DESIGNATION
OF
SERIES C CONVERTIBLE PREFERRED STOCK,
FIXING POWERS, PREFERENCES
AND RIGHTS OF SUCH STOCK
The preferences, voting powers, qualifications, special or relative rights
or privileges of the Series C Convertible Preferred Stock, $1.00 par value per
share (the "Preferred Stock"), shall be as follows:
1. Dividends. The Board of Directors of the Company shall not declare or
---------
pay a dividend for any share of the Common Stock, $.01 par value per share, of
the Company (the "Common Stock") unless the Board of Directors shall first have
declared and paid a dividend for every share of the Preferred Stock. In no
event shall the Board of Directors declare or pay a dividend for any share of
the common Stock that is greater than an amount equal to the dividend declared
or paid for any share of the Preferred Stock divided by the Conversion Ratio, as
hereinafter defined. Any such dividends paid to shares of the Common Stock or
the Preferred Stock shall be declared by the Company's Board of Directors when
and if, in the sole judgment of said Board, there are sufficient funds available
from which such dividends may be properly paid.
2. Liquidation. Upon any liquidation, dissolution or winding up of the
-----------
Company, whether voluntary or involuntary, each holder of the Preferred Stock
then outstanding shall be entitled, before any distribution or payment is made
upon any shares of the Company's Common Stock, to be paid the amount of $1.50
for each share of Preferred Stock held by him, plus the aggregate of any then
unpaid dividends prior to the date of payment with respect to the Preferred
Stock, such amount being hereinafter sometimes referred to as "the Liquidation
Payment". Such holders shall not be entitled to any further payment. If upon
such liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, the assets to be distributed among holders of the Preferred Stock
shall be insufficient to permit payment to the holders of the Preferred Stock of
the amount distributable as aforesaid, then all of the assets of the Company to
be distributed shall be paid ratably among the holders of the Preferred Stock,
pari passu, to the holders of the Corporation's Series A Convertible Preferred
- ----------
Stock, its Series B Convertible Preferred Stock and holders of any other series
of stock entitled to such payment. Upon any such liquidation, dissolution, or
winding up of the Company, after the holders of the Preferred Stock shall have
been paid in full the amount to which they shall be entitled, the remaining net
assets of the Company may be distributed to the holders of the Company's Common
Stock. Written notice of any such liquidation, dissolution or winding up of the
Company, stating (i) the payment date, (ii) the amount of the Liquidation
Payment, (iii) the place where such amount shall be payable, and (iv) the
conversion right sat forth in Section 3 hereof, shall be given by certified
mail, postage prepaid, not less than thirty (30) days prior to the payment date
stated therein to the holders of record of the Preferred
<PAGE>
Stock addressed to each such holder at such holder's post office address as
shown on the books of the Company. The merger or consolidation of the Company
into or with another corporation (except if the shareholders of the Company
beneficially own more than fifty percent (50%) of the capital stock of the
surviving entity), or the sale of all or substantially all the assets of the
Company (except if all or substantially all of the assets are transferred to a
subsidiary of the Company), shall be deemed to be a liquidation, dissolution or
winding up of the Company for purposes of this Section 2.
3. Conversion. Each issued and outstanding share of the Preferred Stock
----------
may, at the option of the holder thereof by written notice to the Company at any
time following issuance of such share, be converted into such number of fully-
paid and non-assessable shares of the Company's Common Stock, as is determined
by dividing $1.50 by the Conversion Price, as defined herein (the "Conversion
Ratio"), in effect at the time of the conversion. The conversion price at which
shares of the Common Stock shall be deliverable upon conversion of the Company's
Preferred Stock without the payment of additional consideration by the holder
thereof (the "Conversion Price") shall initially be $1.50. Such initial
Conversion Price, and the rate at which shares of Preferred Stock may be
converted into shares of Common Stock, shall be subject to adjustment as
provided. A holder's right to convert as aforesaid shall terminate if the
holder's option to convert is not exercised prior to the payment date of the
Liquidation Payment referred to in Section 2 above. A holder's right to convert
as aforesaid, if exercised, must be applied to all shares of the Preferred Stock
of the holder.
The Company, by majority vote of its Board of Directors, shall have the
right to require the conversion of all, but not less than all, of the then
issued and outstanding shares of the Preferred Stock at the Conversion Price
into the Company's Common Stock, $.01 par value per share, upon the following
terms and conditions or upon the occurrence of the following event:
If there is an underwritten offering and sale of the Company's Common
Stock, registered under the Securities Act of 1933, as amended (the "Act"),
having a maximum aggregate offering price of $5,000,000 or greater, then the
Company may require the conversion, at the Applicable Conversion Rate, of all
but not less than all of the then issued and outstanding shares of the Preferred
Stock to Common Stock, immediately prior to the effective date of the
Registration Statement filed with the Securities and Exchange Commission in
connection with such offering. Notwithstanding the above, such conversion shall
be rescinded in the event the closing of such offering does not occur within
thirty (30) days of such effective date or the Company does not receive net
proceeds of at least $5,000,000.
4. Voting.
------
General. At every meeting of the stockholders and except as is
-------
otherwise required by law or herein, on all matters to be voted on by the
stockholders of the Corporation, the holders of shares of Common Stock and of
the Preferred Stock shall vote together as a single class with each holder of
shares of Common Stock being entitled to one vote per share and each holder of
shares of the Preferred Stock being entitled to the number of votes equal to the
number of shares of Common Stock into which the shares of Preferred Stock held
by such holder are convertible (as adjusted from time to time pursuant to
Section 3, 5 and 6 hereof). In the event the matter to be voted upon involves
the sale of all or substantially all of the Company's assets, such matter shall
be determined
2
<PAGE>
by a vote of a two-thirds majority of the shares present in person or
represented by proxy and voting on such matter.
Notwithstanding the foregoing, the holders of the Preferred Stock shall be
entitled, voting as a single class and to the exclusion of the vote of any other
class or series of stock, (i) to approve any change in any of the powers,
designations, preferences and relative, participating, optional or other special
rights of such series, and (ii) to approve any change in any of the powers,
designations, preferences and relative, participating, optional or other special
rights of any other existing class or series of stock that would be adverse to
the holders of the Preferred Stock. In the event any such change is voted upon,
such matter shall be determined by a vote of a majority of the shares present in
person or represented by proxy and voting on such matter.
5. Adjustments. In case the Company shall at any time after the date
-----------
hereof (i) declare a dividend payable in shares of the Common Stock of the
Company (other than dividends paid to the holders of Preferred Stock); (ii)
issue any shares of Common Stock in subdivision of outstanding shares of the
Common Stock of the Company by reclassification or otherwise; or (iii) combine
outstanding shares of the Common Stock of the Company by reclassification or
otherwise; the number of shares of Common Stock to which the holder of then
issued and outstanding shares of the Preferred Stock shall be entitled upon
conversion under Section 3 hereof shall be increased or decreased, as the case
may be, in proportion to such increase or decrease in the then issued and
outstanding shares of Common Stock at the time of such stock dividend,
subdivision or combination as aforesaid.
In addition, if there is any such stock dividend, subdivision or
combination as aforesaid, the voting rights of a holder of the Preferred Stock
under Section 4 hereof shall be similarly adjusted to provide that each then
issued and outstanding share of the Preferred Stock will be entitled to cast as
many votes as such holder would be entitled to cast if, immediately before
casting such vote, such holder had elected to convert, at the Conversion Price,
such holder's Preferred Stock to Common Stock of the Company.
6. Adjustment of Conversion Price (Ratchet Provision). In the event the
--------------------------------------------------
Company shall issue any shares of Common Stock, Options (as hereinafter
defined), Convertible Securities (as hereinafter defined), or any shares of
Additional Shares of Preferred Stock (as hereinafter defined), without
consideration or for a consideration per share less than the Conversion Price,
as adjusted, then and in such event, such Conversion Price shall be reduced,
concurrently with such issue to a price (calculated to the nearest cent)
determined by multiplying such Conversion Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issue plus the number of shares of Common Stock which the
aggregate consideration received by the company for the total number of
Additional Shares of Preferred Stock, shares of Common Stock, Convertible
Securities or Options so issued would purchase at such Conversion Price; and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issue plus the number of shares of Common Stock into
which or for which such Additional Shares of Preferred Stock, shares of Common
Stock, Convertible Securities or Options so issued are convertible or
exercisable; provided, however, that in the event the Company, without receiving
--------
any consideration, declares a dividend on the Preferred Stock payable in
Preferred Stock or effects a subdivision of the outstanding shares of Preferred
Stock into a greater or lesser
3
<PAGE>
number of shares of Preferred Stock, the Conversion Price in effect immediately
prior to such stock dividend or subdivision shall be increased or decreased
proportionately.
For purposes of this Section 6, all shares of Common Stock issuable upon
conversion or exercise of shares of Preferred Stock, Convertible Securities or
Options outstanding immediately prior to such issue shall be deemed to be
outstanding.
For purposes of this Section 6 and of Section 8, the following definitions
shall apply:
(a) "Additional Shares of Preferred Stock" shall mean all shares of
Preferred Stock issued by the Company after July 31, 1993, other than shares of
Preferred Stock issued or issuable as a dividend or distribution on the
Preferred Stock, or by reason of a dividend, stock split, split-up or other
distribution on shares of Preferred Stock.
(b) "Convertible Securities" shall mean any evidences of
indebtedness, shares (other than Common Stock) or other securities directly or
indirectly convertible into or exchangeable for Common Stock.
(c) "Options" shall mean rights, options or warrants to subscribe
for, purchase or otherwise acquire Common Stock or Convertible Securities.
Notwithstanding the foregoing, this provision shall not apply to any
issuance of Common Stock made upon (i) exercise by a holder of Preferred Stock
of the conversion rights described in Section 3, (ii) exercise by a holder of
the company's Series A Convertible Preferred Stock of the conversion rights
accorded such Series A Convertible Preferred Stock; (iii) exercise by a holder
of the Company's Series B Convertible Preferred Stock of the conversion rights
accorded such Series B Convertible Preferred Stock; (iv) exercise of an
incentive or non-qualified stock option pursuant to the Company's 1993 Stock
Option Plan or pursuant to any stock option plan ratified and adopted by
majority vote, on a fully converted basis of the Company's stockholders and by
vote of a majority of the Company's Board of Directors who are not officers of
the Company; or (v) exercise by a warrantholder or optionholder of any Warrant
or non-qualified stock option issued or granted by the Company as of April 7,
1993.
For purposes of this Section 6, the consideration received by the
Corporation for the issue of any Additional Shares of Common Stock shall be
computed as follows:
(A) Cash and Property; Such consideration:
------------------
(I) insofar as it consists of cash, shall be computed at the aggregate
of cash received by the Corporation;
(II) insofar as it consists of property other than cash, shall be
computed at the fair market value thereof at the time of such issue, as
determined in good faith by the Board of Directors.
(B) Options and Convertible Securities. The consideration per share
----------------------------------
received by the Corporation for shares of Common Stock relating to Options and
Convertible Securities, shall be determined by dividing
4
<PAGE>
(x) the total amount, if any, received or receivable by the
Corporation as consideration for the issue of such Options or Convertible
securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration) payable to
the Corporation upon the exercise of such Options or the conversion or exchange
of such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities by
(y) the maximum number of shares of Common Stock (as set forth in the
instruments relating thereto, without regard to any provision contained therein
for a subsequent adjustment for such number) issuable upon the exercise of such
Options or the conversion or exchange of such Convertible Securities.
The Company shall reserve for issuance and keep available, as necessary
from time to time, the number of shares of Common Stock into which or for which
the shares of Preferred Stock, Convertible Securities or Options are convertible
or exercisable.
7. Rights of Co-Sale. Until such time as the Company effects an
-----------------
underwritten offering and sale of the Company's Common Stock, resulting in net
proceeds to the Company of at least $5,000,000, if any holder of shares of
Preferred Stock, or of Common Stock into which such Preferred Stock has been
converted in accordance with the provisions of the Certificate of Designation of
Series C Convertible Preferred Stock, dated as of May 4, 1993 (hereinafter
referred to in this Section 7 as the "Selling Stockholder") , proposes to
transfer more than 100,000 shares of Common Stock or Preferred Stock owned by
him, then he shall afford the other holders of shares of Common Stock or
Preferred Stock (hereinafter referred to in this Section 7 as the "Other
Stockholders") the right to transfer the shares of Common Stock or Preferred
Stock held by them as follows:
The Selling Stockholder shall give written notice to the Other
Stockholders, at least, thirty (30) days prior to any proposed transfer of any
such shares, specifying the number of such shares which he desires to transfer,
the percentage which such shares represent of the total number of shares held by
him, on a fully converted and fully-exercised basis, (the "Sales Percentage"),
the identity of the proposed transferee of such shares, and the time within
which and the price and all other material terms and conditions upon which the
Selling Stockholder proposes to sell such shares.
Each of the Other Stockholders shall notify the Company in writing, within
fifteen (15) days after such notice, whether such Other Stockholder desires to
sell any such shares of Common Stock or Preferred Stock held by such Other
Stockholder concurrently with the Selling Stockholder in accordance with the
terms and provisions of this Section 7. Failure to provide such written notice
within said fifteen-day period after receipt of notice from the Selling
Stockholder, for the purpose hereof, shall be deemed to constitute a refusal by
such Other Stockholder to sell any of such Other Stockholder's shares of Common
Stock or Preferred Stock concurrently with the Selling Stockholder.
Concurrently with the delivery of the notice referred to above, the Selling
Stockholder shall offer each of the Other Stockholders the opportunity to sell
to the proposed purchaser or purchasers of the shares that percentage of the
shares of Common Stock or Preferred Stock then held by the Other Stockholder, on
a fully-converted and fully-exercised basis, which is equal to the Sales
5
<PAGE>
Percentage. It is agreed and understood that the Selling Stockholder shall
obtain the same agreements and commitments from the proposed purchaser or
purchasers in respect of the Preferred Stock to be sold by each of the Other
Stockholders as he has obtained from such purchaser or purchasers in respect of
the shares proposed to be sold by him, including the time of purchase, the
purchase price and the other terms and conditions upon which the purchase of the
Selling Stockholder's shares is to be made.
In the event the Selling Stockholder cannot obtain agreements or
commitments from the proposed purchaser or purchasers to purchase that
percentage of the shares of Common Stock or Preferred Stock held by each of the
Other Stockholders which is equal to the Sales Percentage of the shares, then
the Selling Stockholder shall reduce the number of shares which the Selling
Stockholder proposes to sell so that both the Selling Stockholder and each of
the other Stockholders shall be entitled to sell an identical percentage (as
nearly as possible, with the number of shares being sold by the Selling
Stockholder and each of the Other Stockholders being rounded to the nearest
whole share) of the shares of Common Stock or Preferred Stock then held by each
of them, respectively, or such lesser percentage as the Other Stockholders in
their sole discretion may elect, which decrease shall not require a
proportionate decrease in the percentage sold by the Selling Stockholder.
None of the Other Stockholders shall be obligated to sell any shares of
Common Stock or Preferred Stock pursuant to any notice furnished by the Selling
Stockholder in accordance with the provisions of this Section 7.
Any and all sales of Common Stock or Preferred Stock by the Other
Stockholders pursuant to the terms of this Section 7 shall be made either
concurrently with or prior to the sale of the shares by the Selling Stockholder.
Notwithstanding the foregoing, the provisions of this Section 7 shall not
apply to any proposed sale of shares by the Selling Stockholder to either (i) an
immediate family member of the Selling Stockholder's; (ii) a trust of which the
Selling Stockholder is a trustee and/or a beneficiary; or (iii) a corporation of
which the Selling Stockholder holds more than fifty percent (50%) of the capital
stock; or (iv) a sale pursuant to an effective registration statement including
the Selling Stockholder's shares in accordance with the exercise of registration
rights pursuant to a Registration Rights Agreement among certain stockholders
and the Company.
8. Right to Purchase Shares of an Additional Series or Class of Stock.
------------------------------------------------------------------
In the event the Company proposes to issue and sell any shares of Common Stock,
Additional Shares of Preferred Stock, Convertible Securities or options
(collectively, the "Additional Stock") to one or more investors, then the
Company shall afford the holders of Preferred Stock the right to purchase
certain shares of the Additional Stock as follows:
The Company shall give written notice to all the holders of Preferred
Stock, at least thirty (30) days prior to any proposed issuance and sale of
Additional Stock at a price less than the equivalent of $1.50 per share of
Common Stock (determined in accordance with the principles of Section 6), as
adjusted, specifying the number of such shares to be issued and sold, the time
within which and the price and all other material terms and conditions upon
which the Company proposes to sell such shares.
6
<PAGE>
Each holder of the Preferred Stock shall notify the Company in writing,
within fifteen (15) days after such notice, whether such stockholder desires to
purchase any such shares of Additional Stock in accordance with the terms and
provisions of this Section 8 and, if so, the number of shares he desires to
purchase. Failure to provide such written notice within said fifteen-day period
after receipt of notice from the Company, for the purpose hereof, shall be
deemed to constitute a refusal by such holder of Preferred Stock to purchase any
such shares of Additional Stock. No holder of Preferred Stock shall be entitled
to purchase pursuant to the terms of this Section 8 a percentage of the
Additional Stock which exceeds the percentage of Common Stock, on a fully-
converted and fully-exercised basis, owned by such holder.
Notwithstanding the foregoing, this provision shall not apply to any
issuance of Common Stock made upon (i) exercise by a holder of Preferred Stock
of the conversion rights described in Section 3, (ii) exercise by a holder of
the Company's Series A Convertible Preferred Stock of the conversion rights
accorded such Series A Convertible Preferred Stock; (iii) exercise by a holder
of the Company's Series B Convertible Preferred Stock of the conversion rights
accorded such Series B Convertible Preferred Stock; (iv) exercise of an
incentive or non-qualified stock option pursuant to the Company's 1993 Stock
Option Plan or pursuant to any stock option plan ratified and adopted by
majority vote, on a fully converted basis, of the Company's stockholders and by
vote of a majority of the Company's Board of Directors who are not officers of
the Company; or (v) exercise by a warrantholder or optionholder of any Warrant
or non-qualified stock option issued or granted by the company as of April 7,
1993.
9. Amendments. No provision of these terms of the Series C Convertible
----------
Preferred Stock may be amended, modified, or waived without the written consent
or affirmative vote of the holders of at least a majority of the then
outstanding shares of Series C Convertible Preferred Stock.
7
<PAGE>
ANNEX D
-------
UNIFI COMMUNICATIONS, INC.
CERTIFICATE OF DESIGNATION
OF
SERIES D CONVERTIBLE PREFERRED STOCK,
FIXING POWERS, PREFERENCES
AND RIGHTS OF SUCH STOCK
The preferences, voting powers, qualifications, special or relative rights
or privileges of the Series D Convertible Preferred Stock, $1.00 par value per
share (the "Preferred Stock"), of UNIFI Communications, Inc. (the "Company"),
--------- ----- -------
shall be as follows:
1. Dividends. The Board of Directors of the Company shall not declare or
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pay a dividend for any share of the Common Stock unless the Board of Directors
shall first have declared and paid a dividend for every share of the Preferred
Stock. In no event shall the Board of Directors declare or pay a dividend for
any share of the Common Stock that is greater than an amount equal to the
dividend declared or paid for any share of the Preferred Stock divided by the
Conversion Ratio, as hereinafter defined. Any such dividends paid to shares of
the Common Stock or the Preferred Stock shall be declared by the Company's Board
of Directors when and if, in the sole judgment of said Board, there are
sufficient funds available from which such dividends may be properly paid.
2. Liquidation. Upon any liquidation, dissolution or winding up of the
-----------
Company, whether voluntary or involuntary, each holder of the Preferred Stock
then outstanding shall be entitled, before any distribution or payment is made
upon any shares of the Company's Common Stock, to be paid the amount of $3.50
for each share of Preferred Stock held by him, plus the aggregate of any then
unpaid dividends prior to the date of payment with respect to the Preferred
Stock, such amount being hereinafter sometimes referred to as the "Liquidation
-----------
Payment"; provided, that the Preferred Stock shall rank on a parity with the
- -------
Company's Series A Convertible Preferred Stock, Series B Convertible Preferred
Stock, Series C Convertible Preferred Stock, and any other series of preferred
stock subsequently designated as ranking on parity with the Preferred Stock
(such series, along with the Preferred Stock, are referred to as the "Senior
-------
Preferred Stock"). Such holders shall not be entitled to any further payment.
- -----------------
If upon such liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary, the assets to be distributed among the holders of the
Senior Preferred Stock shall be insufficient to permit payment to the holders of
the Senior Preferred Stock of the amount distributable to each in accordance
with the rights and preferences designated for each respective series, then all
of the assets of the Company to be distributed shall be paid ratably among the
holders of the Senior Preferred Stock in proportion to the respective
Liquidation Payments (or other corresponding liquidation rights and preferences)
designated for each such series. Upon any such liquidation, dissolution, or
winding up of the Company, after the holders of the Senior Preferred Stock shall
have been paid in full the amount to which they shall be entitled, any remaining
net assets of the Company may be distributed to the holders of the Company's
Common Stock. Written notice of any such liquidation, dissolution or winding up
of the Company,
<PAGE>
stating (i) the payment date, (ii) the amount of the Liquidation Payment, (iii)
the place where such amount shall be payable, and (iv) the conversion right set
forth in Section 3 hereof, shall be given by certified mail, postage prepaid,
not less than thirty (30) days prior to the payment date stated therein to the
holders of record of the Preferred Stock addressed to each such holder at such
holder's post office address as shown on the books of the Company. The merger or
consolidation of the Company into or with another corporation (except if the
shareholders of the Company beneficially own more than fifty percent (50%) of
the capital stock of the surviving entity), or the sale of all or substantially
all the assets of the Company (except if all or substantially all of the assets
are transferred to a subsidiary of the Company), shall be deemed to be a
liquidation, dissolution or winding up of the Company for purposes of this
Section 2.
3. Conversion. Each issued and outstanding share of the Preferred Stock
----------
may, at the option of the holder thereof by written notice to the Company at any
time following issuance of such share, be converted into such number of fully-
paid and non-assessable shares of the Company's Common Stock, $.01 par value per
share, as is determined by dividing $3.50 by the Conversion Price, as defined
herein (the "Conversion Ratio"), in effect at the time of the conversion. The
----------------
conversion price at which shares of the Common Stock shall be deliverable upon
conversion of the Company's Preferred Stock without the payment of additional
consideration by the holder thereof (the "Conversion Price") shall initially be
----------------
$3.50. Such initial Conversion Price, and the rate at which shares of Preferred
Stock may be converted into shares of Common Stock, shall be subject to
adjustment as provided below. A holder's right to convert as aforesaid shall
terminate if the holder's option to convert is not exercised prior to the
payment date of the Liquidation Payment referred to in Section 2 above. A
holder's right to convert as aforesaid, if exercised, must be applied to all
shares of the Preferred Stock of the holder.
The Company, by majority vote of its Board of Directors, shall have the
right to require the conversion at the Conversion Price of all, but not less
than all, of the then issued and outstanding shares of the Preferred Stock into
the Company's Common Stock, $0.01 par value per share, immediately prior to the
effective date of any registration statement filed pursuant to the Securities
Act of 1933, as amended, with the Securities and Exchange Commission with
respect to an underwritten offering and sale of the Company's Common Stock
having a maximum aggregate offering price of $5,000,000 or more. Any such
conversion shall be rescinded in the event the closing of such underwritten
public offering does not occur within thirty (30) days of such effective date.
4. Voting.
------
General. At every meeting of the stockholders and except as is otherwise
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required by law or herein, on all matters to be voted on by the stockholders of
the Corporation, the holders of shares of Common Stock and of the Preferred
Stock shall vote together as a single class, with each holder of shares of
Common Stock being entitled to one vote per share and each holder of shares of
the Preferred Stock being entitled to the number of votes equal to the number of
shares of Common Stock into which the shares of Preferred Stock held by such
holder are convertible (as adjusted from time to time pursuant to Sections 3, 5
and 6 hereof). In the event the matter to be voted upon involves the sale of
all or substantially all of the Company's assets, such matter shall be
determined by a vote of two-thirds of the shares present in person or
represented by proxy, voting on such matter as set forth above.
2
<PAGE>
Directors. So long as any shares of Preferred Stock are outstanding, the
---------
holders thereof shall have the right, voting as a single class, to elect one
director. So long as any shares of Preferred Stock are outstanding, such
director may be removed only by holders of a majority of such outstanding shares
of Preferred Stock. Except as provided in this paragraph, holders of the
Preferred Stock shall not have an right to vote with respect to the election or
removal of directors.
Class Vote. Notwithstanding the foregoing, the holders of the Preferred
----------
Stock shall be entitled, voting as a single class and to the exclusion of the
vote of any other class or series of stock, (i) to approve any change in any of
the powers, designations, preferences and relative, participating, optional or
other special rights of such series, and (ii) to approve any change in any of
the powers, designations, preferences and relative, participating, optional or
other special rights of any other existing class or series of stock that would
be adverse to the holders of the Preferred Stock. In the event any such change
is voted upon, such matter shall be determined by a vote of a majority of the
shares of Preferred Stock present in person or represented by proxy and voting
on such matter.
5. Adjustments. In case the Company shall at any time after the date
-----------
hereof declare a dividend payable in shares of the Common Stock of the Company
(other than dividends paid to the holders of Preferred Stock); (ii) issue any
shares of Common Stock in subdivision of outstanding shares of the Common Stock
of the Company by reclassification or otherwise; or (iii) combine outstanding
shares of the Common Stock of the Company by reclassification or otherwise; the
number of shares of Common Stock to which the holder of then issued and
outstanding shares of the Preferred Stock shall be entitled upon conversion
under Section 3 hereof shall be increased or decreased, as the case may be (and,
accordingly, the Conversion Price shall be decreased or increased), in
proportion to such increase or decrease in the then issued and outstanding
shares of Common Stock at the time of such stock dividend, subdivision or
combination as aforesaid. In addition, if the Company, without receiving any
consideration, declares a dividend on the Preferred Stock payable in Preferred
Stock or effects a subdivision of the outstanding shares of Preferred Stock into
a greater or lesser number of shares of Preferred Stock, the Conversion Price in
effect immediately prior to such stock dividend or subdivision shall be
increased or decreased proportionately.
In the event of any such stock dividend, subdivision or combination
described in this Section 5, the voting rights of a holder of the Preferred
Stock under Section 4 hereof shall be similarly adjusted to provide that each
then issued and outstanding share of the Preferred Stock will be entitled to
cast as many votes as such holder would be entitled to cast if, immediately
before casting such vote, such holder had elected to convert, at the Conversion
Price, such holder's Preferred Stock to Common Stock of the Company.
6. Adjustment of Conversion Price (Ratchet Provision). In the event the
--------------------------------------------------
Company shall issue any shares of Common Stock, options (as hereinafter
defined), Convertible Securities (as hereinafter defined), or any shares of
Additional Shares of Preferred Stock (as hereinafter defined), without
consideration or for a consideration per share less than the then Conversion
Price, as adjusted, then and in such event, the Conversion Price shall be
reduced, concurrently with such issue to a price (calculated to the nearest
cent) determined by multiplying the Conversion Price by a fraction, the
numerator of which shall be the number of shares of Common Stock Outstanding
immediately prior to such issue plus the number of shares of Common Stock which
the aggregate consideration received by the Company for the total number of
Additional Shares of Preferred Stock,
3
<PAGE>
shares of Common Stock, Convertible Securities or Options so issued would
purchase at such Conversion Price; and the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior to such issue
plus the number of shares of Common Stock into which or for which such
Additional Shares of Preferred Stock, shares of Common Stock, Convertible
Securities or Options so issued are convertible or exercisable.
For purposes of this Section 6, all shares of Common Stock issuable upon
conversion or exercise of shares of Preferred Stock Convertible Securities or
Options outstanding immediately prior to such issue shall be deemed to be
outstanding. For purposes of this Section 6 and of Section 8, the following
definitions, shall apply:
(a) "Additional Shares of Preferred Stock" shall mean all shares of
preferred stock issued by the Company after January 12, 1994, other than shares
of preferred stock issued or issuable as a dividend or distribution on the
Preferred Stock, or by reason of a dividend, stock split, split-up or other
distribution on shares of Preferred Stock.
(b) "Convertible Securities" shall mean any evidences of
indebtedness, shares (other than Common Stock) or other securities directly or
indirectly convertible into or exchangeable for Common Stock.
(c) "Options" shall mean rights, options or warrants to subscribe
for, purchase or otherwise acquire Common Stock or Convertible Securities.
Notwithstanding the foregoing, this provision shall not apply to any
issuance of Common Stock made upon (i) exercise by a holder of Preferred Stock
of the conversion rights described in Section 3, (ii) exercise by a holder of
the Company's Senior Preferred Stock of the conversion rights accorded such
Senior Preferred Stock; (iii) exercise of an incentive or non-qualified stock
option pursuant to the Company's 1993 Stock Option Plan or pursuant to any stock
option (including without limitation warrants) plan ratified and adopted by
majority vote, on a fully converted basis, of the Company's stockholders and by
vote of a majority of the Company's Board of Directors who are not officers of
the Company; or (iv) exercise by a warrantholder or optionholder of any Warrant
or nonqualified stock option issued or granted by the Company and outstanding as
of January 12, 1994.
For purposes of this Section 6, the consideration received by the
Corporation for the issue of any Additional Shares of Common Stock shall be
computed as follows:
(A) Cash and Property. Such consideration:
-----------------
(I) insofar as it consists of cash, shall be computed at the aggregate
of cash received by the Corporation;
(II) insofar as it consists of property other than cash, shall be
computed at the fair market value thereof at the time of such issue, as
determined in good faith by the Board of Directors.
4
<PAGE>
(B) Options and Convertible Securities. The consideration per share
----------------------------------
received by the Corporation for shares of Common Stock relating to Options and
Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received or receivable by the
Corporation as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration) payable to
the Corporation upon the exercise of such Options or the conversion or exchange
of such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities by
(y) the maximum number of shares of Common Stock (as set forth in the
instruments relating thereto, without regard to any provision contained therein
for a subsequent adjustment for such number) issuable upon the exercise of such
Options or the conversion or exchange of such Convertible Securities.
The Company shall reserve for issuance and keep available, as necessary
from time to time, the number of shares of Common Stock into which. or for which
the shares of Preferred Stock, Convertible Securities or Options are convertible
or exercisable.
7. Rights of Co-Sale.
-----------------
(a) Sales by Shareholders. Until such time as the Company effects an
---------------------
underwritten offering and sale of the Company's Common Stock resulting in net
proceeds to the Company of at least $5,000,000, if any holder (hereinafter
referred to in this Section 7(A) as the "Selling Stockholder") of shares of
-------------------
Preferred Stock, or of Common Stock into which such Preferred Stock has been
converted in accordance with the provisions of this Certificate of Designation
of Series D Convertible Preferred Stock ("Converted Common Stock"), proposes to
--------------------------
transfer more than 100,000 shares of Converted Common Stock or Preferred Stock
owned by him, then he shall, afford the other holders (the "Other Stockholders")
---------------------
of shares of Preferred Stock or of Converted Common Stock, as applicable, the
right to transfer the shares of Preferred Stock or Converted Common Stock, as
applicable, held by them as follows:
The Selling Stockholder shall give written notice to the Other
Stockholders, at least thirty (30) days prior to any proposed transfer of any
such shares, specifying the number of such shares which he desires to transfer,
the percentage which such shares represent of the total number of shares held by
him, on a fully-converted and fully-exercised basis (the "Sales Percentage"),
----------------
the identity of the proposed transferee of such shares, and the time within
which and the price and all other material terms and conditions upon which the
Selling Stockholder proposes to sell such shares.
Concurrently with the delivery of the notice referred to above, the Selling
Stockholder shall offer each of the Other Stockholders the opportunity to sell
to the proposed purchaser or purchasers of the shares that percentage of the
shares of Converted Common Stock or Preferred Stock (as applicable) then held by
the Other Stockholder, on a fully-converted and fully-exercised basis, that is
equal to the Sales Percentage. It is agreed and understood that the Selling
Stockholder shall seek to obtain the same agreements and commitments from the
proposed purchaser or purchasers in
5
<PAGE>
respect of the Preferred Stock or Converted Common Stock (as applicable) to be
sold by each of the Other Stockholders as he has obtained from such purchaser or
purchasers in respect of the shares proposed to be sold by him, including the
time of purchase, the purchase price and the other terms and conditions upon
which the purchase of the Selling Stockholder's shares is to be made.
In the event the Selling Stockholder cannot obtain agreements or
commitments from the proposed purchaser or purchasers to purchase that
percentage of the shares of Converted Common Stock or Preferred Stock (as
applicable) held by each of the Other Stockholders which is equal to the Sales
Percentage of the shares in accordance with the preceding paragraph, then the
Selling Stockholder shall reduce the number of shares which the Selling
Stockholder proposes to sell so that both the Selling Stockholder and each of
the Other Stockholders shall be entitled to sell an identical percentage (as
nearly as possible, with the number of shares being sold by the Selling
Stockholder and each of the Other Stockholders being rounded to the nearest
whole share) of the shares of Converted Common Stock or Preferred Stock then
held by each of them, respectively, or such lesser percentage as the Other
Stockholders in their sole discretion may elect, which decrease shall not
require a proportionate decrease in the percentage sold by the Selling
Stockholder.
Each of the Other Stockholders may notify the Company in writing, within
fifteen (15) days after receiving notice of a proposed sale from a Selling
Stockholder under this Section 7(A), whether such Other Stockholder desires to
sell any such shares of Converted Common Stock or Preferred Stock (as
applicable) held by such Other Stockholder concurrently with the Selling
Stockholder in accordance with the terms and provisions of this Section 7(A).
Failure to provide such written notice within the fifteen-day period after
receipt of notice from the Selling Stockholder shall be deemed to constitute an
irrevocable declination by such Other Stockholder to sell any of such Other
Stockholder's shares of Converted Common Stock or Preferred Stock concurrently
with the Selling Stockholder. No Other Stockholder shall be obliged to sell any
shares of Converted Common Stock or Preferred Stock pursuant to any notice
furnished by the Selling Stockholder in accordance with the provisions of this
Section 7(A).
Any and all sales of Converted Common Stock or Preferred Stock by the Other
Stockholders pursuant to the terms of this Section 7(A) shall be made either
concurrently with or prior to the sale of the shares by the Selling Stockholder.
Notwithstanding the foregoing, the provisions of this Section 7(A) shall
not apply to any proposed sale of shares of Preferred-Stock or Converted Common
Stock by the Selling Stockholder to either (i) an immediate family member of the
Selling Stockholder's; (ii) a trust of which the Selling Stockholder is a
trustee and/or a beneficiary; or (iii) a corporation of which the Selling
Stockholder holds more than fifty percent (50%) of the capital stock; or (iv) a
sale pursuant to an effective registration statement including any of the
Selling Stockholder's shares in accordance with the exercise of registration
rights pursuant to a Registration Rights Agreement to which the Company is a
party.
(b) Sales by Douglas J. Ranalli. Until such time as the Company
---------------------------
effects an underwritten offering and sale of the Company's Common Stock
resulting in net proceeds to the Company of at least $5,000,000, if Douglas J.
Ranalli proposes to transfer more than 100,000 shares of Common Stock (other
than Common Stock acquired by him upon the conversion of Senior Preferred Stock)
owned by him ("Founder Shares"), then he shall afford the holders (the "Class D
-------------- -------
6
<PAGE>
Stockholders") of shares of Preferred Stock and/or of Converted Common Stock the
- ------------
right to transfer the shares of Converted Common Stock held by them as follows:
Ranalli shall give written notice to the Class D Stockholders, at least
thirty (30) days prior to any proposed transfer of any such shares, specifying
the number of Founder Shares that he desires to transfer, the percentage that
such shares represent of the total number of shares held by him, on a fully-
converted and fully-exercised basis (the "Sales Percentage"), the identity of
----------------
the proposed transferee of such shares, and the time within which and the price
and all other material terms and conditions upon which Ranalli proposes to sell
such shares.
Concurrently with the delivery of the notice referred to above, Ranalli
shall offer each of the Class D Stockholders the opportunity to sell to the
proposed purchaser or purchasers of the shares that percentage of the shares of
Converted Common Stock (including shares of Converted Common Stock acquired upon
conversion of the Preferred Stock held by such Class D Stockholders after the
date of such notice) then held by the Class D Stockholder, taking into account
in determining such percentage all shares of Preferred Stock and Converted
Common Stock held by such Class D Stockholder on a fully converted basis, that
is equal to the Sales Percentage. It is agreed and understood that Ranalli
shall seek to obtain the same agreements and commitments from the proposed
purchaser or purchasers in respect of the Converted Common Stock to be sold by
each of the Class D Stockholders as he has obtained from such purchaser or
purchasers in respect of the Founder Shares proposed to be sold by him,
including the time of purchase, the purchase price and the other terms and
conditions upon which the purchase of Ranalli's shares is to be made.
In the event Ranalli cannot obtain agreements or commitments from the
proposed purchaser or purchasers to purchase that percentage of the shares of
Converted Common Stock (including the Preferred Stock as well for purposes of
calculating such percentage as set forth above) held by each of the Class D
Stockholders which is equal to the Sales Percentage of the shares in accordance
with the preceding paragraph, then Ranalli shall. reduce the number of Founder
Shares that Ranalli proposes to sell so that Ranalli and each of the Class D
Stockholders shall be entitled to sell an identical percentage (as nearly as
possible, with the number of shares being sold by Ranalli and each of the Class
D Stockholders being rounded to the nearest whole share) of the Founder Shares
or shares of Converted Common Stock (as applicable) then held by each of them,
respectively, or such lesser percentage as the Class D Stockholders in their
sole discretion may elect, which decrease shall not require a proportionate
decrease in the percentage sold by Ranalli.
Each of the Class D Stockholders may notify the Company in writing, within
fifteen (15) days after receiving notice of a proposed sale from a Ranalli under
this Section 7(B), whether such Class D Stockholder desires to sell any such
shares of Converted Common Stock held by such Class D Stockholder concurrently
with Ranalli in accordance with the terms and provisions of this Section 7(B).
Failure to provide such written notice within the fifteen-day period after
receipt of notice from Ranalli shall be deemed to constitute an irrevocable
declination by such Class D Stockholder to sell any of such Class D
Stockholder's shares of Converted Common Stock concurrently with Ranalli. No
Class D Stockholder shall be obliged to sell any shares of Converted Common
Stock pursuant to any notice furnished by Ranalli in accordance with the
provisions of this Section 7(B).
7
<PAGE>
Any and all sales of Converted Common Stock by the Class D Stockholders
pursuant to the terms of this Section 7(B) shall be made either concurrently
with or prior to the sale of the Founder Shares by Ranalli.
Notwithstanding the foregoing, the provisions of this Section 7(B) shall
not apply to any proposed sale of Founder Shares by Ranalli to either (i) an
immediate family member of Ranalli's; (ii) a trust of which Ranalli is a trustee
and/or a beneficiary; or (iii) a corporation of which Ranalli holds more than
fifty percent (50%) of the capital stock; or (iv) a sale pursuant to an
effective registration statement including any of Ranalli's shares in accordance
with the exercise of registration rights pursuant to a Registration Rights
Agreement to which the Company is a party; provided, that any Founder Shares
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sold in a transaction described in clauses (i) through (iii) shall continue to
be subject to the provisions of this Section 7(B) in the hands of the transferee
thereof.
8. Right to Purchase Shares of an Additional Series or Class of Stock.
------------------------------------------------------------------
In the event the Company proposes to issue and sell any shares of Common Stock,
Additional Shares of Preferred Stock, Convertible Securities or Options
(collectively, the "Additional Stock") to one or more investors, then the
----------------
Company shall afford the holders of Preferred Stock the right to purchase
certain shares of the Additional Stock as follows:
The Company shall give written notice to all the holders of Preferred Stock
at least thirty (30) days prior to any proposed issuance and sale of Additional
Stock at a price less than the equivalent of $3.50 per share of Common Stock
(determined in accordance with the principles of Section 6), as adjusted,
specifying the number of such shares to be issued and sold, the time within
which and the price and all other material terms and conditions upon which the
Company proposes to sell such shares.
Each holder of the Preferred Stock shall notify the Company in writing,
within fifteen (15) days after such notice, whether such stockholder desires to
purchase any such shares of Additional Stock in accordance with the terms and
provisions of this Section 8 and, if so, the number of shares he desires to
purchase. Failure to provide such written notice within said fifteen-day period
after receipt of notice from the Company, for the purpose hereof, shall be
deemed to constitute a refusal by such holder of Preferred Stock to purchase any
such shares of Additional Stock. No holder of Preferred Stock shall be entitled
to purchase pursuant to the terms of this Section 8 a percentage of the
Additional Stock which exceeds the percentage of Common Stock, on a fully-
converted and fully-exercised basis, represented by the Preferred Stock owned by
such holder.
Notwithstanding the foregoing, this provision shall not apply to any
issuance of Common Stock made upon (i) exercise by a holder of Senior Preferred
Stock (including the Preferred Stock) of conversion rights accorded such shares
pursuant to the certificate of designation of powers, rights, and preferences of
such shares, (ii) exercise of an incentive or non-qualified stock option
pursuant to the Company's 1993 Stock Option Plan or pursuant to any stock option
(including without limitation warrants) plan ratified and adopted by majority
vote, on a fully converted basis, of the Company's stockholders and by vote of a
majority of the Company's Board of Directors who are not officers of the
Company; or exercise by a warrantholder or optionholder of any Warrant or non-
qualified stock option issued or granted by the Company and outstanding as of
January 12, 1994.
8
<PAGE>
9. Amendments. No provision of these terms of the Series D Convertible
----------
Preferred Stock may be amended, modified, or waived without the written consent
or affirmative vote of the holders of at least a majority of the then
outstanding shares of Series D Convertible Preferred Stock.
9
<PAGE>
ANNEX E
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UNIFI COMMUNICATIONS, INC.
CERTIFICATE OF DESIGNATION
OF
SERIES E CONVERTIBLE PREFERRED STOCK,
FIXING POWERS, PREFERENCES
AND RIGHTS OF SUCH STOCK
The preferences, voting powers, qualifications, special or relative rights
or privileges of the Series E Convertible Preferred Stock, $1.00 par value per
share (the "Series E Preferred Stock"), of UNIFI Communications, Inc. (the
------------------------
"Company"), shall be as follows:
- --------
1. Dividends. The Board of Directors of the Company shall not declare or
---------
pay a dividend (including any cash dividend or distribution of securities or
assets other than a distribution for which the Conversion Price is adjusted
pursuant to Section 5 or 6) on any share of the Common Stock unless the Board of
Directors shall first have declared and paid a dividend on every share of the
Series E Convertible Preferred Stock. The Board of Directors of the Company
shall not declare or pay a dividend on any share of the Series A, Series B,
Series C, Series D, Series F, or any other series of preferred stock unless a
dividend in equal amount is declared and paid on every share of the Series E
Preferred Stock. In no event shall the Board of Directors declare or pay a
dividend for any share of the Common Stock that is greater than an amount equal
to the dividend declared and paid for any share of the Preferred Stock divided
by the Conversion Ratio, as hereinafter defined. Any such dividends paid to
shares of the Common Stock or the Preferred Stock of the Company shall be
declared by the Company's Board of Directors when and if, in the sole judgment
of said Board, there are sufficient funds available from which such dividends
may be properly paid.
2. Liquidation. Upon any liquidation, dissolution or winding up of the
-----------
Company, whether voluntary or involuntary, each holder of the Series E Preferred
Stock then outstanding shall be entitled, before any distribution or payment is
made upon any shares of the Company's Common Stock, to be paid the amount of
$3.00 for each share of Series E Preferred Stock held by it, plus the aggregate
of any then unpaid dividends prior to the date of payment with respect to the
Series E Preferred Stock, such amount being hereinafter sometimes referred to as
the "Liquidation Payment"; provided, that in such event the Series E Preferred
-------------------
Stock shall rank on a parity with the Company's Series A Convertible Preferred
Stock, Series B Convertible Preferred Stock, Series C Convertible Preferred
Stock, Series D Convertible Preferred Stock, and Series F Convertible Preferred
Stock, and any other series of preferred stock subsequently designated as
ranking on parity with the Series E Preferred Stock (such series, along with the
Series E Preferred Stock, are referred to as the "Senior Preferred Stock").
----------------------
Such holders shall not be entitled to any further payment. If upon such
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, the assets to be distributed among the holders of the Senior
Preferred Stock shall be insufficient to permit payment to the holders of the
Senior Preferred Stock of the amount distributable to each in accordance with
the rights and preferences designated for each respective series, then all of
the assets of the Company to be distributed shall be made ratably among the
holders of the Senior Preferred
<PAGE>
Stock in proportion to the respective Liquidation Payments (or other
corresponding liquidation rights and preferences) designated for each such
series. Upon any such liquidation, dissolution, or winding up of the Company,
after the holders of the Senior Preferred Stock shall have been paid in full the
amount to which they shall be entitled, any remaining net assets of the Company
may be distributed to the holders of the Company's Common Stock. Written notice
of any such liquidation, dissolution or winding up of the Company, stating (i)
the payment date, (ii) the amount of the Liquidation Payment, (iii) the place
where such amount shall be payable, and (iv) the conversion right set forth in
Section 3 hereof, shall be given not less than thirty (30) days prior to the
payment date stated therein to the holders of record of the Series E Preferred
Stock addressed to each such holder at such holder's address as shown on the
books of the Company. The merger or consolidation of the Company into or with
another corporation (except if the shareholders of the Company beneficially own
more than fifty percent (50%) of the capital stock of the surviving entity), or
the sale of all or substantially all the assets of the Company (except if all or
substantially all of the assets are transferred to a subsidiary of the Company)
(any such merger, consolidation, or sale, a "Transfer of the Business"), shall
------------------------
be deemed to be a liquidation, dissolution or winding up of the Company for
purposes of this Section 2.
3. Conversion. Each issued and outstanding share of the Series E
----------
Preferred Stock may, at the option of the holder thereof by written notice to
the Company at any time following issuance of such share, be converted into such
number of fully paid and nonassessable shares of the Company's Common Stock,
$.01 par value per share, as is determined by dividing $3.00 by the Conversion
Price, as defined herein (such quotient, the "Conversion Ratio"), in effect at
----------------
the time of the conversion. The conversion price at which shares of the Common
Stock shall be deliverable upon conversion of the Series E Preferred Stock
without the payment of additional consideration by the holder thereof (the
"Conversion Price") shall initially be $3.00. Such initial Conversion Price and
- -----------------
initial Conversion Ratio shall be subject to adjustment as provided below. A
holder's right to convert as aforesaid shall terminate if the holder's option to
convert is not exercised prior to the payment date of the Liquidation Payment
referred to in Section 2 above.
The Company, by majority vote of its Board of Directors, shall have the
right to require the conversion at the then Conversion Price of all, but not
less than all, of the then issued and outstanding shares of the Series E
Preferred Stock into the Company's Common Stock, $0.01 par value per share,
immediately prior to the effective date of any registration statement filed
pursuant to the Securities Act of 1933, as amended, with the Securities and
Exchange Commission with respect to an underwritten offering and sale of the
Company's Common Stock having a maximum aggregate offering price of $5,000,000
or more. Any such conversion shall be rescinded in the event the closing of
such underwritten public offering does not occur within thirty (30) days of such
effective date.
4. Voting.
------
General. At every meeting of the stockholders and except as is otherwise
-------
required by law or herein, on all matters to be voted on by the stockholders of
the Company, the holders of shares of Common Stock and of the Series E Preferred
Stock shall vote together as a single class, with each holder of shares of
Common Stock being entitled to one vote per share and each holder of shares of
the Series E Preferred Stock being entitled to the number of votes equal to the
number of shares of Common Stock into which the shares of Series E Preferred
Stock held by such holder are convertible
2
<PAGE>
(as adjusted from time to time pursuant to Sections 3, 5 and 6 hereof). In the
event the matter to be voted upon involves a Transfer of the Business, such
matter shall be determined by a vote of two-thirds of the shares present in
person or represented by proxy, voting on such matter as set forth above.
Class Vote. Notwithstanding the foregoing, the holders of the Series E
----------
Preferred Stock shall be entitled, voting as a single class and to the exclusion
of the vote of any other class or series of stock, (i) to approve any change in
any of the powers, designations, preferences and relative, participating,
optional or other special rights of such series, and (ii) to approve any change
in any of the powers, designations, preferences and relative, participating,
optional or other special rights of any other existing class or series of stock
that would be adverse to the holders of the Series E Preferred Stock. In the
event any such matter is voted upon, such matter shall be determined by a vote
of a majority of the shares of Series E Preferred Stock present in person or
represented by proxy and voting on such matter.
5. Adjustment of Conversion Price (Stock Dividends, Etc.). In case the
------------------------------------------------------
Company shall at any time after the date hereof (i) declare a dividend payable
in shares of the Common Stock of the Company (other than dividends paid pro rata
to the holders of Senior Preferred Stock); (ii) issue any shares of Common Stock
in subdivision of outstanding shares of the Common Stock of the Company by
reclassification or otherwise; or (iii) combine outstanding shares of the Common
Stock of the Company by reclassification or otherwise (any such event, a "Common
------
Stock Adjustment"); the Conversion Ratio shall be increased or decreased, as the
- ----------------
case may be (and, accordingly, the Conversion Price shall be decreased or
increased), in proportion to such increase or decrease in the then issued and
outstanding shares of Common Stock at the time of such Common Stock Adjustment
In addition, if the Company, without receiving any consideration, declares a
dividend on the Series E Preferred Stock payable in Series E Preferred Stock or
effects a subdivision or combination of the outstanding shares of Series E
Preferred Stock into a greater or lesser number of shares of Series E Preferred
Stock (a "Series E Stock Adjustment"), the Conversion Ratio in effect
-------------------------
immediately prior to such Series E Stock Adjustment shall be increased or
decreased (and the Conversion Price shall be decreased or increased)
proportionately.
In the event of any such Common Stock Adjustment or Series E Stock
Adjustment, the voting rights of a holder of the Series E Preferred Stock under
Section 4 hereof shall be similarly adjusted to provide that each then issued
and outstanding share of the Series E Preferred Stock will be entitled to cast
as many votes as such holder would be entitled to cast if, immediately before
casting such vote, such holder had elected to convert, at the Conversion Price,
such holder's Series E Preferred Stock to Common Stock of the Company.
6. Adjustment of Conversion Price (Ratchet Provision). In the event the
--------------------------------------------------
Company shall issue any shares of Common Stock, Options (as hereinafter
defined), or Convertible Securities (as hereinafter defined), without
consideration or for a consideration per share less than the then Conversion
Price, as adjusted, then and in such event, the Conversion Price shall be
reduced, concurrently with such issue, to a price (calculated to the nearest
cent) determined by multiplying the Conversion Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issue plus the number of shares of Common Stock which
the aggregate consideration received by the Company for the total number of
shares of Common Stock, Convertible Securities or Options so issued would
(directly or indirectly) purchase
3
<PAGE>
at such Conversion Price; and the denominator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issue plus the
number of shares of Common Stock into which or for which such shares of Common
Stock, Convertible Securities or Options so issued are (directly or indirectly)
convertible or exercisable. In the event of any such adjustment the Conversion
Ratio shall be adjusted correspondingly.
For purposes of this Section 6, all shares of Common Stock issuable upon
conversion or exercise of shares of Senior Preferred Stock, Convertible
Securities or Options outstanding immediately prior to such issue shall be
deemed to be outstanding. For purposes of this Section 6 and of Section 8, the
following definitions shall apply:
(a) "Convertible Securities" shall mean any shares (including shares
of preferred stock, but excluding shares of Common Stock), evidences of
indebtedness, or other securities directly or indirectly convertible into or
exchangeable for Common Stock, other than shares issued or issuable as a
consequence of a Series E Stock Adjustment (or any analogous transaction with
respect to any other class or series of preferred stock of the Company).
(b) "Options" shall mean rights, options or warrants to subscribe
for, purchase or otherwise acquire Common Stock or Convertible Securities.
Notwithstanding the foregoing, this provision shall not apply to any
issuance of Common Stock, Convertible Securities, or Options made upon (i) the
exercise by a holder of Series E Preferred Stock of the conversion rights
described in Section 3, (ii) the exercise by a holder of the Company's Senior
Preferred Stock of the conversion rights accorded such Senior Preferred Stock;
(iii) the grant or exercise of an incentive or non-qualified stock option
pursuant to the Company's 1993 Stock Option Plan, as amended, or the Company's
1994 Investor Incentive Stock Option Plan, or pursuant to any other stock option
(including without limitation warrants) plan ratified and adopted by majority
vote, on a fully converted basis, of the Company's stockholders and by vote of a
majority of the Company's Board of Directors who are not officers of the
Company; or (iv) the exercise of any Option or the conversion of any Convertible
Security or other convertible security of the Company.
For purposes of this Section 6, the consideration received. by the Company
for the issue of any Common Stock, Convertible Securities, or Options shall be
computed as follows:
(A) Cash and Property: Such consideration:
-----------------
(I) insofar as it consists of cash, shall be computed at the
aggregate of cash received by the Company;
(II) insofar as it consists of property other than cash, shall be
computed at the fair market value thereof at the time of such issue, as
determined in good faith by the Board of Directors.
(B) Options and Convertible Securities. The consideration per share
----------------------------------
received by the Company for shares of Common Stock relating to Options and
Convertible Securities, shall be determined by dividing
4
<PAGE>
(x) the total amount, if any, received or receivable by the Company as
consideration for the issue of such Options or Convertible Securities, plus the
minimum aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision contained therein
for a subsequent adjustment of such consideration) payable to the Company upon
the exercise of such Options or the conversion or exchange of such Convertible
Securities, or in the case of Options for Convertible Securities, the exercise
of such Options for Convertible Securities and the conversion or exchange of
such Convertible Securities by
(y) the maximum number of shares of Common Stock (as set forth in the
instruments relating thereto, without regard to any provision contained therein
for a subsequent adjustment for such number) issuable upon the exercise of such
Options or the conversion or exchange of such Convertible Securities.
The Company shall reserve for issuance and keep available, as necessary
from time to time, the number of shares of Common Stock into which or for which
the shares of Series E Preferred Stock are convertible.
7. Rights of Co-Sale: Sales by Doug J. Ranalli. Until such time as the
-------------------------------------------
Company effects an underwritten offering and sale of the Company's Common Stock
resulting in net proceeds to the Company of at least $5,000,000, if Douglas J.
Ranalli ("Ranalli") proposes to transfer more than 100,000 shares of Common
-------
Stock (other than Common Stock acquired by him upon the conversion of Senior
Preferred Stock) owned by him ("Founder Shares"), then he shall afford the
--------------
holders (the "Series E Stockholders") of shares of Series E Preferred Stock
-------- ------------
and/or of the Common Stock of the Company into which such Series E Preferred
Stock was converted (such shares of Series E Preferred Stock and Common Stock
collectively the "Converted Common Stock") the right to transfer the shares of
----------------------
Converted Common Stock held by them as follows:
Ranalli shall give written notice to the Series E Stockholders, at least
thirty (30) days prior to any proposed transfer of any such shares, specifying
the number of Founder Shares that he desires to transfer, the percentage that
such shares represent of the total number of shares held by him, on a fully-
converted and fully-exercised basis (the "Sales Percentage"), the identity of
----------------
the proposed transferee of such shares, and the time within which and the price
and all other material terms and conditions upon which Ranalli proposes to sell
such shares.
Concurrently with the delivery of the notice referred to above, Ranalli
shall offer each of the Series E Stockholders the opportunity to sell to the
proposed purchaser or purchasers of the shares that percentage of the shares of
Converted Common Stock then held by the Series E Stockholder that is equal to
the Sales Percentage. It is agreed and understood that Ranalli shall seek to
obtain the same agreements and commitments from the proposed purchaser or
purchasers in respect of the Converted Common Stock to be sold by each of the
Series E Stockholders as he has obtained from such purchaser or purchasers in
respect of the Founder Shares proposed to be sold by him, including the time of
purchase, the purchase price and the other terms and conditions upon which the
purchase of Ranalli's shares is to be made.
In the event Ranalli cannot obtain agreements or commitments from the
proposed purchaser or purchasers to purchase that percentage of the shares of
Converted Common Stock held by each of the Series E Stockholders which is equal
to the Sales Percentage of the shares in accordance with
5
<PAGE>
the preceding paragraph, then Ranalli shall reduce the number of Founder Shares
that Ranalli proposes to sell so that Ranalli and each of the Series E
Stockholders shall be entitled to sell an identical percentage (as nearly as
possible, with the number of shares being sold by Ranalli and each of the Series
E Stockholders being rounded to the nearest whole share) of the Founder Shares
or shares of Converted Common Stock (as applicable) then held by each of them,
respectively, or such lesser percentage as the Series E Stockholders in their
sole discretion may elect, which decrease shall not require a proportionate
decrease in the percentage sold by Ranalli.
Each of the Series E Stockholders may notify the Company in writing, within
fifteen (15) days after receiving notice of a proposed sale from a Ranalli under
this Section 7, whether such Series E Stockholder desires to sell any such
shares of Converted Common Stock held by such Series E Stockholder concurrently
with Ranalli in accordance with the terms and provisions of this Section 7.
Failure to provide such written notice within the fifteen-day period after
receipt of notice from Ranalli shall be deemed to constitute an irrevocable
declination by such Series E Stockholder to sell any of such Series E
Stockholder's shares of Converted Common Stock concurrently with Ranalli. No
Series E Stockholder shall be obliged to sell any shares of Converted Common
Stock pursuant to any notice furnished by Ranalli in accordance with the
provisions of this Section 7.
Any and all sales of Converted Common Stock by the Series E Stockholders
pursuant to the terms of this Section 7 shall be made either concurrently with
or prior to the sale of the Founder Shares by Ranalli. The Company agrees to
effect any conversion of shares of Series E Preferred Stock into Common Stock
for purposes of any sale under this Section 7 concurrent with such sale.
Notwithstanding the foregoing, the provisions of this Section 7 shall not
apply to any proposed sale of Founder Shares by Ranalli to either (i) an
immediate family member of Ranalli's; (ii) a trust of which Ranalli is a trustee
and/or a beneficiary; or (iii) a corporation of which Ranalli holds more than
fifty percent (50%) of the capital stock; or (iv) a sale pursuant to an
effective registration statement including any of Ranalli's shares in accordance
with the exercise of registration rights pursuant to a Registration Rights
Agreement to which the Company is a party; provided, that any Founder Shares
--------
sold in a transaction described in clauses (i) through (iii) shall continue to
be subject to the provisions of this Section 7 in the hands of the transferee
thereof.
8. Right to Purchase Shares of an Additional Series or Class of Stock.
------------------------------------------------------------------
In the event the Company proposes to issue and sell any shares of Common Stock,
Convertible Securities or Options (collectively, the "Additional Stock") to one
----------------
or more investors, then the Company shall afford the Series E Stockholders the
right to purchase certain shares of the Additional Stock as follows:
The Company shall give written notice to all Series E Stockholders, at
least thirty (30) days prior to any proposed issuance and sale of Additional
Stock at a price less than the equivalent of $3.00 per share of Common Stock
(determined in accordance with the principles of Section 6), as adjusted,
specifying the number of such shares to be issued and sold, the time within
which and the price and all other material terms and conditions upon which the
Company proposes to sell such shares.
Each Series E Stockholder shall notify the Company in writing, within
fifteen (15) days after receiving such notice, whether such stockholder desires
to purchase any such shares of Additional Stock in accordance with the terms and
provisions of this Section 8 and, if so, the number of shares
6
<PAGE>
he desires to purchase. Failure to provide such written notice within such
twenty-day period after receipt of notice from the Company, for the purpose
hereof, shall be deemed to constitute a refusal by such Series E Stockholder to
purchase any such shares of Additional Stock. Each Series E Stockholder shall be
entitled to purchase pursuant to the terms of this Section 8 a percentage of the
Additional Stock equal to the percentage of Common Stock, on a fully-converted
and fully-exercised basis, represented by the Series E Preferred Stock owned by
such holder.
Notwithstanding the foregoing, this provision shall not apply to any
issuance of Additional Stock made upon (i) the exercise by a holder of Senior
Preferred Stock (including the Preferred Stock) of conversion rights accorded
such shares pursuant to the certificate of designation of powers, rights, and
preferences of such shares, (ii) the grant or exercise of an incentive or non-
qualified stock option pursuant to the Company's 1993 Stock Option Plan, as
amended, or the Company's 1994 Investor Incentive Stock Option Plan, or pursuant
to any other stock option (including without limitation warrants) plan ratified
and adopted by majority vote, on a fully converted basis, of the Company's
stockholders and by vote of a majority of the Company's Board of Directors who
are not officers of the Company; or (iii) the exercise of any Option or the
conversion of any Convertible Security or other convertible security of the
Company.
9. Notices. All notices to Series E Stockholders or the Company provided
-------
for in this Certificate of Designation shall be in writing and made by certified
mail, postage prepaid for domestic delivery, or by reputable overnight courier
(e.g. Federal Express), or by facsimile confirmed by one of the other methods
- -----
for giving notice permitted herein, to, in the case of a Series E Stockholder,
such holder's address as shown on the books of the Company, and in the case of
the Company, to 900 Chelmsford Street, Lowell, MA 01851, attn: President.
7
<PAGE>
ANNEX F
-------
UNIFI COMMUNICATIONS, INC.
CERTIFICATE OF DESIGNATION
OF
SERIES F CONVERTIBLE PREFERRED STOCK,
FIXING POWERS, PREFERENCES
AND RIGHTS OF SUCH STOCK
The preferences, voting powers, qualifications, special or relative rights
or privileges of the Series F Convertible Preferred Stock, $1.00 par value per
share (the "Series F Preferred Stock"), of UNIFI Communications, Inc. (the
------------------------
"Company"), shall be as follows:
- --------
1. Dividends. The Board of Directors of the Company shall not declare or
---------
pay a dividend (including any cash dividend or distribution of securities or
assets other than a distribution for which the Conversion Price is adjusted
pursuant to Section 5 or 6) on any share of the Common Stock unless the Board of
Directors shall first have declared and paid a dividend on every share of the
Series F Convertible Preferred Stock. The Board of Directors of the Company
shall not declare or pay a dividend on any share of the Series A, Series B,
Series C, Series D, Series E, or any other series of preferred stock unless a
dividend in equal amount is declared and paid on every share of the Series F
Preferred Stock. In no event shall the Board of Directors declare or pay a
dividend for any share of the Common Stock that is greater than an amount equal
to the dividend declared and paid for any share of the Preferred Stock divided
by the Conversion Ratio, as hereinafter defined. Any such dividends paid to
shares of the Common Stock or the Preferred Stock of the Company shall be
declared by the Company's Board of Directors when and if, in the sole judgment
of said Board, there are sufficient funds available from which such dividends
may be properly paid.
2. Liquidation. Upon any liquidation, dissolution or winding up of the
-----------
Company, whether voluntary or involuntary, each holder of the Series F Preferred
Stock then outstanding shall be entitled, before any distribution or payment is
made upon any shares of the Company's Common Stock, to be paid the amount of
$4.00 for each share of Series F Preferred Stock held by it, plus the aggregate
of any then unpaid dividends prior to the date of payment with respect to the
Series F Preferred Stock, such amount being hereinafter sometimes referred to as
the "Liquidation Payment"; provided, that in such event the Series F Preferred
-------------------
Stock shall rank on a parity with the Company's Series A Convertible Preferred
Stock, Series B Convertible Preferred Stock, Series C Convertible Preferred
Stock, Series D Convertible Preferred Stock, and Series E Convertible Preferred
Stock, and any other series of preferred stock subsequently designated as
ranking on parity with the Series F Preferred Stock (such series, along with the
Series F Preferred Stock, are referred to as the "Senior Preferred Stock").
----------------------
Such holders shall not be entitled to any further payment. If upon such
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, the assets to be distributed among the holders of the Senior
Preferred Stock shall be insufficient to permit payment to the holders of the
Senior Preferred Stock of the amount distributable to each in accordance with
the rights and preferences designated for each respective series, then all of
the assets of the Company to be distributed shall be paid ratably among the
holders of the Senior Preferred
<PAGE>
Stock in proportion to the respective Liquidation Payments (or other
corresponding liquidation rights and preferences) designated for each such
series. Upon any such liquidation, dissolution, or winding up of the Company,
after the holders of the Senior Preferred Stock shall have been paid in full the
amount to which they shall be entitled, any remaining net assets of the Company
may be distributed to the holders of the Company's Common Stock. Written notice
of any such liquidation, dissolution or winding up of the Company, stating (i)
the payment date, (ii) the amount of the Liquidation Payment, (iii) the place
where such amount shall be payable, and (iv) the conversion right set forth in
Section 3 hereof, shall be given not less than thirty (30) days prior to the
payment date stated therein to the holders of record of the Series F Preferred
Stock addressed to each such holder at such holder's address as shown on the
books of the Company. The merger or consolidation of the Company into or with
another corporation (except if the shareholders of the Company beneficially own
more than fifty percent (50%) of the capital stock of the surviving entity), or
the sale of all or substantially all the assets of the Company (except if all or
substantially all of the assets are transferred to a subsidiary of the Company)
(any such merger, consolidation, or sale, a "Transfer of the Business"), shall
------------------------
be deemed to be a liquidation, dissolution or winding up of the Company for
purposes of this Section 2.
3. Conversion. Each issued and outstanding share of the Series F
----------
Preferred Stock may, at the option of the holder thereof by written notice to
the Company at any time following issuance of such share, be converted into such
number of fully-paid and nonassessable shares of the Company's Common Stock,
$.01 par value per share, as is determined by dividing $4.00 by the Conversion
Price, as defined herein (such quotient, the "Conversion Ratio"), in effect at
----------------
the time of the conversion. The conversion price at which shares of the Common
Stock shall be deliverable upon conversion of the Series F Preferred Stock
without the payment of additional consideration by the holder thereof (the
"Conversion Price") shall initially be $4.00. Such initial Conversion Price and
- -----------------
initial Conversion Ratio shall be subject to adjustment as provided below. A
holder's right to convert as aforesaid shall terminate if the holder's option to
convert is not exercised prior to the payment date of the Liquidation Payment
referred to in Section 2 above.
The Company, by majority vote of its Board of Directors, shall have the
right to require the conversion at the then Conversion Price of all, but not
less than all, of the then issued and outstanding shares of the Series F
Preferred Stock into the Company's Common Stock, $0.01 par value per share,
immediately prior to the effective date of any registration statement filed
pursuant to the Securities Act of 1933, as amended, with the Securities and
Exchange Commission with respect to an underwritten offering and sale of the
Company's Common Stock having a maximum aggregate offering price of $5,000,000
or more. Any such conversion shall be rescinded in the event the closing of
such underwritten public offering does not occur within thirty (30) days of such
effective date.
4. Voting.
------
General. At every meeting of the stockholders and except as is otherwise
-------
required by law or herein, on all matters to be voted on by the stockholders of
the Company, the holders of shares of Common Stock and of the Series F Preferred
Stock shall vote together as a single class, with each holder of shares of
Common Stock being entitled to one vote per share and each holder of shares of
the Series F Preferred Stock being entitled to the number of votes equal to the
number of shares of Common Stock into which the shares of Series F Preferred
Stock held by such holder are convertible
2
<PAGE>
(as adjusted from time to time pursuant to Sections 3, 5 and 6 hereof). In the
event the matter to be voted upon involves a Transfer of the Business, such
matter shall be determined by a vote of two-thirds of the shares present in
person or represented by proxy, voting on such matter as set forth above.
Class Vote. Notwithstanding the foregoing, the holders of the Series F
----------
Preferred Stock shall. be entitled, voting as a single class and to the
exclusion of the vote of any other class or series of stock, (i) to approve any
change in any of the powers, designations, preferences and relative,
participating, optional or other special rights of such series, and (ii) to
approve any change in any of the powers, designations, preferences and relative,
participating, optional or other special rights of any other existing class or
series of stock that would be adverse to the holders of the Series F Preferred
Stock. In the event any such matter is voted upon, such matter shall be
determined by a vote of a majority of the shares of Series F Preferred Stock
present in person or represented by proxy and voting on such matter.
5. Adjustment of Conversion Price (Stock Dividends, Etc.). In case the
------------------------------------------------------
Company shall at any time after the date hereof (i) declare a dividend payable
in shares of the Common Stock of the Company (other than dividends paid pro rata
to the holders of Senior Preferred Stock); (ii) issue any shares of Common Stock
in subdivision of outstanding shares of the Common Stock of the Company by
reclassification or otherwise; or (iii) combine outstanding shares of the Common
Stock of the Company by reclassification or otherwise (any such event, a "Common
------
Stock Adjustment"); the Conversion Ratio shall be increased or decreased, as the
- ----------------
case may be (and, accordingly, the Conversion Price and the Base Price (as
defined below) shall be decreased or increased), in proportion to such increase
or decrease in the then issued and outstanding shares of Common Stock at the
time of such Common Stock Adjustment. In addition, if the Company, without
receiving any consideration, declares a dividend on the Series F Preferred Stock
payable in Series F Preferred Stock or effects a subdivision or combination of
the outstanding shares of Series F Preferred Stock into a greater or lesser
number of shares of Series F Preferred Stock (a "Series F Stock Adjustment"),
-------------------------
the Conversion Ratio in effect immediately prior to such Series F Stock
Adjustment shall be increased or decreased (and the Conversion Price and Base
Price shall be decreased or increased) proportionately.
In the event of any such Common Stock Adjustment or Series F Stock
Adjustment, the voting rights of a holder of the Series F Preferred Stock under
Section 4 hereof shall be similarly adjusted to provide that each then issued
and outstanding share of the Series F Preferred Stock will be entitled to cast
as many votes as such holder would be entitled to cast if, immediately before
casting such vote, such holder had elected to convert, at the Conversion Price,
such holder's Series F Preferred Stock to Common Stock of the Company.
6. Adjustment of Conversion Price (Ratchet Provision). The "Base Price"
-------------------------------------------------- ----------
shall be the "Conversion Price" of the Series D Convertible Preferred Stock as
in effect from time to time (as determined pursuant to the Certificate of
Designation of the Series D Convertible Preferred Stock; provided, that solely
--------
for purposes of determining the Base Price hereunder no amendment to such
Certificate of Designation shall be taken into account unless such amendment is
approved by class vote of the holders of Series F Preferred Stock in accordance
with the second paragraph of Section 4 above). In the event the Company shall
issue any shares of Common Stock, Options (as hereinafter defined), or
Convertible Securities (as hereinafter defined), without consideration or for
3
<PAGE>
a consideration per share less than the then Base Price, as adjusted, then and
in such event, the Conversion Price shall be reduced, concurrently with such
issue, to a price (calculated to the nearest cent) determined by multiplying the
Conversion Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issue plus the
number of shares of Common Stock which the aggregate consideration received by
the Company for the total number of shares of Common Stock, Convertible
Securities or Options so issued would (directly or indirectly) purchase at such
Conversion Price; and the denominator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issue plus the number of
shares of Common Stock into which or for which such shares of Common Stock,
Convertible Securities or Options so issued are (directly or indirectly)
convertible or exercisable. In the event of any such adjustment the Conversion
Ratio shall be adjusted correspondingly.
For purposes of this Section 6, all shares of Common Stock issuable upon
conversion or exercise of shares of Senior Preferred Stock, Convertible
Securities or Options outstanding immediately prior to such issue shall be
deemed to be outstanding. For purposes of this Section 6 and of Section 8. the
following definitions shall apply:
(a) "Convertible Securities" shall mean any shares (including shares
of preferred stock, but excluding shares of Common Stock), evidences of
indebtedness, or other securities directly or indirectly convertible into or
exchangeable for Common Stock, other than shares issued or issuable as a
consequence of a Series F Stock Adjustment (or any analogous transaction with
respect to any other class or series of preferred stock of the Company).
(b) "Options" shall mean rights, options or warrants to subscribe
for, purchase or otherwise acquire Common Stock or Convertible Securities.
Notwithstanding the foregoing, this provision shall not apply to any
issuance of Common Stock, Convertible Securities, or Options made upon (i) the
exercise by a holder of Series F Preferred Stock of the conversion rights
described in Section 3, (ii) the exercise by a holder of the Company's Senior
Preferred Stock of the conversion rights accorded such Senior Preferred Stock;
(iii) the grant or exercise of an incentive or non-qualified stock option
pursuant to the Company's 1993 Stock Option Plan, as amended, or the Company's
1994 Investor Incentive Stock Option Plan, or pursuant to any other stock option
(including without limitation warrants) plan ratified and adopted by majority
vote, on a fully converted basis, of the Company's stockholders and by vote of a
majority of the Company's Board of Directors who are not officers of the
Company; or (iv) the exercise of any Option or the conversion of any Convertible
Security or other convertible security of the Company.
For purposes of this Section 6, the consideration received by the Company
for the issue of any Common Stock, Convertible Securities, or Options shall be
computed as follows:
(A) Cash and Property: Such consideration:
-----------------
(I) insofar as it consists of cash, shall be computed at the aggregate of
cash received by the Company;
4
<PAGE>
(II) insofar as it consists of property other than cash, shall be computed
at the fair market value thereof at the time of such issue, as determined in
good faith by the Board of Directors.
(B) Options and Convertible Securities. The consideration per share
----------------------------------
received by the Company for shares of Common Stock relating to Options and
Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received or receivable by the Company as
consideration for the issue of such Options or Convertible Securities, plus the
minimum aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision contained therein
for a subsequent adjustment of such consideration) payable to the Company upon
the exercise of such Options or the conversion or exchange of such Convertible
Securities, or in the case of Options for Convertible Securities, the exercise
of such Options for Convertible Securities and the conversion or exchange of
such Convertible Securities by
(y) the maximum number of shares of Common Stock (as set forth in the
instruments relating thereto, without regard to any provision contained therein
for a subsequent adjustment for such number) issuable upon the exercise of such
Options or the conversion or exchange of such Convertible Securities.
The Company shall reserve for issuance and keep available, as necessary
from time to time, the number of shares of Common Stock into which or for which
the shares of Series F Preferred Stock are convertible.
7. Rights of Co-Sale: Sales by Douglas J. Ranalli. Until such time as
----------------------------------------------
the Company effects an underwritten offering and sale of the Company's Common
Stock resulting in net proceeds to the Company of at least $5,000,000, if
Douglas J. Ranalli ("Ranalli") proposes to transfer more than 100,000 shares of
-------
Common Stock (other than Common Stock acquired by him upon the conversion of
Senior Preferred Stock) owned by him ("Founder Shares"), then he shall afford
--------------
the holders (the "Series F Stockholders") of shares of Series F Preferred Stock
---------------------
and/or of the Common Stock of the Company into which such Series F Preferred
Stock was converted (such shares of Series F Preferred Stock and Common Stock
collectively the "Converted Common Stock") the right to transfer the shares of
----------------------
Converted Common Stock held by them as follows:
Ranalli shall give written notice to the Series F Stockholders, at least
thirty (30) days prior to any proposed transfer of any such shares, specifying
the number of Founder Shares that he desires to transfer, the percentage that
such shares represent of the total number of shares held by him, on a fully-
converted and fully-exercised basis (the "Sales Percentage"), the identity of
----------------
the proposed transferee of such shares, and the time within which and the price
and all other material terms and conditions upon which Ranalli proposes to sell
such shares.
Concurrently with the delivery of the notice referred to above, Ranalli
shall offer each of the Series F Stockholders the opportunity to sell to the
proposed purchaser or purchasers of the shares that percentage of the shares of
Converted Common Stock then held by the Series F Stockholder that is equal to
the Sales Percentage. It is agreed and understood that Ranalli shall seek to
obtain the same agreements and commitments from the proposed purchaser or
purchasers in respect of the Converted Common Stock to be sold by each of the
Series F Stockholders as he has obtained from
5
<PAGE>
such purchaser or purchasers in respect of the Founder Shares proposed to be
sold by him, including the time of purchase, the purchase price and the other
terms and conditions upon which the purchase of Ranalli's shares is to be made.
In the event Ranalli cannot obtain agreements or commitments from the
proposed purchaser or purchasers to purchase that percentage of the shares of
Converted Common Stock held by each of the Series F Stockholders which is equal
to the Sales Percentage of the shares in accordance with the preceding
paragraph, then Ranalli shall reduce the number of Founder Shares that Ranalli
proposes to sell so that Ranalli and each of the Series F Stockholders shall be
entitled to sell an identical percentage (as nearly as possible, with the number
of shares being sold by Ranalli and each of the Series F Stockholders being
rounded to the nearest whole share) of the Founder Shares or shares of Converted
Common Stock (as applicable) then held by each of them, respectively, or such
lesser percentage as the Series F Stockholders in their sole discretion may
elect, which decrease shall not require a proportionate decrease in the
percentage sold by Ranalli.
Each of the Series F Stockholders may notify the Company in writing, within
fifteen (15) days after receiving notice of a proposed sale from a Ranalli under
this Section 7, whether such Series F Stockholder desires to sell any such
shares of Converted Common Stock held by such Series F Stockholder concurrently
with Ranalli in accordance with the terms and provisions of this Section 7.
Failure to provide such written notice within the fifteen-day period after
receipt of notice from Ranalli shall be deemed to constitute an irrevocable
declination by such Series F Stockholder to sell any of such Series F
Stockholder's shares of Converted Common Stock concurrently with Ranalli. No
Series F Stockholder shall be obliged to sell any shares of Converted Common
Stock pursuant to any notice furnished by Ranalli in accordance with the
provisions of this Section 7.
Any and all sales of Converted Common Stock by the Series F Stockholders
pursuant to the terms of this Section 7 shall be made either concurrently with
or prior to the sale of the Founder Shares by Ranalli. The Company agrees to
effect any conversion of shares of Series F Preferred Stock into Common Stock
for purposes of any sale under this Section 7 concurrent with such sale.
Notwithstanding the foregoing, the provisions of this Section 7 shall not
apply to any proposed sale of Founder Shares by Ranalli to either (i) an
immediate family member of Ranalli's; (ii) a trust of which Ranalli is a trustee
and/or a beneficiary; or (iii) a corporation of which Ranalli holds more than
fifty percent (50%) of the capital stock; or (iv) a sale pursuant to an
effective registration statement including any of Ranalli's shares in accordance
with the exercise of registration rights pursuant to a Registration Rights
Agreement to which the Company is a party; provided, that any Founder Shares
--------
sold in a transaction described in clauses (i) through (iii) shall continue to
be subject to the provisions of this Section 7 in the hands of the transferee
thereof.
8. Right to Purchase Shares of an Additional Series or Class of Stock.
------------------------------------------------------------------
In the event the Company proposes to issue and sell any shares of Common Stock,
Convertible Securities or Options (collectively, the "Additional Stock") to one
----------------
or more investors, then the Company shall afford the Series F Stockholders the
right to purchase certain shares of the Additional Stock as follows:
The Company shall give written notice to all Series F Stockholders, at
least thirty (30) days prior to any proposed issuance and sale of Additional
Stock at a price less than the equivalent of the Base Price per share of Common
Stock, as adjusted (determined in accordance with the principles
6
<PAGE>
of Section 6), specifying the number of such shares to be issued and sold, the
time within which and the price and all other material terms and conditions upon
which the Company proposes to sell such shares.
Each Series F Stockholder shall notify the Company in writing, within
fifteen (15) days after receiving such notice, whether such stockholder desires
to purchase any such shares of Additional Stock in accordance with the terms and
provisions of this Section 8 and, if so, the number of shares he desires to
purchase. Failure to provide such written notice within such twenty-day period
after receipt of notice from the Company, for the purpose hereof, shall be
deemed to constitute a refusal by such Series F Stockholder to purchase any such
shares of Additional Stock. Each Series F Stockholder shall be entitled to
purchase pursuant to the terms of this Section 8 a percentage of the Additional
Stock equal to the percentage of Common Stock, on a fully-converted and fully-
exercised basis, represented by the Series F Preferred Stock owned by such
holder.
Notwithstanding the foregoing, this provision shall not apply to any
issuance of Additional Stock made upon (i) the exercise by a holder of Senior
Preferred Stock (including the Preferred Stock) of conversion rights accorded
such shares pursuant to the certificate of designation of powers, rights, and
preferences of such shares, (ii) the grant or exercise of an incentive or non-
qualified stock option pursuant to the Company's 1993 Stock Option Plan, as
amended, or the Company's 1994 Investor Incentive Stock Option Plan, or pursuant
to any other stock option (including without limitation warrants) plan ratified
and adopted by majority vote, on a fully converted basis, of the Company's
stockholders and by vote of a majority of the Company's Board of Directors who
are not officers of the Company; or (iii) the exercise of any Option or the
conversion of any Convertible Security or other convertible security of the
Company.
9. Notices. All notices to Series F Stockholders or the Company provided
-------
for in this Certificate of Designation shall be in writing and made by certified
mail, postage prepaid for domestic delivery, or by reputable overnight courier
(e.g., Federal Express), or by facsimile confirmed by one of the other methods
- -----
for giving notice permitted herein, to, in the case of a Series F Stockholder,
such holder's address as shown on the books of the Company, and in the case of
the Company, to 900 Chelmsford Street, Lowell, MA 01851, attn: President.
7
<PAGE>
ANNEX G
-------
UNIFI COMMUNICATIONS, INC.
CERTIFICATE OF DESIGNATION
OF
SERIES G CONVERTIBLE PREFERRED STOCK,
FIXING POWERS, PREFERENCES
AND RIGHTS OF SUCH STOCK
The preferences, voting powers, qualifications, special or relative
rights or privileges of the Series G Convertible Preferred Stock, $1.00 par
value per share (the "Series G Preferred Stock"), of UNIFI Communications, Inc.
(the "Company"), shall be as follows:
1. Dividends. The Board of Directors of the Company shall not
---------
declare or pay a dividend (including any cash dividend or distribution of
securities or assets other than a distribution for which the Conversion Price is
adjusted pursuant to Section 5 or 6) on any share of the Common Stock unless the
Board of Directors shall first have declared and paid a dividend on every share
of the Series G Convertible Preferred Stock. The Board of Directors of the
Company shall not declare or pay a dividend on any share of the Series A, Series
B, Series C, Series D, Series E, Series F, Series H, or any other series of
preferred stock unless a dividend in equal amount is declared and paid on every
share of the Series G Preferred Stock. In no event shall the Board of Directors
declare or pay a dividend for any share of the Common Stock that is greater than
an amount equal to the dividend declared and paid for any share of the Preferred
Stock divided by the Conversion Ratio, as hereinafter defined. Any such
dividends paid to shares of the Common Stock or the Preferred Stock of the
Company shall be declared by the Company's Board of Directors when and if, in
the sole judgment of said Board, there are sufficient funds available from which
such dividends may be properly paid.
2. Liquidation. Upon any liquidation, dissolution or winding up of
-----------
the Company, whether voluntary or involuntary, each holder of the Series G
Preferred Stock then outstanding shall be entitled, before any distribution or
payment is made upon any shares of the Company's Common Stock, to be paid the
amount of $3.50 for each share of Series G Preferred Stock held by it, plus the
aggregate of any then unpaid dividends prior to the date of payment with respect
to the Series G Preferred Stock, such amount being hereinafter sometimes
referred to as the "Liquidation Payment"; provided, that in such event the
-------------------
Series G Preferred Stock shall rank on a parity with the Company's Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C
Convertible Preferred Stock, Series D Convertible Preferred Stock, Series E
Convertible Preferred Stock, Series F Convertible Preferred Stock, and Series H
Convertible Preferred Stock, and any other series of preferred stock
subsequently designated as ranking on parity with the Series G Preferred Stock
(such series, along with the Series G Preferred Stock, are referred to as the
"Senior Preferred Stock"). Such holders shall not be entitled to any further
- ------- ---------------
payment. If upon such liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, the assets to be distributed among the holders
of the Senior Preferred Stock shall be insufficient to permit payment to the
holders of the Senior Preferred Stock of the amount distributable to each in
<PAGE>
accordance with the rights and preferences designated for each respective
series, then all of the assets of the Company to be distributed shall be paid
ratably among the holders of the Senior Preferred Stock in proportion to the
respective liquidation payments (or other corresponding liquidation rights and
preferences) designated for each such series. Upon any such liquidation,
dissolution, or winding up of the Company, after the holders of the Senior
Preferred Stock shall have been paid in full the amount to which they shall be
entitled, any remaining net assets of the Company may be distributed to the
holders of the Company's Common Stock. Written notice of any such liquidation,
dissolution or winding up of the Company, stating (i) the payment date, (ii) the
amount of the Liquidation Payment, (iii) the place where such amount shall be
payable, and (iv) the conversion right set forth in Section 3 hereof, shall be
given not less than thirty (30) days prior to the payment date stated therein to
the holders of record of the Series G Preferred Stock addressed to each such
holder at such holder's address as shown on the books of the Company. The
merger or consolidation of the Company into or with another corporation (except
ff the shareholders of the Company beneficially own more than fifty percent
(50%) of the capital stock of the surviving entity), or the sale of all or
substantially all the assets of the Company (except if all or substantially all
of the assets are transferred to a subsidiary of the Company) (any such merger,
consolidation, or sale, a "Transfer of the Business"), shall be deemed to be a
------------------------
liquidation, dissolution or winding up of the Company for purposes of this
Section 2.
3. Conversion. Each issued and outstanding share of the Series G
----------
Preferred Stock may, at the option of the holder thereof by written notice to
the Company at any time following issuance of such share, be converted into such
number of fully-paid and nonassessable shares of the Company's Common Stock,
$.01 par value per share, as is determined by dividing $3.50 by the Conversion
Price, as defined herein (such quotient, the "Conversion Ratio"), in effect at
----------------
the time of the conversion. The conversion price at which shares of the Common
Stock shall be deliverable upon conversion of the Series G Preferred Stock
without the payment of additional consideration by the holder thereof (the
"Conversion Price") shall initially be $3.50. Such initial Conversion Price and
- -----------------
initial Conversion Ratio shall be subject to adjustment as provided below. A
holder's right to convert as aforesaid shall terminate if the holder's option to
convert is not exercised prior to the payment date of the Liquidation Payment
referred to in Section 2 above.
The Company, by majority vote of its Board of Directors, shall have
the right to require the conversion at the then Conversion Price of all, but not
less than all, of the then issued and outstanding shares of the Series G
Preferred Stock into the Company's Common Stock, $0.01 par value per share,
immediately prior to the effective date of any registration statement filed
pursuant to the Securities Act of 1933, as amended, with the Securities and
Exchange Commission with respect to an underwritten offering and sale of the
Company's Common Stock having a maximum aggregate offering price of $20,000,000
or more; provided, that the Company also required the conversion of all other
--------
series of convertible preferred stock. Any such conversion shall be rescinded
in the event the closing of such underwritten public offering does not occur
within thirty (30) days of such effective date.
4. Voting.
------
General. At every meeting of the stockholders and except as is
-------
otherwise required by law or herein, on all matters to be voted on by the
stockholders of the Company, the holders of shares of Common Stock and of the
Series G Preferred Stock shall vote together as a single class,
2
<PAGE>
with each holder of shares of Common Stock being entitled to one vote per share
and each holder of shares of the Series G Preferred Stock being entitled to the
number of votes equal to the number of shares of Common Stock into which the
shares of Series G Preferred Stock held by such holder are convertible (as
adjusted from time to time pursuant to Sections 3, 5 and 6 hereof). In the event
the matter to be voted upon involves a Transfer of the Business, such matter
shall be determined by a vote of two-thirds of the shares present in person or
represented by proxy, voting on such matter as set forth above.
Class Vote. Notwithstanding the foregoing, the holders of the Series
----------
G Preferred Stock shall be entitled, voting as a single class and to the
exclusion of the vote of any other class or series of stock, (i) to approve any
change in any of the powers, designations, preferences and relative,
participating optional or other special rights of such series, and (ii) to
approve any change in any of the powers, designations, preferences and relative,
participating optional or other special rights of any other existing class or
series of stock that would be adverse to the holders of the Series G Preferred
Stock. In the event. any such matter is voted upon, such matter shall be
determined by a vote of a majority of the shares of Series G Preferred Stock
present in person or represented by proxy and voting on such matter.
5. Adjustment of Conversion Price (Stock Dividends, Etc.). In case
-----------------------------------------------------
the Company shall at any time after the date hereof (i) declare a dividend
payable in shares of the Common Stock of the Company (other than dividends paid
pro rata to the holders of Senior Preferred Stock); (ii) issue any shares of
Common Stock in subdivision of outstanding shares of the Common Stock of the
Company by reclassification or otherwise; or (iii) combine outstanding shares of
the Common Stock of the Company by reclassification or otherwise (any such
event, a "Common Stock Adjustment"); the Conversion Ratio shall be increased or
-----------------------
decreased, as the case may be (and, accordingly, the Conversion Price shall be
decreased or increased), in proportion to such increase or decrease in the then
issued and outstanding shares of Common Stock at the time of such Common Stock
Adjustment. In addition, if the Company, without receiving any consideration,
declares a dividend on the Series G Preferred Stock payable in Series G
Preferred Stock or effects a subdivision or combination of the outstanding
shares of Series G Preferred Stock into a greater or lesser number of shares of
Series G Preferred Stock (a "Series G Stock Adjustment"), the Conversion Ratio
-------------------------
in effect immediately prior to such Series G Stock Adjustment shall be increased
or decreased (and the Conversion Price shall be decreased or increased)
proportionately.
In the event of any such Common Stock Adjustment or Series G Stock
Adjustment, the voting rights of a holder of the Series G Preferred Stock under
Section 4 hereof shall be similarly adjusted to provide that each then issued
and outstanding share of the Series G Preferred Stock will be entitled to cast
as many votes as such holder would be entitled to cast if, immediately before
casting such vote, such holder had elected to convert, at the Conversion Price,
such holder's Series G Preferred Stock to Common Stock of the Company.
6. Adjustment of Conversion Price (Ratchet Provision). In the event
--------------------------------------------------
the Company shall issue any shares of Common Stock, Options (as hereinafter
defined), or Convertible Securities (as hereinafter defined), without
consideration or for a consideration per share less than the then Conversion
Price, as adjusted, then and in such event, the Conversion Price shall be
reduced, concurrently with such issue, to a price (calculated to the nearest
cent) determined by multiplying the Conversion Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issue plus the number of shares of Common Stock which
the aggregate consideration received by the Company for the total number of
shares
3
<PAGE>
of Common Stock, Convertible Securities or Options so issued would (directly or
indirectly) purchase at such Conversion Price; and the denominator of which
shall be the number of shares of Common Stock outstanding immediately prior to
such issue plus the number of shares of Common Stock into which or for which
such shares of Common Stock, Convertible Securities or Options so issued are
(directly or indirectly) convertible or exercisable. In the event of any such
adjustment the Conversion Ratio shall be adjusted correspondingly.
For purposes of this Section 6, all shares of Common Stock issuable
upon conversion or exercise of shares of Senior Preferred Stock, Convertible
Securities or Options outstanding immediately prior to such issue shall be
deemed to be outstanding. For purposes of this Section 6 and of Section 8, the
following definitions shall apply:
(a) "Convertible Securities" shall mean any shares (including shares
of preferred stock, but excluding shares of Common Stock), evidences of
indebtedness, or other securities directly or indirectly convertible into or
exchangeable for Common Stock, other than shares issued or issuable as a
consequence of a Series G Stock Adjustment (or any analogous transaction with
respect to any other class or series of preferred stock of the Company).
(b) "Options" shall mean rights, options or warrants to subscribe for,
purchase or otherwise acquire Common Stock or Convertible Securities.
Notwithstanding the foregoing, this provision shall not apply to any
issuance of Common Stock, Convertible Securities, or Options made upon (i) the
exercise by a holder of Series G Preferred Stock of the conversion rights
described in Section 3, (ii) the exercise by a holder of the Company's Senior
Preferred Stock of the conversion rights accorded such Senior Preferred Stock;
(iii) the grant or exercise of an incentive or non-qualified stock option
pursuant to the Company's 1993 Stock Option Plan, as amended, or the Company's
1994 Investor Incentive Stock Option Plan, or pursuant to an other stock option
(including without limitation warrants) plan ratified and adopted by majority
vote, on a fully converted basis, of the Company's stockholders and by vote of a
majority of the Company's Board of Directors who are not officers of the
Company; or (iv) the exercise of any Option or the conversion of any Convertible
Security or other convertible security of the Company.
For purposes of this Section 6, the consideration received by the
Company for the issue of any Common Stock, Convertible Securities, or Options
shall be computed as follows:
(A) Cash and Property: Such consideration:
-----------------
(I) insofar as it consists of cash, shall be computed at the
aggregate of cash received by the Company;
(II) insofar as it consists of property other than cash, shall be
computed at the fair market value thereof at the time of such issue, as
determined in good faith by the Board of Directors.
4
<PAGE>
(B) Options and Convertible Securities. The consideration per share
----------------------------------
received by the Company for shares of Common Stock relating to Options and
Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received or receivable by the Company as
consideration for the issue of such Options or Convertible Securities, plus the
minimum aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision contained therein
for a subsequent adjustment of such consideration) payable to the Company upon
the exercise of such Options or the conversion or exchange of such Convertible
Securities, or in the case of Options for Convertible Securities, the exercise
of such Options for Convertible Securities and the conversion or exchange of
such Convertible Securities by
(y) the maximum number of shares of Common Stock (as set forth in the
instruments relating thereto, without regard to any provision contained therein
for a subsequent adjustment for such number) issuable upon the exercise of such
Options or the conversion or exchange of such Convertible Securities.
The Company shall reserve for issuance and keep available, as
necessary from time to time, the number of shares of Common Stock into which or
for which the shares of Series G Preferred Stock are convertible.
Upon the occurrence of each adjustment of the Conversion Price
pursuant to this Section, the Company at its expense shall promptly compute such
adjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series G Preferred Stock a certificate executed by the Company's
President or Chief Financial Officer setting forth such adjustment and showing
in detail the facts upon which such adjustment is based. The Company shall give
each holder of Series G Preferred Stock at least twenty (20) days' prior written
notice of any action by the Company that would result in an adjustment of the
Conversion Price. No fractional shares shall be issued upon the conversion of
any shares of Series G Preferred Stock. All shares of Common Stock (including
fractions thereof) issuable upon conversion of more than one share of Series G
Preferred Stock by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after such aggregation, the conversion would result in
the issuance of a fraction of a share of Common Stock to such a holder, the
Company shall, in lieu of issuing the fractional share, pay the holder otherwise
entitled thereto a sum in cash equal to the fair market value of such fraction
on the date of conversion (as determined in good faith by the Board of
Directors).
7. Rights of Co-Sale: Sales by Douglas J. Ranalli
----------------------------------------------
Until such time as the Company effects an underwritten offering and
sale of the Company's Common Stock resulting in net proceeds to the Company of
at least $20,000,000, if Douglas J. Ranalli ("Ranalli") proposes to transfer
-------
more than 100,000 shares of Common Stock (other than Common Stock acquired by
him upon the conversion of Senior Preferred Stock) owned by him ("Founder
-------
Shares"), then he shall afford the holders (the "Series G Stockholders") of
---------------------
shares of Series G Preferred Stock and/or of the Common Stock of the Company
into which such Series G Preferred Stock was converted (such shares of Series G
Preferred Stock and Common Stock
5
<PAGE>
collectively the "Converted Common Stock") the right to transfer the shares of
----------------------
Converted Common Stock held by them as follows:
Ranalli shall give written notice to the Series G Stockholders, at
least thirty (30) days prior to any proposed transfer of any such shares,
specifying the number of Founder Shares that he desires to transfer, the
percentage that such shares represent of the total number of shares held by him,
on a fully-converted and fully-exercised basis (the "Sales Percentage"), the
----------------
identity of the proposed transferee of such shares, and the time within which
and the price and all other material terms and conditions upon which Ranalli
proposes to sell such shares.
Concurrently with the delivery of the notice referred to above,
Ranalli shall offer each of the Series G Stockholders the opportunity to sell to
the proposed purchaser or purchasers of the shares that percentage of the shares
of Converted Common Stock then held by the Series G Stockholder that is equal to
the Sales Percentage. It is agreed and understood that Ranalli shall seek to
obtain the same agreements and commitments from the proposed purchaser or
purchasers in respect of the Converted Common Stock to be sold by each of the
Series G Stockholders as he has obtained from such purchaser or purchasers in
respect of the Founder Shares proposed to be sold by him, including the time of
purchase, the purchase price and the other terms and conditions upon which the
purchase of Ranalli's shares is to be made.
In the event Ranalli cannot obtain agreements or commitments from the
proposed purchaser or purchasers to purchase that percentage of the shares of
Converted Common Stock held by each of the Series G Stockholders which is equal
to the Sales Percentage of the shares in accordance with the preceding
paragraph, then Ranalli shall reduce the number of Founder Shares that Ranalli
proposes to sell so that Ranalli and each of the Series G Stockholders shall be
entitled to sell an identical percentage (as nearly as possible, with the number
of shares being sold by Ranalli and each of the Series G Stockholders being
rounded to the nearest whole share) of the Founder Shares or shares of Converted
Common Stock (as applicable) then held by each of them, respectively, or such
lesser percentage as the Series G Stockholders in their sole discretion may
elect, which decrease shall not require a proportionate decrease in the
percentage sold by Ranalli.
Each of the Series G Stockholders may notify the Company in writing,
within fifteen (15) days after receiving notice of a proposed sale from a
Ranalli under this Section 7, whether such Series G Stockholder desires to sell
any such shares of Converted Common Stock held by such Series G Stockholder
concurrently with Ranalli in accordance with the terms and provisions of this
Section 7. Failure to provide such written notice within the fifteen-day period
after receipt of notice from Ranalli shall be deemed to constitute an
irrevocable declination by such Series G Stockholder to sell any of such Series
G Stockholder's shares of Converted Common Stock concurrently with Ranalli. No
Series G Stockholder shall be obliged to sell any shares of Converted Common
Stock pursuant to any notice furnished by Ranalli in accordance with the
provisions of this Section 7.
Any and all sales of Converted Common Stock by the Series G
Stockholders pursuant to the terms of this Section 7 shall be made either
concurrently with or prior to the sale of the Founder Shares by Ranalli. The
Company agrees to effect any conversion of shares of Series G Preferred Stock
into Common Stock for purposes of any sale under this Section 7 concurrent with
such sale.
6
<PAGE>
Notwithstanding the foregoing, the provisions of this Section 7 shall
not apply to any proposed sale of Founder Shares by Ranalli to either (i) an
immediate family member of Ranalli's; (ii) a trust for the benefit of Ranalli or
his descendants; or (iii) a corporation directly or indirectly wholly owned by
Ranalli and/or any person referred to in clause (i) or (ii); or (iv) a sale
pursuant to an effective registration statement including any of Ranalli's
shares in accordance with the exercise of registration rights pursuant to a
Registration Rights Agreement to which the Company is a party; provided, that
--------
any Founder Shares sold in a transaction described in clauses (i) through (iii)
shall continue to be subject to the provisions of this Section 7 in the hands of
the transferee thereof, and that such transferee shall agree to be so bound in a
separate agreement and, in the case of a transfer to a corporation, the shares
of such corporation shall also be subject to the provisions of this Section 7
and the holders thereof shall agree to be so bound in a separate agreement.
8. Right to Purchase Shares of an Additional Series or Class of
------------------------------------------------------------
Stock. In the event the Company proposes to issue and sell any shares of Common
- -----
Stock, Convertible Securities or Options (collectively, the "Additional Stock")
----------------
to one or more investors, then the Company shall afford the Series G
Stockholders the right to purchase certain shares of the Additional Stock as
follows:
The Company shall give written notice to all Series G Stockholders, at
least forty (40) days prior to any proposed issuance and sale of Additional
Stock at a price less than the equivalent of $3.50 per share of Common Stock
(determined in accordance with the principles of Section 6), as adjusted,
specifying the number of such shares to be issued and sold, the time within
which and the price and all other material terms and conditions upon which the
Company proposes to sell such shares.
Each Series G Stockholder shall notify the Company in writing, within
twenty (20) days after receiving such notice, whether such stockholder desires
to purchase any such shares of Additional Stock in accordance with the terms and
provisions of this Section 8 and, if so, the number of shares he desires to
purchase. Failure to provide such written notice within such twenty-day period
after receipt of notice from the Company, for the purpose hereof, shall be
deemed to constitute a refusal by such Series G Stockholder to purchase any such
shares of Additional Stock. Each Series G Stockholder shall be entitled to
purchase pursuant to the terms of this Section 8 a percentage of the Additional
Stock equal to the percentage of Common Stock, on a fully-converted and fully-
exercised basis, represented by the Series G Preferred Stock owned by such
holder.
Notwithstanding the foregoing, this provision shall not apply to any
issuance of Additional Stock made upon (i) the exercise by a holder of Senior
Preferred Stock (including the Preferred Stock) of conversion rights accorded
such shares pursuant to the certificate of designation of powers, rights, and
preferences of such shares, (ii) the grant or exercise of an incentive or non-
qualified stock option pursuant to the Company's 1993 Stock Option Plan, as
amended, or the Company's 1994 Investor Incentive Stock Option Plan, or pursuant
to any other stock option (including without limitation warrants) plan ratified
and adopted by majority vote, on a fully converted basis, of the Company's
stockholders and by vote of a majority of the Company's Board of Directors who
are not officers of the Company; or (iii) the exercise of any Option or the
conversion of any Convertible Security or other convertible security of the
Company.
7
<PAGE>
9. Notices. All notices to Series G Stockholders or the Company
-------
provided for in this Certificate of Designation shall be in writing and made by
certified mail, postage prepaid for domestic delivery, or by reputable overnight
courier (e.g., Federal Express), or by facsimile confirmed by one of the other
----
methods for giving notice permitted herein, to, in the case of a Series G
Stockholder, such holder's address as shown on the books of the Company, and in
the case of the Company, to 900 Chelmsford Street, Lowell, MA 01851, attn:
President.
8
<PAGE>
ANNEX H
-------
UNIFI COMMUNICATIONS, INC.
CERTIFICATE OF DESIGNATION
OF
SERIES H CONVERTIBLE PREFERRED STOCK,
FIXING POWERS, PREFERENCES
AND RIGHTS OF SUCH STOCK
The preferences, voting powers, qualifications, special or relative
rights or privileges of the Series H Convertible Preferred Stock, $1.00 par
value per share (the "Series H Preferred Stock"), of UNIFI Communications, Inc.
(the "Company"), shall be as follows:
1. Dividends. The Board of Directors of the Company shall not
---------
declare or pay a dividend (including any cash dividend or distribution of
securities or assets other than a distribution for which the Conversion Price is
adjusted pursuant to Section 5) on any share of the Common Stock unless the
Board of Directors shall first have declared and paid a dividend on every share
of the Series H Convertible Preferred Stock. The Board of Directors of the
Company shall not declare or pay a dividend on any share of the Series A, Series
B, Series C, Series D, Series E, Series F, Series G, or any other series of
preferred stock unless a dividend in equal amount is declared and paid on every
share of the Series H Preferred Stock. In no event shall the Board of Directors
declare or pay a dividend for any share of the Common Stock that is greater than
an amount equal to the dividend declared and paid for any share of the Preferred
Stock divided by the Conversion Ratio, as hereinafter defined. Any such
dividends paid to shares of the Common Stock or the Preferred Stock of the
Company shall be declared by the Company's Board of Directors when and if, in
the sole judgment of said Board, there are sufficient funds available from which
such dividends may be properly paid.
2. Liquidation. Upon any liquidation, dissolution or winding up of
-----------
the Company whether voluntary or involuntary, each holder of the Series H
Preferred Stock then outstanding shall be entitled, before any distribution or
payment is made upon any shares of the Company's Common Stock, to be paid the
amount of $10.50 for each share of Series H Preferred Stock held by it, plus the
aggregate of any then unpaid dividends prior to the date of payment with respect
to the Series H Preferred Stock, such amount being hereinafter sometimes
referred to as the "Liquidation Payment"; provided, that in such event the
-------------------
Series H Preferred Stock shall rank on a parity with the Company's Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C
Convertible Preferred Stock, Series D Convertible Preferred Stock, Series E
Convertible Preferred Stock, Series F Convertible Preferred Stock, and Series G
Convertible Preferred Stock, and any other series of preferred stock
subsequently designated as ranking on parity with the Series H Preferred Stock
(such series, along with the Series H Preferred Stock, are referred to as the
"Senior Preferred Stock"). Such holders shall not be entitled to any further
- -----------------------
payment. If upon such liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, the assets to be distributed among the holders
of the Senior Preferred Stock shall be insufficient to permit payment to the
holders of the Senior Preferred Stock of the amount distributable to each in
accordance with the rights and preferences designated for each respective
series, then all of the assets
<PAGE>
of the Company to be distributed shall be paid ratably among the holders of the
Senior Preferred Stock in proportion to the respective liquidation payments (or
other corresponding liquidation rights and preferences) designated for each such
series. Upon any such liquidation, dissolution, or winding up of the Company,
after the holders of the Senior Preferred Stock shall have been paid in full the
amount to which they shall be entitled, any remaining net assets of the Company
may be distributed to the holders of the Company's Common Stock. Written notice
of any such liquidation, dissolution or winding up of the Company, stating (i)
the payment date, (ii) the amount of the Liquidation Payment, (iii) the place
where such amount shall be payable, and (iv) the conversion right set forth in
Section 3 hereof, shall be given not less than thirty (30) days prior to the
payment date stated therein to the holders of record of the Series H Preferred
Stock addressed to each such holder at such holder's address as shown on the
books of the Company. The merger or consolidation of the Company into or with
another corporation (except if the shareholders of the Company beneficially own
more than fifty percent (50%) of the capital stock of the surviving entity), or
the sale of all or substantially all the assets of the Company (except if all or
substantially all of the assets are transferred to a subsidiary of the Company)
(any such merger, consolidation, or sale, a "Transfer of the Business"), shall
------------------------
be deemed to be a liquidation, dissolution or winding up of the Company for
purposes of this Section 2.
3. Conversion. Each issued and outstanding share of the Series H
----------
Preferred Stock may, at the option of the holder thereof by written notice to
the Company at any time following issuance of such share, be converted into such
number of fully-paid and nonassessable shares of the Company's Common Stock,
$.01 par value per share, as is determined by dividing $10.50 by the Conversion
Price, as defined herein (such quotient, the "Conversion Ratio"), in effect at
----------------
the time of the conversion. The conversion price at which shares of the Common
Stock shall be deliverable upon conversion of the Series H Preferred Stock
without the payment of additional consideration by the holder thereof (the
"Conversion Price") shall initially be $10.50. Such initial Conversion Price
- -----------------
and initial Conversion Ratio shall be subject to adjustment as provided below.
A holder's right to convert as aforesaid shall terminate if the holder's option
to convert is not exercised prior to the payment date of the Liquidation Payment
referred to in Section 2 above.
The Company, by majority vote of its Board of Directors, shall have
the right to require the conversion at the then Conversion Price of all, but not
less than all, of the then issued and outstanding shares of the Series H
Preferred Stock into the Company's Common Stock, $0.01 par value per share,
immediately prior to the effective date of any registration statement filed
pursuant to the Securities Act of 1933, as amended, with the Securities and
Exchange Commission with respect to an underwritten offering and sale of the
Company's Common Stock having a maximum aggregate offering price of $20,000,000
or more; provided, that the Company also required the conversion of all other
--------
series of convertible preferred stock. Any such conversion shall be rescinded
in the event the closing of such underwritten public offering does not occur
within thirty (30) days of such effective date.
4. Voting
------
General. At every meeting of the stockholders and except as is otherwise
-------
required by law or herein, on all matters to be voted on by the stockholders of
the Company, the Holders of shares of Common Stock and of the Series H Preferred
Stock shall vote together as a single class, with each holder of shares of
Common Stock being entitled to one vote per share and each holder of shares of
the Series H Preferred Stock being entitled to the number of votes equal to the
number of shares of
2
<PAGE>
Common Stock into which the shares of Series H Preferred Stock held by such
holder are convertible (as adjusted from time to time pursuant to Sections 3 and
5 hereof). In the event the matter to be voted upon involves a Transfer of the
Business, such matter shall be determined by a vote of two-thirds of the shares
present in person or represented by proxy, voting on such matter as set forth
above.
Class Vote. Notwithstanding the foregoing, the holders of the Series H
----------
Preferred Stock shall be entitled, voting as a single class and to the exclusion
of the vote of any other class or series of stock, (i) to approve any change in
any of the powers, designations, preferences and relative, participating,
optional or other special rights of such series, and (ii) to approve any change
in any of the powers, designations, preferences and relative, participating,
optional or other special rights of any other existing class or series of stock
that would be adverse to the holders of the Series H Preferred Stock. In the
event any such matter is voted upon, such matter shall be determined by a vote
of a majority of the shares of Series H Preferred Stock present in person or
represented by proxy and voting on such matter.
5. Adjustment of Conversion Price (Stock Dividends, Etc.). In case the
-----------------------------------------------------
Company shall at any time after the date hereof declare a dividend payable in
shares of the Common Stock of the Company (other than dividends paid pro rata to
the holders of Senior Preferred Stock); (ii) issue any shares of Common Stock in
subdivision of outstanding shares of the Common Stock of the Company by
reclassification or otherwise; or (iii) combine outstanding shares of the Common
Stock of the Company by reclassification or otherwise (any such event, a "Common
------
Stock Adjustment"); the Conversion Ratio shall be increased or decreased, as the
- ----------------
case may be (and, accordingly, the Conversion Price shall be decreased or
increased), in proportion to such increase or decrease in the then issued and
outstanding shares of Common Stock at the time of such Common Stock Adjustment.
In addition, if the Company, without receiving any consideration, declares a
dividend on the Series H Preferred Stock payable in Series H Preferred Stock or
effects a subdivision or combination of the outstanding shares of Series H
Preferred Stock into a greater or lesser number of shares of Series H Preferred
Stock (a "Series H Stock Adjustment"), the Conversion Ratio in effect
-------------------------
immediately prior to such Series H Stock Adjustment shall be increased or
decreased (and the Conversion Price shall be decreased or increased)
proportionately.
In the event of any such Common Stock Adjustment or Series H Stock
Adjustment, the voting rights of a holder of the Series H Preferred Stock under
Section 4 hereof shall be similarly adjusted to provide that each then issued
and outstanding share of the Series H Preferred Stock will be entitled to cast
as many votes as such holder would be entitled to cast if, immediately before
casting such vote, such holder had elected to convert, at the Conversion Price,
such holder's Series H Preferred Stock to Common Stock of the Company.
6. Rights of Co-Sale: Sales by Douglas j. Ranalli
----------------------------------------------
Until such time as the Company effects an underwritten offering and sale of
the Company's Common Stock resulting in net proceeds to the Company of at least
$20,000,000, if Douglas J. Ranalli ("Ranalli") proposes to transfer more than
-------
100,000 shares of Common Stock (other than Common Stock acquired by him upon the
conversion of Senior Preferred Stock) owned by him ("Founder Shares"), then he
--------------
shall afford the holders (the "Series H Stockholders,") of shares of Series H
-------- ------------
3
<PAGE>
Preferred Stock and/or of the Common Stock of the Company into which such Series
H Preferred Stock was converted (such shares of Series H Preferred Stock and
Common Stock collectively the "Converted Common Stock") the right to transfer
----------------------
the shares of Converted Common Stock held by them as follows:
Ranalli shall give written notice to the Series H Stockholders, at least
thirty (30) days prior to any proposed transfer of any such shares, specifying
the number of Founder Shares that he desires to transfer, the percentage that
such shares represent of the total number of shares held by him, on a fully-
converted and fully-exercised basis (the "Sales Percentage"), the identity of
----------------
the proposed transferee of such shares, and the time within which and the price
and all other material terms and conditions upon which Ranalli proposes to sell
such shares.
Concurrently with the delivery of the notice referred to above, Ranalli
shall offer each of the Series H Stockholders the opportunity to sell to the
proposed purchaser or purchasers of the shares that percentage of the shares of
Converted Common Stock then held by the Series H Stockholder that is equal to
the Sales Percentage. It is agreed and understood that Ranalli shall seek to
obtain the same agreements and commitments from the proposed purchaser or
purchasers in respect of the Converted Common Stock to be sold by each of the
Series H Stockholders as he has obtained from such purchaser or purchasers in
respect of the Founder Shares proposed to be sold by him, including the time of
purchase, the purchase price and the other terms and conditions upon which the
purchase of Ranalli's shares is to be made.
In the event Ranalli cannot obtain agreements or commitments from the
proposed purchaser or purchasers to purchase that percentage of the shares of
Converted Common Stock held by each of the Series H Stockholders which is equal
to the Sales Percentage of the shares in accordance with the preceding
paragraph, then Ranalli shall reduce the number of Founder Shares that Ranalli
proposes to sell so that Ranalli and each of the Series H Stockholders shall be
entitled to sell an identical percentage (as nearly as possible, with the number
of shares being sold by Ranalli and each of the Series H Stockholders being
rounded to the nearest whole share) of the Founder Shares or shares of Converted
Common Stock (as applicable) then held by each of them, respectively, or such
lesser percentage as the Series H Stockholders in their sole discretion may
elect, which decrease shall not require a proportionate decrease in the
percentage sold by Ranalli.
Each of the Series H Stockholders may notify the Company in writing, within
fifteen (15) days after receiving notice of a proposed sale from a Ranalli under
this Section 6, whether such Series H Stockholder desires to sell any such
shares of Converted Common Stock held by such Series H Stockholder concurrently
with Ranalli in accordance with the terms and provisions of this Section 6.
Failure to provide such written notice within the fifteen-day period after
receipt of notice from Ranalli shall be deemed to constitute an irrevocable
declination by such Series H Stockholder to sell any of such Series H
Stockholder's shares of Converted Common Stock concurrently with Ranalli. No
Series H Stockholder shall be obliged to sell any shares of Converted Common
Stock pursuant to any notice furnished by Ranalli in accordance with the
provisions of this Section 6.
Any and all sales of Converted Common Stock by the Series H Stockholders
pursuant to the terms of this Section 6 shall be made either concurrently with
or prior to the sale of the Founder Shares by Ranalli. The Company agrees to
effect any conversion of shares of Series H Preferred Stock into Common Stock
for purposes of any sale under this Section 6 concurrent with such sale.
4
<PAGE>
Notwithstanding the foregoing, the provisions of this Section 6 shall not
apply to any proposed sale of Founder Shares by Ranalli to either (i) an
immediate family member of Ranalli's; (ii) a trust for the benefit of Ranalli or
his descendants; or (iii) a corporation directly or indirectly wholly owned by
Ranalli and/or any person referred to in clause (i) or (ii); or (iv) a sale
pursuant to an effective registration statement including any of Ranalli's
shares in accordance with the exercise of registration rights pursuant to a
Registration Rights Agreement to which the Company is a party; provided, that
--------
any Founder Shares sold in a transaction described in clauses (i) through (iii)
shall continue to be subject to the provisions of this Section 6 in the hands of
the transferee thereof, and that such transferee shall agree to be so bound in a
separate agreement and, in the case of a transfer to a corporation, the shares
of such corporation shall also be subject to the provisions of this Section 6
and the holders thereof shall agree to be so bound in a separate agreement.
8. Notices. All notices to Series H Stockholders or the Company
-------
provided for in this Certificate of Designation shall be in writing and made by
certified mail, postage prepaid for domestic delivery, or by reputable overnight
courier (e.g., Federal Express), or by facsimile confirmed by one of the other
----
methods for giving notice permitted herein, to, in the case of a Series H
Stockholder, such holder's address as shown on the books of the Company, and in
the case of the Company, to 900 Chelmsford Street, Lowell, MA 01851, attn:
President.
5
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF DESIGNATION OF SERIES G
CONVERTIBLE PREFERRED STOCK
OF
UNIFI COMMUNICATIONS, INC.
--------------------------
UNIFI Communications, Inc. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware,
DOES HEREBY CERTIFY:
FIRST: That by unanimous written consent in lieu of a meeting of the Board of
Directors of the Corporation dated as of October 31, 1996, resolutions
were duly adopted setting forth a proposed amendment to the
Certificate of Designation of Series G Convertible Preferred Stock of
the Corporation. The resolution setting forth the proposed amendment
is as follows:
RESOLVED, that the proper officers of the Corporation be, and each of
them is, authorized, empowered and directed, in the name and on behalf
of the Corporation, to execute and file with the appropriate
authorities a First Amendment to Certificate of Designation of Series
G Convertible Preferred Stock, in the form attached to these
resolutions.
SECOND: That thereafter, said proposed First Amendment to Certificate of
Designation of Series G Convertible Preferred Stock was approved by
the holders of not less than 100% of the issued and outstanding Series
G Convertible Preferred Stock by their unanimous written consent dated
as of February 21, 1997.
THIRD: That said First Amendment to Certificate of Designation of Series G
Convertible Preferred Stock, attached hereto, was duly adopted in
accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment of
Certificate of Designation of Series G Convertible Preferred Stock to be signed
by Q. Ellis Telford its Assistant Secretary and Corporate Counsel, this 21st day
of February, 1997.
UNIFI COMMUNICATIONS, INC.
By: /s/ Q. Ellis Telford
----------------------------
Q. Ellis Telford
Assistant Secretary and
Corporate Counsel
6
<PAGE>
UNIFI COMMUNICATIONS, INC.
FIRST AMENDMENT TO CERTIFICATE OF DESIGNATION
OF SERIES G
CONVERTIBLE PREFERRED STOCK
The Certificate of Designation of Series G Convertible Preferred Stock of
UNIFI Communications, Inc. (formerly "Fax International, Inc.") is hereby
amended as follows:
1. By deleting the entire second paragraph of Section 3 of such Certificate
and replacing it with the following:
"The Company, by majority vote of its Board of Directors, shall have the
right to require the conversion at the then Conversion Price of all, but
not less than all, of the then issued and outstanding shares of the Series
G Preferred Stock into, at the election of such holders, either (i) shares
of the Company's Series I Convertible Preferred Stock, $1.00 par value per
share, or (ii) shares of the Company's Common Stock, $0.01 par value per
share, immediately prior to the effective date of any registration
statement filed pursuant to the Securities Act of 1933, as amended, with
the Securities and Exchange Commission with respect to an underwritten
primary offering and sale of the Company's Common Stock having a maximum
aggregate offering price to the public of $20,000,000 or more and in which
such shares offered and sold by the Company in such offering are listed on
the New York Stock Exchange, the American Stock Exchange or on the NASDAQ
system; provided, that the Company also required the conversion of all
other series of convertible preferred stock. Any such conversion shall be
rescinded in the event the closing of such underwritten primary public
offering does not occur within thirty (30) days of such effective date.
Each issued and outstanding share of the Series G Preferred Stock converted
into Series I Convertible Preferred Stock pursuant to this paragraph shall
be converted into the same number of fully paid and non-assessable shares
of the Company's Series I Convertible Preferred Stock that each issued and
outstanding share of the Series G Preferred Stock would be entitled to
convert into if such Series G Preferred Stock were converted into Common
Stock on such date (giving effect to the adjustments from time to time
pursuant to Sections 3, 5 and 6 hereof). In the event that the Company
does not require the conversion of the Series G Preferred Stock as
aforesaid, then after the effective date of such registration statement,
the holders of the Series G Preferred Stock shall have the right at any
time to convert all, but not less than all, of their Series G Preferred
Stock into shares of Series I Preferred Stock or Common Stock.
7
<PAGE>
UNIFI COMMUNICATIONS, INC.
CERTIFICATE OF DESIGNATION
OF
SERIES I
CONVERTIBLE PREFERENCE STOCK,
FIXING POWERS, PREFERENCES
AND RIGHTS OF SUCH STOCK
______________________________
Pursuant to Section 151 of the
General Corporation Law
of the State of Delaware
______________________________
UNIFI Communications, Inc. (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, certifies:
FIRST: That in accordance with the provisions of Section 151 of the General
Corporation Law of the State of Delaware, the Board of Directors of
the Corporation by unanimous written consent dated October 31, 1996
duly approved and adopted the following resolution which resolution
remains in full force and effect on the date hereof:
FURTHER RESOLVED, that, effective upon the closing of the Offering,
(A) the Company designate 8,570,000 shares (adjustable to reflect the
occurrence of any stock dividend, stock split, reverse stock split, or
the like) of its authorized but unissued capital stock as Series I
Convertible Preferred Stock, containing the rights, preferences and
other provisions set forth in the below-mentioned Certificate of
Designation; (B) each Authorized Officer be, and each of them is,
authorized, empowered and directed in the name and on behalf of the
Company, to execute and file with the appropriate authorities (i) a
First Amendment to Certificate of Designation of Series G Convertible
Preferred Stock, and (ii) a Certificate of Designation of Series I
Convertible Preferred Stock, each such document to be substantially in
the form attached as exhibits to the SingTel Agreements and containing
such additions, deletions and other changes as such officers executing
the same on behalf of the Company shall approve, such approval to be
conclusively evidenced by the execution and filing of such documents
on behalf of the Company; and (C) there are hereby reserved for
issuance, upon conversion of the issued and outstanding Series G
Convertible Stock of the Company in the manner set forth in the First
Amendment to Certificate of Designation of Series G Convertible
Preferred Stock, 8,570,000 shares (adjustable to reflect the
occurrence of any stock dividend, stock split, reverse stock split, or
the like) of Series I Convertible Preferred Stock and 8,570,000 shares
(adjustable to reflect the occurrence of any stock dividend, stock
split, reverse stock split, or the like) of Common Stock issuable upon
conversion of the Series I Convertible Preferred Stock.
<PAGE>
SECOND: That said Certificate of Designation of Series I Convertible Preferred
Stock is attached hereto as ANNEX A.
-------
2
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
duly executed by Q. Ellis Telford, Assistant Secretary and Corporate Counsel on
this 21st day of February, 1997.
UNIFI Communications, Inc.
BY Q. Ellis Telford
---------------------------------
Q. Ellis Telford
Assistant Secretary and
Corporate Counsel
3
<PAGE>
ANNEX A
-------
UNIFI COMMUNICATIONS, INC.
CERTIFICATE OF DESIGNATION
OF
SERIES I CONVERTIBLE PREFERENCE STOCK,
FIXING POWERS, PREFERENCES
AND RIGHTS OF SUCH STOCK
The preferences, voting powers, qualifications, special or relative rights
or privileges of the Series I Convertible Preferred Stock, $1.00 par value per
share (the "Series I Preferred Stock"), of UNIFI Communications, Inc. (the
------------------------
"Company"), shall be as follows:
-------
1. Dividends. The Board of Directors of the Company shall not declare or
---------
pay a dividend (including any cash dividend or distribution of securities or
assets other than a distribution for which the Conversion Ratio is adjusted
pursuant to Section 5) on any share of the Common Stock (the "Common Stock"),
------------
par value $.01 per share unless the Board of Directors concurrently declares and
pays a dividend on every share of the Series I Convertible Preferred Stock on a
pro rata basis as if each share of Series I Convertible Preferred Stock were
converted into Common Stock pursuant to Sections 3, 5 and 6 hereof. Any
dividends paid to holders of the Series I Preferred Stock shall be declared by
the Company's Board of Directors when and if, in the sole judgment of said
Board, there are sufficient funds available from which such dividends may be
properly paid. Holders of Series I Preferred Stock shall not be entitled to any
dividend preference.
2. Liquidation. Holders of the Series I Preferred Stock shall not be
-----------
entitled to any preference upon any liquidation, dissolution or winding up of
the Company, whether voluntary or involuntary; provided, that in such event
Series I Preferred Stock shall rank on a parity with the Company's Common Stock.
3. Conversion. Each issued and outstanding share of the Series I
----------
Preferred Stock may, at the option of the holder thereof by written notification
to the Company at any time following the issuance of such share, be converted
into such number of fully-paid and non-assessable shares of the Company's Common
Stock at the conversion ratio (the "Conversion Ratio"), in effect at the time of
----------------
the conversion. In addition, upon transfer of any share of Series I Preferred
Stock to any person who is not a member of the SingTel Group (as defined below),
each share of Series I Preferred Stock so transferred shall automatically, and
without further action on the part of any person convert into Common Stock at
the Conversion Ratio. Such Conversion Ratio shall initially be one (1) and
shall be subject to adjustment as provided below. A holder's right to convert
as aforesaid shall terminate if the holder's option to convert is not exercised
prior to any liquidation, dissolution or winding up of the Company referred to
in Section 2 above.
4. Voting.
------
General. At every meeting of the stockholders and except as is otherwise
-------
required by law or herein, on all matters to be voted on by the stockholders of
the Company, the holders of Common Stock and of the Series I Preferred Stock
shall vote together as a single class, with each holder of
<PAGE>
shares of Common Stock being entitled to one vote per share and each holder of
shares of the Series I Preferred Stock being entitled to the number of votes
equal to the number of shares of Common Stock into which the shares of Series I
Preferred Stock held by such holder are convertible (as adjusted from time to
time pursuant to Sections 3, 5 and 6 hereof).
Directors. Until the payment and satisfaction in full of all Obligations
---------
(as defined below) and so long as the number of shares of Series I Preferred
Stock that is issued and outstanding is convertible (pursuant to Section 3 and
as adjusted from time to time pursuant to Sections 3, 5 and 6 hereof) into
1,000,000 or more shares of the Company's Common Stock, holders of the Series I
Preferred Stock shall have the right, voting as a single class, to elect two
directors to the Company's Board of Directors. The rights of the holders of
Series I Preferred Stock in this paragraph shall be in addition to the rights of
the holders of Series I Preferred Stock to vote for directors of the Company's
Board of Directors under the immediately preceding paragraph. "Obligations"
-----------
means all indebtedness, obligations and liabilities of the Company and its
subsidiaries to the holders of Series I Preferred Stock who are (i) Singapore
Telecommunications Limited ("SingTel"), a Singapore corporation, (ii) SingTel
-------
(Netherlands Antilles) Pte N.V., a Netherlands Antilles corporation ("SingTel
-------
NA"), (iii) SingTel Global Services Pte. Ltd., a Singapore corporation, or (iv)
any person or entity, directly or indirectly controlled by, or under common
control with, SingTel (together, the "SingTel Group"), direct or indirect, joint
-------------
or several, absolute or contingent, matured or unmatured, liquidated or
unliquidated, secured or unsecured, arising by contract, operation of law or
otherwise, that in any case arise under (y) the Credit Agreement between the
Company and SingTel NA, dated as of April 10, 1995, or in respect of any of the
loans made to the Company pursuant thereto or the promissory notes or other
instruments at any time evidencing any thereof (including in each case, without
limitation, any amendments thereto and any extensions thereof) or (z) the Term
Loan Agreement - Equipment between the Company and SingTel NA, dated as of April
10, 1995, or in respect of any of the loans made to the Company pursuant thereto
or the promissory notes or other instruments at any time evidencing any thereof
(including in each case, without limitation, any amendments thereto and any
extensions thereof).
Class Vote. Notwithstanding the foregoing, the holders of the Series I
----------
Preferred Stock shall be entitled, voting as a single class and to the exclusion
of the vote of any other class or series of stock, (i) to approve any change in
any of the powers, designations, preferences and relative, participating,
optional or other special rights of such series, and (ii) to approve any change
in any of the powers, designations, preferences and relative, participating,
optional or other special rights of any other existing class or series of stock
that would be adverse to the holders of the Series I Preferred Stock. In the
event any such matter is voted upon, such matter shall be determined by a vote
of a majority of the shares of Series I Preferred Stock present in person or
represented by proxy and voting on such matter.
5. Adjustment of Conversion Ratio (Stock Dividends, Etc.).
-------------------------------------------------------
(a) Adjustment for Change in Capital Stock. If, after the date this
--------------------------------------
Certificate of Designation is filed with the Secretary of State of the State of
Delaware, the Company:
(i) pays a dividend or makes a distribution on its Common Stock in
shares of its Common Stock;
2
<PAGE>
(ii) subdivides its outstanding shares of Common Stock into a greater
number of shares;
(iii) combines its outstanding shares of Common Stock into a smaller
number of shares;
(iv) pays a dividend or makes a distribution on its Common Stock in
shares of its Capital Stock (as defined below) (other than Common Stock or
rights, warrants, or options for its Common Stock-to the extent such
issuance or distribution is covered by this Section 5); or
(v) issues by reclassification of its Common Stock any shares of its
Capital Stock (other than rights, warrants or options for its Common
Stock);
then the Conversion Rate in effect immediately prior to such action shall be
adjusted so that the holders of Series I Preferred Stock thereafter converted
may receive the number of shares of Capital Stock of the Company which such
holder would have owned immediately following such action if such holder had
converted the Series I Preferred Stock immediately prior to such action or
immediately prior to the record date applicable thereto, if any.
The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
In the event that such dividend or distribution is not so paid or made or such
subdivision, combination or reclassification is not effected, the Conversion
Rate shall again be adjusted to be the Conversion Rate which would then be in
effect if such record date or effective date had not been so fixed.
If after an adjustment a holder of Series I Preferred Stock upon
conversion of such Series I Preferred Stock may receive shares of two or more
classes of Capital Stock of the Company, the Conversion Rate shall thereafter be
subject to adjustment upon the occurrence of an action taken with respect to any
such class of Capital Stock as is contemplated by this Section 5 with respect to
the Common Stock, on terms comparable to those applicable to Common Stock in
this Section 5.
(b) Adjustment for Rights Issue or Sale of Common Stock Below Current
-----------------------------------------------------------------
Market Value. If, at any time or from time to time, after the date this
- ------------
Certificate of Designation is filed with the Secretary of State of the State of
Delaware, the Company (i) distributes any rights, warrants or options to holders
of Common Stock entitling them to purchase shares of Common Stock (other than
securities of the Company pursuant to "poison pills") at a price per share less
than the Current Market Value as of the Time of Determination (as defined in
paragraph (o) of this Section 5) or (ii) sells any Common Stock or any
securities convertible into or exchangeable or exercisable for the Common Stock
(other than pursuant to (1) the conversion of Series I Preferred Stock, (2) any
options, warrants or rights outstanding as of the date this Certificate of
Designation was filed with the Secretary of State of the State of Delaware, (3)
without limiting any options, warrants or rights outstanding pursuant to the
immediately preceding clause (2), any directors' plans and employee stock option
or purchase plans approved by the Company's Board of Directors, [(4) the
issuance of Common Stock or options, warrants or rights to persons or entities
providing financing to the Company or any of its subsidiaries as a condition to
the provision of such financing,] (5) any
3
<PAGE>
registered public offering, or (6) any security convertible into, or
exchangeable or exercisable for, the Common Stock as to which the issuance
thereof has previously been the subject of any required adjustment pursuant to
this Section 5) at a price per share less than the Current Market Value
immediately prior to any adjustment required pursuant to this Section 5, the
Conversion Rate shall be adjusted in accordance with the formula:
E' = E x (O + N)
------------------------------
(O + (N x P/M))
where:
E' = the adjusted Conversion Rate;
E = the current Conversion Rate;
O = the number of shares of Common Stock outstanding on the record date
for the distribution to which this paragraph (b) is being applied or
on the date of sale of Common Stock at a price per share less than the
Current Market Value immediately prior to any adjustment to which this
paragraph (b) applies, as the case may be;
N = the number of additional shares of Common Stock issuable upon exercise
of all rights, warrants and options so distributed or the number of
shares of Common Stock so sold or the maximum stated number of shares
of Common Stock issuable upon the conversion, exchange, or exercise of
any such convertible, exchangeable or exercisable securities, as the
case may be;
P = the price per share of the additional shares of Common Stock upon the
exercise of any such rights, options or warrants so distributed or
pursuant to any such convertible, exchangeable or exercisable
securities so sold or the sale price of the shares so sold, as the
case may be; and
M = the Current Market Value as of the Time of Determination or at the
time of sale, as the case may be, minus, with respect to a
-----
distribution of rights, warrants or options, in case (i) any other
distribution has occurred to which paragraph (a)(iv) applies or (ii)
any other distribution has occurred to which paragraph (c) applies,
and with respect to which, in either case, (x) the record date shall
occur on or before the record date for the distribution to which this
paragraph (b) applies and (y) the Ex-Dividend Time shall occur on or
after the date of the Time of Determination for the distribution to
which this paragraph (b) applies, the fair market value (on the record
date for the distribution to which this paragraph (b) applies) of (1)
the Capital Stock of the Company distributed in respect of each share
of Common Stock in such paragraph (a)(iv) distribution and (2) the
assets of the Company or debt securities or any rights, warrants or
options to purchase securities of the Company distributed in respect
of each share of Common Stock in such paragraph (c) distribution.
4
<PAGE>
The Board of Directors of the Company shall reasonably and in good
faith determine fair market values for the purposes of this paragraph (b), which
determination shall be conclusive absent manifest error.
The adjustment shall become effective immediately after the record
date for the determination of stockholders entitled to receive the rights,
warrants or options to which this paragraph (b) applies or upon consummation of
the sale of Common Stock, as the case may be. To the extent that shares of
Common Stock are not delivered after the expiration of such rights or warrants,
the Conversion Rate shall be readjusted to the Conversion Rate which would
otherwise be in effect had the adjustment made upon the issuance of such rights
or warrants been made on the basis of delivery of only the number of shares of
Common Stock actually delivered. In the event that such rights or warrants are
not so issued, the Conversion Rate shall again be adjusted to be the Conversion
Rate which would then be in effect if such date fixed for determination of
stockholders entitled to receive such rights or warrants had not been so fixed.
No adjustment shall be made under this paragraph (b) if the
application of the formula stated above in this paragraph (b) would result in a
value of E' that is lower than the value of E.
(c) Adjustment for Other Distributions. If, after the date this
----------------------------------
Certificate of Designation is filed with the Secretary of State of the State of
Delaware, the Company distributes to holders of its Common Stock any of its
assets or debt securities or any rights, warrants, or options to purchase Common
Stock of the Company, including securities or cash, but excluding (i)
distributions that would be permitted by the Company's debt agreements
(including indentures) and (ii) distributions of Capital Stock referred to in
paragraph (a) and distributions of rights, warrants or options referred to in
paragraph (b), the Conversion Rate shall be adjusted in accordance with the
formula:
E' = E x M
---
M-F
where:
E' = the adjusted Conversion Rate;
E = the current Conversion Rate;
M = the Current Market Value, minus, in case any other distribution has
-----
occurred to which paragraph (a)(iv) applies, with respect to which (i)
the record date shall occur on or before the record date for the
distribution to which this paragraph (c) applies and (ii) the Ex-
Dividend Time shall occur on or after the date of the Time of
Determination for the distribution to which this paragraph (c)
applies, the fair market value (on the record date for the
distribution to which this paragraph (c) applies) of any Capital Stock
of the Company distributed in respect of each share of Common Stock in
such paragraph (a)(iv) distribution; and
F = the fair market value (on the record date for the distribution to
which this paragraph (c) applies) of the assets, securities, rights,
warrants or options to be distributed in respect of each share of
Common Stock in the distribution to which this paragraph
5
<PAGE>
(c) is being applied (including, in the case of cash dividends or
other cash distributions giving rise to an adjustment, all such cash
distributed concurrently).
The Board of Directors of the Company shall reasonably and in good faith
determine by a board resolution, the fair market value of all property (other
than cash) distributed for the purposes of this paragraph (c).
The adjustment shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distributions
to which this paragraph (c) applies. In the event that such distribution is not
so made, the Conversion Rate shall again be adjusted to be the Conversion Rate
which would then be in effect if such record date had not been so fixed.
In the event that, with respect to any distribution to which this
paragraph (c) would otherwise apply, "F" is equal to or greater than "M", then
the adjustment provided by this paragraph (c) shall not be made.
(d) When Adjustment May Be Deferred. No adjustment in the Conversion
-------------------------------
Rate need be made unless the adjustment would require a change of at least 1.0%
in the Conversion Rate. Any adjustments that are not made shall be carried
forward and taken into account in any subsequent adjustment. However, with
respect to a dividend of the Company's Capital Stock (or rights to acquire such
Capital Stock) adjustments can be deferred only until, and must be made by, the
earlier of (i) three years from the date of such stock dividend and (ii) the
date as of which the aggregate stock dividends for which adjustments have not
been made total at least 1.0% of the then issued and outstanding Common Stock
with respect to which such stock dividends were distributed.
All calculations under this Section 5 shall be made to the nearest
1/1,000th of a share.
(e) When No Adjustment Required. No adjustment need be made for
---------------------------
rights to purchase Common Stock pursuant to a Company plan for reinvestment of
dividends or interest.
No adjustment need be made for a change in the par value or no par
value of the Common Stock.
(f) Notice of Adjustment. Whenever the Conversion Rate is adjusted,
--------------------
the Company shall promptly mail to holders of Series I Preferred Stock a notice
of the adjustment in accordance with Section 6 hereof.
(g) Notice of Certain Transactions. If (i) the Company takes any
------------------------------
action that would require an adjustment in the Conversion Rate pursuant to
paragraphs (a), (b) or (c) (unless no adjustment is to occur pursuant to
paragraph (e)), then the Company shall mail to holders of Series I Preferred
Stock a notice stating the proposed record date for the action. The Company
shall give the notice at least 15 days before such date. Failure to file or
give the notice or any defect in it shall not affect the validity of the
transaction.
(h) Adjustment for Tax Purposes. The Company may make such increases
---------------------------
in the Conversion Rate, in addition to those otherwise required by this Section,
as it considers to be
6
<PAGE>
advisable in order that any event treated for Federal income tax purposes as a
dividend of stock or stock rights shall not be taxable to the recipients.
(i) Specificity of Adjustment. Irrespective of any adjustments in the
-------------------------
number or kind of shares received upon the conversion of the Series I Preferred
Stock, Series I Preferred Stock certificates theretofore or thereafter issued
need not be changed.
(j) Adjustments to Par Value. Subject to receiving shareholder
------------------------
approval, the Company shall make such adjustments to the par value of the Common
Stock in order that, upon conversion of the Series I Preferred Stock, the Common
Stock will be fully paid and non-assessable.
(k) Voluntary Adjustment. The Company from time to time may increase
--------------------
the Conversion Rate by any number and for any period of time (provided that such
---------
period is not less than 20 Business Days). Whenever the Conversion Rate is so
increased, the Company shall mail to holders a notice of the increase in
accordance with Section 6. The Company shall give the notice at least 15 days
before the date the increased Conversion Rate takes effect. The notice shall
state the increased Conversion Rate and the period it will be in effect. A
voluntary increase in the Conversion Rate does not change or adjust the
Conversion Rate otherwise in effect as determined by this Section 5.
(l) No other Adjustment For Dividends. Except as provided in this
---------------------------------
Section 5, no payment or adjustment will be made for dividends on any Common
Stock.
(m) Priority of Adjustments. If this Section 5 requires adjustments
-----------------------
to the Conversion Rate under more than one of paragraphs (a)(iv), (b) or (c),
and the record dates for the distributions giving rise to such adjustments shall
occur on the same date, then such adjustments shall be made by applying, first,
the provisions of paragraph (a), second, the provisions of paragraph (c) and,
third, the provisions of paragraph (b).
(n) Multiple Adjustments. After an adjustment to the Conversion Rate
--------------------
under this Section 5, any subsequent event requiring an adjustment under this
Section 5 shall cause an adjustment to the Conversion Rate as so adjusted.
(o) Definitions. "Capital Stock" means, with respect to any
----------- -------------
corporation, any and all shares, interests, rights to purchase, warrants,
options, participations or other equivalents of or interests (however
designated) in stock issued by that corporation.
"Current Market Value" per share of Common Stock or of any other
--------------------
securities at any date shall be (1) if the security is not registered under the
Exchange Act, the value of the security determined in good faith by the
Company's Board of Directors, based on the most recently completed arm's-length
transaction between the Company and a person other than an affiliate of the
Company, or (2) if the security is registered under the Exchange Act, the
average of the daily closing bid prices for each Business Day during the period
commencing 15 Business Days before such date and ending on the date one day
prior to such date or, if the security has been registered under the Exchange
Act for less than 15 consecutive Business Days before such date, then the
average of the daily closing bid prices for all of the Business Days before
such, date for which daily Closing bid prices are available. If the market
price is not determinable for at least 10 Business Days in such
7
<PAGE>
period, the Current Market Value of the security shall be determined as if the
security was not registered under the Exchange Act.
"Time of Determination" means the time and date of the earlier of (i)
---------------------
the determination of stockholders entitled to receive rights, warrants, or
options or a distribution, in each case, to which paragraphs (b) and (c) apply
and (ii) the time ("Ex-Dividend Time") immediately prior to the commencement of
----------------
"ex-dividend" trading for such rights, warrants or distribution on such national
or regional exchange or market on which the Common Stock is then listed or
quoted.
6. Notices. All notices to Series I Stockholders or the Company provided
-------
for in this Certificate of Designation shall be in writing and made by certified
mail, postage prepaid for domestic delivery, or by reputable overnight courier
(e.g., Federal Express), or by facsimile confirmed by one of the other methods
for giving notice permitted herein, to in the case of a Series I Stockholder,
such holder's address as shown on the books of the Company, and in the case of
the Company, to 900 Chelmsford Street, Lowell, MA 01851, attn: President.
8
<PAGE>
UNIFI COMMUNICATIONS, INC.
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF DESIGNATION OF
SERIES A CONVERTIBLE PREFERENCE STOCK,
____________________________
Pursuant to Section 242 of the
General Corporation Law
of the State of Delaware
___________________________
UNIFI Communications, Inc. (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, certifies:
FIRST: That The Board of Directors of the Corporation by unanimous written
consent dated May 11, 1994 duly approved and adopted the following
resolution which resolution remains in full force and effect on the
date hereof:
FURTHER
RESOLVED: That, subject to approval by holders of a majority of the
--------
outstanding shares of Series A Convertible Preferred Stock, par
value $1.00 per share ("Series A Convertible Preferred Stock"),
the Certificate of Designation of Series A Convertible Preferred
Stock, Fixing Powers, Preferences, and Rights of Such Stock be
amended as set forth in the amended and restated certificate of
designation of Series A Convertible Preferred Stock, Fixing
Powers, Preferences, and Rights of Such Stock attached hereto,
and that, subject to such approval, the shares of the
Corporation's Series A Convertible Preferred Stock shall have the
powers, preferences, and rights set forth on the amended and
restated certificate of designation of Series A Convertible
Preferred Stock, Fixing Powers, Preferences, and Rights of Such
Stock;
SECOND: That as of October 12, 1994 said amended and restated certificate of
designation of Series A Convertible Preferred Stock, attached hereto
as ANNEX A was approved by the holders of a majority of the issued and
-------
outstanding Series A Convertible Preferred Stock by their written
consent.
THIRD: That said Amended and Restated Certificate of Designation of Series A
Convertible Preferred Stock, attached hereto, was duly adopted in
accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
duly executed by Q. Ellis Telford, Assistant Secretary and Corporate Counsel on
this 21st day of February, 1997.
UNIFI Communications, Inc.
BY /s/ Q. Ellis Telford
--------------------------------
Q. Ellis Telford
Assistant Secretary and
Corporate Counsel
2
<PAGE>
ANNEX A
-------
UNIFI COMMUNICATIONS, INC.
AMENDED AND RESTATED
CERTIFICATE OF DESIGNATION
OF
SERIES A CONVERTIBLE PREFERRED STOCK,
FIXING POWERS, PREFERENCES
AND RIGHTS OF SUCH STOCK
The preferences, voting powers, qualifications, special or relative
rights or privileges of the Series A Convertible Preferred Stock, $1.00 par
value per share (the "Preferred Stock"), shall be as follows:
1. Dividends. The Board of Directors of the Company shall not
---------
declare or pay a dividend for any share of the Common Stock unless the Board of
Directors shall first have declared and paid a dividend for every share of the
Preferred Stock. In no event shall the Board of Directors declare or pay a
dividend for any share of the Common Stock that is greater than an amount equal
to the dividend declared or paid for any share of the Preferred Stock divided by
the Conversion Ratio, as hereinafter defined. Any such dividends paid to shares
of the Common Stock or the Preferred Stock shall be declared by the Company's
Board of Directors when and if, in the sole judgment of said Board, there are
sufficient funds available from which such dividends may be properly paid.
2. Liquidation. Upon any liquidation, dissolution or winding up of
-----------
the Company, whether voluntary or involuntary, each holder of the Preferred
Stock then outstanding shall be entitled, before any distribution or payment is
made upon any shares of the Company's Common Stock, to be paid the amount of
$1.00 for each share of Preferred Stock held by him, plus the aggregate of any
then unpaid dividends prior to the date of payment with respect to the Preferred
Stock, such amount being hereinafter sometimes referred to as "the Liquidation
Payment." Such holders shall not be entitled to any further payment. If upon
such liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, the assets to be distributed among holders of the Preferred Stock
shall be insufficient to permit payment to the holders of the Preferred Stock of
the amount distributable as aforesaid, then all of the assets of the Company to
be distributed shall be paid ratably among the holders of the Preferred Stock.
Upon any such liquidation, dissolution, or winding up of the Company, after the
holders of the Preferred Stock shall have been paid in full the amount to which
they shall be entitled, the remaining net assets of the Company may be
distributed to the holders of the Company's Common Stock. Written notice of any
such liquidation, dissolution or winding up of the Company, stating (i) the
payment date, (ii) the amount of the Liquidation Payment, (iii) the place where
such amount shall be payable, and (iv) the conversion right set forth in Section
3 hereof, shall be given by certified mail, postage prepaid, not less than
thirty (30) days prior to the payment date stated therein to the holders of
record of the Preferred Stock addressed to each such holder at such holder's
post office address as shown on the books of the Company. The merger or
consolidation of the Company into or with another corporation (except
<PAGE>
if the shareholders of the Company beneficially own more than fifty percent
(50%) of the capital stock of the surviving entity), or the sale of all or
substantially all the assets of the Company (except if all or substantially all
of the assets are transferred to a subsidiary of the Company), shall, be deemed
to be a liquidation, dissolution or winding up of the Company for purposes of
this Section 2.
3. Conversion. Each issued and outstanding share of the Preferred
----------
Stock may, at the option of the holder thereof by written notice to the Company
at any time following issuance of such share, be converted into such number of
fully paid and non-assessable shares of the Company's Common Stock, $.01 par
value per share, as is determined by dividing $1.00 by the Conversion Price, as
defined herein (the "Conversion Ratio"), in effect at the time of the
conversion. The conversion price at which shares of the Common Stock shall be
deliverable upon conversion of the Company's Preferred Stock without the payment
of additional consideration by the holder thereof (the "Conversion Price") shall
initially be $1.00.
Such initial Conversion Price, and the rate at which shares of
Preferred Stock may be converted into shares of Common Stock, shall be subject
to adjustment as provided. A holder's right to convert as aforesaid shall
terminate if the holder's option to convert is not exercised prior to the
payment date of the Liquidation Payment referred to in Section 2 above. A
holder's right to convert as aforesaid, if exercised, must be applied to all
shares of the Preferred Stock of the holder.
The Company, by majority vote of its Board of Directors, shall have
the right to require the conversion of all, but not less than all, of the then
issued and outstanding shares of the Preferred Stock at the Conversion Ratio
into the Company's Common Stock, $0.01 par value per share, upon the following
terms and conditions or upon the occurrence of the following event:
If there is an underwritten offering and sale of the Company's Common
Stock, registered under the Securities Act of 1933, as amended (the "Act"),
having a maximum aggregate offering price of $5,000,000 or greater, then the
Company may require the conversion, at the Conversion Ratio, of all but not less
than all of the then issued and outstanding shares of the Preferred Stock to
Common Stock, $0.01 par value per share, of the Company immediately prior to the
effective date of the Registration Statement filed with the Securities and
Exchange Commission in connection with such offering. Notwithstanding the
above, such conversion shall be rescinded in the event the dosing of such
offering does not occur within thirty (30) days of such effective date or the
Company does not receive net proceeds of at least $5,000,000.
4. Voting.
------
General. At every meeting of the stockholders and except as is
-------
otherwise required by law or herein, on all matters to be voted on by the
stockholders of the Corporation, the holders of shares of Common Stock and of
the Preferred Stock shall vote together as a single class with each holder of
shares of Common Stock being entitled to one vote per share and each holder of
shares of the Preferred Stock being entitled to the number of votes equal to the
number of shares of Common Stock into which the shares of Preferred Stock held
by such holder are convertible (as adjusted from time to time pursuant to
Sections 3, 5 and 6 hereof). In the event the matter to be voted upon involves
the sale of all or substantially all of the Company's assets, such matter shall
be
2
<PAGE>
determined by a vote of a two-thirds majority of the shares present in person
or represented by proxy and voting on such matter.
Notwithstanding the foregoing, the holders of the Preferred Stock
shall be entitled, voting as a single class and to the exclusion of the vote of
any other class or series of stock, (i) to approve any change in any of the
powers, designations, preferences and relative, participating, optional or other
special rights of such series, and (ii) to approve any change in any of the
powers, designations, preferences and relative, participating, optional or other
special rights of any other existing class or series of stock that would be
adverse to the holders of the Preferred Stock. In the event any such change is
voted upon, such matter shall be determined by a vote of a majority of the
shares present in person or represented by proxy and voting on such matter.
5. Adjustments. In case the Company shall at any time after the
-----------
date hereof (i) declare a dividend payable in shares of the Common Stock of the
Company (other than dividends paid to the holders of Preferred Stock); (ii)
issue any shares of Common Stock in subdivision of outstanding shares of the
Common Stock of the Company by reclassification or otherwise; or (iii) combine
outstanding shares of the Common Stock of the Company by reclassification or
otherwise; the number of shares of Common Stock to which the holder of then
issued and outstanding shares of the Preferred Stock shall be entitled upon
conversion under Section 3 hereof shall be increased or decreased, as the case
may be, in proportion to such increase or decrease in the then issued and
outstanding shares of Common Stock at the time of such stock dividend,
subdivision or combination as aforesaid.
In addition, if there is any such stock dividend, subdivision or
combination as aforesaid, the voting rights of a holder of the Preferred Stock
under Section 4 hereof shall be similarly adjusted to provide that each then
issued and outstanding share of the Preferred Stock will be entitled to cast as
many votes as such holder would be entitled to cast if, immediately before
casting such vote, such holder had elected to convert, at the Conversion Price,
such holder's Preferred Stock to Common Stock of the Company.
6. Adjustment of Conversion Price (Ratchet Provision). In the
--------------------------------------------------
event the Company shall issue any shares of Common Stock, Options (as
hereinafter defined), Convertible Securities (as hereinafter defined), or any
shares of Additional Shares of Preferred Stock (as hereinafter defined), without
consideration or for a consideration per share less than the Conversion Price,
as adjusted, then and in such event, such Conversion Price shall be reduced,
concurrently with such issue to a price (calculated to the nearest cent)
determined by multiplying such Conversion Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issue plus the number of shares of Common Stock which the
aggregate consideration received by the Company for the total number of
Additional Shares of Preferred Stock, shares of Common Stock, Convertible
Securities or Options so issued would purchase at such Conversion Price; and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issue plus the number of shares of Common Stock into
which or for which such Additional Shares of Preferred Stock, shares of Common
Stock, Convertible Securities or Options so issued are convertible or
exercisable; provided, however, that in the event the Company, without receiving
--------
any consideration, declares a dividend on the Preferred Stock payable in
Preferred Stock or effects a subdivision of the outstanding shares of Preferred
Stock into
3
<PAGE>
a greater or lesser number of shares of Preferred Stock, the Conversion Price in
effect immediately prior to such stock dividend or subdivision shall be
increased or decreased proportionately.
For purposes of this Section 6, all shares of Common Stock issuable
upon conversion or exercise of shares of Preferred Stock, Convertible Securities
or Options outstanding immediately prior to such issue shall be deemed to be
outstanding.
For purposes of this Section 6 and of Section 8, the following
definitions shall apply:
(a) "Additional Shares of Preferred Stock" shall mean all shares of
Preferred Stock issued by the Company after September 9, 1992, other than shares
of Preferred Stock issued or issuable as a dividend or distribution on the
Preferred Stock, or by reason of a dividend, stock split, split-up or other
distribution on shares of Preferred Stock.
(b) "Convertible Securities" shall mean any evidences of indebtedness,
shares (other than Common Stock) or other securities directly or indirectly
convertible into or exchangeable for Common Stock.
(c) "Options" shall mean rights, options or warrants to subscribe for,
purchase or otherwise acquire Common Stock or Convertible Securities.
Notwithstanding the foregoing, this provision shall not apply to any
issuance of Common Stock made upon (i) exercise by a holder of Preferred Stock
of the conversion rights described in Section 3; (ii) exercise by a holder of
the Company's Series B Convertible Preferred Stock of the conversion rights
accorded such Series B Convertible Preferred Stock; (iii) exercise of an
incentive or non-qualified stock option pursuant to the Company's 1993 Stock
Option Plan or pursuant to any stock option plan ratified and adopted by
majority vote, on a fully converted basis of the Company's stockholders and by
vote of a majority of
the Company's Board of Directors who are not officers of the Company; or (iv)
exercise by a warrantholder or optionholder of any Warrant or non-qualified
stock option issued or granted by the Company as of April 7, 1993.
For purposes of this Section 6, the consideration received by the
Corporation for the issue of any Additional Shares of Common Stock shall be
computed as follows:
(A) Cash and Property. Such consideration:
-----------------
(I) insofar as it consists of cash, shall be computed at the
aggregate of cash received by the Corporation;
(II) insofar as it consists of property other than cash, shall be
computed at the fair market value thereof at the time of such issue, as
determined in good faith by the Board of Directors.
(B) Options and Convertible Securities. The consideration per share
----------------------------------
received by the Corporation for shares of Common Stock relating to Options and
Convertible Securities, shall be determined by dividing
4
<PAGE>
(x) the total amount, if any, received or receivable by the
Corporation as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration) payable to
the Corporation upon the exercise of such Options or the conversion or exchange
of such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities by
(y) the maximum number of shares of Common Stock (as set forth in the
instruments relating thereto, without regard to any provision contained therein
for a subsequent adjustment for such number) issuable upon the exercise of such
Options or the conversion or exchange of such Convertible Securities.
The Company shall reserve for issuance and keep available, as
necessary from time to time, the number of shares of Common Stock into which or
for which the shares of Preferred Stock, Convertible Securities or Options are
convertible or exercisable.
7. Rights of Co-Sale. Until such time as the Company effects an
-----------------
underwritten offering and sale of the Company's Common Stock, resulting in net
proceeds to the Company of at least $5,000,000, if any holder of shares of
Preferred Stock, or of Common Stock into which such Preferred Stock has been
converted in accordance with the provisions of the Certificate of Designation of
Series A Convertible Preferred Stock, dated as of April 27, 1993 (hereinafter
referred to in this Section 7 as the "Selling Stockholder"), proposes to
transfer more than 100,000 shares of Common Stock or Preferred Stock owned by
him, then he shall afford the other holders of shares of Common Stock or
Preferred Stock (hereinafter referred to in this Section 7 as the "Other
Stockholders") the right to transfer the shares of Common Stock or Preferred
Stock held by them as follows:
The Selling Stockholder shall give written notice to the Other
Stockholders, at least thirty (30) days prior to any proposed transfer of any
such shares, specifying the number of such shares which he desires to transfer,
the percentage which such shares represent of the total number of shares held by
him, on a fully converted and fully exercised basis (the "Sales Percentage"),
the identity of the proposed transferee of such shares, and the time within
which and the price and all other material terms and conditions upon which the
Selling Stockholder proposes to sell such shares.
Each of the Other Stockholders shall notify the Company in writing,
within fifteen (15) days after such notice, whether such Other Stockholder
desires to sell any such shares of Common Stock or Preferred Stock held by such
Other Stockholder concurrently with the Selling Stockholder in accordance with
the terms and provisions of this Section 7. Failure to provide such written
notice within said fifteen-day period after receipt of notice from the Selling
Stockholder, for the purpose hereof, shall be deemed to constitute a refusal by
such Other Stockholder to sell any of such Other Stockholder's shares of Common
Stock or Preferred Stock concurrently with the Selling Stockholder.
Concurrently with the delivery of the notice referred to above, the
Selling Stockholder shall offer each of the Other Stockholders the opportunity
to sell to the proposed purchaser or purchasers of the shares that percentage of
the shares of Common Stock or Preferred Stock then held
5
<PAGE>
by the Other Stockholder, on a fully converted and fully exercised basis, which
is equal to the Sales Percentage. It is agreed and understood that the Selling
Stockholder shall obtain the same agreements and commitments from the proposed
purchaser or purchasers in respect of the Preferred Stock to be sold by each of
the Other Stockholders as he has obtained from such purchaser or purchasers in
respect of the shares proposed to be sold by him, including the time of
purchase, the purchase price and the other terms and conditions upon which the
purchase of the Selling Stockholder's shares is to be made.
In the event the Selling Stockholder cannot obtain agreements or
commitments from the proposed purchaser or purchasers to purchase that
percentage of the shares of Common Stock or Preferred Stock held by each of the
Other Stockholders which is equal to the Sales Percentage of the shares, then
the Selling Stockholder shall reduce the number of shares which the Selling
Stockholder proposes to sell so that both the Selling Stockholder and each of
the Other Stockholders shall be entitled to sell an identical percentage (as
nearly as possible, with the number of shares being sold by the Selling
Stockholder and each of the Other Stockholders being rounded to the nearest
whole share) of the shares of Common Stock or Preferred Stock then held by each
of them, respectively, or such lesser percentage as the Other Stockholders in
their sole discretion may elect, which decrease shall not require a
proportionate decrease in the percentage sold by the Selling Stockholder.
None of the Other Stockholders shall be obligated to sell any shares
of Common Stock or Preferred Stock pursuant to any notice furnished by the
Selling Stockholder in accordance with the provisions of this Section 7.
Any and all sales of Common Stock or Preferred Stock by the Other
Stockholders pursuant to the terms of this Section 7 shall be made either
concurrently with or prior to the sale of the shares by the Selling Stockholder.
Notwithstanding the foregoing, the provisions of Section 7 shall not
apply to any proposed sale of shares by the Selling Stockholder to either (i) an
immediate family member of the Selling Stockholder's; (ii) a trust of which the
Selling Stockholder is a trustee and/or a beneficiary; or (iii) a corporation of
which the Selling Stockholder holds more than fifty percent (50%) of the capital
stock; or (iv) a sale pursuant to an effective registration statement including
the Selling Stockholder's shares in accordance with the exercise of registration
rights pursuant to a Registration Rights Agreement among certain stockholders
and the Company.
8. Right to Purchase Shares of an Additional Series or Class of
------------------------------------------------------------
Stock. In the event the Company proposes to issue and sell any shares of Common
- -----
Stock, Additional Shares of Preferred Stock, Convertible Securities or Options
(collectively, the "Additional Stock") to one or more investors, then the
Company shall afford the holders of Preferred Stock the right to purchase
certain shares of the Additional Stock as follows:
The Company shall give written notice to all the holders of Preferred
Stock, at least thirty (30) days prior to any proposed issuance and sale of
Additional Stock at a price less than the equivalent of $1.50 per share of
Common Stock (determined in accordance with the principles of Section 6), as
adjusted, specifying the number of such shares to be issued and sold, the time
within
6
<PAGE>
which and the price and all other material terms and conditions upon
which the Company proposes to sell such shares.
Each holder of the Preferred Stock shall notify the Company in
writing, within fifteen (15) days after such notice, whether such stockholder
desires to purchase any such shares of Additional Stock in accordance with the
terms and provisions of this Section 8 and, if so, the number of shares he
desires to purchase. Failure to provide such written notice within said
fifteen-day period after receipt of notice from the Company, for the purpose
hereof, shall be deemed to constitute a refusal by such holder of Preferred
Stock to purchase any such shares of Additional Stock. No holder of Preferred
Stock shall be entitled to purchase pursuant to the terms of this Section 8 a
percentage of the Additional Stock which exceeds the percentage of Common Stock,
on a fully converted and fully exercised basis, owned by such holder.
Notwithstanding the foregoing, this provision shall not apply to any
issuance of Common Stock made upon (i) exercise by a holder of Preferred Stock
of the conversion rights described in Section 3; (ii) exercise by a holder of
the Company's Series B Convertible Preferred Stock issued and outstanding as of
March 31, 1993, of the conversion rights accorded such Series B Convertible
Preferred Stock; (iii) exercise of an incentive or nonqualified stock option
pursuant to the Company's 1993 Stock Option Plan or pursuant to any stock option
plan ratified and adopted by majority vote, on a fully converted basis, of the
Company's stockholders and by vote of a majority of the Company's Board of
Directors who are not officers of the Company; or (iv) exercise by a
warrantholder or optionholder of any Warrant or non-qualified stock option
issued or granted by the Company as of April 7, 1993.
9. Amendments. No provision of these terms of the Series A
----------
Convertible Preferred Stock may be amended, modified, or waived without the
written consent or affirmative vote of the holders of at least a majority of the
then outstanding shares of Series A Convertible Preferred Stock.
7
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
FAX INTERNATIONAL, INC.
Article I. Offices.
- --------- -------
Section 1. Registered Office. The registered office of the Corporation
--------- -----------------
shall be at The Corporation Trust Company, 1209 Orange Street, in the City of
Wilmington, County of New Castle, State of Delaware 19801.
Section 2. Additional Offices. The Corporation may also have offices at
--------- ------------------
such other places, both within and without the State of Delaware, as the Board
of Directors may from time to time determine or as the business of the
Corporation may require.
Article II. Meetings of Stockholders.
- ---------- ------------------------
Section 1. Time and Place. A meeting of stockholders for any purpose may
--------- --------------
be held at such time and place within or without the State of Delaware as shall
be stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
Section 2. Annual Meeting. Annual meetings of stockholders, commencing
--------- --------------
with the year 1991, shall be held on the second Monday in May if not a legal
holiday, or, if a legal holiday, then on the next secular day following, at
10:00 a.m., or at such other date and time as shall, from time to time, be
designated by the Board of Directors and stated in the notice of the meeting.
At such annual meetings, the stockholders shall elect a Board of Directors and
transact such other business as may properly be brought before the meetings.
Section 3. Notice of Annual Meeting. Written notice of the annual
--------- ------------------------
meeting, stating the place, date, and time thereof, shall be given to each
stockholder entitled to vote at such meeting not less than ten (unless a longer
period is required by law) nor more than sixty days prior to the meeting.
Section 4. Special Meetings. Special meetings of the stockholders may be
--------- ----------------
called for any purpose or purposes, unless otherwise prescribed by statute or by
the Certificate of Incorporation, by the Chairman of the Board, if any, or the
President, and shall be called by the President or Secretary at the request, in
writing, of a majority of the Board of Directors or of the stockholders owning a
majority of the shares of capital stock of the Corporation issued and
outstanding on a fully converted basis and entitled to vote. Such request shall
state the purpose of the proposed meeting.
Section 5. Notice of Special Meeting. Written notice of a special
--------- -------------------------
meeting, stating the place, date, and time thereof and the purpose or purposes
for which the meeting is called, shall he given to each stockholder entitled to
vote at such meeting not less than ten (unless a longer period is required by
law) nor more than sixty days prior to the meeting.
Section 6. List of Stockholders. The transfer agent or the officer in
--------- --------------------
charge of the stock ledger of the Corporation shall prepare and make, at least
ten days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each
<PAGE>
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten days prior to the meeting, at a place within the city where the
meeting is to be held, which place, if other than the place of the meeting,
shall be specified in the notice of the meeting. The list shall also be produced
and kept at the place of the meeting during the whole time thereof and may be
inspected by any stockholder who is present in person thereat.
Section 7. Presiding Officer and Order of Business.
--------- ---------------------------------------
(a) Meetings of stockholders shall be presided over by the Chairman of the
Board. If he is not present or there is none, they shall be presided over by the
President, or, if he is not present or there is none, by a Vice President, or,
if he is not present or there is none, by a person chosen by the Board of
Directors, or, if no such person is present or has been chosen, by a chairman to
be chosen by the stockholders owning a majority of the shares of capital stock
of the Corporation issued and outstanding and entitled to vote at the meeting
and who are present in person or represented by proxy. The Secretary of the
Corporation, or, if he is not present, an Assistant Secretary, or, if he is not
present, a person chosen by the Board of Directors, shall act as Secretary at
meetings of stockholders; if no such person is present or has been chosen, the
stockholders owning a majority of the shares of capital stock of the Corporation
issued and outstanding and entitled to vote at the meeting who are present in
person or represented by proxy shall choose any person present to act as
secretary of the meeting.
(b) The following order of business, unless otherwise determined at the
meeting, shall be observed as far as practicable and consistent with the
purposes of the meeting:
(1) Call of the meeting to order.
(2) Presentation of proof of mailing of the notice of the meeting
and, if the meeting is a special meeting, the call thereof.
(3) Presentation of proxies.
(4) Announcement that a quorum is present.
(5) Reading and approval of the minutes of the previous meeting.
(6) Reports, if any, of officers.
(7) Election of directors, if the meeting is an annual meeting or a
meeting called for that purpose.
(8) Consideration of the specific purpose or purposes, other than the
election of directors, for which the meeting has been called, if
the meeting is a special meeting.
(9) Transaction of such other business as may properly come before
the meeting.
(10) Adjournment.
Section 8. Quorum and Adjournments. The presence in person or
--------- -----------------------
representation by proxy of the holders of a majority of the shares of the
capital stock of the Corporation issued and outstanding and entitled to vote
shall be necessary to, and shall constitute a quorum, for, the transaction of
business at all meetings of the stockholders, except as otherwise provided by
statute or by the Certificate of Incorporation. If, however, a quorum shall not
be present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat who are present in person or represented by proxy shall
have the power to adjourn the meeting from time to time until a quorum shall be
present or represented. If the time and place of the adjourned meeting are
announced at the meeting at which the adjournment is taken, no further notice of
the adjourned meeting need be given. Even if a quorum shall be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat who are present in person or represented by proxy shall have the
power to adjourn the meeting from time to
2
<PAGE>
time for good cause to a date that is not more than thirty days after the date
of the original meeting. Further notice of the adjourned meeting need not be
given if the time and place thereof are announced at the meeting at which the
adjournment is taken. At any adjourned meeting at which a quorum is present in
person or represented by proxy, any business may be transacted that might have
been transacted at the meeting as originally called. If the adjournment is for
more than thirty days, or if, after the adjournment, a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote thereat.
Section 9. Voting.
--------- ------
(a) At any meeting of the stockholders, every stockholder having the right
to vote shall he entitled to vote in person or by proxy. Except as otherwise
provided by law or the Certificate of Incorporation, each stockholder of record
shall be entitled to one vote for each share of capital stock registered in his
name on the books of the Corporation.
(b) All elections shall he determined by a plurality vote, and, except as
otherwise provided by law or the Certificate of Incorporation, all other matters
shall be determined by a vote of a majority of the shares present in person or
represented by proxy and voting on such other matters.
Section 10. Action by Consent. Any action required or permitted by law or
---------- -----------------
the Certificate of Incorporation to be taken at any meeting of stockholders may
be taken without a meeting, without prior notice if a written consent, setting
forth the action so taken, shall be signed by the holders of outstanding stock
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present or represented by proxy and voted. Such written consent
shall be filed with the minutes of the meetings of stockholders. Prompt notice
of the taking of the corporate action without a meeting by less than unanimous
written consent shall he given to those stockholders who have not consented, in
writing thereto.
Article III. Directors.
- ------------ ---------
Section 1. General Powers, Number, and Tenure. The business of the
--------- ----------------------------------
Corporation shall be managed by its Board of Directors, which may exercise all
powers of the Corporation and perform all lawful acts that are not by law, the
Certificate of Incorporation, or these Bylaws directed or required to be
exercised or performed by the stockholders. The number of directors shall be
determined by the Board of Directors; if no such determination is made, the
number of directors shall be one. The directors shall be elected at the annual
meeting of the stockholders, except as provided in Section 2 of this Article,
and each director elected shall hold office until the next annual meeting and
until his successor is elected and shall qualify. Directors need not be
stockholders.
Section.2. Vacancies. If any vacancies occur in the Board of Directors,
--------- ---------
or if any new directorships are created, they may be filled by a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. Each director so chosen shall hold office until the next annual
meeting of stockholders and until his successor is duly elected and shall
qualify. If there are no directors in office, any officer or stockholder may
call a special meeting of stockholders in accordance with the provisions of the
Certificate of Incorporation or these Bylaws, at which meeting such vacancies
shall be filled.
3
<PAGE>
Section 3. Removal or Resignation.
--------- ----------------------
(a) except as otherwise provided by law or the Certificate of
Incorporation, any director or the entire Board of Directors may be removed,
with or without cause, by the holders of a majority of the shares then entitled
to vote at an election of directors.
(b) Any director may resign at any time by giving written notice to the
Board of Directors, the Chairman of the Board, if any, or the President or
Secretary of the Corporation. Unless otherwise specified in such written
notice, a resignation shall take effect on delivery thereof to the Board of
Directors or the designated officer. It shall not he necessary for a
resignation to be accepted before it becomes effective.
Section 4. Place of Meetings. The Board of Directors may hold meetings,
--------- -----------------
both regular and special, either within or without the State of Delaware.
Section 5. Annual Meeting. The annual meeting of each newly elected Board
--------- --------------
of Directors shall be held immediately following the annual meeting of
stockholders, and no notice of such meeting shall be necessary to the newly
elected directors in order to constitute the meeting legally, provided a quorum
shall be present.
Section 6. Regular meetings. Additional regular meetings of the Board of
--------- ----------------
Directors may be held without notice of such time and place as may be determined
from time to time by the Board of Directors.
Section 7. Special Meetings. Special meetings of the Board of Directors
--------- ----------------
may be called by the Chairman of the Board, the President, or by two or more
directors an at least two days' notice to each director, if such notice is
delivered personally or sent by telegram, or on at least three days' notice if
sent by mail. Special meetings shall be called by the Chairman of the Board,
President, Secretary, or two or more directors in like manner and on like notice
on the written request of one-half or more of the number of directors then in
office. Any such notice need not state the purpose or purposes of such meeting,
except as provided in Article XI.
Section 8. Quorum and Adjournments. At all meetings of the Board of
--------- -----------------------
Directors, a majority of the directors then in office shall constitute a quorum
for the transaction of business, and the act of a majority of the directors
present at any meeting at which there is a quorum shall be the act of the Board
of Directors, except as may be otherwise specifically provided by law or the
Certificate of Incorporation. If a quorum is not present at any meeting of the
Board of Directors, the directors present may adjourn the meeting from time to
time, without notice other than announcement at the meeting at which the
adjournment is taken, until a quorum shall be present.
Section 9. Compensation. Directors shall be entitled to such compensation
--------- ------------
for their services as directors and to such reimbursement for any reasonable
expenses incurred in attending directors' meetings as may from time to time be
fixed by the Board of Directors. The compensation of directors may be on such
basis as is determined by the Board of Directors. Any director may waive
compensation for any meeting. Any director receiving compensation under these
provisions shall not be barred from serving the Corporation in any other
capacity and receiving compensation and reimbursement for reasonable expenses
for such other services.
Section 10. Action by Consent. Any action required or permitted to be
---------- -----------------
taken at any meeting of the Board of Directors may be taken without a meeting,
and without prior notice, if a written consent to
4
<PAGE>
such action is signed by all members of the Board of Directors and such written
consent is filed with the minutes of its proceedings.
Section 11. Meetings by Telephone or Similar Communications Equipment.
---------- ----------------------------------------------- ---------
The Board of Directors may participate in a meeting by conference telephone or
similar communications equipment by means of which all directors participating
in the meeting can hear each other, and participation in such a meeting shall
constitute presence in person by any such director at such meeting.
Article IV. Committees.
- ---------- ----------
Section 1. Executive Committee. The Board of Directors, by resolution
--------- -------------------
adopted by a majority of the whole Board, may appoint an Executive Committee
consisting of one or more directors, one of whom shall be designated as Chairman
of the Executive Committee. Each member of the Executive Committee shall
continue as a member thereof until the expiration of his term as a director or
his earlier resignation, unless sooner removed as a member or as a director.
Section 2. Powers. The Executive Committee shall have and may exercise
--------- ------
those rights, powers, and authority of the Board of Directors as may from time
to time be granted to it by the Board of Directors to the extent permitted by
law, and may authorize the seal of the Corporation to be affixed to all papers
that may require it.
Section 3. Procedure and Meetings. The Executive Committee shall fix its
--------- ----------------------
own rules of procedure and shall meet at such times and at such place or places
as may be provided by such rules or as the members of the Executive Committee
shall fix. The Executive Committee shall keep regular minutes of its meetings,
which it shall deliver to the Board of Directors from time to time. The
Chairman of the Executive Committee or, in his absence, a member of the
Executive Committee chosen by a majority of the members present, shall preside
at meetings of the Executive Committee; and another member chosen by the
Executive Committee shall act as Secretary of the Executive Committee.
Section 4.. Quorum. A majority of the Executive Committee shall
---------- ------
constitute a quorum for the transaction of business, and the affirmative vote of
a majority of the members present at any meeting at which there is a quorum
shall he required for any action of the Executive Committee: provided, however,
that when an Executive Committee of one member is authorized under the
provisions of Section 1 of this Article, that one member shall constitute a
quorum.
Section 5. Other Committees. The Board of Directors, by resolutions
--------- ----------------
adopted by a majority of the whole Board, may appoint such other committee or
committees as it shall deem advisable and with such rights, power, and authority
as it shall prescribe. Each such committee shall consist of one or more
directors.
Section 6. Committee Changes. The Board of Directors shall have the power
--------- -----------------
at any time to fill vacancies in, to change the membership of, and to discharge
any committee.
Section 7. Compensation. Members of any committee shall be entitled to
--------- ------------
such compensation for their services as members of the committee and to such
reimbursement for any reasonable expenses incurred in attending committee
meetings as may from time to time be fixed by the Board of Directors. Any
member may waive compensation for any meeting. Any committee member receiving
compensation
5
<PAGE>
under these provisions shall not be barred from serving the Corporation in any
other capacity and from receiving compensation and reimbursement of reasonable
expenses for such other services.
Section 8. Action by Consent. Any action required or permitted to be
--------- -----------------
taken at any meeting of any committee of the Board of Directors may be taken
without a meeting if a written consent to such action is signed by all members
of the committee and such written consent is filed with the minutes of its
proceedings.
Section 9. Meetings by Telephone or Similar Communications Equipment. The
--------- ---------------------------------------------------------
members of any committee designated by the Board of Directors may participate In
a meeting of such committee by conference telephone or similar communications
equipment by means of which all persons participating in such meeting can hear
each other, and participation in such a meeting shall constitute presence in
person by any such committee member at such meeting.
Article V. Notices.
- --------- -------
Section 1. Form and Delivery. Whenever a provision of any law, the
--------- -----------------
certificate of Incorporation, or these Bylaws requires that notice be given to
any director or stockholder, it shall not be construed to require personal
notice unless so specifically provided, but such notice may be given in writing,
by mail addressed to the address of the director or stockholder as it appears on
the records of the Corporation, with postage prepaid. These notices shall he
deemed to be given when they are deposited in the United States mail. Notice to
a director may also be given personally or by telephone or by telegram sent to
his address as it appears on the records of the Corporation.
Section 2. Waiver. Whenever any notice is required to be given under the
--------- ------
provisions of any law, the Certificate of Incorporation, or these Bylaws, a
written waiver thereof signed by the person entitled to said notice, whether
before or after the time stated therein, shall be deemed to be equivalent to
such notice. In addition, any stockholder who attends a meeting of stockholders
in person or is represented at such meeting by proxy, without protesting at the
commencement of the meeting the lack of notice thereof to him, or any director
who attends a meeting of the Board of Directors without protesting at the
commencement of the meeting of the lack of notice, shall be conclusively deemed
to have waived notice of such meeting.
Article VI. Officers.
- ---------- --------
Section 1. Designations. The officers of the corporation shall be chosen
--------- ------------
by the Board of Directors. The Board of Directors may choose a Chairman of the
Board, a President, a Vice President or Vice Presidents, a Secretary, a
Treasurer, one or more Assistant Secretaries and/or Assistant Treasurers, and
other officers and agents that it shall deem necessary or appropriate. All
officers of the Corporation shall exercise the powers and perform the duties
that shall from time to time be determined by the Board of Directors. Any
number of offices may be held by the same person, unless the Certificate of
Incorporation or these Bylaws provide otherwise.
Section 2. Term of, and Removal From, Office. At its first regular
--------- ---------------------------------
meeting after each annual meeting of stockholders, the Board of Directors shall
choose a President, a Secretary, and a Treasurer. It may also choose a Chairman
of the Board, a Vice President or Vice Presidents, one or more Assistant
Secretaries and/or Assistant Treasurers, and such other officers and agents as
it shall deem necessary or
6
<PAGE>
appropriate. Each officer of the Corporation shall hold office until his
successor is chosen and shall qualify. Any officer elected or appointed by the
Board of Directors may be removed, with or without cause, at any time by the
affirmative vote of a majority of the directors then in office. Removal from
office, however, shall not prejudice the contract rights, if any, of the person
removed. Any vacancy occurring in any office of the Corporation may be filled
for the unexpired portion of the term by the Board of Directors.
Section 3. Compensation. The salaries of all officers of the Corporation
--------- ------------
shall be fixed from time to time by the Board of Directors, and no officer shall
be prevented from receiving a salary because he is also a director of the
Corporation.
Section 4. The Chairman of the Board. The Chairman of the Board, if any,
--------- -------------------------
shall be an officer of the Corporation and, subject to the direction of the
Board of Directors, shall perform such executive, supervisory, and management
functions and duties as may be assigned to him from time to time by the Board of
Directors. He shall, if present, preside at all meetings of stockholders and of
the Board of Directors.
Section 5. The President.
--------- -------------
(a) The President shall be the chief executive officer of the Corporation
and, subject to the direction of the Board of Directors, shall have general
charge of the business, affairs, and property of the Corporation and general
supervision over its other officers and agents. In general, he shall perform
all duties incident to the office of President and shall see that all orders and
resolutions of the Board of Directors are carried into effect.
(b) Unless otherwise prescribed by the Board of Directors, the President
shall have full power and authority to attend, act, and vote on behalf of the
Corporation at any meeting of the security holders of other corporations in
which the Corporation may hold securities. At any such meeting, the President
shall possess and may exercise any and all rights and powers incident to the
ownership of such securities that the Corporation might have possessed and
exercised if it had been present. The Board of Directors may from time to time
confer like powers upon any other person or persons.
Section 6. The Vice President. The Vice President, if any, or in the
--------- ------------------
event there be more than one, the Vice Presidents in the order designated, or in
the absence of any designation, in the order of their election, shall, in the
absence of the President or in the event of his disability, perform the duties
and exercise the powers of the President and shall generally assist the
President and perform such other duties and have such other powers as may from
time to time be prescribed by the Board of Directors.
Section 7. The Secretary. The Secretary shall attend all meetings of the
--------- -------------
Board of Directors and the stockholders and record all votes and the proceedings
of the meetings in a book to be kept for that purpose. He shall perform like
duties for the Executive Committee or other committees, if required. He shall
give, or cause to be given, notice of all meetings of stockholders and special
meetings of the Board of Directors, and shall perform such other duties as may
from time to time be prescribed by the Board of Directors, the Chairman of the
Board, or the President, under whose supervision he shall act. He shall have
custody of the seal of the Corporation, and he, or an Assistant Secretary, shall
have authority to affix it to any instrument requiring it, and, when so affixed,
the seal may be attested by his signature or by the signature of the Assistant
Secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the Corporation and to attest the affixing thereof
by his signature.
7
<PAGE>
Section 8. The Assistant Secretary. The Assistant Secretary, if any, or
--------- -----------------------
in the event there be more than one, the Assistant Secretaries in the order
designated, or in the absence of any designation, in the order of their
election, shall, in the absence of the Secretary or in the event of his
disability, perform the duties and exercise the powers of the Secretary and
shall perform such other duties and have such other powers as may from time to
time he prescribed by the Board of Directors.
Section 9. The Treasurer. The Treasurer shall have custody of the
--------- -------------
corporate funds and other valuable effects, including securities, and shall keep
full and accurate accounts of receipts and disbursements in books belonging to
the Corporation and shall deposit all moneys and other valuable effects in the
name and to the credit of the Corporation in such depositories as may from time
to time be designated by the Board of Directors. He shall disburse the funds of
the Corporation in accord with the orders of the Board of Directors, taking
proper vouchers for such disbursements, and shall render to the Chairman of the
Board, if any, the President, and the Board of Directors, whenever they may
require it or at regular meetings of the Board, an account of all his
transactions as Treasurer and of the financial condition of the Corporation.
Section 10. The Assistant Treasurer. The Assistant Treasurer, if any, or
---------- -----------------------
in the event there shall be more than one, the Assistant Treasurers in the order
designated, or in the absence of any designation, in the order of their
election, shall, in the absence of the Treasurer or in the event of his
disability, perform such other duties and have such other powers as may from
time to time be prescribed by the Board of Directors.
Article VII. Indemnification.
- ----------- ---------------
Section 7.1. Right to Indemnification. Each person who was or is made a
----------- ------------------------
party or threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "Proceeding"), by reason of being or having been a director or
officer of the Corporation or serving or having served at the request of the
Corporation as a director, trustee, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan (an "Indemnitee"),
whether the basis of such proceeding is alleged action or failure to act in an
official capacity as a director, trustee, officer, employee or agent (or in any
other capacity while serving as a director, trustee, officer, employee or
agent), shall be indemnified and held harmless by the Corporation to the fullest
extent authorized by the Delaware General Corporation Law, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than permitted prior thereto) (as used in this Article
VII, the "Delaware Law"), against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid in settlement) reasonably incurred or suffered by such Indemnitee in
connection therewith and such indemnification shall continue as to an Indemnitee
who has ceased to be a director, trustee, officer, employee or agent and shall
inure to the benefit of the Indemnitee's heirs, executors and administrators:
provided, however, that, except as provided in section 7.2 hereof with respect
- -------- -------
to Proceedings to enforce rights to indemnification, the Corporation shall
indemnify any such Indemnitee in connection with a Proceeding (or part thereof)
was authorized by the board of directors of the Corporation. The right to
indemnification conferred in this Article VII shall be a contract right and
shall include the right to be paid by the Corporation the expenses (including
attorneys' fees) incurred in defending any such Proceeding in advance of its
final disposition (an "Advancement of Expenses"); provided, however, that, if
-------- -------
the Delaware Law so requires, an Advancement of Expenses incurred by an
Indemnitee shall be made only upon delivery to the Corporation of an undertaking
(an "Undertaking"),
8
<PAGE>
by or on behalf of such Indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal (a "Final Adjudication") that such Indemnitee is not
entitled to be indemnified for such expenses under this Article VII or
otherwise.
Section 7.2. Right of Indemnitee to Bring Suit. If a claim under Section
----------- ---------------------------------
7.1 hereof is not paid in full by the Corporation within sixty days after a
written claim has been received by the Corporation, except in the case of a
claim for an Advancement of Expenses, in which case the applicable period shall
be twenty days, the Indemnitee may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim. If successful in whole or
in part in any such suit, or in a suit brought by the Corporation to recover an
Advancement of Expenses pursuant to the terms of an Undertaking, the Indemnitee
shall be entitled to be paid also the expense of prosecuting or defending such
suit. In (i) any suit brought by the Indemnitee to enforce a right to
indemnification hereunder (but not in a suit brought by the Indemnitee to
enforce a right to an Advancement of Expenses) it shall be a defense that, and
(ii) in any suit by the Corporation to recover an Advancement of Expenses
pursuant to the terms of an Undertaking the Corporation shall be entitled to
recover such expenses upon a Final Adjudication that, the Indemnitee has not met
the applicable standard of conduct set forth in the Delaware Law. Neither the
failure of the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the Indemnitee is proper in
the circumstances because the Indemnitee has met the applicable standard of
conduct set forth in the Delaware Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) that the Indemnitee has not met such applicable standard of
conduct, shall create a presumption that the Indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
Indemnitee, be a defense to such suit. In any suit brought by the Indemnitee to
enforce a right to indemnification or to an Advancement of Expenses hereunder,
or by the Corporation to recover an Advancement of Expense pursuant to the terms
of an Undertaking, the burden of proving that the Indemnitee is not entitled to
be indemnified, or to such Advancement of Expenses, under this Article VII or
otherwise shall be on the Corporation.
Section 7.3. Non-Exclusivity of Rights. The rights to indemnification and
----------- -------------------------
to the Advancement of Expenses conferred in this Article VII shall not be
exclusive of any other right which any person may have or thereafter acquire
under any statute, the Corporation's Certificate or Incorporation, bylaw,
agreement, vote of stockholders or disinterested directors or otherwise.
Section 7.4. 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 this Article VII or under the Delaware Law.
Section 7.5. Indemnification of Employees and Agents of the Corporation.
----------- ----------------------------------------------------------
The Corporation may, to the extent authorized from time to time by the board of
directors, grant rights to indemnification, and to the Advancement of Expenses,
to any employee or agent of the Corporation to the fullest extent of the
provisions of this Article VII with respect to the indemnification and
Advancement of Expenses of directors and officers of the Corporation.
9
<PAGE>
Article VIII. Affiliated Transactions and Interested Directors.
- ------------ ------------------------------------------------
Section 1. Affiliated Transactions. No contract or transaction between
--------- -----------------------
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers or have a financial interest, shall be void or voidable solely for this
reason, or solely because the director or officer is present at or participates
in the meeting of the Board of Directors or committee thereof that authorizes
the contract or transaction or solely because his or their votes are counted for
such purpose if:
(a) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the Board of Directors or
the committee, and the Board of Directors or committee in good faith authorizes
the contract or transaction by the affirmative vote of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or
(b) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by the vote of the stockholders; or
(c) The contract or transaction is fair as to the Corporation as of the
time it is authorized, approved, or ratified by the Board of Directors, a
committee thereof, or the stockholders.
Section 2. Determining Quorum. Common or interested directors may be
--------- ------------------
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee thereof which authorizes the contract or
transaction.
Article IX. Stock Certificates.
- ---------- ------------------
Section 1. Form and Signatures.
--------- -------------------
(a) Every holder of stock of the Corporation shall be entitled to a
certificate stating the number and class, and series, if any, of shares owned by
him, signed by the Chairman of the Board, if any, or the President and the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary
of the Corporation, and bearing the seal of the Corporation. The signatures and
the seal may be facsimiles. A certificate may be signed, manually or by
facsimile, by a transfer agent or registrar other than the Corporation or its
employee. In case any officer who has signed, or whose facsimile signature was
placed on, a certificate shall have ceased to be such officer before the
certificate is issued, it may nevertheless be issued by the Corporation with the
same effect as if he were such officer at the date of its issue.
(b) All stock certificates representing shares of capital stock that are
subject to restrictions on transfer or to other restrictions may have imprinted
thereon any notation to that effect determined by the Board of Directors.
Section 2. Registered Stockholders.
--------- -----------------------
(a) Except as otherwise provided by law, the Corporation shall be entitled
to recognize the exclusive right of a person who is registered on its books as
the owner of shares of its capital stock to receive dividends or other
distributions and to vote or consent as such owner, and to hold liable for calls
and assessments any person who is registered on its books as the owner of shares
of its capital stock.
10
<PAGE>
The Corporation shall not be bound to recognize any equitable or legal claim to,
or interest in, such shares on the part of any other person.
(b) If a stockholder desires that notices and/or dividends shall be sent to
a name or address other than the name or address appearing on the stock ledger
maintained by the Corporation, or its transfer agent or registrar, if any, the
stockholder shall have the duty to notify the Corporation, or its transfer agent
or registrar, if any, in writing of his desire and specify the alternate name or
address to be used.
Section 3. Record Date. In order that the Corporation may determine the
--------- -----------
stockholders of record who are entitled to receive notice of, or to vote at, any
meeting of stockholders or any adjournment thereof or to express consent to
corporate action in writing without a meeting, to receive payment of any
dividend or other distribution or allotment of any rights, or to exercise any
rights in respect of any change, conversion, or exchange of stock or for the
purpose of any lawful action, the Board of Directors may, in advance, fix a date
as the record date for any such determination. Such date shall not be more than
sixty nor less than ten days before the date of such meeting, nor more than
sixty days prior to the date of any other action. A determination of
stockholders of record entitled to notice of, or to vote at, a meeting of
stockholders shall apply to any adjournment of the meeting taken pursuant to
Section 8 of Article II; provided, however, that the Board of Directors nay fix
a new record date for the adjourned meeting.
Section 4. Lost, Stolen, or Destroyed Certificates. The Board of
--------- ---------------------------------------
Directors may direct that a new certificate be issued to replace any certificate
theretofore issued by the Corporation that, it is claimed, has teen lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate to be lost, stolen, or destroyed. When authorizing the
issue 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 the lost,
stolen, or destroyed certificate, or his legal representative, to advertise the
same in such manner as it shall require, and/or to give the corporation a bond
in such sum, or other security in such form, as it may direct as indemnity
against any claims that may be made against the Corporation with respect to the
certificate claimed to have been lost, stolen, or destroyed.
Article X. General Provisions.
- --------- ------------------
Section 1. Dividends. Subject to the provisions of law and the
--------- ---------
Certificate of Incorporation, dividends upon the outstanding capital stock of
the Corporation may be declared by the Board of Directors at any, regular or
special meeting, and may be paid in cash, in property, or in shares of the
Corporation's capital stock.
Section 2. Reserves. The Board of Directors shall have full power,
--------- --------
subject to the provisions of law and the Certificate of Incorporation, to
determine whether any, and, if so, what part, of the funds legally available for
the payment of dividends shall be declared as dividends and paid to the
stockholders of the Corporation. The Board of Directors, in its sole
discretion, may fix a sum that may be set aside or reserved over and above the
paid-in capital of the Corporation as a reserve for any proper purpose, and may,
from time to time, increase, diminish, or vary such amount.
Section 3. Fiscal Year. Except as from time to time otherwise provided by
--------- -----------
the Board of Directors, the fiscal year of the Corporation shall end on December
31 in each year.
11
<PAGE>
Section 4. Seal. The corporate seal shall have inscribed thereon the name
--------- ----
of the Corporation, the year of its incorporation, and the words "Corporate
Seal" and "Delaware".
Article XI. Amendments.
- ---------- ----------
The Board of Directors shall have the power to alter and repeal these
Bylaws and to adopt new Bylaws by an affirmative vote of a majority of the whole
Board, provided that notice of the proposal to alter or repeal these Bylaws or
to adopt new Bylaws must be included in the notice of the meeting of the Board
of Directors at which such action takes place.
12
<PAGE>
FAX INTERNATIONAL, INC.
CONSENT OF SOLE DIRECTOR
April 22, 1993
Pursuant to the provisions of Delaware Corporation Law, Title 8, Section
141 (f) , the undersigned, being the sole director of FAX INTERNATIONAL, INC.
(the "Corporation"), hereby approves and consents to the actions represented by
the following resolutions:
RESOLVED: That Section 4 of Article II of the Bylaws of the Corporation be,
and hereby is, amended by adding the phrase "on a fully converted basis"
after the phrase "issued and outstanding".
FURTHER RESOLVED: That Article VII of the Bylaws of the Corporation be,
and hereby is, deleted in its entirety, and the following be, and hereby
is, in its place:
"Section 7.1. Right to Indemnification. Each person who was or is
----------- ------------------------
made a party or threatened to be made a party to or is otherwise involved
in any action, suit or proceeding, whether civil, criminal, administrative
or investigative (a "Proceeding"), by reason of being or having been a
director or officer of the Corporation or serving or having served at the
request of the Corporation as a director, trustees officer, employee or
agent of another corporation or of a partnership, joint venture, trust. or
other enterprise, including service with respect to an employee benefit
plan (an "Indemnitee") whether the basis of such proceeding is alleged
action or failure to act in an official capacity as a directors trustee,
officer, employee or agent (or in any other capacity while serving as a
director, trustee, officer, employee or agent) , shall be indemnified and
held harmless by the Corporation to the fullest extent authorized by the
Delaware General Corporation Law, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that
such amendment permits the Corporation to provide broader indemnification
rights than permitted prior thereto) (as used in this Article VII, the
"Delaware Law"), against all expense, liability and loss (including
attorneys, fees, judgments, fines, ERISA excise taxes or penalties and
amounts paid in settlement) reasonably incurred or suffered by such
Indemnitee in connection herewith and such indemnification shall continue
as to an Indemnitee who has ceased to be a director, trustee, officer,
employee or agent and shall inure to the benefit of the Indemnitee's heirs,
executors and administrators: provided, however, that, except as provided
-------- -------
in Section 7.2 hereof with respect to Proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such Indemnitee in
connection with a Proceeding (or part thereof) was authorized by the board
of directors of the Corporation. The right to indemnification conferred
in this Article VII shall be a contract right and shall include the right
to be paid by the Corporation the expenses (including attorneys' fees)
incurred in defending any such Proceeding in advance of its final
disposition (an "Advancement of Expenses"); provided, however, that, if the
-------- -------
Delaware Law so requires, an Advancement of Expenses incurred by an
Indemnitee shall be made only upon delivery to the Corporation of an
undertaking (an "Undertaking"), by or on behalf of such Indemnitee, to
repay all amounts so advanced if it shall ultimately be determined by final
Judicial decision from which there is no
1
<PAGE>
further right to appeal (a "Final Adjudication") that such Indemnitee is
not entitled to be indemnified for such expenses under this Article VII or
otherwise.
Section 7.2 Right of Indemnitee to Bring Suit. If a claim under Section
----------- ---------------------------------
7.1 hereof is not paid in full by the Corporation within sixty days after a
written claim has been received by the Corporation, except in the case of a
claim for an Advancement of Expenses, in which case the applicable period shall
be twenty days, the Indemnitee may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim. If successful in whole
or in part in any such suit, or in a suit brought by the Corporation to recover
an Advancement of Expenses pursuant to the terms of an Undertaking, the
Indemnitee shall be entitled to be paid also the expense of prosecuting or
defending such suit. In (i) any suit brought by the indemnitee to enforce a
right to indemnification hereunder (but not in a suit brought by the Indemnitee
to enforce a right to an Advancement of Expenses) it shall be a defense that,
and (ii) in any suit by the Corporation to recover an Advancement of Expenses
pursuant to the terms of an Undertaking the Corporation shall be entitled to
recover such expenses upon a Final Adjudication that, the Indemnitee has not met
the applicable standard of conduct set forth in the Delaware Law. Neither the
failure of the Corporation (including it's Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnifIcation of the Indemnitee is proper in
the circumstances because the Indemnitee has met the applicable standard of
conduct set forth in the Delaware Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) that the Indemnitee has not met such applicable standard of
conduct, shall create a presumption that the Indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
Indemnitee, be a defense to such suit. In any suit brought by the Indemnitee to
enforce a right to Indemnification or to an Advancement of Expenses hereunder,
or by the Corporation to recover an Advancement of Expense pursuant to the terms
of an Undermaking, the burden of proving that the Indemnitee is not entitled to
be indemnified, or to such Advancement of Expenses, under this Article VII or
otherwise shall be on the Corporation.
Section 7.3. Non-Exclusivity of Rights. The rights to indemnification and
----------- -------------------------
to the Advancement of Expenses conferred in this Article VII shall not be
exclusive of any other right which any person may have or thereafter acquire
under any statute, the Corporation's Certificate or Incorporation, by-law,
agreement, vote of stockholders or disinterested directors or otherwise.
Section 7.4. 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 this Article VII or under the Delaware Law.
Section 7.5 Indemnification of Employees and Agents of the Corporation.
----------- ----------------------------------------------------------
The Corporation may, to the extent authorized from time to time by the board of
directors, grant rights to indemnification, and to the Advancement of Expenses,
to any employee or agent of the Corporation to the fullest extent of the
provisions of this Article VII with respect to the indemnification and
Advancement of Expenses of directors and officers of the Corporation."
FURTHER RESOLVED: That Section 2 of Article IX of the Bylaws of the
Corporation be, and hereby is, deleted in its entirety and the successive
section numbers be, and hereby are, adjusted accordingly.
2
<PAGE>
FURTHER RESOLVED: That the officers of the Corporation, or any of them,
be, and hereby are, authorized, empowered and directed to take any and all
actions and to execute and deliver any and all documents and instruments in
the name and on behalf of the Corporation, and under its corporate seal or
otherwise, and to do any and all things they deem necessary or advisable to
carry out the intent of the foregoing resolutions.
ACKNOWLEDGEMENT AND CONSENT :
)
)
/s/ Douglas J. Ranalli ) BEING THE SOLE DIRECTOR OF
-------------------------------
Douglas J. Ranalli ) FAX INTERNATIONAL, INC.
3
<PAGE>
EXHIBIT 4.1
================================================================================
--------------------
UNIFI COMMUNICATIONS, INC., as Issuer
and
FLEET NATIONAL BANK, as Trustee
---------------------
INDENTURE
Dated as of February 21, 1997
--------------------
$175,000,000
Aggregate Principal Amount
14% Senior Notes due 2004
Series B 14% Senior Notes due 2004
================================================================================
<PAGE>
Reconciliation and tie between Trust Indenture Act of 1939
and Indenture, dated as of February 21, 1997
Trust Indenture Indenture
Act Section Section
- ----------------- --------
(S) 310(a)(1)..................................... 7.11
(a)(2)..................................... 7.11
(a)(3)..................................... N.A.
(a)(4)..................................... N.A.
(a)(5)..................................... 7.11
(b)........................................ 7.09; 7.11; 11.02
(c)........................................ N.A.
(S) 311(a)........................................ 7.12
(b)........................................ 7.12
(c)........................................ N.A.
(S) 312(a)........................................ 2.05
(b)........................................ 11.03
(c)........................................ 11.03
(S) 313(a)........................................ 7.07
(b)(1)...................................... 10.03
(b)(2)...................................... 7.07
(c)......................................... 7.07; 11.02
(d)......................................... 7.07
(S) 314(a)........................................ 4.07; 11.02
(b)......................................... 10.02
(c)(1)...................................... 11.04
(c)(2)...................................... 11.04
(c)(3)...................................... N.A.
(d)......................................... 10.03; 10.04;10.05
(e)......................................... 11.05
(f)......................................... N.A.
(S) 315(a)........................................ 7.01
(b)........................................ 7.05; 11.02
(c)........................................ 7.01
(d)........................................ 7.01
(e)........................................ 6.11
(S) 316(a) (last
sentence)...................................... 2.09
(a)(1)(A).................................. 6.05
(a)(1)(B).................................. 6.04
(a)(2)..................................... N.A.
(b)........................................ 6.07
(c)........................................ 9.04
(S) 317(a)(1)..................................... 6.08
(a)(2)..................................... 6.09
(b)........................................ 2.04
(S) 318(a)........................................ 11.01
(b)........................................ N.A.
(c)........................................ 11.01
________________________
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
<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..... 21
Section 1.03. Rules of Construction................................. 21
ARTICLE TWO
THE SECURITIES
Section 2.01. Forms and Dating...................................... 22
Section 2.02. Execution and Authentication.......................... 23
Section 2.03. Registrar and Paying Agent............................ 23
Section 2.04. Paying Agent To Hold Money in Trust................... 24
Section 2.05. Securityholder Lists.................................. 24
Section 2.06. Transfer and Exchange................................. 24
Section 2.07. Replacement Securities................................ 25
Section 2.08. Outstanding Securities................................ 25
Section 2.09. Treasury Securities................................... 26
Section 2.10. Temporary Securities.................................. 26
Section 2.11. Cancellation.......................................... 26
Section 2.12. Defaulted Interest.................................... 26
Section 2.13. CUSIP Number.......................................... 26
Section 2.14. Deposit of Moneys..................................... 27
Section 2.15. Restrictive Legends................................... 27
Section 2.16. Book-Entry Provisions for Global Security............. 28
Section 2.17. Special Transfer Provisions........................... 29
Section 2.18. Liquidated Damages Under Registration Rights Agreement 32
ARTICLE THREE
REDEMPTION OF SECURITIES
Section 3.01. Notices to the Trustee................................. 32
Section 3.02. Selection of Securities To Be Redeemed................. 33
Section 3.03. Notice of Redemption................................... 33
Section 3.04. Effect of Notice of Redemption......................... 34
- ------------------
Note: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.
-i-
<PAGE>
Page
----
Section 3.05. Deposit of Redemption Price............................ 34
Section 3.06. Securities Redeemed or Purchased in Part............... 34
ARTICLE FOUR
COVENANTS
Section 4.01. Payment of Securities.................................. 35
Section 4.02. Maintenance of Office or Agency........................ 35
Section 4.03. Corporate Existence.................................... 35
Section 4.04. Payment of Taxes and Other Claims...................... 36
Section 4.05. Maintenance of Properties; Insurance; Books and Records;
Compliance with Law.................................... 36
Section 4.06. Compliance Certificate................................. 37
Section 4.07. SEC Reports and Other Information...................... 37
Section 4.08. Limitation on Incurrence of Additional Indebtedness.... 38
Section 4.09. Limitation on Restricted Payments...................... 38
Section 4.10. Limitation on Preferred Stock of Restricted Subsidiaries 41
Section 4.11. Limitation on Liens.................................... 42
Section 4.12. Change of Control...................................... 42
Section 4.13. Disposition of Proceeds of Asset Sales................. 44
Section 4.14. Limitation on Transactions with Affiliates............. 46
Section 4.15. Limitation on Restricted and Unrestricted Subsidiarie.. 47
Section 4.16. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries...................... 48
Section 4.17. Escrow Account......................................... 49
Section 4.18. Limitation on Sale and Leaseback Transactions.......... 49
Section 4.19. Limitation on Line of Business......................... 49
Section 4.20. Waiver of Stay, Extension or Usury Laws................ 50
Section 4.21. Further Assurances to the Trustee...................... 50
ARTICLE FIVE
SUCCESSOR CORPORATION
Section 5.01. When Company May Merge, etc. ........................... 50
Section 5.02. Successor Substituted................................... 51
________________________
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
-ii-
<PAGE>
ARTICLE SIX
REMEDIES
Page
----
Section 6.01. Events of Default....................................... 52
Section 6.02. Acceleration............................................ 53
Section 6.03. Other Remedies.......................................... 54
Section 6.04. Waiver of Past Defaults................................. 54
Section 6.05. Control by Majority..................................... 54
Section 6.06. Limitation on Suits..................................... 55
Section 6.07. Right of Holders To Receive Payment..................... 55
Section 6.08. Collection Suit by Trustee.............................. 55
Section 6.09. Trustee May File Proofs of Claim........................ 55
Section 6.10. Priorities.............................................. 56
Section 6.11. Undertaking for Costs................................... 56
Section 6.12. Restoration of Rights and Remedies...................... 56
ARTICLE SEVEN
TRUSTEE
Section 7.01. Duties.................................................. 57
Section 7.02. Rights of Trustee....................................... 57
Section 7.03. Individual Rights of Trustee............................ 58
Section 7.04. Trustee's Disclaimer................................... 58
Section 7.05. Notice of Default...................................... 59
Section 7.06. Money Held in Trust.................................... 59
Section 7.07. Reports by Trustee to Holders.......................... 59
Section 7.08. Compensation and Indemnity............................. 59
Section 7.09. Replacement of Trustee................................. 60
Section 7.10. Successor Trustee by Merger, etc....................... 61
Section 7.11. Eligibility; Disqualification.......................... 61
Section 7.12. Preferential Collection of Claims Against Company...... 61
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE
Section 8.01. Termination of the Company's Obligations............... 62
Section 8.02. Legal Defeasance and Covenant Defeasance............... 63
Section 8.03. Application of Trust Money............................. 65
Section 8.04. Repayment to Company................................... 66
Section 8.05. Reinstatement.......................................... 66
________________________
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
-iii-
<PAGE>
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.01. Without Consent of Holders............................. 66
Section 9.02. With Consent of Holders................................ 67
Section 9.03. Compliance with Trust Indenture Act.................... 68
Section 9.04. Revocation and Effect of Consents...................... 68
Section 9.05. Notation on or Exchange of Securities.................. 69
Section 9.06. Trustee May Sign Amendments, etc....................... 69
ARTICLE TEN
COLLATERAL AND SECURITY; CONTINGENT WARRANTS
Section 10.01. Escrow Agreement..................................... 69
Section 10.02. Recording and Opinions............................... 70
Section 10.03. Release of Collateral................................ 71
Section 10.04. Certificates of the Company.......................... 71
Section 10.05. Authorization of Actions To Be Taken by the Trustee
Under the Escrow Agreement........................... 71
Section 10.06. Authorization of Receipt of Funds by the Trustee
Under the Escrow Agreement........................... 72
Section 10.07. Termination of Security Interest..................... 72
Section 10.08. Issuance of Contingent Warrants...................... 72
ARTICLE ELEVEN
MISCELLANEOUS
Section 11.01. Trust Indenture Act of 1939............................ 73
Section 11.02. Notices................................................ 73
Section 11.03. Communication by Holders with Other Holders............ 74
Section 11.04. Certificate and Opinion as to Conditions Precedent..... 74
Section 11.05. Statements Required in Certificate or Opinion.......... 74
Section 11.06. Rules by Trustee, Paying Agent, Registrar.............. 75
Section 11.07. Governing Law.......................................... 75
Section 11.08. No Interpretation of Other Agreements.................. 75
Section 11.09. No Recourse Against Others............................. 75
Section 11.10. Successors............................................. 75
Section 11.11. Counterparts........................................... 75
Section 11.12. Separability........................................... 75
________________________
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
-iv-
<PAGE>
Page
----
Section 11.13. Table of Contents, Headings, etc....................... 75
Section 11.14. Benefits of Indenture.................................. 76
Section 11.15. Business Days.......................................... 76
SIGNATURES
EXHIBIT A Form of Initial Security
EXHIBIT B Form of Exchange Security
EXHIBIT C Form of Legend for Book-Entry Security
EXHIBIT D Form of Certificate To Be Delivered in Connection with
Transfers to Non-QIB Accredited Investors
EXHIBIT E Form of Certificate To Be Delivered in Connection with
Transfers Pursuant to Regulation S
EXHIBIT F Form of Escrow Agreement
EXHIBIT G Form of Subordination
________________________
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
-v-
<PAGE>
INDENTURE, dated as of February 21, 1997, between UNIFI
COMMUNICATIONS, INC., a corporation incorporated under the laws of the State of
Delaware (the "Company"), and FLEET NATIONAL BANK, a national banking
association, 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 14%
Senior Notes due 2004 (the "Initial Securities") and the Company's Series B 14%
Senior Notes due 2004 (the "Exchange Securities" and together with the Initial
Securities, the "Securities").
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
1.01. Definitions.
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"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary or
at the time it merges or consolidates with the Company or any Restricted
Subsidiary or assumed in connection with the acquisition of assets from such
Person, including any such Indebtedness incurred by such Person in connection
with, or in anticipation or contemplation of, such Person's becoming a
Restricted Subsidiary or such acquisition, merger or consolidation.
"Additional Interest" has the meaning set forth in Section 2.18.
"Affiliate" means a Person who, directly or indirectly, through one or
more intermediaries, controls, or is controlled by, or is under common control
with, the Company or any Restricted Subsidiary. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise. Notwithstanding the
foregoing, the term "Affiliate" shall not, with respect to the Company, include
any Restricted Subsidiary of the Company.
"Agent" means any Registrar or Paying Agent of the Securities.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary in any other Person pursuant to which such Person shall
become a Subsidiary of the Company, or shall be merged with or into the Company
or any Restricted Subsidiary, (b) the acquisition by the Company or any
Restricted Subsidiary of the assets of any Person which constitute all or
substantially all of the assets of such Person (c) the acquisition by the
Company or any Restricted Subsidiary of any division or line of business of any
Person or (d) any other asset acquisition by the Company or a Restricted
Subsidiary which permits or requires pro forma financial information prepared in
--- -----
accordance with Rule 11-01 under Regulation S-X promulgated under the Securities
Act.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease, assignment or other transfer or disposition for value (for
purposes of this definition, each, a "disposition") by the Company or any
Restricted Subsidiary (including, without limitation, pursuant to any Sale and
Leaseback Transaction or any merger or consolidation of any Subsidiary of the
Company with or into another Person (other than the Company or any Restricted
Subsidiary of the Company) whereby such Subsidiary shall cease to be a
Restricted Subsidiary) to any Person of (i) any Capital Stock of any Restricted
Subsidiary (other than in respect of directors' qualifying shares or investments
by foreign nationals mandated by applicable law); (ii) all
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or substantially all of the properties and assets of any division or line of
business of the Company or any Restricted Subsidiary; or (iii) any other
properties or assets of the Company or any Restricted Subsidiary, other than in
the ordinary course of business; provided, however, that for purposes of Section
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4.13, Asset Sales shall not include: (a) a transaction or series
of related transactions for which the Company or the applicable Restricted
Subsidiary receives aggregate consideration of less than $1,000,000 in any
fiscal year; (b) transactions complying with Section 5.01; (c) any disposition
to the Company; (d) any disposition to a Restricted Subsidiary of the Company;
(e) any Lien securing Indebtedness to the extent that such Lien is granted in
compliance with Section 4.11; (f) any Restricted Payment (or Permitted
Investment) permitted by Section 4.09; and (g) any disposition of assets or
property in the ordinary course of business and on ordinary business terms to
the extent such property or assets are obsolete, worn out or no longer useful in
the Company's or any Restricted Subsidiary's business.
"Asset Sale Offer" has the meaning set forth in Section 4.13.
"Asset Sale Offer Price" has the meaning set forth in Section 4.13.
"Asset Sale Purchase Date" has the meaning set forth in Section 4.13.
"Attributable Value" means, as to any particular lease under which any
Person is at the time liable other than a Capitalized Lease Obligation, and at
any date as of which the amount thereof is to be determined, the total net
amount of rent required to be paid by such Person under such lease during the
initial term thereof as determined in accordance with GAAP, discounted from the
last date of such initial term to the date of determination at a rate per annum
equal to the discount rate which would be applicable to a Capitalized Lease
Obligation with a like term in accordance with GAAP. The net amount of rent
required to be paid under any such lease for any such period shall be the
aggregate amount of rent payable by the lessee with respect to such period after
excluding amounts required to be paid on account of insurance, taxes,
assessments, utility, operating and labor costs and similar charges. In the
case of any lease which is terminable by the lessee upon the payment of a
penalty, such net amount shall also include the amount of such penalty, but no
rent shall be considered as required to be paid under such lease subsequent to
the first date upon which it may be so terminated. "Attributable Value" means,
as to a Capitalized Lease Obligation under which any Person is at the time
liable and at any date as of which the amount thereof is to be determined, the
capitalized amount thereof that would appear on the face of a balance sheet of
such Person in accordance with GAAP.
"Bankruptcy Law" means Title 11, United States Code or any similar law
for the relief of debtors.
"Board of Directors" means the board of directors of the Company or
any duly authorized committee of such board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in The City of New York,
State of New York or State of Massachusetts are authorized or obligated by law,
regulation or executive order to close.
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"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated) of capital stock, including each class of common stock and
Preferred Stock of such Person and (ii) with respect to any Person that is not a
corporation, any and all partnership or other equity interests of such Person.
"Capitalized Lease Obligation" means any obligation under a lease of
(or other agreement conveying the right to use) any property (whether real,
personal or mixed) that is required to be classified and accounted for as a
capital lease obligation under GAAP, and, for purposes of this Indenture, the
amount of any such obligation at any date shall be the capitalized amount
thereof at such date, determined in accordance with GAAP.
"Cash Equivalents" means, at any time, (i) any evidence of
Indebtedness with a maturity of 180 days or less issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof); (ii) certificates of deposit
or acceptances with a maturity of 180 days or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $500,000,000; (iii) certificates
of deposit with a maturity of 180 days or less of any financial institution that
is organized under the laws of the United States, any state thereof or the
District of Columbia that are rated at least A-1 by S&P or at least P-1 by
Moody's or at least an equivalent rating category of another nationally
recognized securities rating agency; (iv) repurchase agreements and reverse
repurchase agreements relating to marketable direct obligations issued or
unconditionally guaranteed by the government of the United States of America or
issued by any agency thereof and backed by the full faith and credit of the
United States of America, in each case maturing within 180 days from the date of
acquisition; provided that the terms of such agreements comply with the
--------
guidelines set forth in the Federal Financial Agreements of Depository
Institutions With Securities Dealers and Others, as adopted by the Comptroller
of the Currency on October 31, 1985.
"Change of Control" means the occurrence of one or more of the
following events:
(i) any sale, lease, exchange, transfer or other disposition (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company and the Restricted Subsidiaries, taken as a whole, to
any Person or group of related Persons for purposes of Section 13(d) of the
Exchange Act (a "Group") (whether or not otherwise in compliance with the
provisions of this Indenture), other than a Permitted Holder, in any such event
pursuant to a transaction in which, immediately after the consummation thereof
the Person or Persons owning a majority of the voting power of the Voting Stock
of the Company immediately prior to the consummation of such transaction, shall
not own, directly or indirectly, a majority of the voting power of the Voting
Stock of the Person to whom such sale, lease, exchange, transfer or other
disposition has been made; or
(ii) during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors (together with any
new directors who were nominated by a Permitted Holder or whose election to such
Board of Directors or whose nomination for election by the stockholders of the
Company was approved by a vote of a majority of the directors of the Company
then still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the Board of Directors then in
office; or
(iii) any Person or Group (other than a Permitted Holder) is or
becomes, by purchase, tender offer, exchange offer, open market purchases,
privately negotiated purchases or otherwise, the
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"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
whether or not applicable, except that a Person shall be deemed to have
"beneficial ownership" of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or after the passage of
time only), directly or indirectly, of more than 50% of the total then
outstanding voting power of the Voting Stock of the Company (for the purpose of
this clause (iii), such Person or Group will be deemed to "beneficially own"
(determined as aforesaid) the voting power of the Voting Stock of a corporation
(the "specified corporation") held by any other corporation (the "parent
corporation") if such Person or Group "beneficially owns," directly or
indirectly, a majority of the voting power of the Voting Stock of such parent
corporation); or
(iv) the Company consolidates with or merges into another Person and
the stockholders immediately prior to such merger or consolidation hold less
than a majority of the voting power of the Voting Stock of the resulting entity.
"Change of Control Date" has the meaning set forth in Section 4.12.
"Change of Control Offer" has the meaning set forth in Section 4.12.
"Change of Control Payment Date" has the meaning set forth in Section
4.12.
"Closing Price" means on any Trading Day with respect to the per share
price of any shares of Capital Stock the last reported sale price regular way
or, in case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices regular way, in either case on the New
York Stock Exchange or, if such shares of Capital Stock are not listed or
admitted to trading on such exchange, on the principal national securities
exchange on which such shares are listed or admitted to trading or, if not
listed or admitted to trading on any national securities exchange, on Nasdaq or,
if such shares are not listed or admitted to trading on any national securities
exchange or quoted on such automated quotation system but the issuer is a
Foreign Issuer (as defined in Rule 3b-4(b) under the Exchange Act) and the
principal securities exchange on which such shares are listed or admitted to
trading is a Designated Offshore Securities Market (as defined in Rule 902(a)
under the Securities Act), the average of the reported closing bid and asked
prices regular way on such principal exchange or, if such shares are not listed
or admitted to trading on any national securities exchange or quoted on such
automated quotation system and the issuer and principal securities exchange do
not meet such requirements, the average of the closing bid and asked prices in
the over-the-counter market as furnished by any New York Stock Exchange member
firm that is selected from time to time by the Company for that purpose.
"Common Stock" means, with respect to any Person, any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or nonvoting) of, such Person's common stock, whether
outstanding at the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.
"Company" means the party named as such in this Indenture until a
successor replaces it (or any previous successor) pursuant to this Indenture,
and thereafter means such successor.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by any one of its Chairman of the Board, its
Vice-Chairman, its President, an Executive Vice President or a Vice President,
and by any one of its Treasurer, an Assistant Treasurer, its Secretary or an
Assistant Secretary, in form and substance satisfactory to the Trustee and
delivered to the Trustee.
<PAGE>
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"Consolidated EBITDA" means, with respect to any Person, for any
period, the sum (without duplication) of (i) Consolidated Net Income of such
Person, plus (ii) to the extent such Consolidated Net Income has been reduced
----
thereby, (A) all income taxes of such Person and its Restricted Subsidiaries
paid or accrued in accordance with GAAP for such period (other than income taxes
attributable to extraordinary or nonrecurring gains or losses), (B) Consolidated
Interest Expense of such Person and (C) without duplication of any amount
included in subclause (A) or (B) of this clause (ii), Consolidated Non-Cash
Charges of such Person, all as determined on a consolidated basis for such
Person and its Restricted Subsidiaries in conformity with GAAP, less (iii) (A)
----
all non-cash items increasing such Consolidated Net Income for such period and
(B) all cash payments during such period relating to non-cash charges that were
added back in determining Consolidated EBITDA in any prior period, all as
determined on a consolidated basis for such Person and its Restricted
Subsidiaries in conformity with GAAP.
"Consolidated Interest Expense" means, with respect to any Person for
any period, without duplication, the sum of (i) the interest expense of such
Person and its Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP, including, without limitation, (a)
any amortization of debt discount, (b) the net cost under Interest Swap
Obligations (including any amortization of discounts), (c) the interest portion
of any deferred payment obligation, (d) all commissions, discounts and other
fees and charges owed with respect to letters of credit, bankers' acceptance
financing or similar facilities, and (e) all accrued interest and (ii) the
interest component of Capitalized Lease Obligations paid or accrued by such
Person and its Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided, however, that there shall be excluded therefrom, without
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duplication, (a) gains and losses from sales or other dispositions of assets of
such Person or any Restricted Subsidiary of such Person or of Capital Stock of
any Restricted Subsidiary of such Person or abandonments or reserves relating
thereto and the related tax effects according to GAAP, (b) items classified as
extraordinary or nonrecurring gains and losses, and the related tax effects
according to GAAP, (c) the net income of any Unrestricted Subsidiary and Persons
(other than Restricted Subsidiaries) accounted for by such Person using the
equity method of accounting, except to the extent of cash dividends or
distributions actually paid in cash to such Person or any Restricted Subsidiary
(in the case of any such payment to a Restricted Subsidiary, subject to the
limitations set forth in clause (e) of this definition), (d) the net income (or
loss) of any Person acquired in a "pooling of interests" transaction accrued
prior to the date it becomes a Restricted Subsidiary of such first referred to
Person or is merged or consolidated with such Person or any of its Restricted
Subsidiaries, (e) the net income (but not loss) of any Restricted Subsidiary of
such Person for such period to the extent that the declaration of dividends or
similar distributions by that Restricted Subsidiary of that income is restricted
by charter, contract (other than, for purposes of Section 4.08, any such payment
restrictions set forth in any Vendor Financing Arrangement permitted to be
incurred under this Indenture), operation of law or otherwise (regardless of any
waiver), and (f) any gain or loss realized upon the termination of any employee
benefit plan, on an after-tax basis.
"Consolidated Net Worth" means, with respect to any Person, at any
date, the consolidated stockholders' equity of such Person and its Restricted
Subsidiaries, as determined on a consolidated basis in accordance with GAAP,
less any amounts attributable to Disqualified Capital Stock of such Person and
any Preferred Stock of any of its Restricted Subsidiaries (other than to the
extent held by such Person or any of its Restricted Subsidiaries).
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"Consolidated Non-Cash Assets" means, with respect to any Person on
any date of determination, the total assets of such Person and its Restricted
Subsidiaries less all cash and Cash Equivalents (including restricted cash) of
such Person and its Restricted Subsidiaries on such date determined on a
consolidated basis in accordance with GAAP. For purposes of the preceding
sentence, the "date of determination" shall be the last day of the fiscal
quarter immediately preceding the date of determination.
"Consolidated Non-Cash Charges" means, with respect to any Person for
any period, the aggregate depreciation, amortization and other non-cash expenses
of such Person and its Restricted Subsidiaries reducing Consolidated Net Income
of such Person and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charges
constituting an extraordinary or nonrecurring item and net of any cash payments
made in such period in respect of any such non-cash expense).
"Consolidated Total Indebtedness" means, with respect to any Person,
on any date, without duplication, the aggregate outstanding principal amount of
Indebtedness of such Person and its Restricted Subsidiaries.
"consolidation" means, with respect to any Person, the consolidation
of the accounts of such Person and each of its Subsidiaries (or its Restricted
Subsidiaries, as the case may be) if and to the extent the accounts of such
Person and each of its Subsidiaries (or its Restricted Subsidiaries, as the case
may be) would normally be consolidated, all in accordance with GAAP. The term
"consolidated" shall have a meaning correlative to the foregoing.
"Contingent Warrants" means warrants issued to the Holders of the
Securities, exercisable for 8.0% of the Common Stock of the Company on a fully-
diluted basis as of the date of such issuance after giving effect to the
issuance of such Contingent Warrants in the event that the Company does not
effect a primary underwritten public offering (excluding any offering pursuant
to Form S-8 under the Securities Act or any other publicly registered offering
pursuant to the Securities Act pertaining to an issuance of shares of Common
Stock or securities exercisable therefor under any benefit plan, employee
compensation plan, or employee or director stock purchase plan) of Common Stock
of the Company pursuant to an effective registration statement under the
Securities Act on or prior to September 1, 1999 resulting in gross proceeds to
the Company of at least $35,000,000, isssued pursuant to the terms of the
Warrant Agreement.
"control" means, with respect to any specified Person, the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of Voting Stock, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Corporate Trust Office" means the corporate trust office of the
Trustee at which at any particular time its corporate trust business shall be
principally administered, which on the date hereof is located in Boston,
Massachusetts.
"covenant defeasance" has the meaning set forth in Section 8.02.
"Cumulative EBITDA" means the cumulative Consolidated EBITDA of the
Company from and after the first day of the first fiscal quarter beginning after
the Issue Date to the end of the fiscal quarter immediately preceding the date
of determination ending not more than 135 days prior to the date of
determination, or, if such cumulative Consolidated EBITDA for such period is
negative, minus the amount by which such cumulative Consolidated EBITDA is less
than zero.
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"Cumulative Interest Expense" means the aggregate amount of
Consolidated Interest Expense of the Company paid or accrued by the Company from
and after the first day of the first fiscal quarter beginning after the Issue
Date to the end of the fiscal quarter immediately preceding the date of
determination ending not more than 135 days prior to the date of determination.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or similar agreement or arrangement designed to protect the
Company or any Subsidiary of the Company against fluctuations in currency
values.
"Default" means an event or condition the occurrence of which is, or
with the lapse of time or the giving of notice or both would be, an Event of
Default.
"Depositary" means The Depository Trust Company, its nominees and
successors.
"Determination Date" has the meaning set forth in the definition of
Leverage Ratio.
"Disqualified Capital Stock" means any Capital Stock which, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable), or upon the happening of any event, matures (excluding any
maturity as the result of an optional redemption by the issuer thereof) or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof (except, in each case,
upon the occurrence of a Change of Control), in whole or in part, on or prior to
the final maturity date of the Securities.
"Electronic Messaging Business" has the meaning set forth in Section
4.19.
"Eligible Institution" means a commercial banking institution that has
combined capital and surplus of not less than $500 million or its equivalent in
foreign currency, whose debt is rated "A" (or higher) according to S&P or
Moody's at the time as of which any investment or rollover therein is made.
"Equity Offering" means an underwritten primary public offering of
Qualified Capital Stock of the Company pursuant to a registration statement
filed with and declared effective by the SEC in accordance with the Securities
Act.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Escrow Agent" means Fleet National Bank, as Escrow Agent pursuant to
the Escrow Agreement.
"Escrow Agreement" means the Escrow Agreement dated as of February 21,
1997, among the Company, Fleet National Bank, as Escrow Agent and Fleet National
Bank, as Trustee.
"Event of Default" has the meaning set forth in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
<PAGE>
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"Exchange Offer" means the exchange offer to be filed with the SEC
relating to the Exchange Securities pursuant to the Registration Rights
Agreement with the Initial Purchaser.
"Exchange Securities" has the meaning set forth in the preamble to
this Indenture.
"fair market value" means, with respect to any asset or property, the
price which could be negotiated in an arm's-length, free market transaction, for
cash, between an informed and willing seller and an informed and willing and
able buyer, neither of whom is under undue pressure or compulsion to complete
the transaction. Except as provided in the TIA, and except with respect to non-
cash Investments not exceeding $5,000,000, fair market value shall be determined
(I) with respect to any Asset Sale involving consideration of less than
$5,000,000, by management of the Company and (II) in all other cases (whether or
not involving an Asset Sale), by the Board of Directors acting in good faith and
shall be evidenced by a Board Resolution; provided, however, that if (A) the
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aggregate non-cash consideration to be received by the Company or any Restricted
Subsidiary from any Asset Sale shall reasonably be expected to exceed
$25,000,000 or (B) if the net worth of any Restricted Subsidiary to be
designated as an Unrestricted Subsidiary shall reasonably be expected to exceed
$25,000,000,then fair market value shall be determined by a nationally
recognized investment banking firm.
"Fax International Japan, Inc." means Fax International Japan, Inc., a
majority-owned subsidiary of the Company.
"FCC" means the Federal Communications Commission, as from time to
time constituted, or if at any time after the execution of this Indenture such
Commission is not existing and performing the applicable duties now assigned to
it, then the body or bodies performing such duties at such time.
"Final Maturity Date" means March 1, 2004.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States of America, which are applicable from time to
time and are consistently applied.
"Global Security" has the meaning set forth in Section 2.01.
"guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other Person and, without limiting the generality of the foregoing, 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 other Person (whether arising by virtue
of partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to 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) (but if in part, only to the extent thereof); provided,
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however, that the term "guarantee" shall not include (A) endorsements for
- -------
collection or deposit in the ordinary course of business and (B) guarantees
(other than guarantees of Indebtedness) by the Company in respect of assisting
one or more Subsidiaries in the ordinary course of their respective businesses,
including without limitation guarantees of trade obligations and operating
leases, on ordinary business terms. The term "guarantee" used as a verb has a
corresponding meaning.
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"Holder" or "Securityholder" means the Person in whose name a Security
is registered on the Registrar's books.
"incur" has the meaning set forth in Section 4.08; and "incurrence"
and "incurred" shall have meanings correlative to the foregoing.
"Indebtedness" means with respect to any Person, without duplication,
any liability of such Person or such Person's Restricted Subsidiaries (i) for
borrowed money, (ii) evidenced by bonds, debentures, notes or other similar
instruments, (iii) constituting Capitalized Lease Obligations, (iv) incurred or
assumed as the deferred purchase price of property or pursuant to conditional
sale obligations and title retention agreements (but excluding trade accounts
payable arising in the ordinary course of business), (v) for the reimbursement
of any obligor on any letter of credit, banker's acceptance or similar credit
transaction, (vi) for Indebtedness of others guaranteed by such Person, (vii)
for Interest Swap Obligations, (viii) for the higher of the voluntary
liquidation preference, involuntary liquidation preference, fixed redemption
price or repurchase price of all Disqualified Capital Stock and (ix) for
Indebtedness of any other Person of the type referred to in clauses (i) through
(viii) which is secured by any Lien on any property or asset of such first
referred to Person, whether or not such Indebtedness is assumed by such Person
or is not otherwise such Person's legal liability; provided, however, that if
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the obligations so secured have not been assumed by such Person or are otherwise
not such Person's legal liability, the amount of such Indebtedness for the
purposes of this definition shall be limited to the lesser of the amount of such
Indebtedness secured by such Lien or the fair market value of the assets or
property securing such Lien. The amount of Indebtedness of any Person at any
date shall be the outstanding principal amount of all unconditional obligations
described above, to the extent that such amount would be reflected on a balance
sheet prepared in accordance with GAAP, and the maximum liability at such date
of such Person for any contingent obligations described above. For purposes of
this Indenture, the issuance of any Warrants shall not constitute the incurrence
of Indebtedness.
"Indenture" means this Indenture, as amended, modified or supplemented
from time to time.
"Initial Purchaser" means Smith Barney Inc., pursuant to the Purchase
Agreement dated February 14, 1997, between the Company and the Initial
Purchaser.
"Initial Securities" has the meaning set forth in the preamble to this
Indenture.
"Initial Warrants" means the warrants of the Company issued on the
Issue Date, initially to purchase 4,816,818 shares of Common Stock of the
Company.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"interest" means, with respect to any Security, the amount of all
interest accruing on such Security, including all interest accruing subsequent
to the occurrence of any events specified in Sections 6.01(f) and (g) or which
would have accrued but for any such event, whether or not such claims are
allowable under applicable law.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities, as set forth therein.
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"Interest Swap Obligations" means the obligations of any Person under
any interest rate protection agreement, interest rate future, interest rate
option, interest rate swap, interest rate cap or other interest rate hedge or
agreement.
"Investment" by any Person means any direct or indirect (i) loan,
advance or other extension of credit or capital contribution (by means of
transfers of cash or other property (valued at the fair market value thereof as
of the date of transfer) to others or payments for property or services for the
account or use of others, or otherwise), (ii) purchase or acquisition of Capital
Stock, bonds, notes, debentures or other securities or evidences of Indebtedness
issued by any other Person (whether by merger, consolidation, amalgamation or
otherwise and whether or not purchased directly from the issuer of such
securities or evidences of Indebtedness) and (iii) guarantee or assumption of
the Indebtedness of any other Person (except for an assumption of Indebtedness
for which the assuming Person receives consideration with a fair market value at
least equal to the principal amount of the Indebtedness assumed). Investments
shall exclude extensions of trade credit and advances to customers and suppliers
to the extent made in the ordinary course of business on ordinary business
terms. The amount of any non-cash Investment shall be the fair market value of
such Investment, as determined conclusively in good faith by management of the
Company unless the fair market value of such Investment exceeds $5,000,000, in
which case the fair market value shall be determined conclusively in good faith
by the Board of Directors at the time such Investment is made. Notwithstanding
the foregoing, the purchase or acquisition of any securities of any other Person
to the extent effected with Qualified Capital Stock of the Company shall not be
deemed to be an Investment. The amount of any Investment shall not be adjusted
for increases or decreases in value, or write-ups, write-downs or write-offs
with respect to such Investment.
"Issue Date" means February 21, 1997.
"legal defeasance" has the meaning set forth in Section 8.02.
"Leverage Ratio" means, as to any Person, the ratio of (i) the
Consolidated Total Indebtedness of such Person as of the date of the transaction
or event giving rise to the need to calculate the Leverage Ratio (the
"Determination Date") on a consolidated basis in accordance with GAAP to (ii)
the product of (A) the Consolidated EBITDA of such Person for the full fiscal
quarter for which financial information is available ending immediately prior to
the Determination Date (such fiscal quarter, the "Measurement Period") and (B)
four.
For purposes of this definition, the Consolidated Total Indebtedness
of the Person as of the Determination Date shall be adjusted as if the
Indebtedness giving rise to the need to perform such calculation had been
incurred and the proceeds therefrom had been applied on the first day of the
Measurement Period. For purposes of calculating Consolidated EBITDA of the
Company for the Measurement Period immediately prior to the relevant
Determination Date, (I) any Person that is a Restricted Subsidiary on such
Determination Date (or would become a Restricted Subsidiary on such
Determination Date in connection with the transaction that requires the
determination of such ratio) will be deemed to have been a Restricted Subsidiary
at all times during such Measurement Period, (II) any Person that is not a
Restricted Subsidiary on such Determination Date (or would cease to be a
Restricted Subsidiary on such Determination Date in connection with the
transaction that requires the determination of such ratio) will be deemed not to
have been a Restricted Subsidiary at any time during such Measurement Period and
(III) if the Company or any Restricted Subsidiary shall have in any manner (x)
acquired (including through an Asset Acquisition or the commencement of
activities constituting such operating business) or (y) disposed of (including
by way of an Asset Sale or the termination or discontinuance of activities
constituting such operating business) any operating business during the
Measurement Period or after the end of such Measurement Period and on or prior
to the Determination Date, such calculation
<PAGE>
-11-
will be made on a pro forma basis in accordance with GAAP as if, in the case
--- -----
of an Assett Acquisition or the commencement of activities constituting such
operating business, all such transactions had been consummated on the first day
of such Measurement Period and, in the case of an Asset Sale or termination or
discontinuance of activities constituting such operating business, all such
transactions had been consummated prior to the first day of such Measurement
Period.
"Lien" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof and any option
or other agreement to sell, and any filing of or any agreement to give, any
security interest).
"Material Subsidiary" means, at any date of determination, any one or
more Restricted Subsidiaries that, (i) for the most recent fiscal year of the
Company accounted for more than 10% of the consolidated revenues of the Company
(exclusive of all Unrestricted Subsidiaries) or (ii) as of the end of such
fiscal year, was the owner of more than 10% of the consolidated assets of the
Company (exclusive of all Unrestricted Subsidiaries), all as set forth on the
most recently available consolidated financial statements of the Company and its
consolidated Restricted Subsidiaries for such fiscal year prepared in conformity
with GAAP.
"Maturity Date" means, with respect to any Security, the date on which
any principal of such Security becomes due and payable as therein or herein
provided, whether at the Stated Maturity with respect to such principal or by
declaration of acceleration, call for redemption or purchase or otherwise.
"Measurement Period" has the meaning set forth in the definition of
Leverage Ratio.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds in the form of cash or Cash Equivalents (including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents) received by the Company or any Restricted Subsidiary from such
Asset Sale net of (i) reasonable out-of-pocket expenses and fees relating to
such Asset Sale (including, without limitation, legal, accounting and investment
banking fees and sales commissions, recording fees, title insurance premiums,
appraisers' fees and costs reasonably incurred in preparation of any asset or
property for sale), (ii) taxes paid or reasonably estimated to be payable
(calculated based on the combined state, federal and foreign statutory tax rates
applicable to the Company or the Restricted Subsidiary consummating such Asset
Sale) and (iii) repayment of Indebtedness secured by assets subject to such
Asset Sale, (iv) appropriate amounts to be provided by the Company or any
Restricted Subsidiary as a reserve, in accordance with GAAP against any
liabilities associated with such assets and retained by the Company or any
Restricted Subsidiary after such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities and liabilities related to
environmental matters and the after-tax cost of any indemnification payments
(fixed or contingent) attributable to the seller's indemnities to the purchaser
undertaken by the Company or any Restricted Subsidiary in connection with any
such Asset Sale (but excluding any payments which, by the terms of the
indemnities will not, under any circumstances, be made during the term of the
Securities) and (v) all distributions and other payments required to be made to
minority interests holders in Restricted Subsidiaries or joint ventures as a
result of such Asset Sale; provided, however, that if the instrument or
-------- -------
agreement governing such Asset Sale requires the transferor to maintain a
portion of the purchase price in escrow (whether as a reserve for adjustment of
the purchase price or otherwise) or to provide for indemnification of the
transferee for specified liabilities in a maximum specified amount, the portion
of the cash or Cash Equivalents that is actually placed in escrow or segregated
and set aside by the transferor for such indemnification obligations shall not
be deemed to be Net Cash Proceeds until the
<PAGE>
-12-
escrow terminates or the transferor ceases to segregate and set aside such
funds, in whole or in part, and then only to the extent of the proceeds released
from escrow to the transferor or that are no longer segregated and set aside by
the transferor.
"Offering Memorandum" means the Offering Memorandum dated February 14,
1997 pursuant to which the Securities were offered, and any supplement thereto.
"Officer" means the Chairman of the Board, the President, any
Executive Vice President, any Vice President, the Chief Financial Officer, the
Treasurer, the Secretary or the Controller of the Company.
"Officers' Certificate" means a certificate signed by two Officers or
by an Officer and an Assistant Treasurer or Assistant Secretary of the Company,
in form and substance satisfactory to the Trustee and delivered to the Trustee.
"Opinion of Counsel" means a written opinion, in form and substance
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.
"Paying Agent" has the meaning set forth in Section 2.03, except that,
for the purposes of Section 4.12 and Section 4.13 and Articles Three and Eight,
the Paying Agent shall not be the Company or a Subsidiary of the Company or any
of their respective Affiliates.
"Payment Restriction" has the meaning set forth in Section 4.16.
"Permitted Holder" means any of (i) Douglas J. Ranalli, any spouse or
lineal descendant thereof, any trust the beneficiaries of which are any of the
foregoing or any affiliate of any of the foregoing, and (ii) SingTel and its
affiliates.
"Permitted Indebtedness" means, without duplication, each of the
following:
(a) the Initial Securities and the Exchange Securities;
(b) Indebtedness of a Restricted Subsidiary of the Company owed to and
held by the Company or another Restricted Subsidiary of the Company, in
each case which is not subordinated in right of payment to any Indebtedness
of such Restricted Subsidiary, except that (x) any transfer of such
Indebtedness by the Company or a Restricted Subsidiary of the Company
(other than to the Company or to a Restricted Subsidiary of the Company)
and (y) the sale, transfer or other disposition by the Company or any
Restricted Subsidiary of Capital Stock of a Restricted Subsidiary of the
Company which is owed Indebtedness of another Restricted Subsidiary of the
Company such that it ceases to be a Restricted Subsidiary of the Company
shall, in each case, be an incurrence of Indebtedness by such Restricted
Subsidiary subject to the other provisions of Section 4.08.
(c) Refinancing Indebtedness;
(d) Interest Swap Obligations; provided, however, that such Interest
-------- -------
Swap Obligations are entered into to protect the Company from fluctuations
in interest rates of its Indebtedness, to the extent the notional principal
amount of such Interest Swap Obligations do not exceed the principal amount
of the Indebtedness to which such Interest Swap Obligations relate;
<PAGE>
-13-
(e) Indebtedness of the Company or any Restricted Subsidiary incurred
under Vendor Financing Arrangements in an aggregate principal amount at any
one time outstanding not to exceed the lesser of (x) $40,000,000 or (y)
100% of the cost of the goods purchased from the vendor;
(f) Indebtedness of Fax International Japan, Inc. not to exceed
$5,000,000 principal amount in the aggregate at any one time outstanding;
(g) Indebtedness incurred by the Company, not to exceed $25,000,000
principal amount in the aggregate at any one time outstanding; provided
--------
that such indebtedness is unsecured and subordinated, pursuant to a written
agreement (containing subordination terms which are at least as favorable
to Holders of the Securities as those set forth as Exhibit G to this
Indenture), to the Company's obligations under this Indenture and the
Securities;
(h) Indebtedness of the Company or any Restricted Subsidiary
represented by letters of credit for the account of the Company or such
Restricted Subsidiary, as the case may be, in order to provide security for
workers' compensation claims, payment obligations in connection with self-
insurance or similar requirements in the ordinary course of business
pursuant to ordinary business terms;
(i) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
-------- -------
Indebtedness is extinguished within two business days of incurrence;
(j) Indebtedness outstanding on the Issue Date less any prepayments or
repayments in respect thereof including any indebtedness issued in lieu of
interest in respect of any indebtedness outstanding on the Issue Date;
(k) Acquired Indebtedness of any corporation that becomes a Restricted
Subsidiary after the Issue Date which Indebtedness is existing at the time
such corporation becomes a Restricted Subsidiary; provided, however, that
-------- -------
(A) immediately after giving effect to such corporation becoming a
Restricted Subsidiary the Company could incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in accordance with the
Leverage Ratio of Section 4.08, (B) such Indebtedness is without recourse
to the Company or to any Restricted Subsidiary or to any of their
respective properties or assets other than the Person becoming a Restricted
Subsidiary or its properties and assets and (C) such Indebtedness was not
incurred as a result of or in connection with or in contemplation of such
entity becoming a Restricted Subsidiary;
(l) Indebtedness of the Company or any of its Restricted Subsidiaries
in an aggregate principal amount (or accreted value, as applicable) not to
exceed $15,000,000 as of the date of any incurrence; and
(m) Indebtedness of the Company not to exceed (A) the aggregate cash
proceeds received by the Company after the Issue Date from the sale or
issuance of Qualified Capital Stock less (B) the portion of such proceeds
----
utilized to make, or anticipated to be used to make, Restricted Payments or
Permitted Investments described in clauses (iv), (x) or (xi) of the
definition of "Permitted Investments", after the Issue Date; provided that
--------
(x) such Indebtedness shall have a final maturity which is later than
<PAGE>
-14-
the final maturity of the Securities and (y) the Weighted Average Life to
Maturity of such Indebtedness is greater than the Weighted Average Life to
Maturity of the Securities.
"Permitted Investment" means, without duplication, each of the
following:
(i) Investments by the Company or any Restricted Subsidiary of the
Company in any Restricted Subsidiary of the Company (whether existing on
the Issue Date or created thereafter) or any Person that after such
Investment and, as a result thereof, becomes a Restricted Subsidiary of the
Company and Investments in the Company by any Subsidiary of the Company;
(ii) Cash and Cash Equivalents;
(iii) Loans or advances to directors, officers and employees made
in the ordinary course of business;
(iv) Investments by the Company or any Subsidiary of the Company
for which the sole consideration provided is Qualified Capital Stock;
(v) Investments arising as a result of the receipt by the Company
or any Restricted Subsidiary of non-cash consideration for an Asset Sale
effected in compliance with Section 4.13;
(vi) Investments in an aggregate amount (with each such Investment
being valued as of the date made and without giving effect to subsequent
changes in value) not to exceed the aggregate net proceeds, including the
fair market value of property other than cash (as determined in good faith
by the Board of Directors), received by the Company after the Issue Date
from the issuance and sale of its Capital Stock (other than Disqualified
Stock) to a Person who is not a Restricted Subsidiary of the Company, or
from the issuance to a Person who is not a Restricted Subsidiary of the
Company of any options, warrants or other rights to acquire Capital Stock
of the Company (in each case, exclusive of any Disqualified Stock or any
options, warrants or other rights that are redeemable at the option of the
holder, or are required to be redeemed prior to the Stated Maturity of the
Securities, less the aggregate net proceeds used to make or committed to be
used to make any Restricted Payments or any Permitted Investments);
(vii) advances to customers made in the ordinary course of
business;
(viii) Investments in Currency Agreements and Interest Rate
Agreements;
(ix) Investments in evidences of Indebtedness, securities or other
property received by the Company or any Restricted Subsidiary from another
Person in connection with any bankruptcy proceedings or by reason of a
composition, restructuring or readjustment of debt or a reorganization of
such Person or as a result of foreclosure, perfection or enforcement of any
Lien;
(x) Investments in WorldVoice Inc. (or any successor thereof) in an
aggregate amount not to exceed (A) $5,000,000 and (B) an additional
$10,000,000 from and after April 1, 1997, in each case on a basis
consistent with the letters of intent relating thereto in effect as of the
Closing Date; and
(xi) other Investments (with each such Investment being valued as
of the date made and without giving effect to subsequent changes in value)
in an aggregate amount not to exceed $15,000,000
<PAGE>
-15-
at any one time outstanding; provided that not more than $5,000,000 of the
--------
Investments pursuant to this clause (xi) is invested directly or
indirectly within any one country.
"Permitted Liens" means, without duplication, each of the following:
(i) Liens in favor of the Trustee in its capacity as trustee for
the Holders;
(ii) Liens existing on the Issue Date as in effect on such date;
(iii) Liens on property of the Company or a Restricted Subsidiary
securing Indebtedness incurred pursuant to (A) the Leverage Ratio to the
extent the Indebtedness is incurred pursuant to a Vendor Financing
Agreement, (B) clauses (e), (f) or (l) of Permitted Indebtedness, and (C)
Liens on Capital Stock of Unrestricted Subsidiaries;
(iv) Liens on property existing on the date of acquisition thereof;
provided, however, that such Liens are not incurred as a result of, or in
-------- -------
connection with or in anticipation of, such transaction and such Liens
relate solely to the property so acquired;
(v) Liens to secure the payment of all or a part of the purchase
price or construction cost of acquired or constructed property which is to
be used by the Company exclusively in the Electronic Messaging Business,
including related activities and services, after the Issue Date; provided,
--------
however, that the Indebtedness secured by such Liens shall not exceed 100%
-------
of the cost of such property and such Liens shall not extend to any other
property or assets of the Company or of any Restricted Subsidiary other
than the property or assets so acquired;
(vi) Liens for taxes, assessments and governmental charges to the
extent not required to be paid under this Indenture;
(vii) statutory Liens of landlords and carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen or other like Liens to the
extent not required to be paid under this Indenture;
(viii) pledges or deposits to secure lease obligations or
nondelinquent obligations under workers' compensation, unemployment
insurance or similar legislation (other than ERISA);
(ix) Liens to secure the performance of public statutory
obligations that are not delinquent, performance bonds or other obligations
of a like nature (other than for borrowed money), in each case incurred in
the ordinary course of business pursuant to ordinary business terms;
(x) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances incurred
in the ordinary course of business pursuant to ordinary business terms not
interfering in any material respect with the business of the Company or any
Restricted Subsidiary;
(xi) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
letters of credit or bankers' acceptances issued or created for the account
of such Person to facilitate the purchase, shipment or storage of such
inventory or other goods in the ordinary course of business pursuant to
ordinary business terms;
<PAGE>
-16-
(xii) judgment and attachment Liens not giving rise to an Event of
Default;
(xiii) leases or subleases granted to others in the ordinary
course of business pursuant to ordinary business terms and consistent with
past practice not interfering in any material respect with the business of
the Company or any Restricted Subsidiary;
(xiv) any interest or title of a lessor in the property subject to
any lease, whether characterized as capitalized or operating other than any
such interest or title resulting from or arising out of a default by the
Company or any Restricted Subsidiary of its obligations under such lease;
(xv) Liens arising from filing UCC financing statements for
precautionary purposes in connection with true leases of personal property
that are otherwise permitted under this Indenture and under which the
Company or any Restricted Subsidiary is a lessee;
(xvi) Liens with respect to Acquired Indebtedness incurred in
accordance with Section 4.08; provided, however, that (A) such Liens
-------- -------
secured such Acquired Indebtedness at the time of and prior to the
incurrence of such Acquired Indebtedness by the Company and were not
granted as a result of, in connection with, or in anticipation of, the
incurrence of such Acquired Indebtedness by the Company and (B) such Liens
do not extend to or cover any property or assets of the Company or of any
Restricted Subsidiary other than the property or assets that secured the
Acquired Indebtedness prior to the time such Indebtedness became Acquired
Indebtedness of the Company and are no more favorable to the lienholders
than those securing the Acquired Indebtedness prior to the incurrence of
such Acquired Indebtedness by the Company;
(xvii) Liens to secure Capitalized Lease Obligations to the extent
arising from transactions consummated in compliance with Section 4.08 and
Section 4.18; provided, however, that such Liens do not extend to or cover
-------- -------
any property or assets of the Company or of any Restricted Subsidiary,
other than the property or assets subject to such Capitalized Lease
Obligation;
(xviii) any Lien to secure the refinancing of any Indebtedness
described in the foregoing clauses; provided, however, that to the extent
-------- -------
any such clause limits the amount secured or the asset subject to such
Liens, no refinancing shall increase the assets subject to such Liens or
the amount secured thereby beyond the assets or amounts set forth in such
clauses;
(xix) Liens securing Indebtedness under the Steelcase Financing
Documents as in effect on the Issue Date and replacements thereof as
permitted by the Steelcase Financing Documents as in effect on the Issue
Date; and
(xx) any Lien arising by operation of law.
"Person" means an individual, partnership, corporation, limited
liability company, unincorporated organization, trust or joint venture, or a
governmental agency or political subdivision thereof.
"Physical Security" has the meaning set forth in Section 2.01.
"Predecessor Security" means, with respect to any particular Security,
every previous Security evidencing all or a portion of the same debt as that
evidenced by such particular Security; and, for the purposes of this definition,
any Security authenticated and delivered under Section 2.07 hereof in exchange
for a
<PAGE>
-17-
mutilated Security or in lieu of a lost, destroyed or stolen Security
shall be deemed to evidence the same debt as the mutilated, lost, destroyed or
stolen Security.
"Preferred Stock" of any Person means any Capital Stock of such Person
that has preferential rights to any other Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation.
"principal" means, with respect to any debt security, the principal of
the security plus, when appropriate, the premium, if any, on the security and
any interest on overdue principal.
"Private Placement Legend" means the first paragraph of the legend
initially set forth on the Securities in the form set forth on Exhibit A.
"Productive Assets" means assets of a kind used or usable by the
Company and the Restricted Subsidiaries in the Electronic Messaging Business or
businesses reasonably related thereto.
"pro forma" means, with respect to any calculation made or required to
--- -----
be made pursuant to the terms of this Indenture, a calculation in accordance
with Article 11 of Regulation S-X under the Securities Act, as determined by the
Board of Directors of the Company in consultation with its independent public
accountants.
"Purchase Agreement" means the Purchase Agreement dated February 14,
1997 between the Company and the Initial Purchaser.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Qualified Institutional Investor" or "QIB" has the meaning specified
in Rule 144A under the Securities Act.
"Redemption Date" means, with respect to any Security to be redeemed,
the date fixed by the Company for such redemption pursuant to this Indenture and
the Securities.
"Redemption Price" means, with respect to any Security to be redeemed,
the price fixed for such redemption pursuant to the terms of this Indenture and
the Securities.
"refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part; "refinanced" and "refinancing"
shall have correlative meanings.
"Refinancing Indebtedness" means any refinancing by the Company of
Indebtedness of the Company or of any Restricted Subsidiaries existing on the
Issue Date or incurred in accordance with Section 4.08 (other than pursuant to
clauses (b), (d), (e), (f), (h) and (i) of the definition of Permitted
Indebtedness); provided, however, that such Indebtedness so incurred to
-------- -------
refinance such other Indebtedness (the "Existing Indebtedness") (1) is not in an
aggregate principal amount as of the date of the consummation of such proposed
refinancing in excess of (or if such Indebtedness being incurred to refinance
the Existing Indebtedness is issued with original issue discount, at an original
issue price not in excess of) the sum of (i) the aggregate principal amount
outstanding of the Existing Indebtedness (provided that (a) if such Existing
Indebtedness was issued with original issue discount, in excess of the accreted
amount of such Existing Indebtedness (as
<PAGE>
-18-
determined in accordance with GAAP) as of the date of such proposed refinancing,
(b) if such Existing Indebtedness was incurred pursuant to a revolving credit
facility or any other agreement providing a commitment for subsequent
borrowings, with a maximum commitment under the agreement governing the
Indebtedness proposed to be incurred not in excess of the maximum commitment
amount under such Existing Indebtedness and (c) any amount of such Existing
Indebtedness owned or held by the Company or any of its Subsidiaries shall not
be deemed to be outstanding for the purposes hereof) as of the date of such
proposed refinancing, plus (ii) the amount of any reasonable premium paid
----
with respect to such Existing Indebtedness and plus (iii) the amount of
----
reasonable expenses incurred by the Company in connection with such refinancing
and (2) does not have (I) a Weighted Average Life to Maturity that is less than
the Weighted Average Life to Maturity of the Existing Indebtedness or (II) a
final maturity earlier than the final maturity of the Existing Indebtedness;
provided, further, however, that (y) if such Existing
- -------- ------- -------
Indebtedness is subordinate or junior to the Securities, then such Indebtedness
proposed to be incurred to refinance the Existing Indebtedness shall be
subordinate to the Securities at least to the same extent and in the same manner
as the Existing Indebtedness and (z) such Indebtedness proposed to be incurred
to refinance the Existing Indebtedness is not incurred more than three months
prior to the complete retirement or defeasance of the Existing Indebtedness with
the proceeds thereof. With respect to any Refinancing of Indebtedness under the
SingTel Credit Agreement and the SingTel Equipment Financing Agreement, in
addition to the foregoing, no Indebtedness incurred to refinance such SingTel
Indebtedness shall provide for any payment of interest or other amounts thereon
prior to the times at which, and not in excess of the amount of, interest and
other amounts are payable on the SingTel Indebtedness.
"Registrar" has the meaning set forth in Section 2.03.
"Registration Rights Agreement" means that certain Registration Rights
Agreement dated as of February 21, 1997 between the Company and the Initial
Purchaser.
"Regulation S" means Regulation S under the Securities Act.
"Restricted Payment" has the meaning set forth in Section 4.09.
"Restricted Security" has the meaning set forth in Rule 144(a)(3)
under the Securities Act; provided that the Trustee shall be entitled to request
--------
and conclusively rely upon an Opinion of Counsel with respect to whether any
Security is a Restricted Security.
"Restricted Subsidiary" means any present or future Subsidiary of the
Company which, as of the determination date, is not an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party providing for
the leasing to the Company or a Restricted Subsidiary of any property, whether
owned by the Company or any Restricted Subsidiary at the Issue Date or later
acquired, which has been or is to be sold or transferred by the Company or such
Restricted Subsidiary to such Person or to any other Person from whom funds have
been or are to be advanced by such Person on the security of such property.
"SEC" means the Securities and Exchange Commission, as from time to
time constituted, or if at any time after the execution of this Indenture such
Commission is not existing and performing the applicable duties now assigned to
it, then the body or bodies performing such duties at such time.
<PAGE>
-19-
"Securities" means the Initial Securities and the Exchange Securities
that are issued under this Indenture, as amended or supplemented from time to
time pursuant to this Indenture.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"SingTel" means Singapore Telecommunications Limited, its successors
and assigns.
"SingTel Credit Agreement" means the Credit Agreement dated as of
April 10, 1995 between the Company and SingTel N.V. (as amended) as in effect on
the Issue Date.
"SingTel Documents" means each of the agreements between SingTel or
any of its affiliates, on the one hand, and the Company or any Restricted
Subsidiary, on the other hand, in each case as in effect on the Closing Date.
"SingTel Equipment Financing Agreement" means the Term Loan Agreement
- -- Equipment dated as of April 10, 1995 between the Company and SingTel N.V. (as
amended) as in effect on the Issue Date.
"S&P" means Standard & Poor's Corporation, and its successors.
"Stated Maturity," when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security as
the fixed date on which the principal of such Security or such installment of
interest is due and payable.
"Steelcase Financing Documents" means certain secured loan and lease
financing arrangements between the Company and Steelcase Financial Services
Inc., as in effect on the Issue Date.
"Subsidiary," with respect to any Person, means (i) any corporation of
which at least a majority of the outstanding Voting Stock shall at the time be
owned, directly or indirectly, by such Person or (ii) any other Person of which
at least a majority of the outstanding Voting Stock is at the time, directly or
indirectly, owned by such Person.
"Surviving Entity" has the meaning set forth in Section 5.01.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (S)(S)
77aaa-77bbbb) as in effect on the Issue Date (other than with respect to
Section 9.03); provided, however, that in the event the Trust Indenture
-------- -------
Act of 1939 is amended after such date, "TIA" means, to the extent
required by such amendment, the Trust Indenture Act of 1939 as so amended.
"Trading Day" means with respect to a securities exchange or automated
quotation system, a day on which such exchange or system is open for a full day
of trading.
"Trust Officer" means any officer in the Corporate Trust Department of
the Trustee or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above-designated officers and also
means, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of his knowledge of and familiarity with
the particular subject.
<PAGE>
-20-
"Trustee" means the party named as such in this Indenture until a
successor replaces such party (or any previous successor) in accordance with the
provisions of this Indenture, and thereafter means such successor.
"Units" means those securities of the Company offered pursuant to the
Offering Memorandum; each Unit consists of one Security (each at $1,000
principal amount) and one warrant to initially purchase 27.524674 shares of
Common Stock.
"Unrestricted Subsidiary" means a Subsidiary of the Company so
designated by a resolution adopted by the Board of Directors in accordance with
Section 4.15.
"U.S. Government Securities" means securities that are (x) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (y) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act) as custodian with respect to any such U.S. Government
obligation or a specific payment of principal of or interest on any such U.S.
Government obligation held by such custodian for the account of the holder of
such depository receipt; provided that (except as required by law) such
--------
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government obligation or the specific payment of principal
of or interest on the U.S. Government obligation evidenced by such depository
receipt.
"Vendor Financing Arrangements" means any Indebtedness (including
Indebtedness under any credit facility entered into with any vendor or supplier
or any financial institution acting on behalf of such vendor or supplier);
provided that such Indebtedness is incurred solely for the purpose of financing
- --------
the cost (including the cost of design, development, improvement, construction
or integration) of assets used or usable in the Electronic Messaging Business.
"Voting Stock" means, with respect to any Person, securities of any
class or classes of Capital Stock in such Person entitling the holders thereof
(whether at all times or only so long as no senior class of stock has voting
power by reason of any contingency) to vote in the election of members of the
Board of Directors of such Person.
"Warrants" means the Initial Warrants and the Contingent Warrants.
"Warrant Agent" means Fleet National Bank, as Warrant Agent pursuant
to the Warrant Agreement.
"Warrant Agreement" means the Warrant Agreement dated as of February
21, 1997 between the Company and Fleet National Bank, as Warrant Agent.
"Warrant Shares" means shares of Common Stock of the Company issuable
upon exercise of the Initial Warrants and the Contingent Warrants pursuant to
the terms of the Warrant Agreement.
"Warrant Shares Registration Rights Agreement" means that certain
Warrant Shares Registration Rights Agreement dated as of February 21, 1997
between the Company and the Initial Purchaser.
<PAGE>
-21-
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness or Preferred Stock at any date, the number of years obtained by
dividing (a) the then outstanding aggregate principal amount or liquidation
preference of such Indebtedness or Preferred Stock into (b) the total of the
product obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal or liquidation preference, including payment at final maturity, in
respect thereof, by (ii) the number of years (calculated to the nearest one-
twelfth) which will elapse between such date and the making of such payment.
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
(unless expressly excluded herefrom). The following TIA terms used in this
Indenture have the following meanings:
"Commission" means the SEC;
----------
"indenture securities" means the Securities;
--------------------
"indenture security holder" means a Securityholder or Holder;
-------------------------
"indenture to be qualified" means this Indenture;
-------------------------
"indenture trustee" or "institutional trustee" means the Trustee; and
----------------- ---------------------
"obligor" on the indenture securities means the Company or any other
-------
obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
1.03. Rules of Construction.
---------------------
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
1. a term has the meaning assigned to it;
2. words in the singular include the plural, and words in the plural
include the singular;
3. "or" is not exclusive;
4. provisions apply to successive events and transactions;
5. all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with GAAP;
<PAGE>
-22-
6. the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision; and
7. all references to $ or dollars shall refer to the lawful currency
of the United States of America.
ARTICLE TWO
THE SECURITIES
2.01. Forms and Dating.
----------------
The Initial Securities and the Trustee's certificate of authentication
thereon shall be in substantially the form of Exhibit A hereto. The Exchange
Securities and the Trustee's certificate of authentication thereon shall be in
substantially the form of Exhibit B hereto. The Securities may have such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture and may have such letters, numbers or
other marks of identification and such legends or endorsements placed thereon as
may be required to comply with any applicable law or with the rules of any
securities exchange or as may, consistently herewith, be determined by the
Officers executing such Securities, as evidenced by their execution thereof.
The Securities shall be issuable only in registered form without coupons and
only in principal denominations of $1,000 and integral multiples thereof.
The definitive Securities 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 Securities may be listed, all as determined by the officers executing such
Securities, as evidenced by their execution of such Securities. Each Security
shall be dated the date of its authentication.
The terms and provisions contained in the form of the Securities
annexed hereto as Exhibit A and Exhibit B 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.
Securities offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent global Securities in registered
form, substantially in the form set forth in Exhibit A, deposited with the
Trustee, as custodian for the Depositary, duly executed by the Company and
authenticated by the Trustee as hereinafter provided and shall bear the legend
set forth on Exhibit C (the "Global Security"). The aggregate principal amount
of the Global Security may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for the Depositary,
as hereinafter provided.
Securities offered and sold in offshore transactions in reliance on
Regulation S shall be issued in the form of permanent certificated Securities,
when permitted under Regulation S, in registered form in substantially the form
set forth in Exhibit A (the "Offshore Physical Securities"). Securities offered
and sold to institutional "accredited investors" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act) shall be issued, and Securities
offered and sold in reliance on Rule 144A may be issued, in the form of
permanent certificated Securities in registered form, in substantially the form
set forth in Exhibit A (the "U.S. Physical
<PAGE>
-23-
Securities"). The Offshore Physical Securities and the U.S. Physical Securities
are sometimes collectively herein referred to as the "Physical Securities."
2.02. Execution and Authentication.
----------------------------
Two Officers shall execute the Securities on behalf of the Company by
either manual or facsimile signature. The Company's seal, if any, may be
impressed, affixed, imprinted or reproduced on the Securities.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security or at any time
thereafter, the Security shall be valid nevertheless.
A Security shall not be valid until an authorized officer of the
Trustee manually signs the certificate of authentication on the Security. Such
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate Initial Securities for original issue
in an aggregate principal amount not to exceed $175,000,000 upon receipt of an
Officers' Certificate signed by two Officers of the Company directing the
Trustee to authenticate the Initial Securities and certifying that all
conditions precedent to the issuance of the Initial Securities contained herein
have been complied with. Upon a written order of the Company signed by two
Officers, the Trustee shall authenticate the Exchange Securities in an aggregate
principal amount not to exceed $175,000,000 for issuance in exchange for Initial
Securities previously issued pursuant to an exchange offer registered under the
Securities Act. The aggregate principal amount of Securities outstanding at any
time may not exceed $175,000,000 except as provided in Section 2.07.
With the prior written approval of the Company, the Trustee may
appoint an authenticating agent acceptable to the Company to authenticate
Securities. Unless limited by the terms of such appointment, an authenticating
agent may authenticate Securities whenever the Trustee may do so. Each
reference in this Indenture to authentication by the Trustee includes
authentication by such agent. Such authenticating agent shall have the same
rights as the Trustee in any dealings hereunder with the Company or with any of
the Company's Affiliates.
2.03. Registrar and Paying Agent.
--------------------------
The Company shall maintain an office or agency (which shall be located
in the Borough of Manhattan, The City of New York, State of New York) where
Securities may be presented for registration of transfer or for exchange (the
"Registrar"), an office or agency (which shall be located in the Borough of
Manhattan, The City of New York, State of New York) where Securities may be
presented for payment of principal, premium, if any, and interest (the "Paying
Agent") and an office or agency where notices and demands to or upon the Company
in respect of the Securities and this Indenture may be served. The Registrar
shall keep a register of the Securities and of their transfer and exchange. The
Company may have one or more co-Registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent. Except
as otherwise expressly provided in this Indenture, the Company or any Affiliate
thereof may act as Paying Agent.
The Company shall enter into an appropriate agency agreement with any
Registrar or Paying Agent not a party to this Indenture, which shall incorporate
the provisions of the TIA. The agreement shall implement the provisions of this
Indenture that relate to such Registrar or Paying Agent or agent for service of
<PAGE>
-24-
notices and demands. The Company shall notify the Trustee of the name and
address of any such Registrar or Paying Agent. If the Company fails to maintain
a Registrar, Paying Agent or agent for service of notices and demands, or fails
to give the foregoing notice, the Trustee shall act as such and shall be
entitled to appropriate compensation in accordance with Section 7.08.
The Company initially appoints the Trustee as Registrar, Paying Agent
and agent for service of notices and demands in connection with the Securities.
2.04. Paying Agent To Hold Money in Trust.
-----------------------------------
Each Paying Agent shall hold in trust for the benefit of Holders or
the Trustee all money held by the Paying Agent for the payment of principal of,
or interest on, the Securities (whether such money has been distributed to it by
the Company or any other obligor on the Securities), and the Company (or any
other obligor on the Securities) and the Paying Agent shall notify the Trustee
of any default by the Company (or any other obligor on the Securities) in making
any such payment. If the Company or an Affiliate of the Company acts as Paying
Agent, it shall segregate the money and hold it as a separate trust fund. The
Company at any time may require a Paying Agent to distribute all money held by
it to the Trustee and account for any funds disbursed and the Trustee may at any
time during the continuance of any default in the payment of the principal of or
interest on the Securities, upon written request to a Paying Agent, require such
Paying Agent to pay all money held by it to the Trustee and to account for any
funds distributed. Upon doing so, the Paying Agent (other than an obligor on
the Securities) shall have no further liability for the money so paid over to
the Trustee.
2.05. Securityholder Lists.
--------------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is not
the Registrar, the Company shall furnish to the Trustee at least ten Business
Days before each Interest Payment Date and at such other times as the Trustee
may request in writing a list in such form and as of such date as the Trustee
may reasonably require of the names and addresses of Holders, which list may be
conclusively relied upon by the Trustee.
2.06. Transfer and Exchange.
---------------------
When Securities are presented to the Registrar or a co-Registrar with
a request to register the transfer of such Securities or to exchange such
Securities for an equal principal amount of Securities of other authorized
denominations, the Registrar or co-Registrar shall register the transfer or make
the exchange as requested if its requirements for such transaction are met;
provided, however, that the Securities surrendered for transfer or exchange
- -------- -------
shall be duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Registrar or co-Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing. To
permit registrations of transfers and exchanges, the Company shall execute and
the Trustee shall authenticate Securities at the Registrar's or co-Registrar's
written request. No service charge shall be made for any transfer, exchange or
redemption, but the Company may require payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable in connection therewith
(other than any such transfer taxes or similar governmental charge payable upon
exchanges or transfers pursuant to Section 2.07, 2.10, 3.06, 4.12, 4.13 or
9.05). The Registrar or co-Registrar shall not be required to register the
transfer of or exchange of any Security (i) during a period beginning at the
opening of business 15 days before the mailing of a notice of redemption of
Securities and ending at the close of business on the day of such
<PAGE>
-25-
mailing and (ii) selected for redemption in whole or in part pursuant to Article
Three, except the unredeemed portion of any Security being redeemed in part.
Any Holder of the Global Security shall, by acceptance of such Global
Security, agree that transfers of beneficial interests in such Global Security
may be effected only through a book-entry system maintained by the Holder of
such Global Security (or its agent), and that ownership of a beneficial interest
in the Global Security shall be required to be reflected in a book-entry system.
2.07. Replacement Securities.
----------------------
If a mutilated Security is surrendered to the Trustee or if the Holder
of a Security claims that the Security has been lost, destroyed or wrongfully
taken, the Company shall issue and the Trustee shall authenticate a replacement
Security if the Trustee's requirements are met. If required by the Trustee or
the Company, such Holder must provide an indemnity bond or other indemnity,
sufficient in the judgment of both the Company and the Trustee, to protect the
Company, the Trustee or any Paying Agent or Registrar from any loss which any of
them may suffer if a Security is replaced. The Company or the Trustee may
charge such Holder for its reasonable, out-of-pocket expenses in replacing a
Security, including reasonable fees and expenses of counsel. Every replacement
Security is an additional obligation of the Company.
In case any such mutilated, lost, destroyed or wrongfully taken
Security has become or is about to become due and payable within one year, the
Company in its discretion may, subject to compliance with the foregoing
conditions, instead of issuing a new Security, pay such Security.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, lost, destroyed or wrongfully taken Securities.
2.08. Outstanding Securities.
----------------------
Securities outstanding at any time are all the Securities that have
been authenticated by the Trustee except those canceled by it, those delivered
to it for cancellation and those described in this Section as not outstanding.
A Security does not cease to be outstanding because the Company or any of its
Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a bona fide purchaser. A mutilated Security ceases to be outstanding
---- ----
upon surrender of such Security and replacement thereof pursuant to Section
2.07.
If on a Redemption Date or a Maturity Date the Paying Agent (other
than the Company or an Affiliate of the Company) holds cash or U.S. Government
Obligations sufficient to pay all of the principal and interest due on the
Securities payable on that date, and is not prohibited from paying such cash or
U.S. Government Obligations to the Holders of such Securities pursuant to the
terms of this Indenture, then on and after that date such Securities cease to be
outstanding and interest on them shall cease to accrue.
<PAGE>
-26-
2.09. Treasury Securities.
-------------------
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities 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 Securities that the Trustee knows or
has reason to know are so owned shall be disregarded.
2.10. Temporary Securities.
--------------------
Until definitive Securities are prepared and ready for delivery, the
Company may prepare and the Trustee shall authenticate temporary Securities.
Temporary Securities shall be substantially in the form of definitive Securities
but may have variations that the Company considers appropriate for temporary
Securities. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Securities in exchange for temporary
Securities. Until such exchange, temporary Securities shall be entitled to the
same rights, benefits and privileges as definitive Securities.
2.11. Cancellation.
------------
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent
(other than the Company or an Affiliate of the Company), and no one else, shall
promptly cancel and, at the written direction of the Company, shall dispose of
all Securities surrendered for transfer, exchange, payment or cancellation.
Subject to Section 2.07, the Company may not issue new Securities to replace
Securities that it has paid or delivered to the Trustee for cancellation. If
the Company shall acquire any of the Securities, such acquisition shall not
operate as a redemption or satisfaction of the Indebtedness represented by such
Securities unless and until the same are surrendered to the Trustee for
cancellation pursuant to this Section 2.11.
2.12. Defaulted Interest.
------------------
If the Company defaults on a payment of interest on the Securities, 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 Holders on a subsequent special record date, which date
shall be at least five Business Days prior to the payment date. The Company
shall fix such special record date and payment date in a manner satisfactory to
the Trustee. At least 15 days before such special record date, the Company
shall mail to the Trustee and to each Holder a notice that states the special
record date, the payment date and the amount of defaulted interest, and interest
payable on such defaulted interest, if any, to be paid.
2.13. CUSIP Number.
------------
The Company in issuing the Securities may use a "CUSIP" number (if
then generally in use), and if so, the Trustee may use the CUSIP numbers in
notices of redemption or exchange as a convenience to Holders; provided,
--------
however, that any such notice may state that no representation is made as to the
- -------
correctness or accuracy of the CUSIP number printed in the notice or on the
Securities, and that reliance may be placed only on the other identification
numbers printed on the Securities. The Company shall promptly notify the
Trustee of any change in the CUSIP number.
<PAGE>
-27-
2.14. Deposit of Moneys.
-----------------
Prior to 10:00 a.m., New York City time, on, or before, each Interest
Payment Date and Maturity Date, the Company shall deposit, or cause to be
deposited, with the Trustee or Paying Agent in immediately available funds money
sufficient to make cash payments, if any, due on such Interest Payment Date or
Maturity Date, as the case may be, in a timely manner which permits the Paying
Agent to remit payment to the Holders on such Interest Payment Date or Maturity
Date, as the case may be.
2.15 Restrictive Legends.
-------------------
Each Global Security and Physical Security that constitutes a
Restricted Security shall bear the following legend (the "Private Placement
Legend") on the face thereof until after the third anniversary of the Issue
Date, unless otherwise agreed by the Company and the Holder thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF,
THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A PROMULGATED UNDER THE SECURITIES ACT)
OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN
RULE 501(a)(1), (2), (3) OR (7) PROMULGATED UNDER THE SECURITIES ACT)
(AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S.
PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (2) AGREES THAT IT
WILL NOT WITHIN THREE YEARS (OR SUCH SHORTER PERIOD AS MAY THEN BE
REQUIRED BY RULE 144(k) UNDER THE SECURITIES ACT) AFTER THE ORIGINAL
ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY
EXCEPT (A) TO THE ISSUER THEREOF OR ANY SUBSIDIARY THEREOF, (B) TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A PROMULGATED
UNDER THE SECURITIES ACT, (C) TO AN INSTITUTIONAL ACCREDITED INVESTOR
THAT, PRIOR TO SUCH TRANSFER, FURNISHED (OR HAS FURNISHED ON ITS
BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS SECURITY, (D) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904
PROMULGATED UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 PROMULGATED UNDER THE
SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT
WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH
ANY TRANSFER OF THIS SECURITY WITHIN THREE YEARS (OR SUCH SHORTER
PERIOD AS MAY THEN BE REQUIRED BY RULE 144(k) UNDER THE SECURITIES
ACT) AFTER THE ORIGINAL ISSUANCE OF THIS
<PAGE>
-28-
SECURITY, IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE
TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, WRITTEN LEGAL OPINIONS OR
OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
Each Global Security shall also bear the following legend on the face
thereof:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH
NOMINEE OF THE DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF SUCH
SUCCESSOR DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR
A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS
GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH
THE RESTRICTIONS SET FORTH IN SECTION 2.17 OF THE INDENTURE.
2.16. Book-Entry Provisions for Global Security.
-----------------------------------------
(a) The Global Security initially shall (i) be registered in the name
of the Depositary or the nominee of such Depositary, (ii) be delivered to the
Trustee as custodian for such Depositary and (iii) bear legends as set forth in
Section 2.15.
<PAGE>
-29-
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depositary, or the Trustee as its custodian, or under the
Global Security, and the Depositary may be treated by the Company, the Trustee
and any Agent of the Company or the Trustee as the absolute owner of the Global
Security for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any Agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the Depositary
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Security.
(b) Transfers of the Global Security shall be limited to transfers in
whole, but not in part, to the Depositary, its successors or their respective
nominees. Interests of beneficial owners in the Global Security may be
transferred or exchanged for Physical Securities in accordance with the rules
and procedures of the Depositary and the provisions of Section 2.17. In
addition, Physical Securities shall be transferred to all beneficial owners in
exchange for their beneficial interests in the Global Security if (i) the
Depositary notifies the Company that it is unwilling or unable to continue as
Depositary for the Global Security and a successor depository is not appointed
by the Company within 90 days of such notice or (ii) an Event of Default has
occurred and is continuing and the Registrar has received a written request from
the Depositary to issue Physical Securities.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in the Global Security to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Securities are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Security in an amount equal to the principal
amount of the beneficial interest in the Global Security to be transferred, and
the Company shall execute, and the Trustee shall authenticate and deliver, one
or more Physical Securities of like tenor and amount.
(d) In connection with the transfer of the entire Global Security to
beneficial owners pursuant to paragraph (b), the Global Security shall be deemed
to be surrendered to the Trustee for cancellation, and the Company shall
execute, and the Trustee shall authenticate and deliver, to each beneficial
owner identified by the Depositary in exchange for its beneficial interest in
the Global Security, an equal aggregate principal amount of Physical Securities
of authorized denominations.
(e) Any Physical Security constituting a Restricted Security delivered
in exchange for an interest in the Global Security pursuant to paragraph (b) or
(c) shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of
Section 2.17, bear the legend regarding transfer restrictions applicable to the
Physical Securities set forth in Section 2.15.
(f) The Holder of the Global Security may grant proxies and otherwise
authorize any person, including Agent Members and persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Securities.
2.17. Special Transfer Provisions.
---------------------------
(a) Transfers to Non-QIB Institutional Accredited Investors and Non-
---------------------------------------------------------------
U.S. Persons. The following provisions shall apply with respect to the
- ------------
registration of any proposed transfer of a Security constituting a Restricted
Security to any Institutional Accredited Investor that is not a QIB or to any
Non-U.S. Person:
<PAGE>
-30-
(i) the Registrar shall register the transfer of any Security
constituting a Restricted Security, whether or not such Security bears the
Private Placement Legend, if (x) the requested transfer is after the third
anniversary of the Issue Date (provided, however, that neither the Company
-------- -------
nor any Affiliate of the Company has held any beneficial interest in such
Security, or portion thereof, at any time on or prior to the third
anniversary of the Issue Date) or (y) (1) in the case of a transfer to an
Institutional Accredited Investor that is not a QIB (excluding Non-U.S.
Persons), the proposed transferee has delivered to the Registrar a
certificate substantially in the form of Exhibit D hereto or (2) in the
case of a transfer to a Non-U.S. Person, the proposed transferor has
delivered to the Registrar a certificate substantially in the form of
Exhibit E hereto; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in the Global Security, upon receipt by the Registrar
of (x) the certificate, if any, required by paragraph (i) above and (y)
written instructions given in accordance with the Depositary's and the
Registrar's procedures,
whereupon (a) the Registrar shall reflect on its books and records the date and
(if the transfer does not involve a transfer of outstanding Physical Securities)
a decrease in the principal amount of the Global Security in an amount equal to
the principal amount of the beneficial interest in the Global Security to be
transferred, and (b) the Company shall execute and the Trustee shall
authenticate and deliver one or more Physical Securities of like tenor and
amount.
(b) Transfers to QIBs. The following provisions shall apply with
-----------------
respect to the registration of any proposed transfer of a Security constituting
a Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer if such transfer is
being made by a proposed transferor who has checked the box provided for on
the form of Security stating, or has otherwise advised the Company and the
Registrar in writing, that the sale has been made in compliance with the
provisions of Rule 144A to a transferee who has signed the certification
provided for on the form of Security stating, or has otherwise advised the
Company and the Registrar in writing, that it is purchasing the Security
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a QIB within the
meaning of Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as it has requested pursuant to Rule 144A
or has determined not to request such information and that it is aware that
the transferor is relying upon its foregoing representations in order to
claim the exemption from registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the Securities
to be transferred consist of Physical Securities which after transfer are
to be evidenced by an interest in the Global Security, upon receipt by the
Registrar of written instructions given in accordance with the Depositary's
and the Registrar's procedures, the Registrar shall reflect on its books
and records the date and an increase in the principal amount of the Global
Security in an amount equal to the principal amount of the Physical
Securities to be transferred, and the Trustee shall cancel the Physical
Securities so transferred.
(c) Private Placement Legend. Upon the transfer, exchange or
------------------------
replacement of Securities not bearing the Private Placement Legend, the
Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Securities bearing the
Private Placement
<PAGE>
-31-
Legend, the Registrar shall deliver only Securities that bear
the Private Placement Legend unless (i) the requested transfer is after the
third anniversary of the Issue Date (provided, however, that neither the Company
-------- -------
nor any Affiliate of the Company has held any beneficial interest in such
Security, or portion thereof, at any time prior to or on the third anniversary
of the Issue Date), or (ii) there is delivered to the Registrar an Opinion of
Counsel reasonably satisfactory to the Company and the Trustee to the effect
that neither such legend nor the related restrictions on transfer are required
in order to maintain compliance with the provisions of the Securities Act.
(d) General. By its acceptance of any Security bearing the Private
-------
Placement Legend, each Holder of such a Security acknowledges the restrictions
on transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as provided
in this Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.16 or this Section 2.17.
The Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time during the
Registrar's normal business hours upon the giving of reasonable written notice
to the Registrar.
(e) Transfers of Securities Held by Affiliates. Any certificate (i)
------------------------------------------
evidencing a Security that has been transferred to an Affiliate of the Company
within three years after the Issue Date, as evidenced by a notation on the
Assignment Form for such transfer or in the representation letter delivered in
respect thereof, for so long as such Security is held by such Affiliate, or (ii)
evidencing a Security that has been acquired from an Affiliate (other than by an
Affiliate) in a transaction or a chain of transactions not involving any public
offering, shall, until three years after the last date on which the Company or
any Affiliate of the Company was an owner of such Security, in each case, bear a
legend in substantially the following form, unless otherwise agreed by the
Company (with written notice thereof to the Trustee):
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF,
THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A PROMULGATED UNDER THE SECURITIES ACT)
OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN
RULE 501(a)(1), (2), (3) OR (7) PROMULGATED UNDER THE SECURITIES ACT)
(AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
RULE 904 UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT WITHIN
THREE YEARS AFTER THE LAST DATE AS OF WHICH THE ISSUER OR ANY
AFFILIATE OF THE ISSUER WAS AN OWNER OF THIS SECURITY RESELL OR
OTHERWISE TRANSFER THIS SECURITY, EXCEPT (A) TO THE ISSUER THEREOF, OR
ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A PROMULGATED UNDER THE SECURITIES ACT, (C) TO
AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHED (OR
<PAGE>
-32-
HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO
THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY
(THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE OR
REGISTRAR), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION
IN COMPLIANCE WITH RULE 904 PROMULGATED UNDER THE SECURITIES ACT, (E)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
PROMULGATED UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN THREE YEARS AFTER
THE LAST DATE AS OF WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER
WAS AN OWNER OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS,
WRITTEN LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE
THE MEANINGS GIVEN TO THEM BY REGULATION S PROMULGATED UNDER THE
SECURITIES ACT.
2.18. Liquidated Damages Under Registration Rights Agreement.
------------------------------------------------------
Under certain circumstances, the Company shall be obligated to pay
certain additional interest as liquidated damages ("Additional Interest") to the
Holders, all as set forth in Section 4 of the Registration Rights Agreement.
The terms thereof are hereby incorporated herein by reference.
ARTICLE THREE
REDEMPTION OF SECURITIES
3.01. Notices to the Trustee.
----------------------
If the Company elects to redeem Securities pursuant to Paragraph 2(a)
or 2(b) of the Securities, it shall notify the Trustee in writing of the
Redemption Date and principal amount of Securities to be redeemed.
<PAGE>
-33-
The Company shall notify the Trustee by an Officers' Certificate,
stating that such redemption will comply with the provisions hereof and of the
Securities, of any redemption at least 45 days before the Redemption Date.
3.02. Selection of Securities To Be Redeemed.
--------------------------------------
If less than all the Securities are to be redeemed at any time, the
particular Securities or portions thereof to be redeemed shall be selected from
the outstanding Securities not previously called for redemption pro rata, by lot
or by such other method as the Trustee considers to be fair and appropriate;
provided, however, that if the Securities are redeemed in part pursuant to
- -------- -------
Paragraph 2(b) of the Securities, the Trustee shall select the Securities to be
redeemed by prorating, as nearly as may be, the principal amount of Securities
to be redeemed among the Holders of the Securities in proportion to the
principal amount of Securities registered in their respective names. In any
proration pursuant to this Section, the Trustee shall make such adjustments,
reallocations and eliminations as it shall deem proper to the end that the
principal amount of Securities so prorated shall be $1,000 or a multiple
thereof, by increasing or decreasing or eliminating the amount which would be
allocable to any Holder on the basis of exact proportion by an amount not
exceeding $1,000. The Trustee in its discretion may determine the particular
Securities (if there are more than one) registered in the name of any Holder
which are to be redeemed, in whole or in part. No Securities of a 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 Securities selected for redemption and, in the case of any
Securities selected for partial redemption, the principal amount thereof to be
redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Securities shall relate, in
the case of any Security redeemed or to be redeemed only in part, to the portion
of the principal amount of such Security which has been or is to be redeemed.
3.03. Notice of Redemption.
--------------------
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at the address of such Holder
appearing in the Security register maintained by the Registrar.
All notices of redemption shall identify the Securities to be redeemed
and shall state:
(a) the Redemption Date;
(b) the Redemption Price and the amount of the principal and accrued
interest, if any, to be paid;
(c) that, unless the Company defaults in making the redemption
payment, interest on Securities called for redemption ceases to accrue on
and after the Redemption Date, and the only remaining right of the Holders
of such Securities is to receive payment of the Redemption Price upon
surrender to the Paying Agent of the Securities redeemed;
(d) if any Security is to be redeemed in part, the portion of the
principal amount (equal to $1,000 or any integral multiple thereof) of such
Security to be redeemed and that on and after the
<PAGE>
-34-
Redemption Date, upon surrender for cancellation of such original Security
to the Paying Agent, a new Security or Securities in the aggregate
principal amount equal to the unredeemed portion thereof will be issued
without charge to the Holder;
(e) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price and the name and address of
the Paying Agent;
(f) the CUSIP number, if any, relating to such Securities, but no
representation is made as to the correctness or accuracy of any such CUSIP
numbers; and
(g) the paragraph of the Securities pursuant to which the Securities
are being redeemed.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's written request,
by the Trustee in the name and at the expense of the Company.
3.04. Effect of Notice of Redemption.
------------------------------
Once notice of redemption is mailed, Securities called for redemption
become due and payable on the Redemption Date and at the Redemption Price. Upon
surrender to the Paying Agent, such Securities called for redemption shall be
paid at the Redemption Price plus accrued and unpaid interest, if any, to the
Redemption Date, but interest installments whose maturity is on or prior to such
Redemption Date will be payable on the relevant Interest Payment Dates to the
Holders of record at the close of business on the relevant record dates referred
to in the Securities.
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 and unpaid interest, if any, on, all the
Securities or portions thereof which are to be redeemed on that date.
If the Company complies with the preceding paragraph, then, unless the
Company defaults in the payment of such Redemption Price, interest on the
Securities to be redeemed will cease to accrue, on and after the applicable
Redemption Date, whether or not such Securities are presented for payment. If
any Security called for redemption shall not be so paid upon surrender thereof
for redemption, the principal, premium, if any, and, to the extent lawful,
accrued interest thereon, shall, until paid, bear interest from the Redemption
Date at the rate provided in the Securities.
3.06. Securities Redeemed or Purchased in Part.
----------------------------------------
Upon surrender to the Paying Agent of a Security which is to be
redeemed in part, the Company shall execute and the Trustee shall authenticate
and deliver to the Holder of such Security without service charge, a new
Security or Securities, of any authorized denomination as requested by such
Holder in aggregate principal amount equal to, and in exchange for, the
unredeemed portion of the principal of the Security so surrendered that is not
redeemed.
<PAGE>
-35-
ARTICLE FOUR
COVENANTS
4.01. Payment of Securities.
---------------------
The Company shall pay, or cause to be paid, the principal of and
interest on the Securities on the dates and in the manner provided in the
Securities and this Indenture. An installment of the principal or interest
shall be considered paid on the date due if the Trustee or Paying Agent (other
than the Company, a Subsidiary of the Company or any Affiliate thereof) holds on
that date money designated and set aside for and sufficient to pay the
installment in a timely manner and is not prohibited from paying such money to
the Holders of the Securities 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 Securities; it shall pay interest on overdue
installments of interest at the same rate and in the same manner, to the extent
lawful.
4.02. Maintenance of Office or Agency.
-------------------------------
The Company shall maintain in the Borough of Manhattan, The City of
New York, an office or agency where Securities may be surrendered for
registration of transfer or exchange or for presentation for payment and where
notices and demands to or upon the Company in respect of the Securities 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 11.02.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
- -------- -------
relieve the 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
located at 14 Wall Street, 8th Floor, Window #2 in the Borough of Manhattan,
City of New York 10005, as such office of the Company in accordance with this
Section 4.02.
4.03. Corporate Existence.
-------------------
Subject to Article Five, the Company shall do or cause to be done all
things necessary to and will cause each of the Restricted Subsidiaries to,
preserve and keep in full force and effect the corporate or partnership
existence and rights (charter and statutory), licenses and/or franchises of the
Company and each of the Restricted Subsidiaries; provided, however, that neither
-------- -------
the Company nor any of the Restricted Subsidiaries shall be required to preserve
any such rights, licenses or franchises if the Board of Directors shall
reasonably determine that (x) the preservation thereof is no longer desirable in
the conduct of the business of the Company and the Restricted Subsidiaries taken
as a whole and (y) the loss thereof is not materially adverse to either the
<PAGE>
-36-
Company and the Restricted Subsidiaries taken as a whole or to the ability of
the Company to otherwise satisfy its obligations hereunder.
4.04. Payment of Taxes and Other Claims.
---------------------------------
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all taxes, assessments and
governmental charges levied or imposed upon the Company or any of the Restricted
Subsidiaries or upon the income, profits or property of the Company or any of
the Restricted Subsidiaries, and (b) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a Lien upon the property of the
Company or any Restricted Subsidiary of the Company; provided, however, that the
-------- -------
Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim the amount, applicability
or validity of which is being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted and which stay the forfeiture of
any property or assets of the Company and the Restricted Subsidiaries and for
which adequate provision has been made or where the failure to effect such
payment or discharge is not adverse in any material respect to the Company.
4.05. Maintenance of Properties; Insurance; Books and Records;
--------------------------------------------------------
Compliance with Law.
- -------------------
(a) The Company shall, and shall cause each of the Restricted
Subsidiaries to, cause all properties and assets to be maintained and kept in
good condition, repair and working order (reasonable wear and tear excepted) and
supplied with all necessary equipment, and shall cause to be made all necessary
repairs, renewals, replacements, additions, betterments and improvements
thereto, as shall be reasonably necessary for the proper conduct of its
business; provided, however, that nothing in this Section 4.05(a) shall prevent
-------- -------
the Company or any of the Restricted Subsidiaries from discontinuing the
operation and maintenance of any of its properties or assets if such
discontinuance is, in the judgment of the Board of Directors or such Restricted
Subsidiary, desirable in the conduct of its business and if such discontinuance
is not materially adverse to either the Company and the Restricted Subsidiaries
taken as a whole or the ability of the Company to otherwise satisfy its
obligations hereunder.
(b) The Company shall, and shall cause each of the Restricted
Subsidiaries to, maintain with financially sound and reputable insurers such
insurance as may be required by law (other than with respect to any
environmental impairment liability insurance not commercially available) and
such other insurance to such extent and against such hazards and liabilities, as
is customarily maintained by companies similarly situated (which may include
self-insurance in the same form as is customarily maintained by companies
similarly situated).
(c) The Company shall, and shall cause each of the Restricted
Subsidiaries to, keep proper books of record and account, in which full and
correct entries shall be made of all business and financial transactions of the
Company and each Restricted Subsidiary of the Company and reflect on its
financial statements adequate accruals and appropriations to reserves, all in
accordance with GAAP consistently applied to the Company and the Restricted
Subsidiaries taken as a whole.
(d) The Company shall and shall cause each of the Restricted
Subsidiaries to comply with all statutes, laws, ordinances, or government rules
and regulations to which it is subject, non-compliance with which would
materially adversely affect the business, earnings, properties, assets or
condition (financial or otherwise) of the Company and the Restricted
Subsidiaries taken as a whole.
<PAGE>
-37-
4.06. Compliance Certificate.
----------------------
(a) The Company shall deliver to the Trustee within 60 days after the
end of each of the Company's first three fiscal quarters and within 90 days
after the end of the Company's fiscal year an Officers' Certificate stating
whether or not the signers know of any default in the performance by the Company
of its obligations under this Indenture or the Escrow Agreement. The Company
shall also notify the Trustee within ten days of any event which is, or after
notice or lapse of time or both would become, an Event of Default under this
Indenture or the Escrow Agreement by the Company. The certificate shall
describe any such Default, Event of Default or default and its status. The
first certificate to be delivered pursuant to this Section 4.06(a) shall be for
the first fiscal quarter of the Company beginning after the Issue Date. The
Company shall also deliver within 90 days after the end of the Company's fiscal
year a certificate to the Trustee from its principal executive, financial or
accounting officer as to his or her knowledge of the Company's compliance with
all conditions and covenants under this Indenture or the Escrow Agreement, such
compliance to be determined without regard to any period of grace or requirement
of notice provided herein or therein.
(b) The Company shall deliver to the Trustee within 90 days after the
end of each fiscal year a written statement by the Company's independent
certified public accountants stating that their audit examination has included a
review of the terms of this Indenture and the Securities as they relate to
accounting matters and indicating whether or not, in the course of their review,
anything came to their attention that caused them to believe that the Company
failed to comply with such terms (it being understood that such audit
examination shall not be directed primarily toward obtaining knowledge of such
noncompliance).
4.07. SEC Reports and Other Information.
---------------------------------
The Company shall deliver to the Trustee, within 15 days after it
files them with the Commission, copies of its annual report and of the
information, documents and other reports (or copies of such portions of any of
the foregoing as the Commission may by rules and regulations prescribe) which
the Company is required to file with the Commission pursuant to Section 13 or
15(d) of the Exchange Act within the time periods prescribed under such rules
and regulations. Notwithstanding that the Company may not be subject to, or
required to remain subject to, the reporting requirements of Section 13 or 15(d)
of the Exchange Act or otherwise report on an annual and quarterly basis on
forms provided for such annual and quarterly reporting pursuant to rules and
regulations promulgated by the Commission, the Company shall continue to file
with the Commission and provide to the Trustee such annual and interim reports
on Forms 10-K and 10-Q, respectively, as the Company would be required to file
were it subject to such reporting requirements within the time periods
prescribed under such rules and regulations. The Company shall not be obligated
to file any such reports with the Commission if the Commission does not permit
such filings but shall remain obligated to provide such reports to the Trustee
and the Holders within the periods of time referred to above. The Company shall
provide to any Holder of Securities any information reasonably requested by such
Holder concerning the Company (including financial statements) consistent with
the requirements of Rule 144A(d)(4) promulgated under the Securities Act
necessary in order to permit such Holder to sell or transfer Securities in
accordance with Rule 144A promulgated under the Securities Act. In addition,
the Company shall cause its annual reports to shareholders and any quarterly or
other financial reports furnished by it to shareholders generally to be filed
with the Trustee and mailed at the expense of the Company no later than the date
such materials are mailed or made available to the Company's shareholders, to
the Holders at their addresses as set forth in the register of Securities
maintained by the Registrar. Upon qualification of this Indenture under the
TIA, the Company also shall comply with the provisions of TIA (S)(S) 314(a).
<PAGE>
-38-
4.08. Limitation on Incurrence of Additional Indebtedness.
---------------------------------------------------
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create, incur, assume, guarantee, acquire
or become liable, contingently or otherwise, for (collectively "incur") any
Indebtedness other than Permitted Indebtedness. Notwithstanding the foregoing
limitations, the Company may incur Indebtedness (including, without limitation,
any Acquired Indebtedness) and Restricted Subsidiaries may incur Indebtedness
under Vendor Financing Arrangements if after giving pro forma effect to the
incurrence of such Indebtedness and the receipt and application of the proceeds
therefrom the Company's Leverage Ratio would be less than 5.0 to 1; provided
--------
that if prior to March 1, 1999, the Company has not consummated a primary
underwritten public offering (excluding any offering pursuant to Form S-8 under
the Securities Act or any other publicly registered offering pursuant to the
Securities Act pertaining to an issuance of shares of Common Stock or securities
exercisable therefor under any benefit plan, employee compensation plan, or
employee or director stock purchase plan) of Common Stock of the Company
pursuant to an effective registration statement under the Securities Act
resulting in gross proceeds to the Company of at least $35.0 million, such ratio
shall be reduced to 4.5 to 1 until such time as the Company completes such an
offering.
(b) Any Indebtedness of an entity existing at the time it becomes a
Restricted Subsidiary (whether by merger, consolidation, acquisition of Capital
Stock or otherwise) or is merged with or into the Company or any Restricted
Subsidiary shall be deemed to be incurred as of the date such entity becomes a
Restricted Subsidiary or the date of such merger.
(c) The Company shall not, directly or indirectly, incur any
Indebtedness that is subordinate to any other Indebtedness of the Company unless
such Indebtedness is also expressly subordinated to the Securities; provided,
--------
however, that no Indebtedness of the Company shall be deemed to be subordinate
- -------
to any other Indebtedness of the Company solely because such other Indebtedness
is secured. Accretion of accreted value and accrual of interest shall not be
deemed to be an "incurrence" for purposes of this Section 4.08, nor shall the
payment of interest in the form of additional Indebtedness.
4.09. Limitation on Restricted Payments.
---------------------------------
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly:
(a) declare or pay any dividend or make any distribution (other than
dividends or distributions payable in Qualified Capital Stock of the
Company or payable to any Restricted Subsidiary of the Company) on shares
of Capital Stock of the Company;
(b) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Company or of any Restricted Subsidiary not owned or
held by the Company or a Restricted Subsidiary, or any warrants, rights or
options to acquire shares of any class of such Capital Stock, other than
(x) the exchange of such Capital Stock or any warrants, rights or options
to acquire shares of any class of such Capital Stock for Qualified Capital
Stock of the Company or warrants, rights or options to acquire Qualified
Capital Stock of the Company or (y) to the extent that such Capital Stock
or warrants, rights or options are owned by the Company or any Restricted
Subsidiary of the Company;
<PAGE>
-39-
(c) make any principal payment on, or purchase, decrease, redeem,
prepay, defease or otherwise acquire or retire for value, prior to any
scheduled final maturity, scheduled repayment or scheduled sinking fund
payment, any Indebtedness that is subordinate or junior in right of payment
to the Securities (other than any such Indebtedness owing to the Company or
any Restricted Subsidiary of the Company); or
(d) make any Investment (other than any Permitted Investments) after
the Issue Date;
(each of the foregoing prohibited actions set forth in clauses (a), (b), (c) and
(d) being referred to as a "Restricted Payment"), if at the time of such
Restricted Payment or immediately after giving effect thereto (i) a Default or
an Event of Default under this Indenture shall have occurred and be continuing
or would result therefrom, (ii) the Company is not, at such time, able to incur
at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with the Leverage Ratio set forth in Section 4.08, or (iii) the
aggregate amount of Restricted Payments made subsequent to the Issue Date (the
amount expended for such purposes, if other than in cash, being the fair market
value of such property as determined in good faith by the Board of Directors,
whose determination shall be conclusive and evidenced by a Board Resolution)
exceeds or would exceed the sum of:
(A) Cumulative EBITDA since the Issue Date less the product of 2.0
times Cumulative Interest Expense since the Issue Date, plus
----
(B) 100% of the aggregate net cash proceeds received by the Company
from any Person (other than a Restricted Subsidiary) from the issuance and
sale subsequent to the Issue Date of Qualified Capital Stock of the Company
(excluding net cash proceeds attributable to the equity securities
comprising a part of the Units), plus
----
(C) without duplication of any amounts included in the immediately
preceding subclause (B), 100% of the aggregate net proceeds (determined
pursuant to the penultimate paragraph of this covenant) received by the
Company from the issuance and sale (other than to any Restricted
Subsidiary) of any Qualified Capital Stock of the Company upon the
conversion of, or in exchange for, any Indebtedness of the Company or any
Restricted Subsidiary (other than Indebtedness under the SingTel Credit
Agreement and SingTel Equipment Financing Agreement and any other
subordinated Indebtedness outstanding immediately after the Issue Date),
plus
----
(D) an amount equal to the aggregate amount of cash dividends,
repayments of loans or advances in cash or other assets constituting
Productive Assets and valued at the fair market value thereof, or other
transfers of cash, in each case to the Company or to any Restricted
Subsidiary of the Company from Unrestricted Subsidiaries (but without
duplication of any such amount included in calculating Cumulative EBITDA of
the Company), or the amount resulting from redesignations of Unrestricted
Subsidiaries as Restricted Subsidiaries (in each case valued as provided in
Section 4.15), not to exceed, in the case of any Unrestricted Subsidiary,
the amount of Investments previously made by the Company or any Restricted
Subsidiary in such Unrestricted Subsidiary and which was treated as a
Restricted Payment under this Indenture, plus
----
(E) without duplication of the immediately preceding subclause (D), an
amount equal to (i) the lesser of the cost or net cash proceeds or other
assets constituting Productive Assets and valued at the fair market value
thereof received upon the sale or other disposition of any Investment made
after the Issue Date which had been treated as a Restricted Payment and
(ii) the cost of any Investment then
<PAGE>
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outstanding in any Person (other than an Unrestricted Subsidiary) at the
time of a transaction whereby such Person becomes a Restricted Subsidiary
(but, in each case, without duplication of any amount included in
calculating Cumulative EBITDA of the Company).
No amount determined under subclause (D) or (E) above shall be less
than zero for purposes of this Section 4.09.
Notwithstanding the foregoing, these provisions do not prohibit:
(1) the payment of any dividend or the making of any distribution
within 60 days after the date of its declaration if the dividend or
distribution would have been permitted on the date of declaration; or
(2) the acquisition of Capital Stock of the Company or any Restricted
Subsidiary or warrants, options or other rights to acquire such Capital
Stock through the application of the net proceeds of any capital
contribution (other than from a Restricted Subsidiary) or a substantially
concurrent sale for cash (other than to a Restricted Subsidiary) of
Qualified Capital Stock of the Company or warrants, options or other rights
to acquire Qualified Capital Stock of the Company; or
(3) the acquisition of Indebtedness of the Company that is subordinate
or junior in right of payment to the Securities, either (i) solely in
exchange for shares of Qualified Capital Stock of the Company (or warrants,
options or other rights to acquire Qualified Capital Stock of the Company)
or for Indebtedness of the Company which is subordinate or junior in right
of payment to the Securities, at least to the extent that the Indebtedness
being acquired is subordinated to the Securities, and has a Weighted
Average Life to Maturity no less than that of the Indebtedness being
exchanged or (ii) through the application of the net proceeds of any
capital contribution or a substantially concurrent sale for cash (other
than to or from a Restricted Subsidiary) of Qualified Capital Stock of the
Company (or warrants, options or other rights to acquire Qualified Capital
Stock of the Company) or Refinancing Indebtedness; or
(4) the repurchase of Capital Stock of the Company (including options,
warrants or other rights to acquire such Capital Stock) from employees or
former employees of the Company or any Restricted Subsidiary for
consideration which, when added to all loans made pursuant to clause (5)
below of this paragraph during the same fiscal year and then outstanding
(determined as provided in clause (5) below) does not exceed $500,000 in
the aggregate in any fiscal year plus the aggregate cash proceeds received
by the Company during such fiscal year from the sale of Capital Stock to
employees of the Company or any Restricted Subsidiary; or
(5) the making of loans and advances to employees of the Company or
any Restricted Subsidiary in an aggregate amount at any time outstanding
(including as outstanding any such loan or advance written off or forgiven)
which, when added to the aggregate consideration paid pursuant to clause
(4) of this paragraph during the same fiscal year, does not exceed $500,000
in any fiscal year plus the aggregate cash proceeds received by the Company
during such fiscal year from the sale of Capital Stock to employees of the
Company or any Restricted Subsidiary; or
(6) the redemption, repurchase or other acquisition of shares of
Capital Stock in satisfaction of indemnification or similar claims arising
under any merger, asset purchase, stock
<PAGE>
-41-
purchase, contribution, joint venture, consolidation or similar acquisition
agreement pursuant to which such shares of Capital Stock were issued; or
(7) the purchase, redemption or other acquisition or retirement for
value of any Capital Stock of any Restricted Subsidiary from any person
other than an Affiliate; or
(8) the repurchase of the Warrants or Warrant Shares pursuant to the
terms of the Warrant Agreement (as in effect on the Issue Date);
provided, however, that in the case of the immediately preceding clauses (2),
- -------- -------
(3), (4), (5) and (6), and in the case of clauses (vi), (x) and (xi) of the
definition of "Permitted Investment", no Default or Event of Default shall have
occurred or be continuing at the time of such Restricted Payment or Permitted
Investment, as the case may be, or would occur as a result thereof. For
purposes of clause (3) above, Indebtedness that is "subordinate or junior in
right of payment to the Securities" will qualify under subclauses (i) and (ii)
thereof if such Indebtedness provides that interest and other amounts are not
payable thereon prior to the times at which, and in the amounts of, interest and
other amounts may be paid upon the Indebtedness being acquired. Fur purposes of
clause (4) above, the proceeds of Capital Stock sold to employees shall not be
duplicative of any such proceeds credited under clause (B) above.
In determining the aggregate amount of Restricted Payments made
subsequent to the Issue Date, amounts expended pursuant to clauses (1), (2), (3)
(but only to the extent that Indebtedness is acquired in exchange for, or with
the net proceeds from, the issuance of Qualified Capital Stock of the Company or
warrants, options or other rights to acquire Qualified Capital Stock of the
Company), (4), (5) and (6) of the immediately preceding paragraph and clauses
(vi), (x) (except, if at the time of such Investment, WorldVoice Inc. shall be a
Restricted Subsidiary) and (xi) of the definition of "Permitted Investment,"
shall be included in such calculation.
For purposes of calculating the net proceeds received by the Company
from the issuance or sale of its Capital Stock either upon the conversion of, or
exchange for, Indebtedness of the Company or any Restricted Subsidiary, such
amount will be deemed to be an amount equal to the difference of (a) the sum of
(i) the principal amount or accreted value (whichever is less) of such
Indebtedness on the date of such conversion or exchange and (ii) the additional
cash consideration, if any, received by the Company upon such conversion or
exchange, less any payment on account of fractional shares, minus (b) all
-----
expenses incurred in connection with such issuance or sale. In addition, for
purposes of calculating the net proceeds received by the Company from the
issuance or sale of its Capital Stock upon the exercise of any options or
warrants of the Company, such amount will be deemed to be an amount equal to the
difference of (a) the additional cash consideration, if any, received by the
Company upon such exercise, minus (b) all expenses incurred in connection with
-----
such issuance or sale.
Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 4.09 were computed, which calculation may
be based on the Company's latest financial statements.
4.10. Limitation on Preferred Stock of Restricted Subsidiaries.
--------------------------------------------------------
The Company shall not permit any Restricted Subsidiary to, directly or
indirectly, issue any Preferred Stock (other than to the Company or to a
Restricted Subsidiary of the Company) or permit any Person
<PAGE>
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(other than the Company or a Subsidiary of the Company) to own any Preferred
Stock of any Restricted Subsidiary; provided, however, that this Section 4.10
-------- -------
shall not prevent the issuance of or be violated by reason of (i) Preferred
Stock of Restricted Subsidiaries to the extent that such Preferred Stock is
outstanding on the Issue Date; (ii) Preferred Stock issued by a Person prior to
the time that (a) such Person becomes a Restricted Subsidiary, (b) such Person
merges with or into a Restricted Subsidiary or (c) another Person merges with or
into such Person in a transaction in which such Person becomes a
Restricted Subsidiary, in each case only if such Preferred Stock was not issued
in anticipation of or in connection with or as a result of such transaction; and
(iii) Preferred Stock issued in exchange for, or the proceeds of which are used
to refinance, Preferred Stock referred to in the foregoing clauses (i) or (ii)
(other than Preferred Stock which by its terms (or by the terms of any security
into which it is convertible or for which it is exchangeable) is redeemable at
the option of the holder thereof or is otherwise redeemable, pursuant to sinking
fund obligations or otherwise, prior to that date of redemption or maturity of
the Preferred Stock being so refinanced); provided, further, however, that (a)
-------- ------- -------
the liquidation value of such Preferred Stock so issued shall not exceed the
liquidation value of the Preferred Stock so refinanced and (b) the Preferred
Stock so issued (I) shall have a stated maturity not earlier than the stated
maturity of the Preferred Stock being refinanced and (II) shall have a Weighted
Average Life to Maturity equal to or greater than the remaining Weighted Average
Life to Maturity of the Preferred Stock being refinanced.
4.11. Limitation on Liens.
-------------------
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, create, incur, assume or suffer to exist any Liens
upon any of their respective property or assets or on any income or profits
therefrom, or assign or otherwise convey any right to receive income or profits
thereon, whether owned on the date of this Indenture or thereafter acquired,
unless (x) in the case of Liens securing Indebtedness subordinate to the
Securities, the Securities are secured by a valid, perfected Lien on such
property, assets or proceeds that is senior in priority to such Liens and (y) in
all other cases, the Securities are equally and ratably secured; provided,
--------
however, that the foregoing shall not prohibit or restrict, and the Company need
- -------
not equally and ratably secure the Securities as a result of, Permitted Liens.
4.12. Change of Control.
-----------------
Upon the occurrence of a Change of Control (the date of such
occurrence, the "Change of Control Date"), the Company shall notify the Holders
of Securities in writing of such occurrence and shall make an offer to
repurchase (the "Change of Control Offer") on a Business Day not less than 30
days nor more than 45 days (other than as may be required by law) following the
date notice is mailed (but in no event less than three Business Days after the
Change of Control Offer has expired) (the "Change of Control Payment Date"), all
of the Securities then outstanding at a purchase price equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest, if any, to
a Change of Control Payment Date.
Notice of a Change of Control Offer shall be mailed by the Company, by
first class mail, not later than the 30th day after the Change of Control Date
to each Holder of Securities at its last registered address with a copy to the
Trustee and the Paying Agent (such copy to be accompanied by an Officers'
Certificate stating that a Change of Control has occurred). The Change of
Control Offer shall remain open from the time of mailing for at least 20
Business Days. The notice, which shall govern the terms of the Change of
Control Offer, shall include such disclosures as are required by law and shall
state:
(a) that the Change of Control Offer is being made pursuant to this
Section 4.12 and that all Securities or portions thereof validly tendered
into the Change of Control Offer and not withdrawn will be accepted for
payment;
<PAGE>
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(b) the purchase price (including the amount of accrued and unpaid
interest, if any) for each Security, the Change of Control Payment Date and
the date on which the Change of Control Offer expires;
(c) that any Security or portion thereof not tendered for payment will
continue to accrue interest, in accordance with the terms thereof;
(d) that, unless the Company shall default in the payment of the
purchase price, any Security or portion thereof accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Payment Date;
(e) that Holders electing to have Securities or portions thereof
purchased pursuant to a Change of Control Offer will be required to
surrender their Securities, properly endorsed for transfer, to the Paying
Agent at the address specified in the notice prior to 5:00 p.m., New York
City time, on the date the Change of Control Offer expires and must
complete any form of letter of transmittal and such other customary
documents as proposed by the Company and reasonably acceptable to the
Trustee and the Paying Agent;
(f) that Holders of Securities will be entitled to withdraw their
election if the Paying Agent receives, not later than 5:00 p.m., New York
City time, on the date the Change of Control Offer expires, a tested telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of Securities the Holder delivered for purchase, the
Security certificate number (if any) and a statement that such Holder is
withdrawing its election to have such Securities or portions thereof
purchased;
(g) that Holders whose Securities are purchased only in part will be
issued Securities equal in principal amount to the unpurchased portion of
the Securities surrendered;
(h) the instructions that Holders must follow in order to tender their
Securities; and
(i) information concerning the business of the Company, the most
recent annual and quarterly reports of the Company filed with the SEC
pursuant to the Exchange Act (or, if the Company is not then permitted to
file any such reports with the SEC, the comparable reports prepared
pursuant to Section 4.07), a description of material developments in the
Company's business, information with respect to pro forma historical
--- -----
financial information after giving effect to such Change of Control and
such other information concerning the circumstances and relevant facts
regarding such Change of Control Offer as would be material to a Holder of
Securities in connection with the decision of such Holder as to whether or
not it should tender Securities pursuant to the Change of Control Offer.
On the date the Change of Control Offer expires, the Company shall
accept for payment Securities or portions thereof validly tendered pursuant to
the Change of Control Offer. Prior to 11 a.m. on the second Business Day
immediately prior to the Change of Control Payment Date, the Company shall
deliver to the Trustee the Securities so accepted together with an Officers'
Certificate setting forth the Securities or portions thereof tendered to and
accepted for payment by the Company. Prior to 11:00 a.m. on the Change of
Control Payment Date, the Company shall (i) deposit with the Paying Agent money,
in immediately available funds, sufficient to pay the purchase price of all
Securities or portions thereof so tendered and accepted and (ii) the Paying
Agent shall promptly mail or deliver to the Holders of Securities so accepted
payment in an amount equal to the purchase price, and the Trustee shall promptly
authenticate and mail or deliver to such Holders a
<PAGE>
-44-
new Security equal in principal amount to any unpurchased portion of the
Security surrendered. Any Securities not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof. The Company will publicly
announce the results of the Change of Control Offer not later than the first
Business Day following the Change of Control Payment Date.
The Company shall comply with the requirements of Rule 14e-1 of the
Exchange Act, and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the purchase
of Securities pursuant to a Change of Control Offer. To the extent the
provisions of any such rule conflict with the provisions of this Indenture
relating to a Change of Control Offer, the Company shall comply with the
provisions of such rule and be deemed not to have breached its obligations
relating to such Change of Control Offer by virtue thereof.
Portions of Securities tendered for purchase shall be in principal
amounts equal to $1,000 or integral multiples thereof.
4.13. Disposition of Proceeds of Asset Sales.
--------------------------------------
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, consummate any Asset Sale unless:
(i) the Company or the applicable Restricted Subsidiary, as the
case may be, receives consideration at the time of such Asset Sale at least
equal to the fair market value of the assets sold or otherwise disposed;
(ii) at least 80% of the consideration received by the Company or
the Restricted Subsidiary, as the case may be, from such Asset Sale is cash
or Cash Equivalents and is received at the time of such disposition;
provided that, for purposes of this Section 4.13 "cash" shall include the
--------
amount of any liabilities of the Company or a Restricted Subsidiary that
are assumed by the transferee of assets in such Asset Sale (excluding any
liability incurred in connection with or in anticipation of such Asset
Sale), but only to the extent that such assumption is without further
recourse to the Company and the Restricted Subsidiaries; and
(iii) upon the consummation of an Asset Sale, the Company applies,
or causes such Restricted Subsidiary to apply, or enters into, or causes
such Restricted Subsidiary to enter into, a binding commitment to apply,
any Net Cash Proceeds within 270 days of receipt thereof (it being
understood that any binding commitment to so apply must be consummated
within 360 days of such receipt) either (A) to reinvest in Productive
Assets, or (B) to repay or prepay Indebtedness (other than non-recourse
Indebtedness) of any Restricted Subsidiary, or (C) to repay or prepay any
Indebtedness of the Company that is secured by a Lien permitted to be
incurred pursuant to Section 4.11, or (D) to the extent not applied
pursuant to the immediately preceding clauses (A), (B) or (C), pro rata
(based on the aggregate principal amount of the Securities and such other
Indebtedness then outstanding) to (I) the repayment or prepayment of any
Indebtedness of the Company (other than the Securities and any Indebtedness
subordinated to the Securities) that is at the time redeemable or
prepayable (and is so redeemed or prepaid) and (II) purchase Securities
tendered to the Company for purchase at a price equal to 100% of the
principal amount thereof, plus in each case accrued and unpaid interest, if
any, to the date of purchase pursuant to an offer to purchase made by the
Company as set forth below (an "Asset Sale Offer"); provided, however, that
-------- -------
if at any time any non-cash consideration received by the Company or any
Restricted Subsidiary, as the case may be, in connection with any Asset
Sale is
<PAGE>
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converted into or sold or otherwise disposed of for cash, then such
conversion or disposition shall be deemed to constitute an Asset Sale
hereunder and the Net Cash Proceeds thereof shall be applied in accordance
with this clause (iii); provided, further, however, that the Company may
-------- ------- -------
defer making an Asset Sale Offer until the aggregate Net Cash Proceeds from
Asset Sales to be applied equal or exceed $5,000,000.
Each notice of an Asset Sale Offer shall be mailed, by first class
mail, by the Company to all Holders of Securities as shown on the applicable
register of holders of Securities, with a copy to the Trustee and the Paying
Agent (such copy to be accompanied by an Officers' Certificate stating that all
conditions precedent contained herein to such Asset Sale Offer have been
complied with). The notice, which shall govern the terms of the Asset Sale
Offer, shall include such disclosures as are required by law and shall state:
(1) that the Asset Sale Offer is being made pursuant to this Section
4.13;
(2) the purchase price (including the amount of accrued interest, if
any) and the purchase date, which shall be not less than 30 days nor more
than 45 days from the date such notice is mailed (but in no event less than
three Business Days after the Asset Sale Offer has expired) (the "Asset
Sale Purchase Date"), except as otherwise required by law;
(3) the amount of Net Cash Proceeds available to repurchase
Securities;
(4) that any Security or portion thereof not tendered or accepted for
payment will continue to accrue interest in accordance with the terms
thereof;
(5) that, unless the Company shall default in the payment of the Net
Cash Proceeds, any Security or portion thereof accepted for payment
pursuant to the Asset Sale Offer shall cease to accrue interest after the
Asset Sale Purchase Date;
(6) that Holders electing to have Securities purchased in whole or in
part in integral multiples of $1,000 in principal amount, pursuant to an
Asset Sale Offer will be required to surrender their Securities to the
Paying Agent at the address specified in the notice prior to 5:00 p.m., New
York City time, on the date the Asset Sale Offer expires and must complete
any form of letter of transmittal proposed by the Company and reasonably
acceptable to the Trustee and the Paying Agent;
(7) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than 5:00 p.m., New York City time, on the
date the Asset Sale Offer expires, a telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of
Securities the Holder delivered for purchase, the Security certificate
number and a statement that such Holder is withdrawing its election to have
such Securities or portions thereof purchased;
(8) that if the aggregate principal amount of Securities properly
tendered by Holders exceeds the Net Cash Proceeds available to repurchase
Securities in the Asset Sale Offer, the Company shall repurchase Securities
on a pro rata basis (based upon the aggregate principal amount tendered by
each Holder, using the procedures set forth in Section 3.02);
(9) that Holders whose Securities are purchased only in part will be
issued new Securities equal in principal amount to the unpurchased portion
of the Securities surrendered;
<PAGE>
-46-
(10) the instructions that Holders must follow in order to tender
their Securities; and
(11) information concerning the business of the Company, the most
recent annual and quarterly reports of the Company filed with the SEC
pursuant to the Exchange Act (or, if the Company is not permitted to file
any such reports with the Commission, the comparable reports prepared
pursuant to Section 4.07), a description of material developments in the
Company's business, information with respect to pro forma historical
--- -----
financial information after giving effect to such Asset Sale and Asset Sale
Offer and such other information concerning the circumstances and relevant
facts regarding such Asset Sale Offer as would be material to a Holder of
Securities in connection with the decision of such Holder as to whether or
not it should tender Securities pursuant to the Asset Sale Offer.
Portions of Securities tendered for purchase shall be in principal amounts equal
to $1,000 or integral multiples thereof.
On the date the Asset Sale Offer expires, the Company shall accept for
payment, on a pro rata basis, Securities or portions thereof tendered pursuant
to the Asset Sale Offer. Prior to 11 a.m. on the second Business Day
immediately prior to the Asset Sale Purchase Date, the Company shall deliver to
the Trustee the Securities so accepted together with an Officers' Certificate
setting forth the Securities or portions thereof tendered to and accepted for
payment by the Company. Prior to 11:00 a.m. on the Asset Sale Purchase Date, the
Company shall (i) deposit with the Paying Agent money, in immediately available
funds, in an amount sufficient to pay the Net Cash Proceeds of all Securities or
portions thereof so tendered and accepted and (ii) the Paying Agent shall
promptly mail or deliver to Holders of Securities so accepted payment in an
amount equal to the Net Cash Proceeds, and the Trustee shall promptly
authenticate and mail or deliver to such Holders a new Security equal in
principal amount to any unpurchased portion of the Security surrendered. Any
Securities not so accepted shall be promptly mailed or delivered by the Company
to the Holder thereof. The Company will publicly announce the results of the
Asset Sale Offer not later than the first Business Day following the Asset Sale
Purchase Date.
To the extent that the aggregate principal amount of Securities
tendered pursuant to an Asset Sale Offer is less than the amount of Net Cash
Proceeds available therefor, the Company may use any remaining portion of such
available Net Cash Proceeds not required to fund the repurchase of tendered
Securities for any purposes otherwise permitted by this Indenture. Upon
consummation of any Asset Sale Offer, the amount of Net Cash Proceeds from the
Asset Sale in question to be the subject of future Asset Sale Offers shall be
deemed to be zero. For purposes of this Section 4.13, the Trustee shall act as
Paying Agent.
The Company shall comply with the requirements of Rule 14e-1 of the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Securities pursuant to an Asset Sale Offer. To the extent the
provisions of any such rule conflict with the provisions of this Indenture
relating to an Asset Sale Offer, the Company shall comply with the provisions of
such rule and be deemed not to have breached its obligations relating to such
Asset Sale Offer by virtue thereof.
4.14. Limitation on Transactions with Affiliates.
------------------------------------------
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, enter into or amend any transaction (including,
without limitation, the purchase, sale, lease or exchange of any property, the
guaranteeing of any Indebtedness or the rendering of any service) with or for
the
<PAGE>
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benefit of any of its Affiliates (an "Affiliate Transaction") other than any
Affiliate Transaction or Affiliate Transactions that are on terms that are no
less favorable to the Company than those that might reasonably have been
obtained at such time in a comparable transaction by the Company on an arm's-
length basis from a Person that is not an Affiliate; provided, however, that for
-------- -------
a transaction or series of related transactions involving value of $1,000,000 or
more, such determination shall be made in good faith by a majority of the
disinterested members of the Board of Directors, if any; provided, further,
-------- -------
however, that for a transaction or series of related transactions involving
- -------
value of $5,000,000 or more, the Board of Directors shall have received, prior
to the consummation thereof, an opinion from a nationally recognized investment
banking, accounting or appraisal firm that such Affiliate Transaction is fair,
from a financial point of view, to the Holders of the Securities.
The foregoing provisions shall not prohibit or restrict (a)
transactions between the Company and a Restricted Subsidiary of the Company or
among Restricted Subsidiaries of the Company, (b) Restricted Payments and
Permitted Investments made in accordance with Section 4.09, (c) the payment of
reasonable and customary fees to directors of the Company who are not employees
of the Company and the payment of reasonable and customary compensation for
director and Board of Director observer fees, meeting expenses, insurance
premiums and indemnities, to the extent permitted by law, (d) making loans or
advances to officers, employees or consultants of the Company and the Restricted
Subsidiaries (including travel and moving expenses) in the ordinary course of
business for bona fide business purposes of the Company or such Restricted
---------
Subsidiary (e) any employment or option agreement entered into by the Company or
any Restricted Subsidiary in the ordinary course of business that is approved by
the Board of Directors, (f) Affiliate Transactions in existence, or for which
rights or agreements are in existence, on the Issue Date, in each case as in
effect on the Issue Date and as amended thereafter as long as such amendment is
not materially adverse to the interests of the Holders of the Securities as
determined in good faith by the Board of Directors, (g) the issuance of stock
options (and shares of stock upon the exercise thereof) pursuant to any stock
option plan approved by the Board of Directors and shareholders of the Company
and (h) Affiliate Transactions pursuant to or contemplated by the SingTel
Documents, in each case as in effect on the Issue Date and as amended thereafter
as long as such amendment is not materially adverse to the interests of the
Holders of the Securities as determined in good faith by the Board of Directors.
4.15. Limitation on Restricted and Unrestricted Subsidiaries.
------------------------------------------------------
The Board of Directors may (subject to the penultimate paragraph of
this Section 4.15), if no Default or Event of Default shall have occurred and be
continuing or would arise therefrom, designate an Unrestricted Subsidiary to be
a Restricted Subsidiary; provided, however, that (i) any such redesignation
-------- -------
shall be deemed to be an incurrence as of the date of such redesignation by the
Company and the Restricted Subsidiaries of the Indebtedness (if any) of such
redesignated Subsidiary for purposes of Section 4.08; and (ii) unless such
redesignated Subsidiary shall not have any Indebtedness outstanding, other than
Indebtedness which would be Permitted Indebtedness, no such designation shall be
permitted if immediately after giving effect to such redesignation and the
incurrence of any such additional Indebtedness, the Company could not incur
$1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to
the Leverage Ratio set forth in Section 4.08. The Board of Directors also may,
if no Default or Event of Default shall have occurred and be continuing or would
arise therefrom, designate any Restricted Subsidiary to be an Unrestricted
Subsidiary if (a) such designation is at that time permitted under Section 4.09
and (b) immediately after giving effect to such designation, the Company could
incur $1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to the Leverage Ratio set forth in Section 4.08. Any such designation
by the Board of Directors shall be evidenced to the Trustee by the filing with
the Trustee of a Board Resolution giving effect to such designation or
redesignation and an Officers' Certificate certifying that such designation or
redesignation complied with the foregoing conditions and setting forth in
reasonable detail the underlying calculations.
<PAGE>
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For purposes of the covenant described in Section 4.09, (x) an
"Investment" shall be deemed to have been made at the time any Restricted
Subsidiary is designated as an Unrestricted Subsidiary in an amount
(proportionate to the Company's equity interest in such Subsidiary) equal to the
net worth of such Restricted Subsidiary at the time that such Restricted
Subsidiary is designated as an Unrestricted Subsidiary; (y) at any date the
aggregate of all Restricted Payments made as Investments since the Issue Date
shall exclude and be reduced by an amount (proportionate to the Company's equity
interest in such Subsidiary) equal to (A) the amount of Investments in any
Unrestricted Subsidiary that becomes a Restricted Subsidiary after the date of
such Investment or (B) the net worth of any Unrestricted Subsidiary at the time
that such Unrestricted Subsidiary is designated a Restricted Subsidiary, not to
exceed, in the case of any such redesignation of an Unrestricted Subsidiary as a
Restricted Subsidiary, the amount of Investments previously made by the Company
and the Restricted Subsidiaries in such Unrestricted Subsidiary that were
treated as Restricted Payments under this Indenture (in each case (x) and (y)
"net worth" to be calculated based upon the fair market value of the assets of
such Subsidiary as of any such date of designation); and (z) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its fair
market value at the time of such transfer.
Notwithstanding the foregoing, the Board of Directors may not
designate any Subsidiary of the Company to be an Unrestricted Subsidiary if,
after such designation, (A) the Company or any other Restricted Subsidiary (i)
provides credit support for, or a guarantee of, any Indebtedness of such
Subsidiary (including any undertaking, agreement or instrument evidencing such
Indebtedness) or (ii) is directly or indirectly liable for any Indebtedness of
such Subsidiary, (B) a default with respect to any Indebtedness of such
Subsidiary (including any right which the holders thereof may have to take
enforcement action against such Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Indebtedness of the Company or any
Restricted Subsidiary to declare a default on such other Indebtedness or cause
the payment thereof to be accelerated or payable prior to its final scheduled
maturity or (C) such Subsidiary owns any Capital Stock of, or owns or holds any
Lien on any property of, any Restricted Subsidiary which is not a Subsidiary of
the Subsidiary to be so designated.
Subsidiaries of the Company that are not designated by the Board of
Directors as Restricted or Unrestricted Subsidiaries will be deemed to be
Restricted Subsidiaries. Notwithstanding any provisions of this covenant, all
Subsidiaries of an Unrestricted Subsidiary will be Unrestricted Subsidiaries.
4.16. Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries.
----------------------------------------------
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, create or otherwise cause or permit to exist or
become effective any encumbrance or restriction on the ability of any Restricted
Subsidiary to: (a) pay dividends or make any other distributions on its Capital
Stock, (b) make loans or advances or to pay any Indebtedness or other obligation
owed to the Company or any Restricted Subsidiary, (c) guarantee any Indebtedness
or any other obligation of the Company or any Restricted Subsidiary, or (d)
transfer any of its property or assets to the Company or any Restricted
Subsidiary (each of the foregoing restrictions, a "Payment Restriction"), except
for such encumbrances or restrictions existing under or by reason of (i)
applicable law, (ii) this Indenture, (iii) customary non-assignment provisions
of any lease or other agreement of the Company or any Restricted Subsidiary,
(iv) any instrument governing Acquired Indebtedness, which encumbrance or
restriction was not incurred in connection with, as a result of, or in
anticipation of the incurrence of such Indebtedness and 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, (v) instruments governing
Indebtedness of Restricted Subsidiaries in respect of Vendor Financing
Arrangements incurred in accordance with the terms of this Indenture, (vi)
agreements existing on the Issue Date as such agreements are
<PAGE>
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from time to time in effect; provided, however, that any amendments or
-------- -------
modifications of such agreements which affect the encumbrances or
restrictions of the types subject to this covenant shall not result in such
encumbrances or restrictions being less favorable to the Company in any material
respect, as determined in good faith by the Board of Directors, than the
provisions as in effect before giving effect to the respective amendment or
modification, (vii) an agreement effecting a refinancing, replacement or
substitution of Indebtedness issued, assumed or incurred pursuant to an
agreement described in clause (iv), (v) or (vi) of this Section 4.16; provided,
--------
however, that the provisions relating to such encumbrance or
- -------
restriction contained in any such refinancing, replacement or substitution
agreement are not less favorable to the Company in any material respect as
determined in good faith by the Board of Directors than the provisions relating
to such encumbrance or restriction contained in agreements referred to in such
clause (iv), (v) or (vi) of this Section 4.16, (viii) Liens permitted under this
Indenture to the extent that such Liens restrict the transfer of the asset or
assets subject thereto, and (ix) with respect to clause (d) above, purchase
money obligations for property acquired in the ordinary course of business
pursuant to ordinary business terms.
4.17. Escrow Account.
--------------
The Company shall, on the date of this Indenture, enter into the
Escrow Agreement and, pursuant thereto, shall place the Initial Escrow Amount
(as defined in the Escrow Agreement) in the Escrow Account held by the Escrow
Agent for the benefit of the Holders of the Securities and the Trustee.
4.18. Limitation on Sale and Leaseback Transactions.
---------------------------------------------
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, enter into any Sale and Leaseback Transaction,
except that the Company or any Restricted Subsidiary may enter into a Sale and
Leaseback Transaction if (i) after giving effect to such Sale and Leaseback
Transaction (the Indebtedness thereunder being equivalent to the Attributable
Value thereof) (A) the Company could incur at least $1.00 of additional
Indebtedness in compliance with the Leverage Ratio set forth in Section 4.08,
provided that in the case of a Restricted Subsidiary, the Indebtedness incurred
- --------
in such Sale and Leaseback Transaction was Indebtedness in respect of a Vendor
Financing Arrangement, or (B) the Indebtedness incurred in such Sale and
Leaseback could have been incurred as (and shall be deemed incurred as)
Permitted Indebtedness under clauses (e), (f), or (g) thereof, and (ii) the Sale
and Leaseback Transaction is effected in accordance with the requirements of
Section 4.13.
4.19. Limitation on Line of Business.
------------------------------
For so long as any Securities are outstanding, the Company shall, and
shall cause any Restricted Subsidiary to, engage in all material respects in the
business of (i) communications services, including facsimile transmission and
delivery services and voice, video or data transmission and delivery services,
(ii) utilizing their facilities for any commercial purpose permitted by
applicable regulation, and (iii) evaluating, participating or pursuing any other
activity or opportunity that is ancillary or related to those identified in (i)
or (ii) above (including pursuant to acquisitions of entities or divisions or
lines of business of entities in the foregoing business) (together, the
"Electronic Messaging Business"); notwithstanding the foregoing, however,
ownership by the Company or any Restricted Subsidiary of stock in any
Unrestricted Subsidiary, or any other entity which is not a Restricted
Subsidiary, shall not be deemed to violate this covenant.
<PAGE>
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4.20. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
The Company covenants (to the extent that it may lawfully do so) that
it shall 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
Securities as contemplated herein, wherever enacted, now or at any time
hereafter in force, or which may affect the covenants or the performance of this
Indenture; and (to the extent that it may lawfully do so) the Company hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
4.21. Further Assurances to the Trustee.
---------------------------------
The Company shall, upon the request of the Trustee, execute and
deliver such further instruments and do such further acts as may be reasonably
necessary or proper to carry out more effectively the provisions of this
Indenture.
ARTICLE FIVE
SUCCESSOR CORPORATION
5.01. When Company May Merge, etc.
---------------------------
The Company shall not, in any transaction or series of transactions,
merge or consolidate with or into, or sell, assign, convey, transfer, lease or
otherwise dispose of all or substantially all of its properties and assets as an
entirety to, any Person or Persons, and the Company shall not permit any
Restricted Subsidiary to enter into any such transaction or series of related
transactions if such transaction or series of transactions, in the aggregate,
would result in a direct or indirect sale, assignment, conveyance, transfer,
lease or other disposition of all or substantially all of the properties and
assets of the Company or the Company and the Restricted Subsidiaries, taken as a
whole, to any other Person or Persons, unless at the time of and after giving
effect thereto (i) either (x) if the transaction or series of transactions is a
merger or consolidation involving the Company, the Company shall be the
surviving Person of such merger or consolidation, or (y) the Person formed by
such consolidation or into which the Company is merged or to which the
properties and assets of the Company or such Restricted Subsidiary, as the case
may be, are sold, assigned, conveyed, transferred, leased or otherwise disposed
of (including, with respect to the Restricted Subsidiaries, by merger or
consolidation) (any such surviving Person or Persons of such merger or
consolidation or to whom such sale, assignment, conveyance, lease or other
disposition has been made 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
reasonably satisfactory to the Trustee, all the obligations of the Company under
the Securities, this Indenture and, if then in effect, the Registration Rights
Agreement, and the Escrow Agreement, and in each case, this Indenture and, if
then in effect, the Registration Rights Agreement, and the Escrow Agreement
shall remain in full force and effect; (ii) immediately before and immediately
after giving effect to such transaction or series of transactions on a pro forma
--- -----
basis (including, without limitation, any Indebtedness incurred or anticipated
to be incurred in connection with or in respect of such transaction or series of
transactions), no Default or Event of Default shall have occurred and be
continuing and the Company or the
<PAGE>
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Surviving Entity, as the case may be, after giving effect to such transaction or
series of transactions on a pro forma basis (including, without
--- -----
limitation, any Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction or series of transactions),
could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to the Leverage Ratio set forth in Section 4.08; and (iii) immediately
after giving effect to such transaction or series of transactions on a pro forma
--- -----
basis (including, without limitation, any Indebtedness incurred or
anticipated to be incurred in connection with or in respect of such transaction
or series of transactions), the Consolidated Net Worth of the Company or the
Surviving Entity, as the case may be, is at least equal to the Consolidated Net
Worth of the Company immediately before such transaction or series of
transactions.
In connection with any transaction contemplated by this Section 5.01,
the Company shall deliver, or cause to be delivered, to the Trustee an Officers'
Certificate and an Opinion of Counsel, each in form and substance reasonably
satisfactory to the Trustee, each stating that such consolidation, merger,
transfer, lease, assignment or other disposition and the supplemental indenture
in respect thereof complies with the requirements under this Indenture.
For all purposes of this Indenture and the Securities (including the
provisions of this Section 5.01 and Section 5.02 and the covenants described in
Sections 4.08, 4.11 and 4.15), Subsidiaries of any Surviving Entity will, upon
such transaction or series of transactions, become Restricted Subsidiaries or
Unrestricted Subsidiaries as provided pursuant to the covenant described in
Section 4.15 and all Indebtedness, and all Liens on property or assets, of the
Company and the Restricted Subsidiaries immediately prior to such transaction or
series of transactions shall be deemed to have been incurred upon such
transaction or series of transactions.
5.02. Successor Substituted.
---------------------
Upon any consolidation or merger or any sale, assignment, conveyance,
transfer, lease or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof in which the Company is
not the continuing corporation, the successor corporation formed by such a
consolidation or into which the Company is merged or to which such transfer is
made 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 corporation had been named as the Company herein, and thereafter,
except in the case of a lease, the predecessor corporation shall be relieved of
all obligations and covenants under this Indenture, the Securities, and if then
in effect, the Registration Rights Agreement; provided, however, that solely for
-------- -------
purposes of calculating Cumulative EBITDA in connection with Section 4.09, any
such successor Person shall only be deemed to have succeeded to and be
substituted for the Company with respect to periods subsequent to the effective
time of such merger, consolidation or sale, assignment, conveyance, transfer,
lease or other disposition of assets.
<PAGE>
-52-
ARTICLE SIX
REMEDIES
6.01. Events of Default.
-----------------
An "Event of Default" means any of the following events:
(a) the failure to pay interest on the Securities when the same become
due and payable and the Default continues for a period of 30 days;
(b) the failure to pay the principal of any Security when such
principal becomes due and payable, at maturity, upon acceleration,
redemption, pursuant to a required offer to purchase or otherwise;
(c) a default in the observance or performance of any other covenant
or agreement contained in the Securities, this Indenture or the Escrow
Agreement which Default continues for a period of 60 days after the Company
receives written notice thereof from the Trustee specifying the default and
stating that such notice is a "Notice of Default" hereunder or the Company
and the Trustee receive such notice from Holders of at least 25% in
aggregate principal amount of the outstanding Securities;
(d) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any Material Subsidiary
(or the payment of which is guaranteed by the Company or any Material
Subsidiary), whether such Indebtedness or guarantee now exists, or is
created after the Issue Date, which default (i) is caused by a failure to
pay principal, at the final stated maturity thereof, on such Indebtedness
(which failure continues beyond any applicable grace period) (a "Payment
Default") or (ii) results in the acceleration of such Indebtedness prior to
its express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $5,000,000 or more and with
respect to such clauses (i) and (ii) such Payment Default or acceleration
has not been rescinded or annulled or such Indebtedness discharged or paid
in full in cash within 20 days;
(e) one or more judgments in an aggregate amount in excess of
$5,000,000 (unless covered by insurance by a reputable insurer as to which
the insurer has acknowledged coverage) being rendered against the Company
or any of its Material Subsidiaries and such judgments remain undischarged
or unstayed for a period of 60 days after such judgment or judgments become
final and non-appealable;
(f) the Company or any Material Subsidiary of the Company pursuant to
or under or within the meaning of any Bankruptcy Law:
(i) commences a voluntary case or proceeding;
(ii) consents to the entry of an order for relief against it in
an involuntary case or proceeding;
<PAGE>
-53-
(iii) consents to the appointment of a Custodian of it or for
all or substantially all of its property;
(iv) makes a general assignment for the benefit of its creditors;
or
(v) shall generally not pay its debts when such debts become due
or shall admit in writing its inability to pay its debts generally;
(g) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any Material Subsidiary
of the Company in an involuntary case or proceeding,
(ii) appoints a Custodian of the Company or any Material
Subsidiary of the Company for all or substantially all of its
properties, or
(iii) orders the liquidation of the Company or any Material
Subsidiary of the Company,
and in each case the order or decree remains unstayed and in effect for 60
days; or
(h) any holder or holders of at least $5,000,000 in aggregate
principal amount of Indebtedness of the Company or any Material Subsidiary
shall foreclose upon assets of the Company or any Material Subsidiary
having an aggregate fair market value, individually or in the aggregate, of
at least $5,000,000 or shall have otherwise taken ownership of such assets
pursuant to any right under applicable law or applicable security documents
in lieu of foreclosure.
6.02. Acceleration.
------------
Upon the happening of any Event of Default (other than as specified in
Section 6.01(f) or (g) with respect to the Company), the Trustee, by written
notice to the Company, or the Holders of not less than 25% in principal amount
of the Securities then outstanding, by written notice to the Trustee and the
Company, in each case specifying the respective Event of Default and that it is
a "notice of acceleration" (the "Acceleration Notice"), may declare all unpaid
principal amount of and accrued but unpaid interest, if any, on all the
Securities to be due and payable immediately, upon which declaration, the same
shall become immediately due and payable, notwithstanding anything else
contained in the Securities or this Indenture to the contrary. If an Event of
Default specified in Section 6.01(f) or (g) with respect to the Company occurs
and is continuing, then such amount shall ipso facto become and be immediately
---- -----
due and payable without any declaration or other act on the part of the Trustee
or any Holder of Securities.
At any time after a declaration of acceleration with respect to the
Securities as described in the preceding paragraph but before a judgment or
decree of money due in respect of the Securities has been obtained, the Holders
of not less than a majority in principal amount of the Securities then
outstanding by written notice to the Company and the Trustee, may rescind such
declaration and its consequences 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 Securities, (iii) the principal of and premium, if
<PAGE>
-54-
any, on any Securities which have become due otherwise than by such declaration
of acceleration and interest thereon at the rate borne by the Securities, and
(iv) to the extent that payment of such interest is lawful, interest upon
overdue interest and overdue principal at the rate provided for in the
Securities 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 (c) all Events of Default, other than
the non-payment of principal of, premium, if any, and interest on the Securities
that have 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 subsequent therein.
6.03. Other Remedies.
--------------
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of the principal of, premium, if any, or interest on the Securities or
to enforce the performance of any provision of the Securities or this Indenture.
All rights of action and claims under this Indenture or the Securities
may be enforced by the Trustee even if it does not possess any of the Securities
or does not produce any of them in the proceeding. A delay or omission by the
Trustee or any Holder in exercising any right or remedy accruing upon an Event
of Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default. No remedy is exclusive of any other
remedy. All available remedies are cumulative to the extent permitted by law.
6.04. Waiver of Past Defaults.
-----------------------
Prior to the declaration of acceleration of the Securities, the
Holders of not less than a majority in principal amount of the Securities by
notice to the Trustee may, on behalf of the Holders of all the Securities, waive
any existing Default or Event of Default and its consequences under this
Indenture, except a Default or Event of Default specified in Section 6.01(a) or
(b) or in respect of any provision hereof which cannot be amended without the
consent of each Holder so affected pursuant to Section 9.02. When a Default or
Event of Default is so waived, it shall be deemed cured and shall cease to
exist. This paragraph of this Section 6.04 shall be in lieu of (S) 316(a)(1)(B)
of the TIA and such (S) 316(a)(1)(B) of the TIA is hereby expressly excluded
from this Indenture and the Securities, as permitted by the TIA.
6.05. Control by Majority.
-------------------
The Holders of not less than a majority in aggregate principal amount
of the then outstanding Securities shall have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee, provided,
--------
however, that the Trustee may refuse to follow any direction (a) that conflicts
- -------
with any rule of law or this Indenture, (b) that the Trustee determines may be
unduly prejudicial to the rights of another Securityholder, or (c) that may
expose the Trustee to personal liability for which reasonable indemnity provided
to the Trustee against such liability shall be inadequate in the Trustee's sole
discretion; provided, further, however, that the Trustee may take any other
-------- ------- -------
action deemed proper by the Trustee that is not inconsistent with such
direction. This Section 6.05 shall be in lieu of (S) 316(a)(1)(A) of the TIA,
and such (S)(S) 316(a)(1)(A) of the TIA is hereby expressly excluded from this
Indenture and the Securities, as permitted by the TIA.
<PAGE>
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6.06. Limitation on Suits.
-------------------
No Holder of any Securities shall have any right to institute any
proceeding with respect to this Indenture or the Securities or any remedy
hereunder unless the Holders of at least 25% in aggregate principal amount of
the outstanding Securities have made written request, and offered reasonable
indemnity, to the Trustee to institute such proceeding as Trustee under the
Securities and this Indenture, the Trustee has failed to institute such
proceeding within 30 days after receipt of such notice, request and offer of
indemnity and the Trustee, within such 30-day period, has not received
directions inconsistent with such written request by Holders of not less than a
majority in aggregate principal amount of the outstanding Securities.
The foregoing limitations shall not apply to a suit instituted by a
Holder of a Security for the enforcement of the payment of the principal of,
premium, if any, or interest on, such Security on or after the respective due
dates expressed or provided for in such Security.
A Holder may not use this Indenture to prejudice the rights of any
other Holders or to obtain priority or preference over such other Holders.
6.07. Right of Holders To Receive Payment.
-----------------------------------
Notwithstanding any other provision in this Indenture, the right of
any Holder of a Security to receive payment of the principal of, premium, if
any, and interest on such Security, on or after the respective due dates
expressed or provided for in such Security, or to bring suit for the enforcement
of any such payment on or after the respective due dates, is absolute and
unconditional and shall not be impaired or affected without the consent of the
Holder.
6.08. Collection Suit by Trustee.
--------------------------
If an Event of Default specified in clause (a) or (b) of Section 6.01
occurs and is continuing, the Trustee may recover judgment in its own name and
as trustee of an express trust against the Company, or any other obligor on the
Securities for the whole amount of the 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 provided for by the
Securities and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
6.09. Trustee May File Proofs of Claim.
--------------------------------
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relative to the Company or the
Material Subsidiaries of the Company (or any other obligor upon the Securities),
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.
<PAGE>
-56-
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
Securities or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
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: to Holders for interest accrued on the Securities, ratably,
without preference or priority of any kind, according to the amounts due
and payable on the Securities for interest;
Third: to Holders for the principal amounts (including any premium)
owing under the Securities, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Securities for the
principal (including any premium); and
Fourth: the balance, if any, to the Company.
The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment to Securityholders pursuant to this
Section 6.10.
6.11. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court may in its discretion require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to any suit by the Trustee, any suit by a
Holder pursuant to Section 6.07, or a suit by a Holder or Holders of more than
10% in aggregate principal amount of the outstanding Securities.
6.12. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture or any Security and such proceeding has
been discontinued or abandoned for any reason, or has been determined adversely
to the Trustee or to such Holder, then and in every such case the Company, the
Trustee and the Holders shall, subject to any determination in such proceeding,
be restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
<PAGE>
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ARTICLE SEVEN
TRUSTEE
7.01. Duties.
------
(a) In case an Event of Default has occurred, the Trustee shall
exercise such rights and powers vested in it under this Indenture, and use the
same degree of care and skill in its exercise thereof, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default,
(i) the Trustee need perform only such duties as are specifically set
forth in this Indenture, and no implied covenants or obligations shall be
read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee shall
be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture, but the Trustee need not
verify the contents thereof.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that
(i) this paragraph does not limit the effect of paragraph (b) of this
Section 7.01;
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01, and
Section 7.02.
7.02. Rights of Trustee.
-----------------
Subject to Section 7.01 hereof and the provisions of TIA (S) 315:
<PAGE>
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(a) The Trustee may rely on any document reasonably believed by it to
be genuine and to have been signed or presented by the proper person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel and may require an Officers' Certificate or an Opinion of
Counsel, which shall conform to Sections 11.04 and 11.05. The Trustee
shall not be liable for any action it takes or omits to take in good faith
in reliance on such certificate or opinion.
(c) The Trustee may act through its attorneys and agents and shall not
be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action taken or omitted by
it in good faith and reasonably believed by it to be authorized or within
the discretion, rights or powers conferred upon it by this Indenture other
than any liabilities arising out of its own negligence.
(e) The Trustee may consult with counsel of its own choosing and the
advice or opinion of such counsel as to matters of law shall be full and
complete authorization and protection in respect of any action taken,
omitted or suffered by it hereunder in good faith and in accordance with
the advice or opinion of such counsel.
(f) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters
as it may see fit.
(g) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this
Indenture or the Escrow Agreement, unless such Holders shall have offered
to the Trustee reasonable security or indemnity against the costs,
expenses, fees and liabilities which may be incurred therein or thereby.
(h) The Trustee shall not be charged with knowledge of any Default or
Event of Default unless (i) a Trust Officer shall have actual knowledge
thereof or (ii) the Trustee shall have received written notice thereof
pursuant to Section 11.02 from the Company or any Holder.
7.03. Individual Rights of Trustee.
----------------------------
The Trustee, any Paying Agent, Registrar or any other agent of the
Company, in its individual or any other capacity, may become the owner or
pledgee of Securities and, subject to Sections 7.11 and 7.12 and TIA (S)(S) 310
and 311, may otherwise deal with the Company and its Subsidiaries with the same
rights it would have if it were not the Trustee, Paying Agent, Registrar or such
other agent.
7.04. Trustee's Disclaimer.
--------------------
The Trustee makes no representations as to the validity or sufficiency
of this Indenture or the Securities, it shall not be accountable for the
Company's use or application of the proceeds from the Securities, it shall not
be responsible for the use or application of any money received by any Paying
Agent other than the
<PAGE>
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Trustee and it shall not be responsible for any statement
in the Securities other than the Trustee's certificate of authentication.
7.05. Notice of Default.
-----------------
If a Default or an Event of Default occurs and is continuing and is
known to the Trustee, the Trustee shall mail at the Company's expense to each
Holder of the Securities notice of the Default or Event of Default within 30
days after obtaining knowledge thereof; provided, however, that, except in the
-------- -------
case of a Default or an Event of Default in the payment of the principal of,
premium, if any, or interest on any Security, or a failure to comply with
Sections 4.12, 4.13 or 5.01, the Trustee shall be protected in withholding such
notice if and so long as the board of directors, the executive committee of the
board of directors or a committee of the directors of the Trustee and/or Trust
Officers in good faith determines that the withholding of such notice is in the
interest of the Holders. This Section 7.05 shall be in lieu of the proviso to
(S) 315(b) of the TIA and such proviso to (S) 315(b) of the TIA is hereby
expressly exc luded from this Indenture and the Securities, as permitted by
the TIA.
7.06. Money Held in Trust.
-------------------
All moneys received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received,
but need not be segregated from other funds except to the extent required herein
or by law. The Trustee shall not be under any liability for interest on any
moneys received by it hereunder, except as the Trustee may agree with the
Company.
7.07. Reports by Trustee to Holders.
-----------------------------
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, the Trustee shall, to the extent that any of the
events described in TIA (S) 313(a) shall have occurred within the previous
twelve months, but not otherwise, mail to each Holder a brief report dated as of
such May 15 that complies with TIA (S) 313(a). The Trustee also shall comply
with TIA (S)(S) 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 Securities are listed.
The Company shall notify the Trustee in writing if the Securities
become listed on any securities exchange.
7.08. Compensation and Indemnity.
--------------------------
The Company covenants and agrees to pay the Trustee from time to time
reasonable compensation for its services. The Trustee's compensation shall not
be limited by any law on compensation of a trustee of an express trust. The
Company shall reimburse the Trustee upon request for all reasonable
disbursements, expenses and advances incurred or made by it. Such expenses
shall include the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel.
The Company shall indemnify the Trustee for, and hold it harmless
against, any loss or liability incurred by it arising out of or in connection
with the administration of this trust and its rights or duties hereunder or in
respect of the Escrow Agreement, including the costs and expenses of defending
itself against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder or
<PAGE>
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thereunder. The Trustee shall notify the Company promptly of any claim asserted
against the Trustee for which it may seek indemnity. The Company shall defend
the claim and the Trustee shall cooperate in the defense. The Trustee may have
separate counsel and the Company shall pay the reasonable fees and expenses of
such counsel. The Company need not pay for any settlement made without its prior
written consent, which shall not be unreasonably withheld. 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 Securities on all assets held or
collected by the Trustee and the Escrow Agent, in its capacity as Trustee,
except assets held in trust to pay the principal of, premium, if any, or
interest on particular Securities.
Without limiting any other rights available to the Trustee under
applicable law, when the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 6.01(f) or (g), the
expenses and the compensation for the services are intended to constitute
expenses of administration under any Bankruptcy Law.
The Company's obligations under this Section 7.08 and any Lien arising
hereunder shall survive the resignation or removal of any trustee, the discharge
of the Company's obligations pursuant to Article Eight and/or the termination of
this Indenture.
7.09. Replacement of Trustee.
----------------------
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the outstanding Securities may remove the
Trustee by so notifying the Company and the Trustee and may appoint a successor
trustee with the Company's prior written consent. The Company may remove the
Trustee if:
1. the Trustee fails to comply with Section 7.11;
2. the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
3. a receiver or other public officer takes charge of the Trustee or
its property; or
4. the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall notify each Holder of such
event and shall promptly appoint a successor Trustee. The Trustee shall be
entitled to payment of its fees and reimbursement of its expenses while acting
as Trustee, and to the extent such amounts remain unpaid, the Trustee that has
resigned or has been removed shall retain the Lien afforded by Section 7.08.
Within one year after the successor Trustee takes office, the Holders of a
majority in principal amount of the outstanding Securities may, with the
Company's prior written consent, appoint a successor Trustee to replace the
successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the Lien provided in Section 7.08, the resignation
or removal of the retiring
<PAGE>
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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 Securityholder.
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 Securities 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 permitted
to do so by the TIA may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.09, the Company's obligations under Section 7.08 shall continue for the
benefit of the retiring Trustee.
7.10. Successor Trustee by Merger, etc.
--------------------------------
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation or national banking association, the resulting, surviving or
transferee corporation or national banking association without any further act
shall, if such resulting, surviving or transferee corporation or national
banking association is otherwise eligible hereunder, be the successor Trustee.
7.11. Eligibility; Disqualification.
-----------------------------
There shall at all times be a Trustee hereunder which shall be
eligible to act as Trustee under TIA (S)(S) 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 (S) 310(b) (subject to the
penultimate paragraph thereof) and the Company shall co mp ly with TIA (S) 310.
7.12. Preferential Collection of Claims Against Company.
-------------------------------------------------
The Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S)(S) 311(b). If the present or any future Trustee
shall resign or be removed, it shall be subject to TIA (S) 311(a) to the extent
provided therein.
<PAGE>
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ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE
8.01. Termination of the Company's Obligations.
----------------------------------------
The Company may terminate its obligations under the Securities and
this Indenture, except those obligations referred to in the penultimate
paragraph of this Section 8.01, if all Securities previously authenticated and
delivered (other than destroyed, lost or stolen Securities which have been
replaced or paid or Securities for whose payment money has theretofore been
deposited with the Trustee or the Paying Agent in trust or segregated and held
in trust by the Company and thereafter repaid to the Company, as provided in
Section 8.04) have been delivered to the Trustee for cancellation and the
Company has paid all sums payable by it hereunder, or if:
(a) either (i) pursuant to Article Three, the Company shall have given
notice to the Trustee and mailed a notice of redemption to each Holder of
the redemption of all of the Securities under arrangements satisfactory to
the Trustee for the giving of such notice or (ii) all Securities have
otherwise become due and payable hereunder;
(b) 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, money in
such amount as is sufficient without consideration of reinvestment of such
interest, to pay the principal of, premium, if any, and interest on the
outstanding Securities to maturity or redemption, as certified in a
certificate of a nationally recognized firm of independent public
accountants or investment bankers; 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 Securities;
(c) no Default or Event of Default with respect to this Indenture or
the Securities shall have occurred and be continuing on the date of such
deposit or shall occur as a result of such deposit and such deposit will
not result in a breach or violation of, or constitute a default under, any
other instrument to which the Company is a party or by which it is bound;
(d) the Company shall have paid all other sums payable by it
hereunder; and
(e) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent providing for the termination of the Company's obligation under
the Securities and this Indenture have been complied with.
Notwithstanding the foregoing paragraph, the Company's obligations in
Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02 and 7.08 shall survive until the
Securities are no longer outstanding pursuant to the last paragraph of Section
2.08. After the Securities are no longer outstanding, the Company's obligations
in Sections 7.08, 8.04 and 8.05 shall survive.
After such delivery or irrevocable deposit the Trustee upon request
shall acknowledge in writing the discharge of the Company's obligations under
the Securities and this Indenture except for those surviving obligations
specified above.
<PAGE>
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8.02. Legal Defeasance and Covenant Defeasance.
----------------------------------------
(a) The Company may, at its option by Board Resolution, at any time,
with respect to the Securities, elect to have either paragraph (b) or paragraph
(c) below be applied to the outstanding Securities upon compliance with the
conditions set forth in paragraph (d).
(b) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (b), the Company shall be deemed to have been
released and discharged from its obligations with respect to the outstanding
Securities on the date the conditions set forth below are satisfied
(hereinafter, "legal defeasance"). For this purpose, such legal defeasance
means that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Securities, which shall thereafter
be deemed to be "outstanding" only for the purposes of paragraph (e) below and
the other Sections of and matters under this Indenture referred to in (i) and
(ii) below, and to have satisfied all its other obligations under such
Securities and this Indenture insofar as such Securities are concerned (and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (i) the rights of Holders of
outstanding Securities 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 Securities
when such payments are due, (ii) the Company's obligations with respect to such
Securities under Sections 2.05, 2.06, 2.07 and 4.02, and, with respect to the
Trustee, under Section 7.08, (iii) the rights, powers, trusts, duties and
immunities of the Trustee hereunder and (iv) this Article Eight. Subject to
compliance with this Section 8.02, the Company may exercise its option under
this paragraph (b) notwithstanding the prior exercise of its option under
paragraph (c) below with respect to the Securities.
(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 Article Five and in
Sections 4.07 (except to the extent required to be complied with by the TIA)
through 4.19 with respect to the outstanding Securities on and after the date
the conditions set forth below are satisfied (hereinafter, "covenant
defeasance"), and the Securities shall thereafter be deemed to be not
"outstanding" for the purpose of any direction, waiver, consent or declaration
or act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all other purposes
hereunder. For this purpose, such covenant defeasance means that, with respect
to the outstanding Securities, the Company may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document and such
omission to comply shall not constitute a Default or an Event of Default under
Section 6.01(c), but, except as specified above, the remainder of this Indenture
and such Securities shall be unaffected thereby.
(d) The following shall be the conditions to application of either
paragraph (b) or paragraph (c) above to the outstanding Securities:
(i) the Company shall irrevocably have deposited or caused to be
deposited with the Trustee as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Securities, (x)
cash, in United States dollars, (y) direct non-callable obligations of, or
non-callable obligations guaranteed by, the United States of America for
the payment of which guarantee or obligation the full faith and credit of
the United States is pledged ("U.S. Government Obligations") maturing as to
principal, premium, if
<PAGE>
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any, and interest in such amounts of cash, in United
States dollars, and at such times as are sufficient without consideration
of any reinvestment of such interest, to pay the principal of, premium, if
any, and interest on the outstanding Securities 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 to pay and discharge the principal of, premium, if any, and
interest on the outstanding Securities (except lost, stolen or destroyed
Securities which have been replaced or paid) on the Final Maturity Date or
on an earlier redemption date in accordance with the terms of this
Indenture and of such Securities; provided, however, that the Trustee shall
-------- -------
have received an irrevocable written order from the Company instructing the
Trustee to apply such money or the proceeds of such U.S. Government
Obligations to said payments with respect to the Securities; provided,
--------
further, that if the Securities are to be redeemed, either notice of such
-------
redemption shall have been given or the Company shall have given the
Trustee irrevocable directions to give notice of such redemption in the
name, and at the expense of the Company, under arrangements satisfactory to
the Trustee;
(ii) no Default or Event of Default or event which with notice or
lapse of time or both would become a Default or an Event of Default with
respect to the Securities shall have occurred and be continuing on the date
of such deposit (other than a Default or Event of Default relating to the
incurrence of Indebtedness to finance such defeasance) or, insofar as
Section 6.01(f) or (g) is concerned, at any time during the period ending
on the 91st day after the date of such deposit (it being understood that
this condition shall not be deemed satisfied until the expiration of such
period);
(iii) such legal defeasance or covenant defeasance shall not cause
the Trustee to have a conflicting interest with respect to any securities
of the Company;
(iv) such legal defeasance or covenant defeasance shall not result in
a breach or violation of, or constitute a default under, any material
agreement or instrument to which the Company is a party or by which it is
bound (other than this Indenture);
(v) in the case of an election under paragraph (b) above, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that (x)
the Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (y) since the date of this Indenture, there has
been a change in the applicable Federal income tax law, in either case to
the effect that, and based thereon such opinion shall confirm that, the
Holders of the outstanding Securities will not recognize income, gain or
loss for Federal income tax purposes as a result of such legal defeasance
and will be subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such legal
defeasance had not occurred;
(vi) in the case of an election under paragraph (c) above, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Holders of the outstanding Securities will not recognize income,
gain or loss for Federal income tax purposes as a result of such covenant
defeasance and will be subject to Federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such covenant defeasance had not occurred;
(vii) in the case of an election under either paragraph (b) or (c)
above, an Opinion of Counsel to the effect that, (x) the trust funds will
not be subject to any rights of any other holders of
<PAGE>
-65-
Indebtedness of the Company, and (y) after the 91st day following the
deposit, the trust funds will not be subject to the effect of any
applicable Bankruptcy Law;
provided, however, that if a court were to rule under any such law in any
-------- -------
case or proceeding that the trust funds remained property of the Company,
no opinion needs to be given as to the effect of such laws on the trust
funds except the following: (A) assuming such trust funds remained in the
Trustee's possession prior to such court ruling to the extent not paid to
Holders of Securities, the Trustee will hold, for the benefit of the
Holders of Securities, a valid and enforceable security interest in such
trust funds that is not avoidable in bankruptcy or otherwise, subject only
to principles of equitable subordination, (B) the Holders of Securities
will be entitled to receive adequate protection of their interests in such
trust funds if such trust funds are used, and (C) no property, rights in
property or other interests granted to the Trustee or the Holders of
Securities in exchange for or with respect to any of such funds will be
subject to any prior rights of any other person, subject only to prior
Liens granted under Section 364 of Title 11 of the U.S. Bankruptcy Code (or
any section of any other Bankruptcy Law having the same effect), but still
subject to the foregoing clause (B); and
(viii) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that (x) all conditions
precedent provided for relating to either the legal defeasance under
paragraph (b) above or the covenant defeasance under paragraph (c) above,
as the case may be, have been complied with and (y) if any other
Indebtedness of the Company shall then be outstanding or committed, such
legal defeasance or covenant defeasance will not violate the provisions of
the agreements or instruments evidencing such Indebtedness.
(e) All money and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee pursuant to paragraph (d) above in respect
of the outstanding Securities shall be held in trust and applied by the Trustee,
in accordance with the provisions of such Securities and this Indenture, to the
payment, either directly or through any Paying Agent (other than the Company or
any Affiliate of the Company) as the Trustee may determine, to the Holders of
such Securities of all sums due and to become due thereon in respect of the
principal, premium and interest, but such money need not be segregated from
other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to paragraph (d) above or the principal, premium, if any, and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding
Securities.
Anything in this Section 8.02 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request,
in writing, by the Company any money or U.S. Government Obligations held by it
as provided in paragraph (d) above which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, are in excess of the amount
thereof which would then be required to be deposited to effect an equivalent
legal defeasance or covenant defeasance.
8.03. Application of Trust Money.
--------------------------
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Sections 8.01 and 8.02, and shall apply the
deposited money and the money from U.S. Government Obligations in accordance
with this Indenture to the payment of the principal, premium, if any, and
interest on the Securities.
<PAGE>
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8.04. Repayment to Company.
--------------------
Subject to Sections 7.08, 8.01 and 8.02, the Trustee shall promptly
pay to the Company upon receipt by the Trustee of an Officers' Certificate, any
excess money, determined in accordance with Section 8.02, held by it at any
time. The Trustee and the Paying Agent shall pay to the Company, upon receipt
by the Trustee or the Paying Agent, as the case may be, of an Officers'
Certificate, any money held by it for the payment of principal, premium, if any,
or interest on the Securities that remains unclaimed for two years after payment
to the Holders is required; provided, however, that the Trustee and the Paying
-------- -------
Agent before being required to make any payment may, but need not, at the
expense of the Company cause to be published once in a newspaper of general
circulation in The City of New York or mail to each Holder entitled to such
money notice that such money remains unclaimed and that after a date specified
therein, which shall be at least 30 days from the date of such publication or
mailing, any unclaimed balance of such money then remaining will be repaid to
the Company. After payment to the Company, Holders entitled to money must look
solely to the Company for payment as general creditors unless an applicable
abandoned property law designates another person, and all liability of the
Trustee or Paying Agent with respect to such money shall thereupon cease.
8.05. Reinstatement.
-------------
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with this Indenture by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, then
and only then the Company's obligations under this Indenture and the Securities
shall be revived and reinstated as though no deposit had been made pursuant to
this Indenture until such time as the Trustee is permitted to apply all such
money or U.S. Government Obligations in accordance with this Indenture;
provided, however, that if the Company has made any payment of the principal of,
- -------- -------
premium, if any, or interest on any Securities because of the reinstatement of
its obligations, the Company shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the money or U.S. Government
Obligations held by the Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
9.01. Without Consent of Holders.
--------------------------
The Company, when authorized by a Board Resolution, and the Trustee
may amend, waive or supplement this Indenture, the Securities or the Escrow
Agreement without notice to or consent of any Holder:
(a) to cure any ambiguity, defect or inconsistency;
(b) to effect the assumption by a successor Person of all obligations
of the Company under the Securities, this Indenture, the Registration
Rights Agreement and the Escrow Agreement in connection with any
transaction complying with Article Five of this Indenture;
(c) to provide for uncertificated Securities in addition to
certificated Securities;
<PAGE>
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(d) to comply with any requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
(e) to provide for issuance of the Exchange Securities (which will
have terms substantially identical in all material respects to the Initial
Securities except that the transfer restrictions contained in the Initial
Securities will be modified or eliminated, as appropriate), and which will
be treated together with any outstanding Initial Securities, as a single
issue of securities; or
(f) to make any change that would provide any additional benefit or
rights to the Holders or that does not adversely affect the rights of any
Holder.
Notwithstanding the above, the Trustee and the Company may not make
any change that adversely affects the rights of any Holders hereunder or under
the Escrow Agreement. The Company shall be required to deliver to the Trustee
an Opinion of Counsel stating that any such change made pursuant to paragraph
(a) or (f) of this Section 9.01 does not adversely affect the rights of any
Holder.
9.02. With Consent of Holders.
-----------------------
Subject to Section 6.04, the Company, when authorized by a Board
Resolution, and the Trustee may waive, modify and amend this Indenture, the
Securities or the Escrow Agreement with the written consent of the Holders of
not less than two-thirds in aggregate principal amount of the then outstanding
Securities, and the Holders of not less than two-thirds in aggregate principal
amount of the then outstanding Securities by written notice to the Trustee may
waive future compliance by the Company with any provision of this Indenture or
the Securities.
Notwithstanding the provisions of this Section 9.02, without the
consent of each Holder affected thereby, a modification, amendment or waiver
(including pursuant to Section 6.04) may not, directly or indirectly:
(a) reduce the percentage in outstanding aggregate principal amount of
Securities the Holders of which must consent to an amendment, modification
or waiver of any provision of this Indenture, the Securities or the Escrow
Agreement;
(b) reduce the rate of or change the time for payment of interest,
including defaulted interest or Additional Interest, on any Security;
(c) reduce the principal amount outstanding of, or change the fixed
maturity of, any Security, or change the date on which any Security may be
subject to redemption, or reduce the redemption price therefor;
(d) make the principal of, premium, if any, or interest on any
Security payable in money other than that stated in the Security;
(e) modify Section 6.04 or Section 6.07, or modify this Section 9.02
(other than to add sections of this Indenture or the Securities which may
not be modified, amended or waived without the consent of each
Securityholder affected);
(f) impair the right to institute suit for the enforcement of any
payment on or with respect to the Securities;
<PAGE>
-68-
(g) waive a default in the payment of the principal of, premium, if
any, or interest on, or redemption with respect to, any Security (except a
rescission of acceleration of the Securities by two-thirds of the Holders
for non-payment defaults and a waiver of the consequences of such
acceleration);
(h) subordinate in right of payment, or otherwise subordinate, the
Securities to any other Indebtedness or obligation of the Company;
(i) upon or following the occurrence of a Change of Control, amend,
alter, change or modify the obligation of the Company to make and
consummate a Change of Control Offer with respect to such Change of Control
or waive any Default in the performance of any such offer or modify any of
the provisions or definitions with respect to any such offer; or
(j) directly or indirectly release the liens on the Escrow Collateral
except as permitted by the Escrow Agreement.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holder of each Security
affected thereby, with a copy to the Trustee, a notice briefly describing the
amendment, supplement or waiver. Any failure of the Company to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any amendment, supplement or waiver.
9.03. Compliance with Trust Indenture Act.
-----------------------------------
Every amendment, waiver or supplement to this Indenture or the
Securities shall comply with the TIA as then in effect; provided, however, that
-------- -------
this Section 9.03 shall not of itself require that this Indenture or the Trustee
be qualified under the TIA or constitute any admission or acknowledgment by any
party hereto that any such qualification is required prior to the time this
Indenture and the Trustee are required by the TIA to be so qualified.
9.04. Revocation and Effect of Consents.
---------------------------------
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder is a continuing consent by such Holder and every subsequent
Holder of that Security or portion of that Security that evidences the same debt
as the consenting Holder's Security, even if notation of the consent is not made
on any Security. However, any such Holder or subsequent Holder may revoke the
consent as to his Security or portion of a Security by written notice to the
Trustee received before the date on which the Trustee receives an Officers'
Certificate certifying that the Holders of the requisite principal amount of
Securities have consented (and not theretofore revoked such consent) to the
amendment, supplement or waiver. An amendment, supplement or waiver becomes
effective upon receipt by the Trustee of such Officers' Certificate and evidence
of consent by the Holders of the requisite percentage in principal amount of
outstanding Securities. Any revocation shall be effective only if the Trustee
receives the written notice of revocation before the date the amendment,
supplement or waiver becomes effective. Notwithstanding the above, nothing in
this paragraph shall impair the right of any Holder under (S) 316(b) of
the TIA.
<PAGE>
-69-
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, third and fourth sentences of the immediately preceding paragraph, those
persons who were Holders at such record date (or their duly designated proxies),
and only those persons, shall be entitled to consent to such amendment,
supplement or waiver or to revoke any consent previously given, whether or not
such persons continue to be Holders after such record date. Such consent shall
be effective only for actions taken within 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder unless it makes a change described in any of clauses (a)
through (j) of Section 9.02; if it makes such a change, the amendment,
supplement or waiver shall bind every subsequent Holder of a Security or portion
of a Security that evidences the same debt as the consenting Holder's Security.
9.05. Notation on or Exchange of Securities.
-------------------------------------
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee shall (in accordance with the specific direction of the Company)
request the Holder of the Security to deliver it to the Trustee. The Trustee
shall (in accordance with the specific direction of the Company) place an
appropriate notation on the Security 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 Security shall issue and the Trustee shall
authenticate a new Security that reflects the changed terms. Failure to make
the appropriate notation or issue a new Security shall not affect the validity
and effect of such amendment, supplement or waiver.
9.06. Trustee May Sign Amendments, etc.
--------------------------------
The Trustee shall sign any amendment, supplement or waiver authorized
pursuant to this Article Nine if the amendment, supplement or waiver does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may, but need not, sign it. In signing or refusing to
sign such amendment, supplement or waiver, the Trustee shall be entitled to
receive, and shall be fully protected in relying upon, an Officers' Certificate
and an Opinion of Counsel stating that the execution of any amendment,
supplement or waiver is authorized or permitted by this Indenture, that it is
not inconsistent herewith and that it will be valid and binding upon the Company
in accordance with its terms.
ARTICLE TEN
COLLATERAL AND SECURITY; CONTINGENT WARRANTS
10.01. Escrow Agreement.
----------------
(a) The due and punctual payment of the interest on the Securities
when and as the same shall be due and payable on an interest payment date, at
maturity or by acceleration, and interest on the overdue principal of and
interest (to the extent permitted by law), if any, on the Securities and
performance of all other obligations of the Company to the Holders of Securities
or the Trustee under this Indenture with respect to the Securities and the
Securities, according to the terms hereunder or thereunder, shall be secured as
provided in the Escrow Agreement which the Company, the Escrow Agent and the
Trustee have entered into simultaneously with the execution of this Indenture.
Upon the acceleration of the maturity of the Securities, the Escrow Agreement
will provide for the foreclosure by the Trustee of the net proceeds of the
Escrow Account. Each
<PAGE>
-70-
Holder of Securities, by its acceptance thereof, consents and agrees to the
terms of the Escrow Agreement (including, without limitation, the provisions
providing for foreclosure and disbursement of Collateral) as the same may be in
effect or may be amended from time to time in accordance with its terms and
authorizes and directs the Escrow Agent and the Trustee to enter into the Escrow
Agreement and to perform its obligations and exercise its rights thereunder in
accordance therewith. The Company shall deliver to the Trustee copies of the
Escrow Agreement, and shall do or cause to be done all such acts and things as
may be necessary or proper, or as may be required by the provisions of the
Escrow Agreement, to assure and confirm to the Trustee the security interest in
the Collateral contemplated by the Escrow Agreement or any part thereof, as from
time to time constituted, so as to render the same available for the security
and benefit of this Indenture with respect to, and of, the Securities, according
to the intent and purposes expressed in the Escrow Agreement. The Company shall
take any and all actions reasonably required to cause the Escrow Agreement to
create and maintain (to the extent possible under applicable law), as security
for the obligations of the Company hereunder, a valid and enforceable perfected
first priority Lien in and on all the Collateral, in favor of the Trustee for
the benefit of the Holders of Securities, superior to and prior to the rights of
all third Persons and subject to no other Liens. The Trustee and the Escrow
Agent shall have no responsibility for perfecting or maintaining the perfection
of the Trustee's security interest in the Collateral or for filing any
instrument, document or notice in any public office at any time or times.
(b) The Escrow Agreement shall further provide that in the event (i)
a portion of the Securities has been retired by the Company and there is no
Default or Event of Default under this Indenture and no Additional Interest is
accruing or remains unpaid, funds representing the interest payments which have
not previously been made on such retired Securities shall, upon the written
request of the Company to the Escrow Agent and the Trustee, be paid to the
Company upon compliance with Section 3(c) of the Escrow Agreement, the release
of collateral provisions of the TIA and upon receipt of a notice relating
thereto from the Trustee and (ii) if immediately prior to an interest payment
date on the Securities, the Company has deposited with the Trustee funds
sufficient to pay the interest on the Securities on such interest payment date,
and there is no Default or Event of Default under this Indenture and no
Additional Interest is accruing or remains unpaid, then funds representing a
like amount shall, upon the written request of the Company to the Escrow Agent
and the Trustee, be paid to the Company upon compliance with Section 3(d) of the
Escrow Agreement, the release of collateral provisions of the TIA and upon
receipt of a notice relating thereto from the Trustee.
10.02. Recording and Opinions.
----------------------
(a) The Company shall furnish to the Trustee simultaneously with the
execution and delivery of this Indenture an Opinion of Counsel either (i)
stating that in the opinion of such counsel all action has been taken with
respect to the recording, registering and filing of this Indenture, financing
statements or other instruments necessary to make effective the Lien intended to
be created by the Escrow Agreement and reciting the details of such action, or
(ii) stating that in the opinion of such counsel no such action is necessary to
make such Lien effective.
(b) The Company shall furnish to the Escrow Agent and the Trustee on
September 15, 1997, and on each September 15 thereafter until the date upon
which the balance of Available Funds (as defined in the Escrow Agreement) shall
have been reduced to zero, an Opinion of Counsel, dated as of such date, either
(i) stating that (A) in the opinion of such counsel, action has been taken with
respect to the recording, registering, filing, re-recording, re-registering and
refiling of all supplemental indentures, financing statements, continuation
statements or other instruments of further assurance as is necessary to maintain
the Lien of the Escrow Agreement and reciting the details of such action or
referring to prior Opinions of Counsel in which such details are given and (B)
based on relevant laws as in effect on the date of such Opinion of Counsel, all
<PAGE>
-71-
financing statements and continuation statements have been executed and filed
that are necessary as of such date and during the succeeding 12 months fully to
preserve and protect, to the extent such protection and preservation are
possible by filing, the rights of the Holders of Securities and the Trustee
hereunder and under the Escrow Agreement with respect to the security interests
in the Collateral or (ii) stating that, in the opinion of such counsel, no such
action is necessary to maintain such Lien and assignment.
10.03. Release of Collateral.
---------------------
(a) Subject to subsections (b), (c) and (d) of this Section 10.03,
Collateral may be released from the Lien and security interest created by the
Escrow Agreement only in accordance with the provisions of the Escrow Agreement.
(b) Except to the extent that any Lien on proceeds of Collateral is
automatically released by operation of Section 9-306 of the Uniform Commercial
Code or other similar law, no Collateral shall be released from the Lien and
security interest created by the Escrow Agreement pursuant to the provisions of
the Escrow Agreement, other than to the Holders pursuant to the terms thereof,
unless there shall have been delivered to the Trustee the certificate required
by Section 10.03(d) and Section 10.04.
(c) At any time when an Event of Default shall have occurred and be
continuing and the maturity of the Securities issued on the Issue Date shall
have been accelerated (whether by declaration or otherwise), no Collateral shall
be released pursuant to the provisions of the Escrow Agreement, and no release
of Collateral in contravention of this Section 10.03(c) shall be effective as
against the Holders of Securities, except for the disbursement of all Available
Funds (as defined in the Escrow Agreement) to the Trustee pursuant to Section
6(b) of the Escrow Agreement.
(d) The release of any Collateral from the Liens and security
interests created by this Indenture and the Escrow Agreement shall not be deemed
to impair the security under this Indenture in contravention of the provisions
hereof if and to the extent the Collateral is released pursuant to the terms
hereof or pursuant to the terms of the Escrow Agreement. To the extent
applicable, the Company shall cause TIA (S) 314(d) relating to the release of
property or securities from the Lien and security interest of the Escrow
Agreement to be complied with. Any certificate or opinion required by TIA
(S)4(d) may be made by an Officer of the Company except in cases where TIA (S)
314(d) requires that such certificate or opinion be made by an independent
Person, which Person shall be an independent engineer, appraiser or other expert
selected or approved by the Trustee in the ex ercise of reasonable care.
10.04. Certificates of the Company.
---------------------------
The Company shall furnish to the Trustee, prior to any proposed
release of Collateral other than pursuant to the express terms of the Escrow
Agreement, (i) all documents required by TIA (S)314(d) and (ii) an Opinion of
Counsel, which may be rendered by internal counsel to the Company, to the effect
that such accompanying documents constitute all documents required by TIA
(S)314(d). The Trustee may, to the extent permitted by Section 7.01 and Section
7.02, accept as conclusive evidence of compliance with the foregoing provisions
the appropriate statements contained in such documents and such Opinion of
Counsel.
10.05. Authorization of Actions To Be Taken by the Trustee Under the
-------------------------------------------------------------
Escrow Agreement.
- ----------------
Subject to the provisions of Section 7.01 and Section 7.02, the
Trustee may, without the consent of the Holders of Securities, on behalf of the
Holders of Securities, take all actions it deems necessary
<PAGE>
-72-
or appropriate in order to (a) enforce any of the terms of the Escrow Agreement
and (b) collect and receive any and all amounts payable in respect of the
obligations of the Company hereunder. The Trustee shall have power to institute
and maintain such suits and proceedings as it may deem expedient to prevent any
impairment of the Collateral by any acts that may be unlawful or in violation of
the Escrow Agreement or this Indenture, and such suits and proceedings as the
Trustee may deem expedient to preserve or protect its interests and the
interests of the Holders of Securities in the Collateral (including power to
institute and maintain suits or proceedings to restrain the enforcement of or
compliance with any legislative or other governmental enactment, rule or order
that may be unconstitutional or otherwise invalid if the enforcement of, or
compliance with, such enactment, rule or order would impair the security
interest hereunder or be prejudicial to the interests of the Holders of
Securities or of the Trustee).
10.06. Authorization of Receipt of Funds by the Trustee Under the
----------------------------------------------------------
Escrow Agreement.
- ----------------
The Trustee is authorized to receive any funds for the benefit of the
Holders of Securities disbursed under the Escrow Agreement, and to make further
distributions of such funds to the Holders of Securities according to the
provisions of this Indenture.
10.07. Termination of Security Interest.
--------------------------------
Upon the earliest to occur of (i) the date upon which the balance of
Available Funds (as defined in the Escrow Agreement) shall have been reduced to
zero, (ii) the payment in full of all obligations of the Company under this
Indenture and the Securities, (iii) legal defeasance pursuant to Section 8.02
and (iv) covenant defeasance pursuant to Section 8.02, the Trustee shall, at the
written request of the Company, release the Liens pursuant to this Indenture and
the Escrow Agreement upon the Company's compliance with the provisions of the
TIA pertaining to release of collateral.
10.08. Issuance of Contingent Warrants.
-------------------------------
The Company will issue to Holders of the Securities warrants (the
"Contingent Warrants"), exercisable for 8.0% of the Common Stock of the Company
on a fully-diluted basis as of the date of such issuance after giving effect to
the issuance of such Contingent Warrants, in the event that the Company does not
effect a primary underwritten public offering (excluding any offering pursuant
to Form S-8 under the Securities Act or any other publicly registered offering
pursuant to the Securities Act pertaining to an issuance of shares of Common
Stock or securities exercisable therefor under any benefit plan, employee
compensation plan, or employee or director stock purchase plan) of Common Stock
of the Company pursuant to an effective registration statement under the
Securities Act on or prior to September 1, 1999, resulting in gross proceeds to
the Company of at least $35,000,000. Such Contingent Warrants will have certain
rights pursuant to the Warrant Agreement and holders thereof will have the
benefits of the Warrant Shares Registration Rights Agreement.
Any Contingent Warrants issued shall be issued to the Holders of the
outstanding Securities as of September 1, 1999, pro rata, based upon the
aggregate principal amount of the Securities held by such Holder as of August
15, 1999. Such Contingent Warrants shall be issued and delivered within 30 days
of the record date for such issuance.
<PAGE>
-73-
ARTICLE ELEVEN
MISCELLANEOUS
11.01. Trust Indenture Act of 1939.
---------------------------
If any provision of this Indenture limits, qualifies, or conflicts
with another provision which is required to be included in this Indenture by the
TIA, the required provision shall control; provided, however, that this Section
-------- -------
11.01 shall not of itself require that this Indenture or the Trustee be
qualified under the TIA or constitute any admission or acknowledgment by any
party hereto that any such qualification is required prior to the time this
Indenture and the Trustee are required by the TIA to be so qualified.
The provisions of Sections 310 through 317 of the TIA that impose
duties on any person (including the provisions automatically deemed included
unless expressly excluded by this Indenture) are a part of and govern this
Indenture, whether or not physically contained herein.
11.02. Notices.
-------
Any notice or communication shall be sufficiently given if in writing
and delivered in person or mailed by first class mail, postage prepaid,
addressed as follows:
If to the Company to:
UNIFI COMMUNICATIONS, INC.
900 Chelmsford Street
Suite 312
Lowell, Massachusetts 01851
Attention: Chief Financial Officer
With a copy to:
Latham & Watkins
885 Third Avenue
New York, New York 10022
Attention: Kirk A. Davenport, Esq.
If to the Trustee to:
Fleet National Bank
1 Federal Street
Boston, Massachusetts 02211
Attention: Corporate Trust Administration
The parties hereto by notice to the other parties may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed, postage prepaid, to a Holder,
including any notice delivered in connection with TIA (S)(S) 310(b), TIA
(S)(S) 313(c), TIA (S)(S) 314(a) and TIA (S)(S) 315(b), shall be mailed by
<PAGE>
-74-
first class mail to such Holder at the address of such Holder as it appears
on the Securities' 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. Any notice or communication shall also be mailed to any other
persons described in TIA (S)(S) 313(c) to the extent and in the manner
required by the TIA.
Failure to mail a notice or communication to a Securityholder 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.
11.03. Communication by Holders with Other Holders.
-------------------------------------------
Holders may communicate pursuant to TIA (S) 312(b) with other Holders
with respect to their rights under this Indenture or the Securities. The
obligor, the Trustee, the Registrar and any other person shall have the
protection of TIA (S)(S) 312(c).
11.04. Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, such obligor shall furnish to the Trustee:
(a) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(b) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
11.05. Statements Required in Certificate or Opinion.
---------------------------------------------
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(a) a statement that the person making such certificate or opinion has
read and understands such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statement or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
opinion as to whether or not such covenant or condition has been complied
with; and
(d) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with; provided, however, that
-------- -------
with respect to matters of fact an Opinion of Counsel may rely on an
Officers' Certificate or certificates of public officials.
<PAGE>
-75-
11.06. Rules by Trustee, Paying Agent, Registrar.
-----------------------------------------
The Trustee may make reasonable rules for action by or at a meeting of
Securityholders. The Paying Agent or Registrar may make reasonable rules for
its functions.
11.07. Governing Law.
-------------
The laws of the State of New York shall govern this Indenture and the
Securities without regard to principles of conflicts of law. The Trustee, the
Company and the Holders agree to submit to the jurisdiction of the courts of the
State of New York in any action or proceeding arising out of or relating to this
Indenture or the Securities.
11.08. No Interpretation of Other Agreements.
-------------------------------------
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any of its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
11.09. No Recourse Against Others.
--------------------------
A director, officer, employee, stockholder or Affiliate, as such, of
the Company shall not have any liability for any obligations of the Company
under the Securities or this Indenture or for any claim based on, in respect of
or by reason of, such obligations or their creation. Each Holder by accepting a
Security waives and releases all such liability.
11.10. Successors.
----------
All agreements of the Company in this Indenture and the Securities
shall bind its successors. All agreements of the Trustee in this Indenture
shall bind its successors.
11.11. Counterparts.
------------
The parties may sign any number of counterparts of this Indenture.
Each such counterpart shall be an original, but all of them together represent
the same agreement.
11.12. Separability.
------------
In case any provision in this Indenture or the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby,
and a Holder shall have no claim therefor against any party hereto.
11.13. Table of Contents, Headings, etc.
--------------------------------
The Table of Contents, Cross-Reference Table and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
<PAGE>
-76-
11.14. Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Securities, express or implied,
shall give to any person, other than the parties hereto and their successors
hereunder, and the Holders, any benefit or any legal or equitable right, remedy
or claim under this Indenture.
11.15. Business Days.
-------------
If a payment date is not a Business Day, payment shall be made on the
next succeeding day that is a Business Day, and no interest shall accrue for the
intervening period.
[Remainder of page intentionally left blank]
<PAGE>
-77-
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed and attested, all as of the day and year first above written.
UNIFI COMMUNICATIONS, INC.
By: /s/ Thomas P. Sosnowski
---------------------------
Name:
Title:
Attest: /s/ Paula Litscher
---------------------
Name:
Title:
FLEET NATIONAL BANK,
as Trustee
By: /s/ Michael Quaile
----------------------------
Name:
Title:
Attest: /s/ Robert L. Bice, II
-------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
[FORM OF INITIAL SECURITY]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
PROMULGATED UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) PROMULGATED UNDER THE
SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S.
PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH RULE 904 UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT WITHIN THREE
YEARS (OR SUCH SHORTER PERIOD AS MAY THEN BE REQUIRED BY RULE 144(k) UNDER THE
SECURITIES ACT) AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER THEREOF OR ANY SUBSIDIARY
THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
PROMULGATED UNDER THE SECURITIES ACT, (C) TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHED (OR HAS FURNISHED ON ITS BEHALF
BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
SECURITY, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH RULE 904 PROMULGATED UNDER THE SECURITIES ACT, (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 PROMULGATED UNDER THE
SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN THREE
YEARS (OR SUCH SHORTER PERIOD AS MAY THEN BE REQUIRED BY RULE 144(k) UNDER THE
SECURITIES ACT) AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED
TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO
SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS,
WRITTEN LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY
REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER
THE SECURITIES ACT.
FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, AND THE RULES AND REGULATIONS THEREUNDER, THIS
SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT. THIS SECURITY WAS ISSUED
WITH ORIGINAL ISSUE DISCOUNT UNDER SECTION 1273 OF THE INTERNAL REVENUE CODE.
YOU MAY CONTACT THE CHIEF FINANCIAL OFFICER OF UNIFI COMMUNICATIONS, INC. AT 900
CHELMSFORD STREET, LOWELL, MASSACHUSETTS 01851, TELEPHONE NUMBER (508) 551-
7500, WHO WILL PROVIDE YOU WITH ANY REQUIRED INFORMATION REGARDING THE ORIGINAL
ISSUE DISCOUNT.
A-1
<PAGE>
UNIFI COMMUNICATIONS, INC.
14% SENIOR NOTE DUE 2004
No. $__________
UNIFI COMMUNICATIONS, INC., a corporation incorporated under the laws
of the State of Delaware (herein called the "Company", which term includes any
successor corporation under the Indenture hereinafter referred to), for value
received, hereby promises to pay to _______________ or registered assigns, the
principal sum of _______________ Dollars on March 1, 2004, at the office or
agency of the Company referred to below, and to pay cash interest thereon on
March 1 and September 1, in each year, commencing on September 1, 1997, accruing
from the most recent Interest Payment Date to which interest has been paid or
duly provided for at the rate of 14% per annum, until the principal hereof is
paid or duly provided for. The Company shall pay interest on overdue principal
from time to time on demand at the rate of 2% per annum in excess of the rate
provided in the immediately preceding sentence; to the extent lawful, the
Company shall pay interest on overdue installments of interest (without regard
to any applicable grace periods) from time to time on demand at the rate of 2%
per annum in excess of the rate provided in the immediately preceding sentence.
Interest shall be computed on the basis of a 360-day year of twelve 30-day
months and, in the case of a partial month, the actual number of days elapsed.
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 Security (or one or
more Predecessor Securities) is registered at the close of business on the
Regular Record Date for such interest, which shall be February 15 and August 15
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date (each a "Regular Record Date"). Any such interest not so
punctually paid, or duly provided for, and interest on such defaulted interest
at the rate provided for above, 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 Security (or one or more Predecessor Securities) is
registered at the close of business on a special record date for the payment of
such defaulted interest to be fixed as more fully provided in such Indenture.
Payment of the principal of, premium, if any, and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in the Borough of Manhattan in The City of New York, or at such other
office or agency of the Company as may be maintained for such purpose, in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts; provided, however, that
-------- -------
payment of interest may be made at the option of the Company by check mailed to
the address of the person entitled thereto as such address shall appear on the
security register maintained by the Registrar.
Reference is hereby made to further provisions of this Security set
forth on the reverse hereof.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof by manual signature, and a seal
has been affixed hereon, this Security shall not be entitled to any benefit
under the Indenture, or be valid or obligatory for any purpose.
A-2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
UNIFI COMMUNICATIONS, INC.
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within-mentioned Indenture.
FLEET NATIONAL BANK,
as Trustee
By:
------------------------------------
Authorized Officer
Dated:
A-3
<PAGE>
(Reverse of Security)
UNIFI COMMUNICATIONS, INC.
14% SENIOR NOTE DUE 2004
1. Indenture. UNIFI COMMUNICATIONS, INC., a Delaware corporation
---------
(the "Company"), issued the Securities (as defined below) under an Indenture,
dated as of February 21, 1997 (the "Indenture"), between the Company and Fleet
National Bank, a national banking association, as trustee (herein called the
"Trustee," which term includes any successor Trustee under the Indenture). This
Security is one of a duly authorized issue of Initial Securities of the Company
designated as its 14% Senior Notes due 2004 (the "Initial Securities"). The
Securities are limited (except as otherwise provided in the Indenture) in
aggregate principal amount to $175,000,000. The Securities include the Initial
Securities and the Exchange Securities (as defined below) issued in exchange for
the Initial Securities pursuant to the Indenture. The Initial Securities and
the Exchange Securities are treated as a single class of securities under the
Indenture, to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights, limitations of rights,
duties, obligations and immunities thereunder of the Company, the Trustee and
the Holders of the Securities, and of the terms upon which the Securities are,
and are to be, authenticated and delivered.
All capitalized terms used in this Security 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
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of, premium,
if any, and interest on this Security at the times, place and rate, and in the
coin or currency, herein prescribed.
2. Redemption.
----------
(a) Optional Redemption. The Securities are subject to redemption, at
-------------------
the option of the Company, in whole or in part, at any time on or after March 1,
2001, upon not less than 30 nor more than 60 days' prior notice, at the
following Redemption Prices (expressed as percentages of principal amount) set
forth below, plus accrued and unpaid interest, if any, to the Redemption Date if
redeemed during the 12-month period beginning on March 1 of the years indicated
below:
Redemption
Year Price
---- -----------
2001 114.000%
2002 107.000%
2003 and thereafter 103.500%
(b) Optional Redemption upon Equity Offerings. In the event that on
-----------------------------------------
or prior to March 1, 2000, the Company consummates one or more Equity Offerings
of its Common Stock, the Company may, at its option, redeem from the proceeds of
such Equity Offerings no later than 60 days following the consummation of such
offering, up to 33% of the aggregate principal amount of the Securities
originally issued at a Redemption Price equal to 114% of the aggregate principal
amount thereof, plus accrued and unpaid interest, if any, on the date of
redemption of the Securities so redeemed; provided, however, that immediately
-------- -------
after giving effect to any such redemption, not less than 67% of the aggregate
principal amount of the Securities originally issued remains outstanding.
A-4
<PAGE>
(c) Interest Payments. In the case of any redemption of Securities,
-----------------
interest installments whose Stated Maturity is on or prior to the Redemption
Date will be payable to the Holders of such Securities, or one or more
Predecessor Securities, of record at the close of business on the relevant
Record Date referred to on the face hereof. Securities (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 Security
------------------
in part only, a new Security or Securities for the unredeemed portion hereof
shall be issued in the name of the Holder hereof upon the cancellation hereof.
3. Offers to Purchase. Sections 4.12 and 4.13 of the Indenture
------------------
provide that upon the occurrence of a Change of Control and following certain
Asset Sales, and subject to further limitations contained therein, the Company
shall make an offer to purchase certain amounts of the Securities in accordance
with the procedures set forth in the Indenture.
4. Defaults and Remedies. If an Event of Default shall occur and be
---------------------
continuing, the principal amount of all of the outstanding Securities, plus all
accrued and unpaid interest, if any, to and including the date the Securities
are paid, may be declared due and payable in the manner and with the effect
provided in the Indenture.
5. Defeasance. The Indenture contains provisions (which provisions
----------
apply to this Security) for defeasance at any time of (a) the entire
indebtedness of the Company under this Security 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.
6. Amendments and Waivers. The Indenture permits, with certain
----------------------
exceptions as therein provided, the amendment thereof and the modification of
the rights and obligations of the Company and the rights of the Holders under
the Indenture at any time by the Company and the Trustee with the consent of the
Holders of not less than two-thirds in aggregate principal amount of the
Securities at the time outstanding. The Indenture also contains provisions
permitting the Holders of specified percentages in aggregate principal amount of
the Securities at the time outstanding, on behalf of the Holders of all the
Securities, to waive compliance by the Company with certain provisions of the
Indenture and certain past Defaults under the Indenture and this Security and
their consequences. Any such consent or waiver by or on behalf of the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange therefor or in lieu hereof whether or not
notation of such consent or waiver is made upon this Security.
7. Denominations, Transfer and Exchange. The Securities are
------------------------------------
issuable only in registered form without coupons in denominations of $1,000 and
any integral multiple thereof. As provided in the Indenture and subject to
certain limitations therein set forth, the Securities are exchangeable for a
like aggregate principal amount of Securities 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 Security is registrable on the security
register of the Company, upon surrender of this Security 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 Securities, of
authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
A-5
<PAGE>
No service charge shall be made for any registration of transfer or
exchange or redemption of Securities, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
8. Persons Deemed Owners. Prior to and at the time of due
---------------------
presentment of this Security 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 Security is registered as the owner hereof for all purposes,
whether or not this Security shall be overdue, and neither the Company, the
Trustee nor any agent shall be affected by notice to the contrary.
9. Governing Law. This Security shall be governed by and construed
-------------
in accordance with the laws of the State of New York, without regard to
conflicts of law principles.
10. Registration Rights. Pursuant to the Registration Rights
-------------------
Agreement between the Company and the Initial Purchaser, the Company will be
obligated to consummate an exchange offer pursuant to which the Holder of this
Initial Security shall have the right to exchange this Initial Security for the
Company's Series B 14% Senior Notes due 2004 (the "Exchange Securities"), which
have been registered under the Securities Act, in like principal amount and
having terms identical in all material respects to the Initial Securities. The
Holders of the Initial Securities shall be entitled to receive certain
additional interest payments in the event such exchange offer is not consummated
and upon certain other conditions, all pursuant to and in accordance with the
terms of the Registration Rights Agreement.
11. Contingent Warrants. In the event that the Company does not
-------------------
effect a primary underwritten public offering (excluding any offering pursuant
to Form S-8 under the Securities Act or any other publicly registered offering
pursuant to the Securities Act pertaining to an issuance of Common Stock or
securities exercisable therefor under any benefit plan, employee compensation
plan, or employee or director or stock purchase plan) of its Common Stock on or
prior to September 1, 1999 resulting in gross proceeds to the Company of at
least $35.0 million, pursuant to Section 10.08 of the Indenture and in
accordance with the terms of the Warrant Agreement between the Company and the
Initial Purchaser, the Company will issue Contingent Warrants to the record
Holders of Securities. Such Contingent Warrants will be exercisable for 8.0% of
the Common Stock of the Company on a fully-diluted basis as of the date of such
issuance after giving effect to the issuance of such Contingent Warrants.
A-6
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Company pursuant to
Section 4.12 or 4.13 of the Indenture, check the appropriate box:
Section 4.12 [ ]
Section 4.13 [ ]
If you wish to have a portion of this Security purchased by the
Company pursuant to Section 4.12 or 4.13 of the Indenture, state the amount:
$_______________ ($1,000 or an integral multiple thereof)
Date: _______ Your Signature:
___________________________________________
(Sign exactly as your name
appears on the other side
of this Security)
Signature Guarantee: ____________________________________
The holder's signature must be guaranteed by an eligible guarantor institution
which is a member of one of the following recognized signature guarantee
programs:
1) The Securities Transfer Agents Medallion Program;
2) The NYSE Medallion Signature Program; and
3) The Stock Exchanges Medallion Program.
A-7
<PAGE>
ASSIGNMENT FORM
If you the holder want to assign this Security, fill in the form below and have
your signature guaranteed:
I or we assign and transfer this Security to
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax ID number)
---------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code) and irrevocably appoint
- --------------------------------------------------------------------------------
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
- --------------------------------------------------------------------------------
Date: _____________ Your signature:
--------------------------------------
(Sign exactly as your name appears
on the other side of this Security)
Signature Guarantee:
-----------------------------------------------------------
The holder's signature must be guaranteed by an eligible
guarantor institution which is a member of one of the
following recognized signature guarantee programs:
1) The Securities Transfer Agents Medallion Program;
2) The NYSE Medallion Signature Program; and
3) The Stock Exchanges Medallion Program.
In connection with any transfer of this Security occurring prior to the date
which is the earlier of (i) the date of the declaration by the SEC of the
effectiveness of a registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), covering resales of this Security (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) February 21, 2000, the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with the
transfer:
<PAGE>
[Check One]
---------
(1) __ to the Company or a subsidiary thereof; or
(2) __ pursuant to and in compliance with Rule 144A under the Securities Act
of 1933, as amended; or
(3) __ to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as
amended) that has furnished to the Trustee a signed letter containing
certain representations and agreements (the form of which letter can
be obtained from the Trustee); or
(4) __ outside the United states to a "foreign person" in compliance with
Rule 904 of Regulation S under the Securities Act of 1933, as amended;
or
(5) __ pursuant to the exemption from registration provided by Rule 144 under
the Securities Act of 1933, as amended; or
(6) __ pursuant to an effective registration statement under the Securities
Act of 1933, as amended; or
(7) __ pursuant to another available exemption from the registration
requirements of the Securities Act of 1933, as amended,
and unless the box below is checked, the undersigned confirms that such Security
is not being transferred to an "affiliate" of the Company as defined in Rule 144
under the Securities Act of 1933, as amended (an "Affiliate"):
[ ] The transferee is an Affiliate of the Company.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any person other
than the registered Holder thereof; provided, however, that if box (3), (4), (5)
-------- -------
or (7) is checked, the Company or the Trustee may require, prior to registering
any such transfer of the Securities, in its sole discretion, such written legal
opinions, certifications (including an investment letter in the case of box (3)
or (4)) and other information as the Trustee or the Company has reasonably
requested to confirm that such transfer is being made pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act of 1933, as amended.
<PAGE>
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Security in the name of any person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.17 of the Indenture shall have
been satisfied.
Dated: __________________________________ Signed:_________________________
(Sign exactly as name
appears on the other
side of this Security)
Signature Guarantee:
----------------------------------------------------------
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this Security for
its own account or an account with respect to which it exercises sole investment
discretion and that it and any such account is a "qualified institutional buyer"
within the meaning of Rule 144A under the Securities Act of 1933, as amended,
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated: ____________ -----------------------------------------------
NOTICE: To be executed by an executive officer
<PAGE>
EXHIBIT B
[FORM OF EXCHANGE SECURITY]
PURSUANT TO PROVISIONS OF THE INTERNAL REVENUE CODE OF 1986 RELATING
TO ORIGINAL ISSUE DISCOUNT AND TREASURY REGULATIONS PUBLISHED THEREUNDER, THE
FOLLOWING INFORMATION IS PROVIDED: (1) THIS SECURITY IS BEING ISSUED WITH
ORIGINAL ISSUE DISCOUNT IN THE AMOUNT OF $[ ] PER $1,000 OF PRINCIPAL
AMOUNT; (2) THE ISSUE PRICE OF THIS SECURITY IS $[ ] PER $1,000 OF
PRINCIPAL AMOUNT; (3) THE ISSUE DATE OF THIS SECURITY IS [ ]; (4) THE
"COMPARABLE YIELD" MATURITY OF THIS SECURITY (WITHIN THE MEANING OF TREASURY
REGULATION 1.1275-4) IS [ ]%; AND (5) THE "PROJECTED PAYMENT SCHEDULE"
(WITHIN THE MEANING OF TREASURY REGULATION 1.1275-4) IS AS FOLLOWS:
DATE AMOUNT PER $1,000 DATE AMOUNT PER $1,000
---- ----------------- ---- -----------------
[ ] $[ ] [ ] $[ ]
HOLDERS SHOULD REFER TO THE DISCUSSION OF CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS SET FORTH IN THE OFFERING MEMORANDUM. CONTACT THE COMPANY AT 900
CHELMSFORD STREET, LOWELL, MASSACHUSETTS 01851, TELEPHONE NUMBER: (508) 551-
7800, ATTENTION: CHIEF FINANCIAL OFFICER FOR MORE DETAILED INFORMATION
CONCERNING THE COMPUTATION OF ORIGINAL ISSUE DISCOUNT SET FORTH HEREIN.
UNIFI COMMUNICATIONS, INC.
SERIES B 14% SENIOR NOTE DUE 2004
No. $__________
UNIFI COMMUNICATIONS, INC., a corporation incorporated under the laws
of the State of Delaware (herein called the "Company", which term includes any
successor corporation under the Indenture hereinafter referred to), for value
received, hereby promises to pay to _______________ or registered assigns, the
principal sum of _______________ Dollars on March 1, 2004, at the office or
agency of the Company referred to below, and to pay cash interest thereon on
March 1 and September 1, in each year, commencing on September 1, 1997, accruing
from the most recent Interest Payment Date to which interest has been paid or
duly provided for at the rate of 14% per annum, until the principal hereof is
paid or duly provided for. The Company shall pay interest on overdue principal
from time to time on demand at the rate of 2% per annum in excess of the rate
provided in the immediately preceding sentence; to the extent lawful, the
Company shall pay interest on overdue installments of interest (without regard
to any applicable grace periods) from time to time on demand at the rate of 2%
per annum in excess of the rate provided in the immediately preceding sentence.
Interest shall be computed on the basis of a 360-day year of twelve 30-day
months and, in the case of a partial month, the actual number of days elapsed.
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 Security (or one or
more Predecessor Securities) is registered at the close of business on the
Regular
B-1
<PAGE>
Record Date for such interest, which shall be February 15 and August 15
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date (each a "Regular Record Date"). Any such interest not so
punctually paid, or duly provided for, and interest on such defaulted interest
at the rate provided for above, 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 Security (or one or more Predecessor Securities) is
registered at the close of business on a special record date for the payment of
such defaulted interest to be fixed as more fully provided in such Indenture.
Payment of the principal of, premium, if any, and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in the Borough of Manhattan in The City of New York, or at such other
office or agency of the Company as may be maintained for such purpose, in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts; provided, however, that
-------- -------
payment of interest may be made at the option of the Company by check mailed to
the address of the person entitled thereto as such address shall appear on the
security register maintained by the Registrar.
Reference is hereby made to further provisions of this Security set
forth on the reverse hereof.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof by manual signature, and a seal
has been affixed hereon, this Security shall not be entitled to any benefit
under the Indenture, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
UNIFI COMMUNICATIONS, INC.
By:
---------------------------------------
Name:
Title:
By:
---------------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within-mentioned Indenture.
FLEET NATIONAL BANK,
as Trustee
By:
----------------------------------------
Authorized Officer
Dated:
B-2
<PAGE>
(Reverse of Security)
UNIFI COMMUNICATIONS, INC.
SERIES B 14% SENIOR NOTE DUE 2004
1. Indenture. UNIFI COMMUNICATIONS, INC., a Delaware corporation
---------
(the "Company"), issued the Securities (as defined below) under an Indenture,
dated as of February 21, 1997 (the "Indenture"), between the Company and Fleet
National Bank, a national banking association, as trustee (herein called the
"Trustee," which term includes any successor Trustee under the Indenture). This
Security is one of a duly authorized issue of Exchange Securities of the Company
designated as its Series B 14% Senior Notes due 2004 (the "Exchange
Securities"). The Securities are limited (except as otherwise provided in the
Indenture) in aggregate principal amount to $175,000,000. The Securities
include the 14% Senior Notes due 2004 (the "Initial Securities") and the
Exchange Securities issued in exchange for the Initial Securities pursuant to
the Indenture. The Initial Securities and the Exchange Securities are treated
as a single class of securities under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties, obligations and immunities
thereunder of the Company, the Trustee and the Holders of the Securities, and of
the terms upon which the Securities are, and are to be, authenticated and
delivered.
All capitalized terms used in this Security 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
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of, premium,
if any, and interest on this Security at the times, place and rate, and in the
coin or currency, herein prescribed.
2. Redemption.
----------
(a) Optional Redemption. The Securities are subject to redemption, at
-------------------
the option of the Company, in whole or in part, at any time on or after March 1,
2001, upon not less than 30 nor more than 60 days' prior notice, at the
following Redemption Prices (expressed as percentages of principal amount) set
forth below, plus accrued and unpaid interest, if any, to the Redemption Date if
redeemed during the 12-month period beginning on March 1 of the years indicated
below:
Redemption
Year Price
---- -------------
2001 114.000%
2002 107.000%
2003 and thereafter 103.500%
(b) Optional Redemption upon Equity Offerings. In the event that on
-----------------------------------------
or prior to March 1, 2000, the Company consummates one or more Equity Offerings
of its Common Stock, the Company may, at its option, redeem from the proceeds of
such Equity Offerings no later than 60 days following the consummation of such
offering, up to 33% of the aggregate principal amount of the Securities
originally issued at a Redemption Price equal to 114% of the aggregate principal
amount thereof, plus accrued and unpaid interest, if any, date of redemption of
the Securities so redeemed; provided, however, that immediately after
-------- -------
B-3
<PAGE>
giving effect to any such redemption, not less than 67% of the aggregate
principal amount of the Securities originally issued remains outstanding.
(c) Interest Payments. In the case of any redemption of Securities,
-----------------
interest installments whose Stated Maturity is on or prior to the Redemption
Date will be payable to the Holders of such Securities, or one or more
Predecessor Securities, of record at the close of business on the relevant
Record Date referred to on the face hereof. Securities (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 Security
------------------
in part only, a new Security or Securities for the unredeemed portion hereof
shall be issued in the name of the Holder hereof upon the cancellation hereof.
3. Offers to Purchase. Sections 4.12 and 4.13 of the Indenture
------------------
provide that upon the occurrence of a Change of Control and following certain
Asset Sales, and subject to further limitations contained therein, the Company
shall make an offer to purchase certain amounts of the Securities in accordance
with the procedures set forth in the Indenture.
4. Defaults and Remedies. If an Event of Default shall occur and be
---------------------
continuing, the principal amount of all of the outstanding Securities, plus all
accrued and unpaid interest, if any, to and including the date the Securities
are paid, may be declared due and payable in the manner and with the effect
provided in the Indenture.
5. Defeasance. The Indenture contains provisions (which provisions
----------
apply to this Security) for defeasance at any time of (a) the entire
indebtedness of the Company under this Security 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.
6. Amendments and Waivers. The Indenture permits, with certain
----------------------
exceptions as therein provided, the amendment thereof and the modification of
the rights and obligations of the Company and the rights of the Holders under
the Indenture at any time by the Company and the Trustee with the consent of the
Holders of not less than two-thirds in aggregate principal amount of the
Securities at the time outstanding. The Indenture also contains provisions
permitting the Holders of specified percentages in aggregate principal amount of
the Securities at the time outstanding, on behalf of the Holders of all the
Securities, to waive compliance by the Company with certain provisions of the
Indenture and certain past Defaults under the Indenture and this Security and
their consequences. Any such consent or waiver by or on behalf of the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange therefor or in lieu hereof whether or not
notation of such consent or waiver is made upon this Security.
7. Denominations, Transfer and Exchange. The Securities are
------------------------------------
issuable only in registered form without coupons in denominations of $1,000 and
any integral multiple thereof. As provided in the Indenture and subject to
certain limitations therein set forth, the Securities are exchangeable for a
like aggregate principal amount of Securities 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 Security is registrable on the security
register of the Company, upon surrender of this Security 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
B-4
<PAGE>
the Company and the Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
No service charge shall be made for any registration of transfer or
exchange or redemption of Securities, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
8. Persons Deemed Owners. Prior to and at the time of due
---------------------
presentment of this Security 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 Security is registered as the owner hereof for all purposes,
whether or not this Security shall be overdue, and neither the Company, the
Trustee nor any agent shall be affected by notice to the contrary.
9. Governing Law. This Security shall be governed by and construed
-------------
in accordance with the laws of the State of New York, without regard to
conflicts of law principles.
10. Contingent Warrants. In the event that the Company does not
-------------------
effect a primary underwritten public offering (excluding any offering pursuant
to Form S-8 under the Securities Act or any other publicly registered offering
pursuant to the Securities Act pertaining to an issuance of Common Stock or
securities exercisable therefor under any benefit plan, employee compensation
plan, or employee or director or stock purchase plan) of its Common Stock on or
prior to September 1, 1999 resulting in gross proceeds to the Company of at
least $35.0 million, pursuant to Section 10.08 of the Indenture and in
accordance with the terms of the Warrant Agreement between the Company and the
Initial Purchaser, the Company will issue Contingent Warrants to the record
Holders of Securities. Such Contingent Warrants will be exercisable for 8.0% of
the Common Stock of the Company on a fully-diluted basis as of the date of such
issuance after giving effect to the issuance of such Contingent Warrants.
B-5
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Company pursuant to
Section 4.12 or 4.13 of the Indenture, check the appropriate box:
Section 4.12 [ ]
Section 4.13 [ ]
If you wish to have a portion of this Security purchased by the
Company pursuant to Section 4.12 or 4.13 of the Indenture, state the amount:
$_______________ ($1,000 or an integral multiple thereof)
Date: __________ Your Signature:
________________________________________
(Sign exactly as your name
appears on the other side
of this Security)
Signature Guarantee: ________________________________
The holder's signature must be guaranteed by an eligible guarantor institution
which is a member of one of the following recognized signature guarantee
programs:
1) The Securities Transfer Agents Medallion Program;
2) The NYSE Medallion Signature Program; and
3) The Stock Exchanges Medallion Program.
B-6
<PAGE>
ASSIGNMENT FORM
If you the holder want to assign this Security, fill in the form below and have
your signature guaranteed:
I or we assign and transfer this Security to
- -------------------------------------------------------------------------------
(Insert assignee's social security or tax ID number)___________________________
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code) and irrevocably appoint
- ------------------------------------------------------------------------------
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
- ------------------------------------------------------------------------------
Date: _____________ Your signature:______________________________________
(Sign exactly as your name appears on the
other
side of this Security)
Signature Guarantee:_________________________________________________________
The holder's signature must be guaranteed by an eligible
guarantor institution which is a member of one of the following
recognized signature guarantee programs:
1) The Securities Transfer Agents Medallion Program;
2) The NYSE Medallion Signature Program; and
3) The Stock Exchanges Medallion Program.
<PAGE>
EXHIBIT C
FORM OF LEGEND FOR BOOK-ENTRY SECURITY
Any Global Security authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case of
a Restricted Security) in substantially the following form:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH NOMINEE OF
THE DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF SUCH SUCCESSOR
DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF
SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTION 2.17 OF THE INDENTURE.
C-1
<PAGE>
EXHIBIT D
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
-----------------------------------------
___________, ____
Fleet National Bank
1 Federal Street
Boston, Massachusetts 02211
Attention: Corporate Trust Administration
Re: Unifi Communications, Inc. (the "Company")
14% Senior Notes due 2004 (the "Securities")
--------------------------------------------
Ladies and Gentlemen:
In connection with our proposed purchase of $_______ aggregate
principal amount of the Securities, we confirm that:
1. We have received a copy of the Offering Memorandum (the "Offering
Memorandum"), dated February 14, 1997, relating to the Securities and such
other information as we deem necessary in order to make our investment
decision. We acknowledge that we have read and agreed to the matters
stated in the section entitled "Transfer Restrictions" of the Offering
Memorandum.
2. We understand that any subsequent transfer of the Securities is
subject to certain restrictions and conditions set forth in the Indenture
dated as of February 21, 1997, relating to the Securities (the "Indenture")
and the undersigned agrees to be bound by, and not to resell, pledge or
otherwise transfer the Securities except in compliance with, such
restrictions and conditions and the Securities Act of 1933, as amended (the
"Securities Act").
3. We understand that the Securities have not been registered under
the Securities Act, and that the Securities may not be offered or sold
except as permitted in the following sentence. We agree, on our own behalf
and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell any Securities within three years after the
original issuance of the Securities, we will do so only (A) to the Company
or any subsidiary thereof, (B) in accordance with Rule 144A under the
Securities Act to a "qualified institutional buyer" (as defined therein),
(C) to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) that,
prior to such transfer, furnishes (or has furnished on its behalf by a U.S.
broker-dealer) to you a signed letter substantially in the form of this
letter, (D) outside the United States in accordance with Rule 904 of
Regulation S under the Securities Act, (E) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act (if available),
or (F) pursuant to an effective registration
D-1
<PAGE>
statement under the Securities Act, and we further agree to provide to any
person purchasing any of the Securities from us a notice advising such
purchaser that resales of the Securities are restricted as stated herein.
4. We understand that, on any proposed resale of any Securities, we
will be required to furnish to you and the Company such certification,
written legal opinions and other information as you and the Company may
reasonably require to confirm that the proposed sale complies with the
foregoing restrictions. We further understand that the Securities
purchased by us will bear a legend to the foregoing effect.
5. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the
Securities, and we and any accounts for which we are acting are each able
to bear the economic risk of our or its investment, as the case may be.
6. We are acquiring the Securities purchased by us for our own account
or for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
You, the Company and counsel for the Company are entitled to rely upon
this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceedings or
official inquiry with respect to the matters covered hereby.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK.
Very truly yours,
[Name of Transferee]
By:____________________________________
Authorized Signature
D-2
<PAGE>
EXHIBIT E
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
----------------------------------------
______________, ____
Fleet National Bank
1 Federal Street
Boston, Massachusetts 02211
Attention: Corporate Trust Administration
Re: Unifi Communications, Inc. (the "Company")
14% Senior Notes due 2004 (the "Securities")
--------------------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of $___________ aggregate
principal amount of the Securities, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Securities was not made to a person in the
United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been pre-
arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer restrictions
applicable to the Securities.
E-1
<PAGE>
You, the Company and counsel for the Company are entitled to rely upon
this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceedings or
official inquiry with respect to the matters covered hereby. Terms used in this
certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:_____________________________________
Authorized Signature
E-2
<PAGE>
EXHIBIT G
Subordination
Among the standard subordination provisions that will be provided for
in the documents governing the terms of any Subordinated Indebtedness of the
Company which is permitted under clause (n) of the definition of "Permitted
Indebtedness" in this Indenture, provisions substantially similar to the
following shall be included therein. For the purposes of this Exhibit G only,
----
the following terms shall have the meanings ascribed below:
"Senior Indebtedness" means the 14% Senior Notes due 2004 of the
Company (the "Securities"), issued pursuant to the provisions of an
Indenture dated as of February 21, 1997, between the Company and Fleet
National Bank of Connecticut, as Trustee (the "Indenture"). All
Senior Indebtedness, including without limitation the Securities,
shall include, without limitation, any refinancings thereof, all
principal, accreted value, interest or premium, if any, thereon, all
charges, fees and expenses in connection therewith, and all interest
accruing thereon during the pendency of any bankruptcy or insolvency
proceeding, whether or not allowed thereunder.
"Senior Representative" means a designated representative of
Senior Indebtedness, as such term (or a substantively similar term)
shall be defined in any document governing the terms of any Senior
Indebtedness.
"Subordinated Indebtedness" means Indebtedness of the Company
that is expressly subordinated in right of payment to Senior
Indebtedness pursuant to the provisions of any document governing the
terms of such Subordinated Indebtedness.
1. Payment Over of Proceeds upon Dissolution, etc.
----------------------------------------------
In the event of (a) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relating to the Company or to its assets, or
(b) any liquidation, dissolution or other winding-up of the Company, whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy,
or (c) any assignment for the benefit of creditors or any other marshalling of
assets or liabilities of the Company, then and in any such event:
(i) the holders of Senior Indebtedness shall be entitled to receive
payment in full in cash or Cash Equivalents or, as acceptable to the
holders of Senior Indebtedness, in any other manner, of all Senior
Indebtedness, or provision shall be made for such payment, before the
holders of the Subordinated Indebtedness are entitled to receive any
payment or distribution of any kind or character on account of principal
of, premium, if any, or interest on the Subordinated Indebtedness other
than payments out of a defeasance trust; and
(ii) any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, by set-off or
otherwise, to which the holders of the Subordinated Indebtedness would be
entitled but for these provisions shall be paid by the liquidating trustee
or agent or other person making such payment or distribution, whether a
trustee in bankruptcy,
G-1
<PAGE>
a receiver or liquidating trustee or otherwise, directly to the holders of
Senior Indebtedness or their representative or representatives or to the
trustee under any indenture under which any instruments evidencing any of
such Senior Indebtedness may have been issued, ratably according to the
aggregate amounts remaining unpaid on account of the Senior Indebtedness
held or represented by each, to the extent necessary to make payment in
full in cash or Cash Equivalents or, as acceptable to the holders of Senior
Indebtedness, in any other manner, of all Senior Indebtedness remaining
unpaid, after giving effect to any concurrent payment or distribution to
the holders of such Senior Indebtedness other than payments out of a
defeasance trust and payments in the form of Subordinated Indebtedness; and
(iii) in the event that, notwithstanding the foregoing provisions,
any holder of any Subordinated Indebtedness shall have received any payment
or distribution of assets of the Company of any kind or character, whether
in cash, property or securities, in respect of principal of, premium, if
any, or interest on the Subordinated Indebtedness before all Senior
Indebtedness is paid in full in cash or Cash Equivalents or, as acceptable
to the holders of Senior Indebtedness, in any other manner, or payment
thereof provided for, then and in such event such payment or distribution
shall be paid over or delivered forthwith to the trustee in bankruptcy,
receiver, liquidating trustee, custodian, assignee, agent or other person
making payment or distribution of assets of the Company for application to
the payment of all Senior Indebtedness remaining unpaid, to the extent
necessary to pay all Senior Indebtedness in full in cash or Cash
Equivalents or, as acceptable to the holders of Senior Indebtedness, in any
other manner, after giving effect to any concurrent payment or distribution
to or for the holders of Senior Indebtedness.
2. Suspension of Payment When Senior Indebtedness in Default.
---------------------------------------------------------
(i) Unless the preceding Section 1 shall be applicable, upon the
occurrence of a default in the payment when due of principal, premium, if any,
or interest on any Senior Indebtedness (a "Payment Default"), 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 principal of, premium, if any, or
interest on the Subordinated Indebtedness or on account of the purchase,
redemption or other acquisition of any Subordinated Indebtedness (other than
payments previously made pursuant to the satisfaction and discharge provisions
of any document governing such Subordinated Indebtedness) unless and until such
Payment Default shall have been cured or waived or shall have ceased to exist or
such Senior Indebtedness as to which such Payment Default relates shall have
been discharged or paid in full in cash or Cash Equivalents, after which,
subject to the preceding Section 1 (if applicable), the Company shall resume
making any and all required payments in respect of the Subordinated
Indebtedness, including any missed payments.
(ii) Unless the preceding Section 1 shall be applicable, upon the
occurrence of a default (other than a Payment Default) with respect to any term
or provision of any Senior Indebtedness (a "Non-Payment Default") and upon the
earlier to occur of (i) the fifth day following receipt by the Company from a
Senior Representative of written notice of such occurrence (a "Payment Blockage
Notice"), or (ii) if such Non-Payment Default results from acceleration of the
Subordinated Indebtedness, the date of such acceleration, no payment or
distribution of any assets of the Company of any kind or character (other than
payments previously made pursuant to the satisfaction and discharge provisions
of any instruments governing such Subordinated Indebtedness) shall be made by or
on behalf of the Company on account of principal of, premium, if any, or
interest on the Subordinated Indebtedness or on account of the purchase,
redemption or other acquisition of Subordinated Indebtedness for a period
(``Payment Blockage Period'') commencing on the fifth day following receipt by
the Company of such notice or the date of acceleration referred to in clause
(ii) above, as the case may be, unless and until the earliest to occur of the
following events: (w) 179 days shall have elapsed since receipt of such written
notice by the Company or the date of such acceleration (provided such Senior
G-2
<PAGE>
Indebtedness shall not theretofore have been accelerated), (x) such non-payment
default shall have been cured or waived or shall have ceased to exist, (y) such
Senior Indebtedness shall have been discharged or paid in full in cash or Cash
Equivalents or (z) such Payment Blockage Period shall have been terminated by
written notice to the Company from the Senior Representative initiating such
Payment Blockage Period, after which, in each case, the Company shall resume
making any and all required payments in respect of the Subordinated
Indebtedness, including any missed payments. Notwithstanding any other
provision contained herein, only one Payment Blockage Period may be commenced
within any consecutive 365-day period. No Non-Payment Default with respect to
Senior Indebtedness which existed or was continuing on the date of the
commencement of any Payment Blockage Period shall be, or be made, the basis for
the commencement of a second Payment Blockage Period, whether or not within a
period of 365 consecutive days, unless such default shall have been cured for a
period of not less than 90 consecutive days. In no event shall a Payment
Blockage Period extend beyond 179 days from the fifth day following the receipt
by the Company of the notice referred to in clause (1) of this Section 2(b) or
the date of the acceleration referred to in clause (ii) of this Section 2(b) and
there must be a 186 consecutive day period in any 365 consecutive day period
during which no Payment Blockage Period is in effect.
(iii) In the event that, notwithstanding the foregoing, any holder of
any Subordinated Indebtedness shall have received any payment prohibited by the
foregoing provisions of this Section 2, then and in such event such payment
shall be paid over and delivered forthwith to the Senior Representative 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.
3. Subrogation to Rights of Holders of Senior Indebtedness.
-------------------------------------------------------
Upon the payment in full in cash of all Senior Indebtedness, the
holders of the Subordinated Indebtedness 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 Subordinated Indebtedness
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 Subordinated
Indebtedness would be entitled except for these provisions, and no payments over
pursuant to these provisions to the holders of Senior Indebtedness by holders of
the Subordinated Indebtedness shall, as among the Company, its creditors other
than holders of Senior Indebtedness, and the holders of the Subordinated
Indebtedness, 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 of Subordinated
Indebtedness would otherwise have been entitled but for these provisions shall
have been applied, pursuant to these provisions, to the payment of all amounts
payable under the Senior Indebtedness of the Company, then and in such case the
holders of Subordinated Indebtedness 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.
4. 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
G-3
<PAGE>
non-compliance by the Company with the terms, provisions and covenants
as described herein, regardless of any knowledge thereof any such holder may
have or be otherwise charged with.
(b) Without limiting the generality of Section 4(a), the holders of
Senior Indebtedness may, at any time and from time to time, without the consent
of or notice to the holders of the Subordinated Indebtedness, without incurring
responsibility to the holders of the Subordinated Indebtedness and without
impairing or releasing the subordination provided herein or the obligations
hereunder of the holders of the Subordinated Indebtedness to the holders of
Senior Indebtedness, do any one or more of the following: (i) 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; (ii) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or otherwise
securing Senior Indebtedness; (iii) release any person liable in any manner for
the collection or payment of Senior Indebtedness; and (iv) exercise or refrain
from exercising any rights against the Company and any other person; provided,
--------
however, that in no event shall any such actions limit the right of the holders
- -------
of the Subordinated Indebtedness to take any action to accelerate the maturity
of the Subordinated Indebtedness pursuant to the provisions of any instrument
governing the terms of Subordinated Indebtedness or to pursue any rights or
remedies thereunder or under applicable laws if the taking of such action does
not otherwise violate the provisions of any instrument governing the terms of
Subordinated Indebtedness.
G-4
<PAGE>
EXHIBIT 4.4
================================================================================
NOTES REGISTRATION RIGHTS AGREEMENT
Dated as of February 21, 1997
between
UNIFI COMMUNICATIONS, INC.,
and
SMITH BARNEY INC.,
(as Initial Purchaser)
================================================================================
$175,000,000
14% SENIOR NOTES DUE 2004
<PAGE>
This Registration Rights Agreement is dated as of February 21, 1997,
between UNIFI Communications, Inc. (formerly Fax International, Inc.), a
Delaware corporation (the "Company") and Smith Barney Inc. (the "Initial
------- -------
Purchaser").
- ---------
This Agreement is made pursuant to the Purchase Agreement, dated
February 14, 1997, between the Company and the Initial Purchaser (the "Purchase
--------
Agreement"). In order to induce the Initial Purchaser to enter into the
- ---------
Purchase Agreement, the Company has agreed to provide the registration rights
provided for in this Agreement to the Initial Purchaser and its direct and
indirect transferees and assigns. The execution and delivery of this Agreement
is a condition to the closing of the transactions contemplated by the Purchase
Agreement.
The parties hereby agree as follows:
1. Definitions
-----------
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: As defined in Section 4(a) hereof.
-------------------
Affiliate: With respect to any specified person, "Affiliate" shall
---------
mean 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 "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing.
Agreement: This Registration Rights Agreement, as the same may be
---------
amended, supplemented or modified from time to time in accordance with the terms
hereof.
Business Day: Any day except a Saturday, a Sunday or a day on which
------------
banking institutions in New York, New York generally are required or authorized
by law or other government action to be closed.
Company: As defined in the preamble hereof.
-------
Company Indemnified Persons: As defined in Section 7(c) hereof.
---------------------------
Consummate or consummate: When used to qualify the term "Exchange
------------------------
Offer", shall mean validly and lawfully to issue and deliver the Exchange Notes
pursuant to the
<PAGE>
-2-
Exchange Offer for all Notes validly tendered and not validly withdrawn pursuant
thereto in accordance with the terms of this Agreement.
Consummation Date: The date that is 45 days immediately following the
-----------------
date that the Exchange Registration Statement is required to have been declared
effective by the SEC.
Effectiveness Period: As defined in Section 3(a) hereof.
--------------------
Exchange Act: The Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations promulgated by the SEC pursuant thereto.
Exchange Date: As defined in Section 2(d) hereof.
-------------
Exchange Notes: The Series B 14% Senior Notes due 2004 of the
--------------
Company, that are identical to the Notes in all material respects, except that
the provisions regarding restrictions on transfer shall be modified, as provided
in the Indenture (or the indenture pursuant to which the Exchange Notes are
issued), and the issuance thereof pursuant to the Exchange Offer shall have been
registered pursuant to an effective Registration Statement in compliance with
the Securities Act.
Exchange Offer: An offer to issue, in exchange for any and all of the
--------------
Notes validly tendered, a like aggregate principal amount of Exchange Notes,
which offer shall be made by the Company pursuant to Section 2 hereof.
Exchange Registration Statement: As defined in Section 2(a) hereof.
-------------------------------
Indemnified Holder: As defined in Section 7(a) hereof.
------------------
Indemnified Person: As defined in Section 7(a) hereof.
------------------
Indenture: The Indenture, dated as of November , 1996, among the
---------
Company and Fleet National Bank, as trustee thereunder, pursuant to which the
Notes are issued, as amended or supplemented from time to time in accordance
with the terms thereof.
Initial Purchaser: As defined in the preamble hereof.
-----------------
Issue Date: As defined in Section 2(a).
----------
Notes: The Series A 14% Senior Notes due 2004 of the Company, issued
-----
pursuant to the Indenture.
<PAGE>
-3-
Participating Broker-Dealer: As defined in Section 2(e) hereof.
---------------------------
Private Exchange: As defined in Section 2(c) hereof.
----------------
Private Exchange Notes: As defined in Section 2(c) hereof.
----------------------
Prospectus: The prospectus included in any Registration Statement
----------
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated pursuant to the Securities
Act), as amended or supplemented by any prospectus supplement, with respect to
the terms of the offering of any portion of the Notes, Exchange Notes or Private
Exchange Notes covered by such Registration Statement, and all other amendments
and supplements to any such prospectus, including post-effective amendments, and
all material incorporated by reference or deemed to be incorporated by
reference, if any, in such prospectus.
Registration Default: As defined in Section 4(a) hereof.
--------------------
Registration Statement: Any registration statement of the Company
----------------------
that covers any of the Notes, Exchange Notes or Private Exchange Notes pursuant
to the provisions of this Agreement, including the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference, if any, in such
registration statement.
Requesting Participating Broker-Dealer: As defined in Section 2(e)
--------------------------------------
hereof.
Rule 144(k): Rule 144(k) promulgated by the SEC pursuant to the
-----------
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 144A: Rule 144A promulgated by the SEC pursuant to the
---------
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 158: Rule 158 promulgated by the SEC pursuant to the Securities
--------
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
<PAGE>
-4-
Rule 174: Rule 174 promulgated by the SEC pursuant to the Securities
--------
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 415: Rule 415 promulgated by the SEC pursuant to the Securities
--------
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 424: Rule 424 promulgated by the SEC pursuant to the Securities
--------
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
SEC: The Securities and Exchange Commission.
---
Securities Act: The Securities Act of 1933, as amended, and the rules
--------------
and regulations promulgated by the SEC thereunder.
Shelf Blackout Period: As defined in Section 3(a) hereof.
---------------------
Shelf Filing Event: As defined in Section 3(a) hereof.
------------------
Shelf Registration: As defined in Section 3(a) hereof.
------------------
Shelf Registration Statement: As defined in Section 3(a) hereof.
----------------------------
TIA: The Trust Indenture Act of 1939, as amended.
---
Transfer Restricted Note: Each Note, upon original issuance thereof,
------------------------
and at all times subsequent thereto, each Exchange Note as to which Section
3(a)(ii) hereof is applicable upon original issuance and at all times subsequent
thereto and each Private Exchange Note upon original issuance thereof and at all
times subsequent thereto, until in the case of any such Note, Exchange Note or
Private Exchange Note, as the case may be, the earliest to occur of (i) the date
on which any such Note has been exchanged by a person other than a Participating
Broker-Dealer for an Exchange Note (other than with respect to an Exchange Note
as to which Section 3(a)(ii) hereof applies) pursuant to the Exchange Offer,
(ii) with respect to Exchange Notes received by Participating Broker-Dealers in
the Exchange Offer, the earlier of (x) the date on which such Exchange Note has
been sold by such Participating Broker-Dealer by means of the Prospectus
contained in the Exchange Registration Statement and (y) the date on which the
Exchange Registration Statement has been effective under the Securities Act for
a period of six months after the Consummation Date, (iii) a Shelf Registration
Statement covering such Note,
<PAGE>
-5-
Exchange Note or Private Exchange Note has been declared effective by the SEC
and such Note, Exchange Note or Private Exchange Note, as the case may be, has
been disposed of in accordance with such effective Shelf Registration Statement,
(iv) the date on which such Note, Exchange Note or Private Exchange Note, as the
case may be, is eligible for distribution to the public without volume or manner
of sale restrictions pursuant to Rule 144(k) or (v) the date on which such Note,
Exchange Note or Private Exchange Note, as the case may be, ceases to be
outstanding for purposes of the Indenture or any other indenture under which
such Exchange Note or Private Exchange Note was issued.
Trustee: The trustee under the Indenture.
-------
underwritten registration or underwritten offering: A registration in
--------------------------------------------------
connection with which securities are sold to an underwriter for reoffering to
the public pursuant to an effective Registration Statement.
2. Exchange Offer
--------------
(a) To the extent not prohibited by any applicable law or applicable
interpretation of the staff of the SEC, the Company shall (A) prepare and, on or
prior to 60 days after the date of original issuance of the Notes (the "Issue
-----
Date"), file with the SEC a Registration Statement under the Securities Act with
- ----
respect to an offer by the Company to the holders of the Notes to issue and
deliver to such holders, in exchange for Notes, a like principal amount of
Exchange Notes, (B) use its best efforts to cause the Registration Statement
relating to the Exchange Offer to be declared effective by the SEC under the
Securities Act on or prior to 150 days after the Issue Date, and (C) promptly
following the declaration of the effectiveness of the Exchange Registration
Statement, commence the Exchange Offer and use its best efforts to issue, on or
prior to the Consummation Date, the Exchange Notes. The offer and sale of the
Exchange Notes pursuant to the Exchange Offer shall be registered pursuant to
the Securities Act on an appropriate form (the "Exchange Registration
---------------------
Statement") and duly registered or qualified under all applicable state
securities or Blue Sky laws and will comply with all applicable tender offer
rules and regulations under the Exchange Act and state securities or Blue Sky
laws. The Exchange Offer shall not be subject to any condition, other than that
the Exchange Offer does not violate any applicable law or interpretation of the
staff of the SEC. No securities shall be included in the Exchange Registration
Statement other than the Exchange Notes.
(b) The Company may require each holder of Notes, as a condition to
its participation in the Exchange Offer, to represent to the Company and its
counsel in writing (which may be contained in the applicable letter of
transmittal) that at the time of the consummation of the Exchange Offer (i) any
Exchange Notes received by such holder will be acquired in the ordinary course
of its business, (ii) such holder will have no arrangement or
<PAGE>
-6-
understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Notes and (iii) such holder is
not an Affiliate of the Company, or if it is an Affiliate of the Company, it
will comply with the registration and prospectus delivery requirements of the
Securities Act, to the extent applicable.
(c) If, prior to consummation of the Exchange Offer, the Initial
Purchaser holds any Notes acquired by it and having, or which are reasonably
likely to be determined to have, the status of an unsold allotment in the
initial distribution, or any other holder of Notes is not entitled, as a matter
of law or based on an interpretation or position of the staff of the SEC, to
participate in the Exchange Offer, the Company, upon the request of such Initial
Purchaser or any such holder, shall, simultaneously with the delivery of the
Exchange Notes in the Exchange Offer, issue and deliver to such Initial
Purchaser and any such holder, in exchange (the "Private Exchange") for such
----------------
Notes held by such Initial Purchaser and any such holder, a like principal
amount of debt securities of the Company that are identical in all material
respects to the Exchange Notes (the "Private Exchange Notes") (and which are
----------------------
issued pursuant to the same indenture as the Exchange Notes). The Private
Exchange Notes shall bear the same CUSIP number as the Exchange Notes.
(d) Unless the Exchange Offer would not be permitted by any
applicable law or interpretation thereof of the staff of the SEC, the Company
shall mail the Exchange Offer Prospectus and appropriate accompanying documents,
including appropriate letters of transmittal, to each holder of Notes providing,
in addition to such other disclosures as are required by applicable law:
(i) that the Exchange Offer is being made pursuant to this
Agreement and that all Notes validly tendered will be accepted for
exchange;
(ii) the date of acceptance for exchange (the "Exchange Date"),
-------------
which date shall in no event be later than the Consummation Date (unless
otherwise required by applicable law);
(iii) that a holder of a Note electing to have a Note exchanged
pursuant to the Exchange Offer will be required to surrender such Note,
together with the enclosed letters of transmittal, to the institution and
at the address (located in the Borough of Manhattan, The City of New York)
specified in the notice prior to the close of business on the Exchange
Date; and
(iv) that holders of Notes that do not validly tender all such
securities pursuant to the Exchange Offer may no longer have any
registration rights hereunder with respect to Notes not validly tendered.
<PAGE>
-7-
Promptly after the Exchange Date, the Company shall:
(i) accept for exchange all Notes or portions thereof validly
tendered and not validly withdrawn pursuant to the Exchange Offer; and
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Notes or portions thereof so accepted for exchange by the
Company, and issue, cause the Trustee under the Indenture (or the indenture
pursuant to which the Exchange Notes are issued) to authenticate, and mail
to each holder of Notes, Exchange Notes equal in principal amount to the
principal amount of the Notes surrendered by such holder.
(e) The Company and the Initial Purchaser acknowledge that the staff
of the SEC has taken the position that any broker-dealer that elects to exchange
Notes that were acquired by such broker-dealer for its own account as a result
of market-making or other trading activities for Exchange Notes in the Exchange
Offer (a "Participating Broker-Dealer") may be deemed to be an "underwriter"
---------------------------
within the meaning of the Securities Act and must deliver a prospectus meeting
the requirements of the Securities Act in connection with any resale of such
Exchange Notes (other than a resale of an unsold allotment resulting from the
original offering of the Notes).
The Company and the Initial Purchaser also acknowledge that it is the
SEC staff's position that if the Prospectus contained in the Exchange
Registration Statement includes a plan of distribution containing a statement to
the above effect and the means by which Participating Broker-Dealers may resell
the Exchange Notes, without naming the Participating Broker-Dealers or
specifying the amount of Exchange Notes owned by them, such Prospectus may be
delivered by Participating Broker-Dealers to satisfy their prospectus delivery
obligations under the Securities Act in connection with resales of Exchange
Notes for their own accounts, so long as the Prospectus otherwise meets the
requirements of the Securities Act.
In light of the foregoing, if requested by a Participating Broker-
Dealer (a "Requesting Participating Broker-Dealer"), the Company agrees (x) to
--------------------------------------
use its best efforts to keep the Exchange Registration Statement continuously
effective for a period of up to six months after the Consummation Date or such
earlier date as each Requesting Participating Broker-Dealer shall have notified
the Company in writing that such Requesting Participating Broker-Dealer has
resold all Exchange Notes acquired in the Exchange Offer and (y) to comply with
the provisions of Section 5 of this Agreement, as they relate to the Exchange
Offer and the Exchange Registration Statement.
(f) The Initial Purchaser shall have no liability to any Requesting
Participating Broker-Dealer with respect to any request made pursuant to Section
2(e).
<PAGE>
-8-
(g) Interest on the Exchange Notes and the Private Exchange Notes
will accrue from the last interest payment date on which interest was paid on
the Notes surrendered in exchange therefor or, if no interest has been paid on
the Notes, from the Issue Date.
(h) The Exchange Notes and the Private Exchange Notes may be issued
under (i) the Indenture or (ii) an indenture identical in all material respects
to the Indenture, which in either event shall provide that the Exchange Notes
shall not be subject to the transfer restrictions set forth in the Indenture.
The Indenture or such indenture shall provide that the Exchange Notes, the
Private Exchange Notes and the Notes shall vote and consent together on all
matters as one class and that neither the Exchange Notes, the Private Exchange
Notes nor the Notes will have the right to vote or consent as a separate class
on any matter.
3. Shelf Registration
------------------
(a) If (i) the Company is not permitted to file the Exchange Offer
Registration Statement or to consummate the Exchange Offer because the Exchange
Offer is not permitted by any applicable law or applicable interpretation
thereof by the staff of the SEC or (ii) any holder of a Note notifies the
Company on or prior to the Consummation Date that (A) due to a change in law or
applicable interpretation thereof by the staff of the SEC it is not entitled to
participate in the Exchange Offer, (B) due to a change in law or applicable
interpretation thereof by the staff of the SEC it may not resell Exchange Notes
acquired by it in the Exchange Offer to the public without delivering a
prospectus and the Prospectus contained in the Exchange Registration Statement
is not appropriate or available for such resales by such holder or (C) it owns
Notes (including the Initial Purchaser with respect to Notes that may be deemed
to be a part of an unsold allotment from the original offering of the Notes)
acquired directly from the Company or an Affiliate of the Company or (iii) any
holder of Private Exchange Notes so requests after the consummation of the
Private Exchange or (iv) the Company has not consummated the Exchange Offer by
the Consummation Date and holders of a majority in principal amount of Notes
outstanding so request (each such event referred to in clauses (i) through (iv),
a "Shelf Filing Event"), the Company shall cause to be filed with the SEC
------------------
pursuant to Rule 415 a shelf registration statement (the "Shelf Registration
------------------
Statement") prior to the later of (x) 60 days after the Issue Date or (y) 30
- ---------
days after the occurrence of such Shelf Filing Event, relating to all Transfer
Restricted Notes (the "Shelf Registration") the holders of which have provided
------------------
the information required pursuant to Section 3(b) hereof, and shall use its best
efforts to have the Shelf Registration Statement declared effective by the SEC
on or prior to 90 days after such Shelf Filing Event. In such circumstances,
the Company shall use its best efforts to keep the Shelf Registration Statement
continuously effective under the Securities Act, until (A) 36 months following
the Issue Date or (B) if sooner, the date immediately following the date that
all Transfer Restricted Notes covered by the Shelf Registration Statement have
been sold pursuant thereto or otherwise cease to be Transfer Restricted Notes
(the "Effectiveness Period");
--------------------
<PAGE>
-9-
provided that the Effectiveness Period shall be extended to the extent required
- --------
to permit dealers to comply with the applicable prospectus delivery requirements
of Rule 174; provided, further, that the Company may suspend the effectiveness
-----------------
of a Shelf Registration Statement, in the event that, and for a period not to
exceed 45 days in any calendar year (a "Shelf Blackout Period") if, (i) an event
---------------------
occurs and is continuing as a result of which the Shelf Registration Statement
would, in the Company's good faith judgment, contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein not misleading and (ii) if the Company determines in good
faith that the disclosure of such event at such time would have a material
adverse effect on the business, operations or prospects of the Company or (b)
the disclosure otherwise relates to a pending material business transaction
which has not yet been publicly disclosed.
(b) No holder of Transfer Restricted Notes may include any of its
Transfer Restricted Notes in any Shelf Registration Statement pursuant to
Section 3(a) of this Agreement unless and until such holder furnishes to the
Company in writing, within 7 days after receipt of a request therefor, such
information as the Company may reasonably request for use in connection with any
Shelf Registration Statement or Prospectus or preliminary prospectus included
therein. No holder of Transfer Restricted Notes shall be entitled to Additional
Interest pursuant to Section 4 hereof unless and until such holder shall have
provided all such reasonably requested information within the time periods set
forth herein. Each holder of Transfer Restricted Notes as to which any Shelf
Registration Statement is being effected 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.
4. Additional Interest
-------------------
(a) The parties hereto agree that the holders of Transfer Restricted
Notes will suffer damages if the Company fails to fulfill its obligations
pursuant to Section 2 or Section 3, as applicable, and that it would not be
feasible to ascertain the extent of such damages. Accordingly, in the event
that (i) the applicable Registration Statement is not filed with the SEC on or
prior to the date specified herein for such filing, (ii) the applicable
Registration Statement has not been declared effective by the SEC on or prior to
the date specified herein for such effectiveness after such obligation arises,
(iii) if the Exchange Offer is required to be Consummated hereunder, the Company
has not exchanged Exchange Notes for all Notes validly tendered and not validly
withdrawn in accordance with the terms of the Exchange Offer by the Consummation
Date or (iv) except during a Shelf Blackout Period, the applicable Registration
Statement is filed and declared effective but shall thereafter cease to be
effective or usable in connection with the Exchange Offer or resales of Transfer
Restricted Notes during a period in which it is required to be effective
hereunder without being succeeded immediately by any additional Registration
Statement covering the Notes, the Exchange Notes or the Private
<PAGE>
-10-
Exchange Notes, as the case may be, which has been filed and declared effective
(each such event referred to in clauses (i) through (iv), a "Registration
------------
Default"), then the interest rate on Transfer Restricted Notes will increase
- -------
("Additional Interest"), with respect to the first 90-day period immediately
-------------------
following the occurrence of such Registration Default, by 0.5% per annum and
will increase by an additional 0.5% per annum with respect to each subsequent
90-day period until such Registration Default has been cured, up to a maximum
amount of 2.0% per annum with respect to all Registration Defaults. Following
the cure of a Registration Default, the accrual of Additional Interest with
respect to such Registration Default will cease and upon the cure of all
Registration Defaults the interest rate will revert to the original rate.
(b) The Company shall notify the Trustee and paying agent under the
Indenture (or the trustee and paying agent under such other indenture under
which any Transfer Restricted Notes are issued) immediately upon the happening
of each and every Registration Default. The Company shall pay the Additional
Interest due on the Transfer Restricted Notes by depositing with the paying
agent (which shall not be the Company for these purposes) for the Transfer
Restricted Notes, in trust, for the benefit of the holders thereof, prior to
11:00 A.M. on the next interest payment date specified by the Indenture (or such
other indenture), sums sufficient to pay the Additional Interest then due. The
Additional Interest due shall be payable on each interest payment date specified
by the Indenture (or such other indenture) to the record holders entitled to
receive the interest payment to be made on such date. Each obligation to pay
Additional Interest shall be deemed to accrue from and including the applicable
Registration Default.
(c) The parties hereto agree that the Additional Interest provided
for in this Section 4 constitutes a reasonable estimate of the damages that will
be suffered by holders of Transfer Restricted Notes by reason of the happening
of any Registration Default.
5. Registration Procedures
-----------------------
In connection with the Company's registration obligations hereunder,
the Company shall effect such registrations on the appropriate form available
for the sale of the Notes, the Exchange Notes or Private Exchange Notes, as
applicable, to (i) in the case of the Exchange Offer, permit the exchange of
Exchange Notes for Notes in the Exchange Offer and, if applicable, resales of
Exchange Notes by Participating Broker-Dealers and (ii) in the case of a Shelf
Registration, permit the sale of the applicable Transfer Restricted Notes in
accordance with the method or methods of disposition thereof specified by the
holders of such Transfer Restricted Notes, and pursuant thereto the Company
shall as expeditiously as reasonably possible:
(a) Furnish to the Initial Purchaser and the holders of the
Transferred Restricted Notes included therein prior to the filing thereof
with the SEC, a copy of the
<PAGE>
-11-
Registration Statement and each amendment thereto and each supplement,
if any, to the prospectus included therein and, in the event that the
Initial Purchaser (with respect to any portion of an unsold allotment from
the original offering) is participating in the Exchange Offer or the Shelf
Registration, shall use reasonable efforts to reflect in each such
document, when so filed with the SEC, such comments as the Initial
Purchaser or its counsel reasonably may propose;
(b) Prepare and file with the SEC such amendments, including post-
effective amendments, to each Registration Statement as may be necessary to
keep such Registration Statement continuously effective for the applicable
time period required hereunder; cause the related Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424; and comply with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
securities covered by such Registration Statement during such period in
accordance with the intended methods of disposition by the sellers thereof
set forth in such Registration Statement as so amended or in such
Prospectus as so supplemented;
(c) Notify the holders of Transfer Restricted Notes to be sold or, in
the case of an Exchange Offer, tendered for, their counsel and the managing
underwriters, if any, promptly, and (if requested by any such person),
confirm such notice in writing, (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment is proposed to be filed, and (B)
with respect to a Registration Statement or any post-effective amendment,
when the same has become effective, (ii) of any request by the SEC or any
other Federal or state governmental authority for amendments or supplements
to a Registration Statement or related Prospectus or for additional
information, (iii) of the issuance by the SEC, any state securities
commission, any other governmental agency or any court of any stop order or
injunction suspending or enjoining the use of a Prospectus or the
effectiveness of a Registration Statement or the initiation of any
proceedings for that purpose, (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or
exemption from qualification of any of the Notes, Exchange Notes or Private
Exchange Notes for sale in any jurisdiction, or the initiation or, to the
actual knowledge of the Company, threatening of any proceeding for such
purpose, and (v) of the happening of any event or information becoming
known to the Company that makes any statement made in a Registration
Statement or related Prospectus or any document incorporated or deemed to
be incorporated therein by reference untrue in any material respect or that
requires the making of any changes in such Registration Statement,
Prospectus or documents so that it will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, not misleading, and
that in the case of a Prospectus, it will not contain any untrue statement
<PAGE>
-12-
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(d) Use its best efforts to avoid the issuance of or, if issued,
obtain the withdrawal of any order enjoining or suspending the use of a
Prospectus or the effectiveness of a Registration Statement or the lifting
of any suspension of the qualification (or exemption from qualification) of
any of the Notes, Exchange Notes or Private Exchange Notes for sale in any
jurisdiction, at the earliest practicable moment;
(e) If a Shelf Registration Statement is filed pursuant to Section 3
hereof and if requested by the managing underwriters, if any, or the
holders of a majority in aggregate principal amount of the Transfer
Restricted Notes being sold pursuant to such Shelf Registration Statement,
(i) promptly incorporate in a Prospectus supplement or post-effective
amendment such information as the managing underwriters, if any, and such
holders reasonably believe should be included therein based on written
advice of counsel to such managing underwriter, if any, and/or counsel to
the holders, and (ii) make all required filings of such Prospectus
supplement or such post-effective amendment under the Securities Act as
soon as practicable after the Company has received notification of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment; provided, however, that the Company shall not be required to
-------- -------
take any action pursuant to this Section 5(e) that would, in the opinion of
counsel for the Company, violate applicable law;
(f) Upon written request to the Company by a holder of Notes,
Exchange Notes or Private Exchange Notes to be exchanged or sold pursuant
to a Registration Statement, their counsel and each managing underwriter,
if any, without charge, furnish at least one conformed copy of such
Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits to the extent requested
(including those previously furnished or incorporated by reference) as soon
as reasonably practicable after the filing of such documents with the SEC;
(g) Deliver to each holder of Notes, Exchange Notes or Private
Exchange Notes to be exchanged or sold pursuant to a Registration
Statement, their counsel, and the underwriters, if any, without charge, as
many copies of the Prospectus (including each form of prospectus) and each
amendment or supplement thereto as such persons reasonably request; and the
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling holders of Transfer Restricted
Notes and the underwriters, if any, in connection with the offering and
sale
<PAGE>
-13-
of the Transfer Restricted Notes covered thereby in accordance with
the terms thereof and with U.S. Federal securities laws and Blue Sky laws
covered by such Prospectus and any amendment or supplement thereto;
(h) Prior to any public offering of Notes, Exchange Notes or Private
Exchange Notes, use its best efforts to register or qualify or cooperate
with the holders of Notes, Exchange Notes or Private Exchange Notes to be
sold or tendered for, the underwriters, if any, and their respective
counsel in connection with the registration or qualification (or exemption
from such registration or qualification) of such Notes, Exchange Notes or
Private Exchange Notes for offer and sale under the securities or Blue Sky
laws of such jurisdictions within the United States as any such holder or
underwriter reasonably requests in writing; keep each such registration or
qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective hereunder and do
any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Notes, Exchange Notes or Private
Exchange Notes covered by the applicable Registration Statement; provided,
--------
however, that the Company shall not be required to (i) qualify generally to
-------
do business in any jurisdiction where it is not then so qualified or (ii)
take any action which would subject it to general service of process or to
taxation in any jurisdiction where it is not so subject;
(i) In connection with any sale or transfer of Transfer Restricted
Notes that will result in such securities no longer being Transfer
Restricted Notes, cooperate with the holders thereof and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Transfer Restricted Notes to be sold, which
certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company and to enable such
Transfer Restricted Notes to be in such denominations and registered in
such names as the managing underwriters, if any, or such holders may
request at least two Business Days prior to any sale of Transfer Restricted
Notes;
(j) Upon the occurrence of any event contemplated by Section 5(c)(v),
as promptly as practicable, prepare a supplement or amendment, including,
if appropriate, a post-effective amendment, to each Registration Statement
or a supplement to the related Prospectus or any document incorporated or
deemed to be incorporated therein by reference, and file any other required
document so that, as thereafter delivered, such Prospectus will not contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
<PAGE>
-14-
(k) Prior to the effective date of the Exchange Registration
Statement, to provide a CUSIP number for the Exchange Notes (and, as
promptly as practicable, the Private Exchange Notes, if applicable);
(l) In connection with a Shelf Registration Statement filed pursuant
to Section 3 hereof, use its best efforts to enter into such agreements
(including an underwriting agreement in form, scope and substance as is
customary in underwritten offerings) and take all such other reasonable
actions in connection therewith (including those reasonably requested by
the managing underwriters, if any, or the holders of a majority in
aggregate principal amount of the Transfer Restricted Notes being sold) in
order to expedite or facilitate the disposition of such Transfer Restricted
Notes, and, whether or not an underwriting agreement is entered into and
whether or not the registration is an underwritten registration, (i) make
such representations and warranties to the holders of such Transfer
Restricted Notes and the underwriters, if any, with respect to the business
of the Company and its subsidiaries (including with respect to businesses
or assets acquired or to be acquired by any of them), and the Shelf
Registration Statement, Prospectus and documents, if any, incorporated or
deemed to be incorporated by reference therein, in each case, in form,
substance and scope as are customarily made by issuers to underwriters in
underwritten offerings, and confirm the same if and when customarily
requested; (ii) use its best efforts to obtain opinions of counsel to the
Company and updates thereof relating to the applicable Registration
Statement and the Notes, Exchange Notes or Private Exchange Notes covered
thereby in customary form (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managing underwriters,
if any, and any counsel to the holders of the Transfer Restricted Notes
being sold), addressed to each selling holder of Transfer Restricted Notes
and each of the underwriters, if any, covering the matters customarily
covered in opinions requested in underwritten offerings and such other
matters as may be reasonably requested by such counsel and the managing
underwriters, in any; (iii) use its best efforts to obtain customary "cold
comfort" letters and updates thereof from the independent certified public
accountants of the Company (and, if necessary, any other independent
certified public accountants of any subsidiary of the Company or of any
business acquired by the Company or any such subsidiary for which financial
statements and financial data is, or is required to be, included in the
Shelf Registration Statement), addressed (where reasonably possible) to
each selling holder of Transfer Restricted Notes and each of the
underwriters, if any, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters in
connection with underwritten offerings; (iv) if an underwriting agreement
is entered into, the same shall contain customary indemnification
provisions and procedures (or such other provisions and procedures
acceptable to holders of a majority in aggregate principal amount of
Transfer Restricted Notes covered by such Shelf Registration
<PAGE>
-15-
Statement and the managing underwriters, if any); and (v) deliver such
documents and certificates as may be reasonably requested by the holders of
a majority in aggregate principal amount of the Transfer Restricted Notes
being sold, their counsel and the managing underwriters, if any, to
evidence the continued validity of the representations and warranties made
pursuant to clause (i) above and to evidence compliance with any customary
conditions contained in the underwriting agreement or other agreement
entered into by the Company;
(m) In the case of a Shelf Registration, make available for
inspection by a representative of the holders of Transfer Restricted Notes
being sold, any underwriter participating in any such disposition of
Transfer Restricted Notes, and any attorney, consultant or accountant
acting for the holders of a majority in aggregate principal amount of such
Transfer Restricted Notes or such underwriter, at the offices where
normally kept, during reasonable business hours, all relevant financial and
other records, pertinent corporate documents and properties of the Company
and its subsidiaries (including with respect to businesses and assets
acquired or to be acquired to the extent that such information is available
to the Company), and cause the officers, directors, agents and employees of
the Company and its subsidiaries (including with respect to businesses and
assets acquired or to be acquired to the extent that such information is
available to the Company) to supply all information in each case reasonably
requested by any such representative, underwriter, attorney, consultant or
accountant in connection with such Shelf Registration; provided, however,
-------- -------
that such persons shall first agree in writing with the Company that any
information that is reasonably and in good faith designated by the Company
in writing as confidential at the time of delivery of such information
shall be kept confidential by such persons, unless and to the extent that
(i) disclosure of such information is required by court or administrative
order or is necessary to respond to inquiries of regulatory authorities,
(ii) disclosure of such information is required by law (including any
disclosure requirements pursuant to Federal securities laws in connection
with the filing of the Shelf Registration Statement or the use of any
Prospectus), (iii) such information becomes generally available to the
public other than as a result of a disclosure or failure to safeguard such
information by such person or (iv) such information becomes available to
such person from a source other than the Company and its subsidiaries and
such source is not bound by a confidentiality agreement;
(n) Provide an indenture trustee for the Notes and/or the Exchange
Notes and Private Exchange Notes, as the case may be, and cause an
indenture to be qualified under the TIA not later than the effective date
of the first Registration Statement relating to the Notes and/or the
Exchange Notes and Private Exchange Notes, as the case may be; and if such
indenture shall be the Indenture, in connection therewith, cooperate with
the
<PAGE>
-16-
Trustee and the holders of the Notes and/or the Exchange Notes and Private
Exchange Notes, to effect such changes to the Indenture, if any, as may be
required for the Indenture to be so qualified in accordance with the terms
of the TIA; and execute, and use its reasonable efforts to cause the
Trustee to execute, all customary documents as may be required to effect
such changes, and all other forms and documents required to be filed with
the SEC to enable the Indenture to be so qualified in a timely manner;
(o) Comply with all applicable rules and regulations of the SEC and
make generally available to its securityholders earning statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule
158, no later than 45 days after the end of any 12-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Transfer Restricted
Notes are sold to underwriters in a firm commitment or reasonable efforts
underwritten offering and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter after the
effective date of a Registration Statement, which statement shall cover
said period, consistent with the requirements of Rule 158; and
(p) Cooperate with each seller of Transfer Restricted Notes covered
by any Registration Statement and each underwriter, if any, participating
in the disposition of such Transfer Restricted Notes and their respective
counsel in connection with any filings required to be made with the
National Association of Securities Dealers, Inc.
The Company may require a holder of Transfer Restricted Notes to be
included in a Registration Statement to furnish to the Company such information
regarding the distribution of such Transfer Restricted Notes as is required by
law to be disclosed in such Registration Statement and the Company may exclude
from such Registration Statement the Transfer Restricted Notes of any holder who
unreasonably fails to furnish such information within a reasonable time after
receiving such request.
If any such Registration Statement refers to any holder by name or
otherwise as the holder of any securities of the Company, then such holder shall
have the right to (i) require the insertion therein of language, in form and
substance reasonably satisfactory to such holder, to the effect that the holding
by such holder of such securities is not to be construed as a recommendation by
such holder of the investment quality of the Company's securities covered
thereby and that such holding does not imply that such holder will assist in
meeting any future financial requirements of the Company, or (ii) in the event
that such reference to such holder by name or otherwise is not required by the
Securities Act, the deletion of the reference to such holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
<PAGE>
-17-
In the case of a Shelf Registration pursuant to Section 3 hereof, each
holder of Transfer Restricted Notes agrees by acquisition of such Transfer
Restricted Notes that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 5(c)(ii), 5(c)(iii),
5(c)(iv) or 5(c)(v) hereof, such holder will forthwith discontinue disposition
of such Transfer Restricted Notes covered by such Registration Statement or
Prospectus until such holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 5(j) hereof, or until it is advised
in writing by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus.
6. Registration Expenses
---------------------
All fees and expenses incident to the performance of or compliance
with this Agreement by the Company shall be borne by the Company whether or not
any Registration Statement is filed or becomes effective and whether or not any
Notes, Exchange Notes or Private Exchange Notes are issued or sold pursuant to
any Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the National Association of Securities Dealers, Inc.
and (B) in compliance with securities or Blue Sky laws), (ii) printing expenses
(including, without limitation, expenses of printing certificates for Notes,
Exchange Notes and Private Exchange Notes in a form eligible for deposit with
The Depository Trust Company and of printing Prospectuses), (iii) reasonable
fees and disbursements of counsel for the Company and the any counsel to the
holders (not to exceed one firm of counsel), (iv) fees and disbursements of all
independent certified public accountants referred to in Section 2(e) and Section
5(l)(iii) hereof (including, without limitation, the expenses of any special
audit and "cold comfort" letters required by or incident to such performance),
(v) if required, the reasonable fees and expenses of any "qualified independent
underwriter" and its counsel as may be required by the rules and regulations of
the National Association of Securities Dealers, Inc., and (vi) fees and expenses
of all other persons retained by the Company. In addition, the Company shall
pay its internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties)
and the expense of any annual audit. Notwithstanding the foregoing or anything
in this Agreement to the contrary, each holder of Transfer Restricted Notes
shall pay all underwriting discounts and commissions of any underwriters with
respect to any Notes, Exchange Notes or Private Exchange Notes sold by or on
behalf of it.
7. Indemnification
---------------
<PAGE>
-18-
(a) The Company agrees to indemnify and hold harmless (i) the Initial
Purchaser, each holder of Notes, Exchange Notes and Private Exchange Notes and
each Participating Broker-Dealer (each such person, an "Indemnified Holder"),
------------------
(ii) each person, if any, who controls (within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act) any of the foregoing (any of the persons
referred to in this clause (ii) being hereinafter referred to as a "controlling
person"), and (iii) the officers, directors, partners, employees,
representatives and agents of the Initial Purchaser, each holder of Notes,
Exchange Notes and Private Exchange Notes, each Participating Broker-Dealer and
any controlling person (any person referred to in clause (i), (ii) or (iii) may
hereinafter be referred to as an "Indemnified Person"), from and against any and
------------------
all losses, claims, damages, liabilities and judgments arising out of or
relating to any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, Prospectus or preliminary prospectus or
in any amendment or supplement thereto, or arising out of or relating to any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
Prospectus or preliminary prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, except insofar as such
losses, claims, damages, liabilities or judgments are caused by or arise out of
any untrue statement or omission or alleged untrue statement or omission based
upon information relating to any Indemnified Person furnished in writing to the
Company by or on behalf of such Indemnified Person expressly for use therein;
provided that the foregoing indemnity with respect to any preliminary prospectus
- --------
shall not inure to the benefit of any Indemnified Person from whom the person
asserting such losses, claims, damages, liabilities and judgments purchased
securities if such untrue statement or omission or alleged untrue statement or
omission made in such preliminary prospectus is eliminated or remedied in the
Prospectus and a copy of the Prospectus shall not have been furnished to such
person in a timely manner due to the wrongful action or wrongful inaction of
such Indemnified Person.
(b) In case any action shall be brought against any Indemnified
Person, based upon any Registration Statement or any such Prospectus or
preliminary prospectus or any amendment or supplement thereto and with respect
to which indemnity may be sought against the Company hereunder, such Indemnified
Person shall promptly notify the Company in writing and the Company shall assume
the defense thereof, including the employment of counsel reasonably satisfactory
to such Indemnified Person and payment of all fees and expenses incurred by the
Company in the assumption of such defense. Any Indemnified Person shall have
the right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Person, unless (i) the employment of such counsel
shall have been specifically authorized in writing by the Company, (ii) the
Company shall have failed to assume the defense and employ counsel or pay all
such fees and expenses of the assumption of such defense or (iii) the named
parties to any such action (including any impleaded parties) include both such
Indemnified Person and the
<PAGE>
-19-
Company and such Indemnified Person shall have been advised by counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the Company (in which case the Company shall
not have the right to assume the defense of such action on behalf of such
Indemnified Person, it being understood, however, that the Company shall not, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all such Indemnified Persons, which firm shall be designated in writing by such
Indemnified Persons, and that all such reasonable fees and expenses shall be
reimbursed as they are incurred upon presentation to the Company of invoices
setting forth and describing such fees and expenses in reasonable detail). The
Company shall not be liable for any settlement of any such action effected
without its written consent but if settled with the written consent of the
Company, the Company agrees to indemnify and hold harmless each Indemnified
Person from and against any loss or liability by reason of such settlement. The
Company shall not, without the prior written consent of each Indemnified Person,
effect any settlement of any pending or threatened proceeding in respect of
which any Indemnified Person is a party and indemnity could have been sought
hereunder by such Indemnified Person, unless such settlement includes an
unconditional release of such Indemnified Person from all liability on claims
that are the subject matter of such proceeding.
(c) In connection with any Registration Statement pursuant to which
an Indemnified Holder offers or sells Transfer Restricted Notes, such
Indemnified Holder agrees, severally and not jointly, to indemnify and hold
harmless (i) the Company, (ii) each of its directors and officers and (iii) any
person controlling the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act (the persons referred to in
clauses (i), (ii) and (iii) hereinafter referred to as "Company Indemnified
-------------------
Persons") from and against any and all losses, claims, damages, liabilities and
- -------
judgments arising out of or relating to any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement, Prospectus
or preliminary prospectus or in any amendment or supplement thereto, or arising
out of or relating to any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statement
therein (in the case of any Prospectus or preliminary prospectus or supplement
thereto, in light of the circumstances under which they were made) not
misleading, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions made in a Registration Statement, Prospectus or
preliminary prospectus or in any amendment or supplement thereto in reliance on
and in conformity with written information furnished to the Company by such
Indemnified Holder expressly for use in such Registration Statement, Prospectus
or preliminary prospectus or in any amendment or supplement thereto. In any
such case in which any action shall be brought against a Company Indemnified
Person based on such Registration Statement, Prospectus or preliminary
prospectus or in any amendment or supplement thereto and in respect
<PAGE>
-20-
of which indemnity may be sought against an Indemnified Holder, such Indemnified
Holder shall have the rights and duties given to the Company (except that if the
Company shall have assumed the defense thereof, such Indemnified Holder shall
not be required to do so, but may employ separate counsel therein and
participate in the defense thereof but the fees and expenses of such counsel
shall be at the expense of such Indemnified Holder), and the Company Indemnified
Persons shall have the rights and duties given to the Indemnified Persons by
Section 7(b) hereof.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liabilities or judgments referred to herein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities and judgments (i) in such proportion as is appropriate to
reflect the relative benefits received by each indemnifying party on the one
hand and the indemnified party on the other hand from the offering of the
Notes, the Exchange Notes or the Private Exchange Notes, as the case may be (it
being expressly understood and agreed that the relative benefits received by the
Company from the offering of the Notes, Exchange Notes or Private Exchange
Notes, as the case may be, shall be the amount of the net proceeds received by
the Company from the sale of the Notes to the Initial Purchaser), or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of each indemnifying
party on the one hand and the indemnified party on the other hand in connection
with the statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative fault of the each indemnifying party on the one
hand the indemnified party on the other hand shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information
supplied by an indemnifying party or such indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company and the Initial Purchaser agree that it would not be just
and equitable if contribution pursuant to this Section 7(d) were determined by
pro rata allocation (even if all Indemnified Persons were treated as one entity
- --- ----
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities or judgments referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 7, no
Indemnified Person shall be required to contribute any amount in excess of the
amount by which the net proceeds received by it in connection with the sale of
the Notes,
<PAGE>
-21-
Exchange Notes or Private Exchange Notes contemplated by this Agreement (or, in
the case of an underwriter that is an Indemnified Person, the total underwriting
discounts received by such underwriter) exceeds the amount of any damages which
such Indemnified Person has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The Indemnified Person's
obligations to contribute pursuant to this Section 7(d) are several in
proportion to the respective amount of Notes, Exchange Notes or Private Exchange
Notes included in any such Registration Statement by each Indemnified Person and
not joint.
8. Rule 144A
---------
The Company shall use its best efforts to file the reports required to
be filed by it under the Securities Act and the Exchange Act in a timely manner
and, if at any time it is not required to file such reports but in the past had
been required to or did file such reports, it will, upon the request of any
holder of Transfer Restricted Notes, make available other information as
required by, and so long as necessary to permit sales of Transfer Restricted
Notes pursuant to Rule 144A. Notwithstanding the foregoing, nothing in this
Section 8 shall be deemed to require the Company to register any of its
securities pursuant to the Exchange Act.
9. Underwritten Registrations
--------------------------
If any of the Transfer Restricted Notes covered by any Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will administer the offering
will be selected by the holders of a majority in aggregate principal amount of
the Transfer Restricted Notes included in such offering, subject to the consent
of the Company (which will not be unreasonably withheld or delayed).
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such Transfer Restricted Notes on the
basis reasonably provided in any underwriting arrangements approved by the
persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements.
<PAGE>
-22-
10. Miscellaneous
-------------
(a) Remedies. In the event of a breach by the Company or by
--------
greement, each holder of Notes, Exchange Notes or Private Exchange Notes and the
Company, in addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific performance of its
rights under this Agreement. Notwithstanding the provisions of Section 4
hereof, the Company and each holder of Notes, Exchange Notes and Private
Exchange Notes agree that monetary damages would not be adequate compensation
for any loss incurred by reason of a breach of any of the provisions of this
Agreement and each hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not enter into any
--------------------------
agreement with respect to its securities that is inconsistent with the rights
granted to the holders of Notes, Exchange Notes and Private Exchange Notes and
Indemnified Persons in this Agreement or otherwise conflicts with the provisions
hereof. Without the written consent of the holders of a majority in aggregate
principal amount of the outstanding Transfer Restricted Notes, the Company shall
not grant to any person any rights which conflict with or are inconsistent with
the provisions of this Agreement.
(c) No Piggyback on Registrations. The Company shall not grant to
-----------------------------
any of its securityholders (other than the holders of Transfer Restricted Notes
in such capacity) the right to include any of their securities in any
Registration Statement other than Transfer Restricted Notes.
(d) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, otherwise than with the prior written consent of the holders
of not less than a majority of the then outstanding aggregate principal amount
of Transfer Restricted Notes; provided, however, that, for the purposes of this
-------- -------
Agreement, Transfer Restricted Notes that are owned, directly or indirectly, by
the Company or any of its Affiliates are not deemed outstanding.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
holders of Transfer Restricted Notes whose securities are being sold or tendered
pursuant to a Registration Statement and that does not directly or indirectly
affect the rights of other holders of Transfer Restricted Notes may be given by
holders of a majority in aggregate principal amount of the Transfer Restricted
Notes being sold or tendered by such holders pursuant to such Registration
Statement; provided, however, that the provisions of this sentence may not be
-------- -------
amended, modified or supplemented except in accordance with the provisions of
the immediately preceding sentence. Notwithstanding the foregoing, no
amendment, modification,
<PAGE>
-23-
supplement, waiver or consent with respect to Section 7 shall be made or given
otherwise than with the prior written consent of each Indemnified Person
affected thereby.
(e) Notices. All notices and other communications provided for
-------
herein shall be made in writing by hand-delivery, next-day air courier,
certified first-class mail, return receipt requested, telex or telecopier:
(i) if to the Company, as provided in the Purchase Agreement,
(ii) if to the Initial Purchaser, as provided in the Purchase
Agreement, or
(iii) if to any other person who is then the registered holder of
Notes, Exchange Notes or Private Exchange Notes, to the address of such
holder as it appears in the register therefor of the Company.
Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given: when delivered by hand,
if personally delivered; one Business Day after being timely delivered to a
next-day air courier; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; and when receipt is
acknowledged by the recipient's telecopier machine, if telecopied.
(f) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each holder of Notes, Exchange
Notes and Private Exchange Notes and each Indemnified Person. The Company may
not assign any of its rights or obligations hereunder without the prior written
consent of each holder of Transfer Restricted Notes and each Indemnified Person.
Notwithstanding the foregoing, no successor or assignee of the Company shall
have any of the rights granted under this Agreement until such person shall
acknowledge its rights and obligations hereunder by a signed written statement
of such person's acceptance of such rights and obligations.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and, all of which taken
together shall constitute one and the same Agreement.
(h) Governing Law; Submission to Jurisdiction. THIS AGREEMENT
-----------------------------------------
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW
YORK. THE COMPANY HEREBY IRREVOCABLY
<PAGE>
-24-
SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH
OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH
OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND EACH IRREVOCABLY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS.
(i) Severability. The remedies provided herein are cumulative and
------------
not exclusive of any remedies provided by law. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(j) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof. All
references made in this Agreement to "Section" and "paragraph" refer to such
Section or paragraph of this Agreement, unless expressly stated otherwise.
(k) This Agreement is intended by the parties as a final expression
of their agreement and is intended to be a complete and exclusive statement of
the agreement and understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein with respect to
the registration rights granted by the Company with respect to the Notes, the
Exchange Notes and the Private Exchange Notes. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the date first written above.
THE COMPANY:
UNIFI COMMUNICATIONS, INC.
By: /s/ Thomas P. Sosnanski
----------------------------
Name:
Title:
THE INITIAL PURCHASER:
SMITH BARNEY INC.
By: /s/ George Alex
---------------------------
Name:
Title:
<PAGE>
EXHIBIT 4.5
- --------------------------------------------------------------------------------
UNIT AGREEMENT
BETWEEN
UNIFI COMMUNICATIONS, INC.
(A DELAWARE CORPORATION)
AND
FLEET NATIONAL BANK
__________________________________
DATED AS OF FEBRUARY 21, 1997
__________________________________
- --------------------------------------------------------------------------------
<PAGE>
-1-
UNIT AGREEMENT dated as of February 21, 1997 among UNIFI Communications,
Inc., a Delaware corporation (the "Company"), and Fleet National Bank, a
national banking association, as Unit Agent, Warrant Agent and Trustee.
WHEREAS, the Company proposes to issue $175,000,000 aggregate principal
amount of its 14% Senior Notes due 2004 (the "Notes") pursuant to an Indenture
dated as of February 21, 1997 (the "Indenture") between the Company and Fleet
National Bank as Trustee (the "Trustee"), and to issue 175,000 warrants (the
"Warrants"), each Warrant entitling the holder thereof to purchase initially
27.524674 shares of its Common Stock, par value $.01 per share (the "Common
Stock"). The Notes and the Warrants will initially be represented by units (the
"Units"), with each Unit consisting of $1,000 principal amount of Notes and one
Warrant of the Company. Fleet National Bank has agreed with the Company to act
as warrant agent for the Warrants (the "Warrant Agent").
WHEREAS, the Company, the Trustee and the Warrant Agent desire to appoint
Fleet National Bank to act as their agent for the purpose of issuing
certificates ("Unit Certificates") representing the Units and for the
registration of transfers and exchanges thereof. Fleet National Bank, in such
capacity, is referred to herein as the "Unit Agent."
WHEREAS, the Units will be exchangeable for the Notes and the Warrants
represented thereby upon the earliest to occur of: (i) 180 days after the date
of original issuance of the Units, (ii) the effective date of the Exchange Offer
(as defined in the Indenture) (iii) such date as may be determined by the
Initial Purchaser (as defined in the Indenture) and specified to the Company,
the Trustee, the Warrant Agent and the Unit Agent in writing. The date on which
an event listed in the preceding sentence occurs is referred to as the
"Separation Date."
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereto agree as follows:
SECTION 1. Appointment of Unit Agent. (a) The Company hereby appoints
-------------------------
the Unit Agent to act as agent for the Company in accordance with and subject to
the terms and conditions set forth in this Agreement, and the Unit Agent hereby
accepts such appointment.
<PAGE>
-2-
(b) The Trustee and the Company hereby appoint the Unit Agent as
Authenticating Agent and Registrar (as such terms are defined in the Indenture)
for the Notes for so long as the Notes are represented by the Units. In its
capacity as Authenticating Agent and Registrar, the Unit Agent shall have the
rights and obligations provided for such capacities in the Indenture.
(c) The Warrant Agent and the Company hereby appoint the Unit Agent as
Authenticating Agent and Registrar (as such terms are defined in the Warrant
Agreement) for the Warrants for so long as the Warrants are represented by the
Units. In its capacity as Authenticating Agent and Registrar, the Unit Agent
shall have the rights and obligations provided for such capacities in the
Warrant Agreement.
SECTION 2. Unit Certificates. The Units will initially be issued either
-----------------
in global form (the "Global Units"), substantially in the form of Exhibit A
(including footnotes 1 and 2 thereto), or in registered form as definitive Unit
certificates ("Definitive Units"), substantially in the form of Exhibit A (not
including footnotes 1 and 2 thereto). Each Global Unit shall represent such of
the outstanding Units as shall be specified therein and each shall provide that
it shall represent the aggregate Units from time to time endorsed thereon and
that the aggregate amount of outstanding Units represented thereby may from time
to time be reduced or increased, as appropriate. Any endorsement of a Global
Unit to reflect the amount of any increase or decrease in the amount of
outstanding Units represented thereby shall be made by the Unit Agent and
depositary with respect to the Global Units (the "Depositary") in accordance
with written instructions given by the holder thereof. The Depository Trust
Company shall act as the Depositary with respect to the Global Units until a
successor shall be appointed by the Company and the Unit Agent. Upon written
request, a Unit holder may receive from the Depositary and Unit Agent Definitive
Units as set forth in Section 5 below.
SECTION 3. Execution of Unit Certificates. Unit Certificates shall be
------------------------------
signed on behalf of the Company by the Company's Chairman of the Board, its
President or a Vice President (each an "Executing Officer"). Each such
signature upon the Unit Certificates may be in the form of a facsimile signature
of the Executing Officer and may be imprinted or otherwise reproduced on the
Unit Certificates.
In case any Executing Officer of the Company who shall have signed any of
the Unit Certificates shall cease to be an
<PAGE>
-3-
Executing Officer before the Unit Certificates so signed shall have been
authenticated by the Unit Agent, or disposed of by the Company, such Unit
Certificates nevertheless may be authenticated and delivered or disposed of as
though such person had not ceased to be an Executing Officer of the Company; and
any Unit Certificate may be signed on behalf of the Company by any person who,
at the actual date of the execution of such Unit Certificate, shall be a proper
Executing Officer of the Company to sign such Unit Certificate, although at the
date of the execution of this Unit Agreement or the authentication of any such
Unit Certificates any such person was not such officer.
SECTION 4. Registration and Authentication. The Unit Agent, on behalf of
-------------------------------
the Company, shall number and register the Unit Certificates in a register as
they are issued by the Company. Unit Certificates shall be manually
authenticated by the Unit Agent and shall not be valid for any purpose unless so
authenticated. Unit Certificates shall be dated the date of authentication by
the Unit Agent. The Unit Agent shall, upon written instructions of the Chairman
of the Board, the President or any Vice President of the Company specifying the
amount of Units to be authenticated, whether the Units are to be Global Units or
Definitive Units, and such other information as the Unit Agent may request,
initially authenticate and deliver not more than 175,000 Units and shall
thereafter authenticate and deliver Units as otherwise provided in this
Agreement.
The Company and the Unit Agent may deem and treat the registered holder(s)
of the Unit Certificates as the absolute owner(s) thereof (notwithstanding any
notation of ownership or other writing thereon made by anyone) for all purposes,
and neither the Company nor the Unit Agent shall be affected by any notice to
the contrary.
SECTION 5. Registration of Transfers and Exchanges.
---------------------------------------
(a) Transfer and Exchange of Definitive Units. Prior to the Separation
-----------------------------------------
Date, when Definitive Units are presented to the Unit Agent with a request:
(i) to register the transfer of the Definitive Units; or
(ii) to exchange such Definitive Units for an equal number of
Definitive Units of other authorized denominations,
<PAGE>
-4-
the Unit Agent shall register the transfer or make the exchange as requested if
the requirements under this Agreement as set forth in this Section 5 for such
transactions are met; provided, however, that the Definitive Units presented or
-------- -------
surrendered for registration of transfer or exchange:
(x) shall be duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Unit Agent, duly executed by the
holder thereof or by his attorney, duly authorized in writing; and
(y) in the case of Units the offer and sale of which have not been
registered under the Act (as defined below) and are presented for
registration of transfer or exchange prior to (I) the date which is
three years after the later of the date of original issue and the last
date on which the Company or any affiliate of the Company was the
owner of such Unit, or any predecessor thereto, and (II) such later
date, if any, as may be required by any subsequent change in
applicable law, such Units shall be accompanied, by the following
additional information and documents, as applicable:
(A) if such Unit is being delivered to the Unit Agent by the
registered holder for registration in the name of such holder,
without transfer, a certification from such holder to that effect
(in substantially the form of Exhibit B hereto);
---------
(B) if such Unit is being transferred to a Qualified Institutional
Buyer (as defined in Rule 144A under the Securities Act of 1933,
as amended (the "Act")) in accordance with Rule 144A under the
Act, a certification to that effect (in substantially the form of
Exhibit B hereto);
---------
(C) if such Unit is being transferred (I) to an institutional
"accredited investor" within the meaning of subparagraph (a)(1),
(a)(2), (a)(3) or (a)(7) of Rule 501 under the Act or (II)
pursuant to an exemption from registration in accordance with
Rule 144 under the Act or (III) pursuant to a private placement
exemption from the registration requirements of the Act (in the
case of clauses (I), (II) and (III) based on an opinion of
counsel if the Unit Agent so requests or if the Company so
requests and notifies the Unit Agent), a certification to that
effect (in
<PAGE>
-5-
substantially the form of Exhibit B hereto) and a certificate
---------
from the applicable transferee (in substantially the form of
Exhibit C hereto);
---------
(D) if such Unit is being transferred pursuant to an exemption from
registration in accordance with Rule 904 under the Act (and based
on an opinion of counsel if the Unit Agent so requests or if the
Company so requests and notifies the Unit Agent), a certification
to that effect (in substantially the forms of Exhibits B and D
---------- -
hereto); or
(E) if such Unit is being transferred in reliance on another
exemption from the registration requirements of the Act, a
certification to that effect (in substantially the form of
Exhibit B hereto) and an opinion of counsel reasonably acceptable
---------
to the Company or the Unit Agent to the effect that such transfer
is in compliance with the Act.
(b) Restrictions on Exchange and Transfer of a Definitive Unit for a
----------------------------------------------------------------
Beneficial Interest in a Global Unit. A Definitive Unit may not be exchanged
- ------------------------------------
for a beneficial interest in a Global Unit except upon satisfaction of the
requirements set forth below. Upon receipt by the Unit Agent of a Definitive
Unit, duly endorsed or accompanied by appropriate instruments of transfer, in
form satisfactory to the Unit Agent, together with:
(A) certification from the holder thereof (substantially in the form
of Exhibit B hereto), that such Definitive Unit is being
---------
transferred to a "Qualified Institutional Buyer" (as defined in
Rule 144A under the Act) in accordance with Rule 144A under the
Act; and
(B) written instructions directing the Unit Agent to make, or to
direct the Depositary to make, an endorsement on the Global Unit
to reflect an increase in the aggregate amount of the Units
represented by the Global Unit,
then the Unit Agent shall cancel such Definitive Unit and cause, or direct the
Depositary to cause, in accordance with the standing instructions and procedures
existing between the Depositary and the Unit Agent, the number of Units
represented by the Global Unit to be increased accordingly. If no Global Unit
<PAGE>
-6-
is then outstanding, the Company shall issue and the Unit Agent shall
authenticate a new Global Unit in the appropriate amount.
(c) Transfer and Exchange of Global Units. The transfer and exchange
-------------------------------------
of Global Units or beneficial interests therein shall be effected through the
Depositary, in accordance with this Unit Agreement (including the restrictions
on transfer set forth herein) and the procedures of the Depositary therefor.
(d) Exchange of a Beneficial Interest in a Global Unit for a
--------------------------------------------------------
Definitive Unit.
- ---------------
(i) Prior to the Separation Date, to the extent permitted by law, any
person having a beneficial interest in a Global Unit may upon
request exchange such beneficial interest for a Definitive Unit.
Upon receipt by the Unit Agent of written instructions (or such
other form of instructions as is customary for the Depositary)
from the Depositary or its nominee on behalf of any person having
a beneficial interest in a Global Unit and, the following
additional information and documents:
(A) If such beneficial interest is being delivered to the person
designated by the Depositary as being the beneficial owner,
a certification from such person to that effect (in
substantially the form of Exhibit B hereto);
---------
(B) if such beneficial interest is being transferred to a
Qualified Institutional Buyer (as defined in Rule 144A under
the Act) in accordance with Rule 144A under the Act or
pursuant to an effective registration statement under the
Act, a certification to that effect (in substantially the
form of Exhibit B hereto);
---------
(C) if such beneficial interest is being transferred (I) to an
institutional "accredited investor" within the meaning of
subparagraph (a)(1), (a)(2), (a)(3) or (a)(7) of Rule 501
under the Act or (II) pursuant to an exemption from
registration in accordance with Rule 144 under the Act or
(III) pursuant to a private
<PAGE>
-7-
placement exemption from the registration requirements of
the Act (in the case of clauses (I), (II) and (III), based
on an opinion of counsel if the Unit Agent so requests or if
the Company so requests and notifies the Unit Agent),
delivery of a Certificate of Transfer (in substantially the
form of Exhibit B hereto) and a certification from the
---------
applicable transferee (in substantially the form of Exhibit
-------
C hereto);
-
(D) if such beneficial interest is being transferred pursuant to
an exemption from registration in accordance with Rule 904
under the Act (and based on an opinion of counsel if the
Unit Agent so requests or if the Company so requests and
notifies the Unit Agent), a certification to that effect (in
substantially the forms of Exhibits B and D hereto); or
---------- -
(E) if such beneficial interest is being transferred in reliance
on another exemption from the registration requirements of
the Act (and based on an opinion of counsel if the Unit
Agent so requests or if the Company so requests and notifies
the Unit Agent), a certification to that effect (in
substantially the form of Exhibit B hereto),
---------
then the Unit Agent will cause, in accordance with the standing
instructions and procedures existing between the Depositary and the
Unit Agent, the aggregate amount of the Global Unit to be reduced and,
following such reduction, the Company will execute and the Unit Agent
will authenticate and deliver to the transferee at the principal
office of the Unit Agent a Definitive Unit.
(ii) Definitive Units issued in exchange for a beneficial interest in
a Global Unit pursuant to this Section 5(d) shall be registered
in such names and in such authorized denominations as the
Depositary, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct in writing the Unit
Agent. The Unit Agent shall deliver at the principal office of
the Unit Agent such Definitive Units to the
<PAGE>
-8-
persons in whose names such Units are so registered.
(e) Restrictions on Transfer and Exchange of Global Units.
-----------------------------------------------------
Notwithstanding any other provisions of this Unit Agreement (other than the
provisions set forth in subsection (f) of this Section 5), a Global Unit may not
be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) Authentication of Definitive Units in
-------------------------------------
Absence of Depositary. If at any time:
- ---------------------
(i) the Depositary for the Units notifies the Company that the
Depositary is unwilling or unable to continue as Depositary for
the Global Unit and a successor Depositary for the Global Unit is
not appointed by the Company within 90 days after delivery of
such notice; or
(ii) the Company, at its sole discretion, notifies the Unit Agent in
writing that it elects to cause the issuance of Definitive Units
under this Unit Agreement,
then the Company will execute, and the Unit Agent, upon written instruction of
the Chairman of the Board, President or any Vice President of the Company, shall
authenticate and deliver, Definitive Units, in an aggregate number equal to the
aggregate number of Units represented by the Global Unit, in exchange for such
Global Unit.
(g) Legends.
-------
(i) Except as permitted by the following paragraph (ii), each Unit
Certificate evidencing the Global Units and the Definitive Units
(and all Units issued in exchange therefor or substitution
thereof) shall bear a legend substantially to the following
effect:
<PAGE>
-9-
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A PROMULGATED UNDER THE SECURITIES ACT) OR
(B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) PROMULGATED UNDER THE SECURITIES ACT) (AN
INSTITUTIONAL "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE
904 UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT WITHIN THREE
YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE
TRANSFER THIS SECURITY, EXCEPT (A) TO THE ISSUER THEREOF, OR ANY SUBSIDIARY
THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE
144A PROMULGATED UNDER THE SECURITIES ACT, (C) TO AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHED (OR HAS
FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE UNIT AGENT A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS SECURITY, (D) OUTSIDE THE UNITED STATES IN
AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 PROMULGATED UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY
RULE 144 PROMULGATED UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN THREE YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE UNIT AGENT AND THE ISSUER SUCH CERTIFICATIONS, WRITTEN LEGAL
OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR
IN A TRANSACTION NOT SUBJECT TO,
<PAGE>
-10-
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSONS" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
EACH UNIT REPRESENTED BY THIS SECURITY CONSISTS OF ONE NOTE OF $1,000
PRINCIPAL AMOUNT OF 14% SENIOR NOTES DUE 2004 (THE "NOTES") OF UNIFI
COMMUNICATIONS, INC. AND ONE WARRANT (THE "WARRANTS"), EACH WARRANT TO
PURCHASE INITIALLY 27.524674 SHARES OF COMMON STOCK OF UNIFI
COMMUNICATIONS, INC. THE NOTES AND WARRANTS WILL BE TRANSFERABLE BY A
HOLDER THEREOF SEPARATELY FROM EACH OTHER UPON THE EARLIEST TO OCCUR OF (i)
180 DAYS AFTER THE DATE OF ORIGINAL ISSUANCE, (ii) THE EFFECTIVE DATE OF
THE EXCHANGE OFFER (AS DEFINED IN THE INDENTURE), OR (iii) SUCH DATE AS MAY
BE DETERMINED BY THE INITIAL PURCHASER (AS DEFINED IN THE INDENTURE)."
(ii) Upon any sale or transfer of a Unit pursuant to Rule 144 under
the Act or an effective registration statement under the Act:
(A) in the case of any Unit that is a Definitive Unit, the Unit
Agent shall permit the registered holder thereof to exchange
such Unit for a Definitive Unit that does not bear the first
paragraph of the legend set forth in clause (i) above and
rescind any restriction on the transfer of such Unit; and
(B) any such Unit represented by a Global Unit shall not be
required to bear the first paragraph of the legend set forth
in clause (i) above but shall continue to be subject only to
the provisions of Section 5(c) hereof; provided, however,
-------- -------
that with respect to any request for an exchange of a Unit
that is represented by a Global Unit for a Definitive Unit
that does not bear the first paragraph of the legend set
forth above, which request is made in reliance upon Rule
144 under the Act (and based on an opinion of counsel if the
Company so requests and notifies the Unit Agent), the
registered
<PAGE>
-11-
holder thereof shall certify in writing to the Unit Agent
that such request is being made pursuant to Rule 144 under
the Act (such certification to be substantially in the form
of Exhibit B hereto).
---------
(h) Cancellation of a Global Unit. At such time as all beneficial
-----------------------------
interests in a Global Unit have either been exchanged for Definitive Units,
redeemed, repurchased or cancelled, such Global Unit shall be returned to or
retained and cancelled by the Unit Agent.
(i) Obligations with Respect to Transfers and Exchanges of Definitive
-----------------------------------------------------------------
Units.
- -----
(i) Prior to the Separation Date, to permit registrations of
transfers and exchanges, the
<PAGE>
-12-
Company shall execute, and the Unit Agent is hereby authorized to
authenticate in accordance with provisions of Section 4 and this
Section 5, Definitive Units and Global Units as required pursuant
to the provisions of this Section 5.
(ii) All Definitive Units and Global Units issued upon any
registration of transfer or exchange of Definitive Units or
Global Units shall be the valid obligations of the Company,
entitled to the same benefits under this Unit Agreement as the
Definitive Units or Global Units surrendered upon the
registration of transfer or exchange.
(iii) Prior to due presentment for registration of transfer of any Unit,
the Unit Agent and the Company may deem and treat the person in
whose name any Unit is registered as the absolute owner of such
Unit, and neither the Unit Agent nor the Company shall be
affected by notice to the contrary.
(iv) No service charge shall be made to a holder for any registration
of transfer or exchange.
SECTION 6. Separation of the Notes and the Warrants. After the
----------------------------------------
Separation Date, the Notes and the Warrants represented by the Units shall be
separately transferable. Upon presentation after the Separation Date of any
Unit Certificate for exchange for Warrants and Notes or for registration of
transfer or otherwise, (i) the Unit Agent shall notify the Trustee and the
Warrant Agent of the number of Units so presented, the registered owner thereof,
such owner's registered address, the nature of any legends or restrictive
endorsements set forth on such Unit Certificate and any other information
provided by the registered holder thereof in connection therewith, (ii) the
Trustee, if the requirements of the Indenture for such transaction are met,
shall promptly authenticate, register and deliver a new Note or Notes equal in
aggregate principal amount to the Notes represented by such Unit Certificate in
accordance with the direction of such registered holder and (iii) the Warrant
Agent, if the requirements for such transaction are met, shall promptly
authenticate, register and deliver a new Warrant certificate or certificates for
the number of Warrants previously represented by such Unit Certificate in
accordance with the directions of such registered holder. The Warrant Agent and
the Trustee will notify the Unit Agent of any
<PAGE>
-13-
additional requirements in connection with a particular transfer or exchange.
Following the Separation Date, no Unit Certificates shall be issued
upon registration of transfer or exchange of Unit Certificates, or otherwise.
SECTION 7. Rights of Unit Holders. The registered owner of a Unit
----------------------
Certificate shall have all the rights and privileges of a registered owner of
the principal amount of Notes represented thereby and the number of Warrants
represented thereby and shall be treated as the registered owner thereof for all
purposes.
SECTION 8. Unit Agent. The Unit Agent undertakes the duties and
----------
obligations imposed by this Agreement upon the following terms and conditions,
by which the Company and the holders of Units, by their acceptance thereof,
shall be bound:
(a) The statements contained herein and in the Unit Certificates
shall be taken as statements of the Company, and the Unit Agent assumes no
responsibility for the correctness of any of the same except such as
describe the Unit Agent. The Unit Agent assumes no responsibility with
respect to the distribution of the Unit Certificates except as herein
otherwise specifically provided.
(b) The Unit Agent shall not be responsible for any failure of the
Company to comply with any of the covenants in this Agreement, the Unit
Certificates, the Warrant Agreement or the Indenture.
(c) The Unit Agent may consult at any time with counsel satisfactory
to it (who may be counsel for the Company) and the Unit Agent shall incur
no liability or responsibility to the Company or to any holder of any Unit
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in accordance with the opinion or the advice of such counsel.
(d) The Unit Agent shall incur no liability or responsibility to the
Company or to any holder of any Unit Certificate for any action taken in
reliance on any Unit Certificate, certificate of shares, notice,
resolution, waiver, consent, order, certificate, or other paper, document
or instrument believed by the Unit Agent to be genuine and to have been
signed, sent or presented by the proper party or parties.
<PAGE>
-14-
(e) The Company agrees to pay to the Unit Agent compensation for all
services rendered by the Unit Agent in connection with the execution and
performance of this Agreement at such rates as have been separately agreed
to by the Company and the Unit Agent and to reimburse the Unit Agent for
all expenses, taxes and governmental charges and other charges of any kind
and nature incurred by the Unit Agent in the execution and performance of
this Agreement. The Company shall indemnify the Unit Agent and its agents
and save each of them harmless against any and all losses, liabilities and
expenses, including judgments, costs and counsel fees and the costs and
expenses of investigating or defending any claim of such liability, for any
action taken or omitted by the Unit Agent or its agents in the execution of
and performance of its obligations under this Agreement except as a result
of its negligence or bad faith. The Unit Agent shall notify the Company
promptly of any claim for which it may seek indemnity; provided that
--------
failure by the Unit Agent to so notify the Company shall not relieve its
obligations hereunder. The Company shall defend the claim and the Unit
Agent shall cooperate in the defense. The Unit Agent may have separate
counsel and the Company shall pay the reasonable fees and expenses of such
counsel. The Company need not pay for any settlement made without its
consent, which consent shall not be unreasonably withheld.
(f) The Unit Agent shall be under no obligation to institute any
action, suit or legal proceeding or to take any other action likely to
involve expense unless the Company or one or more registered holders of
Unit Certificates shall furnish the Unit Agent with security and indemnity
reasonably satisfactory to it for any costs and expenses which may be
incurred, but this provision shall not affect the power of the Unit Agent
to take such action as it may consider proper, whether with or without any
such security or indemnity. All rights of action under this Agreement or
under any of the Units may be enforced by the Unit Agent without the
possession of any of the Unit Certificates or the production thereof at any
trial or other proceeding relative thereto, and any such action, suit or
proceeding instituted by the Unit Agent shall be brought in its name as
Unit Agent and any recovery of judgment shall be for the ratable benefit of
the registered holders of the Units, as their respective rights or
interests may appear.
(g) The Unit Agent, and any stockholder, director, officer or
employee of it, may buy, sell or deal in any of the Units or other
securities of the Company or become
<PAGE>
-15-
pecuniarily interested in any transaction in which the Company may be
interested, or contract with or lend money to the Company or otherwise act
as fully and freely as though it were not the Unit Agent under this
Agreement. Nothing herein shall preclude the Unit Agent from acting in any
other capacity for the Company or for any other legal entity.
(h) The Unit Agent shall act hereunder solely as agent for the
Company, its duties shall be determined solely by the provisions hereof and
no implied covenants or obligations shall be read into this Agreement
against the Unit Agent. The Unit Agent shall not be liable for anything
which it may do or refrain from doing in connection with this Agreement
except for its own negligence or bad faith.
(i) In the absence of bad faith on its part, the Unit Agent 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 Unit Agent and conforming to the requirements of this Agreement.
However, the Unit Agent shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Agreement.
(j) The Unit Agent may rely and shall be fully protected in relying
upon any document believed by it to be genuine and to have been signed or
presented by the proper person. The Unit Agent need not investigate any
fact or matter stated in the documents.
(k) The Unit Agent may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed and
monitored in good faith and with due care.
(l) The Company will perform, execute, acknowledge and deliver or
cause to be performed, executed, acknowledged or delivered all such further
acts, instruments and assurances as may reasonably be required by the Unit
Agent in order to enable it to carry out or perform its duties under this
Agreement.
SECTION 9. Change of Unit Agent. The Unit Agent may resign at any
--------------------
time by so notifying the Company. If the Unit Agent shall resign or become
incapable of acting as Unit Agent, the Company shall appoint a successor to such
Unit Agent. If the Company shall fail to make such appointment within a period
of 30
<PAGE>
-16-
days after it has been notified in writing of such incapacity or resignation by
the Unit Agent or by the registered holder of a Unit Certificate, then the
registered holder of any Unit Certificate may apply to any court of competent
jurisdiction for the appointment of a successor to the Unit Agent. Pending
appointment of a successor to such Unit Agent, either by the Company or by such
a court, the duties of the Unit Agent shall be carried out by the Company. After
appointment, the successor to the Unit Agent shall be vested with the same
powers, rights, duties and responsibilities as it if had been originally named
as Unit Agent without further act or deed; but the former Unit Agent, after the
payment of all outstanding amounts owed to it hereunder, shall deliver and
transfer to the successor to the Unit Agent any property at the time held by it
hereunder and execute and deliver any further assurance, conveyance, act or deed
necessary for such purpose. Failure to give any notice provided for in this
Section 9, however, or any defect therein, shall not affect the legality or
validity of the appointment of a successor to the Unit Agent. The provisions of
Section 8 with respect to any Unit Agent shall survive such Unit Agents
resignation or removal and the termination of this Agreement.
SECTION 10. Successor Unit Agent by Merger, Etc. If the Unit Agent
-----------------------------------
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation, the resulting,
surviving or transferee corporation without any further act shall, if such
resulting, surviving or transferee corporation is otherwise eligible hereunder,
be the successor Unit Agent.
SECTION 11. Notices to the Company and Unit Agent, Trustee and
--------------------------------------------------
Transfer Agent. Any notice or demand authorized by this Agreement to be given
- --------------
or made to or on the Company shall be sufficiently given or made when and if
telecopied to the number indicated below or deposited in the mail, first class
or registered, postage paid, addressed (until another telecopy number or address
is filed in writing by the Company with the Unit Agent, the Trustee and the
Warrant Agent), as follows:
UNIFI Communications, Inc.
900 Chelmsford Street
Suite 312
Lowell, MA 01851
Facsimile No.: (508) 551-7698
Attention: General Counsel
With a copy to:
<PAGE>
-17-
Latham & Watkins
885 Third Avenue
New York, NY 10022-4802
Facsimile No.: (212) 751-4864
Attention: Kirk Davenport, Esq.
In case the Company shall fail to maintain such office or shall fail
to give such notice of any change in the location thereof, presentations may be
made and notices and demands may be served at the principal office of the Unit
Agent.
Any notice pursuant to this Agreement to be given by the Company or by
registered holder(s) of any Unit Certificate to the Unit Agent, the Trustee or
the Warrant Agent shall be sufficiently given when and if telecopied to the
number indicated below or deposited in the mail, first class or registered,
postage prepaid, addressed (until another telecopy number or address is filed in
writing by the class or registered, postage prepaid, addressed (until another
telecopy number or address is filed in writing by the Unit Agent, the Trustee
and the Warrant Agent with the Company), as follows:
Fleet National Bank
1 Federal Street
Boston, MA 02110
Facsimile No.: (617) 346-5501
Attention: Corporate Trust
Administration
Any notice to be mailed to a registered holder of Units shall be
mailed to each holder at its address as it appears on the register of Units
maintained by the Unit Agent. Copies of any such communication shall also be
mailed to the Unit Agent, the Trustee and the Warrant Agent. The Unit Agent
shall furnish the Company, the Trustee or the Warrant Agent promptly when
requested with a list of registered holders of Units for the purpose of mailing
any notice or communication to the registered holders of the Units, the Notes or
the Common Stock and at such other times as may be reasonably requested.
SECTION 12. Supplements and Amendments. The Company and the Unit
--------------------------
Agent may from time to time supplement or amend this Agreement without the
approval of any registered holders of Units in order to cure any ambiguity or to
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provision herein, or to make any other provisions in
regard to matters or questions arising hereunder which the
<PAGE>
-18-
Company, the Trustee, the Warrant Agent and the Unit Agent may deem necessary or
desirable and which shall not, as evidenced by an opinion of counsel delivered
to the Unit Agent, the Trustee and the Warrant Agent, in any way adversely
affect the interests of the registered holders of Units. Any amendment or
supplement to this Agreement that has a material adverse effect on the interests
of Unit holders shall require the written consent of the registered holders of
not less than a majority of the outstanding Units. Each of the Unit Agent, the
Trustee and the Warrant Agent shall be entitled to receive and, subject to
Section 8 shall be fully protected in relying upon an officers' certificate and
opinion of counsel as conclusive evidence that any such amendment or supplement
is authorized or permitted hereunder, that it is not inconsistent herewith, and
that it will be valid and binding upon the Company in accordance with its terms.
The Company may not sign any amendment or supplement until the Company's board
of directors approves it.
SECTION 13. Successors. All the covenants and provisions of this
----------
Agreement by or for the benefit of the Company, the Trustee, the Warrant Agent
or the Unit Agent shall bind and inure to the benefit of their respective
successors and assigns hereunder.
SECTION 14. Governing Law. THIS AGREEMENT AND EACH UNIT CERTIFICATE
-------------
ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
SECTION 15. Benefits of This Agreement. Nothing in this Agreement
--------------------------
shall be construed to give to any person or corporation other than the Company,
the Trustee, the Warrant Agent, the Unit Agent and the registered holders of the
Units any legal or equitable right, remedy or claim under this Agreement; but
this Agreement shall be for the sole and exclusive benefit of the Company, the
Trustee, the Warrant Agent, the Unit Agent and the registered holders of the
Unit Certificates.
SECTION 16. Counterparts. This Agreement may be executed in any
------------
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
SECTION 17. Headings. The headings in this Agreement are for
--------
convenience of reference only and shall not limit or otherwise affect the
meaning of any provision hereof.
<PAGE>
-19-
SECTION 18. Severability. The provisions of this Unit Agreement are
------------
severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Unit Agreement in any jurisdiction.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
UNIFI COMMUNICATIONS, INC.
By: /s/ Thomas P. Sosnowski
---------------------------
Name:
Title:
FLEET NATIONAL BANK,
as Unit Agent
By: /s/ Michael Quaile
---------------------
Name:
Title:
FLEET NATIONAL BANK,
as Trustee
By: /s/ Michael Quaile
---------------------
Name:
Title:
FLEET NATIONAL BANK,
as Warrant Agent
By: /s/ Michael Quaile
---------------------
Name:
Title:
<PAGE>
EXHIBIT A
[FORM OF SECURITY]
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A PROMULGATED UNDER THE SECURITIES ACT) OR
(B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) PROMULGATED UNDER THE SECURITIES ACT) (AN
INSTITUTIONAL "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE
904 UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT WITHIN THREE
YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE
TRANSFER THIS SECURITY, EXCEPT (A) TO THE ISSUER THEREOF, OR ANY SUBSIDIARY
THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE
144A PROMULGATED UNDER THE SECURITIES ACT, (C) TO AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHED (OR HAS
FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE UNIT AGENT A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS SECURITY, (D) OUTSIDE THE UNITED STATES IN
AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 PROMULGATED UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY
RULE 144 PROMULGATED UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN THREE YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE UNIT AGENT AND THE ISSUER SUCH CERTIFICATIONS, WRITTEN LEGAL
OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR
IN A TRANSACTION NOT SUBJECT TO,
A-1
<PAGE>
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSONS" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
EACH UNIT REPRESENTED BY THIS SECURITY CONSISTS OF ONE NOTE OF $1,000
PRINCIPAL AMOUNT OF 14% SENIOR NOTES DUE 2004 (THE "NOTES") OF UNIFI
COMMUNICATIONS, INC. AND ONE WARRANT (THE "WARRANTS"), EACH WARRANT TO
PURCHASE INITIALLY 27.524674 SHARES OF COMMON STOCK OF UNIFI
COMMUNICATIONS, INC. THE NOTES AND WARRANTS WILL BE TRANSFERABLE BY A
HOLDER THEREOF SEPARATELY FROM EACH OTHER UPON THE EARLIEST TO OCCUR OF (i)
180 DAYS AFTER THE DATE OF ORIGINAL ISSUANCE, (ii) THE EFFECTIVE DATE OF
THE EXCHANGE OFFER (AS DEFINED IN THE INDENTURE), OR (iii) SUCH DATE AS MAY
BE DETERMINED BY THE INITIAL PURCHASER (AS DEFINED IN THE INDENTURE)."
[UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR UNITS IN
CERTIFICATED FORM, THIS UNIT MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE
DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF
SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.]/1/
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES
- ----------
/1/ This paragraph is to be included only if the Unit is in global form.
A-2
<PAGE>
OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND
TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS
MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.17 OF THE
INDENTURE.
FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED, AND THE RULES AND REGULATIONS THEREUNDER, THE NOTE
COMPRISING A PART OF THIS SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE
DISCOUNT; FOR EACH $1,000 OF PRINCIPAL AMOUNT (1) THE "ISSUE PRICE" IS $
; (2) THE "STATED REDEMPTION PRICE AT MATURITY" IS $ ; (3) THE
AMOUNT OF ORIGINAL ISSUE DISCOUNT (THE EXCESS OF THE "STATED REDEMPTION
PRICE AT MATURITY" OVER THE "ISSUE PRICE") IS $ ; (4) THE ISSUE DATE
IS FEBRUARY 21, 1997; AND (5) THE YIELD TO MATURITY (COMPOUNDED SEMI-
ANNUALLY) IS %.
UNIFI COMMUNICATIONS, INC.
175,000 Units Consisting of $175,000,000
Principal Amount
14% Senior Notes due 2004 and
175,000 Warrants to
purchase initially
4,816,818 Shares
of Common Stock of
Unifi Communications, Inc.
No. CUSIP No.
Unifi Communications, Inc., a Delaware corporation ("the Company"),
hereby certifies that [ ] is the owner of [
] Units as described above, transferable only on the books of the Company by the
holder thereof in person or by his or her duly authorized attorney, on surrender
of the Certificate properly endorsed.
Each Unit consists of $1,000 principal amount of 14% Senior Notes due
2004 of the Company (the "Notes") and one Warrant (the "Warrants") to purchase
initially 27.524674 shares of common stock, par value $.01 per share, of the
Company (the "Common Stock"). This Unit is issued pursuant to the Unit
Agreement (the "Unit Agreement") dated as of February 21, 1997 between the
Company and Fleet National Bank, as unit agent (the "Unit Agent"), and is
subject to the terms and provisions contained therein, all of which terms and
provisions the holder of this Unit Certificate consents by acceptance hereof.
The terms of the Notes are governed by an Indenture (the "Indenture")
A-3
<PAGE>
dated as of February 21, 1997 between the Company and Fleet National Bank, as
trustee (the "Trustee"), and are subject to the terms and provisions contained
therein, all of which terms and provisions the holder of this Unit Certificate
consents by acceptance hereof. The Notes are also subject to the terms and
provisions of the Escrow Agreement (the "Escrow Agreement") dated as of February
21, 1997 between the Company and Fleet National Bank, as escrow agent (the
"Escrow Agent"), all of which terms and provisions the holder of this Unit
Certificate consents by acceptance hereof. The terms of the Warrants are
governed by the warrant agreement (the "Warrant Agreement") dated as of February
21, 1997 between the Company and Fleet National Bank, as warrant agent (the
"Warrant Agent"), and are subject to the terms and provisions contained therein,
all of which terms and provisions the holder of this Unit Certificate consents
by acceptance hereof.
Reference is made to the further provisions in each of the Unit
Agreement, Indenture, the Warrant Agreement, the Escrow Agreement and this Unit
Certificate, which will for all purposes have the same effect as if set forth at
this place. Copies of the Unit Agreement, the Indenture, the Warrant Agreement
and the Escrow Agreement are on file at the office of Fleet National Bank, 1
Federal Street, Boston, Massachusetts 02211, Attention: Corporate Trust
Administration, and are available to any holder on written request and without
cost.
The Notes and the Warrants represented by this Unit Certificate shall
be non-detachable and not separately transferable until the earliest to occur of
(i) 180 days after the date of original issuance, (ii) the effective date of the
Exchange Offer or (iii) such date as may be determined by the Initial Purchaser
(as defined in the Indenture) and specified to the Company, the Trustee, the
Warrant Agent and the Unit Agent in writing.
Dated:
UNIFI COMMUNICATIONS, INC.
By:
Name:
Title:
Certificate of Authentication:
This is one of the Units
referred to in the within
mentioned Unit Agreement.
A-4
<PAGE>
FLEET NATIONAL BANK,
as Unit Agent
By:_____________________________
Authorized Signatory
A-5
<PAGE>
UNIFI COMMUNICATIONS, INC.
175,000 Units Consisting of $175,000,000 Principal Amount
14% Senior Notes due 2004 and
175,000 Warrants to purchase initially 4,816,818
Shares of Common Stock
of UNIFI Communications, Inc.
PROVISIONS RELATING TO THE
14% SENIOR NOTES DUE 2004
14% SERIES B SENIOR NOTES DUE 2004
1. Indenture. UNIFI Communications, Inc., a Delaware corporation
---------
(the "Company"), issued the Securities (as defined below) under an Indenture,
dated as of February 21, 1997 (the "Indenture"), between the Company and Fleet
National Bank, a national banking association, as trustee (herein called the
"Trustee," which term includes any successor Trustee under the Indenture). This
Security is one of a duly authorized issue of Initial Securities of the Company
designated as its 14% Senior Notes due 2004 (the "Initial Securities"). The
Securities are limited (except as otherwise provided in the Indenture) in
aggregate principal amount to $175,000,000. The Securities include the Initial
Securities and the Exchange Securities (as defined below) issued in exchange for
the Initial Securities pursuant to the Indenture. The Initial Securities and
the Exchange Securities are treated as a single class of securities under the
Indenture, to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights, limitations of rights,
duties, obligations and immunities thereunder of the Company, the Trustee and
the Holders of the Securities, and of the terms upon which the Securities are,
and are to be, authenticated and delivered.
All capitalized terms used in this Security 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
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of, premium,
if any, and interest on this Security at the times, place and rate, and in the
coin or currency, herein prescribed.
A-6
<PAGE>
2. Redemption.
----------
(a) Optional Redemption. The Securities are subject to redemption,
-------------------
at the option of the Company, in whole or in part, at any time on or after March
1, 2001, upon not less than 30 nor more than 60 days' prior notice, at the
following Redemption Prices (expressed as percentages of the principal amount)
plus accrued and unpaid interest, if any, to the Redemption Date if redeemed
during the 12-month period beginning on March 1 of the years indicated below:
Redemption
Year Price
----------
2001 114.000%
2002 107.000%
2003 and thereafter 103.500%
(b) Optional Redemption upon Certain Public Offerings. In the event
-------------------------------------------------
that on or prior to March 1, 2000, the Company consummates one or more public
offerings of its Common Stock, the Company may, at its option, redeem from the
proceeds of such public offerings no later than 60 days following the
consummation of such offering, up to 33% of the aggregate principal amount of
the Securities originally issued at a Redemption Price equal to 114% of the
aggregate principal amount thereof on the date of redemption of the Securities
so redeemed; provided, however, that immediately after giving effect to any such
-------- -------
redemption, not less than 67% of the aggregate principal amount of the
Securities originally issued remains outstanding.
(c) Interest Payments. In the case of any redemption of Securities,
-----------------
interest installments whose Stated Maturity is on or prior to the Redemption
Date will be payable to the Holders of such Securities, or one or more
Predecessor Securities, of record at the close of business on the relevant
Record Date referred to on the face hereof. Securities (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 Security
------------------
in part only, a new Security or Securities for the unredeemed portion hereof
shall be issued in the name of the Holder hereof upon the cancellation hereof.
3. Offers to Purchase. Sections 4.12 and 4.13 of the Indenture
------------------
provide that upon the occurrence of a Change of Control and following certain
Asset Sales, and subject to further limitations contained therein, the Company
shall make an offer to
A-7
<PAGE>
purchase certain amounts of the Securities in accordance with the procedures set
forth in the Indenture.
4. Defaults and Remedies. If an Event of Default shall occur and be
---------------------
continuing, the principal amount of all of the outstanding Securities, plus all
accrued and unpaid interest, if any, to and including the date the Securities
are paid, may be declared due and payable in the manner and with the effect
provided in the Indenture.
5. Defeasance. The Indenture contains provisions (which provisions
----------
apply to this Security) for defeasance at any time of (a) the entire
indebtedness of the Company under this Security 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.
6. Amendments and Waivers. The Indenture permits, with certain
----------------------
exceptions as therein provided, the amendment thereof and the modification of
the rights and obligations of the Company and the rights of the Holders under
the Indenture at any time by the Company and the Trustee with the consent of the
Holders of not less than two-thirds in aggregate principal amount of the
Securities at the time outstanding. The Indenture also contains provisions
permitting the Holders of specified percentages in aggregate principal amount of
the Securities at the time outstanding, on behalf of the Holders of all the
Securities, to waive compliance by the Company with certain provisions of the
Indenture and certain past Defaults under the Indenture and this Security and
their consequences. Any such consent or waiver by or on behalf of the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange therefor or in lieu hereof whether or not
notation of such consent or waiver is made upon this Security.
7. Denominations, Transfer and Exchange. The Securities are issuable
------------------------------------
only in registered form without coupons in denominations of $1,000 and any
integral multiple thereof. As provided in the Indenture and subject to certain
limitations therein set forth, the Securities are exchangeable for a like
aggregate principal amount of Securities 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 Security is registrable on the security
register of the Company, upon surrender of this Security for registration of
transfer at the office or agency of the Company maintained for such purpose in
A-8
<PAGE>
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 Securities, 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 Securities, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
8. Persons Deemed Owners. Prior to and at the time of due
---------------------
presentment of this Security 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 Security is registered as the owner hereof for all purposes,
whether or not this Security shall be overdue, and neither the Company, the
Trustee nor any agent shall be affected by notice to the contrary.
9. Governing Law. This Security shall be governed by and construed
-------------
in accordance with the laws of the State of New York, without regard to
conflicts of law principles.
10. Registration Rights. Pursuant to the Registration Rights
-------------------
Agreement between the Company and the Initial Purchaser, the Company will be
obligated to consummate an exchange offer pursuant to which the Holder of this
Initial Security shall have the right to exchange this Initial Security for the
Company's Series B 14% Senior Notes due 2004 (the "Exchange Securities"), which
have been registered under the Securities Act, in like principal amount and
having terms identical in all material respects to the Initial Securities. The
Holders of the Initial Securities shall be entitled to receive certain
additional interest payments in the event such exchange offer is not consummated
and upon certain other conditions, all pursuant to and in accordance with the
terms of the Registration Rights Agreement.
11. Escrow Agreement. Pursuant to the terms of the Escrow Agreement
----------------
dated as of February 21, 1997 between the Company and Fleet National Bank as
Escrow Agent, the Company has deposited the Initial Escrow Amount into the
Escrow Account. The Initial Escrow Amount, together with the proceeds from the
investment thereof, represents funds that will be sufficient to pay two years'
interest on the Securities. The Trustee, for the
A-9
<PAGE>
benefit of the holders of the Securities, has been granted a security interest
in the Collateral.
A-10
<PAGE>
SCHEDULE OF EXCHANGES OF CERTIFICATED UNITS/2/
-------------------------------------------
The following exchanges of a part of this Global Unit for certificated Units
have been made:
Number of
Units of
Amount of Amount of this Global
decrease in increase in Unit Signature of
Number of Number of following authorized
Date of Units of this Units of this such decrease officer of
Exchange Global Unit Global Unit (or increase) Unit Agent
- --------------------------------------------------------------------------------
- ----------
/2/ This is to be included only if the Unit is in global form.
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF UNITS
Re: Units (the "Units") each consisting of $1,000 principal amount of 14%
Senior Notes due 2004 of UNIFI Communications, Inc. and one Warrant (the
"Warrants") to purchase initially 27.524674 shares of Common Stock of UNIFI
Communications, Inc.
This Certificate relates to ____ Units held in* ___ book-entry or*
_______ certificated form by ______ (the "Transferor").
The Transferor:*
[ ] has requested the Unit Agent by written order to deliver in exchange
-
for its beneficial interest in the Global Unit held by the Depositary a Unit or
Units in definitive, registered form equal to its beneficial interest in such
Global Unit (or the portion thereof indicated above); or
[ ] has requested the Unit Agent by written order to exchange or register
-
the transfer of a Unit or Units.
In connection with such request and in respect of each such Unit, the
Transferor does hereby certify that Transferor is familiar with the Unit
Agreement relating to the above captioned Units, and that the transfer of this
Unit does not require registration under the Securities Act of 1933, as amended
(the "Act"), because*:
[ ] Such Unit is being acquired for the Transferor's own account, without
-
transfer (in satisfaction of Section 5 of the Unit Agreement).
[ ] Such Unit is being transferred (i) to a qualified institutional buyer
-
(as defined in Rule 144A under the Act) in reliance on Rule 144A or (ii)
pursuant to an exemption from registration in accordance with Rule 904 under the
Act (and, in the case of clause (ii), based on an opinion of counsel if the
Company or the Unit Agent so requests) and together with a certification in
substantially the form of Exhibit D to the Unit Agreement in accordance with
Regulation S under the Act.
B-1
<PAGE>
[_] Such Unit is being transferred (i) in accordance with Rule 144 under
the Act (and based on an opinion of counsel if the Company or the Unit Agent so
requests) or (ii) pursuant to an effective registration statement under the Act.
[_] Such Unit is being transferred to an institutional accredited
investor within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Act
pursuant to a private placement exemption from the registration requirements of
the Act (together with a certification in substantially the form of Exhibit C to
the Unit Agreement and based on an opinion of counsel if the Company or the Unit
Agent so requests).
[_] Such Unit is being transferred in reliance on another exemption from
the registration requirement of the Act (and based on an opinion of counsel if
the Company or the Unit Agent so requests).
______________________________
[INSERT NAME OF TRANSFEROR]
By: _________________________
Date: _____________
*Check applicable box.
B-2
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE TO BE DELIVERED
BY ACCREDITED INSTITUTIONS
____________, ____
Fleet National Bank,
as Unit Agent
Attention: Corporate Trust
Department
Ladies and Gentlemen:
In connection with our proposed purchase of certain Units (the
"UNITS") consisting of $[ ] aggregate principal amount of 14% Senior Notes
due 2004 and [ ] Warrants to purchase initially 27.524674 shares of common
stock, par value $.01 per share, of UNIFI Communications, Inc., a Delaware
corporation (the "Company"), we represent that:
(i) we are an "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended
(the "ACT") (an INSTITUTIONAL "ACCREDITED INVESTOR"), or an entity in which
all of the equity owners are Institutional Accredited Investors;
(ii) any purchase of Units will be for our own account or for the
account of one or more other Institutional Accredited Investors as to which
we exercise sole investment discretion;
(iii) we have such knowledge and experience in financial and
business matters that we are capable of evaluating the merits and risks of
purchasing Units and we and any accounts for which we are acting are able
to bear the economic risks of our or their investment;
(iv) we are not acquiring Units with a view to any distribution
thereof in a transaction that would violate the Act or the securities laws
of any State of the United States or any other applicable jurisdiction;
provided that
C-1
<PAGE>
the disposition of our property and the property of any accounts for which
we are acting as fiduciary shall remain at all times within our control;
and
(v) we acknowledge that we have had access to such financial and
other information, and have been afforded the opportunity to ask such
questions of representatives of the Company and receive answers thereto, as
we deem necessary in connection with our decision to purchase Units.
We understand that the Units have not been registered under the Act,
and we agree, on our own behalf and on behalf of each account for which we
acquire any Units, that such Units may be offered, resold, pledged or otherwise
transferred only (i) to a person whom we reasonably believe to be a qualified
institutional buyer (as defined in Rule 144A under the Act) in a transaction
meeting the requirements of Rule 144A under the Act, outside the United States
to a foreign person in a transaction meeting the requirements of Rule 904 under
the Act (and, unless such transfer occurs in a transaction meeting the
requirements of Rule 144A, based upon an opinion of counsel if the Company or
you so requests), in a transaction meeting the requirements of another exemption
under the Securities Act (and based on an opinion of counsel if the Company or
you so requests), (ii) to the Company or (iii) pursuant to an effective
registration statement under the Act, and, in each case, in accordance with any
applicable securities laws of any State of the United States or any other
applicable jurisdiction. We understand that the Unit Agent will not be required
to accept for registration of transfer any Units, except upon presentation of
evidence satisfactory to the Company that the foregoing restrictions on transfer
have been complied with. We further understand that the Units purchased by us
will be in the form of definitive physical certificates and that such
certificates will bear a legend reflecting the substance of this paragraph. We
further agree to provide to any person acquiring any of the Units from us a
notice advising such person that resales of the Units are restricted as stated
herein.
We acknowledge that you, the Company and others will rely upon our
confirmations, acknowledgments and agreements set forth herein, and we agree to
notify you promptly in writing if any of our representations or warranties
herein ceases to be accurate and complete.
C-2
<PAGE>
THIS LETTER SHALL BE DEEMED TO BE CONTRACT MADE UNDER THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
Very truly yours,
_________________________________
[Name of Transferor]
By:______________________________
Name:
Title:
Address:
C-3
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION
WITH TRANSFERS PURSUANT TO REGULATION S
_______________, ____
Fleet National Bank,
as Unit Agent
Attention: Corporate Trust
Department
Ladies and Gentlemen:
In connection with our proposed sale of certain Units (the "UNITS")
consisting of $[ ] aggregate principal amount of 14% Senior Notes due 2004
and [ ] Warrants to purchase initially 27.524674 shares of common stock,
par value $.01 per share, of UNIFI Communications, Inc., a Delaware corporation
(the "COMPANY"), we represent that:
(i) the offer of the Units was not made to a person in the United
States;
(ii) either (a) at the time the buy order was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United
States or (b) the transaction was executed in, on or through the facilities
of a designated off-shore securities market and neither we nor any person
acting on our behalf knows that the transaction has been prearranged with a
buyer in the United States;
(iii) no directed selling efforts have been made by us in the
United States in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S under the Securities Act of 1933, as amended (the
"ACT"), as applicable;
(iv) the transaction is not part of a plan or scheme by us to evade
the registration requirements of the Act; and
(v) we have advised the transferee of the transfer restrictions
applicable to the Units.
D-1
<PAGE>
You, the Company and counsel for the Company are entitled to rely upon
this letter and you are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceedings or
official inquiry with respect to the matters covered hereby. Terms used in
this certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:_______________________
Name:
Title:
Address:
D-2
<PAGE>
EXHIBIT 4.6
ESCROW AGREEMENT
This ESCROW AGREEMENT (this "Agreement"), dated as of February 21,
---------
1997, among Fleet National Bank, as escrow agent (in such capacity, the "Escrow
------
Agent"), Fleet National Bank, as Trustee (in such capacity, the "Trustee") under
- ----- -------
the Indenture (as defined herein), and UNIFI Communications, Inc., a Delaware
corporation (the "Company").
-------
RECITALS
A. Pursuant to the Indenture, dated as of February 21, 1997 (the
"Indenture"), between the Company and the Trustee, the Company is issuing
- ----------
$175,000,000 aggregate principal amount of its 14% Senior Notes due 2004, Series
A and Series B (the "Notes").
-----
B. As security for its obligations under the Notes and the
Indenture, the Company hereby grants to the Trustee, for the benefit of the
holders of the Notes, a security interest in and lien upon the Escrow Account
(as defined herein).
C. The parties have entered into this Agreement in order to set
forth the conditions upon which, and the manner in which, funds will be
disbursed from the Escrow Account and released from the security interest and
lien described above.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. DEFINED TERMS. In addition to any other defined terms used
-------------
herein, the following terms shall constitute defined terms for purposes of this
Agreement and shall have the meanings set forth below:
"ADDITIONAL INTEREST" shall have the meaning ascribed to that term in
-------------------
the Registration Rights Agreement relating to the Notes, dated as of February
21, 1997, between the Company and Smith Barney Inc., as initial purchaser of the
Notes.
"AFFILIATE" of any specified person means (i) any other person which,
---------
directly or indirectly, is in control of, is controlled by or is under common
control with such specified person or (ii) any other person who is a director or
officer
<PAGE>
-2-
(A) of such specified person, (B) of any subsidiary of such specified person or
(C) of any person described in clause (i) above or (iii) any person in which
such person has, directly or indirectly, a 5% or greater voting or economic
interest or the power to control. For purposes of this definition, control of a
person means the power, directly or indirectly, to direct or cause the direction
of the management or policies of such person whether through the ownership of
voting securities or by contract or otherwise and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"APPLIED" means that disbursed funds have been applied (i) to the
-------
payment of interest on the Notes, (ii) pursuant to Section 3(c) or (iii)
pursuant to Section 6(b)(iii).
"AVAILABLE FUNDS" means (A) the sum of (i) the Initial Escrow Amount
---------------
and (ii) interest earned on the funds in the Escrow Account (including holdings
of U.S. Government Securities), less (B) the aggregate disbursements previously
----
made pursuant to this Agreement.
"COLLATERAL" shall have the meaning given in Section 6(a) hereof.
----------
"ESCROW ACCOUNT" shall mean the escrow account established pursuant to
--------------
Section 2.
"ESCROW ACCOUNT STATEMENT" shall have the meaning given in Section
------------------------
2(f).
"INITIAL ESCROW AMOUNT" shall mean approximately $46 million.
---------------------
"INTEREST PAYMENT DATE" means each of September 1, 1997, March 1,
---------------------
1998, September 1, 1998 and March 1, 1999.
"ISSUE DATE" has the meaning set forth in the Indenture.
----------
"PAYMENT NOTICE AND DISBURSEMENT REQUEST" means a notice sent by the
---------------------------------------
Trustee to the Escrow Agent requesting a disbursement of funds from the Escrow
Account, in substantially the form of Exhibit A hereto. Each Payment Notice and
---------
Disbursement Request shall be signed by an officer of the Trustee.
"REVISED ARTICLE 8" means Uniform Commercial Code, Revised Article 8,
-----------------
Investment Securities (with conforming
<PAGE>
-3-
Amendments to Articles 1, 3, 4, 5, 9 and 10) 1994, Official Text, regardless of
whether Revised Article 8 has been enacted by the State of New York or any other
applicable jurisdiction.
"U.S. GOVERNMENT SECURITIES" means security entitlements (as defined
--------------------------
in Revised Article 8) and securities that are (x) direct obligations of the
United States of America for the payment of which its full faith and credit is
pledged or (y) obligations of a Person controlled or supervised by and acting as
an agency or instrumentality of the United States of America, the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America, which, in either case, are not callable or redeemable
at the option of the issuer thereof, and shall also include a depository receipt
issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as
custodian with respect to any such U.S. Government obligation or a specific
payment of principal of or interest on any such U.S. Government obligation held
by such custodian for the account of the holder of such depository receipt;
provided that (except as required by law) such custodian is not authorized to
- --------
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the U.S.
Government obligation or the specific payment of principal of or interest on the
U.S. Government obligation evidenced by such depository receipt.
2. ESCROW ACCOUNT; ESCROW AGENT.
----------------------------
(a) Appointment of Escrow Agent. The Company and the Trustee hereby
---------------------------
appoint the Escrow Agent, and the Escrow Agent hereby accepts appointment, as
escrow agent, under the terms and conditions of this Agreement.
(b) Establishment of Escrow Account. Concurrently with the execution
-------------------------------
and delivery hereof, the Escrow Agent shall establish an Escrow Account entitled
the "Fleet National Bank, as Escrow Agent for UNIFI Escrow Account" pledged by
the Company to Fleet National Bank, as Trustee (the "Escrow Account") at its
office located at Rochester, New York. All funds accepted by the Escrow Agent
pursuant to this Agreement shall be held for the exclusive benefit of the
Trustee and the ratable benefit of the holders of the Notes. All such funds
shall be held in the Escrow Account until disbursed or paid in accordance with
the terms hereof. The Escrow Account, the funds held therein and any U.S.
Government Securities held by the Escrow Agent shall be under the sole dominion
and control of the Escrow Agent for the benefit of the Trustee and the ratable
benefit of the holders of the Notes. On the Issue Date, the Company shall
deliver the Initial Escrow
<PAGE>
-4-
Amount in immediately available funds to the Escrow Agent for deposit into the
Escrow Account against the Escrow Agent's written acknowledgment and receipt of
the Initial Escrow Amount.
(c) Escrow Agent Compensation. The Company shall pay to the Escrow
-------------------------
Agent such compensation for services to be performed by it under this Agreement
as the Company and the Escrow Agent may agree in writing from time to time. The
Escrow Agent shall be paid any compensation owed to it directly by the Company
and shall not disburse from the Escrow Account any such amounts.
The Company shall reimburse the Escrow Agent upon request for all
reasonable expenses, disbursements, and advances incurred or made by the Escrow
Agent in implementing any of the provisions of this Agreement, including
compensation and the reasonable expenses and disbursements of its counsel. The
Escrow Agent shall be paid any such expenses owed to it directly by the Company
and shall not disburse from the Escrow Account any such amounts.
(d) Investment of Funds in Escrow Account. Funds deposited in the
-------------------------------------
Escrow Account shall be invested and reinvested only upon the following terms
and conditions:
(i) Acceptable Investments. All funds deposited or held in the
----------------------
Escrow Account at any time shall be invested by the Escrow Agent in U.S.
Government Securities in accordance with the Company's written instructions
from time to time to the Escrow Agent; provided, however, that the Company
-------- -------
shall only designate investment of funds in U.S. Government Securities
maturing in an amount sufficient to and/or generating interest income
sufficient to, when added to the balance of funds held in the Escrow
Account, provide for the payment of interest on the outstanding Notes on
the Interest Payment Date beginning on and including September 1, 1997 and
through and including the Interest Payment Date on March 1, 1999; provided,
--------
further, however, that any such written instruction shall specify the
------- -------
particular investment to be made, shall state that such investment is
authorized to be made hereby and in particular satisfies the requirements
of the preceding proviso, shall contain the certification referred to in
Section 2(d)(ii), if required, and shall be executed by any officer of the
Company. All U.S. Government Securities shall be assigned to and held in
the possession of, or, in the case of U.S. Government Securities maintained
in book-entry form with the Federal Reserve Bank, transferred to a book-
entry account in the
<PAGE>
-5-
name of, the Escrow Agent, for the benefit of the Trustee and the ratable
benefit of the holders of the Notes, except that U.S. Government Securities
maintained in book-entry form with the Federal Reserve Bank shall be
transferred to a book-entry account in the name of the Escrow Agent at the
Federal Reserve Bank that includes only U.S. Government Securities held by
the Escrow Agent for its customers and segregated by separate recordation
in the books and records of the Escrow Agent.
(ii) Security Interest in Investments. No investment of funds in
--------------------------------
the Escrow Account shall be made unless the Company has certified to the
Escrow Agent and the Trustee that, upon such investment, the Trustee will
have a first priority perfected security interest in the applicable
investment. On the Issue Date, and on each Interest Payment Date
thereafter until the date upon which the balance of the Available Funds
shall have been reduced to zero, each of the Trustee and the Escrow Agent
shall receive an Opinion of Counsel (as such term is defined in the
Indenture) to the Company, dated each such date as applicable, which
opinion shall meet the requirements of Section 314(b) of the Trust
Indenture Act of 1939, as amended (the "TIA") and shall comply with Section
---
10.02 of the Indenture.
(iii) Principal and Interest. All principal and interest earned
----------------------
on funds invested in U.S. Government Securities shall be deposited in the
Escrow Account as additional Collateral for the benefit of the Trustee and
the ratable benefit of the holders of the Notes and shall be reinvested in
accordance with the terms hereof at the Company's written instruction.
(iv) Limitation on Escrow Agent's Responsibilities. The Escrow
---------------------------------------------
Agent's sole responsibilities under this Section 2 shall be (A) to retain
possession of certificated U.S. Government Securities and to be the
registered or designated owner of U.S. Government Securities which are not
certificated, if any, (B) to follow the Company's written instructions
given in accordance with Section 2(d)(i), (C) to invest and reinvest funds
pursuant to this Section 2(d), (D) to maintain possession of, and dominion
and control over, the Escrow Account and the funds and U.S. Government
Securities therein, unless and until such funds are permitted to be
released or disbursed in accordance with the terms of this Agreement and
(E) to use reasonable efforts to reduce to cash such U.S. Government
Securities as may be required to fund any disbursement or payment in
<PAGE>
-6-
accordance with Section 3. In connection with clause (A) above, the Escrow
Agent will maintain continuous possession in the State of New York of
certificated U.S. Government Securities and cash included in the Collateral
and will cause uncertificated U.S. Government Securities, if any, to be
registered in the book-entry system of, and transferred to an account of
the Escrow Agent or a sub-agent of the Escrow Agent at, the Federal Reserve
Bank of New York. Except as provided in Section 6, the Escrow Agent shall
have no other responsibilities with respect to perfecting or maintaining
the perfection of the Escrow Agent's security interest in the Collateral
and shall not be required to file any instrument, document or notice in any
public office at any time or times. In connection with clause (D) above,
and subject to the following sentence, the Escrow Agent shall not be
required to reduce to cash any U.S. Government Securities to fund any
disbursement or payment in accordance with Section 3 in the absence of
written instructions signed by an officer of the Company specifying the
particular investment to liquidate. If no such written instructions are
received, the Escrow Agent shall liquidate those U.S. Government Securities
having the lowest interest rate per annum or if none such exist, those
having the nearest maturity.
(v) Manner of Investment. Funds deposited in the Escrow Account
--------------------
shall initially be invested in a manner such that there will be sufficient
funds available without any further investment by the Company to cover all
interest due on the outstanding Notes, as such interest becomes due, for
each Interest Payment Date occurring from the Issue Date and ending on (and
including) March 1, 1999, provided that such investments shall have such
maturities and/or interest payment dates such that funds will be available
with respect to each such Interest Payment Date no later than the time the
Escrow Agent is required to distribute such funds to the Trustee pursuant
to Section 3(a). The Escrow Agent shall have no responsibility for
determining whether funds held in the Escrow Account shall have been
invested in such a manner so as to comply with the requirements of this
clause (v).
(e) Substitution of Escrow Agent. The Escrow Agent may resign by
----------------------------
giving no less than 30 days' prior written notice to the Company and the
Trustee. Such resignation shall take effect upon the later to occur of (i)
delivery of all funds and U.S. Government Securities maintained by the Escrow
Agent hereunder and copies of all books, records, plans and other
<PAGE>
-7-
documents in the Escrow Agent's possession relating to such funds or U.S.
Government Securities or this Agreement to a successor escrow agent mutually
approved by the Company and the Trustee (which approvals shall not be
unreasonably withheld or delayed) and (ii) the Company, the Trustee and such
successor escrow agent entering into this Agreement or any written successor
agreement no less favorable to the interests of the holders of the Notes and the
Trustee than this Agreement; and the Escrow Agent shall thereupon be discharged
of all obligations under this Agreement and shall have no further duties,
obligations or responsibilities in connection herewith, except as set forth in
Section 4. If a successor escrow agent has not been appointed or has not
accepted such appointment within 30 days after notice of resignation is given to
the Company, the Escrow Agent may apply to a court of competent jurisdiction for
the appointment of a successor escrow agent.
(f) Escrow Account Statement. At least 30 days prior to each Interest
------------------------
Payment Date, the Escrow Agent shall deliver to the Company and the Trustee a
statement signed by the Escrow Agent setting forth with reasonable particularity
the balance of funds then in the Escrow Account and the manner in which such
funds are invested ("Escrow Account Statement"). The parties hereto irrevocably
------------------------
instruct the Escrow Agent that on the first date upon which the balance in the
Escrow Account (including the holdings of all U.S. Government Securities) is
reduced to zero, the Escrow Agent shall deliver to the Company and to the
Trustee a notice that the balance in the Escrow Account has been reduced to
zero.
3. DISBURSEMENTS.
-------------
(a) Payment Notice and Disbursement Request; Disbursements. The
------------------------------------------------------
Company shall give written notice to the Trustee and the Escrow Agent at least
seven (7) business days prior to an Interest Payment Date as to whether the
related interest payment on the Notes is to be made pursuant to a disbursement
from the Escrow Account; and the Trustee shall, at least five (5) business days
prior to an Interest Payment Date, submit to the Escrow Agent a completed
Payment Notice and Disbursement Request substantially in the form of Exhibit A
---------
hereto with blanks appropriately filed in.
The Escrow Agent's disbursement pursuant to any Payment Notice and
Disbursement Request shall be subject to the satisfaction of the applicable
conditions set forth in Section 3(b). Provided such Payment Notice and
Disbursement Request is not rejected by it, the Escrow Agent, in no event later
than
<PAGE>
-8-
10:00 a.m. on the Interest Payment Date, shall disburse the funds requested
in such Payment Notice and Disbursement Request by wire or book-entry transfer
of immediately available funds to the account of the Trustee for the benefit of
the holders of the Notes. The Escrow Agent shall notify the Trustee as soon as
reasonably possible (but not later than two (2) business days from the date of
receipt of the Payment Notice and Disbursement Request) if any Payment Notice
and Disbursement Request is rejected and the reason(s) therefor. In the event
such rejection is based upon nonsatisfaction of the condition in Section 3(b)(I)
below, the Trustee shall thereupon resubmit the Payment Notice and Disbursement
Request with appropriate changes.
(b) Conditions Precedent to Disbursement. The Escrow Agent's payment
------------------------------------
of any disbursement shall be made only if: (I) the Trustee shall have
submitted, in accordance with the provisions of Section 3(a) herein, a completed
Payment Notice and Disbursement Request to the Escrow Agent substantially in the
form of Exhibit A with blanks appropriately filled in and (II) the Escrow Agent
---------
shall not have received any notice from the Trustee that as a result of an Event
of Default (as defined in the Indenture) the indebtedness represented by the
Notes has been accelerated and has become due and payable (in which event the
Escrow Agent shall apply all Available Funds as required by Section 6(b)(iii)).
(c) Retired Notes. In the event a portion of the Notes has been
-------------
retired by the Company and submitted to the Trustee for cancellation and there
is no Default or Event of Default under the Indenture and no Additional Interest
is accruing or remains unpaid, funds representing the lesser of (A) the excess
of the amount sufficient to pay interest through and including March 1, 1999 on
the Notes not so retired and (B) the interest payments which have not previously
been made on such retired Notes for each Interest Payment Date through the
Interest Payment Date to occur on March 1, 1999 shall, upon the written request
of the Company to the Escrow Agent and the Trustee, be paid to the Company upon
compliance with the release of collateral provisions of the TIA (such compliance
to be determined as set forth in an Opinion of Counsel reasonably satisfactory
to the Escrow Agent) and upon receipt by an Escrow Agent of a notice relating
thereto from the Trustee.
(d) Satisfaction of Obligations on Interest Payment Date(s). Upon
------------------------------------------------------
written notice from the Trustee that the Company has satisfied all of its
obligations under the Indenture to pay interest on the Notes on an Interest
Payment Date, if no Default has occurred and is continuing under the Indenture
and no
<PAGE>
-9-
Additional Interest is accruing or remains unpaid, the Escrow Agent shall
upon written request of the Company, release to the Company the amount set forth
in the Notice and Disbursement Request as funds in the Escrow Account equal to
the amount that would have been required to pay interest on all outstanding
Notes on such Interest Payment Date. Upon written notice from the Trustee that
the Company has satisfied all of its obligations under the Indenture to pay
interest on the Notes on all Interest Payment Dates, if no Default or Event of
Default has occurred and is continuing under the Indenture and no Additional
Interest is accruing or remains unpaid, the Escrow Agent shall, upon request of
the Company, release all remaining funds in the Escrow Account to the Company.
(e) Excess of Available Funds. Upon written notice from the Trustee
-------------------------
that the Available Funds exceed the amount sufficient, in the opinion of a
nationally recognized firm of independent public accountants selected by the
Company or the Company's regular independent public accountants, to provide for
payment in full of the first four scheduled interest payments due on the Notes
(or, in the event an interest payment or payments have been made, an amount
sufficient to provide for payment in full of any interest payments remaining, up
to and including the fourth scheduled interest payment) if no Default has
occurred and is continuing under the Indenture and no Additional Interest is
accruing or remains unpaid, the Escrow Agent shall, upon written request of the
Company, release to the Company the amount set forth in the Notice and
Disbursement Request as funds in the Escrow Account equal to the amount of such
excess Available Funds.
4. LIMITATION OF THE ESCROW AGENT'S LIABILITY; RESPONSIBILITIES OF
---------------------------------------------------------------
THE ESCROW AGENT. The Escrow Agent's responsibility and liability under this
- ----------------
Agreement shall be limited as follows: (i) the Escrow Agent does not represent,
warrant or guaranty to the holders of the Notes from time to time the
performance of the Company; (ii) the Escrow Agent shall have no responsibility
to the Company or the holders of the Notes or the Trustee from time to time as a
consequence of performance or non-performance by the Escrow Agent hereunder,
except for any gross negligence or willful misconduct of the Escrow Agent; (iii)
the Company shall remain solely responsible for all aspects of the Company's
business and conduct; and (iv) the Escrow Agent is not obligated to supervise,
inspect or inform the Company or any third party of any matter referred to
above; provided that nothing contained in this Section 4 shall limit the
--------
liability of the Escrow Agent for breach of its responsibilities as provided in
this Agreement.
<PAGE>
-10-
No implied covenants or obligations shall be inferred from this
Agreement against the Escrow Agent, nor shall the Escrow Agent be bound by the
provisions of any agreement beyond the specific terms hereof. Specifically and
without limiting the foregoing, the Escrow Agent shall in no event have any
liability in connection with its investment, reinvestment or liquidation, in
good faith and in accordance with the terms hereof, of any funds or U.S.
Government Securities held by it hereunder, including without limitation any
liability for any delay not resulting from gross negligence or willful
misconduct in such investment, reinvestment or liquidation, or for any loss of
principal or income incident to any such delay. In addition to the extent the
Escrow Agent has not received written investment instructions from the Company
it shall have no duty to invest any funds deposited in the Escrow Account, and
it shall not be liable for any lost interest as a result thereof.
The Escrow Agent shall be entitled to rely upon any judicial order or
judgment, upon any written opinion of counsel or upon any certification,
instruction, notice, or other writing delivered to it by the Company or the
Trustee in compliance with the provisions of this Agreement without being
required to determine the authenticity or the correctness of any fact stated
therein or the propriety or validity of service thereof. The Escrow Agent may
act in reliance upon any instrument comporting with the provisions of this
Agreement or signature believed by it to be genuine and may assume that any
person purporting to give notice or receipt or advice or make any statement or
execute any document in connection with the provisions hereof has been duly
authorized to do so.
At any time, the Escrow Agent may request in writing an instruction in
writing from the Company, and may at its own option include in such request the
course of action it proposes to take and the date on which it proposes to act,
regarding any matter arising in connection with its duties and obligations
hereunder; provided, however, that the Escrow Agent shall state in such request
-------- -------
that it believes in good faith that such proposed course of action is consistent
with another identified provision of this Agreement. The Escrow Agent shall not
be liable to the Company for acting without the Company's consent in accordance
with such a proposal on or after the date specified therein if (i) the specified
date is at least two business days after the Company receives the Escrow Agent's
request for instructions and its proposed course of action, and (ii) prior to so
acting, the Escrow Agent has not received the written instructions requested
from the Company.
<PAGE>
-11-
The Escrow Agent may act pursuant to the written advice of counsel
chosen by it with respect to any matter relating to this Agreement and (subject
to Section 4(a)(ii)) shall not be liable for any action taken or omitted in
accordance with such advice.
The Escrow Agent shall not be called upon to advise any party as to
selling or retaining, or taking or refraining from taking any action with
respect to, any securities or other property deposited hereunder.
In the event of any ambiguity in the provisions of this Agreement with
respect to any funds or property deposited hereunder, the Escrow Agent shall be
entitled to refuse to comply with any and all claims, demands or instructions
with respect to such funds or property, and the Escrow Agent shall not be or
become liable for its failure or refusal to comply with conflicting claims,
demands or instructions. The Escrow Agent shall be entitled to refuse to act
until either any conflicting or adverse claims or demands shall have been
finally determined by a court of competent jurisdiction or settled by agreement
between the conflicting claimants as evidenced in a writing, satisfactory to the
Escrow Agent, or the Escrow Agent shall have received security or an indemnity
satisfactory to the Escrow Agent sufficient to save the Escrow Agent harmless
from and against any and all loss, liability or expense which the Escrow Agent
may incur by reason of its acting. The Escrow Agent may in addition elect in
its sole option to commence an interpleader action or seek other judicial relief
or orders as the Escrow Agent may deem necessary.
No provision of this Agreement shall require the Escrow Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder.
5. INDEMNITY. The Company shall indemnify, hold harmless and defend
---------
the Escrow Agent and its directors, officers, agents, employees and controlling
persons, from and against any and all claims, actions, obligations, liabilities
and expenses, including defense costs, investigative fees and costs, legal fees,
and claims for damages, arising from the Escrow Agent's performance under this
Agreement, except to the extent that such liability, expense or claim is
directly attributable to the gross negligence or willful misconduct of any of
the foregoing persons. The provisions of this Section shall survive any
termination, satisfaction or discharge of this Agreement as well as the
resignation or removal of the Escrow Agent.
<PAGE>
-12-
6. GRANT OF SECURITY INTEREST; INSTRUCTIONS TO ESCROW AGENT.
--------------------------------------------------------
(a) The Company hereby irrevocably grants a first priority security
interest in and pledges, assigns and sets over to the Trustee for the benefit of
the Trustee and the ratable benefit of the holders of the Notes all of the
Company's right, title and interest in the following investment property and
other personal property of the Escrow Account, and all property now or hereafter
placed or deposited in, or delivered to the Escrow Agent for placement or
deposit in, the Escrow Account, including, without limitation, all funds held
therein, all U.S. Government Securities held by (or otherwise maintained in the
name of) the Escrow Agent pursuant to Section 2, as well as all rights of the
Company under this Agreement and the proceeds of all of the foregoing
(collectively, the "Collateral"), in order to secure all obligations and
----------
indebtedness of the Company under the Notes and any other obligation, now or
hereafter arising, of every kind and nature, owed by the Company under the
Indenture to the Trustee or the holders of the Notes or to the Trustee. The
Escrow Agent hereby acknowledges the Trustee's security interest (but not as to
priority) as set forth above. The Company shall take all actions necessary on
its part to insure the continuance of a first priority security interest in the
Collateral in favor of the Trustee in order to secure all such obligations and
indebtedness. As used herein, the term "investment property" shall have the
meaning assigned to that term in Revised Article 8. In addition to the
foregoing, it is the intention of the parties that the Escrow Account constitute
a "securities account" (as defined in Revised Article 8) subject to the
"control" (as defined in Revised Article 8) of the Escrow Agreement.
(b) The Company and the Trustee hereby irrevocably instruct the Escrow
Agent to, and the Escrow Agent shall (i) (A) maintain sole dominion and control
over funds and U.S. Government Securities in the Escrow Account for the benefit
of the Trustee to the extent specifically required herein, (B) maintain, or
cause its agent within the State of New York to maintain, possession of all
certificated U.S. Government Securities purchased hereunder that are physically
possessed by the Escrow Agent in order for the Trustee to enjoy a continuous
perfected
<PAGE>
-13-
first priority security interest therein under the law of the State of New York
(the Company hereby agreeing that in the event any certificated U.S. Government
Securities are in the possession of the Company or a third party, the Company
shall undertake to deliver all such certificates to the Escrow Agent), (C) take
all steps specified by the Company pursuant to paragraph (a) above to cause the
Trustee to enjoy a continuous perfected first priority security interest under
the New York Uniform Commercial Code and any applicable law of the State of New
York in all U.S. Government Securities purchased hereunder that are not
certificated, if any, and (D) maintain the Collateral free and clear of all
liens, security interests, safekeeping or other charges, demands and claims
against the Escrow Agent of any nature now or hereafter existing in favor of
anyone other than the Trustee and the holders of the Notes; (ii) promptly notify
the Trustee if the Escrow Agent receives written notice that any person other
than the Trustee has a lien or security interest upon any portion of the
Collateral and (iii) in addition to disbursing amounts held in escrow pursuant
to any Payment Notice and Disbursement Requests given to it by the Trustee
pursuant to Section 3, upon receipt of written notice from the Trustee of the
acceleration of the maturity of the Notes, and direction from the Trustee to
disburse all Available Funds to the Trustee, as promptly as practicable, after
following, if it so chooses, the procedures set forth in the fourth paragraph of
Section 4(a), disburse all funds held in the Escrow Account to the Trustee and
transfer title to all U.S. Government Securities held by the Escrow Agent
hereunder to the Trustee. The lien and security interest provided for by this
Section 6 shall automatically terminate and cease as to, and shall not extend or
apply to, and the Trustee shall have no security interest in, any funds
disbursed by the Escrow Agent to the Company pursuant to this Agreement to the
extent not inconsistent with the terms hereof. Not withstanding any other
provisions contained in this Agreement, the Escrow Agent shall act solely as the
Trustee's agent in connection with its duties under this Section 6 or any other
duties herein relating to the Escrow Account or any funds or U.S. Government
Securities held thereunder. The Escrow Agent shall not have any right to receive
compensation from the Trustee and shall have no authority to obligate the
Trustee or to subordinate, compromise or pledge its security interest hereunder.
Accordingly, the Escrow Agent is hereby directed to cooperate with the Trustee
in the exercise of its rights in the Collateral provided for herein.
(c) Any money and U.S. Government Securities collected by the Trustee
pursuant to Section 6(b)(iii) shall be applied as provided in Section 6.10 of
the Indenture. Any surplus of such cash or cash proceeds held by the Trustee
and remaining after the 91st day after payment in full of all the obligations
under the Indenture shall be paid over to the Company or to whomsoever may be
lawfully entitled to receive such surplus or as a court of competent
jurisdiction may direct.
<PAGE>
-14-
(d) Upon demand, the Company will execute and deliver to the Trustee
such instruments and documents as the Trustee may reasonably deem necessary or
advisable to confirm or perfect the rights of the Trustee under this Agreement
and the Trustee's interest in the Collateral. The Trustee shall be entitled to
take all necessary action to preserve and protect the security interest created
hereby as a lien and encumbrance upon the Collateral.
(e) The Company hereby appoints the Trustee as its attorney-in-fact
with full power of substitution to do any act which the Company is obligated
hereto to do, and the Trustee may exercise such rights as the Company might
exercise with respect to the Collateral and take any action in the Company's
name to protect the Trustee's security interest hereunder. In addition to the
rights provided under Section 6(b)(iii) hereof, upon an Event of Default as
defined in the Indenture and for so long as such Event of Default continues, the
Trustee may exercise in respect of the Collateral, in addition to other rights
and remedies provided for herein or otherwise available to it, all the rights
and remedies of a secured party under the Uniform Commercial Code of the State
of New York or other applicable law, and the Trustee may also upon obtaining
possession of the Collateral as set forth herein, without notice to the Company
except as specified below, sell the Collateral or any part thereof in one or
more parcels at public or private sale, at any exchange, broker's board or at
any of the Trustee's offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Trustee may deem commercially
reasonable. The Company acknowledges and agrees that any such private sale may
result in prices and other terms less favorable to the seller than if such sale
were a public sale. The Company agrees that, to the extent notice of sale shall
be required by law, at least ten (10) days' notice to the Company of the time
and place of any public sale or the time after which any private sale is to be
made shall constitute reasonable notification. The Trustee shall not be
obligated to make any sale regardless of notice of sale having been given. The
Trustee may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned.
7. TERMINATION. This Agreement shall terminate automatically ten
-----------
(10) days following disbursement of all funds remaining in the Escrow Account
(including U.S. Government Securities), unless sooner terminated by agreement of
the parties hereto (in accordance with the terms hereof and not in violation of
the Indenture; provided, that the Trustee may not agree to terminate unless it
--------
has received the consent of 100% of the
<PAGE>
-15-
holders of all of the Notes outstanding); provided, however, that the
-------- -------
obligations of the Company under Section 2(c) and Section 5 (and any existing
claims thereunder) shall survive termination of this Agreement or the
resignation of the Escrow Agent; provided, further, however, that until
-------- ------- -------
such tenth day, the Company will cause this Agreement (or any
permitted successor agreement) to remain in effect and will cause there to be an
escrow agent (including any permitted successor thereto) acting hereunder (or
under any such permitted successor agreement).
8. MISCELLANEOUS.
-------------
(a) Waiver. Any party hereto may specifically waive any breach of
------
this Agreement by any other party, but no such waiver shall be deemed to have
been given unless such waiver is in writing, signed by the waiving party and
specifically designating the breach waived, nor shall any such waiver constitute
a continuing waiver of similar or other breaches.
(b) Invalidity. If for any reason whatsoever any one or more of the
----------
provisions of this Agreement shall be held or deemed to be inoperative,
unenforceable or invalid in a particular case or in all cases, such
circumstances shall not have the effect of rendering any of the other provisions
of this Agreement inoperative, unenforceable or invalid, and the inoperative,
unenforceable or invalid provision shall be construed as if it were written so
as to effectuate, to the maximum extent possible, the parties' intent.
(c) Assignment. This Agreement is personal to the parties hereto, and
----------
the rights and duties of any party hereunder shall not be assignable except with
the prior written consent of the other parties. Notwithstanding the foregoing,
this Agreement shall inure to and be binding upon the parties and their
successors and permitted assigns.
(d) Benefit. The parties hereto and their successors and permitted
-------
assigns, but no others, shall be bound hereby and entitled to the benefits
hereof; provided, however, that the holders of the Notes and their permitted
-------- -------
assigns shall be entitled to the benefits hereof and to enforce this Agreement.
(e) Time. Time is of the essence with respect to each provision of
----
this Agreement.
(f) Entire Agreement; Amendments. This Agreement, the Notes and the
----------------------------
Indenture contain the entire agreement among the parties with respect to the
subject matter hereof and supersede
<PAGE>
-16-
any and all prior agreements, understandings and commitments, whether oral or
written. This Agreement may be amended only in accordance with Article Nine of
the Indenture and further by a writing signed by a duly authorized
representative of each party hereto.
(g) Notices. All notices and other communications required or
-------
permitted to be given or made under this Agreement shall be in writing and shall
be deemed to have been duly given and received, regardless of when and whether
received, either: (a) on the day of hand delivery; (b) three business days
following the day sent, when sent by United States certified mail, postage and
certification fee prepaid, return receipt requested, addressed as set forth
below; (c) when transmitted by telecopy with verbal confirmation of receipt by
the telecopy operator to the telecopy number set forth below; or (d) one
business day following the day timely delivered to a next-day air courier
addressed as set forth below:
To the Escrow Agent:
Fleet National Bank
1 Federal Street
Boston, MA 02211
Attention: Corporate Trustee
Administration Department
Telecopy: (617) 346-5501
Telephone: (617) 346-5498
To the Trustee:
Fleet National Bank
1 Federal Street
Boston, MA 02211
Attention: Corporate Trustee
Administration Department
Telecopy: (617) 346-5501
Telephone: (617) 346-5498
To the Company:
UNIFI Communications, Inc.
900 Chelmsford Street, Suite 312
Lowell, MA 01851
Attention: Chief Financial Officer
<PAGE>
-17-
Telecopy: (508) 551-7836
Telephone: (508) 551-7598
or at such other address as the specified entity most recently may have
designated in writing in accordance with this Section.
(h) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(i) Captions. Captions in this Agreement are for convenience only and
--------
shall not be considered or referred to in resolving questions of interpretation
of this Agreement.
(j) Choice of Law. The existence, validity, construction, operation
-------------
and effect of any and all terms and provisions of this Agreement shall be
determined in accordance with and governed by the laws of the State of New York,
without regard to principles of conflicts of laws, except to the extent that
Federal law requires Revised Article 8 to be applied. The parties to this
Agreement hereby agree that jurisdiction over such parties and over the subject
matter of any action or proceeding arising under this Agreement may be exercised
by a competent Court of the State of New York, or by a United States Court,
sitting in New York City. The Company hereby submits to the personal
jurisdiction of such courts, hereby waives personal service of process upon it
and consents that any such service of process may be made by certified or
registered mail, return-receipt requested, directed to the Company at its
address last specified for notices hereunder, and service so made shall be
deemed completed five (5) days after the same shall have been so mailed, AND
HEREBY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH THE
ESCROW AGENT. All actions and proceedings brought by the Company against the
Escrow Agent relating to or arising from, directly or indirectly, this Agreement
shall be litigated only in courts within the State of New York.
(k) The Company hereby represents and warrants that this Agreement has
been duly authorized, executed and delivered on its behalf and constitutes the
legal, valid and binding obligation of the Company. The execution, delivery and
performance of this Agreement by the Company does not violate any applicable law
or regulation to which the Company is subject and does not require the consent
of any governmental or other regulatory body to which the Company is subject,
except for such
<PAGE>
-18-
consents and approvals as have been obtained and are in full force and effect.
(l) Each of the Escrow Agent and the Trustee hereby represents and
warrants that this Agreement has been duly authorized, executed and delivered
on its behalf and constitutes its legal, valid and binding obligation.
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Escrow Agreement as of the day first above written.
ESCROW AGENT: FLEET NATIONAL BANK, as Escrow Agent
By: /s/ Michael Quaile
---------------------------------
Name:
Title:
TRUSTEE: FLEET NATIONAL BANK, as Trustee
By: /s/ Michael Quaile
---------------------------------
Name:
Title:
COMPANY: UNIFI COMMUNICATIONS, INC.
By: /s/ Thomas P. Sosnowski
----------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
---------
Form of Payment Notice and Disbursement Request
[Letterhead of the Trustee]
[Date]
Fleet National Bank
[ ]
[ ]
Attention: Corporate Trustee
Administration Department
Re: Disbursement Request No. ____
[indicate whether revised]
Ladies and Gentlemen:
We refer to the Escrow Agreement, dated as of February 21, 1997 (the
"Escrow Agreement") among you (the "Escrow Agent"), the undersigned as Trustee,
and UNIFI COMMUNICATIONS, INC., a Delaware corporation (the "Company").
Capitalized terms used herein shall have the meanings given in the Escrow
Agreement.
This letter constitutes a Payment Notice and Disbursement Request
under the Escrow Agreement.
[choose one of the following, as applicable]
[The undersigned hereby notifies you that a scheduled interest payment
in the amount of $__________ is due and payable on __________ , 199[7][8][9]
and requests a disbursement of funds contained in the Escrow Account in such
amount to the Trustee.]
[The undersigned hereby notifies you that Notes equalling $__________
in aggregate principal amount have been retired and authorizes you to release
$__________ of funds in the Escrow Account to the Company (to an account
designated by the Company in writing), which amount represents the amount
permitted to be released in accordance with Section 3(c) of the Escrow
Agreement.]
[The undersigned hereby notifies you that there has been an
acceleration of the maturity of the Notes. Accordingly, you are hereby
requested to disburse all remaining funds contained in the Escrow Account to
the Trustee such that the balance in the Escrow Account is reduced to zero.]
<PAGE>
-2-
[The undersigned hereby notifies you that the Company has satisfied
[all of] its obligations under the Indenture to pay interest on the Notes on
[all] [the] Interest Payment Date[s] on [[ ], 199[7][8][9]] and
authorizes you to rebate [$[ ]] [all remaining sums in the Escrow Account]
to the Company (to an account designated by the Company in writing), which
amount represents the amount permitted to be released in accordance with Section
3(d) of the Escrow Agreement.]
[The undersigned hereby notifies you that it has received from the
Company an opinion of [nationally recognized firm of independent public
accountants] stating that the amount of all remaining funds in the Escrow
Account is in excess of the amount sufficient to meet the Company's obligations
under the Indenture to pay interest on the Notes on [all] [the] Interest Payment
Date[s] on [[ ], 199[7][8][9]] and authorizes you to rebate $[ ] to the
Company (to an account designated by the Company in writing), which amount
represents the amount permitted to be released in accordance with Section 3(e)
of the Escrow Agreement.]
In connection with the requested disbursement, the undersigned hereby
notifies you that:
1. [The Notes have not, as a result of an Event of Default (as defined
in the Indenture), been accelerated and become due and payable.]
2. All prior disbursements from the Escrow Account have been Applied.
3. [add wire instructions]
The Escrow Agent is entitled to rely on the foregoing in disbursing
funds relating to this Payment Notice and Disbursement Request.
FLEET NATIONAL BANK, as Trustee
By: __________________________________________
Name:
Title:
<PAGE>
EXHIBIT 10.1
CREDIT AGREEMENT
Dated as of April 10, 1995
between
Fax International, Inc.
and
SingTel (Netherlands Antilles) Pte N.V.
<PAGE>
Table of Contents
Page
1. DEFINITIONS..................................... 1
2. CREDIT FACILITY................................. 3
2.1 Commitment to Lend........................ 3
2.2 Interest.................................. 4
2.3 Repayments and Prepayments................ 4
2.4 Senior Indebtedness....................... 5
3. CONVERSION...................................... 5
3.1 Fixed Price Preferred Stock............... 5
3.2 Common Stock (Post-IPO)................... 5
3.3 Assignment of Conversion Rights........... 6
4. PAYMENTS: GENERAL............................... 6
5. REPRESENTATIONS AND WARRANTIES.................. 6
5.1 Comorate Existence: Power and Authority... 6
5.2 Binding Obligation........................ 6
5.3 No Conflicts.............................. 6
5.4 No Consents............................... 7
5.5 Validity of Shares........................ 7
5.6 Title to Properties....................... 7
5.7 Financial Statements...................... 7
5.8 No Material Adverse Change................ 7
5.9 No Litigation............................. 8
5.10 Compliance with Law....................... 8
5.11 Margin Regulations........................ 8
6. CONDITIONS PRECEDENT............................ 8
6.1 Representations and Warranties True....... 8
6.2 No Default................................ 8
6.3 Proceedings and Documents................. 8
6.4 No Change in Law.......................... 8
6.5 Opinion of Company's Counsel.............. 8
6.6 Closing of Series G Purchase.............. 8
7. COVENANTS....................................... 9
7.1 Affirmative Covenants..................... 9
7.2 Negative Covenants........................ 10
8. EVENTS OF DEFAULT: ACCELERATION................. 10
9. SETOFF.......................................... 12
i
<PAGE>
10. MISCELLANEOUS................................... 12
10.1 Indemnity................................. 12
10.2 Notices, Etc.............................. 13
10.3 Binding Agreement: Assignment............. 13
10.4 Amendment: Waiver......................... 13
10.5 Confidentiality........................... 13
10.6 Severability.............................. 13
10.7 Entire Agreement.......................... 13
10.8 Counterparts.............................. 13
10.9 Governing Law............................. 14
ii
<PAGE>
CREDIT AGREEMENT
The parties to this CREDIT AGREEMENT, dated as of April 10, 1995, are Fax
International, Inc., a Delaware corporation having its principal place of
business at 67 South Bedford Street, Suite 100E, Boston, Massachusetts 01803,
U.S.A. (the "Borrower"), and SingTel (Netherlands Antilles) Pte N.V., a
--------
Netherlands Antilles corporation having its registered office at Pietermaai 15
Willemstad, Curacao, Netherlands Antilles ("SingTel NA").
----------
1. DEFINITIONS.
-----------
Certain capitalized terms are defined below:
Agreement: This Agreement and the Schedules hereto, all as amended and in
---------
effect from time to time.
Annual Budget: As defined in the Stock Purchase Agreement and as amended
-------------
and in effect from time to time.
Approved Expenditure: Any expenditure or expense specifically provided for
--------------------
in the Annual Budget or otherwise approved by SingTel NA, or for the purpose of
redeeming shares of the convertible preferred stock of the Borrower pursuant to
a Redemption Loan.
Balance Sheet: See 5.7.
-------------
Base Rate: The rate of interest equal to the yield on a five-year United
---------
States Treasury Bond, as published in the Wall Street Journal on the applicable
date.
Borrower: See preamble.
--------
Borrowing Limit: An amount equal to Twenty-Five Million Dollars
---------------
(U.S.$25,000,000).
Business Day: Any day on which banks in the United States and the
------------
Netherlands Antilles are open for business generally.
Charter Documents: In respect of any entity, the certificate or articles
-----------------
of incorporation or organization and the by-laws of such entity, or other
constitutive documents of such entity.
Commitment: The obligation of SingTel NA to make Loans to the Borrower in
----------
an aggregate principal amount not to exceed the Borrowing Limit, as such amount
may be reduced from time to time or terminated hereunder.
Common Stock: The Borrower's Common Stock, par value $0.01 per share.
------------
Consent: Any permit, license or exemption from, or approval, consent of,
-------
registration or filing with any local, state, federal, or foreign governmental
or regulatory agency or authority, required under applicable law.
Conversion Shares: Shares of Common Stock issuable upon conversion of
-----------------
Loans or Series H Shares.
<PAGE>
Default: An event or act which with the giving of notice and/or the lapse
-------
of time, would become an Event of Default..
Drawdown Date: In respect of any Loan, the date on which such Loan is made
-------------
to the Borrower.
Environmental Laws: All U.S. federal, state, and local laws and ordinances
------------------
pertaining to environmental matters, including without limitation, the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Clean Water Act, the Federal Clean Air
Act, the Toxic Substances Control Act, in each case as amended, and all rules,
regulations, judgments, decrees, orders and licenses arising under all such laws
and ordinances.
ERISA: The Employee Retirement Income Security Act of 1974, as amended,
-----
and all rules, regulations, judgments, decrees, and orders arising thereunder.
Event of Default: Any of the events listed in (S)8 hereof.
----------------
Expiration Date: The fifth (5th) anniversary of the date hereof.
---------------
Final Maturity Date: The eighth (8th) anniversary of the date hereof.
-------------------
Financials: In respect of any period, the consolidated balance sheet of
----------
any person or entity and its Subsidiaries as at the end of such period, and the
related consolidated statements of income and cash flows for such period, each
setting forth in comparative form the figures for the previous comparable fiscal
period, all in reasonable detail and prepared in accordance with GAAP
consistently applied (except, in the case of quarterly Financials, for their
absence of notes thereto).
GAAP: Generally accepted accounting principles consistent with those
----
adopted by the Financial Accounting Standards Board and its predecessors, (i)
generally, as in effect from time to time, and (ii) for purposes of determining
compliance by the Borrower with its financial covenants set forth herein, as in
effect for the fiscal year therein reported in the most recent audited
Financials submitted to SingTel NA prior to execution of this Agreement.
Indebtedness: In respect of any entity, all obligations, absolute,
------------
contingent and otherwise, that in accordance with GAAP should be classified as
liabilities, including without limitation (i) all debt obligations, (ii) all
liabilities secured by Liens, (iii) all guarantees and (iv) all liabilities in
respect of bankers' acceptances or letters of credit.
Lien: Any encumbrance, mortgage, pledge, hypothecation, charge,
----
restriction or other security interest of any kind securing any obligation of
any entity or person.
Loan: Any loan made or to be made to the Borrower pursuant to (S)2 hereof.
----
Loan Documents: This Agreement and the Notes, in each case as from time to
--------------
time amended or supplemented.
Loan Request: See (S)2.1(b).
------------
Margin: one percent (1%) per annum.
------
2
<PAGE>
Materially Adverse Effect: Any materially adverse effect on the financial
-------------------------
condition or business operations of the Borrower and its Subsidiaries taken
together or material impairment of the ability of the Borrower or any of its
Subsidiaries to perform its obligations hereunder or under any of the other Loan
Documents.
Note: See (S)2.1(c).
-----
Obligations: All indebtedness, obligations and liabilities of the Borrower
-----------
and its Subsidiaries to SingTel NA, direct or indirect, joint or several,
absolute or contingent, matured or unmatured, liquidated or unliquidated,
secured or unsecured, arising by contract, operation of law or otherwise, that
in any case arise or are incurred under this Agreement or any other Loan
Document or in respect of any of the Loans or the Notes or other instruments at
any time evidencing any thereof.
Redemption Loan. Any Loan effected by the Borrower during the one hundred
---------------
twenty (120) days after the date hereof and in an aggregate principal amount not
to exceed Ten Million Dollars ($10,000,000) designated by the Borrower in the
applicable Loan Request as solely for the purpose of redeeming outstanding
shares of the convertible preferred stock or warrants of the Borrower from
persons other than employees or ex-employees of the Borrower; provided, that any
--------
sums lent pursuant to Redemption Loans shall be applied for such purpose within
thirty (30) days of the applicable Drawdown Date or repaid to SingTel NA (with
interest), with such repayment being deemed for all purposes to be made in
accordance with, and to satisfy the requirements for effecting prepayments of,
Section 2.3.
Requirement of Law: In respect of any person or entity, any law, treaty,
------------------
rule, regulation or determination of an arbitrator, court, or other governmental
authority, in each case applicable to or binding upon such person or entity or
affecting any of its property.
Series H Preferred Stock: See (S)3.1.
------------------------
Series H Shares: Shares of Series H Preferred Stock issuable upon
---------------
conversion of Loans.
SingTel NA: See preamble.
----------
ST: Singapore Telecommunications Limited, a Singapore corporation.
--
Stock Purchase Agreement: See (S)8(e).
------------------------
Subsidiary: In respect of the Borrower, any business entity of which the
----------
Borrower at any time owns or controls directly or indirectly more than fifty
percent (50%) of the outstanding shares of stock having voting power, regardless
of whether such right to vote depends upon the occurrence of a contingency.
2. CREDIT FACILITY.
---------------
2.1 Commitment to Lend.
------------------
(a) Upon the terms and subject to the conditions of this Agreement and
while the Commitment is outstanding, SingTel NA agrees to lend to the Borrower
such sums that the Borrower may request, up to an aggregate principal amount
equal to the Borrowing Limit at any time and from time to time until the
Expiration Date, the proceeds of which shall be applied by the Borrower to
Approved
3
<PAGE>
Expenditures. The Borrower may not reborrow amounts borrowed and repaid. Each
Loan shall be in a minimum principal amount of U.S.$500,000 and may be in any
integral multiple thereof.
(b) The Borrower shall notify SingTel NA in writing, not later than
ten (10) Business Days preceding the Drawdown Date (which must be a Business
Day) of each Loan requested hereunder. Any such notice (a "Loan Request") shall
------------
specify (i) the principal amount of such Loan, (ii) the proposed Drawdown Date,
and (iii) (in sufficient detail for SingTel NA to verify the same) the specific
Approved Expenditure or Expenditures (including the approximate timing thereof,
which, if not in respect of a Redemption Loan, shall be consistent with the
Annual Budget) in respect of which the Loan Request is being made. Any Loan
Request may be revoked by notice given to SingTel NA in writing not later than
two (2) Business Days preceding the Drawdown Date. Subject to the foregoing, so
long as the Commitment is then in effect and the applicable conditions set forth
in 6 hereof have been met, SingTel NA shall advance the amount requested to the
Borrower by transfer of immediately available funds not later than the close of
business in Boston on such Drawdown Date.
(c) The obligation of the Borrower to repay to SingTel NA the
principal of each Loan and interest accrued thereon shall be evidenced by a
promissory note in the form of Annex A attached hereto (each such promissory
----- -
note, a "Note":), completed with appropriate insertions, dated the Drawdown Date
----
of such Loan, in a principal amount equal to the amount thereof, having a term
ending on the fifth (5th) anniversary of the Drawdown Date thereof or, if
earlier, the Final Maturity Date, executed and delivered by the Borrower and
payable to the order of SingTel NA.
(d) In consideration of SingTel NA's commitments and undertakings
hereunder, the Borrower shall pay to SingTel NA, concurrently with the execution
and delivery hereof, and in good funds, a facility fee in the amount of One
Million Nine Hundred Sixty-Eight Thousand Seven Hundred Fifty Dollars
(U.S.$1,968,750).
2.2 Interest. The Borrower shall pay interest on the principal
--------
amount of each Loan outstanding from time to time from the Drawdown Date through
and including the date repaid at a rate per annum which is equal to the sum of
(i) the Base Rate on the applicable Drawdown Date, and (ii) the Margin. Until
the date that is two (2) years and six (6) months after the earliest Drawdown
Date hereunder (other than the Drawdown Date of a Redemption Loan), interest on
each Loan shall be added to the principal amount of the Loan (without current
payment), in arrears quarterly on each March 31, June 30, September 30, and
December 31 and on such date (provided, that such interest added to principal
--------
shall not be counted toward determining whether the Borrower has reached the
Borrowing Limit and shall not count toward determining whether the Lender has
reached US$12,500,000 of principal amount of loans converted). Thereafter,
interest on each Loan shall accrue and shall be paid in arrears quarterly on
each March 31, June 30, September 30, and December 31 and on any date any
principal amount of the Loan is payable or is repaid. Notwithstanding the
preceding sentence, while an Event of Default is continuing, amounts payable
under any of the Loan Documents shall bear interest (compounded monthly and
payable on demand in respect of overdue amounts) at a rate per annum which is
equal to the sum of (i) the Base Rate on the applicable Loan Drawdown Date, and
(ii) three percent (3%) above the Margin until such amount is paid in full or
(as the case may be) such Event of Default has been cured or waived in writing
by SingTel NA (after as well as before judgment).
2.3 Repayments and Prepayments. The Borrower hereby agrees to pay
--------------------------
SingTel NA on the Final Maturity Date the entire then unpaid principal of and
interest on all Loans. All payments received in respect of the Loans shall be
applied first to any costs or expenses due to SingTel NA under the Loan
Documents, second to the payment of accrued and unpaid interest, and the balance
only applied
4
<PAGE>
to principal. The Borrower may elect at any time and from time to time to prepay
the outstanding principal of all or any part of any Loan, without premium or
penalty, in a minimum amount of U.S.$500,000 and in an integral multiple (taking
into account for this purpose only the original principal amount of such Loan,
and not any interest added to principal under (S)2.2) thereof, provided, (i)
--------
that the Borrower shall give SingTel NA not less than three (3) months' advance
written notice of any such proposed prepayment (specifying therein the amount of
such proposed prepayment), and (ii) that to the extent provided in 3 the Loans
may at SingTel NA's option (but need not) be converted and exchanged for and
into capital stock of the Borrower during such three (3) month period in
accordance with the provisions of 3 notwithstanding such proposed prepayment.
The Borrower shall not be entitled to reborrow before the Final Maturity Date
any such prepaid amounts. Each repayment or prepayment of principal of any Loan
shall be accompanied by payment of the unpaid interest accrued to such date
(including any interest added to principal under (S)2.2) on the principal being
repaid or prepaid. Any notice of repayment shall be irrevocable.
2.4 Senior Indebtedness. The obligation of the Borrower to pay
-------------------
principal, interest, and any other sums payable under the Loan Documents win
rank at least pari passu with all other unsecured senior indebtedness in respect
of borrowed money of the Borrower.
3. CONVERSION.
----------
3.1 Fixed Price Preferred Stock. SingTel NA shall have the option
---------------------------
(but not the obligation), at any time and from time to time while Loans are
outstanding, exercisable by written notice to the Borrower, to convert and
exchange any part of the principal amount thereof, in integral multiples of
U.S.$250,000, up to a cumulative maximum of U.S.$12,500,000 principal amount,
plus all accrued and unpaid interest thereon (on a first-in, first-out basis),
(for such purposes interest added to principal shall be treated as accrued
interest), for and into a number of fully paid and nonassessable shares of
Series H Convertible Preferred Stock of the Borrower, par value $1.00 per share
("Series H Preferred Stock"), equal to the applicable portion of the principal
------------------------
balance of the Loans so being converted, plus all accrued and unpaid interest
thereon, divided by the liquidation preference of such stock ($10.50 as of the
----------
date hereof, adjusted as appropriate to reflect any stock split, stock dividend,
combination of shares, or the like relating to the Series H Preferred Stock
prior to the date of such conversion). In connection with any such conversion
the Borrower shall promptly issue the applicable number of shares to SingTel NA,
and such applicable portion of the Loans shall be cancelled and deemed paid in
full against delivery of such shares. Notwithstanding anything otherwise
provided herein, SingTel NA shall not acquire more than three million five
hundred thousand (3,500,000) Series H Shares (adjusted as appropriate to reflect
any stock split, stock dividend, or combination of shares as described above)
upon conversion of Loans (including interest thereon), and no Loan (including
interest thereon) shall be converted to the extent (and only to the extent)
necessary to give effect to the provisions of this sentence. The Series H
Preferred Stock shall have the terms set forth in the Certificate of Designation
attached hereto as Annex B.
-------
3.2 Common Stock (Post-IPO). At any time and from time to time after
-----------------------
the effective date of any registration statement filed pursuant to the
Securities Act of 1933, as amended, with the U.S. Securities and Exchange
Commission with respect to an underwritten offering and sale of the Borrower's
Common Stock having a maximum offering price of U.S.$20,000,000 or more, SingTel
NA shall have the option (but not the obligation), at any time while Loans are
outstanding, exercisable by written notice to the Borrower, to convert and
exchange all or any part of the principal amount thereof, in integral multiples
of U.S.$250,000, plus all accrued and unpaid interest thereon, for and into a
number of fully paid and nonassessable shares of Common Stock equal to the
applicable portion of the principal balance
5
<PAGE>
of the Loans, plus all accrued and unpaid interest thereon, divided by the gross
-------
initial public offering price per share of such stock (without reduction for
underwriter's fees, expenses, or the like). In connection with any such
conversion the Borrower shall promptly issue the applicable number of shares to
SingTel NA, and the applicable portion of the Loans shall be cancelled and
deemed paid in full against delivery of such shares. SingTel NA shall agree to
such reasonable restrictions as may be required by the underwriters as to the
sale or other transfer of the Common Stock obtained upon conversion of loans
under this subsection following the effective date of such registration
statement.
3.3 Assignment of Conversion Rights. SingTel NA may freely assign
-------------------------------
any of its rights under this Section 3 to ST and/or any entity controlled by ST.
4. PAYMENTS: GENERAL.
-----------------
All payments to be made by the Borrower hereunder or under any of the other
Loan Documents shall be made in U.S. dollars in immediately available funds at
SingTel NA's bank account in Aruba (as designated by SingTel NA by written
notice to the Borrower from time to time), without set-off or counterclaim. If
any payment hereunder is required to be made on a day which is not a Business
Day, it shall be paid on the immediately succeeding Business Day, with interest
and any applicable fees adjusted accordingly. All computations of interest
hereunder shall be made on the basis of actual days elapsed and on a 365-day
year.
5. REPRESENTATIONS AND WARRANTIES.
------------------------------
The Borrower represents and warrants to SingTel NA on the date hereof, on
the date of any Loan Request, and on each Drawdown Date that:
5.1 Comorate Existence: Power and Authority. The Borrower and each
---------------------------------------
of its Subsidiaries is duly organized, validly existing, and in good standing
under the laws of its jurisdiction of incorporation, has the corporate power and
authority to own and hold its properties and to carry on its business as now
conducted and as proposed to be conducted, and is duly qualified and in good
standing in every other jurisdiction where it is doing business. The Borrower
and each of its Subsidiaries who becomes a party hereto has all requisite power
and authority to execute and deliver the Loan Documents and to incur and perform
its obligations thereunder.
5.2 Binding Obligation. Each Loan Document has been duly authorized,
------------------
executed and delivered by the Borrower and its Subsidiaries party thereto and
constitutes the legal, valid and binding obligation of the Borrower and its
Subsidiaries party thereto, enforceable in accordance with its terms.
5.3 No Conflicts. The execution, delivery, and performance of the
------------
Loan Documents and the exercise of rights thereunder (including borrowing) by
the Borrower and its Subsidiaries parties thereto will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Borrower or any of its
Subsidiaries is a party or by which the Borrower or amy of its Subsidiaries is
bound or to which any of the property or assets of the Borrower or any of its
Subsidiaries is subject and will not result in the creation or imposition of a
Lien on any of such property or assets; nor will such action result in any
violation of the provisions of the Charter Documents of the Borrower or any of
its Subsidiaries or any Requirement of Law applicable to the Borrower or any of
its Subsidiaries.
6
<PAGE>
5.4 No Consents. No Consents are required for the execution,
-----------
delivery and performance of the Loan Documents and the exercise of rights
thereunder (including borrowing) by the Borrower and its Subsidiaries parties
thereto. The borrowing of Loans and the consummation of the other transactions
contemplated by this Agreement are exempt from the registration requirements of
the Securities Act of 1933, and neither the Borrower and its Subsidiaries nor
any agents acting on their behalf will take any action that could cause the loss
of such exemption. In connection therewith, SingTel NA hereby represents and
warrants (and acknowledges that the Borrower may rely on such representations
and warranties for purposes of this subsection) that SingTel NA is an
"accredited investor" within the meaning of Regulation D under the Securities
Act of 1933, as amended, and that it is making the Loans (and may acquire the
Conversion Shares) for investment for SingTel NA's account and not with any
present view toward resale or other disposition thereof.
5.5 Validity of Shares. The Series H Shares have been duly
------------------
authorized. The Series H Shares and the Conversion Shares have been duly
reserved for issuance upon conversion of the Loans hereunder and Series H
Shares, and, when so issued, will be duly authorized, validly issued, fully paid
and nonassessable shares of Series H Preferred Stock or Common Stock, as
applicable, with no personal liability attaching to the ownership thereof, and
will be free and clear of all liens, charges, claims, and encumbrances. The
execution, delivery and performance of the Loan Documents and the exercise of
rights thereunder (including borrowings) by the Borrower and its Subsidiaries
will not give rise to any preemptive right, right of first refusal, anti-
dilution adjustment or other right in favor of any person. The Borrower's
representations and warranties with respect to its capitalization in Section 3.4
of the Stock Purchase Agreement were true and correct on the date thereof.
5.6 Title to Properties. The Borrower has good and marketable title
-------------------
to all its material properties, subject only to Liens permitted hereunder, and
possesses all assets including intellectual properties, franchises and Consents,
adequate for the conduct of its business as now conducted, without known
conflict with any rights of others. The Borrower maintains insurance with
financially responsible insurers, copies of the policies for which have been
previously delivered to SingTel NA, covering such risks and in such amounts and
with such deductibles as are customary in the Borrower's business and are
adequate.
5.7 Financial Statements. The Borrower has provided to SingTel NA
--------------------
the audited consolidated balance sheet of the Borrower as of December 31, 1994
(the "Balance Sheet") and the related consolidated statements of income,
-------------
stockholders' equity (or deficit) and cash flows of the Borrower for the year
ended the date of the Balance Sheet. Such financial statements (a) fairly
present the financial position and the results of operations of the Borrower and
its consolidated Subsidiaries as of the date of the Balance Sheet and for the
year then ended, (b) have been prepared in accordance with generally accepted
accounting principles consistently applied, and (c) reflect all accrued
liabilities and adequate reserves for all contingent liabilities of the Borrower
and its consolidated Subsidiaries as of the date of the Balance Sheet. The
representations and warranties in this Section 5.7 shall be true and correct
with respect to the most recent audited consolidated financial statements of the
Borrower furnished to SingTel NA pursuant to Section 7.1(a).
5.8 No Material Adverse Change. Since the date of the most recent
--------------------------
audited annual consolidated balance sheet of the Borrower furnished to SingTel
NA hereunder, (a) there has been no change in the assets, liabilities, financial
condition, or results of operations of the Borrower and its consolidated
Subsidiaries from that reflected in the financial statements referred to in
Section 5.7 except for changes in the ordinary course of business that in the
aggregate have not been materially adverse and (b) none of the business,
prospects, financial condition, operations, property or affairs of the Borrower
7
<PAGE>
has been materially adversely affected by any occurrence or development,
individually or in the aggregate, whether or not insured against.
5.9 No Litigation. There are no legal or other proceedings or
-------------
investigations pending or threatened in writing against the Borrower or any of
its Subsidiaries before any court, tribunal or regulatory authority which would,
if adversely determined, alone or together, have a Materially Adverse Effect.
5.10 Compliance with Law. The Borrower is not in violation of (i) any
-------------------
Charter Document, corporate minute or resolution, (ii) any instrument or
agreement, in each case binding on it or affecting its property, or (iii) any
Requirement of Law, in a manner which could have a Materially Adverse Effect,
including, without limitation, all material applicable U.S. federal and state
tax laws, ERISA and Environmental Laws.
5.11 Margin Regulations. No part of the proceeds of the Loans will be
------------------
used, directly or indirectly, for the purpose of purchasing or carrying any
margin stock within the meaning of Regulation G (12 C.F.R. 207) of the Board of
Governors of the Federal Reserve System.
6. CONDITIONS PRECEDENT.
--------------------
In addition to the making of the foregoing representations and warranties
and the delivery of the Loan Documents and such other documents and the taking
of such actions as SingTel NA may require consistent herewith, the obligation of
SingTel NA to make any Loan to the Borrower hereunder is subject to the
satisfaction of the following further conditions precedent on the date of each
Loan Request and on each Drawdown Date:
6.1 Representations and Warranties True. Each of the representations
-----------------------------------
and warranties of the Borrower to SingTel NA herein, in any of the other Loan
Documents or any documents, certificate or other paper or notice in connection
herewith shall be true and correct in all material respects as of the time made
or deemed to have been made.
6.2 No Default. No Default or Event of Default shall be continuing.
----------
6.3 Proceedings and Documents. All proceedings in connection with
-------------------------
the transactions contemplated hereby shall be in form and substance satisfactory
to SingTel NA, and SingTel NA shall have received all information and documents
as it may have reasonably requested in connection herewith.
6.4 No Change in Law. No change shall have occurred in any law or
----------------
regulation or in the interpretation thereof that in the reasonable opinion of
SingTel NA would make it unlawful for SingTel NA to make such Loan.
6.5 Opinion of Company's Counsel. SingTel NA shall have received
----------------------------
from counsel to the Borrower an opinion letter or letters substantially in the
form attached hereto as Annex C, addressed to them, dated the date hereof. In
----- -
rendering the opinion(s) called for under this subsection, counsel may rely as
to factual matters on certificates of public officials and officers of the
Borrower.
6.6 Closing of Series G Purchase. The purchase and sale of the
----------------------------
Borrower's Series G Convertible Preferred Stock pursuant to the Stock Purchase
Agreement shall have been consummated.
8
<PAGE>
7. COVENANTS.
---------
7.1 Affirmative Covenants. The Borrower agrees that until the
---------------------
termination of the Commitment and the payment and satisfaction in full of all
the Obligations, the Borrower will, and where applicable will cause each of its
Subsidiaries to, comply with its obligations as set forth throughout this
Agreement and to:
(a) furnish to SingTel NA:
(i) within ninety (90) days after the end of each fiscal
year of the Borrower, Financials of the Borrower and its Subsidiaries as of
the end of and for such fiscal year, prepared in accordance with generally
accepted accounting principles and certified by a firm of independent
public accountants of recognized national standing selected by the Board of
Directors of the Borrower;
(ii) within thirty (30) days after the end of each fiscal
quarter in each fiscal year (other than the last fiscal quarter in each
fiscal year) Financials of the Borrower and its Subsidiaries, if any,
unaudited but prepared in accordance with generally accepted accounting
principles (except for the absence of notes thereto) and certified by the
chief financial or accounting officer of the Borrower;
(iii) together with the annual audited and the quarterly
Financials, a certificate of the Borrower certifying that no Default or
Event of Default has occurred, or if it has, the actions taken by the
Borrower with respect thereto; and
(iv) with reasonable promptness, such other information and
data with respect to the Borrower and its Subsidiaries as SingTel NA may
from time to time reasonably request;
(b) keep true and accurate books of account in accordance with
GAAP, and permit SingTel NA or its designated representatives to inspect the
Borrower's premises during normal business hours, to examine and be advised as
to such or other business records upon the request of SingTel NA, and to permit
SingTel NA's representatives (at SingTel NA's sole expense) to conduct periodic
examinations of the Borrower's books and records;
(c) (i) maintain its corporate existence, business and assets,
(ii) keep its business and assets adequately insured, (iii) timely pay its taxes
(other than taxes being contested in good faith as to which adequate reserves
have been established), and (iv) comply with all Requirements of Law, including
ERISA and Environmental Laws;
(d) notify SingTel NA promptly in writing of (i) the occurrence
of any Default or Event of Default, (ii) any noncompliance with ERISA or any
Environmental Law or proceeding in respect thereof which could have a Materially
Adverse Effect, (iii) any change of address, and (iv) any pending or threatened
(in writing) litigation or similar proceeding affecting the Borrower or any
Subsidiary or any material change in any such litigation or proceeding
previously reported; and
(e) cooperate with SingTel NA, take such action, execute such
documents, and provide such information as SingTel NA may from time to time
request in order further to effect the transactions contemplated by and the
purposes of the Loan Documents.
9
<PAGE>
(f) either (i) apply the full proceeds of each Loan made to the
Borrower hereunder for Approved Expenditures in a manner consistent with the
applicable Loan Request or (ii) repay to SingTel NA (along with all accrued and
unpaid interest, as provided in 2.3) any Loan proceeds not so applied within
three (3) Business Days of the occurrence of an event that precludes Borrower's
application of such proceeds in such manner.
7.2 Negative Covenants. The Borrower agrees that until the
------------------
termination of the Commitment and the payment and satisfaction in full of all
the Obligations, the Borrower will not and where applicable will not permit its
Subsidiaries to:
(a) create or incur any Liens on any of the property or assets of
the Borrower or any of its Subsidiaries except (i) Liens (if any) securing the
Obligations; (ii) Liens securing taxes or other governmental charges not yet
due; (iii) deposits or pledges made in connection with social security
obligations; (iv) Liens of carriers, warehousemen, mechanics and materialmen,
less than 120 days old or as to obligations not yet due; (v) easements, rights-
of-way, zoning restrictions and similar minor Liens which individually and in
the aggregate do not have a Materially Adverse Effect; (vi) purchase money
security interests in or purchase money mortgages on real or personal property
securing purchase money Indebtedness in respect of the acquisition of property,
covering only the property so acquired, or security interests resulting solely
from the refinancing of the same; (vii) liens relating to leased assets, which
individually and in the aggregate do not have a Materially Adverse Effect, and
(viii) other Liens existing on the date hereof and listed on Schedule 7,2(a)
---------------
hereto;
(b) issue any Series H Preferred Stock of the Borrower to any
person or entity other than pursuant to 3 hereof;
(c) make any investments other than investments in (i) marketable
obligations of the United States or the Republic of Singapore maturing within
one (1) year, (ii) certificates of deposit, bankers' acceptances and time and
demand deposits of banks having total assets in excess of U.S.$1,000,000,000,
(iii) Subsidiaries, (iv) mutual funds investing principally in investments
described in clauses (i) and (ii), and (v) such other investments as SingTel NA
may from time to time approve in writing;
(d) redeem or repurchase any of its Capital stock except with the
proceeds of Redemption Loans, or as provided for in Section 7.1 of the Stock
Purchase Agreement, or make any distributions on or in respect of its capital
stock of any nature whatsoever, other than dividends payable solely in shares of
stock or distributions by Subsidiaries to the Borrower or other Subsidiaries; or
(e) become party to a merger or sale-leaseback transaction, or
effect any disposition of assets to any person or entity other than the Borrower
and its Subsidiaries other than in the ordinary course of business, or purchase,
lease or otherwise acquire assets other than in the ordinary course of business.
8. EVENTS OF DEFAULT: ACCELERATION.
-------------------------------
If any of the following events ("Events of Default") shall occur:
-----------------
(a) the Borrower or any Subsidiary shall fail to pay when due
and payable any principal of the Loans when the same becomes due;
10
<PAGE>
(b) the Borrower shall fail to pay interest on the Loans or any
other sum (other than principal) due under any of the Loan Documents within five
(5) Business Days after the date on which the same shall have first become due
and payable;
(c) the Borrower shall fail to perform any term, covenant or
agreement contained in (S)(S)3, 7.1(c), 7.1(d), or 7.2;
(d) the Borrower or any Subsidiary shall full to perform any
other term, covenant or agreement contained in the Loan Documents within thirty
(30) days after SingTel NA has given written notice of such failure to the
Borrower;
(e) the Borrower shall fail to perform any covenant or agreement
contained in that certain Series G Convertible Stock Purchase Agreement dated as
of the date hereof between the Borrower and the Purchaser named therein (the
"Stock Purchase Agreement") within thirty (30) days after SingTel NA has given
------------------------
written notice of such failure to the Borrower;
(f) any representation or warranty of the Borrower or any of its
Subsidiaries in the Loan Documents or in any certificate or notice given in
connection therewith shall have been false or misleading in any material respect
at the time made or deemed to have been made;
(g) any representation or warranty of the Borrower in the Stock
Purchase Agreement shall have been false or misleading in any material respect
at the time made, and the same is not cured within (30) days after SingTel NA
has given written notice thereof to the Borrower;
(h) the Borrower or any of its Subsidiaries shall be in default
(after any applicable period of grace or cure period) under the Equipment Loan
Agreement (as such term is defined in the Stock Purchase Agreement);
(i) any of the Loan Documents shall cease to be in full force
and effect;
(j) (I) the Borrower or any Subsidiary shall default in the
payment of any principal of indebtedness in respect of borrowed money when due
and payable after expiration of any grace period applicable thereto, or (II) any
indebtedness in respect of borrowed money of the Borrower or any Subsidiary
shall have become due and payable prior to the date upon which it would
otherwise have become due and payable as a result of default by the Borrower or
such Subsidiary and the aggregate principal amount of all indebtedness referred
to in clauses (I) and (II) is in excess of One Million Dollars ($1,000,000),
without such indebtedness having been discharged or such acceleration having
been rescinded or annulled within 30 days after written notice shall have been
given to the Borrower by SingTel NA specifying such default or acceleration and
requiring such indebtedness to be discharged or such acceleration to be
rescinded or annulled;
(k) the Borrower or any of its Subsidiaries (i) shall make an
assignment for the benefit of creditors, (ii) shall be adjudicated bankrupt or
insolvent, (iii) shall seek the appointment of, or be the subject of an order
appointing, a trustee, liquidator or receiver as to all or part of its assets,
(iv) shall commence, approve or consent to, any case or proceeding under any
bankruptcy, reorganization or similar law and, in the case of an involuntary
case or
11
<PAGE>
proceeding, such case or proceeding is not dismissed within sixty (60) days
following the commencement thereof, or (v) shall be the subject of an order
for relief in an involuntary case under federal bankruptcy law;
(l) the Borrower or any of its Subsidiaries shall be unable to
pay its debts as they mature;
(m) there shall remain undischarged for more than thirty (30)
days any final judgment or execution action against the Borrower or any
of its Subsidiaries that, together with other outstanding claims and
execution actions against the Borrower and its Subsidiaries exceeds One
Million Dollars ($1,000,000) in the aggregate;
THEN, or at any time thereafter:
(1) In the case of any Event of Default under clause (k) or (l), the
Commitment shall automatically terminate, and the entire unpaid principal
amount of the Loans, all interest accrued and unpaid thereon, and all other
amounts payable thereunder and under the other Loan Documents shall
automatically become forthwith due and payable, without presentment,
demand, protest or notice of any kind, all of which are hereby expressly
waived by the Borrower; and
(2) In the case of any Event of Default other than (k) and (l),
SingTel NA may, by written notice to the Borrower, terminate the Commitment
and/or declare the unpaid principal amount of the Loans, all interest
accrued and unpaid thereon, and all other amounts payable hereunder and
under the other Loan Documents to be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Borrower.
No remedy herein conferred upon SingTel NA is intended to be exclusive of
any other remedy and each and every remedy shall be cumulative and in addition
to every other remedy hereunder, now or hereafter existing at law or in equity
or otherwise.
9. SETOFF.
------
Regardless of the adequacy of any collateral for the Obligations, any
deposits or other sums credited by or due from SingTel NA and its affiliates to
the Borrower may be applied to or set off against any principal, interest and
any other amounts due from the Borrower to SingTel NA and its affiliates at any
time while a Default is continuing without notice to the Borrower, or compliance
with any other procedure imposed by statute or otherwise, all of which are
hereby expressly waived by the Borrower.
10. MISCELLANEOUS.
-------------
10.1 Indemnity. The Borrower agrees to indemnify and hold harmless
---------
SingTel NA and its officers, employees, affiliates, agents, and controlling
person from and against all claims, damages, liabilities and losses of every
kind arising out of the Loan Documents, including without limitation, against
those in respect of the application of Environmental Laws to the Borrower and
its Subsidiaries, absent the gross negligence or willful misconduct of SingTel
NA. The Borrower shall pay to SingTel NA promptly on demand all costs and
expenses (including any taxes and reasonable legal and other professional fees)
incurred by SingTel NA in connection with the, amendment, administration or
enforcement of any of the Loan Documents.
12
<PAGE>
10.2 Notices, Etc. Any communication to be made hereunder shall (i)
------------
be made in writing, but unless otherwise stated, may be made by hand, by telex,
by facsimile transmission confirmed by another method of giving notice
hereunder, or by recognized international delivery service, and (ii) be made or
delivered as applicable to the Borrower at its address set forth in the preamble
hereto or to SingTel NA at its address set forth in the preamble hereto with a
copy to SingTel Global Services Pte. Ltd., 31 Exeter Road, Comecentre,
Singapore 0923, Republic of Singapore (unless any such party has by five (5)
days written notice specified another address), and shall be deemed made or
delivered, when dispatched, left at that address, or two (2) business days after
delivery to a recognized international delivery service for deliveries from the
Netherlands Antilles to the United States and three business days after delivery
to such service for deliveries from the United States to the Netherlands
Antilles, to such address.
10.3 Binding Agreement: Assignment. This Agreement shall be binding
-----------------------------
upon and inure to the benefit of each party hereto and its successors and
assigns, but except as specifically set forth herein the Borrower may not assign
its rights or obligations hereunder. The Borrower may assign its rights and
privileges hereunder, in whole or in part, to any one or more Subsidiaries;
provided, that in such event (a) the Borrower shall unconditionally guarantee
- --------
the payment and performance of the Obligations to the extent incurred by such
Subsidiary, (b) the Subsidiary shall agree to be bound by and subject to the
terms and conditions hereof, and (c) the Borrower and such Subsidiary shall
execute and deliver to SingTel NA such agreements, instruments, or other
documents as SingTel NA may in its reasonable discretion require in order to
give effect to the foregoing. SingTel NA may freely assign its rights and
obligations under this Agreement to ST and/or any entity controlled by ST.
10.4 Amendment: Waiver. This Agreement may not be amended or waived
-----------------
except by a written instrument signed by the Borrower and SingTel NA, and any
such amendment or waiver shall be effective only for the specific purpose given.
No failure or delay by SingTel NA to exercise any right hereunder shall operate
as a waiver thereof& nor shall any single or partial exercise of any right,
power or privilege preclude any other right, power or privilege.
10.5 Confidentiality. SingTel NA shall preserve in confidence all
---------------
information proprietary to the Borrower transmitted to it hereunder, including
information it may obtain as a result of examination of the books, records, or
personnel of the Borrower, and shall not use any such information for any
purpose unrelated hereto. Notwithstanding the foregoing, SingTel NA may
disclose such information if required by any governmental, judicial, or
regulatory authority; provided, that SingTel NA agrees to use all reasonable
--------
efforts (excluding instituting any legal proceeding) to minimize the need for
any such disclosure. The covenant set forth in this subsection shall survive
the termination of the Commitment and of this Agreement.
10.6 Severability. The provisions of this Agreement are severable and
------------
if any one provision hereof shall be held invalid or unenforceable in whole or
in part in any jurisdiction, such invalidity or unenforceability shall affect
only such provision in such jurisdiction.
10.7 Entire Agreement. This Agreement, together with all Schedules
----------------
hereto, expresses the entire understanding of the parties with respect to the
transactions contemplated hereby.
10.8 Counterparts. This Agreement and any amendment hereof may be
------------
executed in several counterparts, each of which shall be an original, and all of
which shall constitute one agreement. In proving this Agreement, it shall not
be necessary to produce more than one such counterpart executed by the party to
be charged.
13
<PAGE>
10.9 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the internal substantive laws of the Republic of Singapore.
The Borrower hereby agrees that the courts of Singapore shall have exclusive
jurisdiction with respect to any action or proceeding arising out of or relating
to this Agreement and agrees that it shall commence any such action or
proceeding against SingTel NA in the courts of Singapore; provided, however,
that Section shall not limit the right of SingTel NA to bring any such action in
any other jurisdiction. The Borrower irrevocably waives any objection that it
may have based upon improper venue or forum own conveniens to the conduct of
such action or proceeding in such court, and appoints Drew and Napier of 20
Raffles Place #17-00, Ocean Towers, Singapore 0104, as its agent for a period of
five (5) years from the date hereof (at the end of such 5-year period the
Borrower agrees to appoint a new agent or to renew its appointment of Drew and
Napier as agent) upon which service of this process may be served in any such
action or proceeding brought in a Singapore court. THE PARTIES HEREBY
IRREVOCABLY WAIVE ANY RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. The parties agree that
neither party shall be liable hereunder for any special, indirect,
consequential, or incidental damages, including, without limitation, damages for
lost profits or business.
IN WITNESS WHEREOF, the undersigned have duly executed this Credit
Agreement as of the date first above written.
FAX INTERNATIONAL, INC.
By: /s/ Douglas J. Ranalli
--------------------------------------------
Name: Douglas J. Ranalli
Title: President
SINGTEL (NETHERLANDS ANTILLES) PTE N.V.
By: /s/ Esther Bermudez
--------------------------------------------
Name: Esther Bermudez
Title: Branch Manager - Aruba Branch
14
<PAGE>
SCHEDULE 7.2(a)
---------------
Any property, rights, or assets of the Company granted at any time and from time
to time as "Collateral" to Applied Telecommunications Technologies, Inc.
("ATTI") pursuant to that certain Lease, dated as of September 17, 1993, between
the Company and ATTI (the "Lease"); (for purposes of this parenthetical phrase
only, the term "Collateral" has the meaning assigned to it in the Lease).
15
<PAGE>
EXHIBIT 10.2
FIRST AMENDMENT TO
CREDIT AGREEMENT
The parties to this First Amendment to Credit Agreement, dated as of February
21, 1997, are UNIFI Communications, Inc. (formerly "Fax International, Inc.," a
Delaware corporation (the "Borrower"), and SingTel (Netherlands Antilles) Pte
--------
N.V., a Netherlands Antilles corporation having its registered office at
Pietermaai 15 Willemstad, Curacao, Netherlands Antilles ("SingTel N.V.").
------------
The parties are parties to a Credit Agreement (the "Agreement") dated as of
---------
April 10, 1995, and desire to amend the Agreement in the manner set forth
herein. The parties accordingly agree as follows.
1. The definitions of the terms "Conversion Shares", "Series H Preferred
Stock" and "Series H Shares" in (S)1 of the Agreement are hereby deleted in
their entirety.
2. The definitions of the terms "Expiration Date" and "Final Maturity
Date" in (S)1 of the Agreement are hereby amended to read in their entirety as
follows:
Expiration Date: February 20, 1997
---------------
Final Maturity Date: The later to occur of (a) March 1, 2005 or (b)
------------------- ----- - -
the Senior Note Payment Date; provided, that if the Senior Note
--------
Payment Date is prior to March 1, 2005, the Final Maturity Date
shall be the date that is ninety one (91) days after the Senior
Note Payment Date.
3. The definition of the term "Margin" in (S)1 of the Agreement is hereby
amended to read in its entirety as follows:
Margin: One percent (1%) per annum for the period commencing April
------
10, 1995 and ending February 20, 1997, and three percent (3%) per
annum for the period commencing February 21, 1997.
4. Definitions of new terms "Offering Memorandum", "Senior Note Payment
Date" and "Senior Notes" are hereby inserted in alphabetical order into (S)1 of
the Agreement, such definitions to read in their entirety as follows:
Offering Memorandum: The Confidential Offering Memorandum of the
-------------------
Borrower dated February 14, 1997 relating to 175,000 Units Consisting
of the Senior Notes and Warrants to purchase 4,816,818 shares of
Common Stock of the Borrower.
Senior Note Payment Date: The earlier of the date on which (i) the
------------------------
aggregate outstanding principal amount of the Senior Notes is reduced
to zero ($0), (ii) on which the Senior Notes have been defeased,
redeemed or repurchased in whole by the Borrower or any of its
subsidiaries, or (iii) on which the Borrower's obligations in respect
of the Senior Notes are otherwise deemed to have been satisfied in
full.
<PAGE>
Senior Notes: US$175,000,000 in 14% Senior Notes due 2004 of the
------------
Borrower issued pursuant to the Indenture dated as of February 21,
1997 between the Borrower and Fleet National Bank, as trustee (the
"Trustee") and any notes exchanged therefor in a registered exchange
offering for such notes, and any amendments to any such notes,
including without limitation amendments to extend the maturity
thereof; provided, that any such amendments shall apply to the entire
principal amount (but not less than the entire principal amount) of
such notes originally issued.
5. (S)2.2 of the Agreement is hereby amended by modifying the second
sentence thereof to read in its entirety as follows:
Until the Senior Note Payment Date, interest on each Loan shall be
added to the principal amount of the Loan (without current payment),
in arrears quarterly on each March 31, June 30, September 30, and
December 31 and on such date (provided, that such interest added to
--------
principal shall not be counted toward determining whether the Borrower
has reached the Borrowing Limit).
6. The third sentence of (S)2.3 of the Agreement is hereby amended to
read in its entirety as follows:
The Borrower may elect at any time and from time to time to prepay the
outstanding principal of all or any part of any Loan, without premium
or penalty, in a minimum amount of U.S.$500,000 and in an integral
multiple (taking into account for this purpose only the original
principal amount of such Loan, and not any interest added to principal
under (S)2.2) thereof.
7. (S)2.4 of the Agreement is hereby amended to read in its entirety as
follows:
(S)2.4 Status of Indebtedness. The obligation of the Borrower to pay
----------------------
principal, interest, and any other sums payable under the Loan
Documents will rank at least pari passu with all other unsecured
senior indebtedness in respect of borrowed money of the Borrower other
than the Senior Notes, but shall be subordinated to the Senior Notes
as and in the manner set forth on Annex C attached hereto and
-------
incorporated herein by reference.
8. (S)3 of the Agreement is hereby deleted in its entirety.
9. (S)7.2(b) of the Agreement is hereby deleted in its entirety.
10. (S)8(e) of the Agreement is hereby amended by inserting the following
after the words "Series G Convertible Preferred Stock Purchase Agreement dated
as of the date hereof":
as amended by (i) a letter agreement dated February 5, 1997, and (ii)
a Second Amendment to Series G Convertible Preferred Stock Purchase
Agreement dated as of February 21, 1997.
<PAGE>
11. (S)8(1) of the Agreement is hereby amended to read in its entirety as
follows:
the Borrower or any of its Subsidiaries shall be unable to pay its
debts, other than Senior Indebtedness (as that term is defined in
Annex C attached hereto), as they mature;
-------
12. Annex A to the Agreement is hereby amended to read in its entirety as
-------
set forth in Annex A attached hereto.
-------
13. Annex B to the Agreement is hereby deleted in its entirety.
-------
14. A new Annex C is hereby attached to the Agreement, such Annex C to
------- -------
read in its entirety as set forth in Annex C attached hereto.
-------
15. Except as amended hereby, the Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, this First Amendment to Credit Agreement has been
executed by the parties hereto as of the date first set forth above.
UNIFI COMMUNICATIONS, INC. SINGTEL (NETHERLANDS ANTILLES) PTE
N.V.
By: /s/ Paula Litscher By: /s/ Chua-Lo Yim Kew
----------------------- -----------------------
Name: Paula Litscher Name:
Title: Vice President of Finance Title:
<PAGE>
Annex C
-------
"Indenture" means the Indenture dated as of February 21, 1997, between the
---------
Borrower and Fleet National Bank, as trustee (the "Trustee").
"Senior Indebtedness" means the Senior Notes (including without limitation
-------------------
any amendments thereto and any extensions thereof, but excluding any extensions
applied other than on a pro rata basis with respect to the entire original
principal amount of the Senior Notes), all principal, accreted value, interest
or premium, if any, thereon, all charges, fees and expenses in connection
therewith, and all interest accruing thereon during the pendency of any
bankruptcy or insolvency proceeding, whether or not allowed thereunder.
"Subordinated Indebtedness" means all Loans, interest, and premium, if any,
-------------------------
thereon and any other sums payable by the Borrower under the Loan Documents.
1. 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 Borrower or any of its subsidiaries or its
or their respective assets, or (b) any liquidation, dissolution or other
winding-up of the Borrower, whether voluntary or involuntary and whether or not
involving insolvency or bankruptcy, or (c) any assignment for the benefit of
creditors or any other marshalling of assets or liabilities of the Borrower or
any of its subsidiaries, then and in any such event:
(i) the holders of Senior Indebtedness shall be entitled to receive
payment in full in cash of all Senior Indebtedness, or provision
satisfactory to the holders of Senior Indebtedness shall be made for such
payment, before the holders of the Subordinated Indebtedness are entitled
to receive directly or indirectly any payment or distribution of any kind
or character on account of principal of, premium, if any, or interest on,
or any other amounts in respect of, the Subordinated Indebtedness; and
(ii) any payment or distribution of assets of the Borrower or its
subsidiaries of any kind or character, whether in cash, property or
securities, by set-off or otherwise, to which the holders of the
Subordinated Indebtedness would be entitled but for these provisions 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 the Trustee or Representatives or to the trustee 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, as acceptable to the holders of Senior lndebtedness, in any other
manner, of all Senior Indebtedness remaining unpaid, after giving effect to
any concurrent payment or distribution to the holders of such Senior
Indebtedness; and
(iii) in the event that, notwithstanding the foregoing provisions,
any holder of any Subordinated Indebtedness shall have received any payment
or distribution of assets of the Borrower or any of its subsidiaries of any
kind or character, whether in cash, property or securities, in respect of
principal of, premium, if any, or interest on, or any other amounts in
respect of, the Subordinated Indebtedness before all Senior Indebtedness is
paid in full in cash or, as acceptable to the holders of Senior
Indebtedness, in any other manner, then and in such
<PAGE>
event such payment or distribution 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 Borrower or any of its subsidiaries 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, as acceptable
to the holders of Senior Indebtedness, in any other manner, after giving
effect to any concurrent payment or distribution to or for the holders of
Senior Indebtedness.
The consolidation of the Borrower with, or the merger of the Borrower into,
another person or the liquidation or dissolution of the Borrower following the
conveyance or transfer of its properties and assets substantially as an entirety
to another person shall not be deemed a liquidation, dissolution, winding-up,
reorganization, assignment for the benefit of creditors, or marshalling of
assets and liabilities of the Borrower for the purposes of this Section;
provided that the applicable terms of the Indenture with respect to the
- --------
applicable transaction have been complied with in full.
2. Suspension of Payment When Senior Indebtedness in Default.
---------------------------------------------------------
(i) Upon the occurrence of a default in the payment when due (after
giving effect to any grace period) of principal, premium, if any, or
interest on, or any other amounts in respect of, any Senior Indebtedness (a
"Payment Default"), no payment or distribution of any assets of the
---------------
Borrower or any of its subsidiaries of any kind or character shall be made
by or on behalf of the Borrower on account of principal of, premium, if
any, or interest on, or any other amounts in respect of, the Subordinated
Indebtedness or on account of the purchase, redemption or other acquisition
of any Subordinated Indebtedness unless and until such Payment Default
shall have been cured or waived or shall have ceased to exist or such
Senior Indebtedness as to which such Payment Default relates shall have
been discharged or paid in full in cash, after which the Borrower shall
resume making any and all required payments in respect of the Subordinated
Indebtedness, including any missed payments.
(ii) Upon the occurrence of a default (other than a Payment Default)
with respect to any term or provision of any Senior Indebtedness (a "Non-
---
Payment Default") and upon the earlier to occur of (a) the fifth day
---------------
following receipt by the Borrower from a Trustee of written notice of such
occurrence (a "Payment Blockage Notice"), or (b) if such Non-Payment
-----------------------
Default results from acceleration of the Subordinated Indebtedness, the
date of such acceleration, no payment or distribution of any assets of the
Borrower or any of its subsidiaries of any kind or character shall be made
by or on behalf of the Borrower on account of principal of, premium, if
any, or interest on, or any other amounts in respect of, the Subordinated
Indebtedness or on account of the purchase, redemption or other acquisition
of Subordinated Indebtedness for a period ("Payment Blockage Period")
-----------------------
commencing on the date of receipt by the Borrower of such notice or the
date of acceleration referred to above, as the case may be, unless and
until the earliest to occur of the following events: (x) such non-payment
default shall have been cured or waived or shall have ceased to exist, (y)
such Senior Indebtedness shall have been discharged or paid in full in cash
or (z) such Payment Blockage Period shall have been terminated by written
notice to the Borrower from the Trustee initiating such Payment Blockage
Period, after which, in each case, the Borrower shall resume making any and
all required payments in respect of the Subordinated Indebtedness,
including any missed payments.
(iii) In the event that, notwithstanding the foregoing, any holder of
any Subordinated Indebtedness shall have received any payment prohibited by
the foregoing provisions of this Section 2, then and in such event such
payment shall be paid over and delivered forthwith to the
<PAGE>
Trustee 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, after giving effect to any concurrent payment to or for the holders
of Senior Indebtedness.
3. Subrogation to Rights of Holders of Senior Indebtedness.
-------------------------------------------------------
Upon the payment in full in cash of all Senior Indebtedness, the holders of
the Subordinated Indebtedness 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 Subordinated Indebtedness
shall be paid in full. 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 Subordinated Indebtedness would be
entitled except for these provisions, and no payments over pursuant to these
provisions to the holders of Senior Indebtedness by holders of the Subordinated
Indebtedness shall, as among the Borrower, its creditors other than holders of
Senior Indebtedness, and the holders of the Subordinated Indebtedness, be deemed
to be a payment or distribution by the Borrower to or on account of the Senior
Indebtedness.
If any payment or distribution to which the holders of Subordinated
Indebtedness would otherwise have been entitled but for these provisions shall
have been applied, pursuant to these provisions, to the payment of all amounts
payable under the Senior Indebtedness of the Borrower, then and in such case the
holders of Subordinated Indebtedness 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 cash in full.
4. No Waiver of Subordination Provisions.
-------------------------------------
(i) 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 Borrower or by any act or failure to act, in good faith, by any
such holder, or by any non-compliance by the Borrower with the terms,
provisions and covenants as described herein, regardless of any knowledge
thereof any such holder may have or be otherwise charged with.
(ii) Without limiting the generality of Section 4(i), the holders of
Senior Indebtedness may, at any time and from time to time, without the
consent of or notice to the holders of the Subordinated Indebtedness,
without incurring responsibility to the holders of the Subordinated
Indebtedness and without impairing or releasing the subordination provided
herein or the obligations hereunder of the holders of the Subordinated
Indebtedness to the holders of Senior Indebtedness, do any one or more of
the following: (a) 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, provided such change, extension, renewal or
alteration is applied on a pro rata basis with respect to the entire
original principal amount of the Senior Notes; (b) sell, exchange, release
or otherwise deal with any property pledged, mortgaged or otherwise
securing Senior Indebtedness; (c) release any person liable in any manner
for the collection or payment of Senior Indebtedness; and (d) exercise or
refrain from exercising any rights against the Borrower and any other
person.
<PAGE>
5. Provisions Solely Define Relative Rights. The provisions of this
----------------------------------------
Annex C are and are intended solely for the purpose of defining the relative
rights of the holders of Subordinated Indebtedness on the one hand and the
holders of Senior Indebtedness on the other hand. Nothing contained in this
Annex C or elsewhere in the Loan Documents is intended to or shall (a) impair,
as among the Borrower, its creditors other than holders of Senior Indebtedness
and the holders of Subordinated Indebtedness, the obligation of the Company,
which ranks equally with all other general obligations of the Borrower, to pay
to the holders of Subordinated Indebtedness the principal of (and premium, if
any) and interest on Subordinated Indebtedness as and when the same shall become
due and payable in accordance with their terms; or (b) affect the relative
rights against the Borrower of the holders of Subordinated Indebtedness and
creditors of the Borrower other than the holders of Senior Indebtedness; or (c)
prevent the holder of any Subordinated Indebtedness from exercising all remedies
otherwise permitted by applicable law and the Loan Documents upon default under
the Loan Documents, including to accelerate the maturity of any Subordinated
Indebtedness.
6. Waiver and Amendment. The observance of any term or provision of this
--------------------
Annex C may be waived (either generally or in a particular instance, either
retroactively or prospectively, and either for a specified period of time or
indefinitely) only upon the written consent of holders of not less than fifty
one percent (51%) of the then outstanding principal amount of Senior
Indebtedness, and any term or provision of this Annex C may be amended only by a
writing signed by the Borrower, holders of not less than fifty one percent (51%)
of the then-outstanding principal amount of Senior Indebtedness, and holders of
not less than fifty one percent (51%) of the then-outstanding principal amount
of Subordinated Indebtedness; provided, that no such waiver or amendment shall
reduce the percentage of outstanding principal amount of Senior Indebtedness or
Subordinated Indebtedness the holders of which are required to consent to any
waiver or amendment without the consent of the holders of all of such
outstanding principal amount of such Senior Indebtedness or Subordinated
Indebtedness. Any waiver or amendment effected in accordance with this Section
shall be binding upon each holder of Senior Indebtedness or Subordinated
Indebtedness, each future holder of such securities, and the Borrower. Upon the
effectuation of each such waiver or amendment, the Company shall promptly give
written notice thereof to the record holders of the Senior Indebtedness and
Subordinated Indebtedness who have not previously consented thereto in writing.
<PAGE>
EXHIBIT 10.3
TERM LOAN AGREEMENT - EQUIPMENT
Dated as of April 10, 1995
between
Fax International, Inc.
and
SingTel (Netherlands Antilles) Pte N.V.
<PAGE>
TABLE OF CONTENTS
Page
----
1. DEFINITIONS 1
2. TERM LOAN FACILITY ............................. 4
2.1 Commitment to Lend......................... 4
2.2 Interest ................................. 4
2.3 Repayments and Prepayments................. 5
3. SECURITY ....................................... 5
4. PAYMENTS: GENERAL .............................. 5
5. REPRESENTATIONS AND WARRANTIES ................. 5
5.1 Corporate Existence: Power and Authority.. 5
5.2 Binding Obligation ....................... 6
5.3 No Conflicts ............................. 6
5.4 No Consents .............................. 6
5.5 Perfected Security Interests ............. 6
5.6 Title to Properties ...................... 6
5.7 Financial Statements ..................... 6
5.8 No Material Adverse Change................ 7
5.9 No Litigation ............................ 7
5.10 Compliance with Law....................... 7
5.11 Margin Regulations ....................... 7
6. CONDITIONS PRECEDENT ........................... 7
6.1 Representations and Warranties True........ 7
6.2 No Default ............................... 7
6.3 Proceedings and Documents.................. 7
6.4 No Change in Law .......................... 8
6.5 Security Agreement ........................ 8
6.6 Opinion of Company's Counsel............... 8
6.7 Closing of Series G Purchase............... 8
7. COVENANTS ...................................... 8
7.1 Affirmative Covenants...................... 8
7.2 Negative Covenants ........................ 9
8. EVENTS OF DEFAULT; ACCELERATION ................ 10
9. SETOFF ........................................ 12
i
<PAGE>
10. MISCELLANEOUS.............................. 12
10.1 Indemnity ................................ 12
10.2 Notices, Etc ............................. 12
10.3 Binding Agreement; Assignment............. 13
10.4 Amendment; Waiver ........................ 13
10.5 Confidentially............................ 13
10.6 Severability ............................. 13
10.8 Counterparts ............................. 13
10.9 Governing Law............................. 14
ii
<PAGE>
TERM LOAN AGREEMENT - EQUIPMENT
The parties to this TERM LOAN AGREEMENT - EQUIPMENT, dated as of April 10,
1995, are Fax International, Inc., a Delaware corporation having its principal
place of business at 67 South Bedford Street, Suite 100E, Boston, Massachusetts
01803, U.S.A. (the "Borrower"), and SingTel (Netherlands Antilles) Pte N.V., a
--------
Netherlands Antilles corporation having its registered office at Pietermaai 15
Willemstad, Curacao, Netherlands Antilles ("SingTel NA").
------- --
1. DEFINITIONS.
-----------
Certain capitalized terms are defined below:
Agreement: This Agreement and the Schedules hereto, all as amended and in
---------
effect from time to time.
Annual Budget: The Annual Budget as defined in the Stock Purchase Agreement
-------------
and as amended and in effect from time to time.
Balance Sheet: See (S)5.4.
-------------
Base Rate: In respect of any Loan, the rate of interest equal to the six-
---------
month U.S. Dollar London Interbank Offering Rate (LIBOR) at that Loan's Drawdown
Date.
Borrower: See preamble.
--------
Borrowing Limit: An amount equal to Fifteen Million Dollars
---------------
(U.S.$15,000,000).
Business Day: Any day on which banks in the United States and the
------------
Netherlands Antilles are open for business generally.
Charter Documents: In respect of any entity, the certificate or articles of
-----------------
incorporation or organization and the by-laws of such entity, or other
constitutive documents of such entity.
Commitment: The obligation of SingTel NA to make Loans to the Borrower in
----------
an aggregate principal amount not to exceed the Borrowing Limit, as such amount
may be reduced from time to time or terminated hereunder.
Consent: Any permit, license or exemption from, or approval, consent of,
-------
registration or filing with any local, state, federal, or foreign governmental
or regulatory agency or authority, required under applicable law.
<PAGE>
Default: An event or act which with the giving of notice and/or the lapse
-------
of time, would become an Event of Default.
Drawdown Date: In respect of any Loan, the date on which such Loan is made
-------------
to the Borrower.
Environmental Laws: All U.S. federal, state and local laws or ordinances
------------------
pertaining to environmental matters, including without limitation, the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Clean Water Act, the Federal Clean Air
Act, the Toxic Substances Control Act, in each case as amended, and all rules,
regulations, judgments, decrees, orders and licenses arising under all such laws
or ordinances.
Equipment: Tangible personal property constituting machinery or equipment;
---------
provided, that the Equipment does not mean any item customarily charged directly
- --------
to expense or depreciated over a useful life of twelve (12) months or less in
accordance with GAAP.
Equipment Expenditures: Amounts paid by the Borrower after the date hereof
----------------------
to purchase Equipment.
ERISA: The Employee Retirement Income Security Act of 1974, as amended, and
-----
all rules, regulations, judgments, decrees, and orders arising thereunder.
Event of Default: Any of the events listed in (S)8 hereof.
----------------
Expiration Date: the fifth (5th) anniversary of the date hereof or such
---------------
earlier date on which all Loans; may become due and payable pursuant to the
terms hereof.
Financials: In respect of any period, the consolidated balance sheet of any
----------
person or entity and its Subsidiaries as at the end of such period, and the
related consolidated statements of income and cash flows for such period, each
setting forth in comparative form the figures for the previous comparable fiscal
period, all in reasonable detail and prepared in accordance with GAAP
consistently applied (except, in the case of quarterly Financials, for the
absence of notes thereto).
GAAP: Generally accepted accounting principles consistent with those
----
adopted by the Financial Accounting Standards Board and its predecessors, (i)
generally, as in effect from time to time, and (ii) for purposes of determining
compliance by the Borrower with its financial covenants set forth herein, as in
effect for the fiscal year therein reported in the most recent audited
Financials submitted to SingTel NA prior to execution of this Agreement.
Indebtedness: In respect of any entity, all obligations, absolute,
------------
contingent and otherwise, that in accordance with GAAP should be classified as
liabilities, including without limitation (i) all debt obligations, (ii) all
liabilities secured by Liens, (iii) all guarantees and (iv) all liabilities in
respect of bankers' acceptances or letters of credit.
2
<PAGE>
Lien: Any encumbrance, mortgage, pledge, hypothecation, charge, restriction
----
or other security interest of any kind securing any obligation of any entity or
person.
Loan: Any loan made or to be made to the Borrower pursuant to (S)2 hereof.
----
Loan Documents: This Agreement, the Notes, and the Security Agreement, in
--------------
each case as from time to time amended or supplemented.
Loan Request: See (S)2.1(b).
------------
Materially Adverse Effect: Any materially adverse effect on the financial
-------------------------
condition or business operations of the Borrower and its Subsidiaries taken
together or material impairment of the ability of the Borrower or any of its
Subsidiaries to perform its obligations hereunder or under any of the other Loan
Documents.
Note: See (S)2.1(c).
----
Obligations: All indebtedness, obligations and liabilities of the Borrower
-----------
and its Subsidiaries to SingTel NA, direct or indirect, joint or several,
absolute or contingent, matured or unmatured, liquidated or unliquidated,
secured or unsecured, arising by contract, operation of law or otherwise, that
in any case arise or are incurred under this Agreement or any other Loan
Document or in respect of any of the Loans or the Notes or other instruments at
any time evidencing any thereof.
Permitted Liens: (i) Liens securing taxes or other governmental charges not
---------------
yet due; (ii) deposits or pledges made in connection with social security
obligations; (iii) Liens of carriers, warehousemen, mechanics and materialmen,
less than 120 days old or as to obligations not yet due; (iv) easements, rights-
of-way, zoning restrictions and similar minor Liens which individually and in
the aggregate do not have a Materially Adverse Effect; (v) liens relating to
leased assets which individually and in the aggregate do not have a Materially
Adverse Effect; and (vii) other Liens existing on the date hereof and listed on
Schedule 7.2(a) hereto
- -------- ------
Requirement of Law: In respect of any person or entity, any material law,
------------------
treaty, rule, regulation or determination of an arbitrator, court, or other
governmental authority, in each case applicable to or binding upon such person
or entity or affecting any of its property.
Security Agreement: See (S)3.
------------------
SingTel NA: See preamble.
-----------
ST: See (S)10.3.
--
Stock Purchase Agreement. See (S)8(e).
------------------------
Subsidiary: In respect of the Borrower, any business entity of which the
----------
Borrower at any time owns or controls directly or indirectly more than fifty
percent (50%) of the outstanding
3
<PAGE>
shares of stock having voting power, regardless of whether such right to vote
depends upon the occurrence of a contingency.
2. TERM LOAN FACILITY.
------------------
2.1 Commitment to Lend.
------------------
(a) Upon the terms and subject to the conditions of this Agreement and
while the Commitment is outstanding, SingTel NA agrees to lend to the Borrower
such sums that the Borrower may request up to an aggregate principal amount
equal to the Borrowing Limit at any time and from time to time until the
Expiration Date, the proceeds of which shall be applied by the Borrower for
Equipment Expenditures by the Borrower specifically provided for in the Annual
Budget. The Borrower may not reborrow amounts borrowed and repaid hereunder.
Loans shall be in a minimum aggregate principal amount of U.S.$250,000.
(b) The Borrower shall notify SingTel NA in writing, not later than
five (5) Business Days preceding the Drawdown Date (which must be a Business
Day) of each Loan requested hereunder. Any such notice (a "Loan Request") shall
------------
specify (i) the principal amount of such Loan, (ii) the proposed Drawdown Date,
and (iii) (in sufficient detail to permit SingTel NA to verify the same) the
specific Equipment Expenditures provided for in the Annual Budget (including the
approximate timing thereof which shall be no later than twenty (20) days from
the Drawdown Date and no earlier than three (3) months prior to the Drawdown
Date (and not in any event before the date hereof) in respect of which the Loan
Request is being made. Such notice may not be revoked after two (2) days before
the applicable Drawdown Date. Subject to the foregoing, so long as the
Commitment is then in effect and the applicable conditions set forth in (S)6
hereof have been met, SingTel NA shall advance the amount requested to the
Borrower by transfer of immediately available funds not later than the close of
business in Boston on such Drawdown Date.
(c) The obligation of the Borrower to repay to SingTel NA the
principal of each Loan and interest accrued thereon shall be evidenced by a
promissory note in the form of Annex A attached hereto (each such promissory
-------
note,a "Note"), completed with appropriate insertions, dated the Drawdown Date
----
of such Loan, in a principal amount equal to the amount thereof, having a term
of three (3) years from the Drawdown Date, executed and delivered by the
Borrower and payable to the order of SingTel NA.
(d) In consideration of SingTel NA's commitments and undertakings
hereunder, the Borrower shall pay to SingTel NA, concurrently with the execution
and delivery hereof, and in good funds, a facility fee in the amount of One
Million One Hundred Eighty-One Thousand Two Hundred Fifty Dollars
(U.S.$1,181,250).
2.2 Interest. The Borrower shall pay interest on the principal
--------
amount of the Loans outstanding from time to time from the Drawdown Date through
and including the date repaid at a rate per annum which is equal to the Base
Rate, payable in arrears on each March 31, June 30, September 30, and December
31 and on any date any principal amount is payable or repaid. While an Event of
Default is continuing, the Borrower shall pay interest on the
4
<PAGE>
principal amount of the Loans outstanding and on all other amounts payable under
any of the Loan Documents at a rate per annum which is equal to the sum of (i)
the Base Rate, and (ii) three percent (3%) (compounded monthly and payable on
demand in respect of overdue amounts) until all such amounts are paid in full or
(as the case may be) such Event of Default has been cured or waived in writing
by SingTel NA (after as well as before judgment).
2.3 Repayments and Prepayments. All payments received in respect of
--------------------------
the Loans shall be applied first to any costs or expenses due to SingTel NA
under the Loan Documents, second to the payment of accrued and unpaid interest
and the balance only applied to principal. The Borrower may elect at any time
and from time to time to prepay the outstanding principal of all or any part of
any Loan, without premium or penalty, in a minimum amount of U.S.$250,000. The
Borrower shall not be entitled to reborrow any such prepaid amounts. Each
repayment or prepayment of principal of any Loan shall be accompanied by payment
of the unpaid interest accrued to such date on the principal being repaid or
prepaid.
3. SECURITY.
--------
The Obligations shall be secured by a perfected first priority security
interest (subject only to Permitted Liens entitled to priority under applicable
law) in the Collateral, whether now owned or hereafter acquired, as defined in
and pursuant to the terms of a Security Agreement (the "Security Agreement") in
------------------
the form of Annex B attached hereto to which the Borrower is a party.
----- -
4. PAYMENTS: GENERAL.
-----------------
All payments to be made by the Borrower hereunder or under any of the other
Loan Documents shall be made in U.S. dollars in immediately available funds at
SingTel NA's bank account in Aruba (as designated by SingTel NA by written
notice to the Borrower from time to time), without set-off or counterclaim. If
any payment hereunder is required to be made on a day which is not a Business
Day, it shall be paid on the immediately succeeding Business Day, with interest
and any applicable fees adjusted accordingly. All computations of interest
hereunder shall be made on the basis of actual days elapsed and on a 365-day
year.
5. REPRESENTATIONS AND WARRANTIES.
------------------------------
The Borrower represents and warrants to SingTel NA on the date hereof, on
the date of any Loan Request, and on each Drawdown Date that:
5.1 Corporate Existence: Power and Authority. The Borrower and
----------------------------------------
each of its Subsidiaries is duly organized, validly existing, and in good
standing under the laws of its jurisdiction of incorporation, has the corporate
power and authority to own and hold its properties and to carry on its business
as now conducted and as proposed to be conducted, and is duly qualified and in
good standing in every other jurisdiction where it is doing business. The
Borrower and each of its Subsidiaries who becomes a party hereto has all
requisite power and authority to execute and deliver the Loan Documents and to
incur and perform its obligations thereunder.
5
<PAGE>
5.2 Binding Obligation. Each Loan Agreement has been duly
------------------
authorized, executed, and delivered by the Borrower and its Subsidiaries party
thereto and constitutes the legal, valid and binding obligation of the Borrower
and its Subsidiaries party thereto, enforceable in accordance with its terms.
5.3 No Conflicts. The execution, delivery, and performance of the
------------
Loan Documents and the exercise of rights thereunder (including borrowing) by
the Borrower and its Subsidiaries parties thereto will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Borrower or any of its
Subsidiaries is a party or by which the Borrower or any of its Subsidiaries is
bound or to which any of the property or assets of the Borrower or any of its
Subsidiaries is subject and will not result in the creation or imposition of a
Lien on any of such property or assets except in favor of SingTel NA as
contemplated hereby; nor will such action result in any violation of the
provisions of the Charter Documents of the Borrower or any of its Subsidiaries
or any Requirement of Law applicable to the Borrower or any of its Subsidiaries.
5.4 No Consents. No Consents are required for the execution,
-----------
delivery and performance of the Loan Documents and the exercise of rights
thereunder (including borrowing) by the Borrower and its Subsidiaries parties
thereto.
5.5 Perfected Security Interests. The Borrower (or its applicable
----------------------------
Subsidiary) is the owner of the Collateral (as defined in the Security
Agreement). SingTel NA has a perfected security interest in the Collateral
located in the United States and such perfected security interest is and will be
prior to any other security interest of any other person (except for Permitted
Liens in existence at the time such security interest in favor of SingTel NA is
granted). The representations and warranties made by the Borrower and its
Subsidiaries in the Security Agreement are true and correct.
5.6 Title to Properties. The Borrower has good and marketable title
-------------------
to all its material properties, subject only to Liens permitted hereunder or
created pursuant to the Loan Documents, and possesses all assets, including
intellectual properties, franchises and Consents, adequate for the conduct of
its business as now conducted, without known conflict with any rights of others.
The Borrower maintains insurance with financially responsible insurers, copies
of the policies for which have been previously delivered to SingTel NA, covering
such risks and in such amounts and with such deductibles as are customary in the
Borrower's business and are adequate.
5.7 Financial Statements. The Borrower has provided to SingTel NA
--------------------
the audited consolidated balance sheet of the Borrower as of December 31, 1994
(the "Balance Sheet" ) and the related consolidated statements of income,
-------------
stockholders' equity (or deficit) and cash flows of the Borrower for the year
ended the date of the Balance Sheet. Such financial statements (a) fairly
-
present the financial position and the results of operations of the Borrower and
its consolidated Subsidiaries as of the date of the Balance Sheet and for the
year then ended, (b) have been prepared in accordance with generally accepted
-
accounting principles consistently applied, and (c) reflect all accrued
-
liabilities and adequate reserves for all contingent liabilities
6
<PAGE>
of the Borrower and its consolidated Subsidiaries as of the date of the Balance
Sheet. The representations and warranties in this Section 5.7 shall be true and
correct with respect to the most recent audited consolidated financial
statements of the Borrower furnished to SingTel NA pursuant to Section 7.1(a).
5.8 No Material Adverse Change. Since the date of the most recent
--------------------------
audited annual consolidated balance sheet of the Borrower furnished to SingTel
NA hereunder, (a) there has been no change in the assets, liabilities, financial
-
condition, or results of operations of the Borrower and its consolidated
Subsidiaries from that reflected in the financial statements referred to in
Section 5.7 except for changes in the ordinary course of business that in the
aggregate have not been materially adverse and (b) none of the business,
-
prospects, financial condition, opera tions, property or affairs of the Borrower
has been materially adversely affected by any occurrence or development,
individually or in the aggregate, whether or not insured against.
5.9 No Litigation. There are no legal or other proceedings or
-------------
investigations pending or threatened in writing against the Borrower or any of
its Subsidiaries before any court, tribunal or regulatory authority which would,
if adversely determined, alone or together, have a Materially Adverse Effect.
5.10 Compliance with Law. The Borrower is not in violation of (i) any
-------------------
Charter Document, corporate minute or resolution, (ii) any instrument or
agreement, in each case binding on it or affecting its property, or (iii) any
Requirement of Law, in a manner which could have a Materially Adverse Effect,
including, without limitation, all material applicable U.S. federal and state
tax laws, ERISA and Environmental Laws.
5.11 Margin Regulations. No part of the proceeds of the Loans will be
------------------
used, directly or indirectly, for the purpose of purchasing or carrying any
margin stock within the meaning of Regulation G (12 C.F.R. 207) of the Board of
Governors of the Federal Reserve System.
6. CONDITIONS PRECEDENT.
--------------------
In addition to the making of the foregoing representations and warranties
and the delivery of the Loan Documents and such other documents and the taking
of such actions consistent herewith as SingTel NA may require, the obligation of
SingTel NA to make any Loan to the Borrower hereunder is subject to the
satisfaction of the following further conditions precedent on the date of each
Loan Request and on each Drawdown Date:
6.1 Representations and Warranties True. Each of the representations
-----------------------------------
and warranties of the Borrower to SingTel NA herein, in any of the other Loan
Documents or any documents, certificate or other paper or notice in connection
herewith shall be true and correct in all material respects as of the time made
or deemed to have been made.
6.2 No Default. No Default or Event of Default shall be continuing.
----------
7
<PAGE>
6.3 Proceedings and Documents. All proceedings in connection with
-------------------------
the transactions contemplated hereby shall be in form and substance satisfactory
to SingTel NA, and SingTel NA shall have received all information and documents
as it may have reasonably requested in connection herewith.
6.4 No Change in Law. No change shall have occurred in any law or
----------------
regulation or in the interpretation thereof that in the reasonable opinion of
SingTel NA would make it unlawful for SingTel NA to make such Loan.
6.5 Security Agreement. The Borrower shall have executed and
------------------
delivered to SingTel NA the Security Agreement and all other documents,
agreements, and instruments contemplated thereby, and the Security Agreement and
each such agreement, document and instrument shall be in full force and effect.
6.6 Opinion of Company's Counsel. SingTel NA shall have received
----------------------------
from counsel to the Borrower an opinion letter or letters substantially in the
form attached hereto as Annex C, addressed to them, dated the date hereof. In
----- -
rendering the opinion(s) called for under this subsection, counsel may rely as
to factual matters on certificates of public officials and officers of the
Borrower.
6.7 Closing of Series G Purchase. The purchase and sale of the
----------------------------
Borrower's Series G Convertible Preferred Stock pursuant to the Stock Purchase
Agreement shall have been consummated.
7. COVENANTS.
---------
7.1 Affirmative Covenants. The Borrower agrees that until the
---------------------
termination of the Commitment and the payment and satisfaction in full of all
the Obligations, the Borrower will, and where applicable will cause each of its
Subsidiaries to comply with its obligations as set forth throughout this
Agreement and to:
(a) furnish to SingTel NA:
(i) within ninety (90) days after the end of each fiscal year of the
Borrower, Financials of the Borrower and its Subsidiaries as of the end of and
for such fiscal year, prepared in accordance with generally accepted accounting
principles and certified by a firm of independent public accountants of
recognized national standing selected by the Board of Directors of the Borrower;
(ii) within thirty (30) days after the end of each fiscal quarter in
each fiscal year (other than the last fiscal quarter in each fiscal year)
Financials of the Borrower and its Subsidiaries, if any, unaudited but prepared
in accordance with generally accepted accounting principles (except for the
absence of notes thereto) and certified by the chief financial or accounting
officer of the Borrower;
8
<PAGE>
(iii) together with the annual audited and the quarterly Financials, a
certificate of the Borrower certifying that no Default or Event of Default has
occurred, or if it has, the actions taken by the Borrower with respect thereto;
and
(iv) with reasonable promptness, such other information and data with
respect to the Borrower and its Subsidiaries as SingTel NA may from time to time
reasonably request;
(b) keep true and accurate books of account in accordance with GAAP,
and permit SingTel NA or its designated representatives to inspect the
Borrower's premises during normal business hours, to examine and be advised as
to such or other business records upon the request of SingTel NA, and to permit
SingTel NA's representatives (at SingTel NA!s sole expense) to conduct periodic
examinations of the Borrower's books and records;
(c) (i) maintain its corporate existence, business and assets, (ii)
keep its business and assets adequately insured, (iii) timely pay its taxes
(other than taxes being contested in good faith as to which adequate reserves
have been established), and (iv) comply with all Requirements of Law, including
ERISA and Environmental Laws;
(d) notify SingTel NA promptly in writing of (i) the occurrence of any
Default or Event of Default, (ii) any noncompliance with ERISA or any
Environmental Law or proceeding in respect thereof which could have a Materially
Adverse Effect, (iii) any change of address, and (iv) any pending or threatened
(in writing) litigation or similar proceeding affecting the Borrower or any
Subsidiary or any material change in any such litigation or proceeding
previously reported;
(e) cooperate with SingTel NA, take such action, execute such
documents, and provide such information as SingTel NA may from time to time
request in order further to effect the transactions contemplated by and the
purposes of the Loan Documents; and
(f) either (i) apply the full proceeds of each Loan made to Borrower
hereunder to finance Equipment Expenditures specifically provided for in the
Annual Budget in a manner consistent with the applicable Loan Request within
thirty (30) days of the Drawdown Date, or (ii) repay (along with all accrued
and unpaid interest, as provided in (S)2.3) any Loan proceeds not so applied to
SingTel NA within three (3) Business Days of the occurrence of an event that
precludes Borrower's application of such proceeds in such manner.
7.2 Negative Covenants. The Borrower agrees that until the ter
------------------
mination of the Commitment and the payment and satisfaction in full of all the
Obligations, the Borrower will not and where applicable will not permit its
Subsidiaries to:
(a) create or incur any Liens on any of the property or assets of the
Borrower or any of its Subsidiaries (including without limitation on Equipment
of the Borrower financed in whole or in part pursuant to Loans) except (i) Liens
(if any) securing the Obligations; (ii) Permitted Liens; and (iii) purchase
money security interests in or purchase money mortgages on real or personal
property securing purchase money Indebtedness in respect
9
<PAGE>
of the acquisition of property, covering only the property so acquired, or
security interests resulting solely from the refinancing of the same;
(b) make any investments other than investments in (i) marketable
obligations of the United States or the Republic of Singapore maturing within
one (1) year; (ii) certificates of deposit, bankers' acceptances and time and
demand deposits of banks having total assets in excess of U.S.$1,000,000,000;
(iii) mutual funds investing principally in investments described in clauses (i)
and (ii); (iv) Subsidiaries, and (v) such other investments as SingTel NA may
from time to time approve in writing;
(c) redeem or repurchase any of its capital stock except with the
proceeds of Redemption Loans (as such term is defined in that certain Credit
Agreement dated as of the date hereof between the Borrower and SingTel NA), or
as provided for in Section 7.1 of the Stock Purchase Agreement, or make any
distributions on or in respect of its capital stock of any nature whatsoever,
other than dividends payable solely in shares of stock or distributions by
Subsidiaries to the Borrower or other Subsidiaries; or
(d) become party to a merger or sale-leaseback transaction, or effect
any disposition of assets to any person or entity other than the Borrower and
its Subsidiaries other than in the ordinary course of business, or purchase,
lease or otherwise acquire assets other than in the ordinary course of business.
8. EVENTS OF DEFAULT; ACCELERATION.
-------------------------------
If any of the following events "Events of Default") shall occur:
-----------------
(a) the Borrower or any Subsidiary shall fail to pay when due and
payable any principal of the Loans when the same becomes due;
(b) the Borrower shall fail to pay interest on the Loans or any other
sum (other than principal) due under any of the Loan Documents within five (5)
Business Days after the date on which the same shall have first become due and
payable;
(c) the Borrower shall fail to perform any term, covenant or agreement
contained in (S)(S)3, 7.1(c), 7.1(d), or 7.2;
(d) the Borrower or any Subsidiary shall fail to perform any other
term, covenant or agreement contained in the Loan Documents within thirty (30)
days after SingTel NA has given written notice of such failure to the Borrower;
(e) the Borrower shall fail to perform any covenant or agreement
contained in that certain Series G Convertible Stock Purchase Agreement dated as
of the date hereof between the Borrower and the Purchaser named therein (the
"Stock Purchase Agreement") within thirty (30) days after SingTel NA has given
- ------ -------- ---------
written notice of such failure to the Borrower;
10
<PAGE>
(f) any representation or warranty of the Borrower or any of its
Subsidiaries in the Loan Documents or in any certificate or notice given in
connection therewith shall have been false or misleading in any material respect
at the time made or deemed to have been made;
(g) any representation or warranty of the Borrower in the Stock
Purchase Agreement shall have been false or misleading in any material respect
at the time made, and the same is not cured within (30) days after SingTel NA
has given written notice thereof to the Borrower;
(h) the Borrower or any of its Subsidiaries shall be in default (after
any applicable period of grace or cure period) under the Loan Agreement (as such
term is defined in the Stock Purchase Agreement);
(i) any of the Loan Documents shall cease to be in
full force and effect;
(j) (I) the Borrower or any Subsidiary shall default in the payment of
any principal of indebtedness in respect of borrowed money when due and payable
after expiration of any grace period applicable thereto, or (II) any
indebtedness in respect of borrowed money of the Borrower or any Subsidiary
shall have become due and payable prior to the date upon which it would
otherwise have become due and payable as a result of default by the Borrower or
such Subsidiary and the aggregate principal amount of all indebtedness referred
to in clauses (I) and (II) is in excess of One Million Dollars ($1,000,000),
without such indebtedness having been discharged or such acceleration having
been rescinded or annulled within 30 days after written notice shall have been
given to the Borrower by SingTel NA specifying such default or acceleration and
requiring such indebtedness to be discharged or such acceleration to be
rescinded or annulled;
(k) the Borrower or any of its Subsidiaries (i) shall make an
assignment for the benefit of creditors, (ii) shall be adjudicated bankrupt or
insolvent, (iii) shall seek the appointment of, or be the subject of an order
appointing, a trustee, liquidator or receiver as to all or part of its assets,
(iv) shall commence, approve or consent to, any case or proceeding under any
bankruptcy, reorganization or similar law and, in the case of an involuntary
case or proceeding, such case or proceeding is not dismissed within sixty (60)
days following the commencement thereof, or (v) shall be the subject of an order
for relief in an involuntary case under federal bankruptcy law;
(l) the Borrower or any of its Subsidiaries shall be unable to pay its
debts as they mature;
(m) there shall remain undischarged for more than thirty (30) days any
final judgment or execution action against the Borrower or any of its
Subsidiaries that, together with other outstanding claims and execution actions
against the Borrower and its Subsidiaries exceeds One Millon Dollars
($1,000,000) in the aggregate;
11
<PAGE>
THEN, or at any time thereafter:
(1) In the case of any Event of Default under clause (k) or l), the
Commitment shall automatically terminate, and the entire unpaid principal amount
of the Loans, all interest accrued and unpaid thereon, and all other amounts
payable thereunder and under the other Loan Documents shall automatically become
forthwith due and payable, without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived by the Borrower; and
(2) In the case of any Event of Default other than (k) and l), SingTel NA
may, by written notice to the Borrower, terminate the Commitment and/or declare
the unpaid principal amount of the Loans, all interest accrued and unpaid
thereon, and all other amounts payable hereunder and under the other Loan
Documents to be forthwith due and payable, without presentment, demand, protest
or further notice of any kind, all of which are hereby expressly waived by the
Borrower.
No remedy herein conferred upon SingTel NA is intended to be exclusive of any
other remedy and each and every remedy shall be cumulative and in addition to
every other remedy hereunder, now or hereafter existing at law or in equity or
otherwise.
9. SETOFF.
------
Regardless of the adequacy of any collateral for the Obligations, any
deposits or other sums credited by or due from SingTel NA and its affiliates to
the Borrower may be applied to or set off against any principal, interest and
any other amounts due from the Borrower to SingTel NA and its affiliates at any
time while a Default is continuing without notice to the Borrower, or compliance
with any other procedure imposed by statute or otherwise, all of which are
hereby expressly waived by the Borrower.
10. MISCELLANEOUS.
-------------
10.1 Indemnity. The Borrower agrees to indemnify and hold harmless
---------
SingTel NA and its officers, employees, affiliates, agents, and controlling
persons from and against all claims, damages, liabilities and losses of every
kind arising out of the Loan Documents, including without limitation, against
those in respect of the application of Environmental Laws to the Borrower and
its Subsidiaries, absent the gross negligence or willful misconduct of SingTel
NA The Borrower shall pay to SingTel NA promptly on demand all costs and
expenses (including any taxes and reasonable legal and other professional fees)
incurred by SingTel NA in connection with the amendment, administration or
enforcement of any of the Loan Docu ments.
10.2 Notices, Etc. Any communication to be made hereunder shall (i)
------------
be made in writing, but unless otherwise stated, may be made by hand, by telex,
by facsimile transmission confirmed by another method of giving notice
---------
hereunder, or by recognized international delivery service, and be made or
delivered as applicable to the Borrower at its address set forth in the preamble
hereto or to SingTel NA at its address set forth in the preamble hereto with a
copy to SingTel Global Services Pte. Ltd., 31 Exeter Road, Comcentre, Singapore
12
<PAGE>
0923, Republic of Singapore (unless any such party has by five (5) days written
notice specified another address), and shall be deemed made or delivered, when
dispatched, left at that address, or two (2) business days after delivery to a
recognized international delivery service for deliveries from the Netherlands
Antilles to the United States and three business days after delivery to such
service for deliveries from the United States to the Netherlands Antilles, to
such address.
10.3 Binding Agreement; Assignment. This Agreement shall be binding
-----------------------------
upon and inure to the benefit of each party hereto and its successors and
assigns, but except as specifically set forth herein the Borrower may not assign
its rights or obligations hereunder. The Borrower may assign its rights and
privileges hereunder, in whole or in part, to any one or more Subsidiaries;
provided, that in such event (a) the Borrower shall unconditionally guarantee
- --------
the payment and performance of the Obligations to the extent incurred by such
Subsidiary, (b) the Subsidiary shall agree to be bound by and subject to the
terms and conditions hereof, and (c) the Borrower and such Subsidiary shall
execute and deliver to SingTel NA such agreements, instruments, or other
documents as SingTel NA may in its reasonable discretion require in order to
give effect to the foregoing. SingTel NA may freely assign its rights and
obligations under this Agreement to and among Singapore Telecommunications
Limited ("ST") and/or any entity controlled by ST.
10.4 Amendment; Waiver. This Agreement may not be amended or waived
-----------------
except by a written instrument signed by the Borrower and SingTel NA, and any
such amendment or waiver shall be effective only for the specific purpose given.
No failure or delay by SingTel NA to exercise any right hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any right,
power or privilege preclude any other right, power or privilege.
10.5 Confidentially. SingTel NA shall preserve in confidence all
--------------
information proprietary to the Borrower transmitted to it hereunder, including
information it may obtain as a result of examination of the books, records, or
personnel of the Borrower, and shall not use any such information for any
purpose unrelated hereto. Notwithstanding the foregoing, SingTel NA may
disclose such information if required by any governmental, judicial, or
regulatory authority; provided, that SingTel NA agrees to use all reasonable
--------
efforts (excluding instituting any legal proceeding) to minimize the need for
any such disclosure. The covenant set forth in this subsection shall survive
the termination of the Commitment and of this Agreement.
10.6 Severability. The provisions of this Agreement are severable and
------------
if any one provision hereof shall be held invalid or unenforceable in whole or
in part in any jurisdiction, such invalidity or unenforceability shall affect
only such provision in such jurisdiction.
10.7 Entire Agreement. This Agreement, together with all Schedules
----------------
hereto, expresses the entire understanding of the parties with respect to the
transactions contemplated hereby.
13
<PAGE>
10.8 Counterparts. This Agreement and any amendment hereof may be
------------
executed in several counterparts, each of which shall be an original, and all of
which shall constitute one agreement. In proving this Agreement, it shall not
be necessary to produce more than one such counterpart executed by the party to
be charged.
10.9 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the internal substantive laws of the Republic of Singapore.
The Borrower hereby agrees that the courts of Singapore shall have exclusive
jurisdiction with respect to any action or proceeding arising out of or relating
to this Agreement and agrees that it shall commence any such action or
proceeding against SingTel NA in the courts of Singapore; provided, however,
that this Section shall not limit the right of SingTel NA to bring any such
action in any other jurisdiction. The Borrower irrevocably waives any objection
that it may have based upon improper venue or forum non conveniens to the
conduct of such action or proceeding in such court, and appoints Drew and Napier
of 20 Raffles Place #17-00, Ocean Towers, Singapore 0104, as its agent for a
period of five (5) years from the date hereof (at the end of such 5-year period
the Borrower agrees to appoint a new agent or to renew its appointment of Drew
and Napier as agent) upon which service of this process may be served in any
such action or proceeding brought in a Singapore court. THE PARTIES HEREBY
IRREVOCABLY WAIVE ANY RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. The parties agree that
neither party shall be liable hereunder for any special, indirect,
consequential, or incidental damages, including, without limitation, damages for
lost profits or business.
14
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Term Loan
Agreement - Equipment as of the date first above written.
FAX INTERNATIONAL, INC.
By: /s/ Douglas J. Ranalli
-----------------------------
Name: Douglas J. Ranalli
Title: President
SINGTEL (NETHERLANDS ANTILLES) PTE N.V.
By: /s/ Esther Bermudez
-----------------------------
Name: Esther Bermudez
Title: Branch Manager - Aruba Branch
15
<PAGE>
SCHEDULE 7.2(a)
---------------
Any property, rights, or assets of the Company granted at any time and from time
to time as "Collateral" to Applied Telecommunications Technologies, Inc.
("ATTI") pursuant to that certain Lease, dated as of September 17, 1993, between
the Company and ATTI (the "Lease"); (for purposes of this parenthetical phrase
only, the term "Collateral" has the meaning assigned to it in the Lease).
16
<PAGE>
EXHIBIT 10.4
FIRST AMENDMENT TO
TERM LOAN AGREEMENT - EQUIPMENT
The parties to this First Amendment to Term Loan Agreement - Equipment,
dated as of February 21, 1997, are UNIFI Communications, Inc. (formerly "Fax
International, Inc."), a Delaware corporation (the "Borrower"), and SingTel
--------
(Netherlands Antilles) Pte N.V., a Netherlands Antilles corporation having its
registered office at Pietermaai 15 Willemstad, Curacao, Netherlands Antilles
("SingTel N.V.").
- --------------
The parties are parties to a Term Loan Agreement - Equipment (the
"Agreement") dated as of April 10, 1995, and desire to amend the Agreement in
- ----------
the manner set forth herein. The parties accordingly agree as follows.
1. The definitions of the terms "Base Rate" and "Expiration Date" in (S)1
of the Agreement are hereby amended to read in their entirety as follows:
Base Rate: The annual rate of interest equal to the six-month U.S.
----------
Dollar London Interbank Offering Rate (LIBOR) at that Loan's Drawdown
Date for the period commencing on the applicable Drawdown Date and
ending on February 20, 1997, and equal to the six-month U.S. Dollar
London Interbank Offering Rate (LIBOR) at that Loan's Drawdown Date
plus two percent (2%) commencing on February 21, 1997.
Expiration Date: February 20, 1997
---------------
2. The definition of the term "Loan Documents" in (S)1 of the Agreement
is hereby amended to read in its entirety as follows:
Loan Documents: This Agreement and the Notes, in each case as from
--------------
time to time amended or supplemented.
3. The definition of the term "Security Agreement" in (S)1 of the
Agreement is
hereby deleted in its entirety.
4. Definitions of the new terms "Final Maturity Date," "Offering
Memorandum", "Senior Note Payment Date" and "Senior Notes" are hereby inserted
in alphabetical order into (S)1 of the Agreement, such definitions to read in
their entirety as follows:
Final Maturity Date: As to each Loan, the later to occur of (a) March
-------------------- ----- -
1, 2005 or (b) the Senior Note Payment Date; provided, that if the
- --------
Senior Note Payment Date is prior to March 1, 2005 the Final Maturity
Date shall be the date that is ninety-one (91) days after the Senior
NotePay ment Date.
Offering Memorandum: The Confidential Offering Memorandum of the
-------------------
Borrower dated February 14, 1997 relating to 175,000 Units Consisting
of the Senior Notes and Warrants to purchase 4,816,818 shares of
Common Stock of the Borrower.
Senior Note Payment Date: The earlier of the date on which (i) the ag
------------------------
gregate outstanding principal amount of the Senior Notes is reduced to
<PAGE>
zero ($0), (ii) on which the Senior Notes have been defeased, redeemed
or repurchased in whole by the Borrower or any of its subsidiaries, or
(iii) on which the Borrower's obligations in respect of the Senior
Notes are otherwise deemed to have been satisfied in full.
Senior Notes: US$175,000,000 in 14% Senior Notes due 2004 of the
------------
Borrower issued pursuant to the Indenture dated as of February 21,
1997 between the Borrower and Fleet National Bank, as trustee (the
"Trustee") and any notes exchanged therefor in a registered exchange
offering for such notes, and any amendments to any such notes,
including without limitation amendments to extend the maturity
thereof; provided, that any such amendments shall apply to the entire
principal amount (but not less than the entire principal amount) of
such notes originally issued.
5. (S)2.2 of the Agreement is hereby amended by deleting the first
sentence thereof and replacing it with the following:
From the Drawdown Date until the Senior Note Payment Date, interest on
each Loan at a rate per annum equal to the Base Rate shall be added to
the principal amount of the Loan (without current payment), in arrears
quarterly on each March 31, June 30, September 30, and December 31 and
on such date (provided, that such interest added to principal shall
--------
not be counted toward determining whether the Borrower has reached the
Borrowing Limit). Thereafter, the Borrower shall pay interest on the
principal amount of the Loans outstanding from time to time through
and including the date repaid at a rate per annum which is equal to
the Base Rate, payable in arrears on each March 31, June 30, September
30, and December 31 and on any date any principal amount is payable or
repaid.
6. A new (S)2.4 is hereby added to the Agreement, such (S)2.4 to read in
its entirety as follows:
(S)2.4 Status of Indebtedness. The obligation of the Borrower to
----------------------
pay principal, interest, and any other sums payable under the Loan
Documents will rank at least pari passu with all other unsecured
senior indebtedness in respect of borrowed money of the Borrower other
than the Senior Notes, but shall be subordinated to the Senior Notes
as and in the manner set forth on Annex C attached hereto and
-------
incorporated herein by reference.
7. (S)3 of the Agreement is hereby deleted in its entirety.
8. (S)8(e) of the Agreement is hereby amended by inserting the following
after the words "Series G Convertible Preferred Stock Purchase Agreement dated
as of the date hereof":
as amended by (i) a letter agreement dated February 5, 1997, and (ii)
a Second Amendment to Series G Convertible Preferred Stock Purchase
Agreement dated as of February 21, 1997
9. (S)8(l) of the Agreement is hereby amended to read in its entirety as
follows:
<PAGE>
the Borrower or any of its Subsidiaries shall be unable to pay its debts,
other than Senior Indebtedness (as that term is defined in Annex C at
----- -
tached hereto), as they mature;
10. Annex A to the Agreement is hereby amended to read in its entirety as
-------
set forth in Annex A attached hereto.
-------
11. Annex B to the Agreement is hereby deleted in its entirety.
-------
12. A new Annex C is hereby attached to the Agreement, such Annex C to
------- -------
read in its entirety as set forth in Annex C attached hereto.
-------
13. Except as amended hereby, the Agreement shall remain in full force and
effect.
<PAGE>
IN WITNESS WHEREOF, this First Amendment to Term Loan Agreement - Equipment
has been executed by the parties hereto as of the date first set forth above.
UNIFI Communications, Inc. Singtel (Netherlands Antilles)
Pte N.V.
By: /s/ Paula Litscher By: Chua-Loh Yim Kew
------------------------ -----------------------
Name: Paula Litscher Name:
Title: Vice President of Finance Title:
<PAGE>
Annex C
-------
"Indenture" means the Indenture dated as of February 21, 1997, between the
---------
Borrower and Fleet National Bank, as trustee (the "Trustee").
"Senior Indebtedness" means the Senior Notes (including without limitation
-------------------
any amendments thereto and any extensions thereof, but excluding any extensions
applied other than on a pro rata basis with respect to the entire original
principal amount of the Senior Notes), all principal, accreted value, interest
or premium, if any, thereon, all charges, fees and expenses in connection
therewith, and all interest accruing thereon during the pendency of any
bankruptcy or insolvency proceeding, whether or not allowed thereunder.
"Subordinated Indebtedness" means all Loans, interest, and premium, if any,
-------------------------
thereon and any other sums payable by the Borrower under the Loan Documents.
1. 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 Borrower or any of its
subsidiaries or its or their respective assets, or (b) any liquidation,
dissolution or other winding-up of the Borrower, whether voluntary or
involuntary and whether or not involving insolvency or bankruptcy, or (c) any
assignment for the benefit of creditors or any other marshalling of assets or
abilities of the Borrower or any of its subsidiaries, then and in any such
event:
(i) the holders of Senior Indebtedness shall be entitled to receive
payment in full in cash of all Senior Indebtedness, or provision
satisfactory to the holders of Senior Indebtedness shall be made for such
payment, before the holders of the Subordinated Indebtedness are entitled
to receive directly or indirectly any payment or distribution of any kind
or character on account of principal of, premium, if any, or interest on,
or any other amounts in respect of, the Subordinated Indebtedness; and
(ii) any payment or distribution of assets of the Borrower or its
subsidiaries of any kind or character, whether in cash, property or
securities, by set-off or otherwise, to which the holders of the
Subordinated Indebtedness would be entitled but for these provisions 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 the Trustee or Representatives or to the trustee 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, as acceptable to the holders of Senior Indebtedness, in any other
manner, of all Senior Indebtedness, remaining unpaid, after giving effect
to any concurrent payment or distribution to the holders of such Senior
Indebtedness; and
(iii) in the event that, notwithstanding the foregoing provisions,
any holder of any Subordinated Indebtedness shall have received any payment
or distribution of assets of the Borrower or any of its subsidiaries of any
kind or character, whether in cash, property or securities, in respect of
principal of, premium, if any, or interest on, or any other amounts in
respect of, the Subordinated Indebtedness before all Senior Indebtedness is
paid in full in cash
<PAGE>
or, as acceptable to the holders of Senior Indebtedness, in any other
manner, then and in such event such payment or distribution 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 Borrower or any of its
subsidiaries 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, as acceptable to the holders of Senior Indebtedness, in
any other manner, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness.
The consolidation of the Borrower with, or the merger of the Borrower into,
another person or the liquidation or dissolution of the Borrower following the
conveyance or transfer of its properties and assets substantially as an entirety
to another person shall not be deemed a liquidation, dissolution, winding-up,
reorganization, assignment for the benefit of creditors, or marshalling of
assets and liabilities of the Borrower for the purposes of this Section;
provided that the applicable terms of the Indenture with respect to the
- --------
applicable transaction have been complied with in full.
2. Suspension of Payment When Senior Indebtedness in Default.
---------------------------------------------------------
(i) Upon the occurrence of a default in the payment when due (after
giving effect to any grace period) of principal, premium, if any, or
interest on, or any other amounts in respect of, any Senior Indebtedness (a
"Payment Default"), no payment or distribution of any assets of the
---------------
Borrower or any of its subsidiaries of any kind or character shall be made
by or on behalf of the Borrower on account of principal of, premium, if
any, or interest on, or any other amounts in respect of, the Subordinated
Indebtedness or on account of the purchase, redemption or other acquisition
of any Subordinated Indebtedness unless and until such Payment Default
shall have been cured or waived or shall have ceased to exist or such
Senior Indebtedness as to which such Payment Default relates shall have
been discharged or paid in full in cash, after which the Bor rower shall
resume making any and all required payments in respect of the Subordinated
Indebtedness, including any missed payments.
(ii) Upon the occurrence of a default (other than a Payment Default)
with respect to any term or provision of any Senior Indebtedness (a "Non-
---
Payment Default") and upon the earlier to occur of (a) the fifth day
---------------
following receipt by the Borrower from a Trustee of written notice of such
occurrence (a "Payment Blockage Notice"), or (b) if such Non-Payment
-----------------------
Default results from acceleration of the Subordinated Indebtedness, the
date of such acceleration, no payment or distribution of any assets of the
Borrower or any of its subsidiaries of any kind or character shall be made
by or on behalf of the Borrower on account of principal of, premium, if
any, or interest on, or any other amounts in respect of, the Subordinated
Indebtedness or on account of the purchase, redemption or other acquisition
of Subordinated Indebtedness for a period ("Payment Blockage Period")
-----------------------
commencing on the date of receipt by the Borrower of such notice or the
date of acceleration referred to above, as the case may be, unless and
until the earliest to occur of the following events: (x) such non-payment
default shall have been cured or waived or shall have ceased to exist, (y)
such Senior Indebtedness shall have been discharged or paid in full in cash
or (z) such Payment Blockage Period shall have been terminated by written
notice to the Borrower from the Trustee initiating such Payment Blockage
Period, after which, in each case, the Borrower shall resume making any and
all required payments in respect of the Subordinated Indebtedness,
including any missed payments.
2
<PAGE>
(iii) In the event that, notwithstanding the foregoing, any holder of
any Subordinated Indebtedness shall have received any payment prohibited by
the foregoing provisions of this Section 2, then and in such event such
payment shall be paid over and delivered forthwith to the Trustee 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, after giving effect to
any concurrent payment to or for the holders of Senior Indebtedness.
3. Subrogation to Right of Holders of Senior Indebtedness.
------------------------------------------------------
Upon the payment in full in cash of all Senior Indebtedness, the holders of
the Subordinated Indebtedness 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 Subordinated Indebtedness
shall be paid in full. 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 Subordinated Indebtedness would be
entitled except for these provisions, and no payments over pursuant to these
provisions to the holders of Senior Indebtedness by holders of the Subordinated
Indebtedness shall, as among the Borrower, its creditors other than holders of
Senior Indebtedness, and the holders of the Subordinated Indebtedness, be deemed
to be a payment or distribution by the Borrower to or on account of the Senior
Indebtedness.
If any payment or distribution to which the holders of Subordinated
Indebtedness would otherwise have been entitled but for these provisions shall
have been applied, pursuant to these provisions, to the payment of all amounts
payable under the Senior Indebtedness of the Borrower, then and in such case the
holders of Subordinated Indebtedness 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 cash in full.
4. No Waiver of Subordination Provisions.
-------------------------------------
(i) 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 Borrower or by any act or failure to act, in good faith, by any
such holder, or by any non-compliance by the Borrower with the terms,
provisions and covenants as described herein, regardless of any knowledge
thereof any such holder may have or be otherwise charged with.
(ii) Without limiting the generality of Section 4(i), the holders of
Senior Indebtedness may, at any time and from time to time, without the
consent of or notice to the holders of the Subordinated Indebtedness,
without incurring responsibility to the holders of the Subordinated
Indebtedness and without impairing or releasing the subordination provided
herein or the obligations hereunder of the holders of the Subordinated
Indebtedness to the holders of Senior Indebtedness, do any one or more of
the following: (a) 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, provided such change, extension, renewal or
alteration is applied on a pro rata basis with respect to the entire
original principal amount of the Senior Notes; (b) sell, exchange, release
or otherwise deal with any property pledged, mortgaged or otherwise
securing Senior Indebtedness;
3
<PAGE>
(c) release any person liable in any manner for the collection or payment
of Senior Indebtedness; and (d) exercise or refrain from exercising any
rights against the Borrower and any other person.
5. Provisions Solely Define Relative Rights. The provisions of this
----------------------------------------
Annex C are and are intended solely for the purpose of defining the relative
rights of the holders of Subordinated Indebtedness on the one hand and the
holders of Senior Indebtedness on the other hand. Nothing contained in this
Annex C or elsewhere in the Loan Documents is intended to or shall (a) impair,
as among the Borrower, its creditors other than holders of Senior Indebtedness
and the holders of Subordinated Indebtedness, the obligation of the Company,
which ranks equally with all other general obligations of the Borrower, to pay
to the holders of Subordinated Indebtedness the principal of (and premium, if
any) and interest on Subordinated Indebtedness as and when the same shall become
due and payable in accordance with their terms; or (b) affect the relative
rights against the Borrower of the holders of Subordinated Indebtedness and
creditors of the Borrower other than the holders of Senior Indebtedness; or (c)
prevent the holder of any Subordinated Indebtedness from exercising all remedies
otherwise permitted by applicable law and the Loan Documents upon default under
the Loan Documents, including to accelerate the maturity of any Subordinated
Indebtedness.
6. Waiver and Amendment. The observance of any term or provision of this
--------------------
Annex C may be waived (either generally or in a particular instance, either
retroactively or prospectively, and either for a specified period of time or
indefinitely) only upon the written consent of holders of not less than fifty-
one percent (51%) of the then-outstanding principal amount of Senior
Indebtedness, and any term or provision of this Annex C may be amended only by a
writing signed by the Borrower, holders of not less than fifty-one percent (51%)
of the then-outstanding principal amount of Senior Indebtedness, and holders of
not less than fifty one percent (51%) of the then-outstanding principal amount
of Subordinated Indebtedness; provided, that no such waiver or amendment shall
reduce the percentage of outstanding principal amount of Senior Indebtedness or
Subordinated Indebtedness the holders of which are required to consent to any
waiver or amendment without the consent of the holders of all of such
outstanding principal amount of such Senior Indebtedness or Subordinated
Indebtedness. Any waiver or amendment effected in accordance with this Section
shall be binding upon each holder of Senior Indebtedness or Subordinated
Indebtedness, each future holder of such securities, and the Borrower. Upon the
effectuation of each such waiver or amendment, the Company shall promptly give
written notice thereof to the record holders of the Senior Indebtedness and
Subordinated Indebtedness who have not previously consented thereto in writing.
4
<PAGE>
EXHIBIT 10.8
FAX INTERNATIONAL, INC.
SERIES G CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
Dated as of April 10, 1995
<PAGE>
Table of Contents
1. Authorization and Sale of Preferred Shares; Related Agreements....... 1
1.1 Authorization...................................... 1
1.2 Sale............................................... 1
1.3 Related Transactions............................... 1
2. Closing Date; Delivery............................................... 2
2.1 Closing and Closing Date........................... 2
2.2 Delivery........................................... 2
3. Representations and Warranties of the Company........................ 2
3.1 Organization, Qualifications and Corporate Power... 2
3.2 Authorization of Agreements, Etc................... 2
3.3 Validity........................................... 3
3.4 Authorized Capital Stocks; Capitalization.......... 3
3.5 Subsidiaries....................................... 4
3.6 Financial Statements; No Material Adverse Change... 5
3.7 Litigation; Compliance with Law.................... 5
3.8 Complaints......................................... 6
3.9 Governmental Approvals............................. 6
3.10 Title to Properties................................ 6
3.11 Leasehold Interests................................ 6
3.12 Patents, Trademarks, Etc........................... 7
3.13 Proprietary Information of Third Parties........... 7
3.14 Taxes.............................................. 7
3.15 Other Agreements................................... 8
3.16 Related Party Transactions......................... 10
3.17 Officers; Employees................................ 10
3.18 Loans and Advances................................. 10
3.19 Assumptions, Guaranties, Etc. of Indebtedness
of Other Persons................................... 11
3.20 Brokers............................................ 11
3.21 Significant Suppliers.............................. 11
3.22 Insurance.......................................... 11
3.23 U.S. Real Property Holding Corporation............. 11
3.24 Disclosure......................................... 11
3.25 Offering of the Shares and Borrowing of the Loans... 12
3.26 Change of Control.................................. 12
4. Representations, Warranties, and Covenants of the Purchaser.......... 12
5. Conditions to Obligations of Purchaser............................... 13
5.1 Representations and Warranties True................ 13
5.2 Performance of Obligations......................... 13
5.3 Amendment to the Certificate of Incorporation...... 14
1
<PAGE>
5.4 Other Transactions at the Closing.................. 14
5.5 Proceedings and Documents.......................... 14
5.6 Reservation of Conversion Shares................... 14
5.7 Qualifications, Legal Investment................... 14
5.8 Opinion of the Company's Counsel................... 15
5.9 Election of ST's Directors......................... 15
6. Conditions to Obligations of the Company............................. 15
6.1 Representations and Warranties True................ 15
6.2 Performance of Obligations......................... 15
6.3 Qualifications, Legal Investment................... 15
6.4 Amendment to the Certificate of Incorporation...... 15
6.5 Other Transactions at the Closing.................. 16
7. Affirmative Covenants................................................ 16
7.1 Repayment of Certain Debt.......................... 16
7.2 Information Rights................................. 16
7.3 Right of First Refusal with Respect to Certain
Network Operations and Future Financings....................... 18
(a) Australia and the Philippines.......... 18
(b) Other New Joint Ventures............... 18
(c) ST Not Restricted...................... 19
7.4 Financial Controls................................. 19
(a) Annual Budget.......................... 19
(b) Restrictions on Capital Expenditures
and Investments........................ 19
(c) Miscellaneous.......................... 20
7.5 Board of Directors Meetings........................ 20
7.6 Other Restrictions................................. 20
7.7 Corporate Existence................................ 21
7.8 Properties, Business, Insurance.................... 21
7.9 Key-Man Insurance.................................. 21
7.10 Restrictive Agreements Prohibited.................. 21
7.11 Transactions with Affiliates....................... 21
7.12 Confidentiality Agreements......................... 21
7.13 Compliance with Laws............................... 21
7.14 By-Laws............................................ 22
7.15 U.S. Real Property Interest Statement.............. 22
7.17 Purchaser's Option To Appoint Certain Employees.... 22
8. Miscellaneous........................................................ 22
8.1 Governing Law...................................... 22
8.2 Termination and Survival........................... 22
8.3 Binding Agreement; Successors and Assigns.......... 23
8.4 Entire Agreement................................... 23
8.5 Separability....................................... 23
2
<PAGE>
8.6 Amendment and Waiver............................... 23
8.7 Notices, Etc....................................... 24
8.8 Information Confidential........................... 24
8.9 Titles and Subtitles............................... 24
8.10 Counterparts....................................... 24
3
<PAGE>
FAX INTERNATIONAL, INC.
SERIES G CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
The parties to this Agreement (this "Agreement"), dated as of April 10,
---------
1995, are Fax International, Inc., a Delaware corporation (the "Company"), with
-------
its principal office at 67 South Bedford Street, Burlington, Massachusetts
01803-5152, and SingTel Global Services Pte. Ltd. (the "Purchaser"), a wholly
---------
owned subsidiary of Singapore Telecommunications Limited ("ST") Singapore
--
corporation with its registered office at 31 Exeter Road, Comcentre, Singapore
0923.
1. Authorization and Sale of Preferred Shares; Related Agreements.
--------------------------------------------------------------
1.1 Authorization. The Company has authorized the issuance and sale
-------------
of up to an aggregate of eight million five hundred seventy thousand (8,570,000)
shares of its Series G Convertible Preferred Stock, par value U.S.$1.00 per
share (the "Shares"), having the powers, preferences, rights, restrictions, and
------
privileges set forth in the Certificate of Designation of Series G Convertible
Preferred Stock, Fixing Powers, Preferences, and Rights of Such Stock attached
hereto as Exhibit B-1 (the "Certificate of Designation").
--------------------------
1.2 Sale. Subject to the terms and conditions hereof, the Company
----
hereby agrees to issue and sell to the Purchaser, and the Purchaser hereby
agrees to purchase from the Company, an aggregate of eight million five hundred
seventy thousand (8,570,000) Shares at a purchase price of Three Dollars and
Fifty Cents (U.S.$3.50) per Share, or Twenty-Nine Million Nine Hundred
Ninety-Five Thousand Dollars (U.S.$29,995,000) in the aggregate.
1.3 Related Transactions. In connection with the purchase and sale
--------------------
of the Shares hereunder, the Company is also entering into (i) a Credit
Agreement in the form attached hereto as Exhibit I (the "Credit Agreement"),
--------- ----------------
dated as of the date hereof, with ST or an affiliate, (ii) a Term Loan Agreement
- - Equipment in the form attached hereto as Exhibit J (the "Equipment Loan
--------------
Agreement"), dated as of the date hereof, with ST or an affiliate, (iii) an
- ---------
Intercompany Operating Agreement in the form attached hereto as Exhibit K (the
---------
"Intercompany Operating Agreement"), dated as of the date hereof, with ST or an
-------------------------------
affiliate, (iv) an Amended and Restated Registration Rights Agreement in the
form attached hereto as Exhibit F (the "Amended and Restated Registration Rights
----------------------------------------
Agreement"), dated as of the date hereof, with the investors, including the
- ---------
Purchaser, named therein, and (v) a Stockholders Agreement in the form attached
hereto as Exhibit L (the "Stockholders Agreement"), dated as of the date hereof,
----------------------
with the stockholders, including the Purchaser, named therein. The Credit
Agreement, any note evidencing indebtedness thereunder, the Equipment Loan
Agreement, any note evidencing indebtedness thereunder, the Security Agreement
referred to in the Equipment Loan Agreement, the Intercompany Operating
Agreement, the Amended and Restated Registration Rights Agreement, the
Stockholders Agreement, and any other agreement to which the Company is a party
the execution and delivery of which is contemplated hereby or by such other
agreements are collectively referred to herein as the "Related Agreements".
------------------
Shares of the Company's Series H Convertible Preferred Stock, par value $1.00
per share, issuable under the Credit Agreement are referred to herein as the
"Series H Shares". Loans under the Credit Agreement are referred to as "Loans".
--------------- -----
<PAGE>
2. Closing Date; Delivery.
----------------------
2.1 Closing and Closing Date. The closing of the sale and purchase
------------------------
of the Shares under this Agreement (the "Closing") shall be held at 1:00 p.rn.
-------
on April 10, 1995 (the "Closing Date"), at the offices of Singapore
------------
Telecommunications Limited, 31 Exeter Road, Comcentre, Singapore 0923, Republic
of Singapore, or at such other time and place as the Company and the Purchaser
may agree.
2.2 Delivery. At the Closing, subject to the terms and conditions
--------
hereof, the Company will deliver to the Purchaser certificates, in such
denominations and registered in such name or names as such Purchaser may
designate by notice to the Company, representing the Shares to be purchased by
such Purchaser from the Company, dated the date of such Closing, against payment
of the purchase price therefor by cashier's or bank check or by wire transfer of
funds.
3.0 Representations and Warranties of the Company. Except for the
---------------------------------------------
exceptions set forth on the Schedule of Exceptions attached hereto as Exhibit
-------
C-1 which shall specifically refer to the sentence of this Section to which each
- ---
such exemption applies, the Company represents and warrants to the Purchaser as
follows:
3.1 Organization, Qualifications and Corporate Power.
------------------------------------------------
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware, U.S.A.
The Company has the corporate power and authority to own and hold its properties
and to carry on its business as now conducted and as proposed to be conducted.
The Company is duly qualified and authorized to do business, and is in good
standing as a foreign corporation, in each jurisdiction where the nature of its
activities and of its properties makes such qualification necessary and where a
failure to so qualify would have a material adverse effect on its business or
properties. The Company has all requisite legal and corporate power to execute,
deliver and perform this Agreement and the Related Agreements, to issue, sell
and deliver the Shares, to issue and deliver the Series H Shares, and to issue
and deliver the shares of Common Stock, par value U.S.$0.01 per share, of the
Company ("Common Stock") issuable upon conversion of the Shares, the Series H
------------
Shares, and Loans (the "Conversion Shares").
-----------------
(b) Attached as Exhibit B-2 are a true and complete copy of
the Certificate of Incorporation of the Company, as a-mended (the "Charter"),
-------
the By-laws of the Company, as amended, and the Certificates of Designation of
each class or series of the Company's preferred stock other than the Series G
Convertible Preferred Stock, as set forth in Section 3.4.
3.2 Authorization of Agreements, Etc.
--------------------------------
(a) The execution and delivery by the Company of this
Agreement and the Related Agreements, the performance by the Company of its
obligations hereunder and thereunder, the issuance, sale and delivery of the
Shares and the issuance and delivery of the
5
<PAGE>
Conversion Shares and the Series H Shares have been duly authorized by all
requisite corporate action and will not violate any provision of law, any order
of any court or other agency of government, the Charter, or the By-laws of the
Company, as amended, or any provision of any indenture, agreement or other
instrument to which the Company, or any of its properties or assets is bound, or
conflict with, result in a breach of or constitute (with due notice or lapse of
time or both) a default under any such indenture, agreement or other instrument,
or result in the creation or imposition of any lien, charge, restriction, claim
or encumbrance of any nature whatsoever upon any of the properties or assets of
the Company.
(b) The Shares have been duly authorized and, when issued
pursuant to this Agreement, will be validly issued, fully paid and nonassessable
shares of Series G Convertible Preferred Stock with no personal liability
attaching to the ownership thereof and will be free and clear of all liens,
charges, claims and encumbrances. The Series H Shares have been duly authorized
and, when issued pursuant to the Credit Agreement, will be validly issued, fully
paid and nonassessable shares of the Company's Series H Convertible Preferred
Stock, par value U.S.$1.00 per share, with no personal liability attaching to
the ownership thereof and will be free and clear of all liens, charges, claims
and encumbrances. The Conversion Shares have been duly reserved for issuance
upon conversion of the Shares, the Series H Shares, and Loans and, when so
issued, will be duly authorized, validly issued, fully paid and nonassessable
shares of Common Stock with no personal liability attaching to the ownership
thereof and will be free and clear of all liens, charges, claims and
encumbrances. Neither the issuance, sale or delivery of the Shares nor the
issuance or delivery of the Conversion Shares or the Series H Shares is subject
to any preemptive right of stockholders of the Company or to any right of first
refusal or other right in favor of any person.
3.3 Validity. This Agreement and each Related Agreement has been
--------
duly executed and delivered by the Company and constitutes the legal, valid and
binding obligation of the Company, enforceable in accordance with its terms,
except, in the case of the Amended and Restated Registration Rights Agreement,
to the extent that the indemnification provisions therein may be limited by
applicable federal or state securities law.
3.4 Authorized Capital Stocks; Capitalization. The authorized
-----------------------------------------
capital stock of the Company consists of (a) three million five hundred thousand
(3,500,000) shares of its Series H Convertible Preferred Stock, par value
U.S.$1.00 per share, (b) eight million five hundred seventy thousand (8,570,000)
shares of its Series G Convertible Preferred Stock, par value U.S.$1.00 per
share, (c) five hundred thousand (500,000) shares of its Series F Convertible
Preferred Stock, par value U.S.$1.00 per share, (d) one hundred fifty thousand
(150,000) shares of its Series E Convertible Preferred Stock, par value
U.S.$1.00 per share, (e) two million six hundred thousand (2,600,000) shares of
its Series D Convertible Preferred Stock, par value U.S.$1.00 per share, (f) six
hundred fifty thousand (650,000) shares of Series C Convertible Preferred Stock,
par value U.S.$l.00 per share, (g) two million seven hundred thousand
(2,700,000) shares of Series B Convertible Preferred Stock, par value U.S.$1.00
per share, (h) nine hundred seventy-five thousand five hundred (975,500) shares
of Series A Convertible Preferred Stock, par value U.S.$1.00 per share, and (i)
fifty million (50,000,000) shares of Common Stock. Immediately prior to the
Closing, no shares of Series H Convertible Preferred Stock, no shares of Series
G Convertible Preferred Stock, no shares of Series F
6
<PAGE>
Convertible Preferred Stock, no shares of Series E Convertible Preferred Stock,
2,044,871 shares of Series D Convertible Preferred Stock, 650,000 shares of
Series C Convertible Preferred Stock, 2,668,538 shares of Series B Convertible
Preferred Stock, 975,000 shares of Series A Convertible Preferred Stock and
3,323,800 shares of Common Stock will be outstanding, all of which will be
validly issued, fully paid and nonassessable with no personal liability
attaching to the ownership thereof. Each share of Series H Convertible Preferred
Stock, Series G Convertible Preferred Stock, Series F Convertible Preferred
Stock, Series E Convertible Preferred Stock, Series D Convertible Preferred
Stock, Series C Convertible Preferred Stock, Series B Convertible Preferred
Stock, and Series A Convertible Preferred Stock may be converted in accordance
with its terms into one (1) share of Common Stock. The holders of such Common
Stock and Preferred Stock are as set forth on Exhibit B-3 attached hereto. There
-----------
is not outstanding any securities convertible into (other than the shares of
Preferred Stock referred to above) or exchangeable for, or any option, right, or
warrant to purchase, any shares of the capital stock of the Company from the
Company except for outstanding warrants and non-employee stock options to
purchase an aggregate of 1,445,292 shares of Common Stock, outstanding employee
stock options to purchase an aggregate of 1,554,619 shares of Common Stock, and
outstanding subordinated debentures convertible into an aggregate of 436,685
shares of Series D Convertible Preferred Stock, 149,180 shares of Series E
Convertible Preferred Stock, and 345,133 shares of Series F Convertible
Preferred Stock. The holders of such outstanding warrants and options, the plan
(if any) under which granted, the exercise price, the date of grant and period
of exercise are as set forth on Exhibit B4 attached hereto and the holders of
----------
such outstanding subordinated convertible debt, the principal amount outstanding
thereof, accrued interest, and number of shares issuable upon conversion are set
forth on Exhibit B-5. The only stock option or warrant plans the Company has are
-----------
the 1993 Employee Stock Option Plan and 1994 Investor Stock Option Plan and the
amount of shares available for grant under such plans are 1,195,381 shares and
40,681 shares, respectively. (The Purchaser agrees to support a resolution of
the Company's Board of Directors to increase the number of shares available for
grant under the 1993 Employee Stock Option Plan by 250,000 shares so that the
aggregate number of shares available for grant under such Plan would be
1,445,381. All options issued to Douglas J. Ranalli under the Employment
Agreement attached as Exhibit G and dated as of this date will be issued from
---------
this pool of available shares) No person has any preemptive rights or rights of
first refusal with respect to any capital stock of the Company except holders of
the shares of Preferred Stock referred to above to the extent provided in the
respective Certificates of Designations of such Preferred Stock. All outstanding
shares of the Company's capital stock have been issued pursuant to valid
exemptions from the registration and qualification provisions of the Securities
Act and any relevant state securities laws. The issuance, sale, and delivery of
the Shares, the issuance and delivery of the Series H Shares and the Conversion
Shares and the consummation of the other transactions contemplated by the
Related Agreements will not result in any anti-dilution adjustment with respect
to the conversion rights of any person.
3.5 Subsidiaries. The Company does not own or control, directly or
------------
indirectly, any interest in any other corporation, association, or other
business entity other than (i) Fax International Japan Co., Ltd., a Japanese
corporation. ("FIJ"), Fax International Korea, Ltd. ("FIK"), a Korean
--- ---
corporation, and Fax International U.K., Ltd., a United Kingdom corporation
("FIUK") (each, a "Subsidiary"). Each Subsidiary is a corporation duly
---- ----------
incorporated, validly
7
<PAGE>
existing and in good standing under the laws of its jurisdiction of
incorporation, has the corporate power and authority to own and hold its
properties and to carry on its business as now conducted or proposed to be
conducted and is duly qualified and authorized to do business, and is in good
standing as a foreign corporation, in each jurisdiction where the nature of its
activities and of its properties makes such qualification necessary and where
failure to so qualify would have a material adverse effect on the business or
properties of the Company and its Subsidiaries taken as a whole. All of the
issued shares of capital stock of each Subsidiary have been duly authorized, are
validly issued, fully paid and nonassessable with no personal liability
attaching to ownership thereof, and are owned by the Company free and clear of
all liens, charges, claims and encumbrances, except in the case of FIJ, as to
which Nichimen Corporation, a Japanese corporation, and ORIX Corporation, a
Japanese corporation, collectively own 195 of the 395 outstanding shares of
FIJ's common stock.
3.6 Financial Statements; No Material Adverse Change. Annexed
------------------------------------------------
hereto as Exhibit D is the audited consolidated balance sheet of the Company as
---------
of December 31, 1994 (the "Balance Sheet") and the related consolidated
-------------
statements of income, stockholders equity (deficit) and cash flows of the
Company for the year ended December 31, 1994 (collectively, the "Financial
---------
Statements"). The Financial Statements (a) fairly present the financial
- ----------
position, the results of operations, and changes in the financial position of
the Company and its Subsidiaries as of and for the year ended December 31, 1994,
(b) have been prepared in accordance with generally accepted accounting
principles consistently applied, and (c) reflect all accrued liabilities and
adequate reserves for all contingent liabilities of the Company as of December
31, 1994. Since the date of the Balance Sheet, (i) there has been no change in
the assets, liabilities, financial condition, or results of operations of the
Company from that reflected in the Financial Statements except for changes in
the ordinary course of business that in the aggregate have not been materially
adverse and (ii) none of the business, prospects, financial condition,
operations, property or affairs of the Company has been materially adversely
affected by any occurrence or development, individually or in the aggregate,
whether or not insured against.
3.7 Litigation; Compliance with Law.
-------------------------------
(a) There is no (i) action, suit, claim, proceeding or
investigation pending or, to the best of the Company's knowledge (limited to the
knowledge of Douglas J. Ranalli ("Ranalli") and the Company's operational
-------
directors (collectively with Ranalli, the "Executive Officers")), threatened
------------------
against or affecting the Company, at law or in equity, or before or by any
federal, state, municipal or other governmental court, department, commission,
board, bureau, agency or instrumentality, domestic or foreign (and the Company
has no current intention to initiate any such), (ii) arbitration proceeding
relating to the Company pending under collective bargaining agreements or
otherwise or (iii) governmental inquiry pending or, to the best of the Company's
knowledge, threatened (limited to the knowledge of the Executive Officers)
against or affecting the Company. The Company is not a party to or, to the best
of its knowledge (limited to the knowledge of the Executive Officers) named in
any order, writ, injunction, judgment or decree of any court or governmental
agency or instrumentality.
8
<PAGE>
(b) The Company is in compliance with all material federal,
state, local and foreign statutes, rules, regulations, judgments, orders and
decrees applicable to it, including any of such related to the environment,
occupational health and safety and equal employment.
(c) The Company has all franchises, permits, licenses, and any
similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects, or financial condition of the Company, and
believes it can obtain, without undue burden or expense, any similar authority
for the conduct of its business as currently planned to be conducted. True,
correct, and complete copies of the only licenses which the Company or its
Subsidiaries require for such purpose are attached as Exhibit N. The Company is
---------
not in default under any of such franchises, permits, licenses, or other similar
authorities.
3.8 Complaints. The Company has received no customer complaints
----------
concerning alleged deficiencies in its services or products that, if true, would
materially adversely affect the operations or financial condition of the
Company.
3.9 Governmental Approvals. Subject to the accuracy of the
----------------------
representations a-nd warranties of the Purchaser set forth in Section 4, no
registration or filing with, or consent or approval of or other action by, any
federal, state, or other governmental agency or instrumentality is or will be
necessary for the valid execution, delivery, and performance by the Company of
this Agreement, the issuance, sale, and delivery of the Shares, or the issuance
and delivery of the Conversion Shares or the Series H Shares, other than (i) any
filings pursuant to U.S. federal and state securities laws (all of which filings
have been made or will timely be made by the Company) in connection with the
sale of the Shares, and (ii) filing of an amendment (the "Amendment") to the
---------
Company's Certificate of Incorporation, as previously amended, with the
Secretary of State of the State of Delaware reflecting the authorized capital
stock set forth in Section 3.4. No filing under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act") is required for
-------
consummation of the issuance and sale of the Shares and the other transactions
contemplated by this Agreement and the Related Agreements.
3.10 Title to Properties. Except for assets under capital leases,
-------------------
the Company has good and valid title to its properties and assets reflected on
the Balance Sheet or acquired by it since the date of the Balance Sheet (other
than proper-ties and assets disposed of in the ordinary course of business since
the date of the Balance Sheet), arid all such properties and assets are free and
clear of mortgages, pledges, security interests, liens, charges, claims,
restrictions and other encumbrances, except for (a) a lien in favor of Applied
Telecommunications Technology, Inc., (b) liens for or current taxes not yet due
and payable, (c) liens of carriers, warehousemen, mechanics and materialmen, and
(d) minor imperfections of title, if any, not material in nature or amount or
not materially detracting from the value or impairing the use of the property
subject thereto or impairing the operations or proposed operations of the
Company.
3.11 Leasehold Interests. Each lease or agreement to which the
-------------------
Company is a party under which it is a lessee of any property, real or personal,
is a valid and subsisting agreement without any current default of the Company
thereunder and, to the best of the
9
<PAGE>
Company's knowledge, without any current default thereunder of any other party
thereto. No event has occurred and is continuing which, with due notice or lapse
of time or both, would constitute a default or event of default by the Company
under any such lease or agreement or, to the best of the Company's knowledge, by
any other party thereto. The Company's possession of such property has not been
disturbed and, to the best of the Company's knowledge the Company has a valid
leasehold interest in such property free of any liens, claims or encumbrances
and no claim has been asserted against the Company adverse to its rights in such
leasehold interests.
3.12 Patents, Trademarks, Etc. Set forth in Exhibit C-2 is a list
------------------------ -----------
of an patents, patent rights, patent applications, trademarks, trademark
applications, service marks, service mark applications, trade names, and
copyrights, and au applications therefor that are in the process of being
prepared, owned by or registered in the name of the Company, or of which the
Company is a licensor or licensee or in which the Company has any right, and in
each case a brief description of the nature of such right and any material
limitations on such right The Company owns or possesses adequate licenses or
other rights to use all patents, trademarks, service marks, trade names,
copyrights, manufacturing processes, formulae, trade secrets, and know-how
(collectively, "Intellectual Property") necessary or desirable to the conduct of
---------------------
its business as conducted and as proposed to be conducted, and no claim is
pending or, to the best of the Company's knowledge (limited to the knowledge of
the Executive Officers), threatened, to the effect that the operations of the
Company infringe upon or conflict with the asserted rights of any other person
under any Intellectual Property. No claim is pending or, to the best of the
Company's knowledge (limited to the knowledge of the Executive Officers)
threatened, to the effect that any Intellectual Property owned or licensed by
the Company is invalid or unenforceable by the Company. To the best of the
Company's knowledge, all material technical information developed by and
belonging to the Company that has not been patented or disclosed in a patent
application has been kept confidential.
3.13 Proprietary Information of Third Parties. To the best of the
----------------------------------------
Company's knowledge, no third party has claimed in writing or has reason to
claim that any person currently or previously employed by or affiliated with the
Company has (a) violated or may be violating any of the terms or conditions of
his employment, noncompetition or nondisclosure agreement with such third party,
(b) disclosed or may be disclosing or utilized or may be utilizing any trade
secret or proprietary information or documentation of such third party or (c)
interfered or may be interfering in the employment relationship between such
third party and any of its present or former employees. No third party has
requested information from the Company which suggests that such a claim might be
contemplated. To the best of the Company's knowledge, no person currently or
previously employed by or affiliated with the Company has employed or proposes
to employ any trade secret or any information or documentation proprietary to
any former employer, and to the best of the Company's knowledge, no person
currently or previously employed by or affiliated with the Company has violated
any confidential relationship which such person may have had with any third
party, in connection with the development, manufacture or sale of any product or
proposed product or the development or sale of any service or proposed service
of the Company, and the Company has no reason to believe there will be any such
employment or violation. To the best of the Company's knowledge, none of the
execution or delivery of this Agreement or any Related Agreement, or the
carrying on of
10
<PAGE>
the business of the Company as officers, employees or agents by any officer,
director or key employee of the Company, or the conduct or proposed conduct of
the business of the Company, will conflict with or result in a breach of the
terms, conditions or provisions of or constitute a default under any contract,
covenant or instrument under which any such person is obligated.
3.14 Taxes. The Company has filed all tax returns, federal,
-----
state, foreign and local, required to be filed by it, and such returns are true
and correct in all material respects. The Company has paid all taxes shown to be
due by such returns as well as all other taxes, assessments and governmental
charges which have become due or payable, including without limitation all taxes
which the Company is obligated to withhold from amounts owing to employees,
creditors and third parties, other than taxes being contested in good faith, and
adequate reserves have been established for all taxes accrued but not yet
payable. The federal income tax returns of the Company have never been audited
by the Internal Revenue Service and the Company has never executed any waiver of
any statute of limitations on the assessment or collection of any tax or
governmental charge. No deficiency assessment with respect to or proposed
adjustment of the Company's federal, state, county or local taxes is pending or,
to the best of the Company's knowledge, threatened. There is no tax lien,
whether imposed by any federal, state, county or local taxing authority,
outstanding against the assets, properties or business of the Company, other
than liens resulting from taxes that have not yet become delinquent. The Company
does not have in effect any election to be treated as an S corporation or a
collapsible corporation pursuant to Section 1362(a) or Section 341(f) of the
Internal Revenue Code of 1986, as amended (the "Code").
----
3.15 Other Agreements. The Company is not a party to or otherwise
----------------
bound by any written or oral contract or instrument or other restriction which
individually or in the aggregate could materially adversely affect the business,
prospects, financial condition, operations, property or affairs of the Company.
The Company is not a party to or otherwise bound by any:
(a) agreement granting rights to manufacture, provide, distribute,
license, or market or sell the Company's services or products, other than the
Intercompany Operating Agreement and that certain Intercompany Operating
Agreement dated as of March 25, 1994 between the Company and FIJ (the "FIJ
---
Intercompany Operating Agreement"), which is not terminable on less than ninety
- --------------------------------
(90) days' notice without cost or other liability to the Company (except for
contracts which, in the aggregate, are not material to the business of the
Company);
(b) sales contract which entitles any customer to a rebate or right
of set-off, to return any product to the Company after acceptance thereof or to
delay the acceptance thereof, or which varies in any material respect from the
Company's standard form contracts;
(c) contract with any labor union (and, to the knowledge of the
Company, no organizational effort is being made with respect to any of its
employees);
(d) contract for the future purchase of fixed assets or for the
future purchase of materials, supplies or equipment in excess of its normal
operating requirements;
11
<PAGE>
(e) contract (other than contracts specifically referred to herein
or required to be entered into pursuant hereto) for the employment of any
officer, employee or other person (whether of a legally binding nature or in the
nature of informal understandings) on a full-time or consulting basis which is
not terminable on notice without cost or other liability to the Company, except
customary severance arrangements and accrued vacation pay;
(f) any bonus, pension, profit-sharing, retirement,
hospitalization, insurance, stock purchase, stock option or other plan, contract
or understanding pursuant to which benefits are provided to any employee of the
Company (other than group insurance plans applicable to employees generally, and
other than the 1993 Stock Option Plan of the Company, as amended);
(g) except as set forth in Exhibit E, any promissory note, agreement
---------
or indenture relating to the borrowing of money or to the mortgaging or pledging
of, or otherwise placing a lien or security interest on, any asset of the
Company except for certain equipment covered by leases;
(h) guaranty of any obligation for borrowed money or otherwise;
(i) agreement, or group of related agreements with the same party or
any group of affiliated parties, under which the Company has advanced or agreed
to advance money or has agreed to lease any property as lessee or lessor except
for leases of office space by the Company and leases for certain equipment;
(j) agreement or obligation (contingent or otherwise) to issue, sell
or otherwise distribute or to repurchase or otherwise acquire or retire any
share of its capital stock or any of its other equity securities except pursuant
to the conversion or exercise of the preferred stock, warrants, and options
referred to in Section 3.4 and except as set forth in certain subscription
agreements between the Company and certain holders of its Common Stock listed on
Exhibit E.
- ---------
(k) assignment, license or other agreement with respect to
Intellectual Property or any form of intangible property, other than the
Intercompany Operating Agreement and the FIJ Intercompany Operating Agreement;
(l) agreement under which it has granted any person any registration
rights, except as set forth in the Amended and Restated Registration Rights
Agreement, and except as set forth in certain warrants issued by the Company
(which registration rights are subordinated to the registration rights under the
Amended and Restated Registration Rights Agreement as and to the extent
contemplated by Section 11 of the Amended and Restated Registration Rights
Agreement);
(m) agreement under which it has limited or restricted its
right to compete with any person in any respect;
(n) any shareholders or other agreement that relates to the voting
of any of its capital stock (other than (i) the Stockholders Agreement, and (ii)
an agreement dated as of February 1, 1995 between Antaeus Enterprises, Ranalli,
and the Company in which Ranalli
12
<PAGE>
makes certain agreements with respect to the voting of his stock in the Company
if a loan to the Company from BayBank is not repaid and there is a draw under a
letter of credit arranged to be furnished to BayBank by Antaeus Enterprises in
connection therewith), and, to the best of the Company's knowledge, there are no
such agreements or understandings between any other persons (except that Ranalli
has a proxy to vote certain shares of the Preferred Stock of the Company); and
(o) except for the Shareholders Agreement dated as of March 25, 1994
as to which the Company, FIJ, and the other shareholders of FIJ are parties (the
"FIJ Shareholders Agreement"), any other contract or group of related contracts
--------------------------
with the same party involving more than U.S.$25,000 or continuing over a period
of more than six (6) months from the date or dates thereof (including renewals
or extensions optional with another party), which contract or group of contracts
is not terminable by the Company without penalty upon notice of thirty (30) days
or less, but excluding any contract or group of contracts with a customer of the
Company for the sale, lease or rental of the Company's products or services if
such contract or group of contracts was entered into by the Company in the
ordinary course of business.
The Company, and to the best of the Company's knowledge, each other party
thereto have in all material respects performed all the obligations required to
be performed by them to date, have received no notice of default and are not in
default (with due notice or lapse of time or both) under any lease, agreement or
contract now in effect to which the Company is a party or by which it or its
property may be bound. The Company has no knowledge of any breach or anticipated
breach by the other party to any contract or commitment to which the Company is
a party. The Company is in full compliance with all of the terms and provisions
of its Charter and By-laws, as amended.
3.16 Related Party Transactions. No employee, officer, or director
--------------------------
of the Company or member of his or her immediate family is indebted to the
Company, nor is the Company indebted (or committed to make loans or extend or
guarantee credit) to any of them except as set forth on Exhibit E and except for
---------
outstanding liabilities for compensation and reimbursement of expenses accruing
to or incurred by such individual in the ordinary course of business. To the
best of the Company's knowledge (limited to the knowledge of the Executive
Directors), none of such persons has any direct or indirect ownership interest
in any firm or corporation with which the Company is affiliated or with which
the Company has a business relationship, or any firm or corporation that
competes with the Company, except that employees, officers, or directors of the
Company and members of their immediate families may own stock in the Company
(and, hence, indirectly, in the Company's Subsidiaries) and in publicly traded
companies that may compete with the Company. To the best of the Company's
knowledge, no officer or director or any member of their immediate families is,
directly or indirectly, interested in any contract (other than contracts
relating to the provision of employment or consulting services) with the
Company.
3.17 Officers; Employees. No officer or key employee of the Company
-------------------
has advised the Company (orally or in writing) that he intends to terminate
employment with the Company. The Company has entered into an Employment
Agreement with Ranalli in the form of Exhibit G and such Employment Agreement is
---------
in full force and effect. Each of the executive
13
<PAGE>
officers and managers of the Company (other than Ranalli) has executed an
employee confidentiality agreement containing provisions substantially in the
form of Exhibit H (the "Confidentiality Agreements"), and such agreements are in
--------- --------------------------
full force and effect. The Company has complied in all material respects with
all applicable laws relating to the employment of labor, including provisions
relating to wages, hours, equal opportunity, collective bargaining and the
payment of social security and other taxes, and with the Employee Retirement
Income Security Act of 1974, as amended. There is no strike or labor dispute
pending or threatened (limited to the knowledge of the Executive Officers)
between the Company and its employees.
3.18 Loans and Advances. The Company does not have any outstanding
------------------
loans or advances to any person and is not obligated to make any such loans or
advances, except, in each case, for advances to employees of the Company in
respect of reimbursable business expenses anticipated to be incurred by them in
connection with their performance of services for the Company and accounts
receivable arising in the ordinary course of business.
3.19 Assumptions, Guaranties, Etc. of Indebtedness of Other
------------------------------------------------------
Persons. The Company has not assumed, guaranteed, endorsed or otherwise become
- -------
directly or contingently liable on any indebtedness of any other person
(including, without limitations liability by way of agreement, contingent or
other-wise, to purchase, to provide funds for payment, to supply funds to or
otherwise invest in the debtor, or otherwise to assure the creditor against
loss), except for guaranties by endorsement of negotiable instruments for
deposit or collection in the ordinary course of business.
3.20 Brokers. The Company has no contract, arrangement or
-------
understanding with any broker, finder or similar agent with respect to the
transactions contemplated by this Agreement.
3.21 Significant Suppliers. No supplier that was significant to the
---------------------
Company during the period covered by the Financial Statements or thereafter has
terminated, materially reduced, or is currently threatening in writing to
terminate or materially reduce its provision of products or services to the
Company.
3.22 Insurance. The Company maintains insurance of the kinds and in
---------
the amounts that it believes are appropriate based on the size of the Company
and on the business in which the Company is engaged to protect the Company and
its financial condition against the anticipated risks involved in the business
conducted by the Company.
3.23 U.S. Real Property Holding Corporation. The Company is not now
--------------------------------------
and has never been a United States real property holding corporation," as
defined in Section 897(c)(2) of the Code and Section 1.897-2(b) of the
Regulations promulgated by the U.S. Internal Revenue Service.
3.24 Disclosure. Neither this Agreement, nor any Exhibit attached
----------
hereto, nor any other document delivered pursuant hereto, nor any statement,
report, business plan, or other document delivered to the Purchaser or ST in
connection with the transactions contemplated by this Agreement, when read
together, contains an untrue statement of a material fact or omits a
14
<PAGE>
material fact necessary to make the statements contained herein or therein, in
light of the circumstances under which they were made, not misleading. The
Company knows (limited to the knowledge of the Executive Officers) of no
information or fact that has or would have a material adverse effect on the
business, prospects, assets, financial condition, operations, property, or
affairs of the Company that has not been disclosed herein or such exhibits or
other statements, reports, business plans, or other documents. Any written
projections furnished in any of such materials were prepared in good faith based
on reasonable assumptions and represent the Company's best estimate of the
results set forth therein based on the information available to the Company as
of the date thereof.
15
<PAGE>
3.25 Offering of the Shares and Borrowing of the Loans. Neither the
-------------------------------------------------
Company nor any person authorized or employed by the Company as agent, broker,
dealer or otherwise in connection with the offering or sale of the Shares or any
security of the Company similar to the Shares has offered the Shares or any such
similar security for sale to, or solicited any offer to buy the Shares or any
such similar security from, or otherwise approached or negotiated with respect
thereto with, any person or persons, and neither the Company nor any person
acting on its behalf has taken or will take any other action (including, without
limitations any offer, issuance or sale of any security of the Company under
circumstances which might require the integration of the offering of such
security with the offering of the Shares under the Securities Act of 1933, as
amended (the "1933 Act") or the rules and regulations of the Commission
thereunder), in either case so as to subject the offering, issuance or sale of
the Shares to the registration provisions of the 1933 Act. Subject to the
accuracy of the representations and warranties of the Purchaser set forth in
Section 4, the offer, sale and issuance of the Shares as contemplated by this
agreement and the Borrowing of the Loans as contemplated by the Credit Agreement
are exempt from the registration requirements of the 1933 Act, and neither the
Company nor any agent acting on its behalf will take any action that could cause
the loss of such exemption.
3.26 Change of Control. The execution, delivery, and performance
-----------------
by the Company of this Agreement and the Related Agreements and the consummation
of the transactions contemplated hereby and thereby (including, under certain
circumstances, the acquisition by the Purchaser of over fifty percent (50%) of
the capital stock of the Company and, under certain circumstances, ultimate
control of the Company) will not give rise to any rights in favor of any person
(other than as provided in Section 6(b) of the FIJ Shareholders Agreement) or
result in any loss of any right by the Company or have any material adverse
effect on the Company's business or prospects, provided, that with respect to
any such loss of right or material adverse effect as a result of governmental
regulations of telecommunications, this representation is made only as to such
regulations as are in effect in the United States, Japan, Korea, or the United
Kingdom on the date of this Agreement.
4.0 Representations, Warranties, and Covenants of the Purchaser.
-----------------------------------------------------------
The Purchaser hereby represents, warrants, and covenants to the Company as
follows, and the Purchaser acknowledges that the Purchaser has full knowledge
that the Company intends to rely on such representations, warranties, and
covenants:
4.1 The Purchaser is an "accredited investor" within the meaning of
Regulation D under the Securities Act.
4.2 The Purchaser understands that the Purchaser must bear the
economic risk of this investment for an indefinite period of time; that the
Shares have not been registered under the 1933 Act, or under any applicable
state securities or 'blue sky" laws, and, therefore, cannot be resold unless
they are subsequently registered under the 1933 Act or under such applicable
state laws or unless an exemption from such registration is available; that the
Purchaser is purchasing Shares for investment for the account of the Purchaser
and not with any present view toward resale or other distribution thereof; that
the Purchaser agrees not to resell or otherwise dispose of all or any part of
the Shares purchased by the Purchaser, except as permitted by law,
16
<PAGE>
including, without limitation, any and all applicable provisions of this
Agreement and any regulations under the 1933 Act; and that, except as may be
required by the Amended and Restated Registration Rights Agreement, the Company
does not intend to register the Shares under the 1933 Act or to supply the
information which may be necessary to enable the Purchaser to sell any Shares.
4.3 The Purchaser has no contract, arrangement or understanding with
any broker, finder or similar agent with respect to the transactions
contemplated by this Agreement.
4.4 The Purchaser understands and acknowledges that the certificates
evidencing the Shares shall be endorsed with legends substantially as follows,
and the Purchaser hereby agrees to comply with the provision of such legends:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY
BE SOLD, ASSIGNED, MORTGAGED, PLEDGED, OR OTHERWISE TRANSFERRED ONLY IN
ACCORDANCE WITH THE PROVISIONS OF REGULATION S PROMULGATED UNDER THE ACT, UNLESS
THE SHARES ARE REGISTERED UNDER THE ACT AND REGISTERED OR QUALIFIED UNDER ANY
APPLICABLE STATE SECURITIES LAWS, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION
OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, TO THE
EFFECT THAT SUCH SALE, ASSIGNMENT, OR TRANSFER IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
CERTIFICATE OF DESIGNATION AND TO THE RESTRICTIONS UPON TRANSFER SET FORTH
THEREIN. THE COMPANY WILL FURNISH A COPY OF SUCH CERTIFICATE OF DESIGNATION
TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CAUSE."
It is further agreed and understood that the Company shall not recognize
any purported transfer of Shares made in violation of the provisions of this
subsection, and that in the event of such a transfer the record owner shall for
all purposes be treated as and remain the owner of such Shares.
5. Conditions to Obligations of Purchaser. The Purchaser's
--------------------------------------
obligation to purchase the Shares at the Closing is subject to the fulfillment,
at or prior to the Closing, of all of the following conditions, any of which may
be waived by such Purchaser.
5.1 Representations and Warranties True. The representations and
-----------------------------------
warranties made by the Company in Section 3 hereof will be true and correct on
the Closing Date with the same force and effect as if they had been made on and
as of that date.
17
<PAGE>
5.2 Performance of Obligations. All covenants, agreements and
--------------------------
conditions contained in this Agreement to be performed or complied with by the
Company on or prior to the Closing Date shall have been performed or complied
with.
5.3 Amendment to the Certificate of Incorporation. The Amendment
---------------------------------------------
shall have been filed with the Secretary of State of the State of Delaware.
5.4 Other Transactions at the Closing.
---------------------------------
(a) The Company shall have executed and delivered the Credit
Agreement, and the Credit shall be in full force and effect.
(b) The Company shall have executed and delivered the
Equipment Loan Agreement, and the Equipment Loan Agreement shall be in full
force and effect.
(c) The Company shall have executed and delivered the
Intercompany Operating Agreement, and the Intercompany Operating Agreement shall
be in full force and effect.
(d) The Company shall have executed and delivered the Amended
and Restated Registration Rights Agreement, the Registration Rights Agreement of
the Company dated as of December 31, 1992 shall have been duly amended and
restated thereby, and the Amended and Restated Registration
Rights Agreement shall be in full force and effect.
(e) The Company shall have executed and delivered the
Stockholders Agreement, and the "Stockholders Agreement" shall be in full force
and effect.
5.5 Proceedings and Documents. All corporate and other proceedings
-------------------------
in connection with the transactions contemplated at the Closing hereby and all
documents and instruments incident to such transactions shall have been
reasonably approved by the Purchaser, and the Purchaser shall have received all
such counterpart originals or certified or other copies of such documents as
they may reasonably request.
5.6 Reservation of Conversion Shares. The Conversion Shares have
--------------------------------
been duly authorized and reserved for issuance upon the conversion of the
Shares, the Series H Shares, and the Loans.
5.7 Qualifications, Legal Investment. All authorizations,
--------------------------------
approvals, or permits, if any, of any governmental authority or regulatory body
of the United States or of any state that are required in connection with the
lawful sale and issuance of the Shares pursuant to this Agreement and the
consummation of the transactions contemplated by the Related Agreements shall
have been duly obtained and shall be effective on and as of the Closing. No stop
order or other order enjoining the sale of the Shares, the proposed issuance of
the Conversion Shares, or the consummation of the transactions contemplated by
the Related Agreements shall have been issued and no proceedings for such
purpose shall be pending or, to the knowledge of the Company, threatened by the
Securities and Exchange Commission, or any
18
<PAGE>
commissioner of corporations or similar officer of any state having jurisdiction
over this transaction. At the time of the Closing, the sale and issuance of the
Shares, the proposed issuance of the Conversion Shares, and the consummation of
the transactions contemplated by the Related Agreements shall be legally
permitted by all laws and regulations to which the Company is subject.
5.8 Opinion of the Company's Counsel. The Purchaser shall have
--------------------------------
received from counsel to the Company an opinion letter or letters substantially
in the form attached hereto as Exhibit M, addressed to them, dated the Closing
Date. In rendering the opinion called for under this Section 5.8, counsel may
rely as to factual matters on certificates of public officials, officers of the
Company, and officers of the Purchaser.
5.9 Election of ST's Directors. Effective as of the Closing, the
--------------------------
authorized number of Directors of the Company shall be five (5) or seven (7) (as
determined in accordance with the Stockholders Agreement) and the designees of
ST or an affiliate of ST (as determined in accordance with the Stockholders
Agreement) shall be elected as Directors of the Company.
6. Conditions to Obligations of the Company. The Company's
----------------------------------------
obligation to issue and sell the Shares to the Purchaser at the Closing is
subject to the fulfillment to the Company's satisfaction, on or prior to the
Closing, of the following conditions, any of which may be waived by the Company:
6.1 Representations and Warranties True. The representations and
-----------------------------------
warranties made by the Purchaser in Section 4 hereof shall be true and correct
on the Closing Date with the same force and effect as if they had been made on
and as of that date.
6.2 Performance of Obligations. The Purchaser shall have performed
--------------------------
and complied with all agreements and conditions herein required to be performed
or complied with by it on or before the Closing.
6.3 Qualifications, Legal Investment. All authorizations,
--------------------------------
approvals, or permits, if any, of any governmental authority or regulatory body
of the United States or of any state that are required in connection with the
lawful sale and issuance of the Shares pursuant to this Agreement and the
consummation of the transactions contemplated by the Related Agreements shall
have been duly obtained and shall be effective on and as of the Closing. No stop
order or other order enjoining the sale of the Shares, the proposed issuance of
the Conversion Shares, or the consummation of the transactions contemplated by
the Related Agreements shall have been issued and no proceedings for such
purpose shall be pending or, to the knowledge of the Company, threatened by the
Securities and Exchange Commission, or any commissioner of corporations or
similar officer of any state having jurisdiction over this transaction. At the
time of the Closing, the sale and issuance of the Shares, the proposed issuance
of the Conversion Shares, and the consummation of the transactions contemplated
by the Related Agreements shall be legally permitted by all laws and regulations
to which the Company is subject. It is agreed and understood that the Company
will use its best efforts to cause the foregoing conditions to be satisfied on
and as of the Closing.
19
<PAGE>
6.4 Amendment to the Certificate of Incorporation. The Amendment
---------------------------------------------
shall have been filed with the Secretary of State of the State of Delaware. It
is agreed and understood that the Company will use its best efforts to cause the
foregoing condition to be satisfied on and as of the Closing.
20
<PAGE>
6.5 Other Transactions at the Closing.
---------------------------------
(a) ST or an affiliate shall have executed and delivered the
Credit Agreement to the Company, and the Credit Agreement shall be in full force
and effect.
(b) ST or an affiliate shall have executed and delivered the
Equipment Loan Agreement to the Company, and the Equipment Loan Agreement shall
be in full force and effect.
(c) ST shall have executed and delivered the Intercompany
Operating Agreement to the Company, and the Intercompany Operating Agreement
shall be in full force and effect.
(d) The Purchaser shall have executed and delivered the
Amended and Restated Registration Rights Agreement, the Registration Rights
Agreement of the Company dated as of December 31, 1992 shall have been duly
amended and restated thereby, and the Amended and Restated Registration Rights
Agreement shall be in full force and effect.
(e) The Purchaser shall have executed and delivered the
Stockholders Agreement, and the Stockholders Agreement shall be in full force
and effect.
7. Affirmative Covenants. The Company hereby covenants and agrees
---------------------
as follows:
7.1 Repayment of Certain Debt. The Company shall, within thirty
-------------------------
(30) days of the Closing, use up to $5 million to repay in full all outstanding
indebtedness of the Company for borrowed money stated on Exhibit E; provided,
--------- --------
that if and to the extent any such indebtedness may not be prepaid by the
Company without prior notice, the Company shall instead (a) within such thirty
(30) day period provide the holder thereof with due notice of prepayment setting
forth the Company's intent to pay such indebtedness in full after the expiration
of the minimum permitted notice period, and (b) to the extent such indebtedness
remains outstanding (and has not been converted into equity of the Company or
otherwise retired) at the expiration of such notice period, the Company shall
repay such indebtedness in full on the date of such expiration. To the extent
the Company uses less than $5 million to repay outstanding indebtedness pursuant
to this Section 7.1 (e.g. because certain holders of convertible debt convert
prior to repayment), the Company will use the remaining funds to offer to
repurchase and redeem from financial investors (but not from employees or
ex-employees of the Company) outstanding equity securities (or warrants) of the
Company in the manner provided for in Section 7.6 (c).
7.2 Information Rights.
------------------
(a) The Company shall furnish to the Purchaser, for so long as
it and its Affiliates (as defined below) owns Shares, Series H Shares, and/or
Conversion Shares equivalent in the aggregate to at least 100,000 shares of
Common Stock, and to each transferee of a Purchaser who with its Affiliates then
owns Shares, Series H Shares, and/or Conversion Shares equivalent in the
aggregate to at least 100,000 shares of Common Stock:
21
<PAGE>
(i) within thirty (30) days after the end of each
fiscal year of the Company a consolidated balance sheet of the Company and its
subsidiaries, if any, as of the end of such fiscal year and the related
consolidated statements of income, stockholders' equity and cash flows for the
fiscal year then ended, prepared in accordance with generally accepted
accounting principles, setting forth in each case in comparative form the
figures for or as of the end of the previous fiscal year, and certified by a
firm of independent public accountants of recognized national standing selected
by the Board of Directors of the Company;
(ii) within thirty (30) days after the end of each
fiscal quarter in each fiscal year (other than the last fiscal quarter in each
fiscal year) a consolidated balance sheet of the Company and its subsidiaries,
if any, and the related consolidated statements of income, stockholders' equity
and cash flows, unaudited but prepared in accordance with generally accepted
accounting principles and certified by the chief financial or accounting officer
of the Company, such consolidated balance sheet to be as of the end of such
fiscal quarter and such consolidated statements of income, stockholders' equity
and cash flows to be for such fiscal quarter and for the period from the
beginning of the fiscal year to the end of such fiscal quarter, in each case
with comparative statements for (or as of the end of) the corresponding period
in the prior fiscal year;
(iii) within thirty (30) days after the end of each
month a consolidated balance sheet of the Company and its subsidiaries, if any,
and the related consolidated statements of income, stockholders' equity and cash
flows, unaudited but prepared in accordance with generally accepted accounting
principles and certified by the chief financial or accounting officer of the
Company, such consolidated balance sheet to be as of the end of such month and
such consolidated statements of income, stockholders' equity and cash flows to
be for such month and for the period from the beginning of the fiscal year to
the end of such month, in each case with comparative statements for (or as of
the end of) the corresponding period in the prior fiscal year;
(iv) together with the financial statements
furnished pursuant to clauses (i), (ii) and (iii), a comparison and analysis of
such financial statements against the corresponding figures from the Company's
Annual Budget (as defined below), showing the percentage differences and where
such percentage difference exceeds ten percent (10%) a brief explanation of the
reasons therefor; and
(v) with reasonable promptness, such other
information and data with respect to the Company and its subsidiaries as any
such person may from time to time reasonably request.
(b) The Company will permit any Purchaser or transferee
referred to in subsection (a) (or its representative) to visit and inspect (at
such Purchaser's expense) any of the properties of the Company, including its
books of account and other records (and to make copies thereof and take extracts
therefrom), and to discuss its affairs, finances and accounts with the Company's
officers, its independent public accountants, and its outside counsel, all at
such reasonable times during regular business hours and upon reasonable advance
notice and as often as any such person may reasonably request.
22
<PAGE>
(c) "Affiliate" of any person or entity shall mean any other
---------
person or entity controlled by, controlling, or under common control with such
person or entity.
7.3 Right of First Refusal with Respect to Certain Network
------------------------------------------------------
Operations and Future Financings.
- --------------------------------
(a) Australia and the Philippines. The Company hereby agrees
-----------------------------
to offer ST, subject to the terms and conditions of this Section 7.3, a right of
first refusal to acquire, on terms to be negotiated and agreed in good faith, a
forty-nine percent (49%) interest (or such lesser interest as the Company and ST
may agree) in any joint venture subsidiary established by the Company in either
(or both) of Australia or the Philippines for the purpose of providing facsimile
network transmission services from those countries under an agreement
corresponding generally to the arrangements set forth in the FIJ Intercompany
Operating Agreement. It is agreed and understood that any such joint venture
subsidiary shall be established pursuant to arrangements corresponding generally
(and except with respect to the amount to be invested by ST for its share, which
shall be determined payment to good faith negotiations as the amount of capital
required by the subsidiary to achieve positive cash flow) to the arrangements
already implemented with respect to FIJ by the Company and its current joint
venture partners in FIJ. In the event the Company (in its sole discretion)
determines to establish any such new joint venture subsidiary, the Company will
provide ST with written notice containing a detailed description of any such
proposal (including the country or countries involved, a general business plan
therefor, the amount and nature of the contemplated investment and/or other
accommodations and services sought from the Company's joint venture partner, and
the period over which such investment, accommodations, or other services will be
required); if ST desires to participate in the joint venture on substantially
the terms indicated, it shall give the Company written notice of its desire
within forty-five (45) days of its receipt of such notice. If ST fails timely to
indicate its desire to participate, or if after good-faith negotiations the
Company and ST are unable to close a joint venture transaction within ninety
(90) days of the expiration of the forty-five (45) day notice period, the
Company will be free to enter into a joint venture subsidiary transaction with
other parties for a period of up to nine (9) months from the notice date or
response expiration date, as applicable, on terms generally similar in all
material relevant respects to and (taken as a whole) not less advantageous to
the Company than those set forth in its proposal to ST.
(b) Other New Joint Ventures. The Company hereby agrees to
offer ST, subject to the terms and conditions of this Section 7.3, a right of
first refusal to acquire an interest in any joint venture subsidiary hereafter
established by the Company. Notwithstanding the foregoing, it is agreed and
understood that this right shall not apply (i) to the extent Section 7.3(a)
applies, (ii) to any venture of the Company either established or in the process
of being negotiated as of the date of this Agreement in China solely for the
purpose of providing facsimile network transmission services, or (iii) where and
to the extent the joint venture requires (as determined by the Company in its
good faith judgment; provided, that ST shall be given prompt written notice of
any such determination) a local partner for the Company because of regulatory
restrictions or other practical business considerations. In the event the
Company (in its sole discretion) determines to establish any new joint venture
subsidiary to which this subsection applies, the Company will provide ST with
written notice containing a detailed
23
<PAGE>
description of any such proposal (including the country or countries involved, a
general business plan therefor, the amount and nature of the contemplated
investment and/or other accommodations and services sought from the Company's
joint venture partner, and the period over which such investment,
accommodations, or other services will be required); if ST desires to
participate in the joint venture on substantially the terms indicated, it shall
give the Company written notice of its desire within forty-five (45) days of its
receipt of such notice. If ST fails timely to indicate its desire to
participate, or if after good-faith negotiations the Company and ST are unable
to close a joint venture transaction within ninety (90) days of the expiration
of the forty-five (45) day notice period, the Company will be free to enter into
a joint venture subsidiary transaction with other parties for a period of up to
nine (9) months from the notice date or response expiration date, as applicable,
on terms generally similar in all material relevant respects to and (taken as a
whole) not less advantageous to the Company than those set forth in its proposal
to ST.
(c) ST Not Restrictedc) ST Not Restricted. Nothing contained
in this Section 7.3 shall limit ST's right to pursue any business or investment
with respect to providing facsimile transmission services to or from Australia,
the Philippines, or any other country, whether or not in competition with the
Company.
7.4 Financial Controls.
------------------
(a) Annual Budget. Subject to Section 8.2(b), the Company will
-------------
use its best efforts to prepare and adopt, by vote of two-thirds (2/3) of the
Board of Directors, at least thirty (30) days prior to the commencement of each
calendar year (or by May 30, 1995 with respect to 1995), an annual budget for
the Company for that calendar year (the "Annual Budget"). The Annual Budget
-------------
shall be prepared with utmost diligence and good faith and shall set forth with
appropriate particularity (and broken down into appropriate detail) the
Company's projections for monthly revenues, expenses, and expenditures during
that calendar year and any proposed financings. The Company shall use its best
efforts to prepare and adopt promptly, by vote of two-thirds (2/3) of the Board
of Directors, such amendments to the Annual Budget as may become necessary or
appropriate in the event (i) the information and projections in the Annual
Budget (as theretofore amended) shall become materially and significantly
inaccurate with the result that (ii) the Annual Budget (as theretofore amended)
ceases to be an effective or appropriate business planning tool for the Company,
as the Board of Directors may determine in good faith. The parties acknowledge
that it is their intention to include (without limitation) the following 13
designated countries in the Company's business plan, provided that in the case
of each such country the Company's Board of Directors determines by two-thirds
(2/3) vote that, in their judgment, under sound and prudent business principles,
the proposed business plan for such country is commercially justified and
desirable: the United States, Canada, the United Kingdom, France, Germany,
Italy, Japan, Korea, China, Hong Kong, Taiwan, Australia, and the Philippines.
(b) Restrictions on Capital Expenditures and Investments.
----------------------------------------------------
Subject to Section 8.2(b), the Company shall not make any expenditure for fixed
or capital assets or for other investments (or incur any commitments for such
expenditures) exceeding Fifty Thousand Dollars (U.S.$50,000) in any particular
transaction (provided that no transaction shall be
24
<PAGE>
artificially broken down to avoid this limitation), unless such expenditure is
specifically provided for in the Annual Budget or is approved by two-thirds
(2/3) of the Board of Directors.
(c) Miscellaneous. The Company will: (i) maintain an
-------------
appropriate amount of reserved Common Stock for conversion of the Shares and
(ii) maintain sound bookkeeping and accounting practices.
7.5 Board of Directors Meetings. Subject to Section 8.2(b), the
---------------------------
Company shall use its best efforts to ensure that meetings of its Board of
Directors are held at least four times each year and at least once each quarter.
The Company shall distribute to all Directors that ST and its Affiliates shall
have the right to designate under the Stockholders Agreement an agenda for each
meeting and sufficient information with respect to all matters scheduled to be
considered at such meeting for such Directors to fully consider such matters, in
each case reasonably in advance of such meeting and, in the case of regularly
scheduled meetings, at least five (5) business days prior to such meeting.
7.6 Other Restrictions.
------------------
(a) Subject to Section 8.2(b), without the approval of not
less than two-thirds (2/3) of the Board of Directors, the Company will not: (i)
make, or permit any subsidiary to make, any material change in the nature of its
business as of the date hereof, (ii) consolidate or merge the Company with or
into, or sell all or substantially all its assets to, another entity or entities
in one or a series of related transactions, (iii) loan funds to or provide a
guarantee of or security interest in connection with any borrowing by any other
person or entity (other than a subsidiary wholly owned by the Company), other
than, in the ordinary course of business, effecting bank and similar deposits or
acquiring certificates of deposit of financial institutions and/or obligations
or the U.S. government, its subdivisions, or their respective agencies and
instrumentalities, (iv) redeem, purchase, or otherwise acquire for value any
shares of its capital stock (other than pursuant to conversion rights and as
provided by Sections 7.1 and 7.6(c)), (v) declare or pay a dividend or other
distribution (including any cash dividend or distribution of securities or
assets other than a dividend payable in shares of the Common Stock), (vi)
authorize or issue any capital stock senior to or on a parity with the Shares as
to dividend rights or liquidation preference, (vii) liquidate, voluntarily wind
up, or dissolve the Company, (viii) issue, or grant any registration rights in
respect of, any equity or debt securities (including financing leases with
respect to machinery or equipment), or rights, options, or warrants to purchase
any equity or debt securities of the Company, (ix) incur any indebtedness for
borrowed money, or (x) invest in the equity of any other corporation or other
entity.
(b) The limitation in clause (a)(viii) above on issuances of
securities or rights, options, or warrants to purchase such securities shall not
apply to any issuance of capital stock or rights, options, or warrants to
subscribe for, purchase, or otherwise acquire capital stock of the Company upon
(i) the conversion by the holder thereof of convertible preferred stock or
convertible debt of the Company, (ii) the exercise of any outstanding option,
warrant, or other right to acquire securities of the Company, or (iii) the grant
of an incentive or non-qualified stock option pursuant to the Company's 1993
Stock Option Plan, as amended, or pursuant to any other stock option (including
without limitation warrants) plan ratified and
25
<PAGE>
adopted after the date hereof by majority vote, on a fully converted basis, of
the Company's stockholders and by vote of a majority of the Company's Board of
Directors who are not officers of the Company or designated by officers of the
Company.
(c) It is further agreed and understood that it is
contemplated that promptly after the closing the Company will offer to
repurchase and redeem from financial investors (but not from any employee or
ex-employee of the Company) up to $10 million of outstanding equity securities
(or warrants) of the Company, such repurchase and redemption to be funded by
means of Redemption Loans (as that term is defined in the Credit Agreement), at
a price of $3.50 per share of Common Stock or Preferred Stock (or the net of
such amount and the exercise price in the case of a repurchase of outstanding
warrants).
7.7 Corporate Existence. The Company shall maintain and (except to
-------------------
the extent determined by the Board of Directors) cause each of its subsidiaries
to maintain its respective corporate existence, rights, and franchises in full
force and effect.
7.8 Properties, Business, Insurance. The Company shall maintain and
-------------------------------
cause each of its subsidiaries to maintain as to its respective properties and
business, with financially sound and reputable insurers, insurance against such
casualties and contingencies and of such types and in such amounts as is deemed
by the Company to be sufficient based on the size of the Company (or each such
subsidiary) and on the business in which the Company (or each such subsidiary)
is engaged.
7.9 Key-Man Insurance. The Company shall maintain in force, as
-----------------
long as any of the Shares are outstanding (including any Conversion Shares), a
key-man term insurance policy covering the risk of death or permanent disability
of Ranalli in an amount not less than One Million Dollars (U.S.$1,000,000),
naming the Company as the owner and beneficiary thereof.
7.10 Restrictive Agreements Prohibited. Neither the Company nor any
---------------------------------
of its subsidiaries shall become a party to any agreement which by its terms
restricts the Company's performance of this Agreement, any Related Agreement, or
the Charter.
7.11 Transactions with Affiliates. Subject to Section 8.2(b),
----------------------------
except for transactions contemplated by this Agreement or the Related Agreements
or as otherwise approved by disinterested members of the Board of Directors,
neither the Company nor any of its subsidiaries shall enter into any transaction
with any director, officer, employee, or holder of more than 5% of the
outstanding capital stock of any class or series of capital stock of the Company
or any of its subsidiaries, member of the family of any such person, or any
corporation, partnership, trust, or other entity in which any such person or
family member thereof is a director, officer, trustee, partner or holder of more
than 5% of the outstanding capital stock thereof, except for transactions on
customary terms related to such person's employment (other than any employment
agreement with Ranalli).
7.12 Confidentiality Agreements. The Company shall use its best
--------------------------
efforts to obtain, and shall cause its subsidiaries to use their best efforts to
obtain, Confidentiality
26
<PAGE>
Agreements containing provisions substantially in the form of Exhibit H from all
future managers and executive officers of the Company or any of its
subsidiaries, upon their employment by the Company or any of its subsidiaries.
7.13 Compliance with Laws. The Company shall comply, and cause each
--------------------
subsidiary to comply, with all applicable laws, rules, regulations, and orders,
noncompliance with which could materially adversely affect its business or
condition, financial or otherwise.
7.14 By-Laws. The Company shall use its best efforts to cause its
-------
By-laws to provide at all times that the number of directors fixed in accordance
therewith shall in no event conflict with any of the terms or provisions of the
Stockholders Agreement. The Company shall use its best efforts to cause its
By-laws and/or its Charter to maintain at all times provisions indemnifying all
directors against liability and absolving all directors from liability to the
Company and its stockholders to the maximum extent permitted under the laws of
the State of Delaware; provided, that it is agreed and understood that under
--------
such laws as in effect as of the date hereof, the provisions of the Company's
By-laws and its Charter as in effect as of the date hereof shall be deemed to
satisfy the requirements of this sentence.
7.15 U.S. Real Property Interest Statement. The Company shall not
-------------------------------------
become a "United States real property holding company" as defined in Section
897(c) of the Code and Section 1.897-2(b) of the Regulations promulgated by the
U.S. Internal Revenue Service or any successor Code provision or regulation
7.16 International Investment Survey Act of 1976. The Company shall
-------------------------------------------
file all reports required of it under 22 U.S.C. (s)3104, or any similar statute,
relating to a foreign person's direct or indirect investment in the Company.
Each Purchaser who is a "foreign person" or a U.S. affiliate of a foreign person
agrees to cooperate with the Company in making the necessary filings.
7.17 Purchaser's Option To Appoint Certain Employees: As long as
-----------------------------------------------
the Purchaser and its Affiliates own at least 6,000,000 Shares, the Purchaser
shall have the right to appoint one member of the Company's executive staff
(Vice President level position) and up to three members of the Manager level
staff.
8. Miscellaneous
-------------
8.1 Governing Law. This Agreement shall be governed by and
-------------
construed under the internal substantive laws of the State of Delaware. THE
PARTIES HEREBY IRREVOCABLY WAIVE ANY RIGHT TO A JURY TRIAL WITH RESPECT TO ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. The parties
agree that neither party shall be liable hereunder for any special, indirect,
consequential, or incidental damages, including, without limitation, damages for
lost profits or business.
8.2 Termination and Survival.
------------------------
27
<PAGE>
(a) The representations, warranties, covenants, and agreements
made herein shall survive any investigation made by the Purchaser and the
closing of the transactions contemplated hereby; provided, that the covenants
set forth in Section 7, other than Section 7.3, 7.4, 7.6, 7.10, 7.14 and 7.16
shall terminate and be of no further force or effect upon the consummation of
the first underwritten public offering of Common Stock of the Company pursuant
to a registration statement filed by the Company under the Securities Act of
1933, as amended, having an aggregate offering price to the public of at least
U.S.$20,000,000 and a price paid by the purchasers per share of at least
U.S.$10.50 (appropriately adjusted to reflect the occurrence of any stock
dividend, stock split, reverse stock split, or the like).
(b) Sections 7.4(a), 7.4(b), 7.5,7.6, and 7.11 shall terminate
upon the termination of the Stockholders Agreement in accordance with its terms.
8.3 Binding Agreement; Successors and Assigns. Except as otherwise
-----------------------------------------
expressly provided herein, the provisions hereof shall inure to the benefit of,
and be binding upon, the parties hereto and their successors, permitted assigns,
heirs, executors, and administrators, including without limitation permitted
transferees of any Shares, Series H Shares, Loans, or Conversion Shares.
8.4 Entire Agreement. This Agreement, the Exhibits hereto, the
----------------
Related Agreements, and the other documents delivered pursuant hereto constitute
the full and entire understanding and agreement among the parties with regard to
the subjects hereof and no party shall be liable or bound to any other party in
any manner by any representations, warranties, covenants, or agreements except
as specifically set forth herein or therein. Nothing in this Agreement, express
or implied, is intended to confer upon any party, other than the parties hereto
and their respective successors and assigns, any rights, remedies, obligations,
or liabilities under or by reason of this Agreement, except as expressly
provided herein.
8.5 Separability. Any invalidity, illegality, or limitation of the
------------
enforceability with respect to any Purchaser of any one or more of the
provisions of this Agreement, or any part thereof, whether arising by reason of
the law of any such Purchaser's domicile or otherwise, shall in no way affect or
impair the validity, legality, or enforceability of this Agreement with respect
to other Purchasers. In case any provision of this Agreement shall be invalid,
illegal, or unenforceable, it shall to the extent practicable, be modified so as
to make it valid, legal and enforceable and to retain as nearly as practicable
the intent of the parties, and the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
8.6 Amendment and Waiver. 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 (other than Section 1.2) either retroactively
or prospectively, and either for a specified period of time or indefinitely),
with the written consent of the Company and the holders of not less than
fifty-one percent (51%) of the Shares (treated as if converted at the conversion
rate then in effect and including, for such purposes, on a proportional basis,
any shares of Conversion Shares into which any Shares have been converted that
have not been sold to the public); provided, however, that no such amendment or
waiver shall reduce the aforesaid
28
<PAGE>
percentage of Shares and Conversion Shares the holders of which are required to
consent to any waiver or supplemental agreement without the consent of the
record or beneficial holders of all of the Shares and such Conversion Shares.
Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any securities purchased under this Agreement at the
time outstanding (including securities into which such securities have been
converted), each future holder of all such securities, and the Company. Upon the
effectuation of each such amendment or waiver, the Company shall promptly give
written notice thereof to the record holders of the Shares and such Conversion
Shares who have not previously consented thereto in writing.
8.7 Notices, Etc. All notices and other communications required or
------------
permitted hereunder shall be in writing and shall be deemed effectively given
upon personal delivery, and in the case where delivery is made by any
established and reputable next day delivery service, delivery shall be deemed to
occur on the day after delivery to such delivery service for domestic delivery,
two business days after delivery to such delivery service for international
deliveries from Asia to the United States and three business days after delivery
to such delivery service for international deliveries from the United States to
Asia, or on the fifth (5th) day following mailing by registered or certified
mail, return receipt requested, postage prepaid, addressed: (a) if to a
Purchaser, at such Purchaser's address as set forth in the preamble hereto, or
at such other address as such Purchaser shall have furnished to the Company in
writing, with a copy to Robert G. DeLaMater, Esq., Sullivan & Cromwell, 125
Broad Street, New York, NY 10004, or (b) if to the Company, at its address as
set forth at the beginning of this Agreement, with a copy to Donald-Bruce
Abrams, Esq., Bingham, Dana & Gould, 150 Federal Street, Boston, MA 02110, or at
such other address as the Company shall have furnished to the Purchaser in
writing.
8.8 Information Confidential. The Purchaser acknowledges that the
------------------------
information received by it pursuant hereto is confidential and for such
Purchaser's use only, and it will refrain from using such information or
reproducing, disclosing or disseminating such information to any other person
(other than its employees, affiliates, agents, or partners having a need to know
the contents of such information and its attorneys), except in connection with
the exercise of rights under this Agreement or other agreements referred to
herein or contemplated hereby, unless the Company has made such information
available to the public generally or it is required by a governmental, judicial,
or regulatory body to disclose such information; provided, that each such
--------
Purchaser agrees to use all reasonable efforts (excluding instituting any legal
proceedings) to minimize the need for any such disclosure.
8.9 Titles and Subtitles. The titles of the Sections and
--------------------
Subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
8.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
29
<PAGE>
The foregoing Series G Convertible Preferred Stock Purchase Agreement is
hereby executed as an instrument under seal as of the date first above written.
FAX INTERNATIONAL, INC.
By: /s/ Douglas J. Ranalli
-------------------------------
Douglas J. Ranalli, President
Purchaser:
/s/ various purchasers
-------------------------------
30
<PAGE>
Schedule of Exhibits
--------------------
Exhibit A [Omitted]
Exhibit B-1 Certificate of Designation
Exhibit B-2 Charter, By-laws, and Other Certificates of Designation
Exhibit B-3 Holders of Common Stock and Preferred Stock
Exhibit B-4 Holders of Warrants and Options
Exhibit B-5 Holders Of Convertible Debt
Exhibit C-1 Schedule of Exceptions
Exhibit C-2 Patents, Trademarks, Etc.
Exhibit D Financial Statements
Exhibit E Promissory Notes
Exhibit F Amended and Restated Registration Rights Agreement
Exhibit G Employment Agreement with Douglas Ranalli
Exhibit H Employee Confidentiality Provisions
Exhibit I Credit Agreement
Exhibit J Equipment Loan Agreement
Exhibit K Intercompany Operating Agreement
Exhibit L Stockholders Agreement
Exhibit M Opinion of Bingham, Dana & Gould
Exhibit N Telecommunications Licenses
31
<PAGE>
EXHIBIT 10.10
SECOND AMENDMENT TO
SERIES G CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
The parties to this Second Amendment to Series G Convertible Preferred
Stock Purchase Agreement, dated as of February 21, 1997, are UNIFI
Communications, Inc. (formerly "Fax International, Inc."), a Delaware
corporation (the "Company"), and SingTel Global Services Pte. Ltd. (the
-------
"Purchaser"), a wholly-owned subsidiary of Singapore Telecommunications Limited,
- ----------
a Singapore corporation with its registered office at 31 Exeter Road, Comcentre,
Singapore 239732.
The parties are parties to a Series G Convertible Preferred Stock Purchase
Agreement dated as of April 10, 1995, as amended by that certain letter
agreement between the parties dated as of February 5, 1997 (the "Agreement") and
---------
desire to further amend the Agreement in the manner set forth herein. The
parties accordingly agree as follows.
1. Subsection 7.2(a) is hereby amended by replacing the words "Series H
Shares," each place those words appear, with "Series I Shares".
2. For purposes of the Agreement, as amended by this Second Amendment
thereto, the term "Series I Shares" shall mean the shares of the Company's
Series I Convertible Preferred Stock, $1.00 par value per share.
3. Subsection 7.6(a) is hereby amended by deleting the period at the end
of that subsection and appending the following to the end of that subsection:
"or (xi) amend the Company's Certificate of Incorporation, as amended,
or Bylaws."
4. Subsection 7.6(b) is hereby amended by appending the following to the
end of that subsection:
", or (iv) an underwritten public offering of Common Stock by the
Company approved by majority vote of the Company's Board of Directors."
5. Subsection 8.2 (a) is hereby amended by replacing the proviso
appearing therein in its entirety with the following:
"provided, that the covenants set forth in Section 7, other than
--------
Section 7.3, 7.4, 7.6, 7.10, 7.14 and 7.16 shall terminate and be of
no further force or effect upon the consummation of the first
underwritten primary public offering of Common Stock by the Company
pursuant to a registra tion statement filed by the Company under the
Securities Act of 1933, as amended, having an aggregate offering price
to the public of at least US$20,000,000 and in which the shares
offered and sold thereby are listed on the New York Stock Exchange,
the American Stock Exchange or on the NASDAQ system."
6. Except as amended hereby, the Agreement shall remain in full force and
effect.
<PAGE>
In WITNESS WHEREOF, this Second Amendment to Series G Convertible Preferred
Stock Purchase Agreement has been executed by the parties hereto as of the date
first set forth above.
UNIFI Communications, Inc. Singtel Global Services Pte. Ltd.
By: /s/ Paula Litscher By: /s/ Lim Eng
------------------------ -----------------------------------
Name: Paula Litscher Name:
Title: Vice President of Finance Title:
<PAGE>
EXHIBIT 10.11
FAX INTERNATIONAL, INC.
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
Dated as of April 10, 1995
<PAGE>
TABLE OF CONTENTS
1. Definitions..................................... 2
2. Demand Registration............................. 4
(a) Demand for Registration................. 4
(b) Underwriting............................ 5
3. Company Registration............................ 7
(a) General................................. 7
(b) Underwriting............................ 7
4. Registration on Form S-3........................ 8
5. Expenses of Registration........................ 9
6. Obligations of the Company...................... 10
7. Indemnification................................. 11
8. Information by Persons Registering Securities... 14
9. Transfer of Registration Rights................. 14
10. Delay of Registration........................... 15
11. Limitations on Subsequent Registration Rights... 15
12. Rule 144 Reporting.............................. 15
13. "Market Stand-Off" Agreement.................... 15
14. Termination of Registration Rights.............. 16
15. Miscellaneous................................... 16
i
<PAGE>
FAX INTERNATIONAL, INC.
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
--------------------------------------------------
The parties to this agreement, dated as of April 10, 1995, are (i) Fax
International, Inc., a Delaware corporation (the "Company"), with its principal
office at 67 South Bedford Street, Burlington, Massachusetts 01803, (ii) the
undersigned Current Investors, each of whom is a party to the Registration
Rights Agreement dated as of December 31, 1992 by and among the Company and
certain investors named therein (the "Rights Agreement), and (ii) each of the
undersigned New Investors. The Current Investors and the New Investors are
collectively referred to below as the "Investors".
1. The Company and each of the undersigned Current Investors are
parties to the Rights Agreement.
2. The Rights Agreement grants the Current Investors named therein
certain registration rights with respect to the Company's Common Stock, par
value $0.01 per share (the "Common Stock"), issuable upon conversion of shares
------------
of the Company's outstanding convertible preferred stock.
3. The Company and the New Investors have agreed to enter into (as
applicable in each case) (a) a Series G Convertible Preferred Stock Purchase
Agreement dated as of the date hereof pursuant to which such New Investors will
purchase and the Company will issue to the New Investors its Series G
Convertible Preferred Stock, par value $1.00 per share (the "Series G
--------
Convertible Preferred Stock"), and/or (b) a Revolving Credit Agreement dated as
- --------------------------- -
of the date hereof pursuant to which such New Investors may elect to convert
certain debt obligations of the Company into Series H Convertible Preferred
Stock, par value $1.00 per share (the "Series H Convertible Preferred Stock"),
------------------------------------
of the Company.
4. The Company wishes to provide the New Investors with rights
corresponding generally to the rights of the Current Investors now parties to
the Rights Agreement, as set forth more specifically below.
5. In order to induce the New Investors to enter into the Series G
Convertible Preferred Stock Purchase Agreement and the Revolving Credit
Agreement referred to above, the undersigned Current Investors desire to permit
the New Investors to participate generally in the rights granted to the Current
Investors under the Rights Agreement. In addition, and more specifically, the
Company, the Current Investors, and the New Investors all desire (a) to amend
-
the Rights Agreement to reflect certain changes in the Current Investors' (and
the New Investors) registration rights set forth therein, and (b) to restate
-
the Rights Agreement, as amended hereby.
6. The Rights Agreement may be amended with the written consent of the
Company and of the Current Investors collectively holding not less than
sixty-six and two-thirds percent (66-2/3%) of the Registrable Securities (as
defined in Section I of the Rights Agreement); the undersigned Current
Investors collectively hold not less than sixty-six and two-thirds percent
(66-2/3%) of such Registrable Securities.
1
<PAGE>
The parties accordingly agree as follows:
1. Definitions. As used herein:
-----------
(a) "Affiliate" means, as to any person or entity, any other person or
---------
entity directly or indirectly controlling or controlled by or under direct or
indirect common control with such person (but, as to any Holder, excluding the
Company).
(b) "Group 1 Initiating Holders" means any Holder or Holders of not
--------------------------
less than fifty-five percent (55%) of the Group 1 Registrable Securities
(measured on a fully exercised and converted basis) not registered at the time
of any request for registration pursuant to Section 2 of this agreement;
provided, that if any one Holder and its Affiliates collectively own at least
- --------
fifty-five percent (55%) of the Group 2 Registrable Securities (measured on a
fully exercised and converted basis), then solely for purposes of determining
whether such fifty-five percent (55%) of the Group 1 Registrable Securities
threshold has been reached, such Holder (and its Affiliates) and such Holder's
(and its Affiliates') Group 1 Registrable Securities shall not be taken into
account.
(c) "Group 1 Registrable Securities" means (A) shares of Common Stock
------------------------------ -
issued or issuable upon conversion of the Preferred Stock (other than Series G
Convertible Preferred Stock and Series H Convertible Preferred Stock); (B)
-
shares of Common Stock purchased (or issued or issuable upon the conversion or
exercise of any warrant, right, or other security that is purchased) pursuant
to any right of first refusal or preemptive right held by the Investors in
respect of their Preferred Stock (other than Series G Convertible Preferred
Stock and Series H Convertible Preferred Stock); and (C) shares of Common Stock
-
issued as (or issuable upon the conversion or exercise of any warrant, right,
or other security that is issued as) a dividend or other distribution with
respect to, or in exchange for or in replacement of, any of the securities
referred to in clauses (A) or (B) above; provided, however, that shares of
- - --------
Common Stock shall cease to be Group 1 Registrable Securities if the rights of
the Holder thereof to cause the Company to register such securities under this
agreement shall terminate as provided in Section 14.
(d) "Group 2 Initiating Holders" means any Holder or Holders of not
--------------------------
less than fifty-five percent (55%) of the Group 2 Registrable Securities
(measured on a fully exercised and converted basis) not registered at the time
of any request for registration pursuant to Section 2 of this agreement.
(e) "Group 2 Registrable Securities" means (A) shares of Common Stock
------------------------------ -
issued or issuable upon conversion of the Series G Convertible Preferred Stock
or Series H Convertible Preferred Stock; (B) shares of Common Stock purchased
-
(or issued or issuable upon the conversion or exercise of any warrant, right,
or other security that is purchased) pursuant to any right of first refusal or
preemptive right held by the Investors in respect of their Series G Convertible
Preferred Stock or Series H Convertible Preferred Stock; (C) shares of Common
-
Stock issued as (or issuable upon the conversion or exercise of any warrant,
right, or other security that is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, any of the securities
referred to in clauses (A) or (B) above; and (D) shares
- - -
2
<PAGE>
of Common Stock purchased by or issued or issuable to Singapore
Telecommunications Limited ("ST") or any of its Affiliates, including without
--
limitation any shares of Common Stock issued or issuable upon conversion of
loans made under the Credit Agreement between the Company and an affiliate of ST
dated as of April 10, 1995; provided, however, that shares of Common Stock shall
--------
cease to be Group 2 Registrable Securities if the rights of the Holder thereof
to cause the Company to register such securities under this agreement shall
terminate as provided in Section 14.
(f) Subject to the provisions of Section 9, "Holders" any persons and
-------
entities holding outstanding shares of Registrable Securities that have not
been sold to the public.
(g) "Initiating Holders" means the Group 1 Initiating Holders or the
------------------
Group 2 Initiating Holders, as applicable in any case.
(h) "1933 Act" means the Securities Act of 1933, as amended and in
--------
effect from time to time, and any successor statute.
(i) "Preferred Stock" means the Company's Series A Convertible Preferred
---------------
Stock, Series B Convertible Preferred Stock, Series C Convertible Preferred
Stock, Series D Convertible Preferred Stock, Series E Convertible Preferred
Stock, Series F Convertible Preferred Stock, Series G Convertible Preferred
Stock, and Series H Convertible Preferred Stock.
(j) "Register," "registered," and "registration" refer to a registration
-------- ---------- ------------
effected by filing with the SEC a registration statement (the "Registration
------------
Statement") in compliance with the 1933 Act and the declaration or ordering by
- ---------
the SEC of the effectiveness of such Registration Statement.
(k) "Registrable Securities" means the Group 1 Registrable Securities and
----------------------
the Group 2 Registrable Securities. In the event of any recapitalization by
the Company, whether by stock split, reverse stock split, stock dividend or the
like, the number of shares and the price per share of Registrable Securities
(including as well for this purpose both Group 1 Registrable Securities and
Group 2 Registrable Securities) used throughout this agreement for various
purposes (including without limitation for purposes of Section 2(a)(ii)(E))
shall be proportionately increased or decreased as appropriate.
(l) "SEC" means the Securities and Exchange Commission or any successor
---
agency.
(m) Notwithstanding anything otherwise provided herein, it is hereby
agreed and understood that the Company may, at any time and from time to time
after the date hereof, authorize and issue shares of convertible preferred
stock in one or more classes or series, including classes or series not in
existence on the date hereof ("Additional Shares of Preferred Stock"). In any
------------------------------------
such event, if such authorization and issuance is duly approved by a vote of
not less than seventy-five percent (75%) of the Company's Board of Directors,
as then constituted:
3
<PAGE>
(i) such series and/or class of Additional Shares of Preferred Stock
shall be, and shall be included within the definition of, "Preferred Stock" for
---------------
all purposes of this agreement (and accordingly, for example, shares of Common
Stock issued or issuable upon conversion of the Additional Shares of Preferred
Stock shall be, and shall be included within the definition of, "Group 1
-------
Registrable Securities" hereunder except to the extent such shares would be
- ----------------------
included within the definition of "Group 2 Registrable Securities" as set forth
------------------------------
above); and
(ii) each purchaser of Additional Shares of Preferred Stock shall be
treated as, and included within the definition of, an "Investor" for all
--------
purposes of this agreement, shall have all of the rights and privileges granted
by this agreement to an Investor, and shall be subject to all of the
liabilities and obligations of an Investor hereunder, upon his, her, or its
execution of a counterpart of this agreement and his, her, or its written
agreement to be bound by all of the terms and conditions hereof.
2. Demand Registration.
-------------------
(a) Demand for Registration. If the Company shall receive from either
-----------------------
the Group 1 Initiating Holders or the Group 2 Initiating Holders a written
demand that the Company effect a registration under the 1933 Act of all or part
of the Registrable Securities (other than a registration on Form S-3 or any
related form of registration statement, such a request being provided for under
Section 4 hereof), the Company will:
(i) promptly (but in any event within ten (10) days) give written notice
of the proposed registration to all other Holders; and
(ii) use its best efforts (limited to the extent provided herein) to
effect such registration as soon as practicable as may be so demanded and as
will permit or facilitate the sale and distribution of all or such portion of
such Initiating Holders' Registrable Securities as are specified in such
demand, together with all or such portion of the Registrable Securities of any
Holder or Holders joining in such demand as are specified in a written demand
received by the Company within thirty (30) days after such written notice is
given; provided, however, that the only securities that the Company shall be
required to register pursuant hereto shall be shares of Common Stock; and
provided, further, that the Company shall not be obligated to take any action
to effect any such registration pursuant to this Section 2:
(A) Prior to December 31, 1997;
(B) When the Company is in the process of registering Registrable
Securities pursuant to any demand made under this Section 2;
(C) In the case of a demand by the Group 1 Initiating Holders, after the
Company has effected a registration pursuant to this Section 2 pursuant to a
prior demand by the Group 1 Initiating Holders where such registration has been
declared or ordered effective and the securities offered thereby have been
sold; provided, however, that if the prior demand was for the registration of
--------
the initial public offering of the Company's Common Stock and the Holders of
Group 1 Registrable Securities were unable to include in such registration all
the
4
<PAGE>
Registrable Securities requested in their written demands as a result, in
whole or in part, of pro rata allocation with Holders of Group 2 Registrable
Securities as provided in Section 2(b), such prior demand shall not count as a
prior demand for purposes of this clause (C);
(D) In the case of a demand by the Group 2 Initiating Holders, after the
Company has effected a registration pursuant to this Section 2 pursuant to two
(2) prior demands by the Group 2 Initiating Holders where such registration has
been declared or ordered effective and the securities offered thereby have been
sold; provided, however, that if the prior demand was for the registration of
--------
the initial public offering of the Company's Common stock and the Holders of
Group 2 Registrable Securities were unable to include in such registration all
the Registrable Securities requested in their written demands as a result, in
whole or in part, of pro rata allocation with Holders of Group 1 Registrable
Securities as provided in Section 2(b), such prior demand shall not count as a
prior demand for purposes of this clause (C);
(E) If the Registrable Securities requested to be registered have an
expected public offering price of less than Seven Dollars and Fifty Cents
($7.50) per share of Common Stock;
(F) Within one hundred eighty (180) days immediately following the
effective date of any registration statement pertaining to an underwritten
public offering of Common Stock of the Company for its own account (other than
a registration on Form S-4 relating solely to a transaction or transactions
described in SEC Rule 145, or a registration relating solely to employee
benefit plans), or within one hundred eighty (180) days immediately following
the effective date of any registration statement pertaining to an underwritten
public offering of Common Stock of the Company pursuant to this Section 2;
(G) If the Company shall furnish to such Holders a certificate signed by
the President of the Company, stating that in the good faith judgment of the
Board of Directors of the Company it would be seriously detrimental to the
Company and its shareholders for such Registration Statement to be filed at the
date filing would be required, in which case the Company shall have an
additional period of not more than ninety (90) days within which to file such
Registration Statement; provided, however, that the Company shall not use this
right more than once as to each of the Holders of Group 1 Registrable
Securities and the Holders of Group 2 Registrable Securities; or
(H) If more than fifty percent (50%) of the Registrable Securities
requested to be registered by Initiating Holders' group (i.e., Group 1 or Group
----
2) are withdrawn from such registration.
Subject to the foregoing clauses (A) through (H), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the Initiating Holders.
(b) Underwriting. If the Initiating Holders intend to distribute the
------------
Registrable Securities covered by their demand by means of an underwriting,
they shall so advise the Company as part of their demand made pursuant to this
Section 2; and the Company shall
5
<PAGE>
include such information in the written notice referred to in Section 2(a)(i)
above. In such event, the right of any Holder to registration pursuant to this
Section 2 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein. A Holder may
elect to include in such underwriting or any part of the Registrable Securities
the Holder holds.
The Company shall, together with all Holders proposing to distribute
their securities through such underwriting, enter into an underwriting agreement
in customary form (i) with the underwriter or underwriters, if any, that have
served as underwriter or underwriters for the most recent sale of registered
securities of the Company for its own account, or (ii), if there has been no
such prior sale or the terms of such underwriting agreement are not acceptable
to a majority of the Initiating Holders (in their sole discretion), then with
the underwriter or underwriters selected by a majority in interest of the
Initiating Holders and reasonably satisfactory to the Company. Notwithstanding
any other provision of this Section 2, if the underwriter advises the Company in
writing (and if the underwriter or the Company advise in writing the Holders of
Registrable Securities that have demanded registration) that marketing factors
(including, without limitation, an adverse effect on the per share offering
price) require a limitation of the number of shares to be underwritten, then the
number of shares of Registrable Securities that may be included in the
registration and underwriting shall be allocated:
(I) in the case of the initial public offering of the Company's Common
Stock, pro rata among the Holders thereof, in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by such
Holders at the time of filing the registration statement, and
(II) in all other cases, first (X) pro rata among the Initiating Holders
-
and other Holders of the applicable group of Registrable Securities (i.e., the
----
Group 1 Registrable Securities or the Group 2 Registrable Securities, as
applicable), and second (Y) (to the extent such limitation has not theretofore
been reached) pro rata among the other such Holders thereof, in proportion, as
to each such class and as nearly as practicable, to the respective amounts of
Registrable Securities held by such Holders at the time of filing the
registration statement.
No Registrable Securities excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in such registration.
With respect to any "selling Holder" that is selling securities hereunder and
which is a partnership or corporation, in the event of any underwriter cutback,
the partners, retired partners, stockholders, and Affiliates of such "selling
Holder," or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall
be deemed to be a single "selling Holder," and any pro rata allocation with
respect to such "selling Holder" shall be based upon the aggregate amount of
shares carrying registration rights owned by all entities and individuals
included in such "selling Holder," as defined in this sentence.
If any Holder disapproves of the terms of the underwriting, such Holder may
elect to withdraw therefrom by written notice to the Company, the underwriter,
and the Initiating Holders. The Registrable Securities so withdrawn shall also
be withdrawn from registration.
6
<PAGE>
If by the withdrawal of such Registrable Securities a greater number of
Registrable Securities held by other Holders may be included in such
registration (up to the maximum of any limitation imposed by the underwriters),
then the Company shall offer to all Holders who have included Registrable
Securities in the registration the right to include additional Registrable
Securities in the same proportion used in determining the underwriter limitation
in this Section 2(b).
If the underwriter has not limited the number of Registrable Securities to
be underwritten, the Company may include securities for its own account (or for
the account of other shareholders) in such registration if the underwriter so
agrees and if the number of Registrable Securities that would otherwise have
been included in such registration and underwriting will not thereby be limited.
3. Company Registration.
--------------------
(a) General. If at any time or from time to time the Company shall
-------
determine to register any of its securities, either for its own account or the
account of security holders, other than a registration relating solely to
employee benefit plans, a registration on Form S-4 relating solely to a
transaction or transactions described in SEC Rule 145, or a registration
pursuant to Section 2 hereof, the Company will:
(i) promptly give to each Holder written notice thereof (which shall
include a list of the jurisdictions in which the Company intends to attempt to
qualify such securities under the applicable blue sky or other state securities
laws); and
(ii) include in such registration (and any related qualification under
blue sky laws or other compliance), and in any underwriting involved therein,
all the Registrable Securities specified in a written request or requests, made
within thirty (30) days after receipt of such written notice from the Company,
by any Holder subject to the limitations set forth in Section 3(b) below.
(b) Underwriting. If the registration of which the Company gives notice
------------
is for a registered public offering involving an underwriting, the Company
shall so advise the Holders as a part of the written notice given pursuant to
Section 3(a)(i). In such event the right of any Holder to registration
pursuant to this Section 3 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
securities in the underwriting to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall,
together with the Company and the other parties distributing their securities
through such underwriting, enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such underwriting by the
Company. Notwithstanding any other provision of this Section 3, if the
underwriter advises the Company in writing (and if the underwriter or the
Company advises in writing the Holders of Registrable Securities that have
demanded registration) that marketing factors (including, without limitation,
an adverse effect on the per share offering price) require a limitation of the
number of shares to be underwritten, and (i) if such registration is the first
-
registered offering of the Company's securities to the public, the underwriter
may limit the number of Registrable Securities that may be included in the
registration and underwriting pursuant hereto to the full extent required by
7
<PAGE>
such marketing factors, and (ii) if such registration is other than the first
registered offering of the sale of the Company's securities to the public, the
underwriter may limit the number of Registrable Securities to be included in
the registration and underwriting to not less than fifty percent (50%) of the
securities included therein (based on aggregate market values); provided,
however, that in the case of each of clauses (i) and (ii) such number of
Registrable Securities shall not be reduced if any shares are to be included in
such underwriting for the account of any person other than the Company or
Holders of Registrable Securities. The Company shall so advise all holders of
the Company's securities requesting registration of any such limitation, and
the number of shares of securities, including Registrable Securities, held by
such holders that are entitled to be included in the registration and
underwriting shall be allocated in the following manner: shares, other than
Registrable Securities, requested to be included in such registration by
shareholders shall be excluded, and if a limitation on the number of shares is
still required, the number of Registrable Securities that may be included in
the registration shall be allocated among the Holders in proportion, as nearly
as practicable, to the respective amounts of Registrable Securities held by
each such Holder at the time of filing the registration statement; subject to
the immediately preceding sentence, securities to be registered by the Company
for its own account shall be excluded only if a limit on the number of shares
is still required after exclusion of Registrable Securities held by each such
Holder as provided above. With respect to any "selling Holder" that is selling
securities hereunder and which is a partnership or corporation, in the event of
any underwriter cutback, the partners, retired partners, stockholders, and
Affiliates of such "selling Holder," or the estates and family members of any
such partners and retired partners and any trusts for the benefit of any of the
foregoing persons shall be deemed to be a single "selling Holder," and any pro
rata allocation with respect to such "selling Holder" shall be based upon the
aggregate amount of shares carrying registration rights owned by all entities
and individuals included in such "selling Holder," as defined in this sentence.
No securities excluded from the underwriting by reason of the underwriter's
marketing limitation shall be included in such registration.
If any Holder disapproves ofwithdraw therefrom by written notice to the
Company and the underwriter. Any securities so withdrawn shall also be withdrawn
from registration. If by the withdrawal of such securities a greater number of
Registrable Securities held by other Holders may be included in such
registration (up to the maximum of any limitation imposed by the underwriters),
then the Company shall offer to all Holders who have included Registrable
Securities in the registration the right to include additional Registrable
Securities in the same proportion used in determining the underwriter limitation
in this Section 3(b).
4. Registration on Form S-3. The Company shall use its best efforts
------------------------
to qualify for registration on Form S-3 or any comparable or successor form or
forms; and to that end the Company shall register (whether or not required by
law to do so) the Common Stock under the Securities Exchange Act of 1934, as
amended (the "1934 Act"), in accordance with the provisions of the 1934 Act
--------
following the effective date of the first registration of any securities of the
Company on Form S-1, S-2 or Form SB-2 or any comparable or successor form or
forms. After the Company has qualified for the use of Form S-3, in addition to
the rights contained in the foregoing provisions of this agreement, the Holders
of Registrable Securities shall have the right to request unlimited
registrations on Form S-3 as provided in this Section 4 (such requests
8
<PAGE>
shall be in writing and shall state the number of shares of Registrable
Securities to be disposed of and the intended methods of disposition of such
shares by such Holder or Holders). If the Company receives a written request
from the Holders of Securities worth an aggregate price of at least two hundred
fifty thousand dollars ($250,000) to the public requesting that the Company file
a registration statement with respect to all or part of the Registrable
Securities, the Company shall:
(a) promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any Holder or Holders
joining in such request as are specified in a written request given within ten
(10) business days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
- -------- -------
registration, qualification, or compliance, pursuant to this Section 4: (i) if
the Holders, together with holders of any other securities of the Company
entitled to inclusion in such registration, if any, propose to sell Registrable
Securities and such other securities, if any, at an aggregate price to the
public of less than two hundred fifty thousand dollars ($250,000), (ii) in any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration,
qualification or compliance and in which it has not already filed such a
consent, or (iii) if the Company shall furnish to the Holders a certificate of
the type described in Section 2(a)(ii)(B) hereof, in which case the Company's
obligation to effect such registration shall be deferred as provided in that
Section provided, that no registration pursuant to this Section 4 shall be
--------
deferred more than once pursuant to such certificates). Subject to the
foregoing, the Company shall file a registration statement covering the
Registrable Securities and the securities so requested to be registered as soon
as practicable after receipt of the request or requests of the Holder.
Registrations effected pursuant to this Section 4 shall not be counted as
requests for registrations or Company registrations pursuant to Sections 2 or
3, respectively.
5. Expenses of Registration.
All expenses incurred in connection with (a) any registration effected
pursuant to Section 2, (b) all registrations effected pursuant to Section 3 and
(c) one registration per year effected pursuant to Section 4 (including,
without limitation, (i) all SEC and any NASD registration and filing fees and
expenses, (ii) all fees and expenses in connection with the qualification of
the Registrable Securities for offering and sale under the State securities and
blue sky laws (including reasonable fees and disbursements of counsel for the
underwriters, if any, incurred in connection therewith), (iii) all expenses
relating to the preparation, printing, distribution and reproduction of the
registration statement, each prospectus included therein or prepared for
distribution pursuant hereto, each amendment or supplement to the foregoing,
the certificates representing the Registrable Securities and all other
documents relating thereto, (iv) fees and expenses of any escrow agent or
custodian, (v) fees, disbursements and expenses of counsel and independent
certified public accountants of the Company (including the expenses of any
opinions
9
<PAGE>
or "comfort" letters required), (vi) the cost of any special or other
non-ordinary course of business audit required, (vii) any fees and expenses of
the Company's registrar and transfer agent, (viii) any stock exchange listing
fees and (ix) if required by the underwriters, reasonable and customary
reimbursement and disbursements of the underwriters, including the reasonable
fees and disbursements of counsel to the underwriters) shall.be borne by the
Company; provided, however, that the Company shall not be required to pay stock
--------
transfer taxes or underwriters' discounts, or commissions relating to
Registrable Securities. Notwithstanding anything to the contrary above, the
Company shall not be required to pay for any expenses of any registration
proceeding under Section 2 if the registration request is subsequently
withdrawn at the request of the Holders of a majority of the Registrable
Securities to have been registered of the Initiating Holders' group (i.e.,
----
Group 1 or Group 2; provided, that in the case of Group 1, such majority shall
be calculated in a manner consistent with the exclusion specified in Section
l(b)), unless such Holders agree (irrevocably, and on behalf the Holders of the
Group 1 Registrable Securities or the Group 2 Registrable Securities, as
applicable) to forfeit their right to a demand registration pursuant to Section
2 (in which event such right shall be forfeited by all Holders of the
applicable group). In the absence of such an agreement to forfeit, the Holders
of Registrable Securities to have been registered who withdrew their
registration request shall bear all such expenses pro rata on the basis of such
withdrawing Holders' Registrable Securities to have been registered.
Notwithstanding the foregoing, however, if at the time of the withdrawal, the
Holders have learned of a material adverse change in the condition, business,
or prospects of the Company from that known to the Holders at the time of their
request, of which the Company had knowledge at the time of the request, then
the Holders shall not be required to pay any of said expenses and shall retain
their rights under Section 2.
6. Obligations of the Company. Whenever required by this agreement to
--------------------------
effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with respect
to such Registrable Securities and use its diligent best efforts to cause such
registration statement to become effective, and keep such registration statement
effective for up to one hundred eighty (180) days or until the Holder or Holders
have completed the distribution relating thereto, whichever first occurs.
(b) Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
1933 Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
1933 Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities covered
by such registration statement under such other securities or Blue Sky laws of
such jurisdictions within
10
<PAGE>
the United States as shall be reasonably requested by the Holders, provided that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions.
(e) Use its best efforts to list the Common Stock covered by such
registration statement with any securities exchange (including the NASDAQ
National Market System) on which the Common Stock of the Company is then
listed; or, if the Common Stock is not then listed, use its best efforts to
list the Common Stock on such securities exchange (including the NASDAQ
National Market System) as the Company and Holders of at least sixty-six and
two-thirds percent (66-2/3%) of each of the Group 1 Registrable Securities and
the Group 2 Registrable Securities shall agree (provided, that if the Company
--------
and such Holders cannot reach such agreement, the decision of the Company shall
be controlling).
(f) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering (including, without
limitation, arranging for the delivery of customary legal opinions and
accountants' comfort letters). Each Holder participating in such underwriting
shall also enter into and perform its obligations under such an agreement.
(g) Make available for inspection by each seller of Registrable
Securities, any underwriter participating in any distribution pursuant to such
registration statement, and any attorney, accountant, or other agent retained
by such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, and employees to supply all information reasonably
requested by any such seller, underwriter, attorney, accountant, or agent in
connection with such registration statement in order to permit such parties to
conduct a reasonable investigation of the Company within the meaning of Section
11 of the 1933 Act.
(h) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the 1933 Act of the happening of any event 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 a
material fact required to be stated therein or necessary to make the statements
there in not misleading in the light of the circumstances then existing, and
promptly prepare and furnish to each such Holder selling Registrable Securities
a reasonable number of copies of a prospectus supplemented or amended so that,
as so supplemented or amended, such prospectus shall not include any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing.
7. Indemnification.
---------------
(a) The Company will, and does hereby agree to, indemnify and hold
harmless each Holder participating in any registration, qualification or
compliance effected pursuant hereto, each of such Holder's officers, directors,
partners and agents, and each person controlling such Holder, and each
underwriter, if any, and each person who controls any
11
<PAGE>
underwriter, against all claims, losses, damages, and liabilities (or actions in
respect thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, to which they may become subject under the
1933 Act, the 1934 Act, or other federal or state law arising out of or based on
(i) any untrue statement (or alleged untrue statement) of a material fact
contained in any preliminary, final, or summary prospectus, offering circular,
or other similar document (including any related Registration Statement,
notification, or the like), or any amendment or supplement thereto, incident to
any such registration, qualification, or compliance, or based on any omission
(or alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or (ii) any violation or
alleged violation by the Company of any federal, state or common law rule or
regulation applicable to the Company in connection with any such registration,
qualification, or compliance, and will reimburse, as incurred, each such Holder,
each such underwriter, and each such director, officer, partner, agent and
controlling person, for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability, or action; provided that the Company will not be liable to
any Holder or underwriter in any such case to the extent that any such claim,
loss, damage, liability or expense, arises out of or is based on any untrue
statement (or alleged untrue statement) or omission (or alleged omission) made
in reliance upon and in conformity with written information furnished to the
Company by such Holder or underwriter and stated to be specifically for use
therein.
(b) Each Holder will, and does hereby agree to, if Registrable Securities
held by or issuable to such Holder are included in such registration,
qualification, or compliance, indemnify the Company, each of its directors, and
each officer who signs a Registration Statement in connection therewith, and
each person controlling the Company, each underwriter, if any, and each person
who controls any underwriter, of the Company's securities covered by such a
Registration Statement, and each other Holder, each of such other Holder's
officers, partners, directors and agents and each person controlling such other
Holder, against all claims, losses, damages, and liabilities (or actions in
respect thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
such Registration Statement, preliminary, final, or summary prospectus,
offering circular, or other document, or any amendment or supplement thereto,
or any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading, and will reimburse,
as incurred, the Company, each such underwriter, each such other Holder (as the
case may be), and each such director, officer, partner, and controlling person,
for any legal or any other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, loss, damage, liability,
or action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) was
made in such Registration Statement, prospectus, offering circular, or other
document, in reliance upon and in conformity with written information furnished
to the Company by such Holder and stated to be specifically for use therein;
provided, however, that the liability of each Holder hereunder shall be limited
to the net proceeds, if any, received by such Holder from the sale of
securities under such Registration Statement. In no event will any Holder be
required to enter into any agreement or undertaking in connection with any
registration hereunder
12
<PAGE>
providing for any indemnification or contribution obligations on the part of
such Holder greater than such Holder's obligations under this Section 7.
(c) Each party entitled to indemnification under this Section 7 (the
"Indemnified Party") shall give notice to the party required to provide such
-----------------
indemnification (the "Indemnifying Party") of any claim as to which
------------------
indemnification may be sought. Promptly after such Indemnified Party has
actual knowledge thereof, and defense of any such claim or any litigation
resulting therefrom; provided that the Indemnified Party may participate in such
defense at the Indemnified Party's expense or at the Indemnifying Party's
expense if (and only if) representation of such Indemnified Party by counsel for
the Indemnifying Party would be inappropriate due to actual or potential
differing interests between such Indemnified Party and the Indemnifying Party;
and provided further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
hereunder, except to the extent that such failure to give notice shall
materially adversely affect the Indemnifying Party in the defense of any such
claim or any such litigation. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the written consent of the applicable
Indemnified Party, consent to entry of any judgment or enter into any settlement
unless such judgment or settlement (i) includes as an unconditional term thereof
the giving by the claimant or plaintiff therein, to such Indemnified Party, of a
release from all liability in respect to such claim or litigation, and (ii) does
not include a statement as to or an admission of fault, culpability, or failure
to act by or on behalf of such Indemnified Party.
(d) The Company and each Holder hereby agree that, if for any reason the
indemnification contemplated by Section 7(a) and (b) is unavailable to or
insufficient to hold harmless an Indemnified Party in respect of any claims,
losses, damages or liabilities (or actions in respect thereof) referred to
therein, then each Indemnifying Party shall contribute to the amount paid or
payable by such Indemnified Party as a result of such claims, losses, damages
or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by them from the
offering. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law, then each Indemnifying Party shall
contribute to such amount paid or payable by such Indemnified Party in such
proportion as is appropriate to reflect not only such relative benefits but
also their relative fault in connection with the statements or omissions that
resulted in such claims, losses, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company and the selling Holders on the one hand and
the underwriters on the other shall be deemed to be in the same proportion as
the total net proceeds from the offering (before deducting expenses) received
by the Company and the selling Holders bear to the total underwriting discounts
and commissions received by the underwriters in each case as set forth in the
applicable prospectus. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact related
to information supplied by the Company, the selling Holders, or the
underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company
and the Holders agree that it would not be just and equitable if contribution
pursuant to this Section 7(d) were determined by pro rata allocation (even if
the Holders or any
13
<PAGE>
underwriters or all of them were treated as one entity for such purpose) or by
any other method of allocation which does not take account of the equitable
considerations referred to in this Section 7(d). The amount paid or payable by
an Indemnified Party as a result of the claims, losses, damages, or liabilities
(or actions in respect thereof) referred to above shall be deemed to include any
legal or other fees or expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7(d), no Holder shall be required
to contribute any amount in excess of the amount by which the dollar amount of
the proceeds received by such Holder from the sale of any Registrable Securities
(after deducting any fees, discounts, and commissions applicable thereto)
exceeds the amount of any damages which such Holder has otherwise been required
to pay be reason of such untrue or alleged untrue statement or omission or
alleged omission, and no underwriter shall be required to contribute any amount
in excess of the amount by which the total price at which the Registrable
Securities underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11 (f) of the 1933 Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' and any underwriter's obligations in this
Section 7(d) to contribute shall be several in proportion to the number or
amount of Registrable Securities registered or underwritten, as the case may be,
by them, and not joint.
(e) The indemnification of and contribution to underwriters provided for
in this Section 7 shall be on such additional or alternative terms and
conditions as are States, and reasonably required by such underwriters, in which
event the foregoing indemnification and contribution provisions as applicable to
such public offering shall at the underwriters' request be modified to conform
to such terms and conditions.
8. Information by Persons Registering Securities. Each Holder including
---------------------------------------------
securities of the Company in any registration pursuant hereto shall furnish to
the Company such information regarding such Holder, and the distribution
proposed by such Holder as the Company may reasonably request in writing and as
shall be required in connection with any registration, qualification, or
compliance referred to herein.
9. Transfer of Registration Rights. The rights contained in this
-------------------------------
agreement may be assigned or otherwise conveyed to a transferee or assignee of
Registrable Securities, who shall be considered a "Holder" for purposes of this
agreement, only if (a) such transfer is effected in accordance with applicable
federal and state securities laws and (b) such transferee or assignee (i) is a
wholly owned subsidiary or constituent partner (including limited partner) of
the transferring Holder, or (ii) acquires at least one thousand (1,000) shares
of the Registrable Securities held by the transferring Holder and, provided
further, that the Company is given written notice by such Holder at the time of
or within a reasonable time after said transfer, stating the name and address of
said transferee or assignee and identifying the securities with respect to which
such registration rights are being assigned.
14
<PAGE>
10. Delay of Registration. No Holder shall have any right to obtain or
---------------------
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this agreement.
11. Limitations on Subsequent Registration Rights. From and after the date
---------------------------------------------
of this agreement, the Company shall not, without the prior written consent of
Holders holding at least sixty-six and two-thirds percent (66-2/3%) of the
Registrable Securities, enter into any agreement with any holder or prospective
holder of any securities of the Company which would allow such holder or
prospective holder to (i) require the Company to effect a registration or (ii)
include any securities in any registration filed under Section 2 or 3 hereof,
unless, under the terms of such agreement, such holder or prospective holder
may include such securities in any such registration only to the extent that
the inclusion of such securities will not diminish the amount of Registrable
Securities which are included in such registration and includes the equivalent
of Section 13 as a term; provided, that in the case of any sale of registered
securities of the Company consistent with the provisions of Sections 2, 3, or 4
hereof, the restrictions of this Section 11 shall not apply to agreements with
the underwriter or underwriters for such sale or the holders of such registered
securities.
12. Rule 144 Reporting. With a view to making available to the Holders the
------------------
benefits of certain rules and regulations of the SEC which may permit the sale
of the Registrable Securities to the public without registration, the Company
agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the 1933 Act, at all times after the effective date of the
first registration filed by the Company for an offering of its securities to
the general public;
(b) File with the SEC, in a timely manner, all reports and other documents
required of the Company under the 1933 Act and 1934 Act;
(c) So long as a Holder owns any Registrable Securities, furnish to such
Holder forthwith upon reasonable request: a written statement by the Company as
to its compliance with the reporting requirements of SEC Rule 144, of the 1933
Act, and of the 1934 Act (at any time after it has become subject to such
reporting requirements); a copy of the most recent annual or quarterly report
of the Company; and such other reports and documents as a Holder may reasonably
request in availing itself of any rule or regulation of the SEC allowing it to
sell any such securities without registration.
13. "Market Stand-Off" Agreement. Each Holder hereby agrees that for a
---------------------------
period of ninety (90) days following the effective date of the first
registration statement of the Company covering Common Stock (or other
securities) to be sold on its behalf in an underwritten public offering, not to
sell or other-wise transfer or dispose of (other than to donees who agree to be
similarly bound) any Common Stock of the Company held by it at any time during
such period except Common Stock included in such registration; provided,
however, that all officers and directors of the Company who hold securities of
the Company or options to acquire securities
15
<PAGE>
of the Company and all other persons with registration rights (whether or not
pursuant to this agreement) enter into similar agreements.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
14. Termination of Registration Rights. The rights to cause the Company to
----------------------------------
register securities granted Holders under Sections 2, 3 and 4 and the rights
provided in Section 11 shall terminate as to any Holder who becomes eligible to
sell, pursuant to Rule 144 under the 1933 Act, all Registrable Securities held
by such Holder within a three-month period and current public information
concerning the Company (as defined in Rule 144) is available.
15. Miscellaneous.
-------------
(a) Except as otherwise expressly provided herein, including, without
limitation, as provided in Section 9, the provisions hereof shall inure to the
benefit of, and be binding upon, the parties and their respective the
successors, assigns, heirs, executors, and administrators.
(b) This agreement (including Schedule 1 hereto) constitutes the full and
----------
entire understanding and agreement among the parties with regard to the subject
matter hereof.
(c) Any invalidity, illegality, or limitation of the enforceability with
respect to any Holder of any one or more of the provisions of this agreement,
or any part thereof, whether arising by reason of the law of any such Holder's
domicile or otherwise, shall in no way affect or impair the validity, legality,
or enforceability of this agreement with respect to other Holders. In case any
provision of this agreement shall be invalid, illegaL or unenforceable, it
shall to the extent practicable, be modified so as to make it valid, legal and
enforceable and to retain as nearly as practicable the intent of the parties,
and the validity, legality, and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby.
(d) 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, either retroactively or prospectively, and either for a specified
period of time or indefinitely), only with the written consent of the Company
and holders of not less than sixty-six and two-thirds percent (66-2/3%) of the
Registrable Securities then outstanding which have not been sold to the public;
provided, that (i) no such amendment or waiver shall reduce the percentage of
Registrable Securities the holders of which are required to consent to any
waiver or amendment without the consent of the record or beneficial holders of
all of such Registrable Securities, and (ii) no such amendment or waiver shall
adversely affect Group 1 Registrable Securities or Group 2 Registrable
Securities (or their Holders) or disproportionately benefit Group 1 Registrable
Securities or Group 2 Registrable Securities (or their Holders) compared to the
other group without the written consent of Holders of not less than sixty-six
and two-thirds percent (66-2/3%) of the Registrable Securities of the group(s)
adversely affected or disproportionately less
16
<PAGE>
benefited. Any amendment or waiver effected in accordance with this subsection
shall be binding upon each holder of Registrable Securities, each future holder
of all such securities, and the Company. Upon the effectuation of each such
amendment or waiver, the Company shall promptly give written notice thereof to
the record holders of the Registrable Securities who have not previously
consented thereto in writing.
(e) No delay or omission to exercise any right, power, or remedy accruing
to any Holder or any subsequent holder of any Registrable Securities upon any
breach, default or noncompliance of the Company under this agreement, shall
impair any such right, power, or remedy, nor shall it be construed to be a
waiver of any such breach, default or noncompliance, or any acquiescence there
in, or of any similar breach, default or noncompliance thereafter occurring.
It is further agreed that any waiver, permit, consent, or approval of any kind
or character on the Holders' part of any breach, default or noncompliance under
this agreement or any waiver on the Holders' part of any provisions or
conditions of this agreement must be in writing and shall be effective only to
the extent specifically set forth in such writing, and that all remedies,
either under this agreement, by law, or otherwise afforded to the Holders,
shall be cumulative and not alternative.
(f) All notices and other communications required or permitted hereunder
shall be in writing and shall be deemed effectively given upon personal
delivery or (except in the case of demands for registration under Section 2) by
telecopier confirmed by one of the other methods of giving notice described in
this paragraph, and in the case where delivery is made by any established and
reputable next day delivery service, delivery shall be deemed to occur on the
day after delivery to such delivery service in the case of domestic delivery
and two business days after delivery to such delivery service in the case of
international deliveries, or on the fifth (5th) day following mailing for
domestic deliveries by registered or certified mail, return receipt requested,
postage prepaid, addressed: (a) if to a Holder, at such Holder's address as set
forth on Schedule 1 hereto, or at such other address as such Holder shall have
----------
furnished to the Company in writing, or (b) if to the Company, at its address
as set forth at the beginning of this agreement (facsimile number
617-564-6599), or at such other address as the Company shall have furnished to
the Holders in writing.
(g) This agreement shall substantive laws of the State of Delaware.
(h) The titles of the Sections of this agreement are for convenience of
reference only and are not to be considered in construing this agreement.
(i) This agreement may be executed in any number of counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one instrument.
17
<PAGE>
The foregoing agreement is hereby executed as an instrument under seal
as of the date first above written.
Company:
---------------------------------------
FAX INTERNATIONAL, INC.
By: /s/ Douglas J. Ranalli
---------------------------------
Douglas J. Ranalli, President
/s/ several stockholders
-------------------------------------
18
<PAGE>
EXHIBIT 10.12
FIRST AMENDMENT TO
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
The parties to this First Amendment to Amended and Restated Registration
Rights Agreement, dated as of February 21, 1997, are UNIFI Communications, Inc.
(formerly Fax International, Inc.), a Delaware corporation (the "Company"), and
-------
the undersigned stockholders of the Company, each of whom is a party to the
Amended and Restated Registration Rights Agreement dated as of April 10, 1995
(the "Agreement").
---------
The undersigned desire to amend the Agreement in the manner set forth
herein. The parties accordingly agree as follows.
1. The Agreement is amended by deleting all references therein to Series
H Convertible Preferred Stock and replacing them with references to
Series I Convertible Preferred Stock.
2. Section 3(b) on page 1 of the Agreement is hereby amended to read in
its entirety as follows:
"(b) a Revolving Credit Agreement dated as of the date hereof."
3. The following definition of the new term "Series I Convertible
Preferred Stock" is hereby inserted immediately after the definition
of "SEC" in Section 1 of the Agreement and Section 1(m) is renumbered
as Section 1(n): (m) "Series I Convertible Preferred Stock" means the
Series I Convertible Preferred Stock, $1.00 par value per share, of
the Company.
4. Section 1(e) of the Agreement is amended by deleting the word "and"
immediately preceding clause (D) thereof and by adding the following
as new clause (E) immediately after said clause (D) and before the
proviso:
"(E) shares of Common Stock issuable upon exercise of the Warrant
(as defined in that certain Restructuring Agreement dated October
31, 1996, as amended, among the Company and the stockholders of
the Company named therein)."
5. Section 2(a)(ii)(E) is hereby amended to read in its entirety as
follows:
"Prior to December 31, 1998 if the Registrable Securities
requested to be registered have an expected public offering price
of less than Seven Dollars and Fifty Cents ($7.50) per share of
Common Stock;"
6. Except as amended hereby, the Agreement shall remain in full force and
effect.
<PAGE>
IN WITNESS WHEREOF, this First Amendment to Amended and Restated
Registration Rights Agreement has been executed by the parties hereto as of the
date first set forth above.
UNIFI COMMUNICATIONS, INC.
By: /s/ Douglas J. Ranalli
--------------------------
Name: Douglas J. Ranalli
Title: President
/s/ Douglas J. Ranalli
--------------------------------------------
Douglas J. Ranalli
/s/ Shelley Ranalli
--------------------------------------------
Shelley Ranalli
ANTAEUS ENTERPRISES, INC.
By: /s/ John Beineke
--------------------------------------------
Title
420 ASSOCIATES
By: /s/ John Beineke
--------------------------------------------
Title
1950 ASSOCIATES
By: /s/ John Beineke
--------------------------------------------
Title
SINGTEL GLOBAL SERVICES
PTE. LTD.
By: /s/ Lim Eng
--------------------------------------------
Title
<PAGE>
EXHIBIT 10.13
CONSENT AND WAIVER OF HOLDERS OF REGISTRABLE SECURITIES
February 20, 1997
The undersigned holders of at least sixty-six and two-thirds percent
(66-2/3) of Registrable Securities under that certain Amended and Restated
Registration Rights Agreement (the "Amended and Restated Agreement") dated as of
April 10, 1995 among Fax International, Inc. (renamed UNIFI Communications, Inc.
and herein referred to as the "Company") and the stockholders of the Company
named therein, hereby:
(a) consent to the granting of registration rights, pursuant to a
registration rights agreement (the "Warrant Shares Registration Rights
Agreement"), in respect of the common stock, $0.01 par value per share, of the
Company (the "Common Stock") issuable upon exercise of those certain warrants
for the purchase of Common Stock (the "Warrants"), to be issued in connection
with the Company's offering and sale of units consisting of senior notes of the
Company due 2004 (the "Senior Notes") and Warrants, such registration rights and
Warrant Shares Registration Rights Agreement to be substantially similar to the
description set forth in Annex A hereto, with such changes, modifications,
-------
additions or deletions as any officer authorized by the Board of Directors shall
approve, such approval to be conclusively evidenced by such officer's execution
and delivery, in the name and on behalf of the Company, of the Warrant Shares
Registration Rights Agreement;
(b) consent to the granting of registration rights, pursuant to a
registration rights agreement (the "Notes Registration Rights Agreement"), in
respect of the Senior Notes, such registration rights and Notes Registration
Rights Agreement to be substantially similar to the description set forth in
Annex B hereto, with such changes, modifications, additions or deletions as any
- -------
officer authorized by the Board of Directors shall approve, such approval to be
conclusively evidenced by such officer's execution and delivery, in the name and
on behalf of the Company, of the Notes Registration Rights Agreement; and
(c) pursuant to Section 15(d) of the Amended and Restated Agreement,
irrevocably waive the "piggy back" registration rights of all holders of
Registrable Securities under Section 3 of the Amended and Restated Agreement to
register, or have registered by the Company, any securities of the Company held
by such holders in the filing of a registration statement under the Securities
Act of 1933 with respect to (i) an offer to exchange Senior Notes for the Series
B senior notes of the Company due 2004 pursuant to the Notes Registration Rights
Agreement and (ii) the common stock of the Company issuable upon the exercise of
the Warrants pursuant to the Warrant Shares Registration Rights Agreement.
<PAGE>
/s/ Douglas J. Ranalli ANTAEUS ENTERPRISES, INC.
------------------------------------
Douglas J. Ranalli
By: /s/ John Beineke
-----------------------------
Title: ________________________
420 ASSOCIATES 1950 ASSOCIATES
By: /s/ John Beineke By: /s/ John Beineke
--------------------------------- -----------------------------
Title: _____________________ Title:________________________
SINGTEL GLOBAL SERVICES PTE. LIMITED UNIFI COMMUNICATIONS, INC.
By: /s/ Lim Eng By: /s/ Douglas J. Ranalli
--------------------------------- -----------------------------
Title: ______________________ Title:________________________
<PAGE>
EXHIBIT 10.17
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND NEITHER THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT AND PURSUANT TO AN EFFECTIVE REGISTRATION OR QUALIFICATION
UNDER APPLICABLE STATE SECURITIES LAWS, OR PURSUANT TO AN EXEMPTION FROM SUCH
REGISTRATION AND/OR QUALIFICATION, AND, IF AN EXEMPTION SHALL BE APPLICABLE,
THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY THAT SUCH REGISTRATION AND/OR QUALIFICATION IS NOT REQUIRED.
Void after 5:00 pm. Eastern Standard Time on March 1, 2007.
WARRANT TO PURCHASE COMMON STOCK
OF
UNIFI COMMUNICATIONS, INC.
FOR VALUE RECEIVED, UNIFI COMMUNICATIONS, INC., (formerly "Fax
International, Inc.") a Delaware corporation, (the "Company") hereby grants to
-------
SingTel Global Services Pte Ltd., or its permitted assigns, the right to
purchase from the Company, at any time or from time to time commencing February
21, 1997, and prior to 5:00 P.M., Eastern Standard Time, on March 1, 2007, up to
a total of Two Million (2,000,000) (subject to adjustment as provided in Section
3 below) fully paid and nonassessable shares of the Commons Stock, par value
$.01 per share, of the Company for an aggregate purchase price of Three Million
Six Hundred Sixty Thousand Dollars ($3,660,000) (computed on the basis of $1.83
per share).
Hereinafter,
(i) said Common Stock, together with any other equity securities which
may be issued by the Company with respect thereto or in substitution
therefor, is referred to as the "Common Stock."
------------
(ii) the shares of the Common Stock purchasable hereunder are referred
to as the "Warrant Shares."
--------------
(iii) the aggregate purchase price payable hereunder for the Warrant
Shares is referred to as the "Aggregate Warrant Price."
-----------------------
(iv) the price payable hereunder for each of the Warrant Shares is
referred to as the "Per Share Warrant Price."
-----------------------
(v) this Warrant, and all warrants hereafter issued in exchange or
substitution for this Warrant are referred to as the "Warrant" and
-------
(vi) the holder of this Warrant is referred to as the "Holder."
------
1. EXERCISE OF WARRANT. This Warrant may be exercised, in whole at
-------------------
any time or in part from time to time, commencing February 21, 1997, and prior
to 5:00 P.M., Eastern Standard Time then current, on March 1, 2007, by the
Holder of this Warrant by the surrender of this Warrant (with the subscription
form at the end hereof duly executed) at the address set forth in
<PAGE>
Subsection 8(a) hereof, together with proper payment of the Aggregate Warrant
Price, or the proportionate part thereof if this Warrant is exercised in part.
The number of Warrant Shares for which this Warrant may be exercised (the
"Exercise Rate") shall be subject to adjustment from time to time as set forth
- --------------
in Section 3 below. Payment for Warrant Shares shall be made by certified or
official bank check payable to the order of the Company, or by wire transfer.
If this Warrant is exercised in part, the Holder is entitled to receive a new
Warrant covering the number of Warrant Shares in respect of which this Warrant
has not been exercised and setting forth the proportionate part of the Aggregate
Warrant Price applicable to such Warrant Shares. Upon such surrender of this
Warrant, the Company will issue a certificate or certificates in the name of the
Holder for the number of shares of the Common Stock to which the Holder shall be
entitled.
No Warrant granted herein shall be exercisable after 5:00 p.m. Eastern
Standard Time on March 1, 2007.
2. RESERVATION OF WARRANT SHARES. The Company agrees that, prior to
-----------------------------
the expiration of this Warrant, the Company will at all times have authorized
and in reserve, and will keep available, solely for issuance and delivery upon
the exercise of this Warrant, the shares of the Common Stock as from time to
time shall be receivable upon the exercise of this Warrant.
3. ANTI-DILUTION PROVISIONS.
------------------------
(a) Adjustment for Change in Capital Stock. If, after the date
--------------------------------------
hereof, the Company:
(i) pays a dividend or makes a distribution on its Common Stock
in shares of its Common Stock;
(ii) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(iii) combines its outstanding shares of Common Stock into a
smaller number of shares;
(iv) pays a dividend or makes a distribution on its Common Stock
in shares of its Capital Stock (as defined below) (other than Common
Stock or rights, warrants, or options for its Common Stock to the
extent such issuance or distribution is covered by this Section 3); or
(v) issues by reclassification of its Common Stock any shares of
its Capital Stock (other than rights, warrants or options for its
Common Stock);
then the Exercise Rate in effect immediately prior to such action
shall be adjusted so that the Holder of this Warrant thereafter exercised may
receive the number of shares of Capital Stock of the Company which such Holder
would have owned immediately following such action if such Holder had exercised
this Warrant immediately prior to such action or immediately prior to the record
date applicable thereto, if any.
The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision,
2
<PAGE>
combination or reclassification. In the event that such dividend or
distribution is not so paid or made or such subdivision, combination or
reclassification is not effected, the Exercise Rate shall again be adjusted to
be the Exercise Rate which would then be in effect if such record date or
effective date had not been so fixed.
If after an adjustment the Holder of this Warrant upon exercise of
such Warrant may receive shares of two or more classes of Capital Stock of the
Company, the Exercise Rate shall thereafter be subject to adjustment upon the
occurrence of an action taken with respect to any such class of Capital Stock as
is contemplated by this Section 3 with respect to the Common Stock, on terms
comparable to those applicable to Common Stock in this Section 3.
(b) Adjustment for Rights Issue or Sale of Common Stock Below Current
-----------------------------------------------------------------
Market Value. If, at any time or from time to time, after the date hereof, the
- ------------
Company (i) distributes any rights, warrants or options to holders of Common
Stock entitling them to purchase shares of Common Stock (other than securities
of the Company pursuant to "poison pills to the extent such issuance or
distribution is covered by paragraph (h) below) at a price per share less than
the Current Market Value as of the Time of Determination (as defined paragraph
(p) of this Section 3) or (ii) sells any Common Stock or any securities
convertible into or exchangeable or exercisable for the Common Stock (other than
pursuant to (1) the exercise of the Warrant, (2) any options, warrants or rights
outstanding as of the date of this Agreement, (3) without limiting any options,
warrants or rights outstanding pursuant to the immediately preceding clause (2),
any directors' plans and employee stock option or purchase plans approved by the
Company's Board of Directors, (4) the issuance of Common Stock or options
warrants or rights to persons or entities providing financing to the Company or
any of its subsidiaries as a condition to the provision of such financing, (5)
any registered pubic offering, or (a) any security convertible into, or
exchangeable or exercisable for, the Common Stock as to which the issuance
thereof has previously been the subject of any required adjustment pursuant to
this Section 3) at a price per share less than the Current Market Value
immediately prior to an adjustment required pursuant to this Section 3, the
Exercise Rate shall be adjusted in accordance with the formula:
E' = E x___________(O + N)
(O + (N x P/M))
where:
E' = the adjusted Exercise Rate;
E = the current Exercise Rate;
O = the number of shares of Common Stock outstanding on the record date
for the distribution to which this paragraph (b) is being applied or on the date
of sale of Common Stock at a price per share less than (i) the Current Market
Value immediately prior to any adjustment to which this paragraph (b) applies,
as the case may be;
N = the number of additional shares of Common Stock issuable upon exercise
of all rights, warrants and options so distributed or the number of shares of
Common Stock so sold or the maximum stated number of shares of Common Stock
issuable upon the conversion, exchange, or exercise of any such convertible,
exchangeable or exercisable securities, as the case may be;
3
<PAGE>
P = the price per share of the additional shares of Common Stock upon the
exercise of any such rights, options or warrants so distributed or pursuant to
any such convertible, exchangeable or exercisable securities so sold or the sale
price of the shares so sold, as the case may be; and
M = the Current Market Value as of the Time of Determination or at the
time of sale, as the case may be, minus, with respect to a distribution of
-----
rights, warrants or options, in case (i) any other distribution has occurred to
which paragraph (a)(iv) applies or (ii) any other distribution has occurred to
which paragraph (c) applies, and with respect to which, in either case, (x) the
record date shall occur on or before the record date for the distribution to
which this paragraph (b) applies and (y) the Ex-Dividend Time shall occur on or
after the date of the Time of Determination for the distribution to which this
paragraph (b) applies, the fair market value (on the record date for the
distribution to which this paragraph (b) applies) of (1) the Capital Stock of
the Company distributed in respect of each share of Common Stock in such
paragraph (a)(iv) distribution and (2) the assets of the Company or debt
securities or any rights, warrants or options to purchase securities of the
Company distributed in respect of each share of Common Stock in such paragraph
(c) distribution.
The Board of Directors of the Company shall reasonably and in good
faith determine fair market values for the purposes of this paragraph (b), which
determination shall be conclusive absent manifest error.
The adjustment shall become effective immediately after the record
date for the determination of stockholders entitled to receive the rights,
warrants or options to which this paragraph (b) applies or upon consummation of
the sale of Common Stock, as the case may be. To the extent that shares of
Common Stock are not delivered after the expiration of such rights or warrants,
the Exercise Rate shall be readjusted to the Exercise Rate which would otherwise
be in effect had the adjustment made upon the issuance of such rights or
warrants been made on the basis of delivery of only the number of shares of
Common Stock actually delivered. In the event that such rights or warrants are
not so issued, the Exercise Rate shall again be adjusted to be the Exercise Rate
which would then be in effect if such date fixed for determination of
stockholders entitled to receive such rights or warrants had not been so fixed.
No adjustment shall be made under this paragraph (b) if the
application of the formula stated above in this paragraph (b) would result in a
value of E' that is lower than the value of E.
(c) Adjustment for Other Distributions. If after the date hereof, the
----------------------------------
Company distributes to holders of its Common Stock any of its assets or debt
securities or any rights, warrants, or options to purchase Common Stock of the
Company, including securities or cash, but excluding (i) distributions that
would be permitted by the debt agreements (including indentures) and (ii)
distributions of Capital Stock referred to in paragraph (a) and distributions of
rights, warrants or options referred to in paragraph (b), the Exercise Rate
shall be adjusted in accordance with the formula:
E' E x M
-
M-F
where:
E' the adjusted Exercise Rate;
4
<PAGE>
E = the current Exercise Rate;
M = the Current Market Value, minus, in case any other distribution has
-----
occurred to which paragraph (a)(iv) applies, with respect to which (i) the
record date shall occur on or before the record date for the distribution to
which paragraph (c) applies and (ii) the Ex-Dividend Time shall occur on or
after the date of the Time of Determination for the distribution to which this
paragraph (c) applies, the fair market value (on the record date for the
distribution to which this paragraph (c) applies) of any Capital Stock of the
Company distributed in respect of each share of Common Stock in such paragraph
(a)(iv) distribution; and
F = the fair market value (on the record date for the distribution to
which this paragraph (c) applies) of the assets, securities, rights, warrants or
options to be distributed in respect of each share of Common Stock in the
distribution to which this paragraph (c) is being applied (including, in the
case of cash dividends or other cash distributions giving rise to an adjustment,
all such cash distributed concurrently).
The Board of Directors of the Company shall reasonably and in good
faith determine by a board resolution, the fair market value of all property
(other than cash) distributed for the purposes of this paragraph (c).
The adjustment shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distributions
to which this paragraph (c) applies. in the event that such distribution is not
so made, the Exercise Rate shall again be adjusted to be the Exercise Rate which
would then be in effect if such record date had not been so fixed.
In the event that, with respect to any distribution to which this
paragraph (c) would otherwise apply, "F" is equal to or greater than "M", then
the adjustment provided by this paragraph (c) shall not be made and in lieu
thereof the provisions of paragraph (h) shall apply to such distribution.
(d) When Adjustment May Be Deferred. No adjustment in the Exercise
-------------------------------
Rate need be made unless the adjustment would require a change of at least 1.0%
in the Exercise Rate. Any adjustments that are not made shall be carried
forward and taken into account in any subsequent adjustment. However, with
respect to a dividend of the Company's Capital Stock (or rights to acquire such
Capital Stock) adjustments can be deferred only until, and must be made by, the
earlier of (i) three years from the date of such stock dividend and (ii) the
date as of which the aggregate stock dividends for which adjustments have not
been made total at least 1.0% of the then issued and outstanding Common Stock
with respect to which such stock dividends were distributed.
All calculations under this Section 3 shall be made to the nearest
1/1,000th of a share.
(e) When No Adjustment Required. No adjustment need be made for
---------------------------
rights to purchase Common Stock pursuant to a Company plan for reinvestment of
dividends or interest.
No adjustment need be made for a change in the par value or no par
value of the Common Stock.
5
<PAGE>
(f) Notice of Adjustment. Whenever the Exercise Rate is adjusted, the
--------------------
Company shall promptly mail to the Holder of this Warrant at the address
appearing in Section 8(b) below a notice of the adjustment.
(g) Notice of Certain Transactions. If:
------------------------------
(i) the Company takes any action that would require an adjustment in
the Exercise Rate pursuant to paragraphs (a), (b) or (c) (unless no
adjustment is to occur pursuant to paragraph (e)); or
(ii) the Company takes any action that would require a supplemental
warrant agreement pursuant to paragraph (h); or
(iii) there is a liquidation or dissolution of the Company;
then the Company shall mail to the Holder of this Warrant at the address
appearing in Section 8(b) hereof a notice stating the proposed record date for a
dividend or distribution or the proposed effective date of a subdivision,
combination, reclassification, consolidation, sale, merger, binding share
exchange, transfer, liquidation or dissolution, as the case may be. The Company
shall file and give the notice at least 15 days before such date. Failure to
file or give the notice or any defect in it shall not affect the validity of the
transportation.
(h) Reorganization of Company; Special Distributions. If the Company,
------------------------------------------------
in a single transaction or through a series of related transactions,
consolidates with or merges with or into any other person or transfers (by
lease, assignment, sale or otherwise) all or substantially all of its properties
and assets to another person or group of affiliated persons (other than a sale
of all or substantially all of the assets of the Company in a transaction in
which the holders of Common Stock immediately prior to such transaction do not
receive securities, cash, or other assets of the Company or any other person) or
is a party to a merger or binding share exchange which reclassifies or changes
its outstanding Common Stock, the Company covenants that prior to entering into
such transaction, the person obligated to deliver securities, cash or other
assets upon exercise of this Warrant will enter into a supplemental warrant
agreement. If the issuer of securities deliverable upon exercise of this
Warrant is an affiliate of the successor Company, that issuer shall join in the
supplemental warrant agreement.
The supplemental warrant agreement shall provide that the Holder of
this Warrant may exercise it for the kind and amount of securities, cash or
other assets which such Holder would have received immediately after the
consolidation, merger, binding share exchange or transfer if such Holder had
exercised this Warrant immediately before the effective date of the transaction,
assuming (to the extent applicable) that such Holder (i) was not a constituent
person or an affiliate of a constituent person to such transaction; and (ii)
made no election with respect thereto. The supplemental warrant agreement shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 3. The successor
Company shall mail to the Holder of this Warrant at the address appearing in
Section 8(b) below a notice briefly describing the supplemental warrant
agreement.
If the Company makes a distribution to all holders of its Common Stock
of any of its assets, or debt securities or any rights, warrants or options to
purchase securities of the Company that, but for the provisions of the last
paragraph of paragraph (c), would result in an adjustment in the
6
<PAGE>
Exercise Rate pursuant to the provisions of paragraph (c), then, from, and after
the record date for determining the holders of Common Stock entitled to receive
the distribution, the Holder of this Warrant that exercises such Warrant in
accordance with its terms will upon such exercise be entitled to receive, in
addition to the Warrant Shares into which this Warrant is exercisable, the kind
and amount of securities, cash or other assets comprising the distribution that
such Holder would have received if such Holder had exercised this Warrant
immediately prior to the record date for determining the holders of Common Stock
entitled to receive the distribution (whether or not this Warrant was then
exercisable hereunder).
If this paragraph (h) applies, neither paragraph (a), (b), (c) nor (d)
shall apply.
(i) Adjustment for Tax Purposes. The Company may make such increases
---------------------------
in the Exercise Rate, in addition to those otherwise required by this Section,
as it considers to be advisable in order that any event treated for Federal
income tax purposes as a dividend of stock or stock rights shall not be taxable
to the recipients.
(j) Specificity of Adjustment. Irrespective of any adjustments in the
-------------------------
number or kind of shares purchasable upon the exercise of this Warrant, Warrant
Certificates theretofore or thereafter issued may continue to express the same
number and kind of Warrant Shares as are stated on this Warrant Certificate.
(k) Adjustments to Par Value. Subject to receiving shareholder
------------------------
approval, the Company shall make such adjustments to the par value of the Common
Stock in order that, upon exercise of this Warrant, the Warrant Shares will be
fully paid and non-assessable.
(l) Voluntary Adjustment. The Company from time to time may increase
--------------------
the Exercise Rate by any number and for any period of time (provided that such
--------
period is not less than 20 Business Days). Whenever the Exercise Rate is so
increased, the Company shall mail to the Holder at the address appearing in
Section 8(b) a notice of the increase. The Company shall give the notice at
least 15 days before the date the increased Exercise Rate takes effect. The
notice shall state the increased Exercise Rate and the period it will be in
effect. A voluntary increase in the Exercise Rate does not change or adjust the
Exercise Rate otherwise in effect as determined by this Section 3.
(m) No other Adjustment For Dividends. Except as provided in this
---------------------------------
Section 3, no payment or adjustment will be made for dividends on any Common
Stock.
(n) Priority of Adjustments. If this Section 3 requires adjustments
-----------------------
to the Exercise Rate under more than one of paragraphs (a)(iv), (b) or (c), and
the record dates for the distributions giving rise to such adjustments shall
occur on the same date, then such adjustments shall be made by applying, first,
the provisions of paragraph (a), second, the provisions of paragraph (c) and,
third, the provisions of paragraph (b).
(o) Multiple Adjustments. After an adjustment to the Exercise Rate
--------------------
under this Section 3, any subsequent event requiring an adjustment under this
Section shall cause an adjustment to the Exercise Rate as so adjusted.
(p) Definitions. "Capital Stock" means, with respect to any
----------- -------------
corporation, any and all shares, interests, rights to purchase, warrants,
options, participations or other equivalents of or interests (however
designated) in stock issued by that corporation.
7
<PAGE>
"Current Market Value" per share of Common Stock or of any other
--------------------
securities at any date shall be (1) if the security is not registered under the
Exchange Act, (i) the value of the security determined in good faith by the
Company's Board of Directors, based on the most recently completed arm's-length
transaction between the Company and a person other than an affiliate of the
Company, or (2) if the security is registered under the Exchange Act, the
average of the daily closing bid prices for each Business Day during the period
commencing 15 Business Days before such date and ending on the date one day
prior to such date or, if the security has been registered under the Exchange
Act for less than 15 consecutive Business Days before such date, then the
average of the daily closing bid prices for all of the Business Days before
such, date for which daily Closing bid prices are available. If the market price
is not determinable for at least 10 Business Days in such period, the Current
Market Value of the security shall be determined as if the security was not
registered under the Exchange Act.
"Time of Determination" means the time and date of the earlier of (i)
---------------------
the determination of stockholders entitled to receive rights, warrants, or
options or a distribution, in each case, to which paragraphs (b) and (c) apply
and (ii) the time ("Ex-Dividend Time") immediately prior to the commencement of
----------------
"ex-dividend" trading for such rights, warrants or distribution on such national
or regional exchange or market on which the Common Stock is then listed or
quoted.
(q) Notice. If the Board of Directors of the Company shall declare
------
any dividend or other distribution in cash with respect to the Common Stock,
other than out of earned surplus,the Company shall mail notice thereof to the
Holder not less than 15 days prior to the record date fixed for determining
shareholders entitled to participate in such dividend or other distribution.
4. FULLY PAID STOCK; TAXES. The Company agrees that the shares of
-----------------------
the Common Stock represented by each and every certificate for Warrant Shares
delivered on the exercise of this Warrant shall, at the time of such delivery,
be validly issued and outstanding, fully paid and non-assessable, and not
subject to preemptive rights, and the Company will take all such actions as may
be necessary to assure that the par value or stated value, if any, per share of
the Common Stock is at all times equal to or less than the then Per Share
Warrant Price. The Company further covenants and agrees that it will pay, when
due and payable, any and all Federal and state stamp, original issue or similar
taxes that may be payable in respect of the issue of any Warrant Share or
certificate therefor.
5. TRANSFER.
--------
(a) Securities Laws. Neither this Warrant nor the Warrant Shares
---------------
issuable upon the exercise hereof have been registered under the Securities Act
of 1933, as amended (the "Securities Act"), or under any state securities laws
--------------
and unless so registered may not be transferred, sold, pledged, hypothecated or
otherwise disposed of unless an exemption from such registration is available.
In the event the Holder desires to transfer this Warrant or any of the Warrant
Shares issued, the Holder must give the Company prior written notice of such
proposed transfer including the name and address of the proposed transferee.
Such transfer may be made only either (i) upon issuance by the Securities and
Exchange Commission (the "Commission") of a ruling, interpretation, opinion or
"no action letter" based upon facts presented to said commission, or (ii) upon
receipt by the Company of an opinion of counsel to the Holder, reasonably
acceptable to the Company both as to such counsel and as to such opinion, in
either case to the effect that the proposed transfer will not violate the
provisions of the Securities Act, or the rules and regulations promulgated under
such act, or in the case of clause (ii) above, to the effect that the Warrant or
Warrant Shares to be sold or
8
<PAGE>
transferred has been registered under the Securities Act and that there is in
effect a current prospectus meeting the requirements of Subsection 10(a) of the
Securities Act that is being or will be delivered to the purchaser or transferee
at or prior to the time of delivery of the certificates evidencing the Warrant
or Warrant Stock to be sold or transferred.
(b) Lock-Up Agreements with Underwriters. In the event of a public
------------------------------------
offering of the Company's securities, the Holder agrees to enter into an
agreement with the underwriter or underwriter's representative for such offering
restricting the sale, transfer or other disposition of this Warrant or the
Warrant Shares to the extent that such agreement is required to be executed by
the underwriter or the underwriter's representative.
(c) Conditions to Transfer. Prior to any such proposed transfer, and
----------------------
as a condition thereto, if such transfer is not made pursuant to an effective
registration statement under the Securities Act, the Holder will, if requested
by the Company, deliver to the Company (i) an agreement by the proposed
transferee to the impression of the restrictive investment legend set forth
herein on the certificate or certificates representing the securities acquired
by such transferee, (ii) an agreement by such transferee that the Company may
place a "stop transfer order" with its transfer agent or registrar, and (iii) an
agreement by the transferee to indemnify the Company to the same extent as set
forth in the next succeeding paragraph.
(d) Indemnity. The Holder acknowledges that the Holder understands
---------
the meaning and legal consequences of this Section 5, and the Holder hereby
agrees to indemnify and hold harmless the Company, its representatives and each
officer and director thereof from and against any and all loss, damage or
liability (including all attorneys' fees and costs incurred in enforcing this
indemnity provision) due to or arising out of (a) the inaccuracy of any
representation or the breach of any warranty of the Holder contained in, or any
other breach of, this Warrant, (b) any transfer of any of the Warrant or the
Warrant Shares in violation of the Securities Act or the rules and regulations
promulgated under such act, (c) any transfer of the Warrant or any of the
Warrant Shares not in accordance with this Warrant or (d) any untrue statement
or omission to state any material fact in connection with the investment
representations or with respect to the facts and representations supplied by the
Holder to counsel upon which its opinion as to a proposed transfer shall have
been based.
(e) Transfer. Except as restricted hereby, this Warrant and the
--------
Warrant Shares issued may be transferred by the Holder in whole or in part at
any time or from time to time. Upon surrender of this Warrant to the Company or
at the office of its stock transfer agent, if any, with assignment documentation
duly executed and funds sufficient to pay any transfer tax, and upon compliance
with the foregoing provisions, the Company shall, without charge, execute and
deliver a new Warrant in the name of the assignee named in such instrument of
assignment, and this Warrant shall promptly be canceled. Any assignment,
transfer, pledge, hypothecation or other disposition of this Warrant attempted
contrary to the provisions of this Warrant, or any levy of execution, attachment
or other process attempted upon the Warrant, shall be null and void and without
effect.
(f) Legend and Stop Transfer Orders. Unless the Warrant Shares have
-------------------------------
been registered under the Securities Act, upon exercise of any part of the
Warrant and the issuance of any of the shares of Warrant Shares, the Company
shall instruct its transfer agent to enter stop transfer orders with respect to
such shares, and all certificates representing Warrant Shares shall bear on the
face thereof substantially the following legend, insofar as is consistent with
Delaware law:
9
<PAGE>
"The shares of common stock represented by this certificate have not
been registered under the Securities Act of 1933, as amended, and may
not be sold, offered for sale, assigned, transferred or otherwise
disposed of unless registered pursuant to the provisions of that Act
or an opinion of counsel to the Company is obtained stating that such
disposition is in compliance with an available exemption from such
registration."
6. LOSS, ETC. OF WARRANT. Upon receipt of evidence satisfactory to
---------------------
the Company of the loss, theft, destruction or mutilation of this Warrant, and
of indemnity reasonably satisfactory to the Company, if lost, stolen or
destroyed, and upon surrender and cancellation of this Warrant, if mutilated,
the Company shall execute and deliver to the Holder a new Warrant of like date,
tenor and denomination.
7. WARRANT HOLDER NOT A SHAREHOLDER. Except as otherwise
--------------------------------
specifically provided herein, this Warrant does not confer upon the Holder any
right to vote or to consent to or receive notice as a shareholder of the
Company, as such, in respect of any matters whatsoever, or any other rights or
liabilities as a shareholder, prior to the exercise hereof.
8. COMMUNICATIONS. No notice or other communication under this
--------------
Warrant shall be effective unless the same is in writing and is delivered
personally, mailed by first-class mail, postage prepaid, postage paid, or mailed
by nationally recognized overnight courier (e.g., Federal Express), addressed
----
to:
(a) the Company at 900 Chelmsford Street, Suite 312, Lowell, MA 01851,
attn: Corporate Counsel, or such other address as the Company has designated in
writing to the Holder, or
(b) the Holder at 31 Exeter Road, #18-00 Comcentre, Singapore 239732,
or such other address as the Holder has designated in writing to the Company.
Any such notice shall be effective upon receipt.
9. HEADINGS. The headings of this Warrant have been inserted as a
matter of convenience and shall not affect the construction hereof.
10. APPLICABLE LAW. This Warrant shall be governed by and construed
--------------
in accordance with the internal substantive laws of the State of Delaware.
IN WITNESS WHEREOF, UNIFI COMMUNICATIONS, INC., has caused this
Warrant to be signed by its duly authorized representative and its corporate
seal to be hereunto affixed as of the date first set forth above.
Attest: UNIFI communications, inc.
_____________________________ By: /s/ Paula Litscher
--------------------------------
Paula Litscher
Vice President of Finance
[Corporate Seal]
10
<PAGE>
SUBSCRIPTION
------------
The undersigned, _________________________, pursuant to the provisions of the
foregoing Warrant, hereby agrees to subscribe for the purchase of ____shares of
the Common Stock of UNIFI communications, inc., covered by said Warrant, and
makes payment therefor in full at the price per share provided by said Warrant.
Dated: ____________________ Signature: __________________________
Address: __________________________
__________________________
ASSIGNMENT
----------
FOR VALUE RECEIVED ___________________ hereby sells, assigns and
transfers unto _____________________ the foregoing Warrant and all rights
evidenced thereby, and does irrevocably constitute and appoint attorney to
transfer said Warrant on the books of UNIFI communications, inc.
Dated: ____________________ Signature: __________________________
Address: __________________________
__________________________
PARTIAL ASSIGNMENT
------------------
FOR VALUE RECEIVED ________________ hereby assigns and transfers unto
_____________ the right to purchase _____ shares of the Common Stock of UNIFI
COMMUNICATIONS, INC. by the foregoing Warrant, and a proportionate part of said
Warrant and the rights evidenced hereby, and does irrevocably constitute and
appoint attorney to transfer that part of said Warrant on the books of UNIFI
communications, inc.
Dated: ____________________ Signature: __________________________
Address: __________________________
__________________________
<PAGE>
EXHIBIT 10.18
================================================================================
WARRANT AGREEMENT
Dated as of February 21, 1997
Between
UNIFI COMMUNICATIONS, INC.,
as Issuer
and
FLEET NATIONAL BANK,
as Warrant Agent
______________________
Warrants to Purchase Common Stock
Par Value $.01 Per Share
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
ISSUANCE, FORM, EXECUTION, DELIVERY AND
REGISTRATION OF WARRANT CERTIFICATES
SECTION 1.01. Issuance of Warrants.....................................
SECTION 1.02. Form of Warrant Certificates.............................
SECTION 1.03. Execution of Warrant Certificates........................
SECTION 1.04. Countersignature and Delivery............................
SECTION 1.05. Temporary Warrant Certificates...........................
SECTION 1.06. Separation of Initial Warrants
and Notes..............................................
SECTION 1.07. Registration; Registration of
Transfers and Exchanges................................
SECTION 1.08. Lost, Stolen, Destroyed, Defaced
or Mutilated Warrant Certificates......................
SECTION 1.09. Offices for Exercise, etc................................
ARTICLE II
DURATION, EXERCISE OF WARRANTS
AND EXERCISE PRICE
SECTION 2.01. Duration of Warrants.....................................
SECTION 2.02. Exercise, Exercise Price, Settlement
and Delivery...........................................
SECTION 2.03. Cancellation of Warrant Certificates.....................
ARTICLE III
OTHER PROVISIONS RELATING TO
RIGHTS OF HOLDERS OF WARRANTS
SECTION 3.01. Enforcement of Rights....................................
ARTICLE IV
CERTAIN COVENANTS OF THE COMPANY
SECTION 4.01. Payment of Taxes.........................................
SECTION 4.02. Compliance with the Warrant Shares
Registration Rights Agreement..........................
SECTION 4.03. Rules 144 and 144A.......................................
SECTION 4.04. Repurchase of Warrants and Warrant
Shares.................................................
SECTION 4.05. Reservation of Warrant Shares............................
-i-
<PAGE>
Page
----
SECTION 4.06. Obtaining of Governmental Approvals......................
ARTICLE V
ADJUSTMENTS
SECTION 5.01. Adjustment of Exercise Rate; Notices.....................
SECTION 5.02. Fractional Warrant Shares................................
SECTION 5.03. Article Not Applicable to Issuance
of Contingent Warrants.................................
ARTICLE VI
CONCERNING THE WARRANT AGENT
SECTION 6.01. Warrant Agent Conditions of Warrant
Agent's Obligations Resignation and
Appointment of Successor...............................
SECTION 6.02. Conditions of Warrant Agent's Obligations................
SECTION 6.03. Resignation and Appointment of Successor.................
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Amendment................................................
SECTION 7.02. Notices and Demands to the Company
and Warrant Agent......................................
SECTION 7.03. Addresses for Notices to Parties
and for Transmission of Documents......................
SECTION 7.04. Notices to Holders.......................................
SECTION 7.05. Applicable Law...........................................
SECTION 7.06. Persons Having Rights Under Agreement....................
SECTION 7.07. Headings.................................................
SECTION 7.08. Counterparts.............................................
SECTION 7.09. Inspection of Agreements.................................
EXHIBIT A - Form of Warrant Certificate................................
EXHIBIT B - Certificate To Be Delivered upon Exchange or
Registration of Transfer of Warrants.....................
EXHIBIT C - Transferee Letter of Representation........................
EXHIBIT D - Form of Certificate of Election............................
ANNEX I - Warrant Shares Registration Rights Agreement..................
-ii-
<PAGE>
WARRANT AGREEMENT
WARRANT AGREEMENT ("Agreement"), dated as of February 21, 1997 between
---------
UNIFI COMMUNICATIONS, INC., a Delaware corporation, as Issuer (together with any
successor thereto, the "Company"), and FLEET NATIONAL BANK, a national banking
-------
association, not in its individual capacity but solely as warrant agent
(together with any successor warrant agent, the "Warrant Agent").
-------------
WHEREAS, the Company has entered into a purchase agreement dated
February 14, 1997 with Smith Barney Inc. (the "Initial Purchaser") in which the
-----------------
Company has agreed to sell to the Initial Purchaser 175,000 units (the "Units")
-----
consisting in the aggregate of (i) $175,000,000 aggregate principal amount of
14% Senior Notes due 2004 (the "Notes") of the Company to be issued under an
-----
indenture dated as of February 21, 1997 (the "Indenture"), between the Company
---------
and Fleet National Bank, as trustee (in such capacity, the "Trustee"), and (ii)
-------
175,000 Warrants (the "Initial Warrants"), each representing the right to
----------------
purchase initially 27.524674 shares of Common Stock, par value $.01 per share,
of the Company (the "Common Stock"), subject to adjustment in accordance with
------------
the terms hereof; and
WHEREAS, each Unit will consist of one Note in the principal amount of
$1,000 and one Initial Warrant and the Notes and the Initial Warrants comprising
part of the Units shall not be separately transferable until the Separability
Date (as defined below); and
WHEREAS, pursuant to section 10.08 of the Indenture, in certain
circumstances the Company will be obligated to issue additional warrants (the
"Contingent Warrants" and together with the Initial Warrants, the "Warrants";
- -------------------- --------
and the certificates evidencing the Warrants being herein referred to as the
"Warrant Certificates") exercisable for Common Stock of the Company; and
- ---------------------
WHEREAS, the holders of the Warrants will have the registration rights
with respect to the Warrant Shares (as defined) issuable upon exercise of the
Warrants as set forth in the Warrant Shares Registration Rights Agreement, dated
as of February 21, 1997 between the Company and the Initial Purchaser (the
"Warrant Shares Registration Rights Agreement") substantially in the form of
- ---------------------------------------------
Annex I hereto; and
WHEREAS, the Company desires the Warrant Agent as warrant agent to
assist the Company in connection with the issuance, exchange, cancellation,
replacement and exercise of the Warrants and the repurchase of the Warrants and
the Warrant Shares, and in this Agreement wishes to set forth, among other
things, the terms
<PAGE>
-2-
and conditions on which the Warrants may be issued, exchanged, cancelled,
replaced, exercised and repurchased;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
ISSUANCE, FORM, EXECUTION, DELIVERY AND
REGISTRATION OF WARRANT CERTIFICATES
---------------------------------------
SECTION 1.01. Issuance of Warrants. Warrants comprising part of the
--------------------
Units shall be originally issued in connection with the issuance of the Units.
Each Warrant Certificate shall evidence the number of Warrants
specified therein, and each Warrant evidenced thereby shall represent the right,
subject to the provisions contained herein and therein, to purchase from the
Company (and the Company shall issue and sell to such holder of the Warrant)
fully paid and nonassessable shares of the Company's Common Stock, par value
$.01 per share (the shares purchasable upon exercise of a Warrant being
hereinafter referred to as the "Warrant Shares" and, where appropriate, such
--------------
term shall also mean the other securities or property purchasable and
deliverable upon exercise of a Warrant as provided in Article V and such Common
Stock, being hereinafter referred to as the "Common Stock") at the price
------------
specified herein and therein, in each case subject to adjustment as provided
herein and therein.
SECTION 1.02. Form of Warrant Certificates. The Warrant Certificates
----------------------------
will initially be issued either in global form (the "Global Warrants"),
---------------
substantially in the form of Exhibit A hereto (including footnote 1 thereto) or
---------
in registered form as definitive Warrant certificates (the "Definitive
----------
Warrants"). The Warrant Certificates evidencing the Global Warrants or the
Definitive Warrants to be delivered pursuant to this Agreement shall be
substantially in the form set forth in Exhibit A attached hereto. Such Global
---------
Warrants shall represent such of the outstanding Warrants as shall be specified
therein, and each shall provide that it shall represent the aggregate amount of
outstanding Warrants from time to time endorsed thereon and that the aggregate
amount of outstanding Warrants represented thereby may from time to time be
reduced or increased, as appropriate. Any endorsement of a Global Warrant to
reflect the amount of any increase or decrease in the amount of outstanding
Warrants represented thereby shall be made by the Warrant Agent and Depositary
(as defined below) in accordance with instructions given by the holder thereof.
The Depository
<PAGE>
-3-
Trust Company shall act as the Depositary with respect to the Global Warrants
until a successor shall be appointed by the Company and the Warrant Agent. Upon
written request, a Warrant holder may receive from the Warrant Agent Definitive
Warrants as set forth in Section 1.07 hereof.
SECTION 1.03. Execution of Warrant Certificates. The Warrant
---------------------------------
Certificates shall be executed on behalf of the Company by the Chairman of its
Board of Directors, its president or any vice president and attested by its
secretary or assistant secretary, under its corporate seal, if any. Such
signatures may be the manual or facsimile signatures of the present or any
future such officers. The seal of the Company may be in the form of a facsimile
thereof and may be impressed, affixed, imprinted or otherwise reproduced on the
Warrant Certificates. Typographical and other minor errors or defects in any
such reproduction of the seal or any such signature shall not affect the
validity or enforceability of any Warrant Certificate that has been duly
countersigned and delivered by the Warrant Agent.
In case any officer of the Company who shall have signed any of the
Warrant Certificates shall cease to be such officer before the Warrant
Certificate so signed shall be countersigned and delivered by the Warrant Agent
or disposed of by the Company, such Warrant Certificate nevertheless may be
countersigned and delivered or disposed of as though the person who signed such
Warrant Certificate had not ceased to be such officer of the Company; and any
Warrant Certificate may be signed on behalf of the Company by such persons as,
at the actual date of the execution of such Warrant Certificate, shall be the
proper officers of the Company, although at the date of the execution and
delivery of this Agreement any such person was not such an officer.
SECTION 1.04. Countersignature and Delivery. Warrant Certificates
-----------------------------
shall be countersigned by manual signature and dated the date of
countersignature by the Warrant Agent and shall not be valid for any purpose
unless so countersigned and dated. The Warrant Certificates shall be numbered
and shall be registered in the Warrant Register (as defined in Section 1.06
hereof).
Upon the receipt by the Warrant Agent of a written order of the
Company, which order shall be signed by the Chairman of its Board of Directors,
its president or any vice president and attested by its secretary or assistant
secretary, and shall specify the amount of Warrants to be countersigned, whether
the Warrants are to be Global Warrants or Definitive Warrants, the date of such
Warrants and such other information as the Warrant Agent may
<PAGE>
-4-
reasonably request, without any further action by the Company, the Warrant Agent
is authorized, upon receipt from the Company at any time and from time to time
of the Warrant Certificates, duly executed as provided in Section 1.03 hereof,
to countersign the Warrant Certificates and deliver them. Such countersignature
shall be by a duly authorized signatory of the Warrant Agent (although it shall
not be necessary for the same signatory to sign all Warrant Certificates) and
shall be conclusive evidence that the Warrant Certificate so countersigned has
been delivered hereunder.
In case any authorized signatory of the Warrant Agent who shall have
countersigned any of the Warrant Certificates shall cease to be such authorized
signatory before the Warrant Certificate shall be disposed of by the Company,
such Warrant Certificate nevertheless may be delivered or disposed of as though
the person who countersigned such Warrant Certificate had not ceased to be such
authorized signatory of the Warrant Agent; and any Warrant Certificate may be
countersigned on behalf of the Warrant Agent by such persons as, at the actual
time of the countersignature of such Warrant Certificates, shall be the duly
authorized signatories of the Warrant Agent, although at the time of the
execution and delivery of this Agreement any such person is not such an
authorized signatory.
The Warrant Agent's countersignature on all Warrant Certificates shall
be in substantially the form set forth in Exhibit A hereto.
---------
SECTION 1.05. Temporary Warrant Certificates. Pending the
------------------------------
preparation of definitive Warrant Certificates, the Company may execute, and the
Warrant Agent shall countersign and deliver, temporary Warrant Certificates,
which are printed, lithographed, typewritten or otherwise produced,
substantially of the tenor of the definitive Warrant Certificates in lieu of
which they are issued.
If temporary Warrant Certificates are issued, the Company will cause
definitive Warrant Certificates to be prepared without unreasonable delay.
After the preparation of definitive Warrant Certificates, the temporary Warrant
Certificates shall be exchangeable for definitive Warrant Certificates upon
surrender of the temporary Warrant Certificates at any office or agency
maintained by the Company for that purpose pursuant to Section 1.09 hereof.
Subject to the provisions of Section 4.01 hereof, such exchange shall be without
charge to the holder. Upon surrender for cancellation of any one or more
temporary Warrant Certificates, the Company shall execute, and the Warrant Agent
shall countersign and
<PAGE>
-5-
deliver in exchange therefor, one or more definitive Warrant Certificates
representing in the aggregate a like number of Warrants. Until so exchanged,
the holder of a temporary Warrant Certificate shall in all respects be entitled
to the same benefits under this Agreement as a holder of a definitive Warrant
Certificate.
SECTION 1.06. Separation of Initial Warrants and Notes. The Notes
----------------------------------------
and Initial Warrants will not be separately transferable until the Separability
Date. "Separability Date" shall mean the earliest to occur of: (i) August 20,
-----------------
1997, (ii) the date a registration statement under the Securities Act of 1933,
as amended (the "Securities Act"), with respect to a registered exchange offer
--------------
for the Notes or covering the sale by holders of the Notes is declared effective
under the Securities Act or (iii) such date as may be determined by Smith Barney
Inc. and specified to the Company, the Trustee, the Warrant Agent and the Unit
Agent in writing. The separation of Warrant and Note certificates is herein
referred to as a "Separation" and the related Initial Warrants are referred to
----------
as "Separated".
---------
SECTION 1.07. Registration; Registration of Transfers and Exchanges.
-----------------------------------------------------
The Company will keep, at the office or agency maintained by the Company for
such purpose, a register or registers in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of, and registration of transfer and exchange of, Warrants and Warrant Shares as
provided in this Article I. Each person designated by the Company from time to
time as a person authorized to register the transfer and exchange of the
Warrants is hereinafter called, individually and collectively, the "Registrar".
---------
The Company hereby initially appoints the Warrant Agent as Registrar. Each
person designated by the Company from time to time as a person authorized to
register the transfer and exchange of the Warrant Shares is hereinafter called,
individually and collectively, the "Transfer Agent". The Company hereby
--------------
initially appoints itself as Transfer Agent. Upon written notice to the Warrant
Agent and any acting Registrar, the Company may appoint a successor Registrar
for such purposes. Upon written notice to the Warrant Agent, the Company may
appoint a successor Transfer Agent for such purposes.
The Company will at all times designate one person (who may be the
Company and who need not be a Registrar) to act as repository of a master list
of names and addresses of the holders of Warrants (the "Warrant Register") and
----------------
Warrant Shares. The Warrant Agent will act as such repository with respect to
the Warrants unless and until some other person is, by written notice
<PAGE>
-6-
from the Company to the Warrant Agent and the Registrar, designated by the
Company to act as such. The Company will act as such repository with respect to
the Warrant Shares unless and until some other person is designated by the
Company to act as such. The Company will provide notice to the Warrant Agent
and Registrar of any such designation. The Company shall cause each Registrar
to furnish to such repository with respect to the Warrants, on a current basis,
such information as to all registrations of transfer and exchanges effected by
such Registrar, as may be necessary to enable such repository to maintain the
Warrant Register on as current a basis as is practicable.
The Company shall cause each Transfer Agent to furnish to the Warrant
Agent, on a current basis and immediately upon the request of the Warrant Agent,
such information as to all registrations of transfer and exchanges effected by
such Transfer Agent, as may be necessary or desirable to enable the Warrant
Agent to perform its functions under Section 4.04 hereof.
Upon due presentation for registration of transfer of any Warrant
Certificate at any such office or agency to be maintained for the purpose as
provided in Section 1.09, the Company shall execute and the Warrant Agent shall
countersign and deliver (or cause to be delivered) in the name of the transferee
or transferees a new Warrant Certificate or Warrant Certificates for a like
aggregate number of Warrants bearing numbers or other distinguishing symbols not
contemporaneously outstanding.
Any Warrant Certificate or Warrant Certificates may be exchanged for a
Warrant Certificate or Warrant Certificates in other authorized denominations,
representing in the aggregate a like number of Warrants. A Warrant Certificate
or Warrant Certificates to be so exchanged shall be surrendered at any office or
agency to be maintained by the Company for the purpose as provided in Section
1.09, and the Company shall execute and the Warrant Agent shall countersign and
deliver (or cause to be delivered) in exchange therefor the Warrant Certificate
or Warrant Certificates bearing numbers or other distinguishing symbols not
contemporaneously outstanding.
The Company, the Warrant Agent, the Registrar and any agent of the
Company, the Warrant Agent or the Registrar may deem and treat the person in
whose name any Warrant Certificate shall be registered in the Warrant Register
as the absolute owner of such Warrant Certificate (notwithstanding any notation
of ownership or other writing thereon) for the purpose of any exercise thereof
or any distribution to the holder thereof and for all other purposes;
<PAGE>
-7-
and neither the Company nor the Warrant Agent nor the Registrar nor any agent of
the Company, the Warrant Agent or the Registrar shall be affected by any notice
to the contrary.
All Warrants presented for transfer or exchange shall be duly endorsed
by the registered holder or holders thereof or by the duly appointed legal
representative thereof or by a duly authorized attorney, and in the case of
transfer, such signature shall be guaranteed by an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (each an "Eligible Guarantor
------------ ------------------
Institution"), and shall be accompanied by a written instrument or instruments
- -----------
of exchange or transfer, in form satisfactory to the Company, the Warrant Agent,
the Trustee and the Registrar.
Until the earlier to occur of (i) the consummation of a Public Equity
Offering resulting in gross proceeds to the Company of at least $35.0 million
and (ii) March 1, 2002, each Holder of Warrants or Warrant Shares shall, by
acceptance of such Warrants or Warrant Shares, agree that transfers of
beneficial interests in such Warrants or Warrant Shares may be effected only on
the books and records maintained by the Transfer Agent, and that ownership of
Warrants or Warrant Shares shall be required to be reflected in the books and
records of the Transfer Agent.
Upon issuance by the Company, the Warrant Shares shall be
appropriately legended to reflect such obligations upon transfer as well as the
repurchase obligations of the Company and the co-sale and co-investment rights
of such holders.
(a) Transfer and Exchange of Definitive Warrants. When Definitive
--------------------------------------------
Warrants are presented to the Warrant Agent with a request:
(i) to register the transfer of the Definitive Warrants; or
(ii) to exchange such Definitive Warrants for an equal number of
Definitive Warrants of other authorized denominations,
the Warrant Agent shall register the transfer or make the exchange as requested
if the requirements under this Warrant Agreement as set forth in this Section
1.07 hereof for such transactions are met; provided, however, that the
-------- -------
Definitive Warrants presented or surrendered for registration of transfer or
exchange:
(x) shall be duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the
<PAGE>
-8-
Company and the Warrant Agent, duly executed by the holder thereof or
by his attorney, duly authorized in writing; and
(y) in the case of Warrants the offer and sale of which have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act") and are presented for transfer or exchange prior to
---------------
(x) the date which is three years after the later of the date of
original issue and the last date on which the Company or any affiliate
of the Company was the owner of such Warrant, or any predecessor
thereto and (y) such later date, if any, as may be required by any
subsequent change in applicable law (the "Resale Restriction
------------------
Termination Date"), such Warrants shall be accompanied, in the sole
----------------
discretion of the Company, by the following additional information and
documents, as applicable, however, it being understood that the
Warrant Agent need not determine which clause (A) through (D) below is
applicable:
(A) if such Warrant is being delivered to the Warrant Agent by a
holder for registration in the name of such holder, without
transfer, a certification from such holder to that effect (in
substantially the form of Exhibit B hereto); or
---------
(B) if such Warrant is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the Securities
Act or pursuant to an exemption from registration in accordance
with Rule 144 or Regulation S under the Securities Act or
pursuant to an effective registration statement under the
Securities Act, a certification to that effect (in substantially
the form of Exhibit B hereto) and an opinion of counsel and/or
---------
other information satisfactory to the Company to the effect that
such transfer is in compliance with the Securities Act; or
(C) if such Warrant is being transferred to an institutional
"accredited investor" within the meaning of subparagraphs (a)(1),
(a)(2), (a)(3) or (a)(7) of Rule 501 under the Securities Act,
delivery of a Certificate of Transfer in the form of Exhibit C
---------
hereto and an opinion of counsel and/or other information
satisfactory to the
<PAGE>
-9-
Company to the effect that such transfer is in compliance with
the Securities Act; or
(D) if such Warrant is being transferred in reliance on another
exemption from the registration requirements of the Securities
Act, a certification to that effect (in substantially the form of
Exhibit B hereto) and an opinion of counsel from the transferee
---------
or transferor reasonably acceptable to the Company to the effect
that such transfer is in compliance with the Securities Act.
(b) Restrictions on Transfer of a Definitive Warrant for a Beneficial
-----------------------------------------------------------------
Interest in a Global Warrant. A Definitive Warrant may not be exchanged for a
- ----------------------------
beneficial interest in a Global Warrant except upon satisfaction of the
requirements set forth below. Upon receipt by the Warrant Agent of a Definitive
Warrant, duly endorsed or accompanied by appropriate instruments of transfer, in
form satisfactory to the Warrant Agent, together with:
(A) certification, substantially in the form of Exhibit B hereto,
---------
that such Definitive Warrant is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the Securities
Act; and
(B) written instructions directing the Warrant Agent to make, or to
direct the Depositary to make, an endorsement on the Global
Warrant to reflect an increase in the aggregate amount of the
Warrants represented by the Global Warrant,
then the Warrant Agent shall cancel such Definitive Warrant and cause, or direct
the Depositary to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Warrant Agent, the aggregate
amount of the Global Warrant to be increased accordingly. If no Global Warrant
is then outstanding, the Company shall issue and the Warrant Agent shall
countersign a new Global Warrant in the appropriate amount.
(c) Transfer and Exchange of Global Warrants. The transfer and
----------------------------------------
exchange of Global Warrants or beneficial interests therein shall be effected
through the Depositary, in accordance with this Warrant Agreement (including the
restrictions on transfer set forth herein) and the procedures of the Depositary
therefor.
<PAGE>
-10-
(d) Transfer of a Beneficial Interest in a Global Warrant for a
-----------------------------------------------------------
Definitive Warrant.
- ------------------
(i) Any person having a beneficial interest in a Global Warrant may upon
request exchange such beneficial interest for a Definitive Warrant.
Upon receipt by the Warrant Agent of written instructions or such
other form of instructions as is customary for the Depositary from the
Depositary or its nominee on behalf of any person having a beneficial
interest in a Global Warrant and upon receipt by the Warrant Agent of
a written order or such other form of instructions as is customary for
the Depositary or the person designated by the Depositary as having
such a beneficial interest containing registration instructions and,
in the case of any such transfer or exchange prior to the Resale
Restriction Termination Date, the following additional information and
documents, however, it being understood that the Warrant Agent need
not determine which clause (A) through (D) below is applicable:
(A) if such beneficial interest is being transferred to the person
designated by the Depositary as being the beneficial owner, a
certification from such person to that effect (in substantially
the form of Exhibit B hereto); or
---------
(B) if such beneficial interest is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the Securities
Act or pursuant to an exemption from registration in accordance
with Rule 144 or Regulation S under the Securities Act or
pursuant to an effective registration statement under the
Securities Act, a certification to that effect from the
transferee or transferor (in substantially the form of Exhibit B
---------
hereto) and an opinion of counsel and/or other information
satisfactory to the Company to the effect that such transfer is
in compliance with the Securities Act; or
(C) if such beneficial interest is being transferred to an
institutional "accredited investor" within the meaning of
subparagraphs (a)(1), (a)(2), (a)(3) or (a)(7) of Rule 501 under
the Securities Act, delivery of a Certificate of Transfer in the
form
<PAGE>
-11-
of Exhibit C hereto and an opinion of counsel and/or other
---------
information satisfactory to the Company to the effect that such
transfer is in compliance with the Securities Act; or
(D) if such beneficial interest is being transferred in reliance on
another exemption from the registration requirements of the
Securities Act, a certification to that effect (in substantially
the form of Exhibit B hereto) and an opinion of counsel from the
---------
transferee or transferor reasonably acceptable to the Company to
the effect that such transfer is in compliance with the
Securities Act,
then the Warrant Agent will cause, in accordance with the standing
instructions and procedures existing between the Depositary and the
Warrant Agent, the aggregate amount of the Global Warrant to be
reduced accordingly and, following such reduction, the Company will
execute and, upon receipt of an order for countersignature in the form
of an Officers' Certificate (as defined), the Warrant Agent will
countersign and deliver to the transferee a Definitive Warrant.
(ii) Definitive Warrants issued in exchange for a beneficial interest in
a Global Warrant pursuant to this Section 1.06(d) shall be registered
in such names and in such authorized denominations as the Depositary,
pursuant to instructions from its direct or indirect participants or
otherwise, shall instruct the Warrant Agent in writing. The Warrant
Agent shall deliver such Definitive Warrants to the persons in whose
names such Definitive Warrants are so registered.
(e) Restrictions on Transfer and Exchange of Global Warrants.
--------------------------------------------------------
Notwithstanding any other provisions of this Warrant Agreement (other than the
provisions set forth in subsection (f) of this Section 1.07), a Global Warrant
may not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) Authentication of Definitive Warrants in Absence of Depositary.
--------------------------------------------------------------
If at any time:
<PAGE>
-12-
(i) the Depositary for the Warrants notifies the Company that the
Depositary is unwilling or unable to continue as Depositary for the
Global Warrant and a successor Depositary for the Global Warrant is
not appointed by the Company within 90 days after delivery of such
notice; or
(ii)the Company, at its sole discretion, notifies the Warrant Agent in
writing that it elects to cause the issuance of Definitive Warrants
under this Warrant Agreement,
then the Company will execute, and the Warrant Agent, upon receipt of an
officers' certificate signed by two officers of the Company (one of whom must be
the principal executive officer, principal financial officer or principal
accounting officer) (an "Officers' Certificate") requesting the countersignature
---------------------
and delivery of Definitive Warrants, will countersign and deliver Definitive
Warrants, in an aggregate number equal to the aggregate number of warrants
represented by the Global Warrant, in exchange for such Global Warrant.
(g) Legends.
-------
(i) Except as permitted by the following paragraph (ii), each Warrant
Certificate evidencing the Global Warrants and the Definitive Warrants
(and all Warrants issued in exchange therefor or substitution thereof)
shall bear a legend substantially to the following effect:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A PROMULGATED UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3)
OR (7) PROMULGATED UNDER THE SECURITIES ACT) (AN INSTITUTIONAL "ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN
AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES
ACT, (2) AGREES THAT IT WILL NOT WITHIN THREE YEARS (OR SUCH SHORTER PERIOD
AS MAY THEN BE REQUIRED BY RULE 144(k) UNDER THE SECURITIES ACT) AFTER THE
ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS
SECURITY, EXCEPT (A) TO THE ISSUER THEREOF, OR ANY SUBSIDIARY THEREOF, (B)
TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A PROMULGATED
UNDER THE
<PAGE>
-13-
SECURITIES ACT, (C) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO
SUCH TRANSFER, FURNISHED (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-
DEALER) TO THE WARRANT AGENT A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF
THIS SECURITY, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 PROMULGATED UNDER THE SECURITIES ACT, (E) PURSUANT
TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 PROMULGATED UNDER
THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER
OF THIS SECURITY WITHIN THREE YEARS (OR SUCH SHORTER PERIOD AS MAY THEN BE
REQUIRED BY RULE 144(k) UNDER THE SECURITIES ACT) AFTER THE ORIGINAL
ISSUANCE OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL
ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO
THE WARRANT AGENT AND THE ISSUER SUCH CERTIFICATIONS, WRITTEN LEGAL
OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR
IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S
UNDER THE SECURITIES ACT.
(ii) Upon any sale or transfer of a Warrant pursuant to Rule 144 under
the Securities Act in accordance with Section 1.07 hereof or under an
effective registration statement under the Securities Act:
(A) in the case of any Warrant that is a Definitive Warrant, the
Warrant Agent shall permit the holder thereof to exchange such
Warrant for a Definitive Warrant that does not bear the legends
set forth above and rescind any related restriction on the
transfer of such Warrant; and
(B) any such Warrant represented by a Global Warrant shall not be
subject to the provisions set forth in (i) above (such sales or
transfers being subject only to the provisions of Section 1.06(c)
hereof);
<PAGE>
-14-
provided, however, that with respect to any request for an
-------- -------
exchange of a Warrant that is represented by a Global Warrant for
a Definitive Warrant that does not bear the legend set forth
above, which request is made in reliance upon Rule 144 under the
Securities Act, the holder thereof shall certify in writing to
the Warrant Agent that such request is being made pursuant to
Rule 144 under the Securities Act (such certification to be
substantially in the form of Exhibit B hereto).
---------
(h) Cancellation and/or Adjustment of a Global Warrant. At such time
--------------------------------------------------
as all beneficial interests in a Global Warrant have either been exchanged for
Definitive Warrants, redeemed, repurchased or cancelled, such Global Warrant
shall be returned to or retained and cancelled by the Warrant Agent. At any
time prior to such cancellation, if any beneficial interest in a Global Warrant
is exchanged for Definitive Warrants, redeemed, repurchased or cancelled, the
number of Warrants represented by such Global Warrant shall be reduced and an
endorsement shall be made on such Global Warrant, by the Warrant Agent to
reflect such reduction.
(i) Obligations with Respect to Transfers and Exchanges of Definitive
-----------------------------------------------------------------
Warrants.
- --------
(i) To permit registrations of transfers and exchanges, the Company
shall execute, at the Warrant Agent's request, and the Warrant
Agent shall countersign Definitive Warrants and Global Warrants.
(ii) All Definitive Warrants and Global Warrants issued upon any
registration, transfer or exchange of Definitive Warrants or Global
Warrants shall be the valid obligations of the Company, entitled to
the same benefits under this Warrant Agreement as the Definitive
Warrants or Global Warrants surrendered upon the registration of
transfer or exchange.
(iii) Prior to due presentment for registration of transfer of any
Warrant, the Warrant Agent and the Company may deem and treat the
person in whose name any Warrant is registered as the absolute
owner of such Warrant, and neither the Warrant Agent nor the
Company shall be affected by notice to the contrary.
<PAGE>
-15-
(j) Payment of Taxes. The Company will pay all documentary stamp
----------------
taxes attributable to the initial issuance of the Warrant Shares upon the
exercise of Warrants; provided, however, that the Company shall not be required
-------- -------
to pay any tax or taxes which may be payable in respect of any transfer involved
in the issue of any Warrant Certificates or any certificates for the Warrant
Shares in a name other than that of the registered holder of a Warrant
Certificate surrendered upon the exercise of a Warrant, and the Company shall
not be required to issue or deliver such Warrant Certificates unless or until
the person or persons requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
SECTION 1.08. Lost, Stolen, Destroyed, Defaced or Mutilated Warrant
-----------------------------------------------------
Certificates. Upon receipt by the Company and the Warrant Agent (or any agent
- ------------
of the Company or the Warrant Agent, if requested by the Company) of evidence
satisfactory to them of the loss, theft, destruction, defacement, or mutilation
of any Warrant Certificate and of indemnity satisfactory to them and, in the
case of mutilation or defacement, upon surrender thereof to the Warrant Agent
for cancellation, then, in the absence of notice to the Company or the Warrant
Agent that such Warrant Certificate has been acquired by a bona fide purchaser
---- ----
or holder in due course, the Company shall execute, and an authorized signatory
of the Warrant Agent shall manually countersign and deliver, in exchange for or
in lieu of the lost, stolen, destroyed, defaced or mutilated Warrant
Certificate, a new Warrant Certificate representing a like number of Warrants,
bearing a number or other distinguishing symbol not contemporaneously
outstanding. Upon the issuance of any new Warrant Certificate under this
Section, the Company may require the payment from the holder of such Warrant
Certificate of a sum sufficient to cover any tax, stamp tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Warrant Agent and the
Registrar) in connection therewith. Every substitute Warrant Certificate
executed and delivered pursuant to this Section in lieu of any lost, stolen or
destroyed Warrant Certificate shall constitute an additional contractual
obligation of the Company, whether or not the lost, stolen or destroyed Warrant
Certificate shall be at any time enforceable by anyone, and shall be entitled to
the benefits of (but shall be subject to all the limitations of rights set forth
in) this Agreement equally and proportionately with any and all other Warrant
Certificates duly executed and delivered hereunder. The provisions of this
Section 1.08 are exclusive with respect to the replacement of lost, stolen,
destroyed, defaced or mutilated Warrant Certificates and shall
<PAGE>
-16-
preclude (to the extent lawful) any and all other rights or remedies
notwithstanding any law or statute existing or hereafter enacted to the contrary
with respect to the replacement of lost, stolen, destroyed, defaced or mutilated
Warrant Certificates.
The Warrant Agent is hereby authorized to countersign in accordance
with the provisions of this Agreement, and deliver the new Warrant Certificates
required pursuant to the provisions of this Section.
SECTION 1.09. Offices for Exercise, etc. So long as any of the
-------------------------
Warrants remain outstanding, the Company will designate and maintain in the
Borough of Manhattan, The City of New York: (a) an office or agency where the
Warrant Certificates may be presented for exercise, (b) an office or agency
where the Warrant Certificates may be presented for registration of transfer and
for exchange (including the exchange of temporary Warrant Certificates for
definitive Warrant Certificates pursuant to Section 1.05 hereof), and (c) an
office or agency where notices and demands to or upon the Company in respect of
the Warrants or of this Agreement may be served. The Company may from time to
time change or rescind such designation, as it may deem desirable or expedient;
provided, however, that an office or agency shall at all times be maintained in
- -------- -------
the Borough of Manhattan, The City of New York, as provided in the first
sentence of this Section. The Company hereby designates the Warrant Agent at 14
Wall Street, 8th Floor, Window #2 in the Borough of Manhattan, The City of New
York (the "Warrant Agent Office"), as the initial agency maintained for each
--------------------
such purpose. In case the Company shall fail to maintain any such office or
agency or shall fail to give such notice of the location or of any change in the
location thereof, presentations and demands may be made and notice may be served
at the Warrant Agent Office and the Company appoints the Warrant Agent as its
agent to receive all such presentations, surrenders, notices and demands.
ARTICLE II
DURATION, EXERCISE OF WARRANTS AND EXERCISE PRICE
-------------------------------------------------
SECTION 2.01. Duration of Warrants. Subject to the terms and
--------------------
conditions established herein, the Warrants shall expire at 5:00 p.m., New York
City time, March 1, 2007 (the "Expiration Date"). Each Warrant may be exercised
---------------
on any Business Day (as defined below) on or after the Exercise Commencement
Date (as defined below) and on or prior to the close of business on the
Expiration Date.
<PAGE>
-17-
Any Warrant not exercised before the close of business on the Expiration
Date shall become void, and all rights of the holder under the Warrant
Certificate evidencing such Warrant and under this Agreement shall cease.
"Business Day" shall mean any day on which (i) banks in New York City, (ii)
------------
the principal national securities exchange or market, if any, on which the
Common Stock is listed or admitted to trading and (iii) the principal national
securities exchange or market, if any, on which the Warrants are listed or
admitted to trading are open for business.
SECTION 2.02. Exercise, Exercise Price, Settlement and Delivery. (a)
-------------------------------------------------
Subject to the provisions of this Agreement, a holder of each Warrant shall have
the right to purchase from the Company on or after the occurrence of an Exercise
Event (the date of the occurrence of an Exercise Event, the "Exercise
--------
Commencement Date") and on or prior to the close of business on the Expiration
- -----------------
Date fully paid, registered and nonassessable Warrant Shares, subject to
adjustment in accordance with Article V hereof, (x) in the case of the Initial
Warrants, 27.524674 and (y) in the case of the Contingent Warrants, according
to the following formula:
S x .08
----
A = .92
----------
N
where:
A = the number of shares each Contingent Warrant shall have the right to
purchase
S = the number of shares of Common Stock of the Company on a fully-diluted
basis on August 15, 1999 (such number will not include shares issuable upon
exercise of the Contingent Warrants)
N = the aggregate principal amount of Notes outstanding on August 15, 1999
divided by 1000
in each case at the purchase price of $.25 for each Warrant exercised (the
"Exercise Price"). The number of Warrant Shares for which a Warrant may be
- ---------------
exercised (the "Exercise Rate") shall be subject to adjustment from time to
-------------
time as set forth in Article V hereof.
<PAGE>
-18-
"Change of Control" means the occurrence of one or more of the following
-----------------
events:
(i) any sale, lease, exchange, transfer or other disposition (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company and the Restricted Subsidiaries, taken as a whole, to
any Person or group of related Persons for purposes of Section 13(d) of the
Exchange Act (a "Group") (whether or not otherwise in compliance with the
provisions of the Indenture) other than a Permitted Holder, in any such event
pursuant to a transaction in which, immediately after the consummation thereof
the Person or Persons owning a majority of the voting power of the Voting Stock
of the Company immediately prior to the consummation of such transaction, shall
not own directly or indirectly, a majority of the voting power of the Voting
Stock of the Person to whom such sale, lease, exchange, transfer or other
disposition has been made; or
(ii) during any consecutive two-year period, individuals who at the beginning
of such period constituted the Board of Directors of the Company (together with
any new directors who were nominated by a Permitted Holder or whose election to
such Board of Directors or whose nomination for election by the stockholders of
the Company was approved by a vote of a majority of the directors of the Company
then still in office who were either directors at the beginning of such period
of whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the Board of Directors of the Company
then in office; or
(iii) any Person or Group (other than a Permitted Holder) is or becomes, by
purchase, tender offer, exchange offer, open market purchases, privately
negotiated purchases or otherwise, the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, whether or not applicable, except that a
Person shall be deemed to have "beneficial ownership" of all securities that
such Person has the right to acquire, whether such right is exercisable
immediately or after the passage of time only), directly or indirectly, of more
than 50% of the total then outstanding voting power of the Voting Stock of the
Company (for the purpose of this clause (iii), such Person or Group will be
deemed to "beneficially own" (determined as aforesaid) the voting power of the
Voting Stock of a corporation (the "specified corporation") held by any other
corporation (the "parent corporation") if such Person or Group "beneficially
owns," directly or indirectly, a majority of the
<PAGE>
-19-
voting power of the Voting Stock of such parent corporation); or
(iv) the Company consolidates with or merges into another Person and the
stockholders immediately prior to such merger or consolidation hold less than a
majority of the voting power of the Voting Stock of the resulting entity.
"Exercise Event" means, with respect to each Warrant, the date of the
--------------
earliest of: (1) March 1, 1998; (2) 30 days after the occurrence of a Change of
Control and (3) the date that is 180 days after the consummation of an initial
public offering of the Company's Common Stock.
"Permitted Holder" means any of (i) Douglas J. Ranalli, any spouse or
----------------
lineal descendant thereof, any trust the beneficiaries of which are any of the
foregoing or any affiliate of the foregoing, and (ii) SingTel and its
affiliates.
"Public Equity Offering" means a primary underwritten public offering
----------------------
(excluding any offering pursuant to Form S-8 under the Securities Act or any
other publicly registered offering pursuant to the Securities Act pertaining to
an issuance of shares of Common Stock or securities exercisable therefor under
any benefit plan, employee compensation plan, or employee or director stock
purchase plan) of Common Stock of the Company pursuant to an effective
registration statement under the Securities Act.
"Restricted Subsidiaries" means any present or future Subsidiary of the
-----------------------
Company which, as of the determination date, is not an Unrestricted Subsidiary.
"SingTel" means Singapore Telecommunications Limited, its successors and
-------
assigns.
"Subsidiary," with respect to any Person, means (i) any corporation of
----------
which at least a majority of the outstanding Voting Stock shall at the time be
owned, directly or indirectly, by such Person or (ii) any other Person of which
at least a majority of the outstanding Voting Stock is at the time, directly or
indirectly, owned by such Person.
"Person" means an individual, partnership, corporation, limited liability
------
company, unincorporated organization, trust or joint venture, or a governmental
agency or political subdivision thereof.
<PAGE>
-20-
"Unrestricted Subsidiary" means a Subsidiary of the Company so designated
-----------------------
by a resolution adopted by the Board of Directors of the Company in accordance
with Section 4.15 of the Indenture.
"Voting Stock" means, with respect to any Person, securities of any class
------------
or classes of Capital Stock of such Person entitling the holders thereof
(whether at all times or only so long as no senior class of stock has voting
power by reason of any contingency) to vote in the election of members of the
Board of Directors of such Person.
(b) Warrants may be exercised on or after the Exercise Commencement Date by
(i) surrendering at any office or agency maintained for that purpose by the
Company pursuant to Section 1.09 (each a "Warrant Exercise Office") the Warrant
-----------------------
Certificate evidencing such Warrants with the form of election to purchase
Warrant Shares set forth on the reverse side of the Warrant Certificate (the
"Election to Exercise") duly completed and signed by the registered holder or
- ---------------------
holders thereof or by the duly appointed legal representative thereof or by a
duly authorized attorney, and in the case of a transfer, such signature shall be
guaranteed by an Eligible Guarantor Institution, and (ii) paying in full the
Exercise Price for each such Warrant exercised and any other amounts required to
be paid pursuant to Section 1.07(j) hereof. Each Warrant may be exercised only
in whole.
(c) Simultaneously with the exercise of each Warrant, payment in full of
the Exercise Price shall be made in cash or by certified or official bank check
to be delivered to the office or agency where the Warrant Certificate is being
surrendered. No payment or adjustment shall be made on account of any dividends
on the Warrant Shares issued upon exercise of a Warrant.
(d) Upon such surrender of a Warrant Certificate and payment and collection
of the Exercise Price at any Warrant Exercise Office (other than any Warrant
Exercise Office that also is an office of the Warrant Agent), such Warrant
Certificate and payment shall be promptly delivered to the Warrant Agent. The
"Exercise Date" for a Warrant shall be the date when all of the items referred
- --------------
to in the first sentence of paragraphs (b) and (c) of this Section 2.02 are
received by the Warrant Agent at or prior to 11:00 a.m., New York City time, on
a Business Day and the exercise of the Warrants will be effective as of such
Exercise Date. If any items referred to in the first sentence of paragraphs (b)
and (c) are received after 11:00 a.m., New York City time, on a Business Day,
the exercise of the Warrants to which such item
<PAGE>
-21-
relates will be effective on the next succeeding Business Day. Notwithstanding
the foregoing, in the case of an exercise of Warrants on the Expiration Date (as
defined in Section 2.01), if all of the items referred to in the first sentence
of paragraphs (b) and (c) are received by the Warrant Agent at or prior to 5:00
p.m., New York City time, on such Expiration Date, the exercise of the Warrants
to which such items relate will be effective on the Expiration Date.
(e) Upon the exercise of a Warrant in accordance with the terms hereof, the
receipt of a Warrant Certificate and payment of the Exercise Price, the Warrant
Agent shall: (i) cause an amount equal to the Exercise Price to be paid to the
Company by crediting the same to the account designated by the Company in
writing to the Warrant Agent for that purpose; (ii) advise the Company
immediately by telephone of the amount so deposited to the Company's account and
promptly confirm such telephonic advice in writing; and (iii) as soon as
practicable, advise the Company in writing of the number of Warrants exercised
in accordance with the terms and conditions of this Agreement and the Warrant
Certificates, the instructions of each exercising holder of the Warrant
Certificates with respect to delivery of the Warrant Shares to which such holder
is entitled upon such exercise, and such other information as the Company shall
reasonably request.
(f) Subject to Section 5.02 hereof and the terms and provisions of the
Warrant Shares Registration Rights Agreement, as soon as practicable after the
exercise of any Warrant or Warrants in accordance with the terms hereof, the
Company shall issue or cause to be issued to or upon the written order of the
registered holder of the Warrant Certificate evidencing such exercised Warrant
or Warrants, a certificate or certificates evidencing the Warrant Shares to
which such holder is entitled, in fully registered form, registered in such name
or names as may be directed by such holder pursuant to the Election to Exercise,
as set forth on the reverse of the Warrant Certificate. Such certificate or
certificates evidencing the Warrant Shares shall be deemed to have been issued
and any persons who are designated to be named therein shall be deemed to have
become the holder of record of such Warrant Shares as of the close of business
on the Exercise Date.
SECTION 2.03. Cancellation of Warrant Certificates. In the event the
------------------------------------
Company shall purchase or otherwise acquire Warrants, the Warrant Certificates
evidencing such Warrants may thereupon be delivered to the Warrant Agent, and if
so delivered, shall at the Company's written instruction be canceled by it and
retired. The Warrant Agent shall cancel all Warrant Certificates properly
<PAGE>
-22-
surrendered for exchange, substitution, transfer or exercise. The Warrant Agent
shall deliver such canceled Warrant Certificates to the Company.
ARTICLE III
OTHER PROVISIONS RELATING TO
RIGHTS OF HOLDERS OF WARRANTS
-----------------------------
SECTION 3.01. Enforcement of Rights. (a) Notwithstanding any of the
---------------------
provisions of this Agreement, any holder of any Warrant Certificate, without the
consent of the Warrant Agent, the holder of any Warrant Shares or the holder of
any other Warrant Certificate, may, in and for his own behalf, enforce, and may
institute and maintain any suit, action or proceeding against the Company
suitable to enforce, his right to exercise the Warrant or Warrants evidenced by
his Warrant Certificate in the manner provided in such Warrant Certificate and
in this Agreement.
(b) Neither the Warrants nor any Warrant Certificate shall entitle the
holders thereof to any of the rights of a holder of Warrant Shares, including,
without limitation, the right to vote or to receive any dividends or other
payments or to consent or to receive notice as stockholders in respect of the
meetings of stockholders or for the election of directors of the Company or any
other matter, or any rights whatsoever as stockholders of the Company.
ARTICLE IV
CERTAIN COVENANTS OF THE COMPANY
--------------------------------
SECTION 4.01. Payment of Taxes. The Company will pay all documentary
----------------
stamp taxes attributable to the initial issuance of Warrants and of the Warrant
Shares upon the exercise of Warrants; provided, however, that the Company shall
-------- -------
not be required to pay any tax or other governmental charge which may be payable
in respect of any transfer or exchange of any Warrant Certificates or any
certificates for Warrant Shares in a name other than the registered holder of a
Warrant Certificate surrendered upon the exercise of a Warrant. In any such
case, no transfer or exchange shall be made unless or until the person or
persons requesting issuance thereof shall have paid to the Company the amount of
such tax or other governmental charge or shall have established to the
satisfaction of the Company that such tax or other governmental charge has been
paid or an exemption is available therefrom.
<PAGE>
-23-
SECTION 4.02. Compliance with the Warrant Shares Registration Rights
------------------------------------------------------
Agreement. Prior to the occurrence of an Exercise Event the Company will take
- ---------
all such action as is necessary to cause the offer and sale by the Company of
the Warrant Shares issuable upon exercise of the Warrants to be registered or
otherwise qualified under the provisions of the Securities Act and pursuant to
all applicable state securities laws and to provide for the issuance of all
Warrant Shares delivered upon exercise of the Warrants pursuant to an effective
registration statement under the Securities Act, as provided in the Warrant
Shares Registration Rights Agreement. The Warrant Agent shall have no duty to
monitor when such registration or qualification is necessary nor shall the
Warrant Agent be responsible for the Company's failure to comply with this
Section 4.02.
SECTION 4.03. Rules 144 and 144A. The Company covenants that it 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 Securities and
Exchange Commission thereunder in a timely manner in accordance with the
requirements of the Securities Act and the Exchange Act and, if at any time the
Company is not required to file such reports, it will, upon the request of any
holder or beneficial owner of Warrants, make available such information
necessary to permit sales pursuant to Rule 144A under the Securities Act. The
Company further covenants that it will take such further action as any holder or
beneficial owner of Warrants may reasonably request, all to the extent required
from time to time to enable such holder or beneficial owner to sell Warrants
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144(k) and Rule 144A under the Securities Act,
as such Rules may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Securities and Exchange Commission.
SECTION 4.04. Repurchase of Warrants and Warrant Shares. (i) (a) In
-----------------------------------------
the event that a Public Equity Offering shall not have occurred on or prior to
March 1, 2002 resulting in gross proceeds to the Company of at least $35.0
million, the Company shall give written notice (the "Notice of Election Right")
------------------------
to the holders of Warrants or Warrant
<PAGE>
-24-
Shares within 60 days after March 1, 2002 of the holders' right to the election
described herein, together with a certificate of election (the "Certificate of
--------------
Election") substantially in the form of Exhibit D to this Agreement, which
- --------- ---------
notice shall describe with reasonable detail the holders' right to election.
Within 60 days after receipt of such Notice of Election Right, the election (as
evidenced by the choice elected in the Notice of Election Right) of the holders
of Warrants or Warrant Shares who complete and return their Certificates of
Election to the Warrant Agent (the "Electing Holders") shall be deemed to be
----------------
notice (which notice shall be irrevocable) (such notice, the "Election Notice"
---------------
and the date the Election Notice is given, the "Notice Date") to the Company of
------------
the holders' election to require the Company to offer to purchase all of such
Electing Holders' Warrants or Warrant Shares at a price per Warrant or Warrant
Share, as applicable (the "Warrant Purchase Price" and "Warrant Share Purchase
---------------------- ----------------------
Price", respectively), equal to the fair market value thereof as determined in
- ------
accordance with the procedures described below, on the Warrant Purchase Date (as
defined below).
(b) The Company shall, in connection with sending the Notice of Election
Right, select an independent investment banking or appraisal firm of national
standing (an "Independent Financial Expert") and cause such Independent
----------------------------
Financial Expert to deliver to the Company a written report (the "First
-----
Valuation Report") stating the methods of valuation considered or used and the
- ----------------
fair market value of each of the Warrants and Warrant Shares, as applicable, as
of December 31, 2001 (the "Valuation Date") and containing a statement as to the
--------------
nature and scope of the examination or investigation upon which the
determination of fair market value was made and the factors and bases underlying
such determination.
(c) In the Election Notice the Electing Holders holding not less than 66-
2/3% of the Warrants or Warrant Shares held by the Electing Holders may elect to
appoint a second Independent Financial Expert to make a determination of the
fair market value of the Warrants and Warrant Shares as of the Valuation Date.
If they so elect, the Electing Holders who hold a majority of the Warrants and
Warrant Shares held by the Electing Holders shall cause such Independent
Financial Expert, within 45 days of such election, to deliver to the Company
(with a copy to the Warrant Agent) a written report (the "Second Valuation
----------------
Report") of the fair market value of each of the Warrants and Warrant Shares as
- ------
of the Valuation Date substantially similar in content as to methods, nature and
scope of examination and factors and bases underlying valuation and disclosure
thereof to the First Valuation Report.
(d) The Company shall have ten Business Days after receipt of the Second
Valuation Report to object to the fair market value of the Warrants and Warrant
Shares as set forth in the Second Valuation Report. If the Company does not
object, such fair market value shall be the Warrant Purchase Price or Warrant
Shares Purchase Price, as applicable. If the Company does object, it shall give
written notice thereof to the holders of the Warrants, the Warrant Shares and
the Warrant Agent. The Electing Holders who
<PAGE>
-25-
hold a majority of the Warrants held by the Electing Holders and the Company
shall, within 20 Business Days after the Company so objects, select a third
Independent Financial Expert mutually acceptable to both parties to prepare a
written report (the "Third Valuation Report") of its determination of the fair
----------------------
market value of the Warrants and Warrant Shares as of the Valuation Date, which
report shall be delivered to the Company and the holders of the Warrants and
Warrant Shares (with a copy to the Warrant Agent) within 30 days after the
selection of such Independent Financial Expert. Such valuation shall contain a
statement as to the nature and scope of the examination or investigation upon
which the determination of fair market value was made and the factors and bases
underlying such determination. If the holders and the Company cannot agree to
the selection of an Independent Financial Expert, the New York office of the
following firms (or their successor firms) shall serve as the Independent
Financial Expert in the following order of priority; provided, however, that
-------- -------
such firm has not, for the prior three years, rendered professional services to
the Company or its Affiliates:
(1) Price Waterhouse & Co.
(2) Deloitte & Touche
(3) Ernst & Young
(4) Coopers & Lybrand
(e) The fair market value determined in the Third Valuation Report shall
constitute the Warrant Purchase Price or Warrant Shares Purchase Price, as
applicable; provided, however, that if the Warrant Purchase Price or Warrant
-------- -------
Shares Purchase Price, as applicable, contained in the Third Valuation Report is
more than the higher of the first two valuations, the higher of the first two
valuations shall constitute the Warrant Purchase Price or Warrant Shares
Purchase Price, as applicable; provided, further, however, that if the Warrant
-------- ------- -------
Purchase Price or Warrant Shares Purchase Price, as applicable, contained in the
Third Valuation Report is less than the lower of the first two valuations, the
lower of the first two valuations shall constitute the Warrant Purchase Price or
Warrant Shares Purchase Price, as applicable. If any Independent Financial
Expert becomes aware of any material changes since the Valuation Date, after
reasonable inquiry with respect thereto, in the business or financial condition
or prospects of the Company and its Subsidiaries, such Independent Financial
Expert shall specify such material changes in its written report and shall
revise its valuation as it deems appropriate. The fees and other costs of each
of the first two Independent Financial Experts shall be borne by the party
appointing such Independent Financial Expert, and the fees and other costs of
the third
<PAGE>
-26-
Independent Financial Expert shall be shared equally by the Company and the
holders of Warrants and Warrant Shares; provided, however, that all indemnities
-------- -------
in respect of any Independent Financial Expert shall be for the account of the
Company.
(f) The Company shall be obligated to purchase for cash the Warrants or
Warrant Shares at the Warrant Purchase Price or Warrant Shares Purchase Price,
respectively.
(ii) Within 20 Business Days after the Warrant Purchase Price or Warrant
Shares Purchase Price, as applicable, has been determined in accordance with any
required offer to purchase Warrants and Warrant Shares, the Company shall
provide notice of its offer to purchase (the "Purchase Offer") to the holders of
--------------
Warrants and Warrant Shares by mailing by first class mail a notice of such
offer (the "Purchase Notice") to their addresses as set forth in the Warrant
---------------
Register with a copy to the Warrant Agent. The date of the mailing of the
Purchase Notice is hereafter called the "Purchase Notice Date." The Purchase
--------------------
Offer must remain open for 20 Business Days after the Purchase Notice Date (or
such longer period as may be required by law) and the date set for the purchase
of the Warrants and Warrant Shares shall be the "Warrant Purchase Date." The
---------------------
notice, which shall govern the terms of the Purchase Offer, shall include such
disclosures as are required by law and shall state:
(a) that the Warrant Purchase Date has been determined, which shall be a
Business Day, specified in such notice, that is not earlier than 30 days or
later than 60 days from the date such notice is mailed;
(b) that Holders electing to have Warrants or Warrant Shares, as applicable,
purchased pursuant to a Purchase Offer will be required to surrender their
Warrants or Warrant Shares to the Warrant Agent at the address specified in the
notice prior to 5:00 p.m., New York City time, on the Warrant Purchase Date
with, in the case of the Warrants, the "Option of Holder to Elect Purchase" on
the reverse thereof completed and must complete any form letter of transmittal
proposed by the Company and be completed correctly by such Holder and be
acceptable to the Warrant Agent;
(c) that Holders of Warrants or Warrant Shares will be entitled to withdraw
their election if the Paying Agent receives, not later than 5:00 p.m., New York
City time, on the Business Day prior to the Warrant or Warrant Shares Purchase
Date, a telegram, telex, facsimile transmission or letter
<PAGE>
-27-
setting forth the name of the Holder, the number of Warrants or Warrant Shares
the Holders delivered for purchase, the Warrant Certificate number (if any), in
the case of the Warrants, or Warrant Share certificate number, if any, in the
case of the Warrant Shares, and a statement that such Holder is withdrawing its
election to have such Warrants or Warrant Shares, as applicable, purchased;
(d) that Holders whose Warrants or Warrant Shares are purchased only in part
will be issued Warrant Certificates or Warrant Share Certificates, as applicable
representing the number of unpurchased Warrants or Warrant Shares;
(e) the instructions that Holders must follow in order to tender their
Warrants or Warrant Shares; and
(f) information concerning the business of the Company, the most recent
annual and quarterly reports of the Company filed with the SEC pursuant to the
Exchange Act (or, if the Company is not then required to file any such reports
with the SEC, the comparable reports prepared pursuant to Section 10.08 of the
Indenture as in effect on the date hereof), a description of material
developments in the Company's business, information with respect to pro forma
---------
historical financial information after giving effect to such Purchase Offer and
such other information concerning the circumstances and relevant facts regarding
such Purchase Offer as would be material to a Holder of Warrants or Warrant
Shares in connection with the decision of such Holder as to whether or not it
should tender Warrants pursuant to the Purchase Offer.
On the Warrant Purchase Date, the Company will (i) accept for payment all
Warrants or Warrant Shares or portions thereof tendered pursuant to the Purchase
Offer, subject to the limitations set forth herein, (ii) deposit with the
Warrant Agent cash in an amount equal to the Warrant Purchase Price and Warrant
Shares Purchase Price for all Warrants or Warrant Shares or portions thereof
accepted for payment, and (iii) deliver or cause to be delivered to the Warrant
Agent all Warrants tendered pursuant to the Purchase Offer. If less than all
Warrants tendered pursuant to the Purchase Offer are accepted for payment with
cash by the Company for any reason consistent with this Warrant Agreement,
selection of the Warrants or Warrant Shares to be purchased by the Company shall
be on a pro rata basis. The Warrant Agent shall promptly mail to each Holder of
--------
Warrants or Warrant Shares or portions thereof accepted for payment the Warrant
Purchase Price or Warrant Shares Purchase Price. The Warrant Agent shall
promptly
<PAGE>
-28-
countersign and mail to such Holder of Warrants accepted for payment in part a
new Warrant Certificate representing the number of any unpurchased Warrants, and
any Warrants not accepted for payment shall be promptly returned to the Holder
of such Warrants. The Company shall promptly issue and mail to such Holder of
Warrant Shares accepted for payment in part a new Warrant Share Certificate
representing the number of any unpurchased Warrant Shares, and any Warrant
Shares not accepted for payment shall be promptly returned to the Holder of such
Warrant Shares.
The Company will comply with the applicable tender offer rules, including
the requirements of Rule 14e-1 under the Exchange Act, and all other applicable
securities laws and regulations in connection with any Purchase Offer and will
be deemed not to be in violation of any of its covenants herein to the extent
such compliance is in conflict with such covenants.
SECTION 4.05. Reservation of Warrant Shares. The Company will at all
-----------------------------
times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Stock, for the purpose of
enabling it to satisfy any obligation to issue Warrant Shares upon exercise of
Warrants, the maximum number of shares of Common Stock which may then be
deliverable upon the exercise of all outstanding Warrants.
Before taking any action which would cause an adjustment pursuant to
Section 5.01 reducing the Exercise Price below the then par value of the Warrant
Shares, the Company will take any and all corporate action which may be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable Warrant Shares at the Exercise Price as so adjusted.
SECTION 4.06. Obtaining of Governmental Approvals. The Company will from
-----------------------------------
time to time take all action required to be taken by it which may be necessary
to obtain and keep effective any and all permits, consents and approvals of
governmental agencies and authorities and securities acts filings under United
States Federal and State laws, and the rules and regulations of all stock
exchanges on which the Warrants are listed, if any, which may be or become
requisite in connection with the issuance, sale, transfer, and delivery of the
Warrant Certificates, the exercise of the Warrants or the issuance, sale,
transfer and delivery of the Warrant Shares issued upon exercise of the
Warrants.
ARTICLE V
ADJUSTMENTS
-----------
<PAGE>
-29-
SECTION 5.01. Adjustment of Exercise Rate; Notices. The Exercise Rate is
------------------------------------
subject to adjustment from time to time as provided in this Section.
(a) Adjustment for Change in Capital Stock. If, after the date hereof, the
--------------------------------------
Company:
(i) pays a dividend or makes a distribution on its Common Stock in shares of
its Common Stock;
(ii) subdivides its outstanding shares of Common Stock into a greater number
of shares;
(iii) combines its outstanding shares of Common Stock into a smaller number
of shares;
(iv) pays a dividend or makes a distribution on its Common Stock in shares of
its Capital Stock (as defined below) (other than Common Stock or rights,
warrants, or options for its Common Stock to the extent such issuance or
distribution is covered by Section 5.03); or
(v) issues by reclassification of its Common Stock any shares of its Capital
Stock (other than rights, warrants or options for its Common Stock);
then the Exercise Rate in effect immediately prior to such action shall be
adjusted so that the holder of a Warrant thereafter exercised may receive the
number of shares of Capital Stock of the Company which such holder would have
owned immediately following such action if such holder had exercised the Warrant
immediately prior to such action or immediately prior to the record date
applicable thereto, if any.
The adjustment shall become effective immediately after the record date in
the case of a dividend or distribution and immediately after the effective date
in the case of a subdivision, combination or reclassification. In the event
that such dividend or distribution is not so paid or made or such subdivision,
combination or reclassification is not effected, the Exercise Rate
<PAGE>
-30-
shall again be adjusted to be the Exercise Rate which would then be in effect if
such record date or effective date had not been so fixed.
If after an adjustment a holder of a Warrant upon exercise of such Warrant
may receive shares of two or more classes of Capital Stock of the Company, the
Exercise Rate shall thereafter be subject to adjustment upon the occurrence of
an action taken with respect to any such class of Capital Stock as is
contemplated by this Article V with respect to the Common Stock, on terms
comparable to those applicable to Common Stock in this Article V.
(b) Adjustment for Rights Issue or Sale of Common Stock Below Current
-----------------------------------------------------------------
Market Value. If, at any time or from time to time, after the date hereof, the
- ------------
Company (i) distributes any rights, warrants or options to holders of its Common
Stock entitling them to purchase shares of Common Stock (other than securities
of the Company pursuant to "poison pills" to the extent such issuance or
distribution is covered by paragraph (h) below) at a price per share less than
the Current Market Value as of the Time of Determination (as defined in
paragraph (q) of this Section 5.01) or (ii) sells any Common Stock or any
securities convertible into or exchangeable or exercisable for the Common Stock
(other than pursuant to (1) the exercise of the Warrants, (2) any options,
warrants or rights outstanding as of the date of this Agreement, (3) without
limiting any options, warrants or rights outstanding pursuant to the immediately
preceding clause (2), any directors' plans and employee stock option or purchase
plans approved by the Company's Board of Directors, (4) the issuance of Common
Stock or options, warrants or rights to persons or entities providing financing
to the Company or any of its subsidiaries as a condition to the provision of
such financing, (5) any registered public offering, or (6) any security
convertible into, or exchangeable or exercisable for, the Common Stock as to
which the issuance thereof has previously been the subject of any required
adjustment pursuant to this Article V) at a price per share less than the
Current Market Value immediately prior to any adjustment required pursuant to
this Article V, the Exercise Rate shall be adjusted in accordance with the
formula:
E' = E x (O + N)
----------------------------
(O + (N x P/M))
where:
E' = the adjusted Exercise Rate;
E = the current Exercise Rate;
O = the number of shares of Common Stock outstanding on the record date for
the distribution to which this paragraph (b) is being applied or on the
date of sale of Common Stock at a price per share less than (i) the
Current
<PAGE>
-31-
Market Value immediately prior to any adjustment to which this paragraph
(b) applies, as the case may be;
N = the number of additional shares of Common Stock issuable upon exercise of
all rights, warrants and options so distributed or the number of shares of
Common Stock so sold or the maximum stated number of shares of Common
Stock issuable upon the conversion, exchange, or exercise of any such
convertible, exchangeable or exercisable securities, as the case may be;
P = the price per share of the additional shares of Common Stock upon the
exercise of any such rights, options or warrants so distributed or
pursuant to any such convertible, exchangeable or exercisable securities
so sold or the sale price of the shares so sold, as the case may be; and
M = the Current Market Value as of the Time of Determination or at the time of
sale, as the case may be, minus, with respect to a distribution of rights,
-----
warrants or options, in case (i) any other distribution has occurred to
which paragraph (a)(iv) applies or (ii) any other distribution has
occurred to which paragraph (c) applies, and with respect to which, in
either case, (x) the record date shall occur on or before the record date
for the distribution to which this paragraph (b) applies and (y) the Ex-
Dividend Time shall occur on or after the date of the Time of
Determination for the distribution to which this paragraph (b) applies,
the fair market value (on the record date for the distribution to which
this paragraph (b) applies) of (1) the Capital Stock of the Company
distributed in respect of each share of Common Stock in such paragraph
(a)(iv) distribution and (2) the assets of the Company or debt securities
or any rights, warrants or options to purchase securities of the Company
distributed in respect of each share of Common Stock in such paragraph (c)
distribution.
The Board of Directors of the Company shall reasonably and in good faith
determine fair market values for the purposes of this paragraph (b), which
determination shall be conclusive absent manifest error.
The adjustment shall become effective immediately after the record date for
the determination of stockholders entitled to receive the rights, warrants or
options to which this paragraph (b)
<PAGE>
-32-
applies or upon consummation of the sale of Common Stock, as the case may be. To
the extent that shares of Common Stock are not delivered after the expiration of
such rights or warrants, the Exercise Rate shall be readjusted to the Exercise
Rate which would otherwise be in effect had the adjustment made upon the
issuance of such rights or warrants been made on the basis of delivery of only
the number of shares of Common Stock actually delivered. In the event that such
rights or warrants are not so issued, the Exercise Rate shall again be adjusted
to be the Exercise Rate which would then be in effect if such date fixed for
determination of stockholders entitled to receive such rights or warrants had
not been so fixed.
No adjustment shall be made under this paragraph (b) if the application of
the formula stated above in this paragraph (b) would result in a value of E'
that is lower than the value of E.
(c) Adjustment for Other Distributions. If, after the date hereof, the
----------------------------------
Company distributes to holders of its Common Stock any of its assets or debt
securities or any rights, warrants or options to purchase Common Stock of the
Company (including securities or cash, but excluding (i) distributions that
would be permitted by the Company's debt agreements (including the Indenture)
and (ii) distributions of Capital Stock referred to in paragraph (a) and
distributions of rights, warrants or options referred to in paragraph (b), the
Exercise Rate shall be adjusted in accordance with the formula:
E' = E x M
---
M-F
where:
E' = the adjusted Exercise Rate;
E = the current Exercise Rate;
M = the Current Market Value, minus, in case any other distribution has
-----
occurred to which paragraph (a)(iv) applies, with respect to which (i) the
record date shall occur on or before the record date for the distribution
to which this paragraph (c) applies and (ii) the Ex-Dividend Time shall
occur on or after the date of the Time of Determination for the
distribution to which this paragraph (c) applies, the fair market value (on
the record date for the distribution to which this paragraph (c) applies)
of any Capital Stock of the Company
<PAGE>
-33-
distributed in respect of each share of Common Stock in such paragraph
(a)(iv) distribution; and
F = the fair market value (on the record date for the distribution to which
this paragraph (c) applies) of the assets, securities, rights, warrants or
options to be distributed in respect of each share of Common Stock in the
distribution to which this paragraph (c) is being applied (including, in
the case of cash dividends or other cash distributions giving rise to an
adjustment, all such cash distributed concurrently).
The Board of Directors of the Company shall reasonably and in good faith
determine by a board resolution, the fair market value of all property (other
than cash) distributed for the purposes of this paragraph (c).
The adjustment shall become effective immediately after the record date for
the determination of stockholders entitled to receive the distributions to which
this paragraph (c) applies. In the event that such distribution is not so made,
the Exercise Rate shall again be adjusted to be the Exercise Rate which would
then be in effect if such record date had not been so fixed.
For purposes of this paragraph (c), the term "Extraordinary Cash Dividend"
---------------------------
shall mean any cash dividend with respect to the Common Stock the amount of
which, together with the aggregate amount of cash dividends on the Common Stock
to be aggregated with such cash dividend in accordance with the provisions of
this paragraph, equals or exceeds the threshold percentages set forth in item
(i) or (ii) below:
(i) If, upon the date prior to the Ex-Dividend Time with respect to a cash
dividend on the Common Stock, the aggregate amount of such cash dividend
together with the amounts of all cash dividends on the Common Stock with Ex-
Dividend Times occurring in the 85 consecutive day period ending on the date
prior to the Ex-Dividend Time with respect to the cash dividend to which this
provision is being applied, equals or exceeds 6.0% on a per share basis of the
average of the Current Market Values during the period beginning on the date
after the first such Ex-Dividend Time in such period and ending on the date
immediately prior to the Ex-Dividend Time with respect to the cash dividend to
which this provision is being applied (except that if no other cash dividend has
had an Ex-Dividend Time occurring in such period, the period for calculating the
average of the Current Market Values shall be
<PAGE>
-34-
the period commencing 85 days prior to the date immediately prior to the Ex-
Dividend Time with respect to the cash dividend to which this provision is being
applied), such cash dividend together with each other cash dividend with an Ex-
Dividend Time occurring in such 85 day period shall be deemed to be an
Extraordinary Cash Dividend and for the purposes of applying the formula set
forth above in this paragraph (c), the value of "F" shall be equal to (w) the
aggregate amount of such cash dividend which constitutes an Extraordinary Cash
Dividend minus (x) the aggregate amount of such other cash dividends with Ex-
-----
Dividend Times occurring in such period for which a prior adjustment in the
Exercise Rate was previously made under this paragraph (c).
(ii) If, upon the date prior to the Ex-Dividend Time with respect to a cash
dividend on the Common Stock, the aggregate amount of such cash dividend
together with the amounts of all cash dividends on the Common Stock with Ex-
Dividend Times occurring in the 365 consecutive day period ending on the date
immediately prior to the Ex-Dividend Time with respect to the cash dividend to
which this provision is being applied equals or exceeds on a per share basis 20%
of the average of the Current Market Values during the period beginning on the
date after the first such Ex-Dividend Time in such period and ending on the date
immediately prior to the Ex-Dividend Time with respect to the cash dividend to
which this provision is being applied (except that if no other cash dividend has
had an Ex-Dividend Time occurring in such period, the period for calculating the
average of the Current Market Values shall be the period commencing 365 days
prior to the date immediately prior to the Ex-Dividend Time with respect to the
cash dividend to which this provision is being applied), such cash dividend
together with each other cash dividend with an Ex-Dividend Time occurring in
such 365 day period shall be deemed to be an Extraordinary Cash Dividend and for
purposes of applying the formula set forth above in this paragraph (c), the
value of "F" shall be equal to (y) the aggregate amount of such cash dividend
together with amounts of the other cash dividends with Ex-Dividend Times
occurring in such period minus (z) the aggregate amount of such other cash
-----
dividends with Ex-Dividend Times occurring in such period for which a prior
adjustment in the Exercise Rate was previously made under this paragraph (c).
In making the determination required by items (i) and (ii) above, the
amount of cash dividends paid on a per share basis and the average of the
Current Market Value, in each case during
<PAGE>
-35-
the period specified in item (i) or (ii) above, as applicable, shall be
appropriately adjusted to reflect the occurrence during such period of any event
described in paragraph (a).
In the event that, with respect to any distribution to which this paragraph
(c) would otherwise apply, "F" is equal to or greater than "M", then the
adjustment provided by this paragraph (c) shall not be made and in lieu thereof
the provisions of paragraph (h) shall apply to such distribution.
(d) When Adjustment May Be Deferred. No adjustment in the Exercise Rate
-------------------------------
need be made unless the adjustment would require a change of at least 1.0% in
the Exercise Rate. Any adjustments that are not made shall be carried forward
and taken into account in any subsequent adjustment. However, with respect to a
dividend of the Company's Capital Stock (or rights to acquire such Capital
Stock) adjustments can be deferred only until, and must be made by, the earlier
of (i) three years from the date of such stock dividend and (ii) the date as of
which the aggregate stock dividends for which adjustments have not been made
total at least 1.0% of the then issued and outstanding Common Stock with respect
to which such stock dividends were distributed.
All calculations under this Article V shall be made to the nearest
1/1,000th of a share.
(e) When No Adjustment Required. No adjustment need be made for rights to
---------------------------
purchase Common Stock pursuant to a Company plan for reinvestment of dividends
or interest.
No adjustment need be made for a change in the par value or no par value of
the Common Stock.
(f) Notice of Adjustment. Whenever the Exercise Rate is adjusted, the
--------------------
Company shall promptly mail to holders of Warrants at the addresses appearing on
the Warrant Register a notice of the adjustment. The Company shall file with
the Warrant Agent and any other Registrar such notice and a certificate from the
Company's independent public accountants briefly stating the facts requiring the
adjustment and the manner of computing it. The certificate shall be conclusive
evidence that the adjustment is correct. Neither the Warrant Agent nor any such
Registrar shall be under any duty or responsibility with respect to any such
certificate except to exhibit the same during normal business hours to any
holder desiring inspection thereof.
(g) Notice of Certain Transactions. If:
------------------------------
<PAGE>
-36-
(i) the Company takes any action that would require an adjustment in the
Exercise Rate pursuant to paragraphs (a), (b) or (c) (unless no adjustment is to
occur pursuant to paragraph (e)); or
(ii) the Company takes any action that would require a supplement to the
Warrant Agreement pursuant to paragraph (h); or
(iii) there is a liquidation or dissolution of the Company;
then the Company shall mail to holders of Warrants at the addresses appearing on
the Warrant Register and file with the Warrant Agent and any other Registrar a
notice stating the proposed record date for a dividend or distribution or the
proposed effective date of a subdivision, combination, reclassification,
consolidation, sale, merger, binding share exchange, transfer, liquidation or
dissolution, as the case may be. The Company shall file and give the notice at
least 15 days before such date. Failure to file or give the notice or any
defect in it shall not affect the validity of the transaction.
(h) Reorganization of Company; Special Distributions. If the Company, in a
------------------------------------------------
single transaction or through a series of related transactions, consolidates
with or merges with or into any other person or transfers (by lease, assignment,
sale or otherwise) all or substantially all of its properties and assets to
another person or group of affiliated persons (other than a sale of all or
substantially all of the assets of the Company in a transaction in which the
holders of Common Stock immediately prior to such transaction do not receive
securities, cash, or other assets of the Company or any other person) or is a
party to a merger or binding share exchange which reclassifies or changes its
outstanding Common Stock, the Company covenants that prior to entering into such
transaction, the person obligated to deliver securities, cash or other assets
upon exercise of Warrants will enter into a supplemental warrant agreement. If
the issuer of securities deliverable upon exercise of Warrants is an affiliate
of the successor Company, that issuer shall join in the supplemental warrant
agreement.
The supplemental warrant agreement shall provide that the holder of a
Warrant may exercise it for the kind and amount of securities, cash or other
assets which such holder would have received immediately after the
consolidation, merger, binding share exchange or transfer if such holder had
exercised the Warrant
<PAGE>
-37-
immediately before the effective date of the transaction, assuming (to the
extent applicable) that such holder (i) was not a constituent person or an
affiliate of a constituent person to such transaction; (ii) made no election
with respect thereto; and (iii) was treated alike with the plurality of non-
electing holders. The supplemental warrant agreement shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article V. The successor Company shall mail to
holders of Warrants at the addresses appearing on the Warrant Register a notice
briefly describing the supplemental warrant agreement.
If the Company makes a distribution to all holders of its Common Stock of
any of its assets, or debt securities or any rights, warrants or options to
purchase securities of the Company that, but for the provisions of the last
paragraph of paragraph (c), would result in an adjustment in the Exercise Rate
pursuant to the provisions of paragraph (c), then, from and after the record
date for determining the holders of Common Stock entitled to receive the
distribution, a holder of a Warrant that exercises such Warrant in accordance
with the provisions of this Warrant Agreement will upon such exercise be
entitled to receive, in addition to the Warrant Shares into which the Warrant is
exercisable, the kind and amount of securities, cash or other assets comprising
the distribution that such holder would have received if such holder had
exercised the Warrant immediately prior to the record date for determining the
holders of Common Stock entitled to receive the distribution (whether or not the
Warrants were then exercisable hereunder).
If this paragraph (h) applies, neither paragraph (a), (b), (c) nor (d)
shall apply.
(i) Warrant Agent's Adjustment Disclaimer. The Warrant Agent has no duty
-------------------------------------
to determine when an adjustment under this Article V should be made, how it
should be made or what it should be. The Warrant Agent has no duty to determine
whether a supplemental warrant agreement under paragraph (h) need be entered
into or whether any provisions of any supplemental warrant agreement are
correct. The Warrant Agent shall not be accountable for and makes no
representation as to the validity or value of any securities or assets issued
upon exercise of Warrants. The Warrant Agent shall not be responsible for the
Company's failure to comply with this Article V.
(j) Adjustment for Tax Purposes. The Company may make such increases
---------------------------
in the Exercise Rate, in addition to those otherwise
<PAGE>
-38-
required by this Section, as it considers to be advisable in order that any
event treated for Federal income tax purposes as a dividend of stock or stock
rights shall not be taxable to the recipients.
(k) Specificity of Adjustment. Irrespective of any adjustments in the
-------------------------
number or kind of shares purchasable upon the exercise of the Warrants, Warrant
Certificates theretofore or thereafter issued may continue to express the same
number and kind of Warrant Shares per Warrant as are stated on the Warrant
Certificates initially issuable pursuant to this Agreement.
(l) Adjustments to Par Value. Subject to receiving shareholder approval,
------------------------
the Company shall make such adjustments to the par value of the Common Stock in
order that, upon exercise of the Warrants, the Warrant Shares will be fully paid
and non-assessable.
(m) Voluntary Adjustment. The Company from time to time may increase the
--------------------
Exercise Rate by any number and for any period of time (provided that such
--------
period is not less than 20 Business Days). Whenever the Exercise Rate is so
increased, the Company shall mail to holders at the addresses appearing on the
Warrant Register and file with the Warrant Agent a notice of the increase. The
Company shall give the notice at least 15 days before the date the increased
Exercise Rate takes effect. The notice shall state the increased Exercise Rate
and the period it will be in effect. A voluntary increase in the Exercise Rate
does not change or adjust the Exercise Rate otherwise in effect as determined by
this Section 5.01.
(n) No Other Adjustment For Dividends. Except as provided in this Article
---------------------------------
V, no payment or adjustment will be made for dividends on any Common Stock.
(o) Priority of Adjustments. If this Article V requires adjustments to the
-----------------------
Exercise Rate under more than one of paragraphs (a)(iv), (b) or (c), and the
record dates for the distributions giving rise to such adjustments shall occur
on the same date, then such adjustments shall be made by applying, first, the
provisions of paragraph (a), second, the provisions of paragraph (c) and, third,
the provisions of paragraph (b).
(p) Multiple Adjustments. After an adjustment to the Exercise Rate under
--------------------
this Article V, any subsequent event requiring an adjustment under this Article
V shall cause an adjustment to the Exercise Rate as so adjusted.
<PAGE>
-39-
(q) Definitions. "Capital Stock" means, with respect to any corporation,
----------- -------------
any and all shares, interests, rights to purchase, warrants, options,
participations or other equivalents of or interests (however designated) in
stock issued by that corporation.
"Current Market Value" per share of Common Stock or of any other security
--------------------
at any date shall be (1) if the security is not registered under the Exchange
Act, the value of the security determined in good faith by the Company's Board
of Directors, based on the most recently completed arm's-length transaction
between the Company and a person other than an affiliate of the Company or (2)
if the security is registered under the Exchange Act, the average of the daily
closing bid prices for each Business Day during the period commencing 15
Business Days before such date and ending on the date one day prior to such date
or, if the security has been registered under the Exchange Act for less than 15
consecutive Business Days before such date, then the average of the daily
closing bid prices for all of the Business Days before such date for which daily
closing bid prices are available. If the market price is not determinable for
at least 10 Business Days in such period, the Current Market Value of the
security shall be determined as if the security was not registered under the
Exchange Act.
"Time of Determination" means the time and date of the earlier of (i) the
---------------------
determination of stockholders entitled to receive rights, warrants, or options
or a distribution, in each case, to which paragraphs (b) and (c) apply and (ii)
the time ("Ex-Dividend Time") immediately prior to the commencement of "ex-
----------------
dividend" trading for such rights, warrants or distribution on such national or
regional exchange or market on which the Common Stock is then listed or quoted.
SECTION 5.02. Fractional Warrant Shares. The Company will not be
-------------------------
required to issue fractional Warrant Shares upon exercise of the Warrants or
distribute Share certificates that evidence fractional Warrant Shares. In lieu
of fractional Warrant Shares, there may be paid to the registered holders of
Warrant Certificates at the time Warrants evidenced thereby are exercised as
herein provided an amount in cash equal to the same fraction of the Current
Market Value, as defined in paragraph (s) of Section 5.01, per Warrant Share on
the Business Day preceding the date the Warrant Certificates evidencing such
Warrants are surrendered for exercise. Such payments will be made by check or by
transfer to an account maintained by such registered holder with a bank in the
City of New York. If any holder surrenders for exercise more than one Warrant
Certificate, the number of Warrant Shares deliverable
<PAGE>
-40-
to such holder may, at the option of the Company, be computed on the basis of
the aggregate amount of all the Warrants exercised by such holder.
SECTION 5.03. Article Not Applicable To Issuance Of Contingent Warrants.
---------------------------------------------------------
Notwithstanding anything in this Article to the contrary, this Article shall not
apply to the issuance of the Contingent Warrants.
ARTICLE VII.
CONCERNING THE WARRANT AGENT
----------------------------
SECTION 7.01. Warrant Agent. The Company hereby appoints Fleet National
-------------
Bank as Warrant Agent of the Company in respect of the Warrants and the Warrant
Certificates upon the terms and subject to the conditions herein and in the
Warrant Certi ficates set forth; and Fleet National Bank hereby accepts such
appointment. The Warrant Agent shall have the powers and authority specifically
granted to and conferred upon it in the Warrant Certificates and hereby and such
further powers and authority to act on behalf of the Company as the Company may
hereafter grant to or confer upon it and it shall accept in writing. All of the
terms and provisions with respect to such powers and authority contained in the
Warrant Certificates are subject to and governed by the terms and provisions
hereof.
SECTION 7.02. Conditions of Warrant Agent's Obligations. The Warrant
-----------------------------------------
Agent accepts its obligations herein set forth upon the terms and conditions
hereof and in the Warrant Certificates, including the following, to all of which
the Company agrees and to all of which the rights hereunder of the holders from
time to time of the Warrant Certificates shall be subject:
(a) The Warrant Agent shall be entitled to compensation to be agreed upon
with the Company in writing for all services rendered by it and the Company
agrees promptly to pay such compensation and to reimburse the Warrant Agent for
its reasonable out-of-pocket expenses (including reasonable fees and expenses of
counsel) incurred without gross negligence or willful misconduct on its part in
connection with the services rendered by it hereunder. The Company also agrees
to indemnify the Warrant Agent, its directors, officers, affiliates, agents and
employees for, and to hold it and its directors, officers, affiliates, agents
and employees harmless against, any loss, liability or expense of any nature
whatsoever (including, without limitation, fees and expenses
<PAGE>
-41-
of counsel) incurred without gross negligence or willful misconduct on the part
of the Warrant Agent, arising out of or in connection with its acting as such
Warrant Agent hereunder and its exercise of its rights and performance of its
obligations hereunder. The obligations of the Company under this Section 6.02
shall survive the exercise and the expiration of the Warrant Certificates and
the resignation and removal of the Warrant Agent.
(b) In acting under this Agreement and in connection with the Warrant
Certificates, the Warrant Agent is acting solely as agent of the Company and
does not assume any obligation or relationship of agency or trust for or with
any of the owners or holders of the Warrant Certificates.
(c) The Warrant Agent may consult with counsel of its selection and any
advice or written opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in accordance with such advice or opinion.
(d) The Warrant Agent shall be fully protected and shall incur no liability
for or in respect of any action taken or omitted to be taken or thing suffered
by it in reliance upon any Warrant Certificate, notice, direction, consent,
certificate, affidavit, opinion of counsel, instruction, statement or other
paper or document reasonably believed by it to be genuine and to have been
presented or signed by the proper parties.
(e) The Warrant Agent, and its officers, directors, affiliates and
employees ("Related Parties"), may become the owners of, or acquire any interest
---------------
in, Warrant Certificates, shares or other obligations of the Company with the
same rights that it or they would have it if were not the Warrant Agent
hereunder and, to the extent permitted by applicable law, it or they may engage
or be interested in any financial or other transaction with the Company and may
act on, or as depositary, trustee or agent for, any committee or body of holders
of shares or other obligations of the Company as freely as if it were not the
Warrant Agent hereunder. Nothing in this Agreement shall be deemed to prevent
the Warrant Agent or such Related Parties from acting in any other capacity for
the Company.
(f) The Warrant Agent shall not be under any liability for interest on, and
shall not be required to invest, any monies at any time received by it pursuant
to any of the provisions of this Agreement or of the Warrant Certificates.
<PAGE>
-42-
(g) The Warrant Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution and delivery hereof by the Warrant Agent) or in respect of the
validity or execution of any Warrant Certificate (except its countersignature
thereon).
(h) The recitals and other statements contained herein and in the Warrant
Certificates (except as to the Warrant Agent's countersignature thereon) shall
be taken as the statements of the Company and the Warrant Agent assumes no
responsibility for the correctness of the same. The Warrant Agent does not make
any representation as to the validity or sufficiency of this Agreement or the
Warrant Certificates, except for its due execution and delivery of this
Agreement; provided, however, that the Warrant Agent shall not be relieved of
-------- -------
its duty to countersign the Warrant Certificates as authorized by this
Agreement. The Warrant Agent shall not be accountable for the use or
application by the Company of the proceeds of the exercise of any Warrant.
(i) The Warrant Agent shall be obligated to perform such duties as are
herein and in the Warrant Certificates specifically set forth and no implied
duties or obligations shall be read into this Agreement or the Warrant
Certificates against the Warrant Agent. The Warrant Agent shall be under no
obligation to institute any action, suit or legal proceeding or to take any
other action likely to involve expense unless the Company shall furnish the
Warrant Agent with reasonable security and indemnity for any costs or expenses
which may be incurred. The Warrant Agent shall not be accountable or under any
duty or responsibility for the use by the Company of any of the Warrant
Certificates countersigned by the Warrant Agent and delivered by it to the
Company pursuant to this Agreement. The Warrant Agent shall have no duty or
responsibility in case of any default by the Company in the performance of its
covenants or agreements contained in the Warrant Certificates or in the case of
the receipt of any written demand from a holder of a Warrant Certificate with
respect to such default, including, without limiting the generality of the
foregoing, any duty or responsibility to initiate or attempt to initiate any
proceedings at law or otherwise or, except as provided in Section 7.02 hereof,
to make any demand upon the Company.
(j) Unless otherwise specifically provided herein, any order, certificate,
notice, request, direction or other communication from the Company made or given
under any provision of this Agreement shall be sufficient if signed by its
chairman of the
<PAGE>
-43-
Board of Directors, its president, its treasurer, its controller or any vice
president or its secretary or any assistant secretary.
(k) The Warrant Agent shall have no responsibility in respect of any
adjustment pursuant to Article V hereof.
(l) The Company agrees that it will perform, execute, acknowledge and
deliver, or cause to be performed, executed, acknowledged and delivered, all
such further and other acts, instruments and assurances as may reasonably be
required by the Warrant Agent for the carrying out or performing by the Warrant
Agent of the provisions of this Agreement.
(m) The Warrant Agent is hereby authorized and directed to accept written
instructions with respect to the performance of its duties hereunder from any
one of the chairman of the Board of Directors, the president, the treasurer, the
controller, any vice president or the secretary of the Company or any other
officer or official of the Company reasonably believed to be authorized to give
such instructions and to apply to such officers or officials for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken or suffered to be taken by it in good faith in accordance with
instructions with respect to any matter arising in connection with the Warrant
Agent's duties and obligations arising under this Agreement. Such application
by the Warrant Agent for written instructions from the Company may, at the
option of the Warrant Agent, set forth in writing any action proposed to be
taken or omitted by the Warrant Agent with respect to its duties or obligations
under this Agreement and the date on or after which such action shall be taken
and the Warrant Agent shall not be liable for any action taken or omitted in
accordance with a proposal included in any such application on or after the date
specified therein (which date shall be not less than 10 Business Days after the
Company receives such application unless the Company consents to a shorter
period), provided that (i) such application includes a statement to the effect
--------
that it is being made pursuant to this paragraph (m) and that unless objected to
prior to such date specified in the application, the Warrant Agent will not be
liable for any such action or omission to the extent set forth in such paragraph
(m) and (ii) prior to taking or omitting any such action, the Warrant Agent has
not received written instructions objecting to such proposed action or omission.
(n) Whenever in the performance of its duties under this Agreement the
Warrant Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or
<PAGE>
-44-
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed on behalf of the Company by any one of the chairman of the
Board of Directors, the president, the treasurer, the controller, any vice
president or the secretary of the Company or any other officer or official of
the Company reasonably believed to be authorized to give such instructions and
delivered to the Warrant Agent; and such certificate shall be full authorization
to the Warrant Agent for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such certificate.
(o) The Warrant Agent shall not be required to risk or expend its own funds
in the performance of its obligations and duties hereunder.
SECTION 7.03. Resignation and Appointment of Successor.
----------------------------------------
(a) The Company agrees, for the benefit of the holders from time to time of
the Warrant Certificates, that there shall at all times be a Warrant Agent
hereunder.
(b) The Warrant Agent may at any time resign as Warrant Agent by giving
written notice to the Company of such intention on its part, specifying the date
on which its desired resignation shall become effective; provided, however, that
-------- -------
such date shall be at least 60 days after the date on which such notice is given
unless the Company agrees to accept less notice. Upon receiving such notice of
resignation, the Company shall promptly appoint a successor Warrant Agent,
qualified as provided in Section 6.03(d) hereof, by written instrument in
duplicate signed on behalf of the Company, one copy of which shall be delivered
to the resigning Warrant Agent and one copy to the successor Warrant Agent. As
provided in Section 6.03(d) hereof, such resignation shall become effective upon
the earlier of (x) the acceptance of the appointment by the successor Warrant
Agent or (y) 60 days after receipt by the Company of notice of such resignation.
The Company may, at any time and for any reason, and shall, upon any event set
forth in the next succeeding sentence, remove the Warrant Agent and appoint a
successor Warrant Agent by written instrument in duplicate, specifying such
removal and the date on which it is intended to become effective, signed on
behalf of the Company, one copy of which shall be delivered to the Warrant Agent
being removed and one copy to the successor Warrant Agent. The Warrant Agent
shall be removed as aforesaid if it shall become incapable of acting, or shall
be adjudged a bankrupt or insolvent, or a receiver of the Warrant Agent or of
its property shall be appointed, or any public
<PAGE>
-45-
officer shall take charge or control of it or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation. Any removal of the
Warrant Agent and any appointment of a successor Warrant Agent shall become
effective upon acceptance of appointment by the successor Warrant Agent as
provided in Section 6.03(d). As soon as practicable after appointment of the
successor Warrant Agent, the Company shall cause written notice of the change in
the Warrant Agent to be given to each of the registered holders of the Warrants
in the manner provided for in Section 7.04 hereof.
(c) Upon resignation or removal of the Warrant Agent, if the Company shall
fail to appoint a successor Warrant Agent within a period of 60 days after
receipt of such notice of resignation or removal, then the holder of any Warrant
Certificate or the retiring Warrant Agent may apply to a court of competent
jurisdiction for the appointment of a successor to the Warrant Agent. Pending
appointment of a successor to the Warrant Agent, either by the Company or by
such a court, the duties of the Warrant Agent shall be carried out by the
Company.
(d) Any successor Warrant Agent, whether appointed by the Company or by a
court, shall be a bank or trust company in good standing, incorporated under the
laws of the United States of America or any State thereof and having, at the
time of its appointment, a combined capital surplus of at least $100 million.
Such successor Warrant Agent shall execute and deliver to its predecessor and to
the Company an instrument accepting such appointment hereunder and all the
provisions of this Agreement, and thereupon such successor Warrant Agent,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, duties and obligations of its predecessor hereunder, with like
effect as if originally named as Warrant Agent hereunder, and such predecessor
shall thereupon become obligated to (i) transfer and deliver, and such successor
Warrant Agent shall be entitled to receive, all securities, records or other
property on deposit with or held by such predecessor as Warrant Agent hereunder
and (ii) upon payment of the amounts then due it pursuant to Section 6.02(a)
hereof, pay over, and such successor Warrant Agent shall be entitled to receive,
all monies deposited with or held by any predecessor Warrant Agent hereunder.
(e) Any corporation or bank into which the Warrant Agent hereunder may be
merged or converted, or any corporation or bank with which the Warrant Agent may
be consolidated, or any corporation or bank resulting from any merger,
conversion or consolidation to which the Warrant Agent shall be a party, or any
<PAGE>
-46-
corporation or bank to which the Warrant Agent shall sell or otherwise transfer
all or substantially all of its corporate trust business, shall be the successor
to the Warrant Agent under this Agreement (provided that such corporation or
bank shall be qualified as aforesaid) without the execution or filing of any
document or any further act on the part of any of the parties hereto.
(f) No Warrant Agent under this Warrant Agreement shall be personally
liable for any action or omission of any successor Warrant Agent.
ARTICLE VII
MISCELLANEOUS
-------------
SECTION 7.01. Amendment. This Agreement and the terms of the Warrants
---------
may be amended by the Company and the Warrant Agent, without the consent of the
holder of any Warrant Certificate, for the purpose of curing any ambiguity, or
of curing, correcting or supplementing any defective or inconsistent provision
contained herein or therein, or to effect any assumptions of the Company's
obligations hereunder and thereunder by a successor corporation under the
circumstances described in Section 5.01(d) hereof or in any other manner which
the Company may deem necessary or desirable and which shall not adversely affect
the interests of the holders of the Warrant Certificates.
The Company and the Warrant Agent may modify this Agreement and the terms
of the Warrants with the consent of not less than a majority of the votes of the
holders of the then outstanding Warrants, each Warrant holder having that number
of votes as the number of shares into which his Warrants are exercisable at such
time (including fractional shares), for the purpose of adding any provision to
or changing in any manner or eliminating any of the provisions of this Agreement
or modifying in any manner the rights of the holders of the outstanding
Warrants; provided, however, that no such modification that decreases the
-------- -------
Exercise Rate, reduces the period of time during which the Warrants are
exercisable hereunder, otherwise materially and adversely affects the exercise
rights of the holders of the Warrants, reduces the percentage required for
modification, or effects any change to this Section 7.01 may be made with
respect to an outstanding Warrant without the consent of the holder of such
Warrant; provided, further, that any modification to Section 4.04 shall require
-------- -------
the consent of a majority of the votes of the holders of Warrants and Warrant
Shares, each Warrant holder or Warrant Share
<PAGE>
-47-
holder, as applicable, having that number of votes as the number of shares into
which his Warrants are exercisable at such time (including fractional shares)
plus the number of Warrant Shares held by such holder.
Any modification or amendment made in accordance with this Agreement will
be conclusive and binding on all present and future holders of Warrant
Certificates whether or not they have consented to such modification or
amendment or waiver and whether or not notation of such modification or
amendment is made upon such Warrant Certificates. Any instrument given by or on
behalf of any holder of a Warrant Certificate in connection with any consent to
any modification or amendment will be conclusive and binding on all subsequent
holders of such Warrant Certificate.
SECTION 7.02. Notices and Demands to the Company and Warrant Agent. If
----------------------------------------------------
the Warrant Agent shall receive any notice or demand addressed to the Company by
the holder of a Warrant Certificate pursuant to the provisions hereof or of the
Warrant Certificates, the Warrant Agent shall promptly forward such notice or
demand to the Company.
SECTION 7.03. Addresses for Notices to Parties and for Transmission of
--------------------------------------------------------
Documents. All notices hereunder to the parties hereto shall be deemed to have
- ---------
been given when sent by certified or registered mail, postage prepaid, or by
facsimile transmission, confirmed by first class mail, postage prepaid,
addressed to any party hereto as follows:
To the Company:
UNIFI Communications, Inc.
900 Chelmsford Street, Suite 312
Lowell, MA 01851
Facsimile No.: (508) 551-7698
Attention: General Counsel
with copies to:
Latham & Watkins
885 Third Avenue
New York, NY 10022-4802
Facsimile No.: (212) 751-4864
Attention: Kirk A. Davenport, Esq.
To the Warrant Agent:
<PAGE>
-48-
Fleet National Bank
1 Federal Street
Boston, MA 02211
Facsimile No.: (617) 346-5501
Attention: Corporate Trust Administration
or at any other address of which either of the foregoing shall have notified the
other in writing.
SECTION 7.04. Notices to Holders. Notices to holders of Warrants shall
------------------
be mailed to such holders at the addresses of such holders as they appear in the
Warrant Register. Notices to holders of Warrant Shares shall be mailed to such
holders as they appear in the records of the Company or the Transfer Agent. Any
such notice shall be sufficiently given if sent by first-class mail, postage
prepaid.
SECTION 7.05. APPLICABLE LAW. THE VALIDITY, INTERPRETATION AND
--------------
PERFORMANCE OF THIS AGREEMENT AND EACH WARRANT CERTIFICATE ISSUED HEREUNDER AND
OF THE RESPECTIVE TERMS AND PROVISIONS THEREOF SHALL BE GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
THEREOF.
SECTION 7.06. Persons Having Rights Under Agreement. Nothing in this
-------------------------------------
Agreement expressed or implied and nothing that may be inferred from any of the
provisions hereof is intended, or shall be construed, to confer upon, or give
to, any person or corporation other than the Company, the Warrant Agent and the
holders of the Warrant Certificates or Warrant Shares any right, remedy or claim
under or by reason of this Agreement or of any covenant, condition, stipulation,
promise or agreement hereof; and all covenants, conditions, stipulations,
promises and agreements in this Agreement contained shall be for the sole and
exclusive benefit of the Company and the Warrant Agent and their successors and
of the holders of the Warrant Certificates.
SECTION 7.07. Headings. The descriptive headings of the several Articles
--------
and Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
SECTION 7.08. Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which so executed shall be deemed to be an original;
but such counterparts shall together constitute but one and the same instrument.
<PAGE>
-49-
SECTION 7.09. Inspection of Agreements. A copy of this Agreement and the
------------------------
Warrant Shares Registration Rights Agreement shall be available during regular
business hours at the principal corporate trust office of the Warrant Agent, for
inspection by the holder of any Warrant Certificate Warrant Shares. The
Warrant Agent may require such holder to submit his Warrant Certificate or
evidence of ownership of Warrant Shares for inspection by it.
<PAGE>
-50-
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the day and year first above written.
UNIFI COMMUNICATIONS, INC.
By: /s/ Thomas P. Sosnowski
--------------------------------
Name:
Title:
FLEET NATIONAL BANK,
as Warrant Agent
By: /s/ Michael Quaile
-------------------------------
Name:
Title:
<PAGE>
-51-
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
[FACE]
[Unless and until it is exchanged in whole or in part for Warrants in
certificated form, this Warrant may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the issuer or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or such other
name as requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.]/3/
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
PROMULGATED UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) PROMULGATED UNDER THE
SECURITIES ACT) (AN INSTITUTIONAL "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S.
PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH RULE 904 UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT WITHIN THREE
YEARS (OR SUCH SHORTER PERIOD AS MAY THEN BE REQUIRED BY RULE 144(k) UNDER THE
SECURITIES ACT) AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE
TRANSFER THIS SECURITY, EXCEPT (A) TO THE ISSUER THEREOF, OR ANY SUBSIDIARY
THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
PROMULGATED UNDER THE SECURITIES ACT, (C) TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHED (OR HAS FURNISHED ON ITS BEHALF
BY A U.S. BROKER-DEALER) TO THE WARRANT AGENT A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON
- -----------------
/3/ This paragraph is to be included only if the Warrant is in global form.
A-1
<PAGE>
-52-
TRANSFER OF THIS SECURITY, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 PROMULGATED UNDER THE SECURITIES ACT,
(E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 PROMULGATED
UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THIS SECURITY WITHIN THREE YEARS (OR SUCH SHORTER PERIOD AS MAY THEN BE REQUIRED
BY RULE 144(k) UNDER THE SECURITIES ACT) AFTER THE ORIGINAL ISSUANCE OF THIS
SECURITY, IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR,
THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE WARRANT AGENT AND THE
ISSUER SUCH CERTIFICATIONS, WRITTEN LEGAL OPINIONS OR OTHER INFORMATION AS
EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING
MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS
GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
IN THE EVENT A PUBLIC EQUITY OFFERING SHALL NOT HAVE OCCURRED ON OR PRIOR TO
MARCH 1, 2002 RESULTING IN GROSS PROCEEDS OF AT LEAST $35.0 MILLION TO THE
COMPANY, HOLDERS OF WARRANTS OR WARRANT SHARES SHALL HAVE THE RIGHT TO REQUIRE
THE COMPANY TO OFFER TO PURCHASE ALL OF SUCH HOLDERS WARRANTS OR WARRANT SHARES
AT A PRICE PER WARRANT OR WARRANT SHARE, AS APPLICABLE, EQUAL TO THE FAIR MARKET
VALUE THEREOF, AS DETERMINED IN ACCORDANCE WITH THE PROCEDURES SET FORTH IN THE
WARRANT AGREEMENT. UNTIL THE EARLIER TO OCCUR OF (i) THE CONSUMMATION OF A
PUBLIC EQUITY OFFERING RESULTING IN GROSS PROCEEDS TO THE COMPANY OF AT LEAST
$35.0 MILLION AND (ii) MARCH 1, 2002, THE WARRANTS AND THE WARRANT SHARES SHALL
BE TRANSFERABLE ONLY ON THE BOOKS OF THE TRANSFER AGENT AS SET FORTH IN THE
WARRANT AGREEMENT.
CUSIP #[ ]
No. [ ] [ ] Warrants
WARRANT CERTIFICATE
UNIFI COMMUNICATIONS, INC.
This Warrant Certificate certifies that [ ], or registered
assigns, is the registered holder of [ ] Warrants (the "Warrants") to purchase
--------
shares of Common Stock, par value $.01 per share (the "Common Stock"), of UNIFI
------------
COMMUNICATIONS, INC., a Delaware corporation (the "Company"). Each Warrant
-------
entitles the
A-2
<PAGE>
-53-
holder to purchase from the Company at any time from 9:00 a.m. New York City
time on or after the occurrence of an Exercise Event until 5:00 p.m., New York
City time, [ ] fully paid and nonassessable share of Common Stock (a "Warrant
-------
Share", or, if adjusted, the "Warrant Shares", which may also include any other
- ----- --------------
securities or property purchasable upon exercise of a Warrant, such adjustment
and inclusion each as provided in the Warrant Agreement) at the exercise price
(the "Exercise Price") of $.25 per Warrant upon surrender of this Warrant
--------------
Certificate and payment of the Exercise Price at any office or agency maintained
for that purpose by the Company (the "Warrant Agent Office"), subject to the
--------------------
conditions set forth herein, in the Warrant Agreement and in the Warrant Shares
Registration Rights Agreement.
"Exercise Event" means, with respect to each Warrant as to which such
event is applicable (but not with respect to any other Warrant), the date of the
earliest of: (1) March 1, 1998, (2) 30 days after the occurrence of a Change of
Control and (3) the date that is 180 days after the consummation of an initial
public offering of the Company's Common Stock.
The Exercise Price shall be payable by certified check or official
bank check or by such other means as is acceptable to the Company in the lawful
currency of the United States of America which as of the time of payment is
legal tender for payment of public or private debts. The Company has initially
designated the corporate trust office of the Warrant Agent in the Borough of
Manhattan, The City of New York, as the initial Warrant Agent Office. The
number of Warrant Shares issuable upon exercise of the Warrants ("Exercise
--------
Rate") is subject to adjustment upon the occurrence of certain events set forth
in the Warrant Agreement.
Any Warrants not exercised on or prior to 5:00 p.m., New York City
time, March 1, 2007 shall thereafter be void.
Reference is hereby made to the further provisions on the reverse
hereof which provisions shall for all purposes have the same effect as though
fully set forth at this place.
This Warrant Certificate shall not be valid unless countersigned by
the Warrant Agent, as such term is used in the Warrant Agreement.
THIS WARRANT CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS
PROVISIONS THEREOF.
A-3
<PAGE>
-54-
WITNESS the facsimile seal of the Company and facsimile signatures of
its duly authorized officers.
Dated:
UNIFI COMMUNICATIONS, INC.
By: ____________________________
Name:
Title:
Attest:
By: _______________________
Name:
Title:
Certificate of Authentication:
This is one of the Warrants
referred to in the within
mentioned Warrant Agreement:
FLEET NATIONAL BANK,
as Warrant Agent
By: _____________________________
Authorized Signatory
A-4
<PAGE>
-55-
[FORM OF WARRANT CERTIFICATE]
[REVERSE]
UNIFI COMMUNICATIONS, INC.
The Warrants are issued pursuant to a Warrant Agreement dated as of
February 21, 1997 (the "Warrant Agreement"), duly executed and delivered by the
-----------------
Company and Fleet National Bank, a national banking association, as Warrant
Agent (the "Warrant Agent"), which Warrant Agreement is hereby incorporated by
-------------
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Warrant Agent, the Company and the holders (the
words "holders" or holder" meaning the registered holders or registered holder)
of the Warrants. The holders will have certain registration rights with respect
to the Warrant Shares issuable upon exercise of the Warrants as set forth in the
Warrant Shares Registration Rights Agreement.
Subject to the provisions of the Warrant Agreement and the Warrant
Shares Registration Rights Agreement, the holder of each Warrant shall have the
right to purchase from the Company (and the Company shall issue and sell to such
holder of the Warrant), at any time and from time to time on any Business Day
(as defined below) on or prior to 5:00 p.m., New York City time, on the
Expiration Date, March 1, 2007 (or such other number as may result from
adjustments in the Exercise Rate as provided in the Warrant Agreement) fully
paid and nonassessable share of Common Stock at the Exercise Price (and any
other securities or property purchasable upon exercise of such Warrant at the
time of such exercise as provided in the Warrant Agreement). Warrants may be
exercised by (i) surrendering at any Warrant Agent Office this Warrant
Certificate with the form of Election to Exercise set forth hereon duly
completed and executed and (ii) paying in full the Warrant Exercise Price for
each such Warrant exercised and any other amounts required to be paid pursuant
to the Warrant Agreement.
If all of the items referred to in the last sentence of the preceding
paragraph are received by the Warrant Agent at or prior to 11:00 a.m., New York
City time, on a Business Day, the exercise of the Warrant to which such items
relate will be effective on such Business Day. If any items referred to in the
last sentence of the preceding paragraph are received after 11:00 a.m., New York
City time, on a Business Day, the exercise of the Warrants to which such item
relates will be deemed to be effective on the next succeeding Business Day.
Notwithstanding the foregoing, in the case of an exercise of Warrants on the
Expiration Date, if all of the items referred to in the last sentence of the
preceding paragraph are received by the Warrant Agent at or prior
A-5
<PAGE>
-56-
to 5:00 p.m., New York City time, on such Expiration Date, the exercise of the
Warrants to which such items relate will be effective on the Expiration Date.
As soon as practicable after the exercise of any Warrant or Warrants,
the Company shall issue or cause to be issued to or upon the written order of
the registered holder of this Warrant Certificate, a certificate or certificates
evidencing the Share or Shares to which such holder is entitled, in fully
registered form, registered in such name or names as may be directed by such
holder pursuant to the Election to Exercise, as set forth on the reverse of this
Warrant Certificate. Such certificate or certificates evidencing the Warrant
Share or Warrant Shares shall be deemed to have been issued and any persons who
are designated to be named therein shall be deemed to have become the holder of
record of such Warrant Share or Warrant Shares as of the close of business on
the date upon which the exercise of this Warrant was deemed to be effective as
provided in the preceding paragraph.
The Company will not be required to issue fractional shares of Common
Stock upon exercise of the Warrants or distribute Warrant Share certificates
that evidence fractional shares of Common Stock. In lieu of fractional shares
of Common Stock, there shall be paid to the registered Holder of this Warrant
Certificate at the time such Warrant Certificate is exercised an amount in cash
equal to the same fraction of the Current Market Value (as defined in the
Warrant Agreement) per share on the Business Day preceding the date this Warrant
Certificate is surrendered for exercise.
Warrant Certificates, when surrendered at any office or agency
maintained by the Company for that purpose by the registered holder thereof in
person or by legal representative or attorney duly authorized in writing, may be
exchanged for a new Warrant Certificate or new Warrant Certificates evidencing
in the aggregate a like number of Warrants, in the manner and subject to the
limitations provided in the Warrant Agreement and the Warrant Shares
Registration Rights Agreement, without charge except for any tax or other
governmental charge imposed in connection therewith.
Upon due presentment for registration of transfer of this Warrant
Certificate at any office or agency maintained by the Company for that purpose,
a new Warrant Certificate evidencing in the aggregate a like number of Warrants
shall be issued to the transferee in exchange for this Warrant Certificate,
subject to the limitations provided in the Warrant Agreement, without charge
except for any tax or other governmental charge imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder hereof as the absolute owner of this Warrant Certificate (notwithstanding
any notation of ownership or other
A-6
<PAGE>
-57-
writing hereon made by anyone) for the purpose of any exercise hereof and for
all other purposes, and neither the Company nor the Warrant Agent shall be
affected by any notice to the contrary.
The term "Business Day" shall mean any day on which (i) banks in New
York City, (ii) the principal national securities exchange or market, if any, on
which the Common Stock is listed or admitted to trading and (iii) the principal
national securities exchange or market, if any, on which the Warrants are listed
or admitted to trading are open for business.
In the event a Public Equity Offering shall not have occurred on or
prior to March 1, 2002 resulting in gross proceeds of at least $35.0 million to
the Company, holders of Warrants or Warrant Shares shall have the right to
require the Company to offer to purchase all of such holders Warrants or Warrant
Shares at a price per Warrant or Warrant Share, as applicable, equal to the fair
market value thereof, as determined in accordance with the procedures set forth
in the Warrant Agreement.
A-7
<PAGE>
(FORM OF ELECTION TO EXERCISE)
(To be executed upon exercise of Warrants on the Exercise Date)
The undersigned hereby irrevocably elects to exercise [ ] of the
Warrants represented by this Warrant Certificate and purchase the whole number
of Warrant Shares issuable upon the exercise of such Warrants and herewith
tenders payment for such Warrant Shares in the amount of $[ ] in cash or by
certified or official bank check, in accordance with the terms hereof. The
undersigned requests that a certificate representing such Warrant Shares be
registered in the name of ______________________ whose address is
_____________________________ and that such certificate be delivered to
___________________________ whose address is __________________________. Any
cash payments to be paid in lieu of a fractional Warrant Share should be made to
__________________ whose address is ________________________ and the check
representing payment thereof should be delivered to ______________________ whose
address is ______________________.
Dated __________________,
Name of holder of
Warrant Certificate:
------------------------------------------
(Please Print)
Tax Identification or
Social Security Number:
----------------------------------------
Address:
--------------------------------------------------------
--------------------------------------------------------
Signature:
--------------------------------------------------------
Note: The above signature must correspond with the name as
written upon the face of this Warrant Certificate in
every particular, without alteration or enlargement or
any change whatever and if the certificate representing
the Warrant Shares or any Warrant Certificate
representing Warrants not exercised is to be registered
in a name other than that in which this Warrant
Certificate is registered, or if any cash payment to be
paid in lieu of a fractional share is to be made to a
person other than the registered holder of this Warrant
Certificate,
A-8
<PAGE>
the signature of the holder hereof must be guaranteed
as provided in the Warrant Agreement.
Dated ____________________,
Signature:
---------------------------------------------------
Note: The above signature must correspond with the name as
written upon the face of this Warrant Certificate in
every particular, without alteration or enlargement
or any change whatever.
Signature Guaranteed:
----------------------------------------------
[FORM OF ASSIGNMENT]
For value received _______________________ hereby sells, assigns and
transfers unto _____________________ the within Warrant Certificate, together
with all right, title and interest therein, and does hereby irrevocably
constitute and appoint __________________________ attorney, to transfer said
Warrant Certificate on the books of the within-named Company, with full power of
substitution in the premises.
Dated ____________________,
Signature:
--------------------------------------------------------
Note: The above signature must correspond with the name as
written upon the face of this Warrant Certificate in
every particular, without alteration or enlargement
or any change whatever.
Signature Guaranteed:
-----------------------------------------------
A-9
<PAGE>
SCHEDULE OF EXCHANGES OF CERTIFICATED WARRANTS/4/
----------------------------------------------
The following exchanges of a part of this Global Warrant for certificated
Warrants have been made:
<TABLE>
<CAPTION>
Number of
Warrants of
Amount of Amount of this Global
decrease in increase in Warrant Signature of
Number of Number of following authorized
Date of Warrants of this Warrants of this such decrease officer of
Exchange Global Warrant Global Warrant (or increase) Warrant Agent
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
- -------------------
/4/ This is to be included only if the Warrant is in global form.
A-10
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have the Warrants represented by this Warrant
Certificate purchased by the Company pursuant to Section 4.04 of the Warrant
Agreement, check the Box: [ ]
If you wish to have a portion of the Warrants represented by this
Warrant Certificate purchased by the Company pursuant to Section 4.04 of the
Warrant Agreement, state the number of Warrants:
----------------
Date: ________________ Your Signature:
-------------------------------------
(Sign exactly as your name appears on the
other side of this Warrant Certificate)
By:
-------------------------------------------
NOTICE: To be signed
by an executive officer
NOTICE: Signature(s) must be guaranteed by an institution which is a
participant in the Securities Transfer Agent Medallion Program ("STAMP") or
similar program.
A-11
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF WARRANTS
Re: Warrants to Purchase Common Stock (the "Warrants")
of UNIFI COMMUNICATIONS, INC.
This Certificate relates to ____ Warrants held in* ___ book-entry or*
_______ certificated form by ______ (the "Transferor").
The Transferor:*
[_] has requested the Warrant Agent by written order to deliver in
exchange for its beneficial interest in the Global Warrant held by the
Depositary a Warrant or Warrants in definitive, registered form of authorized
denominations and an aggregate number equal to its beneficial interest in such
Global Warrant (or the portion thereof indicated above); or
[_] has requested the Warrant Agent by written order to exchange or
register the transfer of a Warrant or Warrants.
In connection with such request and in respect of each such Warrant,
the Transferor does hereby certify that Transferor is familiar with the Warrant
Agreement relating to the above captioned Warrants and the restrictions on
transfers thereof as provided in Section 1.07 of such Warrant Agreement, and
that the transfer of this Warrant does not require registration under the
Securities Act of 1933, as amended (the "Act") because[*]:
---
[_] Such Warrant is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 1.07(a)(y)(A) or Section
1.07(d)(i)(A) of the Warrant Agreement).
[_] Such Warrant is being transferred to a qualified institutional buyer
(as defined in Rule 144A under the Act), in reliance on Rule 144A or in
accordance with Regulation S under the Act.
[_] Such Warrant is being transferred in accordance with Rule 144 under
the Act.
B-1
<PAGE>
[_] Such Warrant is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Act, other than Rule
144A or Rule 144 or Regulation S under the Act. An opinion of counsel to the
effect that such transfer does not require registration under the Act
accompanies this Certificate.
______________________________
[INSERT NAME OF TRANSFEROR]
By: _________________________
Date: _____________
*Check applicable box.
B-2
<PAGE>
EXHIBIT C
Transferee Letter of Representation
UNIFI COMMUNICATIONS, INC.
67 South Bedford Street
Burlington, MA 01803-5152
Ladies and Gentlemen:
In connection with our proposed purchase of warrants to purchase
Common Stock, par value $.01 per share, (the "Securities") of UNIFI
----------
Communications, Inc. (the "Company") we confirm that:
-------
1. We understand that the Securities have not been registered under the
Securities Act of 1933, as amended (the "Securities Act") and, unless so
--------------
registered, may not be sold except as permitted in the following sentence. We
agree on our own behalf and on behalf of any investor account for which we are
purchasing Securities to offer, sell or otherwise transfer such Securities prior
to the date which is three years after the later of the date of original issue
and the last date on which the Company or any affiliate of the Company was the
owner of such Securities, or any predecessor thereto (the "Resale Restriction
------------------
Termination Date") only (a) to the Company, (b) pursuant to a registration
- ----------------
statement which has been declared effective under the Securities Act, (c) so
long as the Securities are eligible for resale pursuant to Rule 144A, under the
Securities Act, to a person we reasonably believe is a qualified institutional
buyer under Rule 144A (a "QIB") that purchases for its own account or for the
---
account of a QIB and to whom notice is given that the transfer is being made in
reliance on Rule 144A, (d) pursuant to offers and sales that occur outside the
United States within the meaning of Regulation S under the Securities Act, (e)
to an institutional "accredited investor" within the meaning of subparagraphs
(a)(1), (2), (3) or (7) of Rule 501 under the Securities Act that is purchasing
for his own account or for the account of such an institutional "accredited
investor," or (f) pursuant to any other available exemption from the
registration requirements of the Securities Act, subject in each of the
foregoing cases to any requirement of law that the disposition of our property
or the property of such investor account or accounts be at all times within our
or their control and to compliance with any applicable state
C-1
<PAGE>
securities laws. The foregoing restrictions on resale will not apply subsequent
to the Resale Restriction Termination Date. If any resale or other transfer of
the Securities is proposed to be made pursuant to clause (e) above prior to the
Resale Restriction Termination Date, the transferor shall deliver a letter from
the transferee substantially in the form of this letter to the warrant agent
under the Warrant Agreement pursuant to which the Securities were issued (the
"Warrant Agent") which shall provide, among other things, that the transferee is
- --------------
an institutional "accredited investor" within the meaning of subparagraphs
(a)(1), (2), (3) or (7) of Rule 501 under the Securities Act and that it is
acquiring such Securities for investment purposes and not for distribution in
violation of the Securities Act. The Warrant Agent and the Company reserve the
right prior to any offer, sale or other transfer prior to the Resale Restriction
Termination Date of the Securities pursuant to clauses (c), (d), (e) or (f)
above to require the delivery of a written opinion of counsel, certifications,
and or other information satisfactory to the Company and the Warrant Agent.
2. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) purchasing
for our own account or for the account of such an institutional "accredited
investor," and we are acquiring the Securities for investment purposes and not
with a view to, or for offer or sale in connection with, any distribution in
violation of the Securities Act and we have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of our investment in the Securities, and we and any accounts for which we
are acting are each able to bear the economic risk of our or its investment for
an indefinite period.
3. We are acquiring the Securities purchased by us for our own account or
for one or more accounts as to each of which we exercise sole investment
discretion.
C-2
<PAGE>
4. You and your counsel are entitled to rely upon this letter and you are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
-----------------------------------------
(Name of Purchaser)
By:
--------------------------------------
Date:
------------------------------------
Upon transfer the Securities would be registered in the name
of the new beneficial owner as follows:
Name:______________________________
Address:___________________________
Taxpayer ID Number:________________
C-3
<PAGE>
EXHIBIT D
[FORM OF CERTIFICATE OF ELECTION]
The Company has not effected a Public Equity Offering resulting in
gross proceeds to the Company of at least $35.0 million and in accordance with
Section 4.04 of the Warrant Agreement you have the option of choosing the
following:
If you wish to have this Warrant or Warrant Share purchased (subject
to the limitations set forth in the Warrant Agreement) by the Company pursuant
to Section 4.04 of the Warrant Agreement, check the Box: [ ]
Included herewith is a Valuation Report describing the fair market
value of the Warrants and Warrant Shares as of the Valuation Date as determined
by an Independent Financial Expert chosen by the Company.
In the event that holders of 66-2/3% of the votes of the Warrants and
Warrant Shares held by the holders who complete and return this form with the
Box above checked elect to have another Independent Financial Expert appointed
to determine the fair market value of the Warrants and Warrant Shares on the
Valuation Date, such an Independent Financial Expert will be appointed to
determine the fair market value of the Warrant and Warrant Shares on the
Valuation Date. Such Independent Financial Expert shall be selected by the
Electing Holders holding a majority of the votes of the holders of Warrants and
Warrant Shares held by the Electing Holders, each Electing Holder having that
number of votes as the number of Warrant Shares into which such holder's
Warrants are exercisable (including fractional shares) plus the number of
Warrant Shares held by such holder. The fees of the Independent Financial Expert
so chosen shall be borne by holders of Warrants and Warrant Shares (pro rata
based on each holder's votes) and shall be deducted from the Warrant Purchase
Price or Warrant Share Purchase Price, as applicable.
Please check the following box if you wish to appoint another
Independent Financial Expert to issue another valuation report.
Check here: [ ].
Capitalized terms used herein and not defined have the meaning set
forth in the Warrant Agreement.
<PAGE>
EXHIBIT 10.20
================================================================================
WARRANT SHARES REGISTRATION RIGHTS AGREEMENT
Dated as of February 21, 1997
between
UNIFI COMMUNICATIONS, INC.
and
SMITH BARNEY INC.,
(as Initial Purchaser)
_______________________
================================================================================
<PAGE>
WARRANT SHARES REGISTRATION RIGHTS AGREEMENT
WARRANT SHARES REGISTRATION RIGHTS AGREEMENT ("Agreement"), dated as
---------
of February 21, 1997 between UNIFI COMMUNICATIONS, INC., a Delaware corporation
(the "Company"), and SMITH BARNEY INC. (the "Initial Purchaser").
------- -----------------
WHEREAS, the Company has entered into a purchase agreement (the
"Purchase Agreement") dated February 14, 1997 with the Initial Purchaser
- -------------------
pursuant to which the Company has agreed to sell to the Initial Purchaser
175,000 units (the "Units") each Unit consisting of $1,000 principal amount of
-----
the Company's 14% Senior Notes due 2004 (the "Notes") and one warrant (the
-----
"Initial Warrants") entitling the holder thereof to purchase initially 27.524674
- -------- --------
shares of Common Stock, par value $.01 per share (the "Common Stock") of the
------------
Company (subject to adjustment pursuant to the terms of the Warrant Agreement
(as defined)), (the "Initial Warrant Shares"); and
------- --------------
WHEREAS, in the event the Company does not complete a primary
underwritten public offering of its Common Stock on or prior to September 1,
1999, resulting in gross proceeds to the Company of at least $35.0 million, each
holder of Notes will be entitled to receive for each Note, one warrant (the
"Contingent Warrants") and, together with the Initial Warrants, the "Warrants")
- ----------- -------- --------
to purchase a pro rata share of an additional 8% of the fully diluted Common
Stock (the "Contingent Warrant Shares" and, together with the Initial Warrant
-------------------------
Shares, the "Warrant Shares"), and
------- ------
WHEREAS, the Company has entered into a Warrant Agreement (the
"Warrant Agreement"), dated as of the date hereof, between the Company, as
- ------------------
Issuer, and Fleet National Bank, a national banking association, not in its
individual capacity but solely as warrant agent (together with any successor
warrant agent, the "Warrant Agent"); and
-------------
WHEREAS, pursuant to the Purchase Agreement the Initial Purchaser
(together with any successors, assigns and direct and indirect transferees who
become registered owners of the Warrants or Warrant Shares, the "Holders") will
-------
have the registration rights, co-sale rights, and co-investment rights as set
forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
<PAGE>
-2-
ARTICLE I
REGISTRATION
------------
SECTION 1.01. Shelf Registration.
------------------
(a) The Company shall prepare and file with the United States
Securities and Exchange Commission (the "Commission") a registration statement
----------
or a post-effective amendment to an existing registration statement (the
"Registration Statement") on an appropriate form under the Securities Act of
- -----------------------
1933, as amended (the "Securities Act"), relating to the issuance by the Company
--------------
of the Warrant Shares issuable upon exercise of all of the Warrants by the
Holders thereof from time to time in accordance with the terms and conditions
set forth in the Warrant and the Warrant Agreement.
(b) The Company shall cause such Registration Statement to become
effective under the Securities Act on or prior to the Exercise Commencement Date
(as defined in the Warrant Agreement).
SECTION 1.02. Effectiveness Period. The Company shall use its best
--------------------
efforts to keep the Registration Statement continuously effective under the
Securities Act in order to permit the prospectus included therein to be lawfully
delivered by the Company to the Holders of the Warrant Shares until March 1,
2007 (the "Expiration Date")(the "Effectiveness Period"); provided that, except
--------------- --------------------
as provided below with respect to any Blackout Period (as defined), the Company
shall be deemed not to have used its best efforts to keep the Registration
Statement effective during the requisite period if it voluntarily takes any
action that would result in it not being able to offer and sell the Warrant
Shares issuable upon exercise of the Warrants during that period, unless such
action is required by applicable law. Notwithstanding the foregoing, the
Company shall not be required to amend or supplement the Registration Statement,
any related prospectus or any document incorporated therein by reference in the
event that, and for a period (a "Blackout Period") not to exceed, for so long as
---------------
this Agreement is in effect, an aggregate of 90 days if (x) an event occurs and
is continuing as a result of which the Registration Statement, any related
prospectus or any document incorporated therein by reference as then amended or
supplemented would, in the Company's good faith judgment, contain an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made,
<PAGE>
-3-
not misleading, and (y)(1) the Company determines in good faith that the
disclosure of such event at such time would have a material adverse effect on
the business, operations or prospects of the Company or (2) the disclosure
otherwise relates to a pending material business transaction which has not yet
been publicly disclosed.
SECTION 1.03. Registration Procedures.
-----------------------
(a) The Company shall cause the Registration Statement
and the related prospectus and any amendments or supplements thereto, as of the
effective date of the Registration Statement, (subject to Section 1.02), as of
any time thereafter while any of the Warrants, or, during the Effectiveness
Period, the Warrant Shares, remain outstanding (i) to comply in all material
respects with the applicable requirements of the Securities Act and the rules
and regulations of the Commission and (ii) not to contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(b) The Company shall give prompt written notices to the Holders of
the Warrants:
(i) on the date when the Registration Statement or any post-
effective amendments thereto have become effective;
(ii) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or the initiation or
threatening of any proceedings for that purpose;
(iii) of the receipt by the Company or its legal counsel of any
notification with respect to the suspension of the qualification of the
Warrant Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose;
(iv) of the happening of any event that requires the Company to make
changes in the Registration Statement or prospectus in order to make the
statements therein not misleading;
(v) of the commencement and termination of any Blackout Period; and
(vi) 90 days prior to the Expiration Date.
<PAGE>
-4-
(c) The Company shall use its best efforts to prevent the issuance or
obtain the withdrawal of any order suspending the effectiveness of the
Registration Statement at the earliest possible time.
(d) Upon the occurrence of any event contemplated by clauses (b)(iv)
or (v) of this Section 1.03, the Company shall promptly prepare a post-effective
amendment to the Registration Statement or a supplement to the related
prospectus or file any other required document so that, as thereafter delivered
to Holders of the Warrant Shares, the prospectus will not contain an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading and will contain the current information required by the
Securities Act.
(e) Not later than the effective date of the Registration Statement,
the Company will provide a CUSIP number for the Warrant Shares, and provide the
registrar with printed certificates for the Warrant Shares in a form eligible
for deposit with The Depository Trust Company.
(f) The Company will comply with all rules and regulations of the
Commission to the extent and so long as they are applicable to the Registration
Statement and will make generally available to its securities holders (or
otherwise provide in accordance with Section 11(a) of the Securities Act) an
earnings statement satisfying the provisions of Section 11(a) of the Securities
Act as soon as practicable, but in any event, no later than 45 days after the
end of the most recent 12-month period (or 90 days, if such period is a fiscal
year (plus any extension permitted by Rule 12b-25 under the Exchange Act))
beginning with the first month of the Company's first fiscal quarter commencing
after the effective date of the Registration Statement, which earnings statement
shall cover such 12-month period.
(g) The Company shall register or qualify or cooperate with the
Holders in connection with the registration or qualification of the Warrant
Shares issuable upon exercise of the Warrants under the securities or blue sky
laws of such states of the United States as any Holder reasonably requests and
do any and all other acts or things necessary or advisable to enable such
exercise in such jurisdictions; provided that the Company shall not be required
to (i) qualify to do business in any jurisdiction where it is not then so
qualified or (ii) take any action which would subject it to general service of
process or to taxation in any jurisdiction where it is not then so subject.
<PAGE>
-5-
(h) The Company shall bear all expenses incurred by it in connection
with the performance of its obligations under this Article I.
(i) The Company shall deliver to the Holders of the Warrants or
Warrant Shares, as the case may be, who so request, without charge, at least one
copy of the applicable Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, and, if any such Holder
requests, all exhibits (including those, if any, incorporated by reference).
(j) The Company shall cause all Warrant Shares covered by the
Registration Statement to be listed on each securities exchange on which similar
securities issued by the Company are then listed, to the extent such Warrant
Shares satisfy applicable listing requirements, if requested by the Holders of a
majority of such Warrant Shares.
SECTION 1.04. Registration Default. The Company acknowledges and
--------------------
agrees that any remedy at law for breach of any provision of this Article I
(each such default, a "Registration Default") will be inadequate and that, in
--------------------
addition to any other remedies that the Holders of Warrants may have, such
Holders shall be entitled to liquidated damages (the "Liquidated Damages") for
------------------
each week or portion thereof during which the Registration Default continues.
The Liquidated Damages will be equal to $.001 per week per Warrant for the first
90-day period during which the Registration Default continues and will increase
by an amount equal to $.001 per week per Warrant with respect to each subsequent
90-day period during which the Registration Default continues and until the
Registration Default is cured, up to a maximum of $.005 per week per Warrant.
All Liquidated Damages will be paid to Holders of the Warrants on each March 1
and September 1.
ARTICLE II
RIGHTS OF CO-SALE
-----------------
SECTION 2.01. Sales by Douglas J. Ranalli. Until such time as the
---------------------------
Company effects a Public Equity Offering resulting in net proceeds to the
Company of at least $35,000,000, if Douglas J. Ranalli ("Ranalli") proposes to
-------
transfer more than 100,000 shares of Common Stock owned by him ("Founder
-------
Shares"), then he shall afford the Holders the right to transfer the Warrants
and/or Warrant Shares held by them as follows:
<PAGE>
-6-
(a) Ranalli shall give written notice to the Holders, at least thirty
(30) days prior to any proposed transfer of any such shares, specifying the
number of Founder Shares that he desires to transfer, the percentage that such
shares represent of the total number of shares held by him, on a fully-converted
and fully-exercised basis (the "Sales Percentage"), the identity of the proposed
----------------
transferee of such shares, and the time within which and the price and all other
material terms and conditions upon which Ranalli proposes to sell such shares.
(b) Concurrently with the delivery of the notice referred to in
paragraph (a) above, Ranalli shall offer each of the Holders the opportunity to
sell to the proposed purchaser or purchasers of the shares that percentage of
the Warrants and/or Warrant Shares then held by the Holders that is equal to the
Sales Percentage. Any Warrants and/or Warrant Shares to be sold by each of the
Holders shall be sold on such terms as Ranalli has obtained from such purchaser
or purchasers in respect of the Founder Shares proposed to be sold by him,
including the time of purchase, the purchase price and the other terms and
conditions upon which the purchase of Ranalli's shares is to be made, provided,
--------
that the price per Warrant to be paid by the proposed purchaser shall be less
the exercise price of such Warrant.
SECTION 2.02. Adjustments. In the event Ranalli cannot obtain
-----------
agreements or commitments from the proposed purchaser or purchasers to purchase
that percentage of Warrants and/or Warrant Shares held by each of the Holders
which is equal to the Sales Percentage of the shares in accordance with Section
2.01, Ranalli shall reduce the number of Founder Shares that Ranalli proposes to
sell so that Ranalli and each of the Holders shall be entitled to sell an
identical percentage (as nearly as possible, with the number of shares or
Warrants and/or Warrant Shares being sold by Ranalli and each of the Holders
being rounded to the nearest whole share) of the Founder Shares or Warrants or
Warrant Shares (as applicable) then held by each of them, respectively, or such
lesser percentage as the Holders in their sole discretion may elect, which
decrease shall not require a proportionate decrease in the percentage sold by
Ranalli.
SECTION 2.03. Notice of Sales by Holders. Each of the Holders may
--------------------------
notify the Company in writing, within fifteen (15) days after receiving notice
of a proposed sale from Ranalli, whether such Holder desires to sell any such
Warrants and/or Warrant Shares held by such Holder concurrently with Ranalli in
accordance with the terms and provisions set forth above. Failure to provide
such written notice within the fifteen-day period after receipt of notice from
Ranalli shall be deemed to
<PAGE>
-7-
constitute an irrevocable declination by such Holder to sell any of such
Holder's Warrants and/or Warrant Shares concurrently with Ranalli. No Holders
shall be obligated to sell any Warrants and/or Warrant Shares pursuant to any
notice furnished by Ranalli.
SECTION 2.04. Concurrent Sales. Any and all sales of Warrants and/or
----------------
Warrant Shares by the Holders pursuant to the co-sale rights set forth in this
Article II shall be made either concurrently with or prior to the sale of the
Founder Shares by Ranalli.
SECTION 2.05. Exceptions to Co-sale Rights. Notwithstanding anything
----------------------------
contained in this Articles II to the contrary, the co-sale rights shall not
apply to any proposed sale of Founder Shares by Ranalli to (i) an immediate
family member of Ranalli; (ii) a trust for the benefit of Ranalli, his spouse or
his descendants; (iii) a corporation directly or indirectly wholly owned by
Ranalli and/or any person referred to in clause (i) or (ii); or (iv) a sale
pursuant to an effective registration statement including any of Ranalli's
shares in accordance with the exercise of registration rights pursuant to a
registration rights agreement to which the Company is a party; provided, that
any Founder Shares sold in a transaction described in clauses (i) through (iii)
shall continue to be subject to the co-sale rights set forth above in the hands
of the transferee thereof, and that such transferee shall agree to be so bound
in a separate agreement and, in the case of a transfer to a corporation, the
shares of such corporation shall also be subject to the co-sale rights set forth
above and the holders thereof shall agree to be so bound in a separate
agreement.
ARTICLE III
RIGHTS OF CO-INVESTMENT
-----------------------
SECTION 3.01. Right to Purchase Shares of an Additional Series or
---------------------------------------------------
Class of Stock. In the event the Company proposes to issue and sell any shares
- --------------
of Common Stock, convertible securities, warrants or options (collectively, the
"Additional Stock") to Ranalli, then the Company shall afford the Holders the
----------------
right to purchase certain shares of the Additional Stock as follows:
(a) The Company shall give written notice to all Holders, at least
thirty (30) days prior to any proposed issuance and sale of Additional Stock at
a price less than the equivalent
<PAGE>
-8-
of the fair market value thereof, specifying the number of such shares to be
issued and sold, the time within which and the price and all other material
terms and conditions upon which the Company proposes to sell such shares.
(b) Each Holder shall notify the Company in writing, within twenty
(20) days after receiving such notice, whether such Holder desires to purchase
any such shares of Additional Stock and, if so, the number of shares he desires
to purchase. Failure to provide such written notice within such twenty-day
period after receipt of notice from the Company, for the purpose hereof, shall
be deemed to constitute a refusal by such Holder to purchase any such shares of
Additional Stock. Each Holder shall be entitled to purchase a percentage of the
Addition Stock equal to the percentage of Common Stock, on a fully-converted and
fully-exercised basis, represented by the Warrants and/or Warrant Shares owned
by such Holder.
SECTION 3.02. Exceptions to Co-investment Rights. Notwithstanding
----------------------------------
the foregoing, this Article III shall not apply to any issuance of Additional
Stock made upon (i) the exercise by Ranalli of Convertible Preferred Stock,
Series A, B, C, D, E or F of the Company or any other series designated as
ranking on a parity with such series of conversion rights accorded such shares
pursuant to the certificate of designation of powers, rights and preferences of
such shares, (ii) the grant or exercise of an incentive or non-qualified stock
option pursuant to the Company's 1993 Stock Option Plan, as amended, or the
Company's 1994 Investor Incentive Stock Option Plan, or pursuant to any other
stock option (including, without limitation, warrants) plan ratified and adopted
by majority vote, on a fully converted basis, of the Company's stockholders and
by vote of a majority of the Company's Board of Directors who are not officers
of the Company or (iii) the exercise of any option or the conversion of any
convertible security of the Company.
ARTICLE IV
MISCELLANEOUS
-------------
SECTION 4.01. Remedies. In the event of a breach by the Company or
--------
by a Holder of Warrants or Warrant Shares, as the case may be, of any of its
obligations under this Agreement, each Holder of Warrants or Warrant Shares, as
the case may be, and the Company, in addition to being entitled to exercise all
rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement.
<PAGE>
-9-
Notwithstanding the provisions of Section 1.04 hereof, the Company and each
Holder of Warrants or Warrant Shares, as the case may be, agree that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach of any of the provisions of this Agreement and each hereby further agrees
that, in the event of any action for specific performance in respect of such
breach, it shall waive the defense that a remedy at law would be adequate.
SECTION 4.02. No Inconsistent Agreements. The Company will not enter
--------------------------
into any agreement with respect to its securities that is inconsistent with the
rights granted to the Holders of the Warrants and Warrant Shares in this
Agreement or otherwise conflicts with the provisions hereof. Without the
written consent of the Holders of a majority of the outstanding Warrants, the
Company shall not grant to any person any rights which conflict with or are
inconsistent with the provisions of this Agreement.
SECTION 4.03. No Piggyback on Registrations. The Company shall not
-----------------------------
grant to any of its securityholders (other than the Holders of the Warrants in
such capacity) the right to include any of their securities in any Registration
Statement other than Warrant Shares.
SECTION 4.04. Amendments and Waivers. The provisions of this
----------------------
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, otherwise than with the prior written
consent of the Holders of not less than a majority of the votes of the then
outstanding Warrants, each Holder having such number of votes which is equal to
the number of Warrant Shares into which such Holder's Warrants are exercisable
at such time; provided, however, that, for the purposes of this Agreement,
-------- -------
Warrants that are owned, directly or indirectly, by the Company or any of its
Affiliates are not deemed outstanding; provided, further, that any modification
of Articles II or III hereunder shall require the consent of a majority of the
votes of the holders of Warrants and Warrant Shares, each Warrant holder or
Warrant Shareholder, as applicable, having that number of votes as the number of
shares into which his Warrants are exercisable at such time (including
fractional shares) plus the number of Warrant Shares held by such holder.
SECTION 4.05. Notices. All notices and other communications provided
-------
for herein shall be made in writing by
<PAGE>
-10-
hand-delivery, next-day air courier, certified first-class mail, return receipt
requested, telex or telecopier:
(a) if to the Company, as provided in the Purchase Agreement,
(b) if to the Initial Purchaser, as provided in the Purchase
Agreement, or
(c) if to any other person who is then the registered Holder of
Warrants or Warrant Shares, as the case may be, to the address of such Holder as
it appears in the register therefor of the Company.
Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given: when delivered by hand,
if personally delivered; one Business Day after being timely delivered to a
next-day air courier; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; and when receipt is
acknowledged by the recipient's telecopier machine, if telecopied.
SECTION 4.06. Successors and Assigns. This Agreement shall inure to
----------------------
the benefit of and be binding upon the successors and permitted assigns of each
of the parties and shall inure to the benefit of each Holder of Warrants or
Warrant Shares, as the case may be. The Company may not assign any of its
rights or obligations hereunder without the prior written consent of each Holder
of Warrants or Warrant Shares, as the case may be. Notwithstanding the
foregoing, no successor or assignee of the Company shall have any of the rights
granted under this Agreement until such person shall acknowledge its rights and
obligations hereunder by a signed written statement of such person's acceptance
of such rights and obligations.
SECTION 4.07. Counterparts. This Agreement may be executed in any
------------
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and, all of which
taken together shall constitute one and the same Agreement.
SECTION 4.08. Governing Law; Submission to Jurisdiction. THIS
-----------------------------------------
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE
OF NEW YORK. THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY
NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK
OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE
<PAGE>
-11-
CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT, AND EACH IRREVOCABLY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE
AFORESAID COURTS.
SECTION 4.09. Severability. The remedies provided herein are
------------
cumulative and not exclusive of any remedies provided by law. If any term,
provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their reasonable efforts to
find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms, provisions, covenants
and restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
SECTION 4.10. Headings. The headings in this Agreement are for
--------
convenience of reference only and shall not limit or otherwise affect the
meaning hereof. All references made in this Agreement to "Article," "Section"
and "paragraph" refer to such Article, Section or paragraph of this Agreement,
unless expressly stated otherwise.
SECTION 4.11. Entire Agreement. This Agreement is intended by the
----------------
parties as a final expression of their agreement and is intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein with respect to the registration rights granted by the
Company with respect to the Warrant Shares. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Warrant Shares
Registration Rights Agreement to be duly executed as of the date first written
above.
/s/ Douglas J. Ranalli
-------------------------------
Douglas J. Ranalli
THE COMPANY:
UNIFI COMMUNICATIONS, INC.
By: /s/ Douglas J. Ranalli
-------------------------------
Name:
Title:
THE INITIAL PURCHASER:
SMITH BARNEY INC.
By: /s/ George Alex
----------------------------
Name:
Title:
<PAGE>
EXHIBIT 10.21
LEASE
BETWEEN
CROSS POINT LIMITED PARTNERSHIP
as Landlord
AND
FAX INTERNATIONAL, INC.
as Tenant
Dated as of August 2, 1996
<PAGE>
August 2, 1996
INDEX
-----
Tab No. Description
- ------- -----------
1 Lease dated as of August 2, 1996 between Cross Point Limited
Partnership as Landlord and Fax International, Inc. as Tenant
Exhibit A - Floor Plan of Premises
---------
Exhibit B - Legal Description of Fee Land
---------
Exhibit B-1 - Legal Description of Easement Land
-----------
Exhibit C - Utilities and Other Services
-----------
Exhibit D - Rules and Regulations
-----------
Exhibit E --- Form of Tenant Improvement Work Agreement
(SEE TAB NO. 2)
2 Tenant Improvement Work Agreement dated as of August 2,
1996 between Cross Point Limited Partnership and Fax
International, Inc.
Attachment 1 - Form of Term Note (SEE TAB NO. 3)
------------
Attachment 2 - Form of Subordination Agreement (SEE TAB NO.
------------ 4)
3 Term Note of Fax International, Inc. dated August 2, 1996 in
original principal amount of $1,500,000
4 Subordination Agreement dated as of August 2, 1996 among
Cross Point Limited Partnership, Fax International, Inc. and
Singapore Telecommunications Limited
5 Agreement dated as of August 2, 1996 between Cross Point
Limited Partnership and Fax International, Inc.
6 Warrant to Purchase Common Stock of Fax International, Inc.
dated August 2, 1996 issued to Cross Point Limited Partnership
7 Subscription of Cross Point Limited Partnership to purchase
30,000 shares of Fax International, Inc. Common Stock dated
August 2,1996
<PAGE>
LEASE BETWEEN CROSS POINT LIMITED PARTNERSHIP
AND
FAX INTERNATIONAL, INC.
Tab Description
- --- -----------
8 Certificate No. 161 for 30,000 shares of Fax International, Inc.
Common Stock dated August 2, 1996 issued to Cross Point
Limited Partnership
9 Check of Cross Point Limited Partnership for $300 payable to
Fax International, Inc. in payment for Common Stock
10 Letter Agreement dated August 2, 1996 between Cross Point
Limited Partnership and Fax International, Inc.
<PAGE>
LEASE
THIS LEASE (this "Lease") is made as of the 2nd day of August, 1996 by and
between CROSS POINT LIMITED PARTNERSHIP, a Massachusetts limited partnership
having an address at 900 Chelmsford Street, Lowell, Massachusetts 01851
("Landlord") and FAX INTERNATIONAL, INC., a Delaware corporation having an
address at 67 South Bedford Street, Suite 100E, Burlington, Massachusetts
01803-5152 ("Tenant"), for space in the Building (as defined below). The
following schedule (the "Schedule") sets forth certain basic terms of this
lease:
SCHEDULE
--------
1. Fee Land: The parcel of land known and numbered as 900 Chelmsford
--------
Street, Lowell, Massachusetts, located partly in Lowell and partly in
Chelmsford, County of Middlesex, Commonwealth of Massachusetts, and more
particularly described in Exhibit "B" attached hereto and incorporated herein.
2. Easement Land: The parcel of land located in Lowell, County of
-------------
Middlesex, Commonwealth of Massachusetts, and more particularly described in
Exhibit "B-1" attached hereto and incorporated herein.
3. Land: Collectively, the Fee Land and the Easement Land.
----
4. Building: The building containing approximately 1,216,738 rentable
--------
square feet of floor area located at the Fee Land and all other improvements now
located at the Fee Land.
5. Property: Collectively, the Building, the Land and any other building
--------
or improvements hereafter located at the Fee Land.
6. Premises: Collectively, the entire tenth floor of Tower 3 of the
--------
Building consisting of approximately 36,316 rentable square feet of floor area,
the entire eleventh floor of Tower 3 of the Building consisting of approximately
36,316 rentable square feet of floor area, and the entire twelfth floor of Tower
3 of the Building consisting of approximately 36,316 rentable square feet of
floor area, all as shown on the floor plans attached hereto as Exhibit "A" and
incorporated herein by this reference.
7. Commencement Date: The earlier of (i) the date on which Tenant
-----------------
commences use of the Premises or any portion thereof, (ii) the Substantial
Completion Date (as defined in the Tenant Improvement Work Agreement attached
hereto as Exhibit "E" and incorporated herein by this reference), or (iii)
December 1, 1996.
8. Expiration Date: The day prior to the seventh anniversary of the
---------------
Commencement Date.
9. Annual Base Rent: For the period from the Commencement Date through
----------------
and including the day prior to the date which is six (6) months after the
Commencement Date, $648,240.60 per year; and for the period from the date which
is six (6) months after the Commencement Date through and including the
Expiration Date, $1,220,865.60 per year.
10. Monthly Base Rent: For the period from the Commencement Date through
-----------------
and including the day prior to the date which is six (6) months after the
Commencement Date, $54,020.05 per month; and for the period from the date which
is six (6) months after the Commencement Date through and Including the
Expiration Date, $101,738.80 per month.
<PAGE>
11. Tenant's Proportionate Share: 8.95% (108,948 rentable square feet of
----------------------------
floor area in the Premises divided by 1,216,738 rentable square feet of floor
area in the Building).
12. Base Expense Year: Calendar Year 1996 (i.e., January 1, 1996 -
----------------- ---
December 31, 1996).
13. Base Tax Year: Fiscal Year 1997 (i.e., July 1, 1996-June 30, 1997).
------------- ---
14. Broker: Fallon, Hines and O'Conner.
------
15. Address of Landlord: Cross Point Limited Partnership
-------------------
900 Chelmsford Street
Lowell, Massachusetts 01851
Attention: Luis A. Alvarado and
Christopher J. Kelly
16. Address of Tenant: FAX International, Inc.
-----------------
67 South Bedford Street, Suite 1OOE
Burlington, Massachusetts 01803-5152
Attention: Corporate Counsel
1. DEMISE AND TERM. Landlord hereby leases to Tenant and Tenant hereby
leases from Landlord the premises (the "Premises") described in Item 6 of the
Schedule, subject to the covenants and conditions set forth in this Lease, for a
term (the "Term") commencing on the date (the "Commencement Date") described in
Item 7 of the Schedule and expiring on the date (the "Expiration Date")
described in Item 8 of the Schedule, unless terminated earlier as otherwise
provided in this Lease. Upon the determination of the Commencement Date,
Landlord and Tenant shall memorialize the Commencement Date and the Expiration
Date in a written instrument. Tenant shall have, as appurtenant to the Premises,
the right to use in common with others entitled thereto, subject to reasonable
rules and regulations from time to time made by Landlord, those common areas and
common facilities of the Property necessary for access to and beneficial use of
the Premises, including without Limitation, (i) the common lobbies, corridors,
stairways, elevators and loading docks of the Building necessary for access to
and beneficial use of the Premises, (ii) the common walkways and driveways
necessary for access to the Premises, and (iii) the pipes, ducts, conduits,
wires and related equipment necessary for Tenant's beneficial use of the
Building systems as provided herein.
2. RENT.
A. Definitions. For purposes of this Lease, the following terms shall
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have the following meanings:
(i) "Base Expense Year" shall mean the year set forth in Item 12 of
the Schedule.
(ii) "Base Tax Year" shall mean the year set forth in Item 13 of the
Schedule.
(iii) "Base Expenses" shall mean the amount of Expenses (as defined
below) for the Base Expense Year, with an appropriate adjustment to such amount
to reflect the Expenses that would have been paid or incurred by Landlord had
the Building been at least ninety-five percent (95%) occupied by tenants for the
entire Base Expense Year.
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(iv) "Base Taxes" shall mean the amount of Taxes (as defined below)
for the Base Tax Year.
(v) "Controllable Expenses" shall mean all Expenses other than the
cost of furnishing water, sewer, gas, fuel, electricity and other utility
services to the Property.
(vi) "Expenses" shall mean all expenses, costs and disbursements
(other than Taxes) paid or incurred by Landlord in connection with the
ownership, management, maintenance, operation, replacement and repair of the
Property, including by way of example rather than limitation: security expenses;
legal fees; salaries, wages, fringe benefits, worker's compensation insurance
premiums and payroll taxes and union dues of workers and other on-site employees
of Landlord; all insurance premiums, fees and impositions; costs for repairs,
maintenance, service contracts, management fees, governmental permits and
overhead expenses; costs of furnishing water, sewer, gas, fuel, electricity and
other utility services; janitorial service, care of interior and exterior
landscaping, snow removal and trash removal; and the costs of any other items
attributable to operating or maintaining any or all of the Property. Expenses
shall not include: (a) costs of tenant alterations; (b) costs of capital
improvements (except for costs of any capital improvements made or installed for
the purpose of reducing Expenses or made or installed pursuant to governmental
requirement or insurance requirement, which costs shall be amortized by Landlord
in accordance with generally accepted accounting principles consistently
applied); (c) interest and principal payments on mortgages or any rental
payments on any ground leases (except for rental payments which constitute
reimbursement for Taxes and Expenses); (d) advertising expenses and leasing
commissions; (e) any cost or expenditure for which Landlord is reimbursed,
whether by insurance proceeds or otherwise, except through Adjustment Rent (as
defined below); (f) the cost of any kind of service furnished to any other
tenant in the Building which Landlord does not generally make available to all
tenants in the Building; and (g) legal expenses of negotiating leases or of
enforcing leases or other obligations of Building tenants. Notwithstanding
anything in this Lease to the contrary, in no event shall the calculation of
Expenses for calendar year 1997 include any amount of Controllable Expenses for
calendar year 1997 in excess of one hundred five percent (105%) of Controllable
Expenses for calendar year 1996.
(vii) "Rent" shall mean Base Rent (as defined below), Adjustment Rent
and any other sums or charges due by Tenant hereunder.
(viii) "Taxes" shall mean all taxes, assessments, betterments and
fees levied upon the Building, the Fee Land, the Easement Land (but only to the
extent that such taxes, assessments and fees are paid or payable by Landlord to
the taxing authority or are reimbursed or reimbursable by Landlord to a third
party which has an interest in the Easement Land and which is obligated as
between Landlord and such third party to pay taxes, assessments and fees levied
upon the Easement Land) or the rents collected therefrom, by any governmental
entity based upon the ownership, leasing, renting or operation of the Building,
the Fee Land or the Easement Land, including all costs and expenses of
protesting any such taxes, assessments or fees. Taxes shall not include any net
income, capital stock, succession, transfer, franchise, gift, estate or
inheritance taxes; provided, however, if at any time during the Term, a tax or
excise on income is levied or assessed by any governmental entity, in Lieu of or
as a substitute for, in whole or in part, real estate taxes or other ad valorem
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taxes, such tax shall constitute and be included in Taxes. In addition, Taxes
shall not include any and all taxes, assessments, betterments and fees levied
upon any buildings or improvements located on the Easement Land. For the
purposes of determining Taxes for any given year, the amount to be included for
such year (a) from special assessments payable in installments shall be the
amount of the installments (and any interest) due and payable during such year,
and (b) from all other Taxes shall at Landlord's election either be the amount
accrued, assessed or otherwise imposed for such year or the amount due and
payable in such year.
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(ix) "Tenant's Proportionate Share" shall mean the percentage set
forth in Item 11 of the Schedule, which has been determined by dividing the
rentable square feet of floor area in the Premises by the rentable square feet
of floor area in the Building.
B. Components of Rent. Tenant agrees to pay the following amounts to
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Landlord at the office of the Building or at such other place as Landlord
designates:
(i) Base rent ("Base Rent") to be paid in monthly installments in the
amount set forth in Item 10 of the Schedule in advance on or before the first
day of each month of the Term commencing with the Commencement Date. Landlord
acknowledges that Annual Base Rent includes Tenant's Proportionate Share of Base
Expenses and Tenant's Proportionate Share of Base Taxes.
(ii) Adjustment rent ("Adjustment Rent") in an amount equal to
Tenant's Proportionate Share of (a) the increase in Expenses for any calendar
year during the Term over the Base Expenses and (b) the increase in Taxes for
any calendar year during the Term over the Base Taxes. Notwithstanding anything
in this Lease to the contrary, in no event shall Adjustment Rent for calendar
year 1997 include any increase in the cost of providing electrical energy to the
Property during calendar year 1997 over the cost of providing electrical energy
to the Property during calendar year 1996 except to the extent that such
increase is due to any increase in the rates charged by the electric utility
company to Landlord for electrical energy furnished to the Property. Prior to
each calendar year during the Term, Landlord shall estimate the amount of
Adjustment Rent due for such calendar year, and Tenant shall pay Landlord one-
twelfth of such estimate on the first day of each month during such calendar
year. Such estimate may be revised by Landlord whenever it obtains information
relevant to making such estimate more accurate. After the end of each calendar
year during the Term, Landlord shall deliver to Tenant a report (a "Report")
setting forth the actual Expenses and Taxes for such calendar year and a
statement of the amount of Adjustment Rent that Tenant has paid and is payable
for such year. Within thirty (30) days after receipt of such Report, Tenant
shall pay to Landlord the amount of Adjustment Rent due for such calendar year
minus any payments of Adjustment Rent made by Tenant for such calendar year. If
Tenant's estimated payments of Adjustment Rent for any calendar year exceed the
amount of Adjustment Rent due Landlord for such calendar year, Landlord shall
apply such excess as a credit against Tenant's other obligations under this
Lease or promptly refund such excess to Tenant if the Term has already expired,
provided Tenant is not then in default hereunder, in either case without
interest to Tenant. Notwithstanding the foregoing, if Tenant's estimated
payments of Adjustment Rent for any calendar year exceed the amount of
Adjustment Rent due Landlord for such calendar year by greater than ten percent
(10%), then Landlord shall pay Tenant interest on such excess at the annual rate
of the prime rate of The First National Bank of Boston. Any Report sent to
Tenant shall be conclusively binding upon Tenant unless, within ninety (90) days
after such Report is sent, Tenant shall send a notice to Landlord objecting to
all or any portion of such Report. If such objection is not resolved as between
the parties within thirty, (30) days thereafter, then Tenant shall have the
right to audit the books and records relating to the operation of the Property
for the calendar year to which such objected Report relates, provided Tenant
makes a request to conduct such audit within one hundred twenty (120) days after
such Report is sent to Tenant and provided such audit is performed within thirty
(30) days following such request. Such audit shall be performed at such time or
times during normal business hours as Landlord shall reasonably designate and
shall be performed by an independent certified public accounting firm selected
by mutual agreement of Tenant and Landlord. The determination of such
accounting firm shall be conclusively binding upon Landlord and Tenant. Within
thirty (30) days following the determination of such accounting firm, Tenant
shall pay to Landlord the amount of Adjustment Rent underpaid, if any, or
Landlord shall refund to Tenant the amount of Adjustment Rent overpaid, if any,
in either case without interest on such underpayment or overpayment.
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C. Payment of Rent. The following provisions shall govern the payment of
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Rent: (i) if this Lease commences or ends on a day other than the first day or
last day of a calendar month, respectively, the monthly installments of Rent for
the calendar month in which this Lease so begins or ends shall be prorated; (ii)
all Rent shall be paid to Landlord without offset or deduction, and the covenant
to pay Rent shall be independent of every other covenant in this Lease; (iii) if
during all or any portion of any calendar year during the Term the Building is
not at least ninety-five percent (95%) occupied by tenants, Landlord shall make
an appropriate adjustment of Expenses for such calendar year to determine the
Expenses that would have been paid or incurred by Landlord had the Building been
at least ninety-five percent (95%) occupied by the tenants for the entire
calendar year and the amount so determined shall be deemed to have been the
Expenses for such calendar year; (iv) any sum due from Tenant to Landlord which
is not paid within thirty (30) days after the date due shall bear interest from
the date due until the date paid at the annual rate of the prime rate of The
First National Bank of Boston, plus four percent (4%), but in no event higher
than the maximum rate permitted by law (the "Default Rate"); and, in addition,
at Landlord's option, Tenant shall pay Landlord a late charge for any Rent
payment which is not paid within eight (8) business days after its due date
equal to five percent (5%) of such payment if, on at least one (1) occasion
within twelve (12) months prior to such due date, Tenant shall have failed to
pay any Rent payment within eight (8) business days after such payment's due
date; (v) in the event of the termination of this Lease prior to the
determination of any Adjustment Rent, Tenant's agreement to pay any such sums
and Landlord's obligation to refund any such sums (provided Tenant is not in
default hereunder) shall survive the termination of this Lease; (vi) no
adjustment to the Rent by virtue of the operation of the rent adjustment
provisions in this Lease shall result in the payment by Tenant in any year of
less than the Base Rent shown on the Schedule; (vii) Landlord may at any time
change the fiscal year of the Building; (viii) each amount owed to Landlord
under this Lease for which the date of payment is not expressly fixed shall be
due on the same date as the Rent listed on the statement showing such amount is
due; and (ix) if Landlord fails to give Tenant an estimate of Adjustment Rent
prior to the beginning of any calendar year, Tenant shall continue to pay
Adjustment Rent at the rate for the previous calendar year until Landlord
delivers such estimate; and (x) if, after Tenant shall have made any payment of
Adjustment Rent to Landlord pursuant to Section 2.B of this Lease, Landlord
shall receive a refund of any portion of Taxes paid by Tenant with respect to
any Tax period during the Term of this Lease as a result of abatement of such
Taxes, by legal proceedings, settlement, or otherwise, Landlord shall credit to
Tenant Tenant's Proportionate Share of such refund (less the proportional pro
rata reasonable expenses, including reasonable attorneys' fees and appraisers'
fees, incurred by Landlord in connection with obtaining such refund) as it
relates to Taxes paid by Tenant to Landlord with respect to any such period for
which a refund is obtained, or, if no further Rent is due hereunder from Tenant
to Landlord, pay such amount to Tenant within thirty (30) days after receipt of
such refund.
3. USE. Tenant agrees that it shall occupy and use the Premises only as
general business offices and for setting up, adjusting, repairing and operating
computer, telecommunications and related equipment and software and for no other
purposes. Tenant shall comply with all federal, state and local laws,
ordinances and regulations and all covenants, conditions and restrictions of
record applicable to Tenant's use or occupancy of the Premises. Without
limiting the foregoing, Tenant shall not cause, nor permit. any hazardous or
toxic substances to be brought upon, produced, stored, used, discharged or
disposed of in, on or about the Premises without the prior written consent of
Landlord and then only in compliance with all applicable environmental laws.
4. CONDITION OF PREMISES. Tenant's taking possession of the Premises
shall be conclusive evidence that the Premises were in good order and
satisfactory condition when Tenant took possession, except as otherwise provided
in Exhibit "E" attached hereto and incorporated herein by this reference. No
agreement of Landlord to alter, remodel, decorate, clean or improve the Premises
or the Building (or to provide Tenant with any credit or allowance for the
same), and no representation
<PAGE>
regarding the condition of the Premises or the Building, have been made by or on
behalf of Landlord or relied upon by Tenant, except as otherwise provided in
Exhibit "E" attached hereto and incorporated herein by this reference.
5. UTILITIES AND OTHER SERVICES
A. Utilities and Services Furnished by Landlord. Landlord agrees to
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furnish or cause to be furnished to the Premises, the utilities and services
described in Exhibit "C" attached hereto and incorporated herein by this
reference (hereinafter referred to collectively as "Landlord's Services"),
subject to the conditions and in accordance with the standards set forth in this
Section 5 and in Exhibit "C". All costs and expenses incurred by Landlord in
connection with furnishing Landlord's Services shall be included as part of
Expenses pursuant to Section 2 hereof except for the cost of furnishing
electrical energy (for lights, plugs, heat pumps and air handlers) to the
Premises. With respect to such electrical energy furnished to the Premises,
Tenant shall pay all of Landlord's charges for such electrical energy furnished
to the Premises during the Term, which charges shall be based on meter readings
from separate meters for each separate floor within the Premises.
B. Special and Additional Usage. Landlord may impose a reasonable charge
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for any utilities and services, including without limitation, air conditioning,
electricity, and water, provided by Landlord by reason of: (i) any use of the
Premises at any time other than the hours set forth above or in Exhibit "C";
(ii) any use beyond what Landlord agrees herein or in Exhibit "C" to furnish; or
(iii) special electrical, cooling and ventilating needs created by Tenant's
telephone equipment, computers, electronic data processing equipment and other
similar equipment or uses. Landlord shall have no obligation to provide such
additional utilities or services (except for Non-Normal Business Hours heating
or air conditioning which shall be furnished as provided below). Notwithstanding
anything herein to the contrary but subject to the provisions of the last
sentence of this Section 5.B, Landlord shall furnish heating or air conditioning
to the Premises during times other than Normal Business Hours (as defined in
Exhibit C) provided that notice requesting such service is delivered to
Landlord's managing agent before noon on any business weekday when such service
is required for that evening and by noon of the immediately preceding business
weekday when such service is required for after 4:00 p.m. on a Saturday or a
Sunday or for any time on a holiday. Landlord's cost of supplying such
additional heating or air conditioning to the Premises shall be paid by Tenant
within thirty (30) days of receipt of an invoice therefor. Landlord hereby
acknowledges that the current charge for non-Normal Business Hours heating or
air conditioning is $40.00 per hour. Such charge is subject to commercially
reasonable increase from time to time by Landlord. Notwithstanding anything in
this Section 5.B to the contrary, Landlord shall furnish heat and air
conditioning in accordance with the requirements and conditions set forth in
Exhibit "C" attached hereto to the entire eleventh floor of Tower 3 of the
Building twenty-four hours per day, three hundred sixty-five days per year
during the Term at no additional cost to Tenant.
C. Cooperation: Payment of Charges: Approval of Special Equipment Usage.
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Tenant agrees to cooperate fully at all times with Landlord and to abide by all
reasonable regulations and requirements which Landlord may prescribe for the use
of the above utilities and services. Tenant agrees to pay any charge imposed by
Landlord pursuant to Section 5.B above within thirty (30) days of receipt by
Tenant of an invoice therefor. Any failure to pay any such charge for additional
utilities or services shall constitute a breach of the obligation to pay Rent
under this Lease and shall entitle Landlord to the rights herein granted for
such breach and shall entitle Landlord to immediately discontinue providing such
additional utility or service. Tenant's use of electricity shall at no time
exceed the capacity of the service to the Premises or the electrical risers or
wiring installation.
<PAGE>
D. Failure, Stoppage or Interruption of Service: No Release from
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Obligations. Landlord shall not be liable for, and Tenant shall not be
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entitled to any abatement or reduction of Rent by reason of, Landlord's failure
to furnish any of the foregoing services when such failure is caused by
accident, breakage, repairs, riots, strikes, lockouts or other labor disturbance
or labor dispute of any character, Governmental regulation, moratorium or other
Governmental action, inability by exercise of reasonable diligence to obtain
electricity, water or fuel, or by any other cause beyond Landlord's immediate
control or for stoppages or interruptions of any such services for the purpose
of making necessary repairs or improvements. Failure, stoppage or interruption
of any such service shall not be construed as an actual or constructive eviction
or as a partial eviction against Tenant, or release Tenant from the prompt and
punctual performance by Tenant of the covenants contained herein or operate to
abate Rent.
E. Limitation and Unavailability of Service. Anything hereinabove to the
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contrary notwithstanding, Landlord and Tenant agree that Landlord's obligation
to furnish heat, electricity, air conditioning and/or water to the Premises
shall be subject to and limited by all laws, rules, and regulations of any
governmental authority affecting the supply, distribution, availability,
conservation or consumption of energy, including, but not limited to, heat,
electricity, gas, oil and/or water. Landlord shall abide by all such
governmental laws, rules and regulations and, in so doing, Landlord shall not be
in default in any manner whatsoever under the terms of this Lease, and
Landlord's compliance therewith shall not affect in any manner whatsoever
Tenant's obligation to pay the full Rent set forth in this Lease.
F. Load Bearing Capacity. Except as may otherwise be permitted by
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Landlord pursuant to Section 30 below, Tenant shall not place a load upon any
floor of the Premises which exceeds 100 pounds per square foot "live load."
Landlord reserves the right to prescribe in a reasonable manner the weight and
position of all safes and heavy installations which Tenant wishes to place in
the Premises so as to properly distribute the weight thereof.
G. Unreasonable Noise or Vibration. Business machines and mechanical
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equipment belonging to Tenant which cause unreasonable noise or vibration that
may be transmitted to the structure of the Building or to any leased space to
such a degree as to be objectionable to Landlord or to any tenants in the
Building shall be placed and maintained by Tenant, at Tenant's expense, on
vibration eliminators or other devices sufficient to eliminate such unreasonable
noise or vibration.
H. Telephone. Subject to applicable codes, Landlord has or will cause to
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be installed telephone risers (collectively the "risers") from the outside of
the Building to the telephone room (the "telephone room") serving the Premises.
Tenant shall have the right to use the risers by installing telephone lines (the
"telephone lines") from the Premises to the telephone room if and to the extent
such telephone lines are not now in place. Subject to the terms and conditions
of this Lease, Tenant shall be permitted access to the telephone room at
reasonable times after reasonable prior notice to Landlord for the purpose of
ensuring proper installation, maintenance and operation of the telephone lines
and related equipment. Landlord makes no representations or warranties with
respect to the capacity, suitability or design of the risers, the telephone room
or the telephone lines. If there is more than one tenant on a floor, Landlord
shall allocate hookups to the telephone room based on the proportion of rentable
square feet that each tenant occupies on the floor. The installation and hook-
up of telephone lines by Tenant shall be subject to all of the terms and
conditions of this Lease, including, without limitation, Section 9 of this
Lease. Except to the extent that any damage to property is due to the
negligence or willful misconduct of Landlord, its property manager or their
respective agents and employees, Landlord shall not be liable for, and Tenant
waives all claims with respect to, any damages or losses sustained by Tenant or
by any occupant of the Premises, including, without limitation, any
compensatory, property or consequential damages, resulting from the operation or
maintenance of the risers, telephone rooms and telephone lines, including,
without limitation, (i) any damage to Tenant's telephone lines, telephones or
other equipment connected to the telephone lines, or (ii) interruption or
<PAGE>
failure of, or interference with, telephone or other service coming through the
telephone lines to the Premises. Subject to the terms and conditions of this
Lease, including, without limitation, Section 9 of this Lease, Tenant may, at
its sole cost and expense, install additional telephone risers, access paths,
telephone lines and related equipment to serve the Premises.
6. RULES AND REGULATIONS. Tenant shall observe and comply and shall
cause its subtenants, assignees, invitees, employees, contractors and agents to
observe and comply, with the rules and regulations listed on Exhibit "D"
attached hereto and incorporated herein and with such reasonable modifications
and additions thereto as Landlord may make from time to time. Landlord shall
not be liable for failure of any person to obey such rules and regulations.
Landlord shall not be obligated to enforce such rules and regulations against
any person and the failure of Landlord to enforce any such rules and regulations
shall not constitute a waiver thereof or relieve Tenant from compliance
therewith. Notwithstanding the foregoing, Landlord shall not enforce such rules
and regulations against Tenant in a discriminatory manner. If there be any
conflicts between any rules and regulations and any other provisions of this
Lease, such other provisions of this Lease shall govern.
7. CERTAIN RIGHTS RESERVED TO LANDLORD. Landlord reserves the following
rights, each of which Landlord may exercise without notice to Tenant and without
liability to Tenant, and the exercise of any such rights shall not be deemed to
constitute an eviction or disturbance of Tenant's use or possession of the
Premises and shall not give rise to any claim for set-off or abatement of rent
or any other claim: (a) to change the name or street address of the Building or
the suite number of the Premises; (b) to install, affix and maintain any and all
signs on the exterior or interior of the Building; (c) to make repairs,
decorations, alterations, additions, or improvements, whether structural or
otherwise, in and about the Building, and for such purposes (upon reasonable
prior notice to Tenant except in the event of an emergency) to enter upon the
Premises, temporarily close doors, corridors and other areas in the Building and
interrupt or temporary suspend services or use of common areas, and Tenant
agrees to pay Landlord for overtime and similar expenses incurred if such work
is done other than during ordinary business hours at Tenant's request; (d) to
retain at all times, and to use in appropriate instances, keys to all doors
within and into the Premises; (e) to show or inspect the Premises at reasonable
times and upon reasonable prior notice and, if vacated or abandoned, to prepare
the Premises for reoccupancy; (f) to install, use and maintain in and through
the Premises, pipes, conduits, wires and ducts serving the Building, provided
that such installation, use and maintenance does not unreasonably interfere with
Tenant's use of the Premises; and (g) to take any other action which Landlord
deems reasonable in connection with the operation, maintenance or preservation
of the Building. Landlord agrees that, in exercising any rights reserved to
Landlord in this Section 7 or elsewhere in this Lease, Landlord shall use
reasonable efforts to minimize any interference with Tenant's access to or
permitted use of the Premises.
8. MAINTENANCE AND REPAIRS. Tenant, at its expense, shall maintain and
keep the Premises in good order and repair at all times during the Term. In
addition, Tenant shall reimburse Landlord for the cost of any repairs to the
Building necessitated by the acts or omissions of Tenant, its subtenants,
assignees, invitees, employees, contractors and agents, to the extent Landlord
is not reimbursed for such costs under its insurance policies. Landlord may
perform any maintenance or make any repairs to the Building as Landlord shall
desire or deem necessary for the safety, operation or preservation of the
Building, or as Landlord may be required or requested to do by any governmental
authority or by the order or decree of any court or by any other proper
authority.
Landlord, throughout the Term, shall keep and maintain or cause to be kept
and maintained the structural components of the Building (including, without
limitation, the roof and the roof membrane and
<PAGE>
the windows), all common areas of the Property, and all Building systems
(excluding only those non-standard portions of Building systems which are (a)
located within a tenant's premises and (b) service only such tenant's premises
and (c) are required by the terms of such tenant's lease to be maintained by
such Tenant) in good order and repair (consistent with that of other first class
office buildings in the Route 3/Route 495 submarket) and shall make all
necessary repairs thereto. Landlord shall also make all repairs, replacements,
additions, alterations and improvements to the Building (including the Premises)
and the common areas of the Property which are required by any law, statute,
code. ordinance, by-law, order, judgment, decree, rule or regulation of any
governmental authority except such of the foregoing as are required because of a
specific nongeneral business office use made of the Premises by Tenant
hereunder. Except as otherwise provided in this Lease, the cost of all such
repairs, replacements, alterations, additions and improvements shall be borne by
Landlord and shall be included as part of Expenses.
9. ALTERATIONS.
A. Requirements. Tenant shall not make any replacement, alteration,
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improvement or addition to or removal from the Premises (collectively an
"alteration") without the prior written consent of Landlord, which consent shall
not be unreasonably withheld or delayed. In the event Tenant proposes to make
any alteration, Tenant shall, prior to commencing such alteration, submit to
Landlord for prior written approval: (i) detailed plans and specifications; (ii)
the names and,addresses for all contractors; (iii) all necessary permits
evidencing compliance with all applicable governmental rules, regulations and
requirements; certificates of insurance in form and amounts required by
Landlord, naming Landlord and any other parties designated by Landlord as
additional insureds; and (v) all other documents and information as Landlord may
reasonably request in connection with such alteration. Tenant agrees to
reimburse Landlord for any reasonable and necessary (meaning that Landlord at
the time did not have on staff a person with the appropriate training and
experience to review such items and as such had to have a third party so review
such items) third party charges incurred by Landlord in connection with the
review of any such items. Neither approval of the plans and specifications nor
supervision of the alteration by Landlord shall constitute a representation or
warranty by Landlord as to the accuracy, adequacy, sufficiency or propriety of
such plans and specifications or the quality of workmanship or the compliance of
such alteration with applicable law. Tenant shall pay the entire cost of the
alteration. Each alteration shall be performed in a good and workmanlike
manner, in accordance with the plans and specifications approved by Landlord,
and shall meet or exceed the standards for construction and quality of materials
established by Landlord for the Building. In addition, each alteration shall be
performed in compliance with all applicable governmental and insurance company
laws, regulations and requirements. Each alteration shall be performed by
Tenant's contractors in harmony with Landlord's employees, contractors and other
tenants. The selection of the contractor(s) to perform any alteration shall be
subject to Landlord's approval, which approval shall not be unreasonably
withheld or delayed. Each alteration, whether temporary or permanent in
character, made by Landlord or Tenant in or upon the Premises (excepting only
Tenant's furniture, equipment and trade fixtures) shall become Landlord's
property and shall remain upon the Premises at the expiration or termination of
this Lease without compensation to Tenant; provided, however, that Landlord
shall have the right to require Tenant to remove such alteration at Tenant's
sole cost and expense in accordance with the provisions of Section 15 of this
Lease so long as Landlord has specified such alteration (or any portion thereof)
for such removal at the time of Landlord's approval of the plans and
specifications depicting such alteration.
Tenant acknowledges that the Premises may constitute a place of public
accommodation or a commercial facility under Title III of the Americans with
Disabilities Act (the "ADA") and that the ADA is applicable to both an owner and
a lessee of a place of public accommodation or commercial facility. Tenant
further acknowledges that under the ADA any structural alteration to the
Premises must comply
<PAGE>
with accessibility standards set forth in the rules promulgated by the
Department of Justice at 28 C.F.R. 36.101 et. seq. Notwithstanding anything in
this Lease to the contrary, in the event Tenant makes any structural alteration
to the Premises which would require compliance with Title III of the ADA and the
accessibility standards promulgated by the Department of Justice. Tenant agrees
to design and build such structural alterations so as to comply with the ADA and
the accessibility standards. Landlord shall be responsible for any and an
alterations to the Building outside of the Premises required to comply with the
ADA and the accessibility standards. Nothing contained herein shall be construed
to modify the requirement that any alteration to the Premises must have the
prior written approval of Landlord, and such approval, if given, shall not be
construed to be a waiver by Landlord of Tenant's obligations and agreements as
set forth in this Section 9.
B. Liens. Upon completion of any alteration, Tenant shall promptly
-----
furnish Landlord with sworn owner's and contractors statements and full and
final waivers of lien covering all labor and materials included in such
alteration. Tenant shall not permit any mechanic's lien to be filed against the
Building, or any part thereof, arising out of any alteration performed, or
alleged to have been performed, by or on behalf of Tenant. If any such lien is
filed, Tenant shall within ten (10) days thereafter have such lien released of
record or deliver to Landlord a bond in form, amount, and issued by a surety
satisfactory to Landlord, indemnifying Landlord against all costs and
liabilities resulting from such lien and the foreclosure or attempted
foreclosure thereof. If Tenant fails to have such lien so released or to
deliver such bond to Landlord, Landlord, without investigating the validity of
such lien, may pay or discharge the same; and Tenant shall reimburse Landlord
upon demand for the amount so paid by Landlord, including Landlord's reasonable
expenses and attorneys' fees.
10. INSURANCE
A. Tenant's Insurance. Tenant, at its expense, shall maintain at all
------------------
times during the Term the following insurance policies: (a) fire insurance,
including extended coverage, vandalism, malicious mischief, sprinkler leakage
and water damage coverage and demolition and debris removal, insuring the full
replacement cost of all improvements, alterations or additions to the Premises
made at Tenant's expense, and all other property owned or used by Tenant and
located in the Premises; (b) commercial general liability insurance, contractual
liability insurance and property damage insurance with respect to the Building
and the Premises, with limits to be set by Landlord from time to time but in any
event not less than $3,000,000.00 combined single limit for personal injury,
sickness or death or for damage to or destruction of property for any one
occurrence; and (c) insurance against such other risks and in such other amounts
as Landlord may from time to time reasonably require (provided that such
insurance and/or such amounts are commercially reasonable for commercial
properties similar to the Building). The form of all such policies and
deductibles thereunder shall be subject to Landlord's prior reasonable approval.
All such policies shall be issued by insurers reasonably acceptable to Landlord
and licensed to do business in the State in which the Premises are located and
shall contain a waiver of any rights of subrogation thereunder. In addition,
the policies shall name Landlord and any other parties designated by Landlord as
additional insureds, shall require at least thirty (30) days' prior written
notice to Landlord and such other parties designated by Landlord of termination
or modification and shall be primary and not contributory. Tenant shall at
least fifteen (15) days prior to the Commencement Date, and within fifteen (15)
days prior to the expiration of each such policy, deliver to Landlord
certificates evidencing the foregoing insurance or renewal thereof, as the case
may be.
B. Landlord's Insurance. Landlord shall take out and maintain in force
--------------------
throughout the Term, in a company or companies authorized to do business in
Massachusetts, (i) casualty insurance on the Building in an amount equal to the
full replacement value of the Building (exclusive of foundations), covering all
risks of direct physical loss or damage and so-called "extended coverage" risks
and (ii)
<PAGE>
commercial general liability insurance with respect to the Building in such
amounts as Landlord may from time to time deem necessary or desirable (but in no
event less than $3,000,000.00 combined single limit for personal injury,
sickness or death or for damage to or destruction of property for any one
occurrence). This insurance may be maintained in the form of a blanket policy
covering the Building as well as other properties owned by Landlord so long as
the blanket policy does not reduce the limits nor diminish the coverage required
herein.
II. WAIVER AND INDEMNITY
A. Waiver. Except to the extent that any damage or injury to person or
------
property is due to the negligence or willful misconduct of Landlord, its
property manager or their respective agents and employees, Tenant releases
Landlord, its property manager and their respective agents and employees from,
and waives all claims for, damage or injury to person or property and loss of
business sustained by Tenant and resulting from the Building or the Premises or
any part thereof or any equipment therein becoming in disrepair, or resulting
from any accident in or about the Building. This paragraph shall apply
particularly, but not exclusively, to flooding, damage caused by Building
equipment and apparatus, water, snow, frost, steam, excessive heat or cold,
broken glass, sewage, gas, odors, excessive noise or vibration or the bursting
or leaking of pipes, plumbing fixtures or sprinkler devices. Without limiting
the generality of the foregoing, Tenant waives all claims and rights of recovery
against Landlord, its property manager and their respective agents and employees
for any loss or damage to any property of Tenant, which loss or damage is
insured against, or required to be insured against, by Tenant pursuant to
Section 11 above, regardless of the amount of insurance proceeds collected or
collectible under any insurance policies in effect.
B. Indemnity. Except to the extent caused by the negligence or willful
---------
misconduct of Landlord, its property manager and/or their respective agents and
employees, Tenant agrees to indemnify, defend and hold harmless Landlord, its
property manager and their respective agents and employees, from and against any
and all claims, demands, actions, liabilities, damages, costs and expenses
(including reasonable attorneys' fees), for injuries to any persons and damage
to or theft or misappropriation or loss of property occurring in or about the
Building and arising from the use and occupancy of the Premises or from any
activity, work, or thing done, permitted or suffered by Tenant in or about the
Premises (including, without limitation, any alteration by Tenant) or from any
breach or default on the part of Tenant in the performance of any covenant or
agreement on the part of Tenant to be performed under this Lease or due to any
other act or omission of Tenant, its subtenants, assignees, invitees, employees,
contractors and agents. Without limiting the foregoing, Tenant shall indemnify,
defend and hold Landlord harmless from any claims, liabilities, damages, costs
and expenses arising out of the use or storage of hazardous or toxic materials
in the Building by Tenant. If any such proceeding is filed against Landlord or
any such indemnified party, Tenant agrees to defend Landlord or such party in
such proceeding at Tenant's sole cost by legal counsel reasonably satisfactory
to Landlord, if requested by Landlord.
12. FIRE AND CASUALTY
A. Obligation to Repair or Rebuild the Premises or the Building shall be
-------------------------------
damaged or destroyed by fire or other casualty, Tenant shall promptly notify
Landlord of any damage or destruction to the Premises which Tenant has knowledge
or is aware of, and Landlord, subject to its mortgagee's consent and to the
conditions set forth in this Section 12, shall repair, rebuild or replace such
damage and restore the Premises and/or the Building, subject to Section 12.D and
Section 12.F below, to substantially the same condition in which they were
immediately prior to such damage or destruction; provided, however, that
Landlord shall only be obligated to restore such damage which is covered by the
casualty
<PAGE>
insurance on the Building required to be maintained by Landlord pursuant to
Section 10.B above, whether or not such insurance is actually maintained by
Landlord.
B. Commencement and Completion of Work. The work shall be commenced
-----------------------------------
promptly and completed with due diligence, taking into account the time required
by Landlord to effect a settlement with, and procure insurance proceeds from,
the insurer, and for delays beyond Landlord's reasonable control.
C. Application of Proceeds. The amount of any insurance proceeds
-----------------------
(excluding proceeds received pursuant to any rental interruption coverage
obtained by Landlord) recovered by reason of the damage or destruction of the
Building in excess of the cost of adjusting the insurance claim and collecting
the insurance proceeds (such excess amount being hereinafter called the "net
insurance proceeds") plus the amount of the applicable insurance deductible
shall be applied towards the reasonable cost of restoration. If the net
insurance proceeds are more than adequate to complete such restoration, the
amount by which the net insurance proceeds exceed the cost of restoration will
be retained by Landlord.
D. Tenant's Personal Property and Alterations. Landlord's obligation or
------------------------------------------
election to restore the Premises under this Section 12 shall not include the
repair, restoration or replacement of the furniture or any other personal
property owned by or in the possession of Tenant. In addition, Landlord shall
not be under any obligation to repair, restore or replace any alterations made
by or on behalf of Tenant, but shall be obligated to repair, restore or replace,
as appropriate, Landlord's Work (as defined in Exhibit "E" attached hereto and
incorporated herein).
E. Abatement of Rent. Tenant will receive an abatement of Rent to the
-----------------
extent and during the time the Premises are rendered unusable by Tenant for the
purposes described in Section 3 of this Lease due to fire or other casualty,
such Rent to abate in such proportion as the part of the Premises thus destroyed
or rendered so unusable bears to the total Premises from the date of such damage
or destruction and until the earlier of (i) Landlord obtains a certificate of
occupancy with respect to completion of such repairs or (ii) Tenant recommences
use of such part of the Premises and, in cases in which the Premises are being
restored by Landlord, to be conditioned upon Tenant not occupying such part of
the Premises for the conduct of business. If the Premises are so slightly
damaged by such fire or other casualty as not to be rendered in any part so
unusable, Landlord shall make the repairs it deems necessary with reasonable
promptness and the payment of Rent shall not be affected thereby. Tenant shall,
at its own cost and expense, remove such of its furniture and furnishings and
other belongings from the Premises as Landlord shall require in order to repair
and restore the Premises.
F. Landlord's Option Not to Restore. Notwithstanding the foregoing
--------------------------------
provisions, if there is substantial destruction of the Building as the result of
a fire or other casualty, and if, in the judgment of Landlord's architect, any
damage resulting therefrom cannot be repaired and the Premises cannot be made
usable by Tenant for the purposes described in Section 3 of this Lease within
one hundred twenty (120) days of such fire or other casualty, then Landlord
shall have the option not to restore, and may elect to terminate this Lease by
sending, a written notice of such termination to Tenant, the notice to specify,
a termination date no less than sixty (60) days after its transmission provided,
however, Landlord may only so terminate this Lease if Landlord also terminates
the Leases of Tenants occupying in the aggregate fifty percent (50%) or more
(inclusive of the Premises) of the then occupied space in the Building
immediately prior to such fire or other casualty. Landlord shall notify Tenant
in writing within forty-five (45) days after the date of such fire or other
casualty of such architect's estimate of the period of time required to repair
and restore the Premises to a tenantable condition. If such period of time
exceeds one hundred eighty (180) days, Tenant shall also have the right to
terminate this Lease by written notification to Landlord of such termination
within fifteen (15) days of delivery of Landlord's notice to Tenant.
<PAGE>
G. Tenant's Right to Terminate. Notwithstanding anything herein to the
---------------------------
contrary, if Landlord fails to make the Premises usable by Tenant for the
purposes described in Section 3 of this Lease within one hundred eighty (180)
days from the date of the fire or other casualty, then Tenant may terminate this
Lease by notice to Landlord at any time after the end of such one hundred eighty
(180) day period but prior to the date that the Premises are again made so
usable.
13. CONDEMNATION. If the Premises or the Building is rendered unusable by
------------
Tenant for the purposes described in Section 3 of this Lease by reason of a
condemnation (or by a deed given in lieu thereof), then either party may
terminate this Lease by giving written notice of termination to the other party
within thirty (30) days after such condemnation, in which event this Lease shall
terminate effective as of the date of such condemnation. If this Lease so
terminates, Rent shah be paid through and apportioned as of the date of such
condemnation. If such condemnation does not render the Premises or the Building
so unusable, this Lease shall continue in effect and Landlord shall promptly
restore the portion not condemned to the extent reasonably possible to the
condition existing prior to the condemnation. In such event, however, Landlord
shall not be required to expend an amount in excess of the proceeds received by
Landlord from the condemning, authority. Landlord reserves all rights to
compensation for any condemnation (except for any awards payable directly to
Tenant for relocation expenses and except for any award for alterations to the
Premises paid for by Tenant except to the extent any such award diminishes the
award payable to Landlord on account of any such condemnation). Tenant hereby
assigns to Landlord any right Tenant may have to such compensation (except as
provided in the immediately preceding sentence), and Tenant shall make no claim
against Landlord or the condemning authority for compensation (except as
provided in the immediately preceding sentence) for termination of Tenant's
leasehold interest under this Lease or interference with Tenant's business.
14. ASSIGNMENT AND SUBLETTING
A. Landlord's Consent. Tenant shall not, without the prior written
------------------
consent of Landlord: (i) assign, convey, mortgage or otherwise transfer this
Lease or any interest hereunder, or sublease the Premises, or any part thereof,
whether voluntarily or by operation of law; or (ii) permit the use of the
Premises by any person other than Tenant and its employees and business
invitees. Any such transfer, sublease or use described in the preceding
sentence (a "Transfer") occurring without the prior written consent of Landlord
shall be void and of no effect. Landlord's consent to any Transfer shall not
constitute a waiver of Landlord's right to withhold its consent to any future
Transfer. Landlord's consent to any Transfer or acceptance of rent from any
party other than Tenant shall not release Tenant from any covenant or obligation
under this Lease. Landlord may require as a condition to its consent to any
assignment of this Lease that the assignee execute an instrument in which such
assignee assumes the obligations of Tenant hereunder. For the purposes of this
paragraph, the merger, consolidation or reorganization of a corporate Tenant,
and the transfer of all or any general partnership interest in any partnership
Tenant and the sale of all or substantially all of the assets of Tenant shall be
considered a Transfer. Notwithstanding anything in this Section 14.A to the
contrary, Landlord consent shall not be required in connection with a Transfer
to an Affiliate (as defined below) provided that (a) the financial condition of
the Affiliate, in the reasonable judgment of Landlord, is such that it will be
able to perform its obligations under this Lease, (b) proof satisfactory to
Landlord of such financial condition shall have been delivered to Landlord at
least ten (10) days prior to the effective date of such Transfer, and (c) the
Affiliate agrees directly with Landlord, by written instrument satisfactory to
Landlord, to be bound by all of the obligations of Tenant hereunder. The term
"Affiliate" shall mean any entity which succeeds to Tenant's business by merger,
consolidation or other form of corporate reorganization or any entity which
controls, is controlled by or is under common control with Tenant or any entity
which purchases all or substantially all of the assets of Tenant.
<PAGE>
B. Standards for Consent. If Tenant desires the consent of Landlord to a
---------------------
Transfer, Tenant shall submit to Landlord, at least thirty (30) days prior to
the proposed effective date of the Transfer, a written notice which includes
such information as Landlord may require about the proposed Transfer and the
transferee. If Landlord does not terminate this Lease, in whole or in part,
pursuant to Section 14.C, Landlord shall not unreasonably withhold or delay its
consent to any assignment or sublease. Landlord shall not be deemed to have
unreasonably withheld its consent if, in the judgment of Landlord: (i) the
transferee is of a character or engaged in a business which is not in keeping
with the standards or criteria used by Landlord in leasing the Building; (ii)
the financial condition of the transferee is such that it may not be able to
perform its obligations in connection with this Lease; (iii) the purpose for
which the transferee intends to use the Premises or portion thereof is in
violation of the terms of this Lease or the lease of any other tenant in the
Building; (iv) the transferee is a tenant of the Building (except if there is no
other space reasonably comparable to the Premises from the perspective of the
transferee available for lease by Landlord in the Building at the time that
Landlord receives the above-referenced notice from Tenant, in which event the
transferee may be a tenant of the Building); (v) the rent to be charged the
transferee is less than the then fair market rental value of comparable space in
the Building (which fair market rental value shall be deemed to be the rent set
forth in the most current lease by Landlord of comparable space in the
Building); or (vi) any other bases which Landlord reasonably deems appropriate.
If Landlord wrongfully withholds its consent to any Transfer, such wrongful
withholding shall not release Tenant from the prompt and punctual performance by
Tenant of the covenants contained herein or operate to abate Rent and Tenant
shall have no right to terminate this Lease because of an such wrongful
withholding. Subject to the foregoing, Tenant may pursue any and all remedies
available to it at law or in equity in connection with any such wrongful
withholding. If Landlord consents to any Transfer, Tenant shall pay to Landlord
fifty percent (50%) of all rent and other consideration received by Tenant in
excess of the Rent paid by Tenant hereunder for the portion of the Premises so
transferred (after first deducting therefrom all reasonable costs incurred by
Tenant in connection therewith, including, without limitation, reasonable legal,
brokerage, space planning and construction costs in connection therewith). Such
rent shall be paid as and when received by Tenant. In addition, Tenant shall
pay to Landlord any reasonable attorneys' fees and expenses incurred by Landlord
in connection with any Transfer.
C. Recapture. If at any time during the Term Tenant desires to effect a
---------
Transfer with respect to all or any portion of the Premises (other than to an
Affiliate), before Tenant does so effect such Transfer, Tenant shall notify
Landlord of Tenant's desire to effect such Transfer (the "Proposed Transfer
Notice"). The Proposed Transfer Notice shall contain a description of the
portion of the Premises that Tenant desires to Transfer (such portion being
hereinafter referred to as the "Transfer Premises") and date that the proposed
Transfer will take effect. Landlord shall have the right to terminate this
Lease as to the Transfer Premises by giving notice of such termination to Tenant
at any time within thirty (30) days, after the date on which Landlord has
received the Proposed Transfer Notice.
If Landlord exercises such right to terminate, Landlord shall be entitled
to recover possession of, and Tenant shall surrender, the Transfer Premises
(with appropriate demising partitions erected at the expense of Tenant and with
appropriate submetering of utilities to be done at the expense of Tenant), on
the date specified in Landlord's notice of termination, which date shall in no
event be sooner than the earlier of (i) ninety (90) days after Tenant's receipt
of Landlord's notice of termination or (ii) the date that the proposed Transfer
was to take effect as set forth in the Proposed Transfer Notice. If Landlord
does not exercise such right to terminate with respect to such Transfer
Premises, then Landlord shall have no right to terminate the Lease with respect
to the Transfer Premises as provided herein for six (6) months after the earlier
of (i) receipt by Tenant from Landlord of a notice whereby Landlord waives its
right to terminate the Lease with respect to the Transfer Premises as provided
herein or (ii) the expiration of the thirty (30) day period referred to in the
preceding paragraph if during such thirty (30) day period Landlord fails to
respond to the Proposed Transfer Notice. During such six (6) month period
Tenant may
<PAGE>
Transfer the entire Transfer Premises (but no other portion of the Premises)
only free of Landlord's right to terminate as provided above but subject to
Landlord's consent as provided in Sections 14.A and 14.B. If Tenant fails to
effect a Transfer of the Transfer Premises (to effect such a Transfer shall mean
that Tenant and a proposed transferee shall have both executed a binding
assignment, sublease or similar type of agreement for the lease of the Transfer
Premises) by the end of such six (6) month period, then Landlord's right to
terminate as provided herein shall once again apply to the Transfer Premises and
Tenant shall be obligated to comply with the provisions of this Section 14.C if
Tenant still desires or subsequently desires to effect a Transfer of the
Transfer Premises. If Landlord exercises its right to terminate as provided
herein (either following receipt of an initial Proposed Transfer Notice or a
subsequent Proposed Transfer Notice delivered after the end of the applicable
six (6) month period), Landlord shall have the right to enter into a lease with
any party with which Tenant may have had any dealings with regard to a possible
Transfer to such party without incurring any liability to Tenant on account
thereof.
D. No Release. In no event shall any Transfer release or relieve Tenant
----------
from its obligations to fully observe or perform all of the terms, covenants and
conditions of this Lease on its part to be observed or performed (including
liability arising during any renewal term of this Lease or with respect to any
expansion space included in the Premises). It is agreed that the liabilities
and obligations of Tenant hereunder are enforceable either before,
simultaneously with or after proceeding against any assignee, sublessee or other
transferee of Tenant.
15. SURRENDER. Upon the expiration or earlier termination of the Term or
Tenant's right to possession of the Premises, Tenant shall return the Premises
to Landlord in good order and condition, ordinary wear and tear and damage by
taking or by fire or other casualty not caused by the negligence or willful
misconduct of Tenant or its agents, employees or contractors excepted. If
Landlord requires Tenant to remove any alterations pursuant to Section 9, then
such removal shall be done in a good and workmanlike manner; and upon such
removal Tenant shall restore the Premises to its condition prior to the
installation of such alterations. If Tenant does not remove such alterations
after request to do so by Landlord, Landlord may remove the same and restore the
Premises; and Tenant shall pay the cost of such removal and restoration to
Landlord upon demand. Tenant shall also remove its furniture, equipment, trade
fixtures and all other items of personal property from the Premises prior to the
expiration or earlier termination of the Term or Tenant's right to possession of
the Premises. If Tenant does not remove such items, Tenant shall be
conclusively presumed to have conveyed the same to Landlord without further
payment or credit by Landlord to Tenant; or at Landlord's sole option such items
shall be deemed abandoned, in which event Landlord may cause such items to be
removed and disposed of at Tenant's expense, without notice to Tenant and
without obligation to compensate Tenant.
16. DEFAULTS AND REMEDIES
A. Default. The occurrence of any of the following shall constitute a
-------
default (a "Default") by Tenant under this Lease:
(i) Tenant fails to pay any Rent when due and such failure is not
cured within five (5) business days after notice from Landlord;
(ii) Tenant falls to perform any other provision of this Lease and
such failure is not cured within thirty (30) days (or immediately if the failure
involves a hazardous condition) after notice from Landlord;
(iii) the leasehold interest of Tenant is levied upon or attached
under process of law;
<PAGE>
(iv) Tenant or any guarantor of this Lease dies or dissolves;
(v) any voluntary or involuntary proceedings are filed by or against
Tenant or any guarantor of this Lease under any bankruptcy, insolvency or
similar laws and, in the case of any involuntary proceedings, are not dismissed
within sixty (60) days after filing;
(vi) the occurrence of an Event of Default under the Note (as defined
in the Tenant Improvement Work Agreement attached hereto as Exhibit "E" and
incorporated herein by this reference); or
(vii) the occurrence of a default or breach of any of Tenant's
obligations, covenants and agreements under the Subordination Agreement (as
defined in the Tenant Improvement Work Agreement attached as Exhibit "E" and
incorporated herein by this reference).
B. Right of Re-Entry. Upon the occurrence of a Default, Landlord may
-----------------
elect to terminate this Lease, or, without terminating this Lease, terminate
Tenant's right to possession of the Premises, in either case by notice thereof
to Tenant. Upon any such termination, Tenant shall immediately surrender and
vacate the Premises and deliver possession thereof to Landlord. Tenant grants
to Landlord the right, after any such termination, without notice to Tenant (but
in accordance with applicable laws), to enter and repossess the Premises and to
expel Tenant and any others who may be occupying the Premises and to remove any
and all property therefrom, without being deemed in any manner guilty of
trespass and without relinquishing Landlord's rights to Rent or any other right
given to Landlord hereunder or by operation of law.
C. Reletting. If Landlord terminates Tenant's right to possession of the
---------
Premises without terminating this Lease, Landlord may relet the Premises or any
part thereof. In such case, Landlord shall use reasonable efforts to relet the
Premises on such terms as Landlord shall reasonably deem appropriate; provided,
however, Landlord may first lease Landlord's other available space and shall not
be required to accept any tenant offered by Tenant or to observe any
instructions given by Tenant about such reletting. Tenant shall reimburse
Landlord for the reasonable costs and expenses of reletting the Premises
including, but not Limited to, all brokerage, advertising, legal, alteration and
other expenses incurred to secure a new tenant for the Premises. In addition,
if the consideration collected by Landlord upon any such reletting, after
payment of the expenses of reletting the Premises which have not been reimbursed
by Tenant, is insufficient to pay monthly the full amount of the Rent and if
Landlord has not terminated this Lease pursuant to Section 16.D below, then
Tenant shall pay to Landlord the amount of each monthly deficiency as it becomes
due. If such consideration is greater than the amount necessary to pay the full
amount of the Rent, the full amount of such excess shall be retained by Landlord
and shall in no event be payable to Tenant.
D. Termination of Lease. If Landlord terminates this Lease because of a
--------------------
Default, Landlord may recover from Tenant and Tenant shall pay to Landlord, on
demand, as and for liquidated and final damages, an accelerated lump sum amount
equal to the amount by which Landlord's estimate of the aggregate amount of Rent
owing from the date of such termination through the Expiration Date plus
Landlord's estimate of the aggregate reasonable expenses of reletting the
Premises, exceeds Landlord's estimate of the fair rental value of the Premises
for the same period (after deducting from such fair rental value the time needed
to relet the Premises and the amount of concessions which would normally be
given to a new tenant), both discounted to present value at the annual rate of
the prime rate of The First National Bank of Boston.
<PAGE>
E. Other Remedies. Landlord may but shall not be obligated to perform
--------------
any obligation of Tenant under this Lease; and, if Landlord so elects, all costs
and expenses paid by Landlord in performing such obligation, together with
interest at the Default Rate, shall be reimbursed by Tenant to Landlord on
demand. Any and all remedies set forth in this Lease: (i) shall be in addition
to any and all other remedies Landlord may have at law or in equity, (ii) shall
be cumulative, and (iii) may be pursued successively or concurrently as Landlord
may elect. The exercise of any remedy by Landlord shall not be deemed an
election of remedies or preclude Landlord from exercising any other remedies in
the future.
F. Bankruptcy. If Tenant becomes bankrupt, the bankruptcy trustee shall
----------
not have the right to assume or assign this Lease unless the trustee complies
with all requirements of the United States Bankruptcy Code; and Landlord
expressly reserves all of its rights, claims, and remedies thereunder.
G. Waiver of Trial by Jury. Landlord and Tenant waive trial by jury in
-----------------------
the event of any action, proceeding or counterclaim brought by either Landlord
or Tenant against the other in connection with this Lease.
17. HOLDING OVER. If Tenant retains possession of the Premises after the
expiration or earlier termination of the Term or Tenant's right to possession of
the Premises, Tenant shall pay Rent during the first two (2) months of any such
holding over at one hundred fifty percent (150%) of the Rent in effect
immediately preceding such holding over and during any subsequent period of such
holding over at two hundred percent (200%) of the Rent in effect immediately
preceding such holding over computed on a monthly basis for each month or
partial month that Tenant remains in possession. The provisions of this Section
do not waive Landlord's right of re-entry or right to regain possession by
actions at law or in equity or any other rights hereunder, and any receipt of
payment by Landlord shall not be deemed a consent by Landlord to Tenant's
remaining in possession or be construed as creating or renewing any lease or
right of tenancy between Landlord and Tenant.
18. ESTOPPEL CERTIFICATES. Tenant agrees that, from time to time upon not
less than ten (10) days' prior request by Landlord, Tenant shall execute and
deliver to Landlord a written certificate certifying: (i) that this Lease is
unmodified and in full force and effect (or if there have been modifications, a
description of such modifications and that this Lease as modified is in full
force and effect); (ii) the dates to which Rent has been paid: (iii) that Tenant
is in possession of the Premises, if that is the case; (iv) that Landlord is not
in default under this Lease, or, if Tenant believes Landlord is in default, the
nature thereof in detail; (v) that Tenant has no off-sets or defenses to the
performance of its obligations under this Lease (or if Tenant believes there are
any off-sets or defenses, a full and complete explanation thereof); and (vi)
such additional matters as may be requested by Landlord, it being agreed that
such certificate may be relied upon by any prospective purchaser, mortgagee or
other person having or acquiring an interest in the Building. If Tenant fails
to execute and deliver any such certificate within ten (10) days after request,
Tenant shall be deemed to have irrevocably appointed Landlord as Tenant's
attorney-in-fact to execute and deliver such certificate in Tenant's name.
19. SUBORDINATION. This Lease is and shall be expressly subject and
subordinate at all times to (a) any present or future ground, underlying or
operating lease of the Building, and all amendments, renewals and modifications
to any such lease, and (b) the lien of any present or future mortgage or deed of
trust encumbering fee title to the Building and/or the leasehold estate under
any such lease, provided and on condition that Landlord obtains and delivers to
Tenant a so-called non-disturbance agreement from the lessor or holder under any
such lease, mortgage or deed of trust, by which such lessor or holder agrees in
substance not to disturb Tenant's possession under this Lease so long as Tenant
is not in Default hereunder. If any such mortgage or deed of trust be
foreclosed, or if any such lease be terminated, upon request of the mortgagee,
beneficiary or lessor, as the case may be, Tenant will attorn
<PAGE>
to the purchaser at the foreclosure sale or to the lessor under such lease, as
the case may be. The foregoing provisions are declared to be self-operative and
no further instruments shall be required to effect such subordination and/or
attornment; provided, however, that Tenant agrees upon request by any such
mortgagee, beneficiary, lessor or purchaser at foreclosure, as the case may be,
to execute such subordination and/or attornment instruments as may be required
by such person to confirm such subordination and/or attornment on the form
customarily used by such party. Notwithstanding the foregoing to the contrary,
any such mortgagee, beneficiary or lessor may elect to give the rights and
interests of Tenant under this Lease (excluding rights in and to insurance
proceeds and condemnation awards) priority over the lien of its mortgage or deed
of trust or the estate of its lease. as the case may be. In the event of such
election and upon the mortgagee, beneficiary or lessor notifying Tenant of such
election, the rights and interests of Tenant shall be deemed superior to and to
have priority over the lien of said mortgage or deed of trust or the estate of
such lease, as the case may be, whether this Lease is dated prior to or
subsequent to the date of such mortgage, deed of trust or lease. In such event,
Tenant shall execute and deliver whatever instruments may be required by such
mortgagee, beneficiary or lessor to confirm such superiority on the form
customarily used by such party. If Tenant fails to execute any instrument
required to be executed by Tenant under this Section 19 within ten (10) business
days after request, Tenant irrevocably appoints Landlord as its attorney-in-
fact, in Tenant's name, to execute such instrument.
20. QUIET ENJOYMENT. As long as no Default exists, Tenant shall
peacefully and quietly have and enjoy the Premises for the Term, free from
interference by Landlord and all persons claiming by or through Landlord,
subject, however, to the provisions of this Lease.
21. BROKER. Tenant represents to Landlord that Tenant has dealt only with
the broker set forth in Item 14 of the Schedule (the "Broker") in connection
with this Lease and that, insofar as Tenant knows, no other broker negotiated
this Lease or is entitled to any commission in connection herewith. Landlord
represents to Tenant that Landlord has dealt only with the Broker in connection
with this Lease and that, insofar as Landlord knows, no other broker negotiated
this Lease or is entitled to any commission in connection therewith. Tenant
agrees to indemnify, defend and hold Landlord, its property manager and their
respective employees harmless from and against any claims for a fee or
commission made by any broker, other than the Broker, claiming to have acted by
or on behalf of Tenant in connection with this Lease. Landlord agrees to
indemnify, defend and hold Tenant harmless from and against any claims for a fee
or commission made by any broker, other than the Broker, claiming to have acted
by or on behalf of Landlord in connection with this Lease.
22. NOTICES. All notices and demands to be given by one (1) party to the
other party under this Lease shall be given in writing, mailed or delivered to
Landlord or Tenant, as the case may be, at the address of each party set forth
in the Schedule or at such other address as either party may hereafter
designate. Notices shall be delivered by hand or by United States certified or
registered mail, postage prepaid, return receipt requested, or by a nationally
recognized overnight air courier service. Notices shall be considered to have
been given upon the earlier to occur of actual receipt or two (2) business days
after posting in the United States mail.
23. MISCELLANEOUS
A. Successors and Assigns. Subject to Section 14 of this Lease, each
----------------------
provision of this Lease shall extend to, bind and inure to the benefit of
Landlord and Tenant and their respective legal representatives, successors and
assigns and all references herein to Landlord and Tenant shall be deemed to
include all such parties.
<PAGE>
B. Entire Agreement. This Lease, and the riders and exhibits, if any,
----------------
attached hereto which are hereby made a part of this Lease, represent the
complete agreement between Landlord and Tenant; and Landlord has made no
representations or warranties except as expressly set forth in this Lease. No
modification or amendment of or waiver under this Lease shall be binding upon
Landlord or Tenant unless in writing signed by Landlord and Tenant.
C. Time of Essence. Time is of the essence of this Lease and each and all
---------------
of its provisions.
D. Execution and Delivery. Submission of this instrument for examination
----------------------
or signature by Tenant does not constitute a reservation of space or an option
for lease, and it is not effective until execution and delivery by both Landlord
and Tenant.
E. Severability. The invalidity or unenforceability of any provision of
------------
this Lease shall not affect or impair any other provisions of this Lease.
F. Governing Law. This Lease shall be governed by and construed in
-------------
accordance with the laws of The Commonwealth of Massachusetts.
G. Attorneys' Fees. Tenant shall pay to Landlord all reasonable costs
---------------
and expenses. including reasonable attorneys fees and expenses, incurred by
Landlord in enforcing this Lease against Tenant with respect to any violation
thereof by Tenant. Landlord shall pay to Tenant all reasonable costs and
expenses, including reasonable attorneys' fees and expenses, incurred by Tenant
in enforcing this Lease against Landlord with respect to any violation thereof
by Landlord. In the event either party commences a legal proceeding to enforce
any of the terms of this Lease, the prevailing party in such action shall have
the right to recover reasonable attorneys' fees and costs from the other party,
to be fixed by the court in the same action. The term "legal proceedings" shall
include appeals from a lower court judgment as well as proceedings in the
Federal Bankruptcy Court, whether or not they are adversary proceedings or
contested matters. The "prevailing party" shall mean the party that prevails in
obtaining a remedy or relief which more nearly reflects the remedy or relief
which the party sought.
H. Joint and Several Liability. If Tenant is comprised of more than one
---------------------------
(1) party, each such party shall be jointly and severally liable for Tenant's
obligations under this Lease.
I. Force Majeure. Landlord shall not be in default hereunder and Tenant
-------------
shall not be excused from performing any of its obligations hereunder if
Landlord is prevented from performing any of its obligations hereunder due to
any accident, breakage, strike, shortage of materials, acts of God or other
causes beyond Landlord's reasonable control. Tenant shall not be in default
hereunder and Landlord shall not be excused from performing any of its
obligations hereunder if Tenant is prevented from performing any of its
obligations hereunder due to any accident, breakage, strike, shortage of
materials, acts of God or other causes beyond Tenant's reasonable control (but
specifically excluding financial inability to perform).
J. Captions. The headings and titles in this Lease are for convenience
--------
only and shall have no effect upon the construction or interpretation of this
Lease.
K. No Waiver. No receipt of money by Landlord from Tenant after
---------
termination of this Lease or after the service of any notice or after the
commencing of any suit or after final judgment for possession of the Premises
shall renew, reinstate, continue or extend the Term or affect any such notice or
suit. No waiver of any default of Tenant shall be implied from any omission by
Landlord to take any action on account of such default if such default persists
or be repeated, and no express waiver shall affect
<PAGE>
any default other than the default specified in the express waiver and then only
for the time and to the extent therein stated.
L. No Recording. Tenant shall not record this Lease. Landlord and Tenant
------------
share, upon request of either, execute and deliver a notice of this Lease in
such recordable form as may be permitted by applicable law.
M. Definition of Landlord: Landlord's Liability. The word "Landlord" is
--------------------------------------------
used herein to include the Landlord named above as well as its successors and
assigns, each of whom shall have the same rights, remedies, powers, authorities
and privileges as it would have had it originally signed this Lease as Landlord.
Any such person, whether or not named herein, shall have no liability hereunder
after it ceases to hold title to the Premises except for obligations which may
have theretofore accrued. Neither Landlord nor any principal, employee or
partner of Landlord nor any owner of the Property, whether disclosed or
undisclosed. shall have any personal liability with respect to any of the
provisions of this Lease or the Premises, and neither Landlord nor any
principal, employee or partner of Landlord shall have any personal liability to
Tenant for any liability of or claim against Landlord under this Lease beyond
the equity of the Landlord in the Building and the Fee Land.
24. PARKING. Tenant shall be permitted to use at no cost to Tenant its
allocable share of vehicular parking spaces in the parking lot located on the
Land (the "Parking Lot") during the Term, subject to such reasonable terms,
conditions and regulations as are from time to time applicable to patrons of the
Parking Lot. Tenant's allocable share of such parking spaces shall be 3.5
parking spaces per 1,000 square feet of rentable floor area in the Premises.
From and after the Commencement Date, Tenant's allocable share of such parking
spaces is 508 parking spaces (based upon 145,264 rentable square feet of floor
area, which includes the original Premises described in Item 6 of the Schedule
and the Additional Premises, as defined in Section 29 below). If the Premises
expands or contracts at any time during the Term, the number of parking spaces
that Tenant shall be permitted to use shall be increased or decreased as
appropriate to maintain the ratio of 3.5 parking spaces per 1,000 rentable
square feet of floor area in the Premises. The parking spaces that Tenant shall
be permitted to use in accordance with this Section 24 shall be provided to
Tenant on an unassigned, non-reserved basis. Landlord may, pursuant to Section
6 of this Lease, establish reasonable rules and regulations regarding Tenant's
use of parking spaces in the Parking Lot.
Landlord presently contemplates converting the so-called "Building 11"
located on the property into a parking area containing approximately 300 parking
spaces. If Landlord does so convert such building into a parking garage, Tenant
shall have the right to use up to (on an unassigned non-reserved basis) thirty-
six (36) of the parking spaces in such parking garage. The number of parking
spaces Tenant shall have the right to use in the Parking Lot pursuant to the
immediately preceding paragraph shall be reduced by the number of parking spaces
Tenant uses in the parking garage pursuant to this paragraph. Tenant shall pay
Landlord's reasonable charge for use of the parking spaces in such parking
garage and such use shall be subject to reasonable rules and regulations
established by Landlord from time to time. Such charge shall be based upon
Landlord's cost of maintaining and operating the parking garage and shall not
include any mark-up for profit accruing to Landlord.
25. COOPERATIVE INTERRUPTIBLE SERVICE AGREEMENT Landlord has entered into
that certain Cooperative Interruptible Service Agreement dated March 21, 1994
with Massachusetts Electric Company. If Landlord shall be required to pay a
penalty or extra fee under such Agreement because of Landlord's election not to
allow interruption of electrical service to the Building after request thereof
by Massachusetts Electric Company, Tenant shall reimburse Landlord for Tenant's
Proportionate Share of the amount of such penalty or extra fee. Such
reimbursement shall be made by Tenant to
<PAGE>
Landlord within thirty (30) days of receipt by Tenant of a statement setting
forth the total amount of the penalty or extra fee and Tenant's Proportionate
Share thereof. Landlord agrees not to elect to allow interruption of electrical
service to the Building after a request thereof by Massachusetts Electric
Company pursuant to the Cooperative Interruptible Service Agreement without the
prior consent of Tenant.
26. OPTION TO EXTEND On the condition that Tenant is not in default of its
covenants and obligations under this Lease (beyond applicable notice and cure
periods) both at the time of option exercise and as of the commencement of the
hereinafter described additional term, Tenant shall have the option ("Tenant's
Extension Option") to extend the Term for an additional term of five (5) years
(herein referred to as the "Additional Term"), said Additional Term to commence
immediately after the expiration of the initial Term. If Tenant desires to
extend the Term as aforesaid, it shall give notice thereof (the "Extension
Notice") to Landlord no earlier than twelve (12) months and no later than nine
(9) months prior to the end of the initial Term. If Tenant fails timely to give
such notice, then Tenant shall have no right to extend the Term (time being, of
the essence with respect to exercise of Tenant's Extension Option). Upon the
timely giving of such notice, the Term shall be deemed extended upon all of the
same terms and conditions of this Lease, except that the Base Rent during said
Additional Term shall be at the rate of 100% of the then current fair market
annual rent for five (5) year leases of comparable premises in comparable
buildings in the general vicinity of Building (with respect to age, quality and
location), as determined in accordance with the following paragraph (the
"Additional Term Base Rent"). The Additional Term Base Rent shall be payable in
equal monthly installments in advance on or before the first day of each
calendar month during the Additional Term. Notwithstanding the fact that
Tenant's exercise of the herein option to extend the Term shall be self-
executing, as aforesaid, upon the request of Landlord, Tenant shall promptly
execute a lease amendment reflecting said Additional Term and the Additional
Term Base Rent thereof after Tenant exercises the herein option. Upon the
commencement of the Additional Term, the word "Term" wherever it appears in this
Lease shall include the Additional Term.
Landlord shall notify Tenant of its food faith determination of the
Additional Term Base Rent within thirty (30) days of receipt of the Extension
Notice (the "Additional Term Rental Notice"). If Tenant does not accept
Landlord's determination of Additional Term Base Rent and if Landlord and Tenant
cannot agree on the Additional Term Base Rent within thirty (30) days after
Tenant's receipt of the Additional Term Rental Notice, then Landlord and Tenant
shall, not later than sixty (60) days after Landlord receives Tenant's Extension
Notice, each retain a real estate professional with at least ten (10) years'
continuous experience in the business of appraising marketing commercial real
estate in the Lowell, Massachusetts area who shall, within thirty (30) days of
his or her selection, prepare a written report summarizing his or her conclusion
as to the Additional Term Base Rent. Landlord and Tenant shall simultaneously
exchange such reports; provided, however, that if one (1) party has not obtained
-------- -------
such a report within ninety (90) days after Landlord receives Tenant's Extension
Notice, then the determination set forth in the other party's report shall be
final and binding upon the parties. If both parties receive reports within such
time and the lesser of the two (2) determinations is within ten (10%) percent of
the higher determination, then the average of these determinations shall be
deemed to be the Additional Term Base Rent. If these determinations differ by
more than ten (10%) percent, then Landlord and Tenant shall mutually select a
person with the qualifications stated above (for purposes of this Section 26,
the "Final Professional") to resolve the dispute as to the Additional Term Base
Rent. If Landlord and Tenant cannot agree upon the designation of the Final
Professional within thirty (30) days of the exchange of the first valuation
reports, either party may apply to the American Arbitration Association, the
Greater Boston Real Estate Board, or any successor thereto for the designation
of a Final Professional. Within ten (10) days of the selection of the Final
Professional, Landlord and Tenant shall each submit to the Final Professional a
copy of their respective real estate professional's determination of the
Additional Term Base Rent. The Final Professional shall not perform his or her
own valuation but rather shall, within thirty (30) days after such submissions,
select the submission which is closest, to the determination of the Additional
<PAGE>
Term Base Rent which the Final Professional would have made acting alone. The
Final Professional shall have notice of his or her selection to Landlord and
Tenant and such decision shall be final and binding upon Landlord and Tenant.
Each party shall pay the fees and expenses of its real estate professional and
counsel, if any, in connection with any proceeding under this paragraph, and the
losing party shall pay the fees and expenses
27. DIRECTORY; SIGNS. Landlord will place Tenant's name and suite number
on the Building standard directory. Except as provided in the following
paragraph and except for signs which are located wholly within the interior of
the Premises and which are not visible from the exterior of the Premises, no
signs shall be placed, erected, maintained or painted by Tenant at any place
upon the Premises or the Property, except with Landlord's prior written
approval, which approval shall not be unreasonably withheld or delayed.
Notwithstanding anything to the contrary, provided Tenant continues to
actually occupy not less than 108,948 rentable square feet of floor area in
Tower 3 of the Building, Tenant may beginning with the date which is six (6)
months after the Commencement Date, at Tenant's sole cost and expense. install
one (1) sign identifying Tenant on the exterior of Tower 3 of the Building on
the west side thereof. The specific location, size and design of such sign
shall be subject to Landlord's approval, which approval shall not be
unreasonably withheld or delayed. Tenant shall be responsible for obtaining any
and all necessary governmental approvals and permits for the installation of
such sign and may not commence such installation unless and until Tenant has
provided to Landlord a copy of all such approvals and permits. Throughout the
Term, Tenant shall be solely responsible for the maintenance and repair of such
sign. Tenant shall pay all of Landlord's charges for electrical energy
furnished for illumination of such sign. On or prior to expiration or earlier
termination of the Term of this Lease, Tenant shall remove such sign from the
Building and shall repair any damage to the Building caused by the installation,
maintenance and/or removal of such sign. Landlord agrees that, during the
period which Tenant shall have the right to install and maintain such sign on
the exterior of Tower 3 of the Building pursuant to the provisions of this
paragraph, no other tenant of the Building may place and Landlord shall not
place on behalf of any other tenant of the Building any sign on the exterior of
Tower 3 of the Building.
28. RIGHT OF FIRST OFFER TO LEASE. Tenant shall have the right to add to
the Premises, upon the terms and conditions set forth in this Section 28, the
entire eighth floor of Tower 3 of the Building (the "Expansion Space").
Tenant's rights hereunder with respect to the Expansion Space shall be subject
to the rights of the Building tenants on the date of execution of this Lease.
Whenever during the Term Landlord determines to Lease all or any portion of the
Expansion Space, Landlord shall first offer to lease to Tenant such portion of
the Expansion Space in an "as is" condition; such offer shall be in writing and
shall specify the rent to be paid for such portion of the Expansion Space and
the date on which such portion of the Expansion Space shall be included in the
Premises (the "Offer Notice"). Tenant shall notify Landlord in writing whether
Tenant elects to lease such portion of the Expansion Space at the rental rate
set forth in the Offer Notice within ten (10) days after Landlord delivers to
Tenant the Offer Notice. If Tenant timely elects to lease such portion of the
Expansion Space, then Landlord and Tenant shall execute an amendment to this
Lease no later than fourteen (14) days after Tenant notifies Landlord of
Tenant's election to lease such portion of the Expansion Space, effective as of
the date such portion of the Expansion Space is to be included in the Premises,
on the same terms as this Lease execute that (a) the rentable area of the
Premises shall be increased by the rentable area in such portion of the
Expansion Space (and Tenant's Proportionate Share shall be adjusted
accordingly), (b) the Base Rent shall be increased by the amount for such
portion of the Expansion Space in the Offer Notice, and (c) Landlord shall not
provide to Tenant any allowances (e.g., moving allowance, construction
----
allowance, and the like)
<PAGE>
or other tenant inducements. If Tenant fails or is unable to timely exercise its
right hereunder, then such right shall lapse, time being of the essence with
respect to the exercise thereof, and, subject to the following three (3)
sentences, Landlord may lease such portion of the Expansion Space to third
parties on such terms as Landlord may elect. Notwithstanding anything herein to
the contrary, Landlord may not enter into such third party lease at a net
effective rent of less than ninety percent (90%) of the net effective rent set
forth in the most recent Offer Notice to Tenant without first offering to lease
to Tenant such portion of the Expansion Space at such net effective rent being
offering to such third party. As used in this Section 28, the phrase "net
effective rent" shall mean the Base Rent for such portion of the Expansion Space
less the cost of tenant improvements and other tenant inducements which are
included in such Base Rent. In addition, if Landlord fails to enter into any
such third party lease within six (6) months after Tenant has elected not to
lease such portion of the Expansion Space after receipt of an Offer Notice, then
such portion of the Expansion Space shall again be subject to Tenant's rights
under this Section 28. Notwithstanding anything herein to the contrary, Landlord
shall have no obligation to first offer to lease to Tenant all or any portion of
the Expansion Space in accordance with this Section 28 111 at the time Landlord
would have sent to Tenant an Offer Notice, Tenant Is then In default of any of
its conditions or obligations under this Lease (beyond applicable notice and
cure periods). If Tenant is so then in default, Landlord may proceed to lease
all or any portion of the Expansion Space to any third party without Tenant
having any prior right's to lease all or any portion of the Expansion Space.
29. INCLUSION OF ADDITIONAL PREMISES Landlord hereby leases to Tenant and
Tenant hereby leases from Landlord, upon the terms and conditions set forth in
this Section 29, the entire ninth floor of Tower 3 of the Building (the
"Additional Premises"), for a term commencing on the Additional Premises
Commencement Date (as defined below) and expiring on the Expiration Date, unless
terminated earlier as otherwise provided in this Lease. On and after the
Additional Premises Commencement Date, the word "Premises", wherever it appears
in this Lease, shall include the Additional Premises. The Additional Premises
Commencement Date shall mean the earlier of (i) the date on which Tenant
commences use of the Additional Premises or any portion thereof or (ii) May 1,
1998. With the prior consent of Landlord, Tenant may enter the Additional
Premises prior to the Additional Premises Commencement Date to undertake such
work as is to be performed by Tenant pursuant to this Lease in order to prepare
the Additional Premises for Tenant's occupancy. In addition, with the prior
consent of Landlord, Tenant may use the Additional Premises prior to the
Additional Premises Commencement Date for the storage of furniture, equipment,
and similar items used or to be used by Tenant in connection with its operations
at the Premises. Any such entry and/or use by Tenant shall be at the sole risk
of Tenant. During the period of any such entry and/or use, all of the
obligations of Tenant set forth in this Lease with regard to the Premises shall
apply to the Additional Premises except for the obligation to pay Rent with
respect thereto, which obligation shall not commence until the Additional
Premises Commencement Date. Tenant acknowledges and agrees that Landlord shall
have no obligation to provide any utilities and/or services to the Additional
Premises prior to the Additional Premises Commencement Date except for
electrical energy in accordance with the requirements set forth in "Exhibit C"
attached hereto and incorporated herein by this reference. During the period of
any such entry and/or use prior to the Additional Premises Commencement Date,
Tenant shall pay all of Landlord's charges for electrical energy furnished to
the Additional Premises during such period.
Tenant shall lease the Additional Premises upon all of the same terms and
conditions set forth in Lease with respect to the Premises described in Item 6
of the Schedule, except that (a) the Annual Base Rent with respect to the
Additional Premises (the "Additional Premises Annual Base Rent") shall be (i)
$388,581.20 if the Additional Premises Commencement Date occurs on or prior to
December 31, 1997 and (ii) one hundred percent (100%) of the then current fair
market annual rent for five (5) year leases of comparable premises in comparable
buildings (including the Building) in the general vicinity of the Building (with
respect to age, quality and location) as determined in accordance with the
following
<PAGE>
paragraph (hereinafter referred to as the "Current Fair Market Annual
Rent"), if the Additional Premises Commencement Date occurs after December 31,
1997 and (b) if the Additional Premises Commencement Date occurs on or prior to
December 31, 1997, the Base Expense Year with respect to the Additional
Premises only shall be calendar year 1997 (i.e., January 1, 1997 - December 31,
----
1997). Tenant agrees that the Additional Premises shall be leased to Tenant in
its "as is" "where is" condition as of the Additional Premises Commencement
Date, and that Landlord shall have no obligation with respect to build out of
the Additional Premises.
If the Additional Premises Commencement Date shall occur on or prior to
December 31, 1997, then this paragraph shall not apply and shall have no effect.
If the Additional Premises Commencement Date shall occur after December 31,
1997, then the Additional Premises Annual Base Rent shall be the Current Fair
Market Annual Rent as determined in accordance with this paragraph. Landlord
shall notify Tenant of its good faith determination of the Current Fair Market
Annual Rent no later than January 31, 1998 (the "Additional Premises Rental
Notice"). If Tenant does not accept Landlord's determination of the Current
Fair Market Annual Rent and Landlord and Tenant cannot agree on the Current Fair
Market Annual Rent within twenty (20) days after Tenant's receipt of the
Additional Premises Rental Notice, then Landlord and Tenant shall, not later
than February 29, 1998, each retain a real estate professional with at least ten
(10) years continuous experience in the business of appraising or marketing
commercial real estate in the Lowell, Massachusetts area who shall, within
twenty (20) days of his or her selection, prepare a written report summarizing
his or her conclusion as to the Current Fair Market Annual Rent. Landlord and
Tenant shall simultaneously exchange such reports: provided, however, that if
one party has not obtained such a report on or prior to March 31, 1998, then the
determination as to the Current Fair Market Annual Rent set forth in the other
party's report shall be final and binding upon the parties. If both parties
receive reports within such time and the lesser of the two (2) determinations is
within ten percent (10%) of the higher determination, then the average of these
determinations shall be deemed to be the Current Fair Market Annual Rent. If
these determinations differ by more than ten percent (10%), then Landlord and
Tenant shall mutually select a person with the qualifications stated above (for
purposes of this Section 29, the "Final Professional") to resolve the dispute as
to the Current Fair Market Annual Rent. If Landlord and Tenant cannot agree
upon the designation of a Final Professional within ten (10) days of the
exchange of the fist evaluation reports, either party may apply to the American
Arbitration Association, the Greater Boston Real Estate Board or any successor
thereto for the designation of a Final Professional. Within five (5) days of
the selection of the Final Professional, Landlord and Tenant shall, each submit
to the Final Professional a copy of their respective real estate professional's
determination of the Current Fair Market Annual Rent. The Final Professional
shall not perform his or her own valuation, but rather shall, within ten (10)
days after such submissions, select the submission which is closest to the
determination of the Current Fair Market Annual Rent which the Final
Professional would have made acting alone. The Final Professional shall give
notice of his or her selection to Landlord and Tenant and such decision as to
the Current Fair Market Annual Rent shall be final and binding upon Landlord and
Tenant. Each party shall pay the fees and expenses of its real estate
professional and counsel, if any, in connection with any proceeding under this
paragraph, and the losing party shall pay the fees and expenses of the Final
Professional. Prior to the determination of the Current Fair Market Annual Rent
as provided in this paragraph, Tenant shall pay Additional Premises Annual Base
Rent at the rate of $388,581.20 per year. Within thirty (30) days after the
determination of the Current Fair Market Annual Rent as provided in this
paragraph, Tenant shall pay to Landlord the difference between the Current Fair
Market Annual Rent and $388,581.20 multiplied by the number of monthly
installments of Additional Premises Annual Base Rent paid by Tenant prior to the
first payment by Tenant of Additional Premises Annual Base Rent at the rate of
the Current Fair Market Annual Rent. After the determination of the Current
Fair Market Annual Base Rent, Tenant shall pay Additional Premises Annual Base
Rent at the rate of the Current Fair Market Annual Rent in equal monthly
installments throughout the remainder of the Term.
<PAGE>
30. INSTALLATION OF UPS. Subject to all of the requirements and
conditions set forth in Section 9 of this Lease, Tenant may install within the
Premises one or more UPS (uninterruptible power supply) back-up battery systems.
Tenant shall have the right to connect such system or systems to the electrical
system servicing the Premises and shall, have the right to maintain such
connection or connections throughout the Term. Tenant shall be responsible
throughout the Term for the maintenance of such system or systems, and Landlord
shall have no obligations in connection with the installation, maintenance,
repair and/or replacement of such system or systems. Notwithstanding any other
provisions of this Lease to the contrary, prior to the expiration or earlier
termination of this Lease, Tenant shall remove such system or systems from the
Premises and shall repair any damage caused by such removal.
31. INSTALLATION OF EMERGENCY GENERATOR Subject to all of the requirements
and conditions set forth in Section 9 of this Lease, Tenant shall have the right
to install one (1) electric generator for the purpose of providing backup or
emergency electricity to the Premises. Such electric generator shall have a
capacity of not more than 600 kilowatts and shall be installed in a location to
be mutually agreed to by Landlord and Tenant. Subject to all of the
requirements and conditions set forth in Section 9 of this Lease, Tenant shall
have the right to connect such electric generator to the electrical system
servicing the Premises. Subject to all of the requirements and conditions set
forth in Section 9 of this Lease, Tenant may install one (1) above-ground diesel
fuel storage tank for use in connection with such electric generator. Such
diesel fuel storage tank shall have a capacity of not more 500 gallons and shall
be installed in a location to be mutually agreed to by Landlord and Tenant.
Tenant shall be responsible throughout the Term for the maintenance of such
electric generator and such diesel fuel storage tank and agrees that Landlord
shall have no obligations in connection with the installation, maintenance,
repair and/or replacement of such electric generator and/or diesel fuel storage
tank. Notwithstanding any other provisions of this Lease to the contrary, prior
to the expiration or earlier termination of this Lease, Tenant shall remove
shall electric Generator and diesel fuel Storage tank from the Property and
shall repair any damage caused by such removal.
31. ACCESS TO TOWER 3 ROOF Throughout the Term, Tenant shall have the
right to install, use, replace, repair and maintain, at its sole cost and
expense, one (1) satellite dish and associated electronic equipment and cables
(hereinafter collectively referred to as the "Equipment") on the roof of Tower 3
of Building. In addition, Tenant shall have the right to install conduits,
wires, cables and other necessary connections between the Equipment and the
Premises (collectively, the "Connections"). The Equipment and the Connections
shall be installed n such locations to be reasonably determined by Landlord.
Tenant shall be required to obtain any and all governmental permits and
approvals required for the installation and use of the Equipment and the
Connections. Landlord agrees to use reasonable efforts to cooperate with Tenant
in connection with Tenant obtaining such permits and approvals. Tenant's right
hereunder to use the Equipment and the Connections is subject to any rights
previously given by Landlord to other parties with respect to use and frequency
only and otherwise subject to such reasonable rules and regulations as Landlord
may promulgate from time to time for the purpose of safety and frequency
management. Landlord may require Tenant to relocate the Equipment and/or the
Connections from time to time during the Term. Landlord shall reimburse Tenant
for its actual and reasonable costs in connection with any such relocation.
Tenant shall, at its sole cost and expense, maintain the Equipment and the
Connections in a safe condition and good repair throughout the Term. Tenant
shall, at its sole cost and expense, on or prior to the expiration or earlier
termination of the Term, remove from the Building all of the Equipment and the
Connections and restore any part of the Building damaged or altered by Tenant's
use or removal thereof. Accompanied by a representative of Landlord, Tenant or
Tenant's representatives shall have the right, at all reasonable times during
the Term, to gain access to the Equipment and/or the Connections for the
inspection, maintenance, repair, replacement or removal of same.
<PAGE>
33. RAISED FLOORING PANELS Landlord shall attempt but shall be under no
obligation to provide to Tenant up to 1,400 square feet of raised flooring
panels for installation by Tenant in the computer room to be constructed within
the Premises. If Landlord so provides such raised flooring panels, Tenant shall
be responsible for all costs in connection with moving of such panels to the
Premises and the installation of such panels and Landlord shall have no
responsibility for such moving and installation.
34. LIEBERT AIR CONDITIONING UNITS Landlord shall provide to Tenant for
use during the Term three (3) Liebert air conditioning units at no cost to
Tenant for such use. Tenant may select such three (3) units from the inventory
of such units maintained by Landlord from time to time. Notwithstanding any of
the foregoing to the contrary, Tenant shall be responsible for all costs in
connection with the moving of such units to the Premises and for the
installation and maintenance of same, and Landlord shall have no responsibility
for such moving, installation and/or maintenance.
35. FINANCING BUILD OUT OF EXPANSION SPACE AND/OR ADDITIONAL PREMISES
Landlord shall consider any request of Tenant for Landlord to finance the build
out of all or any portion of the Expansion Space and/or the Additional Premises;
however, Landlord shall in no event have any obligation to so finance any such
build out. In connection with any such request by Tenant, Tenant shall provide
to Landlord all financial information of Tenant that Landlord may deem
appropriate in considering any such request. If Landlord determines to finance
all or any part of the build out of the Expansion Space and/or the Additional
Premises, such financing shall be upon such terms and conditions specified by
Landlord in its sole, subjective discretion. Nothing herein shall obligate
Landlord to finance all or any portion of the build out of the Expansion Space
and/or the Addition Premises, and whether or not Landlord determines to finance
any such build out shall be determined by Landlord in its sole, subjective
discretion.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as a
sealed instrument as of the day and year first above written.
WITNESS: LANDLORD:
CROSS POINT LIMITED PARTNERSHIP
By: ONE INDUSTRIAL AVENUE
CORP., its Operating
General Partner
/s/ Q. Ellis Telford By: /s/ L. Alvarado
- -------------------- ----------------------------
Name: Name:
Title:
WITNESS: TENANT:
FAX INTERNATIONAL, INC.
/s/ Q. Ellis Telford By: /s/ Douglas J. Ranalli
- -------------------- -----------------------------
Name: Name:
Title:
<PAGE>
EXHIBIT "A"
FLOOR PLANS OF PREMISES
-----------------------
<PAGE>
EXHIBIT "B"
LEGAL DESCRIPTION OF FEE LAND
-----------------------------
Three (3) certain parcels of land located in Lowell and in Chelmsford in
Middlesex County, Massachusetts, more particularly described as Parcel 1, Parcel
2, and Parcel 3, below:
Parcel 1:
- --------
A certain parcel of land situated southwest of Industrial Avenue at River Meadow
Brook in the City of Lowell, County of Middlesex, Commonwealth of Massachusetts,
bounded and described as follows:
Beginning at a point on the southwesterly side of Industrial Avenue and the
northeasterly corner of said lot thence;
S 59 .05'36"E A distance of sixty-four and forty-seven hundredths feet
(64.47') to a point; thence
S 46 .22'30"W A distance of six hundred twenty-eight and eighty three
hundredths feet (64.47') to a point; thence
S 56 .26'20"W A distance of three hundred ninety and twenty-five hundredths
feet (390.25') to a point; thence
N 17 .55'20"W A distance of one hundred thirty and no hundredths feet (130.00')
to a point; thence
N 56 .03'05"E A distance of four hundred eighty-eight and fifty four hundredths
feet (488.54') to a point; thence
Northeasterly And curving left along the arc of a curve having a radius of two
thousand eight hundred ninety-seven and ninety three hundredths
feet (2897.93'), a length of four hundred sixty and twenty-four
hundredths feet (460.24') to the point of beginning on the
southwesterly side of Industrial Avenue.
The above described parcel of land contains 2.276 acres in the City of Lowell,
Massachusetts and is shown as Lot 2 on a plan entitled "Subdivision Plan of Land
in Lowell, Massachusetts" by Vanasse Hangen Brustlin, Inc., scale 1" = 80',
dated February 27, 1995 and revised May 22, 1995, which plan is recorded with
the Middlesex North District Registry of Deeds with the below-described deed.
For title to Parcel 1, see deed recorded with the Middlesex North District
Registry of Deeds in Book 7158, Page 147.
Parcel 2:
- --------
A certain parcel of land with the buildings thereon situated partly in Lowell
and partly in Chelmsford, Middlesex County, Massachusetts, and bounded and
described as follows:
<PAGE>
Beginning at a point located 165.08 feet on a curve to the right having a radius
of 4,750.00 feet from Sta. 1285+02.50 located on centerline of location, Lowell
Secondary Branch, Boston and Maine Corporation, thence running on a curve to the
left a distance of 198.85 feet to a point; thence turning and running
North 57 . 09'30" East, 1, 417.96 feet to a point; thence turning and running
On a curve to the left having a radius of 2,831.93 feet a distance of 466.97
feet to a point; thence turning and running
South 57 . 58'11" East 44.54 feet to a point; thence turning and running
South 46 . 56'05" West 35.74 feet to a point; thence turning and running
South 57 . 58'11" East 23.45 feet to a point; thence turning and running
On a curve to the right having a radius of 2,897.93 feet, a distance of 460.49
feet to a point;
thence turning and running
South 57 . 09'30" West 982.69 feet to a point; thence turning and running
South 49 . 27'00" East 8.65 feet to a point; thence turning and running
South 43 . 17'30" West 600.00 feet to the point of beginning.
Be all of said measurements, more or less, however otherwise bounded and
described, said parcel containing an area of 2.125 acres in the Town of
Chelmsford and 1.452 acres in the City of Lowell, or a total of 3.577 acres,
more or less, and being shown upon plan marked: "Plan of Land in Lowell &
Chelmsford, Massachusetts, Robert W. Meserve, et al., Trustees of the Property
of the Boston and Maine Corporation to Wang Laboratories, Inc., Scale: 1" =60',
August 19, 1980, Dana F. Perkins and Assoc., Inc., Civil Engineers and
Surveyors, Reading-Lowell, Mass." recorded with the Middlesex North District
Registry of Deeds in Plan Book 134, Page 70.
For title to Parcel 2, see deed recorded with the Middlesex North District
Registry of Deeds in Book 7158, Page 147.
Parcel 3:
- --------
A certain parcel of land with the buildings thereon, situate partly Lowell
and partly in Chelmsford in the County of Middlesex, Commonwealth of
Massachusetts, bounded and described as follows:
Northwesterly by Chelmsford Street, seven hundred sixty-one and 07/100 (761.07)
feet;
Northerly by the southerly line forming the junction of said Chelmsford Street
and Industrial Avenue, one hundred one and 41/100 (101.41) feet;
Northeasterly by the southwesterly line of said Industrial Avenue, eight hundred
ninety and 19/100 (890.19) feet;
Southeasterly by land now or formerly of Trustees of the New York, New Haven and
Hartford Railroad Company Debtor, twelve hundred ninety-three and 24/100
(1293.24) feet; and
<PAGE>
Westerly eleven and 12/100 (11.12) feet;
Northwesterly three hundred twenty-four and 83/100 (324.83) feet;
Northerly eleven and 06/100 (11.06) feet;
Northwesterly one hundred eighty-six and 60/100 (186.60) feet; and
Southwesterly two hundred sixteen (216) feet by land now for formerly of
Massachusetts
Electric Company.
All of the boundaries are determined by the Land Court to be located as shown on
Plan 33375-A, drawn by Dana F. Perkins & Sons Inc., Surveyors, dated July 6,
1964 and October 1965, as modified and approved by the Court, filed in the Land
Registration Office, a copy of a portion of which is filed with Certificate of
Title No. 14864.
For title to Parcel 3, see Certificate of Title No. 31319 filed with the
Middlesex North Registry District of the Land Court in Registration Book 159,
Page 237.
<PAGE>
EXHIBIT "B-1"
LEGAL DESCRIPTION OF EASEMENT LAND
----------------------------------
A certain parcel of land situated at the southwesterly intersection of
Industrial Avenue and
River Meadow Brook in the City of Lowell, County of Middlesex, Commonwealth of
Massachusetts, bounded and described as follows:
Beginning at the point at the northwesterly corner of the intersection of
Industrial Avenue and a private way known as Reiss Avenue; thence
S 44 .0-5'16"E A distance of fifty and no hundredths feet (50.00') to a point,
by said Industrial Avenue; thence
S 45 .54'44"W A distance of fifty and no hundredths feet (50.00') to a point;
thence
S 44 .05'16"E A distance of eighty-seven and sixty five hundredths feet
(87.65') to a point; thence
S 10 .54'44"W A distance of two hundred seven and ninety hundredths feet
(207.90') to a point; thence
N 82 .54'42"E A distance of two hundred seventy five and fifty hundredths feet
(207.90') to a point, the last four (4) courses by land now
or formerly of Shaw Corp.; thence
S 07 .0.5'18"E A distance of one hundred forty-two and twenty-nine hundredths
feet (142.29') to a point; thence
S 00 .24'42"W A distance of four hundred sixty-seven and fifteen hundredths
feet (467.15') to a point of non-tangency; thence
Southwesterly And curving to the right along the arc of a curve having a
radius of one thousand nine hundred twenty and no hundredths
feet (1,920.00') a length of three hundred and fifty-five
hundredths feet (300.55') to a point; thence
Southwesterly And curving to the right along the arc of a curve having a
radius of seven hundred twenty and non hundredths feet
(720.00') a length of two hundred seventy-nine and ninety-
four hundredths feet (279.94') to a point; thence
Northwesterly And curving to the right along the arc of a curve having a
radius of two hundred forty and no hundredths feet
(240.00'), a length of three hundred ten and twenty-nine
hundredths feet (310.29') to a point; thence
N 71 .38'56"W A distance of five hundred twenty-seven and seventeen hundredths
feet (527.17') to a point: thence
<PAGE>
Northwesterly And curving to the right along the arc of a curve having a
radius of two thousand nine hundred twenty and no hundredths
feet (2,920.00'), a length of sixty three and twenty-one
hundredths feet (63.21') to a point, the last seven (7)
courses by the State Highway layout #4709 of both the Lowell
Connector and Route 495; thence
N 17 55'20"W A distance of seven hundred fifty-eight and thirty-nine
hundredths feet (758-393) to a point; thence
N 42 .12'04"E A distance of one hundred seventy-three and two hundredths feet
(173.02"') to a point; thence
N 17 .55'20"W A distance of four hundred sixty-four and forty-eight hundredths
feet (464.48") to a point, the last three (3) courses by
land now or formerly of New England Power Co. and the Town
Line; thence
N 56 .26'20"E A distance of three hundred ninety and twenty five hundredths
feet (390.25') to a point; thence
N 46 .22'30"E A distance of six hundred twenty-eight and eighty-three
hundredths feet (628.83') to a point, the last two (2)
courses by Lot 2; thence
S 59 .05'36"E A distance of one hundred twenty-four and eight hundredths feet
(124.83') to a point; thence
S 44 .05'16"E A distance of one hundred five and thirty-seven hundredths feet
(105.37') to a point, thence
Southwesterly And curving to the right along the arc of a curve having a
radius of ninety-one and no hundredths feet (91.00'), a
length of twenty-seven and thirty-one hundredths feet
(27.31') to a point; thence
S 00 .24'42"W A distance of three hundred thirty-eight and thirteen hundredths
feet (338.13') to a point; thence
Southwesterly And curving to the right along the arc of a curve having a
radius of ninety-one and no hundredths feet (91.00'), a
length of seventy-two and twenty-seven hundredths feet
(72.27') to a point of beginning, the last five (5) courses
by the westerly sideline of Industrial Avenue.
The above described parcel of land contains 42.403 acres in the City of Lowell,
Massachusetts and is shown as Lot 1 on a plan entitled "Subdivision Plan of Land
in
Lowell, Massachusetts" by Vanasse Hangen Brustlin, Inc., scale 1" = 803, dated
February 27, 1995 and revised May 22, 1995, which plan is recorded with the
Middlesex North District Registry of Deeds with the below-referenced deed.
The above described parcel of land includes, in addition to land not
registered, the following parcels of registered land: (i) Lot 3 as shown on Land
Court Plan No. 30641B, more particularly
<PAGE>
described in Certificate of Title No. 22535; and (ii) Lot 6 as shown on Land
Court Plan No. 30641C, more particularly described in Certificate of Title No.
25059.
For title reference, see deed of Wang Laboratories, Inc. recorded with the
Middlesex North District Registry of Deeds in Book 7518, Page 140 and filed for
registration with Middlesex North Registry District of the Land Court as
Document No. 159311, and Certificate of Title No. 31999.
<PAGE>
EXHIBIT "C"
UTILITIES AND OTHER SERVICES
----------------------------
I. CLEANING
--------
A. Office Area (including elevator lobbies)
Daily: (Monday through Friday, inclusive, holidays excepted).
1. Empty and clean all waste receptacles and ash trays and remove waste
material from the Premises and wash receptacles as necessary.
2. Sweep and dust mop all uncarpeted areas using a dust-treated mop.
3. Vacuum all rugs and carpeted areas.
4. Hand dust and wipe clean with treated cloths all horizontal surfaces
including furniture, office equipment, window sills, door ledges, chair rails,
and convector tops, within reach, but excluding work areas in use at the time of
cleaning.
5. Wash clean all water fountains.
6. Remove and dust under all desk equipment and telephones and replace
same.
7. Hand dust all grill work within normal reach.
8. Upon completion of cleaning, all lights will be turned off and doors
locked, leaving the Premises in an orderly condition.
9. Remove fingerprints from glass entry doors and office side lights.
10. Remove all trash left on conference room tables and place cups and
dishes in kitchen sink.
11. Clean all white boards using appropriate cleaning agents (unless
otherwise instructed per message left on such boards).
Weekly:
1. Dust exposed coat racks and the like.
2. Remove all finger marks from private entrance doors, light switches and
doorways.
Quarterly:
Render high dusting not reached in daily cleaning to include:
1. Dusting all pictures, frames, charts, graphs and similar wall hangings.
<PAGE>
2. Dusting all vertical surfaces, such as walls, partitions, doors and
ducts.
3. Dusting of all pipes, ducts, and high moldings.
4. Dusting of all horizontal blinds.
B. Lavatories
Daily: (Monday through Friday, inclusive, holidays excepted.)
1. Sweep and damp mop floors.
2. Clean all mirrors, powder shelves, dispensers and receptacles, bright
work, flushometers, piping and toilet seat hinges.
3. Wash both sides of all toilet seats.
4. Wash all basins, bowls and urinals.
5. Dust and clean all powder room fixtures.
6. Empty and clean paper towel and sanitary disposal receptacles.
7. Remove waste paper and refuse.
8. Refill tissue holders, soap dispensers, towel dispensers, vending
sanitary dispensers; materials to be furnished by Landlord.
9. A sanitizing solution will be used in all lavatory cleaning.
Monthly:
1. Machine scrub lavatory floors.
2. Wash all partitions and tile walls in lavatories.
C. Main Lobby, Elevators, Building Exterior and Corridors
Daily: (Monday through Friday, inclusive, holidays excepted.)
1. Sweep and wash all floors.
2. Wash all rubber mats.
3. Clean elevators, wash or vacuum floors, wipe down walls and doors.
4. Spot clean any metal work inside lobby.
5. Spot clean any metal work surrounding Building Entrance doors.
<PAGE>
Monthly: All resilient tile floors in public areas to be treated
equivalent to spray buffing.
D. Window Cleaning
Interior and exterior of windows of exterior walls will be washed three (3)
times annually.
E. Common Areas
Landlord shall keep repaired and maintain all common areas of the Property
and any sidewalks, parking areas, curbs and access ways adjoining the Property
in a clean and orderly condition. Snow and ice will be removed from exterior
sidewalks, parking areas and curbs and access ways adjoining the Property, as
necessary.
II. HEATING, VENTlLATING, AIR-CONDITIONING
--------------------------------------
Landlord shall furnish space heating and cooling as normal seasonal changes may
require to provide reasonably comfortable space temperature and ventilation for
occupants of the Premises under normal business operation, Monday through
Friday, inclusive, from 7:00 a.m. to 8:30 p.m. and Saturday and Sunday from 8:00
a.m. to 4:00 p.m., holidays excepted (hereinafter referred to as "Normal
Business Hours").
The HVAC system will be operated during such hours so as to maintain inside
conditions as follows:
A. During the summer, not more than 78 degrees Fahrenheit (plus or minus 2
degrees) and 50% relative humidity when the outside temperature does not exceed
88 degrees Fahrenheit dry bulb and 74 degrees Fahrenheit wet bulb; and
B. During the winter, not less than 72 degrees Fahrenheit (plus or minus 2
degrees) (no humidity control) when the outside temperature is not less than 9
degrees Fahrenheit dry bulb (no wet bulb).
The air-conditioning system is based upon an occupancy of not more than one
person per 150 square feet of usable floor area, and upon a combined lighting
and standard electrical load not to exceed 7 watts per square foot of usable
floor area. If Tenant exceeds this condition or introduces into the Premises
equipment which overloads the system, and/or in any other way causes the system
not adequately to perform their proper functions, and the system is damaged
thereby, Landlord shall give notice thereof to Tenant and Tenant shall pay the
reasonable cost of repairing such damage (within thirty (30) days of receipt of
invoice therefor) and Tenant shall, promptly after receipt of such notice, cease
the act or omission causing such damage; provided, however, that if Landlord
agrees that the system may be supplemented to prevent the recurrence of the
problem, Landlord shall give notice thereof to Tenant, and Tenant may elect to
have such supplemental work performed, at Tenant's sole cost and expense, by
notice to Landlord within 30 days of receipt of Landlord's notice.
III. WATER
-----
Cold water at temperatures supplied by the City of Lowell water mains for
lavatory, toilet and other approved purposes (including two (2) sinks per floor
of the Premises and two (2) showerheads in total within the Premises) and hot
water for lavatory purposes and for such approved sinks and showerheads only
from regular Building supply at prevailing temperatures; provided, however, if
Tenant requires, uses or consumes water for any purpose (e.g., kitchen purposes,
shower facilities,
<PAGE>
etc.) other than lavatory and toilet purposes and for such approved sinks and
showerheads, Landlord may, at Tenant's sole cost and expense, install a meter or
meters to measure the water so supplied, in which case Tenant shall, upon
Landlord's request, reimburse Landlord for the cost of the water (including
heating and cooling thereof) consumed in such areas and the sewer use charges
resulting therefrom.
IV. ELEVATORS
---------
Landlord shall provide elevator service; provided, however, that Landlord
shall, from time to time, have the right to remove elevators from service as may
be required for servicing or maintaining the elevators or the Building or
removing freight, provided that subject to conditions outside of Landlord's
control, such removal from service shall not unreasonably interfere with
Tenant's use of the Premises.
V. ELECTRICAL SERVICE
------------------
Landlord shall furnish electric energy to the Premises in accordance with
base Building electrical capacity limits and load limits of 10 watts per square
foot, exclusive of HVAC.
VI. BUILDING SECURITY
-----------------
Landlord shall provide a security system for all portions of the Building
excluding the Premises. Landlord shall provide at least two (2) security guards
in the Building during Normal Business Hours and at least one (1) roving
security guard during all other hours. Tenant shall have access to the Premises
only through an entrance or entrances designated by Landlord from time to time
on a 24 hours per day, 7 days per week basis. Tenant shall be solely
responsible for all security within the Premises.
<PAGE>
EXHIBIT "D"
-----------
RULES AND REGULATIONS
---------------------
1. Tenant shall not make any room-to-room canvas to solicit business from
other tenants in the Building and shall not exhibit, sell or offer to sell, use,
rent or exchange any item or services in or from the Premises unless ordinarily
included within Tenant's use of the Premises as specified in the Lease.
2. Subject to the provisions of this Lease, Tenant shall not make any use
of the Premises which may be dangerous to person or property or which shall
increase the cost of insurance or require additional insurance coverage.
3. Tenant shall not paint, display, inscribe or affix any sign, picture,
advertisement, notice, lettering or direction or install any lights on any part
of the outside or inside of the Building, other than the Premises, and then not
on any part of the inside of the Premises which can be seen from outside the
Premises, except as approved by Landlord in writing, which approval shall not be
unreasonably withheld or delayed.
4. Tenant shall not use the name of the Building in advertising or other
publicity, except as the address of its business, and shall not use pictures of
the Building in advertising or publicity.
5. Tenant shall not obstruct or place objects on or in sidewalks,
entrances, passages, courts, corridors, vestibules, halls, elevators and
stairways in and about the Building. Tenant shall not place objects against
glass partitions or doors or windows or adjacent to an open common space which
would be unsightly from the Building corridors or from the exterior of the
Building,
6. Bicycles shall not be permitted in the Building other than in a
location designated by Landlord.
7. Tenant shall not allow any animals, other than seeing eye dogs, in the
Premises or the Building.
8. Tenant shall not disturb other tenants or make excessive noises, cause
disturbances, create excessive vibrations, odors or noxious fumes or use or
operate any electrical or electronic devices or other devices that emit
excessive sound waves or are dangerous to other tenants of the Building or that
would interfere with the operation of any device or equipment or radio or
television broadcasting or reception from or within the Building or elsewhere,
and, subject to the provisions of this Lease, shall not place or install any
projections, antennae, aerials or similar devices outside of the Building or the
Premises.
9. Tenant shall not waste electricity or water and shall cooperate fully
with Landlord to assure the most effective operation of the Building's heating
and air conditioning systems, and shall refrain from attempting to adjust any
controls except for the thermostats within the Premises. Tenant shall keep all
doors to the Premises closed.
10. Unless Tenant installs new doors to the Premises, Landlord shall furnish
two (2) sets of keys for all doors to the Premises at the commencement of the
Term. Tenant shall furnish Landlord with duplicate keys for any new or
additional locks on doors installed by Tenant. When the Lease is
<PAGE>
terminated, Tenant shall deliver all keys to Landlord and will provide to
Landlord the means of opening any safes, cabinets or vaults left in the
Premises.
11. Tenant shall not install any signal, communication, alarm or other
utility or service system or equipment without the prior written consent of
Landlord (which consent shall not be unreasonably withheld or delayed) and then
only in compliance with provisions of Section 9 of this Lease.
12. Tenant shall not use any draperies or other window coverings instead
of or in addition to the Building standard window coverings designated and
approved by Landlord for exclusive use throughout the Building.
13. Landlord may require that all persons who enter or leave the Building
identify themselves to watchmen, by registration or otherwise. Landlord,
however, shall have no responsibility or liability for any theft, robbery or
other crime in the Building. Tenant shall assume full responsibility for
protecting the Premises, including keeping all doors to the Premises locked
after the close of business.
14. Tenant shall not overload floors; and Tenant shall obtain Landlord's
prior written approval as to size, maximum weight, routing and location of
business machines, safes, and heavy objects. Tenant shall not install or
operate machinery or any mechanical devices of a nature not directly related to
Tenant's ordinary use of the Premises.
15. In no event shall Tenant bring into the Building inflammables such as
gasoline, kerosene, naphtha and benzene, or explosives or firearms or any other
articles of an intrinsically dangerous nature. The foregoing prohibitions shall
not apply to any inflammables present in commonly used commercial cleaning
agents.
16. Furniture, equipment and other large articles may be brought into the
Building only at the time and in the manner designated by Landlord. Tenant
shall furnish Landlord with a list of furniture, equipment and other large
articles which are to be removed from the Building, and Landlord may require
permits before allowing anything to be moved in or out of the Building.
Movements of Tenant's property, into or out of the Building and within the
Building are entirely at the risk and responsibility of Tenant.
17. No person or contractor, unless approved in advance by Landlord (which
approval shall not be unreasonably withheld or delayed) shall be employed to do
janitorial work, interior window washing, cleaning, decorating or similar
services in the Premises.
18. Tenant shall not use the Premises for lodging, cooking (except for
microwave reheating and coffee makers) or manufacturing or selling any alcoholic
beverages or for any illegal purposes.
19. Tenant shall cooperate and participate in all reasonable security
programs affecting the Building.
20. Tenant shall not loiter, eat, drink or lie in the lobby or other
public areas in the Building. Subject to the provisions of this Lease, Tenant
shall not go onto the roof of the Building or any other non-public areas of the
Building (except the Premises), and Landlord reserves all rights to control the
public and non-public areas of the Building. Subject to the provisions of this
Lease, in no event shall Tenant have access to any electrical, telephone,
plumbing or other mechanical closets without Landlord's prior written consent.
<PAGE>
21. Tenant shall not use the freight or passenger elevators, loading docks
or receiving areas of the Building except in accordance with regulations for
their use established by Landlord.
22. Tenant shall not dispose of any foreign substances in the toilets,
urinals, sinks or other washroom facilities, nor shall Tenant permit such items
to be used other than for their intended purposes; and Tenant shall be liable
for all damage as a result of a violation of this rule.
23. In no event shall Tenant allow its employees to use the public areas
of the Building as smoking areas.
<PAGE>
EXHIBIT "E"
TENANT IMPROVEMENT WORK AGREEMENT
---------------------------------
This Tenant Improvement Work Agreement (the "Agreement") is made and
entered into as of the 2nd day of August, 1996 by and between CROSS POINT
LIMITED PARTNERSHIP, a Massachusetts limited partnership (hereinafter called
"Landlord"), and FAX INTERNATIONAL, INC., a Delaware corporation (hereinafter
called "Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant have entered into a Lease, dated as of the
date hereof (hereinafter called the "Lease"), for the entire tenth floor, the
entire eleventh floor and the entire twelfth floor of Tower 3 of the building
(the "Building") located at 900 Chelmsford Street, Lowell, Massachusetts
containing approximately 108,948 rentable square feet of floor area as shown on
Exhibit "A" of the Lease (hereinafter collectively called the "Premises"); and,
WHEREAS, certain tenant improvement work is to be completed upon the
Premises; and,
WHEREAS, the purpose of this Agreement is to set forth the relative rights
and obligations of Landlord and Tenant with respect to space planning,
engineering, final working drawings and the construction and installation of
certain tenant improvements upon the Premises.
NOW, THEREFORE, for and in consideration of the agreement to lease the
Premises, pay rent, and the mutual covenants contained herein and in the Lease,
the parties hereby agree as follows:
1. Incorporation of Lease: The Lease is hereby incorporated by reference
----------------------
into this Agreement, as if set forth in full.
2. Tenant's Plans: On or before August 9, 1996, Tenant shall provide to
--------------
Landlord for its approval final working drawings, prepared by an architect that
has been approved by Landlord (which approval shall not be unreasonably
withheld), of all improvements that Tenant proposes to have installed in the
Premises; such working drawings shall include the partition layout, ceiling
plan, electrical outlets and switches, telephone outlets, drawings for any
modifications to the mechanical and plumbing systems of the Building, and
detailed plans and specifications for the construction of the improvements
called for in this Agreement, in accordance with all applicable governmental
laws, codes, rules and regulations. Landlord shall approve or disapprove such
drawings within ten (10) business days of their receipt by Landlord. If
Landlord disapproves such working drawings, Landlord shall specify the reasons
for such disapproval in reasonable particularity, and Tenant shall make
conforming revisions thereto and resubmit such working drawings to Landlord for
re-review in accordance with the same procedure set forth above, except that
Landlord must complete its review and notify Tenant of its approval or
disapproval of such revised working drawings within five (5) business days of
their receipt by Landlord. Landlord and Tenant shall initial the working
drawings after the same have been finally approved by Landlord. If Landlord
falls to give Tenant notice as aforesaid either approving or disapproving
Tenant's initial working drawings or resubmitted working drawings within the
time periods specified above, Landlord shall be deemed to have approved such
initial working drawings or resubmitted working drawings, as applicable.
Landlord's approval of Tenant's working drawings shall not be unreasonably
withheld, provided that (a) they comply with all applicable governmental laws,
codes, rules and regulations, (b) such working drawings are sufficiently
detailed to allow construction of the improvements in a good and workmanlike
manner, and (c) the improvements depicted thereon conform to the rules and
regulations promulgated by Landlord for the construction of tenant improvements
in the Building. As used herein, the phrase
<PAGE>
"Tenant's Plans" shall mean the final working drawings approved by Landlord
pursuant to this Paragraph 2, as amended from time to time by any approved
changes thereto. As used herein, the phrase "Landlord's Work" shall mean the
work specified in Tenant's Plans. Approval by Landlord of Tenant's Plans shall
not be a representation or warranty of Landlord that Tenant's Plans are adequate
for any use, purpose, or condition, or that Tenant's Plans comply with any
applicable law or code, but shall merely be the consent of Landlord to Tenant's
Plans. All changes in Tenant's Plans must receive the prior written approval of
Landlord. Landlord shall pay the entire cost of preparation of Tenant's Plans
(such entire cost of preparation of Tenant's Plans plus the entire cost of
preparing any other plans and specifications and/or working drawings necessary
for the construction of Landlord's Work being hereinafter referred to as the
"Total Plans Cost").
3. Preparation of the Premises: (a) Landlord and Tenant have selected John
---------------------------
Moriarty and Associates (the "Contractor") as the contractor to construct
Landlord's Work. Promptly after Landlord's approval of Tenant's Plans, Landlord
shall enter into a construction contract (the "Construction Contract") with the
Contractor and shall cause the Contractor to commence construction of Landlord's
Work and to diligently prosecute to completion the construction of Landlord's
Work so as to prepare the Premises for Tenant's Occupancy on or prior to
December 1, 1996, but Tenant shall have no claim against Landlord for failure so
to complete Landlord's Work by such date, nor shall such failure affect the
validity of this Lease. Landlord's Work shall be performed in a good and
workmanlike manner. Landlord agrees not to enter into a construction contract
with a price in excess of $1,500,000.00 without the prior written consent of
Tenant, which consent shall not be unreasonably withheld or delayed. In
addition, Landlord agrees not to modify Landlord's Work without the prior
written consent of Tenant (which consent shall not be unreasonably withheld or
delayed) if, as a result of such modification, there shall be an increase in the
Total Construction Cost (as defined below). Tenant shall have the right to
inspect the progress of Landlord's Work to determine if such work is being
performed in accordance with the requirements of the Lease and this Agreement.
Any entry by Tenant pursuant to the preceding sentence shall be at the sole risk
of Tenant.
(b) As used herein, the phrase "Substantial Completion Date" shall mean the
first business day as of which (1) a Certificate of Occupancy has been obtained
from the City of Lowell allowing Tenant to use the Premises for the purposes set
forth in Section 3 of the Lease, and (ii) Landlord's Work has been completed
except for minor items of work (and, if applicable, adjustment of equipment and
fixtures) which do not materially interfere with Tenant's use of the Premises
for the purposes set forth in Section 3 of this Lease, and can be completed
after occupancy has been taken without causing undue interference with Tenant's
use of the Premises (i.e., so-called "Punch-List" items). The Contractor shall
complete as soon as conditions permit all "Punch-List" items, and Tenant shall
afford Landlord and the Contractor access to the Premises for such purposes.
Landlord shall use reasonable efforts to cause all "Punch-List" items to be
completed within thirty (30) days after the Substantial Completion Date.
(c) Tenant agrees that Landlord may make any minor changes in Landlord's
Work, the necessity or advisability of which becomes apparent during the course
of the performance of Landlord's Work, so long as Tenant has provided prior
verbal approval therefor (which approval shall not be unreasonably withheld or
delayed) and such changes do not adversely affect the quality or extent of
Landlord's Work. Any other changes in Landlord's Work shall not be made without
the written approval of Tenant, which approval shall not be unreasonably
withheld or delayed.
(d) The following are herein referred to collectively and individually as
"Tenant Delays": (i) failure by Tenant to provide to Landlord for Landlord's
approval final working drawings on or prior to August 9, 1996 as required in
Paragraph 2 of this Exhibit "E"; (ii) failure by Tenant to make conforming
revisions to the working drawing and resubmits same to Landlord for review
within the time period set
<PAGE>
forth in Paragraph 2 of this Exhibit "E"; (iii) any failure by Tenant to consent
or any delay by Tenant in consenting to a construction contract if such consent
is required under Paragraph 3(a) of this Exhibit "E"; (iv) any delay by Tenant
in consenting to a modification to Landlord's Work if such consent is required
under Paragraph 3(a) of this Exhibit "E"; (v) any request by Tenant that
Landlord delay in the commencement or completion of Landlord's Work for any
reason; (vi) any change by Tenant in any of Tenant's Plans which cause a delay
in the commencement or completion of Landlord's Work; (vii) any other act or
omission of Tenant or its officers, agents, employees or contractors which
causes a delay in the commencement or completion of Landlord's Work; or (viii)
any delay which is the result of any "Force Majeure" condition as defined in
subparagraph (f) hereof in which delay would not have occurred but for a delay
referenced in clauses (i), (ii), (iii), (iv), (v), (vi) or (vii) of this
subparagraph (d).
(e) If, as a result of any delays other than Tenant's Delays and other than
any delays which are the result of any "Force Majeure" condition, the
Substantial Completion Date is delayed beyond December 1, 1996, then Tenant
shall have no obligation to pay Base Rent for the period from December 1, 1996
through the day prior to the Substantial Completion Date, provided that Tenant
has not commenced use of the Premises or any portion thereof prior to December
1, 1996. Notwithstanding any of the provisions of the preceding sentence to the
contrary, if, as a result of delays other than Tenant's Delays and other than
any delays which are the result of any "Force Majeure" condition, the
Substantial Completion Date is delayed beyond December 1, 1996 and Tenant
commences use of the Premises or any portion thereof prior to the Substantial
Completion Date, then Tenant's obligation to pay Base Rent shall commence on the
date that Tenant commences use of the Premises or any portion thereof.
(f) "Force Majeure" condition shall be defined as any strike or other labor
trouble, fire, flood or other casualty, unusually severe weather, governmental
preemption of priorities or other controls in connection with a national or
other public emergency (or shortages of fuel, supplies or labor resulting
therefrom) or civil commotion, or any other cause whether similar or dissimilar
beyond Landlord's reasonable control.
4. Conclusiveness of Landlord's Performance: Except to the extent to
----------------------------------------
which Tenant shall have given Landlord notice not later than six (6) months from
the Substantial Completion Date of respects in which Landlord has not performed
Landlord's Work, Tenant shall have no claim that Landlord has failed to perform
any of Landlord's Work.
5. Cost of Landlord's Work: The total cost of construction of Landlord's
-----------------------
Work shall be paid by Landlord (such total cost of construction being
hereinafter referred to as the "Total Construction Cost"). Upon final
completion of Landlord's Work, Landlord shall certify to Tenant the Total Plans
Cost and the Total Construction Cost (hereinafter collectively referred to as
the "Total Cost"). To the extent that the Total Cost exceeds $1,500,000.00,
Tenant shall pay such excess (less any amounts paid by Tenant to Landlord in
accordance with the following provisions of this Paragraph 5) to Landlord, as
additional Rent under the Lease, not later than thirty (30) days after receipt
by Tenant of the certification referred to in the second sentence of this
Paragraph 5. Notwithstanding anything in this Exhibit "E" to the contrary, if
the price set forth in the Construction Contract exceeds $1,500,000.00, at
Landlord's option, Tenant shall make periodic payments to Landlord for the
excess between the price of the Construction Contract and $1,500,000.00 in
accordance with the following provisions. Such periodic payment shall be made
in connection with periodic payments made by Landlord to the Contractor under
the Construction Contract during the performance of Landlord's Work based upon
the ratio of the price of the Construction Contract in excess of $1,500,000.00
and the price of the Construction Contract. Such periodic payment shall be made
by Landlord to Tenant based upon such ratio within five (5) days after receipt
by Tenant of a copy of all documentation submitted by the Contractor to Landlord
in connection with periodic requisitions for pavement made by the Contractor
under the Construction Contract. For
<PAGE>
example, if the price of the Construction Contract is $2,000,000.00 (and
therefore the excess of the price of the Construction Contract and $1,500,000.00
is $500,000.00), then Tenant shall pay to Landlord in connection with each
requisition for payment made by the Contractor twenty-five percent (25%) of the
amount of each such requisition (based upon the ratio of $500,000.00 to
$2,000,000.00).
Tenant shall reimburse Landlord for the first $1,500,000.00 of the Total
Cost pursuant to the terms of a certain Term Note of even date herewith from
Tenant to Landlord, a copy of which is attached to this Agreement as Attachment
1 and incorporated herein by this reference (the "Note"). Simultaneously with
the execution and delivery of the Lease and this Agreement, Tenant shall execute
and deliver to Landlord the Note. Attached to this Agreement as Attachment 2
and incorporated herein by this reference is a certain Subordination Agreement
of even date herewith by and among Landlord, Tenant and Singapore
Telecommunications Limited (the "Subordination Agreement"). Simultaneously with
the execution and delivery of the Lease, this Agreement and the Note, Tenant
shall execute and deliver and shall cause Singapore Telecommunications Limited
to execute and deliver the Subordination Agreement.
6. Construction Management Fee: Tenant shall pay to Landlord a
---------------------------
construction management fee in the amount of four percent (4%) of the Total Hard
Construction Cost (as defined below). Fifty percent (50%) of such construction
management fee shall be due and payable within thirty (30) days after the
Commencement Date and the remainder of such construction management fee shall be
due and payable within thirty (30) days after the Substantial Completion Date.
"Total Hard Construction Cost" shall mean the Total Construction Cost less the
amount attributable to "General Conditions" under the Construction Contract.
Such construction management fee shall be deemed to be additional Rent under the
Lease. In acting as construction manager with respect to the performance of
Landlord's Work, Landlord shall perform the duties typically expected of a
construction manager, including, without limitation: (a) providing
administration of the Construction Contract; (b) using diligent efforts to
determine in general that the Landlord's Work is being performed in accordance
with the requirements of Tenant's Plans; (c) managing communications between the
Contractor and Tenant as needed to efficiently complete Landlord's Work; (d)
reviewing and processing requisitions for payment by the Contractor for progress
and final payment and certifying the amounts due; and (e) assisting in
establishing the "Punch-List" upon substantial completion of Landlord's Work.
7. Entry by Tenant: Interference With Construction: With the prior
-----------------------------------------------
consent of Landlord, Tenant may enter the Premises prior to the Commencement
Date to undertake such work as is to be performed by Tenant pursuant to this
Lease in order to prepare the Premises for Tenant's occupancy. Such entry shall
be at the sole risk of Tenant. In no event shall Tenant use any contractor if
Landlord reasonably determines that such contractor will cause a labor dispute
at the Property, or otherwise materially interfere with any construction work
being performed by or on behalf of Landlord in or around the Property. Without
limiting the generality of the foregoing, Tenant shall comply with all
reasonable instructions issued by Landlord relative to the moving of Tenant's
equipment and other property into the Premises and shall pay any actual fees or
costs incurred by Landlord in connection therewith. If noncompliance by Tenant
with any instructions issued by Landlord results in a work stoppage or other job
action by any employees of such contractors or subcontractors thereof performing
work at the Property, Tenant and its contractors shall cease construction of
such work.
9. Miscellaneous:
-------------
a. Definitions. The definitions set forth in the Lease shall apply
-----------
throughout this Agreement.
b. Headings. The headings contained in this Agreement are for
--------
convenience only.
<PAGE>
c. Force Majeure. Landlord shall not be responsible for failure to
-------------
complete Landlord's Work in the time provided due to reasons beyond its
reasonable control, including, without limitation, strikes, natural disasters,
acts of God, civil commotion, riots, war or governmental actions (but
specifically excluding financial inability to perform).
d. Election of Law. This Agreement shall be governed by the laws of The
---------------
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties have executed this Agreement as a sealed
instrument as of the day and year first above written.
WITNESS: LANDLORD:
CROSS POINT LIMITED PARTNERSHIP
By: ONE INDUSTRIAL AVENUE CORP.,
its Operating General Partner
By:
- ------------------------- ----------------------------------
Name: Name: Luis A. Alvarado
Title: Exec. Vice President
WITNESS: TENANT:
FAX INTERNATIONAL, INC.
By:
- ------------------------- ----------------------------------
Name: Name:
Title:
<PAGE>
ATTACHMENT 1
------------
Term Note
---------
<PAGE>
ATTACHMENT 2
------------
Subordination Agreement
-----------------------
<PAGE>
TERM NOTE
---------
$1,500,000 As of August 2, 1996
FOR VALUE RECEIVED, the undersigned Fax International, Inc., a Delaware
corporation, with a place of business at 67 South Bedford Street, Suite 100E,
Burlington, MA 01803-5152 (hereinafter referred to as the "Tenant"), promises to
pay to the order of Cross Point Limited Partnership, a Massachusetts limited
partnership (together with any subsequent holders of this Note, the "Landlord"),
at its office at 900 Chelmsford Street, Lowell, MA 01851 or at such other place
as the Landlord may from time to time designate in writing, the principal sum of
ONE MILLION FIVE HUNDRED THOUSAND DOLLARS
($1,500.000) or such lower amount as set forth in an amendment to this Note upon
a final determination of the Total Construction Cost (as defined in the Lease,
as defined below), together with interest on the unpaid principal balance hereof
from time to time at a rate per annum equal to thirteen percent (13%) (the
"Stated Rate"). In the absence of demonstrable error, the books and records of
the Landlord shall constitute conclusive evidence of the unpaid principal
balance hereof from time to time.
1. Payments of principal and interest shall be made on the basis of a
seven (7) year amortization schedule. Such payments shall be made in monthly
installments of Twenty Seven Thousand Two Hundred Eighty-Seven and 95/100
Dollars($27,287.95) due and payable on the first day of each month, provided
that the Tenant's first monthly payment of principal and interest hereunder
shall not be due and payable until the first payment of Monthly Base Rent (as
defined in the Lease) that is due and payable after the Substantial Completion
Date (as defined in the Lease). Notwithstanding anything herein to the
contrary, interest on the unpaid balance hereof will not begin to accrue until
the Substantial Completion Date. If not sooner paid, all outstanding principal
and accrued and unpaid interest thereon shall be paid to the Landlord on that
date which shall be eighteen (18) months after the Substantial Completion Date
(the "Maturity Date"). Notwithstanding the foregoing, at the Tenant's option,
the Maturity Date may be extended for an additional six (6) months, provided
that (i) the Tenant gives the Landlord notice of the exercise of such option (an
"Option Notice") no later than thirty (30) days prior to the Maturity Date, and
(ii) at the time the Landlord receives the Option Notice there shall not exist a
Default under the Lease or an Event of Default hereunder.
2. This Note may be prepaid, in whole or from time to time in part, at any
time, without premium or penalty.
3. All payments hereunder shall be payable in lawful money of the United
States which shall be legal tender for public and private debts at the time of
payment. Interest shall be calculated on the basis of a 360-day year and
payable for the actual number of days elapsed (including the first day but
excluding the last day), including any time extended by reason of Saturdays,
Sundays and holidays. All payments shall be applied first to any costs and
expenses of the Landlord due hereunder, then to interest due hereunder, and any
balance shall be applied in the manner as set forth above and the remainder
shall be applied in reduction of principal in the inverse order of maturities.
4. Notwithstanding any other provision hereof, the Tenant shall not be
required to pay any amount pursuant hereto which is in excess of the maximum
amount permitted under applicable law. It is the intention of the parties
hereto to conform strictly to any applicable usury law, and it is agreed that if
any amount contracted for, chargeable or receivable under this Note shall exceed
the maximum amount permitted under any such law, any such excess shall be deemed
a mistake and cancelled automatically and, if theretofore paid, shall be
refunded to the Tenant or, at the Landlord's option, shall be applied as set
forth above.
<PAGE>
5. It is expressly agreed that the occurrence of any one or more of the
following shall constitute an "Event of Default" hereunder: (a) any failure to
pay any amount or installment of interest or of principal and interest on any
day whereon the same is payable as above expressed and such failure is not cured
within five (5) business days after notice from landlord; or (b) the occurrence
of a Default (as defined in Section 16 of the Lease). As used herein, the
"Lease" shall mean that certain Lease dated as of the date hereof by and between
Landlord and Tenant with respect to a portion of the building known and numbered
as 900 Chelmsford Street, Lowell, Massachusetts. If any such Event of Default
hereunder shall occur the Landlord may, at its option, declare to be immediately
due and payable the then outstanding principal balance under this Note, with all
accrued and unpaid interest thereon, and all other amounts payable to the
Landlord hereunder, whereupon all such amounts shall become and be due and
payable immediately. The failure of the Landlord to exercise said option to
accelerate shall not constitute a waiver of the right to exercise the same at
any other time.
6. In the event that any payment due hereunder shall not be paid within
eight (8) business days after its due date and if, on at least one (1) occasion
within twelve (12) months prior to such due date, Tenant shall have failed to
pay any payment due hereunder within eight (8) business days after its due date,
then the Tenant shall pay a late fee equal to five percent (5%) of such payment.
7. The Tenant will pay on demand all costs and expenses, including
reasonable attorneys' fees, incurred or paid by the Landlord in enforcing or
collecting any of the obligations of the Tenant hereunder. The Tenant agrees
that all such costs and expenses and all other expenditures by the Landlord on
account hereof, other than advances of principal, which are not reimbursed by
the Tenant immediately upon demand, all amounts due under this Note after
maturity, and any amounts due hereunder if an Event of Default shall occur
hereunder, shall bear interest at a per annum rate equal to the Stated Rate plus
three percent (3%), but in no event more than the maximum rate of interest then
permitted by law (the "Default Rate"), until such expenditures are repaid or
this Note and such amounts as are due are paid to the Landlord.
8. Notwithstanding anything else to the contrary contained in this Note,
subject to the terms and conditions contained in this Section 8. the Landlord
hereby subordinates all of its right, title and interest in and to all
obligations of the Tenant hereunder, together with any and all renewals and
modifications thereof (the "Subordinated Indebtedness"), whether in the ordinary
course of business or in any voluntary or involuntary dissolution, winding up,
liquidation or reorganization or other bankruptcy or insolvency proceeding, to
the right, title and interest of any holder (hereinafter a "Senior Creditor") of
bank indebtedness or asset financing indebtedness ("Senior Indebtedness") of
the Tenant. Accordingly, upon receipt of a notice from a Senior Creditor that
an event of default shall have occurred and is continuing under the documents
and instruments evidencing such Senior Indebtedness, the Landlord shall not have
the right to receive and the Tenant shall not be obligated to pay any amount to
the Landlord in respect of the Subordinated indebtedness until and unless the
event of default has been cured or waived in writing by the Senior Creditor or
shall otherwise no longer exist. If, notwithstanding the foregoing, any payment
or distribution of the assets of the Tenant of any kind or character, other than
distributions expressly permitted hereunder, shall be received, by set-off or
otherwise, by the Landlord in violation of the terms of this paragraph. the
Landlord shall promptly notify the Senior Creditor of any such payment or
distribution and shall deliver such payment or distribution, in the form
received, except for the addition of any required endorsement or assignment, to
the Senior Creditor for application in accordance herewith. Until so delivered,
any such payment or distribution shall be held by the Landlord in trust for the
Senior Creditor and shall not be commingled with other funds or property of the
Landlord. Upon the request of a Senior Creditor, the Landlord shall from time
to time make, execute and deliver any endorsements, assignments. proofs of
claim, pleadings, verifications, affidavits, consents, agreements or other
instruments or take any other action which the Senior Creditor may deem
reasonably necessary in order to effectuate the purposes of this paragraph.
<PAGE>
9. All notices required or permitted to be given hereunder shall be in
writing and shall be given in the manner and as required by the Lease.
10. All of the provisions of this Note shall be binding upon and inure to
the benefit of the Tenant and the Landlord and their respective successors and
assigns and the provisions of paragraph 8 hereof shall bind and inure to the
benefit of each Senior Creditor and their successors and assigns.
11. This Note shall be interpreted in accordance with and governed by the
laws of The Commonwealth of Massachusetts without regard to choice of law
principles. Any action or suit in connection with this Note may be brought in a
court of record in Boston, Massachusetts, the Tenant, and, by accepting this
Note, the Landlord hereby irrevocably submitting and consenting to the non-
exclusive jurisdiction of each thereof, and each party irrevocably waives, to
the fullest extent it may effectively do so under applicable law, any objection
it may have or hereafter have to the laying of the venue of any such suit,
action or proceeding brought in any such court and claim that the same has been
brought in an inconvenient forum. Service of process may be made on the other
party by mailing a copy of the summons to such party, by registered mail, at its
address to be used for the giving of notices under this Note.
12. IN THE EVENT OF ANY LITIGATION IN CONNECTION WITH THIS NOTE, THE
TENANT AND THE LANDLORD KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ALL
RIGHTS TO A TRIAL BY JURY.
13. The Tenant and every endorser and guarantor hereof hereby consents to
any extension of time of payment hereof, release of all or any part of the
security for the payment hereof, or release of any party liable for this
obligation, and waives presentment for payment. demand. protest and notice of
dishonor. Any such extension or release may be made without notice to the
Tenant and without discharging its liability.
IN, WITNESS WHEREOF, the parties hereto have executed and delivered this
Note, under seal. on the day and year first above written.
Witness: FAX INTERNATIONAL, INC.
By:
- ------------------------------- -----------------------------
Name: Its:
-----------------------------
The Landlord hereby accepts the Note and acknowledges and agrees to the terms of
Paragraph 8 thereof.
CROSS POINT LIMITED PARTNERSHIP
Witness: By: ONE INDUSTRIAL AVENUE CORP.,
Its Operating General Partner
By:
- --------------------------------- ---------------------------
Name: Its:
---------------------------
<PAGE>
SUBORDINATION AGREEMENT
This Subordination Agreement (as from time to time amended and in effect,
this "Agreement") is made as of August 2, 1996, by and among Cross Point Limited
Partnership, a Massachusetts limited partnership with a place of business
located at 900 Chelmsford Street, Lowell, MA 01851 (the "Senior Creditor") and
Singtel (Netherlands Antilles) Pte N.V., a Netherlands Antilles corporation with
a place of business at Pickanari 15 Willamstad, Curacao, Netherlands Antilles
(the "Subordinated Creditor"), and Fax International, Inc., a Delaware
corporation with a place of business located at 67 South Bedford, Suite 100 E,
Burlington, Massachusetts 01803 (the "Tenant").
Reference is made to the following documents:
(i) The Credit Agreement, dated as of April 10, 1995 (the "Credit
Agreement"), between the Subordinated Creditor and the Tenant, the Term Loan
Agreement-Equipment, dated as of April 10, 1995 (the "Equipment Loan
Agreement"), between the Subordinated Creditor and the Tenant and all notes
evidencing loans under the Credit Agreement and the Equipment Loan Agreement
(the "Subordinated Notes");
(ii) The Security Agreement, dated as of April 10, 1995 (the "Subordinated
Security Agreement"), between the Subordinated Creditor and the Tenant;
(iii) Any and all financing statements on Form UCC-1 related to the
Subordinated Security Agreement naming the Subordinated Creditor as secured
party and the Tenant as debtor, as the same may from time to time be amended and
in effect (the "Subordinated Financing Statements");
(iv) The Term Note dated as of August 2, 1996, made by the Tenant payable
to the Senior Creditor in the principal amount of $1,500,000, (the "Senior
Note");
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency whereof is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Definitions.
-----------
For purposes of this Agreement, the following terms shall have the
respective meanings set forth below:
"Bankruptcy Code" means Title 11 of the United States Code as from time to
time amended and in effect.
"Senior Indebtedness" means: (i) all obligations of the Tenant to the
Senior Creditor under the Senior Note and in respect to the Senior Lien,
including, without limitation, all commitment fees and other fees, costs and
expenses owing thereunder, the principal of the Senior Note and all interest
owing on the loans evidenced thereby, whether such interest accrued or accrues
before or after the institution by or against the Tenant of proceedings under
the Bankruptcy Code or any other law of any jurisdiction relating to the
liquidation or reorganization of debtors or to the modification or alteration of
the rights of creditors or before or after any declaration or determination of
the insolvency or bankruptcy of the Tenant and whether or not such Interest is
allowable in any such proceeding, and (ii) all renewals, extensions, and
refundings of Senior Indebtedness which do not increase the amount of Senior
Indebtedness, made with the prior written consent of the Subordinated Creditor.
<PAGE>
"Senior Lien" means any mortgage, pledge, hypothecation, claim,
encumbrance, lien (statutory or other), preference, priority or other security
agreement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement and any assignment or
deposit arrangement in the nature of a security device) in favor of the Senior
Creditor with respect to the Senior Note, whether now existing or hereafter
obtained.
"Senior Loan Documents" means the Senior Note and any and all documents at
any time evidencing the Senior Lien.
"Subordinated Indebtedness" means (i) all obligations of the Tenant to the
Subordinated Creditor under the Subordinated Loan Documents, including, without
limitation, all commitment fees and other fees, costs and expenses owing under
the Subordinated Loan Documents, the principal of the Subordinated Note and all
interest owing on the loans evidenced thereby, whether such interest accrued or
accrues before or after the institution by or against the Tenant of proceedings
under the Bankruptcy Code or any other law of any jurisdiction relating to the
liquidation or reorganization of debtors or to the modification or alteration of
the rights of creditors or before or after any declaration or determination of
the insolvency or bankruptcy of the Tenant, and (ii) all renewals, extensions,
and refundings by the Subordinated Creditor or any of its affiliates, of
Subordinated Indebtedness as defined in clause (i) above.
"Subordinated Lien" means any mortgage, pledge, hypothecation, claim,
encumbrance, lien (statutory or other), preference, priority or other security
agreement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement and any assignment or
deposit arrangement in the nature of a security device) in favor of the Senior
Creditor with respect to the Senior Note, whether now existing or hereafter
obtained.
"Subordinated Loan Documents" means the Credit Agreement, the Equipment
Loan Agreement, the Subordinated Notes, the Subordinated Security Agreement and
the Subordinated Financing Statements.
2. Subordination. The Subordinated Creditor hereby subordinates the
-------------
Subordinated Indebtedness all of its right, title and interest in, to and under
the Subordinated Indebtedness, the Subordinated Lien and the Subordinated Loan
Documents, in right of payment, to the right, title and interest of the Senior
Creditor in, to and under the Senior Indebtedness, the Senior Lien and the
Senior Loan Documents, to the extent and in the manner provided herein.
3. Terms of Subordination.
----------------------
3.1.1 Payments. In the event of any payment default in respect of Senior
--------
Indebtedness of which the Senior Creditor shall have given the Subordinated
Creditor and Tenant written notice, the Tenant will not make, and the
Subordinated Creditor will not accept or receive from the Tenant, any payment of
Subordinated Indebtedness, whether in cash, securities or other property or by
way of set-off or otherwise, provided the Subordinated Creditor may accelerate
--------
Subordinated Indebtedness, foreclose on any security interest with respect to
Subordinated Indebtedness and exercise any other rights it has under the
Subordinated Loan Documents subject to complying with Section 3.2 hereof, and
provided further, the Subordinated Creditor may exercise any rights it has to
- ----------------
convert Subordinated Indebtedness into Preferred Stock or Common Stock of the
Tenant. Nothing herein shall prevent the Tenant from making payments on
Subordinated Indebtedness, or the Subordinated Creditor from accepting and
retaining such payments, if at the time of such payments there is no payment
default of Senior Indebtedness.
3.1.2. Reorganization. In the event of any distribution of the assets of
--------------
the Tenant upon any voluntary or involuntary dissolution, winding-up, total or
partial liquidation or reorganization, or
<PAGE>
bankruptcy, insolvency, receivership or other statutory or common law
proceedings or arrangements, including any proceeding under the Bankruptcy Code,
involving such Tenant or the readjustment of the Tenant's liabilities or any
assignment for the benefit of creditors or any marshalling of the assets or
liabilities of the Tenant (collectively called a "Reorganization") then all
Senior Indebtedness shall first be paid in full in cash before any payment is
made on account of the Subordinated Indebtedness, and in any such proceeding any
payment, dividend or distribution of any kind or character, whether in cash or
property or securities, which may be payable or deliverable in respect of the
Subordinated Indebtedness shall be paid or delivered directly to the Senior
Creditor for application to the payment of the Senior Indebtedness, unless and
until all such Senior Indebtedness shall have been paid and satisfied in full in
cash, provided the Subordinated Creditor may exercise any rights it has to
convert Subordinated Indebtedness into Preferred Stock or Common Stock of the
Tenant and the Subordinated Creditor hereby irrevocably authorizes the Senior
Creditor at its election and in its sole discretion, in furtherance of the
foregoing to collect any assets of the Tenant distributed, divided or applied by
way of dividend or payment or any such securities issued, on account of
Subordinated Indebtedness, and apply the same, or the proceeds of any
realization upon the same, to the Senior Indebtedness.
3.1.3. Agreement to Hold in Trust. If, notwithstanding the foregoing, any
--------------------------
payment or distribution of the assets of the Tenant of any kind or character,
other than distributions expressly permitted hereunder, shall be received, by
set-off or otherwise, by the Subordinated Creditor in violation of the terms of
this Agreement, the Subordinated Creditor shall promptly notify the Senior
Creditor of any such payment or distribution and shall deliver such payment or
distribution, in the form received, except for the addition of any required
endorsement or assignment, to the Senior Creditor for application in accordance
herewith. Until so delivered, any such payment or distribution shall be held by
the Subordinated Creditor in trust for the Senior Creditor and shall not be
commingled with other funds or property of the Subordinated Creditor.
3.2 Liens. Notwithstanding anything to the contrary contained in the
-----
Subordinated Loan Documents and notwithstanding the fact that the Senior
Indebtedness is currently unsecured, the Subordinated Creditor agrees that any
and all proceeds realized from any foreclosure of the Subordinated Lien or the
exercise of any other rights or remedies under the Subordinated Loan Documents,
shall be paid over to the Senior Creditor until such time as the Senior
Indebtedness has been paid and satisfied in full.
3.3 Amendment of Subordinated Loan Documents; Subordination to Other
----------------------------------------------------------------
Obligations. The Subordinated Creditor may, without the consent of the Senior
- -----------
Creditor, (i) amend the Subordinated Loan Documents; (ii) waive any provision of
the Subordinated Loan Documents; (iii) release any Subordinated Lien and (iv)
subordinate Subordinated Indebtedness to any other obligations of the Tenant.
3.4. Notice of Subordination.
-----------------------
3.4.1. Legend. The Tenant and the Subordinated Creditor hereby agree to
------
cause each Subordinated Note, to have affixed upon it in a conspicuous place the
following legend:
"This instrument is subject to a Subordination Agreement dated as of
August 2, 1996, by and in favor of Cross Point Limited Partnership, which,
among other things, subordinates the rights of Singtel (Netherlands
Antilles) Pte N.V. to the rights of Cross Point Limited Partnership. Each
holder hereof agrees that its rights are subject to the terms of the
Subordination Agreement and, at the request of Cross Point Limited
Partnership, to enter into a subordination agreement on the same terms and
conditions."
<PAGE>
4. Representations, Warranties, Covenants and Agreements.
-----------------------------------------------------
4.1. Subordinated Creditor. The Subordinated Creditor represents and
---------------------
warrants to and covenants and agrees with the Senior Creditor as follows:
4.1.1. The Subordinated Loan Documents are all of the documents and other
instruments evidencing the Subordinated Indebtedness and the Subordinated Lien.
A true, correct and complete copy of the Subordinated Loan Documents is attached
as Exhibit A to this Agreement.
4.1.2. No part of the Subordinated Indebtedness has been previously
assigned, subordinated or subjected to any security interest in favor of a party
other than the Senior Creditor.
4.1.3. No payment default by the Tenant presently exists under the
Subordinated Loan Documents, and the aggregate outstanding principal balance of
the Subordinated Note is $28,573,208 as of this date.
----------
4.1.4. So long as the Senior Indebtedness shall be outstanding, the
Subordinated Creditor shall not transfer, assign or pledge any of its interest
in the Subordinated Loan Documents to any other person without first requiring
such transferee to execute a subordination agreement with the parties hereto in
the same form as this Agreement.
4.2. Senior Creditor. The Senior Creditor represents and warrants to and
---------------
covenants and agrees with
the Subordinated Creditor as follows:
4.2. 1. The Senior Loan Documents are all of the documents and other
instruments evidencing the Senior Indebtedness and Senior Lien. A true, correct
and complete copy of the Senior Loan Documents is attached as Exhibit B to this
Agreement.
5. Miscellaneous Provisions.
------------------------
5.1. Continuing Agreement. This Agreement shall be a continuing agreement
--------------------
and shall be irrevocable and shall remain in full force and effect until the
payment in full of the Senior Indebtedness in accordance with the terms thereof,
and no action which the Senior Creditor or the Tenant may take or refrain from
taking with respect to the Senior Indebtedness, including any amendments
thereto, shall affect the provisions of this Agreement or the obligations of the
Tenant or the Subordinated Creditor hereunder, provided the Senior Creditor may
--------
not increase the principal amount of Senior Indebtedness; and provided further
----------------
that the Senior Creditor may not renew, extend or refund Senior Indebtedness
without the prior written consent of the Subordinated Creditor. No right of the
Senior Creditor or any present or future holder of any Senior Indebtedness to
enforce the provisions of this Agreement shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Tenant or
by any act or failure to act, in good faith, by the Senior Creditor, or by any
noncompliance by the Tenant with the terms, provisions and covenants of this
Agreement regardless of any knowledge thereof which the Senior Creditor may have
or otherwise be charged with.
5.2. Specific Performance. The Senior Creditor is hereby authorized to
--------------------
demand specific performance of this Agreement at any time when the Tenant or the
Subordinated Creditor shall have failed to comply with any provision hereof
applicable to it, and each hereby irrevocably waives any defense based on the
adequacy of a remedy at law which might be asserted as a bar to the remedy of
specific performance hereof in any action brought therefor.
<PAGE>
5.3. Subrogation. Subject to the payment in full of the Senior
-----------
Indebtedness, the Subordinated Creditor shall be subrogated to the rights of the
Senior Creditor to receive payments or distributions of assets of the Tenant
made on the Senior Indebtedness until the Subordinated Indebtedness shall be
paid in full; and, for the purposes of such subrogation, no payments or
distributions to the Senior Creditor of any cash, property or securities to
which the Subordinated Creditor would be entitled except for these provisions
shall, as between the Tenant and its creditors other than the Senior Creditors
and the Subordinated Creditor, be deemed to be a payment by the Tenant to or on
account of the Senior Indebtedness, it being understood that these provisions
are and are intended solely for the purpose of defining the relative rights of
the Senior Creditor, on the one hand, and the Subordinated Creditor, on the
other hand.
5.4. Effect of Provisions. This Agreement is solely for the benefit of the
--------------------
Senior Creditor and the Subordinated Creditor, and nothing herein contained
shall affect or enlarge the rights, duties or obligations of the Tenant under
the Subordinated Loan Documents or the Senior Loan Documents. The Tenant shall
not be entitled to assert the provisions of this Agreement as a defense to the
acceleration or demand of indebtedness evidenced by or incurred pursuant to the
Subordinated Loan Documents or the Senior Loan Documents, or to the commencement
of foreclosure proceedings or exercise of any other rights or remedies under the
Subordinated Loan Documents or the Senior Loan Documents.
5.5. Waivers. With notice to the Subordinated Creditor and without in any
-------
way impairing or affecting this Agreement, the Senior Creditor may from time to
time in the Senior Creditor's absolute discretion, for value or without value,
or grant any indulgence with respect to, any of the Senior Indebtedness, waive
compliance with and any Default or Event of Default under, the Senior Loan
Documents, modify in any manner or release in whole or in part any security
therefor or any obligations of endorsers, sureties or guarantors thereof, or
take any other action with respect to the Senior Creditor's rights as against
the Tenant or any of its claims against any of the foregoing or in connection
therewith, including any release, compromise or settlement with respect to any
of the foregoing, provided the Senior Credit may not increase the principal
--------
amount of Senior Indebtedness; and provided further that the Senior Creditor may
----------------
not renew, extend or refund Senior Indebtedness without the prior written
consent of the Subordinated Creditor.
5.6. No Obligations on Subordinated Indebtedness. The rights granted to
-------------------------------------------
the Senior Creditor hereunder are solely for its protection and nothing herein
contained shall impose on the Senior Creditor any duties with respect to the
Subordinated Indebtedness or any property of the Tenant in the custody of the
Senior Creditor, except such duties as are imposed by law and cannot be waived
by agreement.
5.7. Further Assurances. The Subordinated Creditor will from time to time,
------------------
upon request of the Senior Creditor, make, execute and deliver any endorsements,
assignments, proofs of claim, pleadings, verifications, affidavits, consents,
agreements or other instruments or take any other action which the Senior
Creditor may reasonably deem necessary or desirable in order to effectuate the
purposes of this Agreement.
5.8. Successors. The provisions of this Agreement shall inure to the
----------
benefit of the Senior Creditor and its respective successors and assigns and
shall be binding upon the Tenant, the Subordinated Creditor and their respective
successors and assigns.
5.9. Notices. All notices and other communications required or permitted
-------
to be given hereunder shall be in writing and when mailed, postage prepaid, by
registered or certified mail (return receipt requested), shall be effective 7
days after such mailing, or when delivered to Federal Express or other overnight
courier, delivery charges prepaid, shall be effective 4 days after such
delivery, or when
<PAGE>
transmitted by facsimile machine to a facsimile machine owned or used by the
addressee and the telephonic link has been verified by such machine or machine
operator, shall be effective 1 day after such transmission addressed in the case
of the Tenant, the Senior Creditor and the Subordinated Creditor, in each case
to the appropriate party at the address set forth in the preamble hereof or to
such other address as such party may from time to time specify by like notice.
The Senior Creditor and the Subordinated Creditor acknowledge that on and after
the Commencement Date (as defined in that certain Lease, as defined in the
Senior Note), the address of the Tenant shall be 900 Chelmsford, Lowell, MA
01851.
5.10. Amendments. This Agreement may not be waived, changed or discharged
----------
orally, but only by an agreement in writing and signed by the Senior Creditor
and the Subordinated Creditor, and any oral waiver, change or discharge of any
provision of this Agreement shall be without authority and of no force and
effect.
5.11. Governing Law. This Agreement shall be interpreted in accordance
-------------
with and governed by the laws of The Commonwealth of Massachusetts without
regard to choice of law principles.
5.12. Litigation. Any action or suit in connection with this Agreement
----------
may be brought in a court of record in Boston, Massachusetts, the parties hereby
irrevocably submitting and consenting to the non-exclusive jurisdiction of each
thereof, and each party irrevocably waives, to the fullest extent it may
effectively do so under applicable law, any objection it may have or hereafter
have to the laying of the venue of any such suit, action or proceeding brought
in any such court and claim that the same has been brought in an inconvenient
forum. Service of process may be made on the other party by mailing a copy of
the summons to such party, by registered mail, at its address to be used for the
giving of notices under this Agreement. IN THE EVENT OF ANY LITIGATION IN
CONNECTION WITH THIS AGREEMENT, EACH PARTY HERETO KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ALL RIGHTS TO A TRIAL BY JURY.
5.13. Entire Agreement; Severability. This Agreement, any Schedules or
------------------------------
Exhibits hereto and any riders or other attachments constitute the entire
agreement between the parties with respect to the subject matter hereof. No
course of dealing, course of performance or trade usage, and no parole evidence
of any nature, shall be used to supplement or modify the terms of the foregoing
documents. If at any time one or more provisions of this Agreement, any
amendment or supplement thereto or any related writing is or becomes invalid,
illegal or unenforceable in whole or in part in any jurisdiction, the validity,
legality and enforceability of such provision in any other jurisdiction or of
the remaining provisions shall not in any way be affected or impaired thereby.
5.14. Counterparts. This Agreement may be executed in as many
------------
counterparts as may be deemed necessary and convenient, and by the different
parties hereto on separate counterparts, each of which when so executed shall be
deemed an original, but all such counterparts shall constitute one and the same
instrument.
5.15. Headings. The headings to Sections appearing in this Agreement have
--------
been inserted for the purpose of convenience and ready reference. They do not
purport to, and shall not be deemed to, define, limit or extend the scope or
intent of the Sections to which they appertain.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as an instrument under seal, by their respective
proper and duly authorized officers as of the date and year first above written.
Witness: CROSS POINT LIMITED PARTNERSHIP
-----------------------------
<PAGE>
By: One Industrial Avenue Corp.,
its Operating General Partner
By:
-------------------------------
Its:
-------------------------------
Witness: SINGTEL (NETHERLAND ANTILLES) PTE N.V.
----------------------
By:
-------------------------------
Its:
-------------------------------
Witness: FAX INTERNATIONAL, INC.
----------------------
By:
-------------------------------
Its:
-------------------------------
<PAGE>
AGREEMENT
---------
THIS AGREEMENT, dated as of August 2, 1996, by and between Cross Point
Limited Partnership, a Massachusetts limited partnership ("Cross Point") and FAX
International, Inc., a Delaware corporation ("FAX"),
WITNESSETH:
WHEREAS, the parties are entering into a Lease dated as of August 2, 1996,
(the "Lease") providing for the lease by Cross Point. as lessor, to FAX, as
lessee, of a portion of the premises owned by Cross Point located at 900
Chelmsford Street, Lowell, Massachusetts;
WHEREAS, in connection with the Lease, FAX has executed and delivered a
Promissory Note (the "Note") also dated as of August 2, 1996, in the original
principal amount of $1,500,000;
WHEREAS, in consideration of Cross Point's entering into the Lease, and to
induce Cross Point to do so, FAX has agreed to provide Cross Point with certain
rights to purchase shares of Common Stock, $.01 par value per share, of FAX
("Common Stock"); and
WHEREAS, the parties wish to set forth the terms and conditions under which
Cross Point may purchase certain shares of such Common Stock;
NOW, THEREFORE, in consideration of the foregoing, the parties hereby agree
as follows:
1. Purchase of Initial Shares. Simultaneously herewith, FAX is issuing to
--------------------------
Cross Point, pursuant to FAX's 1994 Investor Incentive Stock Option Plan, an
Option, in the form of a Warrant (the "Initial Option"), exercisable only on the
date thereof, to purchase 30,000 shares of Common Stock (the "Initial Shares")
at an exercise price of $.01 per share, and Cross Point is exercising such
Option to acquire the Initial Shares as of such date.
2. Option to Purchase Extension Shares. In the event that FAX elects to
-----------------------------------
extend the maturity date of the Note as provided therein, FAX shall, as
additional consideration to Cross Point for such extension, issue and sell to
Cross Point and Cross Point shall purchase and pay for an additional 10,000
shares of Common Stock at a purchase price of $.01 per share (the "Extension
Shares"). The Extension Shares
<PAGE>
shall be issued pursuant to an option (the "Extension Option"') granted to Cross
Point under FAX's 1994 Investor Incentive Stock Option Plan. The Extension
Option shall be granted and issued only upon FAX's election to extend the due
date of the Note as provided therein and shall be exercisable only upon the date
on which it is granted to Cross Point.
3. Cross Point Investment Representations. Cross Point represents and
--------------------------------------
warrants that (i) it is an "accredited investor" as such term is defined in
Regulation D promulgated under the Securities Act of 1933, as amended, (ii) it
has sufficient knowledge and experience in investing in companies similar to FAX
in terms of FAX's stage of development to be able to evaluate the risks and
merits of its investment in FAX and is able financially to bear the risks
thereof, (iii) it has had an opportunity to discuss with management FAX's
business, management and financial affairs, (iv) the Initial Option, the Initial
Shares, the Extension Option and the Extension Shares are being acquired for
investment purposes only and not with a view to or for sale or other
distribution, and (v) it understands that the Initial Option, the Initial
Shares, the Extension Option and the Extension Shares may not be sold or
otherwise transferred or disposed of by Cross Point except in connection with a
registration of such securities under applicable Federal and State securities
laws or an opinion from FAX's counsel or an opinion from other counsel
satisfactory to FAX both as to opinion and counsel that such registration is not
required, and that all such securities shall bear legends to such effect.
4. Option to Subscribe in IPO. FAX hereby grants to Cross Point the right
--------------------------
and option to subscribe for the purchase of up to 250,000 shares of Common
Stock, subject to adjustment as provided herein, offered by FAX or its
stockholders in any initial public offering of shares of FAX Common Stock
pursuant to a registration statement filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, (an "IPO") completed by
FAX at any time hereafter (the "IPO Option") at a price per share equal to the
price per share at which shares of Common Stock are offered for sale to the
public in the IPO. FAX shall be under no obligation to Cross Point to commence
or, if commenced, pursue to completion, any IPO or other public offering of its
securities (including, without
<PAGE>
limitation, Common Stock) or otherwise to register or qualify for re-sale any of
its securities (including, without limitation, Common Stock) with any Federal or
State securities authorities. FAX's agreement in this Section 4, and Cross
Point's right to purchase shares of Common Stock in the IPO, shall be subject to
the reasonable approval of the underwriter(s) of any such public offering. Cross
Point agrees that if such underwriter(s) approve(s) Cross Point's purchase of
such shares of Common Stock in the IPO, Cross Point shall effect such purchase
on the terms and conditions reasonably required by such underwriter(s) and at
the time(s) required by such underwriter(s), and shall execute and deliver all
agreements, instruments, certificates and other papers reasonably required by
such underwriter(s) in connection with such purchase. The IPO Option may be
exercised by Cross Point by delivery to FAX of a written notice indicating Cross
Point's election to exercise the IPO Option and specifying the number of shares
Cross Point elects to purchase in the IPO. FAX agrees to keep Cross Point
informed from time to time as to the status and anticipated timing of any IPO
and any terms and conditions the underwriter(s) propose to impose on the
exercise of the IPO Option so that Cross Point shall have reasonable notice of
such IPO and a reasonable period of time to decide whether it wishes to exercise
the IPO Option.
5. Recapitalizations, Reorganizations and the Like. In the event that the
-----------------------------------------------
outstanding shares of Common Stock of FAX are changed into or exchanged for a
different number or kind of shares or other securities of FAX or of another
corporation by reason of any reorganization, merger, consolidation,
recapitalization, reclassification, stock split, combination of shares, or stock
dividends, appropriate adjustment shall be made in the number and kind of shares
which may be purchased pursuant to the Extension Option and the IPO Option to
the end that the proportionate interest of Cross Point shall be maintained as
before the occurrence of such event. In such event, an appropriate adjustment
shall also be made in the purchase price per share of the Extension Option, but
such adjustment in the number and/or kind of shares which may be purchased
pursuant to the IPO Option shall be made without change in the price applicable
to such Option, i.e., the price at which shares of Common Stock or other FAX
securities are offered to the public in the IPO.
<PAGE>
6. Miscellaneous.
-------------
(a) Notices. Any notices required or permitted to be given hereunder shall
-------
be sufficient if in writing, and if delivered by hand, by courier, by facsimile,
or sent by certified mail, return receipt requested, prepaid, to the addresses
set forth above or such other address as either party may from time to time
designate in writing to the other and shall be deemed given as of the date of
the delivery if delivered by hand, by facsimile or by courier or, if mailed,
three (3) days after the date of mailing.
If to Cross Point: Cross Point Limited Partnership
900 Chelmsford Street
Lowell, Massachusetts 01851
Attention: Luis A. Alvarado and Christopher J. Kelly
Telephone: (508) 453-6666
Telecopler:(508) 454-6394
- With a copy to -
Peabody & Brown
101 Federal Street
Boston, MA 02110-1832
Attention: Craig D. Mills and Matthew R. Lynch
Telephone: (617) 345-1000
Telecopier: (617) 345-1300
If to FAX: FAX International, Inc. a
67 South Bedford Street, Suite 100E
Burlington, Massachusetts 01803-5152
Attention: Ellis Telford, Esq.
Telephone: (617) 564-6500
Telecopier: (617) 564-6599
(b) Waiver. The waiver by either party of a breach of any provision of
------
this Agreement is not effective unless made in a writing specifically referring
to this Agreement signed by the party to be held bound and shall not operate as
or be construed as a waiver of any prior or subsequent breach thereof unless
specifically provided in such writing.
(c) Binding Effect: Amendment. This Agreement shall be binding upon and
-------------------------
inure to the benefit of the parties hereto and their respective successors,
assigns and legal representatives. No amendment or alteration of the terms of
this Agreement shall be valid or binding unless made in a writing signed by the
parties to this Agreement specifically referring to this Agreement.
<PAGE>
(d) Governing Law. This Agreement and the rights and obligations of the
-------------
parties hereunder shall be governed by and construed according to the domestic
substantive laws of The Commonwealth of Massachusetts without giving effect to
choice or conflict of law provisions that would cause the application of the
domestic substantive laws of any other jurisdiction.
(e) Counterparts. This Agreement may be executed in one or more
------------
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all of
which together shall constitute one and the same instrument, and in pleading or
proving any provision of this Agreement it shall not be necessary to produce
more than one of such counterparts.
(f) Integration. This Agreement constitutes the entire agreement between
-----------
the parties with respect to the subject matter hereof and supersedes any prior
or contemporaneous oral or written understanding, agreements, negotiations, or
discussions, whether written or oral, concerning the subject matter hereof. No
course of dealing, course of performance or parol evidence, of any nature, shall
be used to supplement or modify the terms of this Agreement.
(g) Severability. If any term or provision of this Agreement shall to any
------------
extent be illegal, invalid or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby and each term and provision of this Agreement shall
be valid and enforceable to the fullest extent permissible by law.
IN WITNESS WHEREOF, the parties have executed this Agreement as an
instrument under seal as of the day and year first above written.
CROSS POINT LIMITED PARTNERSHIP
By: ONE INDUSTRIAL AVENUE CORP.,
its Operating General Partner
<PAGE>
By:
-------------------------------
Name:
Title:
FAX INTERNATIONAL, INC.
By:
-------------------------------
Name:
Title:
<PAGE>
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND NEITHER THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT AND PURSUANT TO AN EFFECTIVE REGISTRATION OR QUALIFICATION UNDER APPLICABLE
STATE SECURITIES LAWS, OR PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION AND/OR
QUALIFICATION, AND, IF AN EXEMPTION SHALL BE APPLICABLE, THE HOLDER SHALL HAVE
DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION
AND/OR QUALIFICATION IS NOT REQUIRED.
Void after 5:00 p.m. Eastern Standard Time on August 1, 2001.
WARRANT TO PURCHASE COMMON STOCK
OF
FAX INTERNATIONAL, INC.
FOR VALUE RECEIVED, FAX INTERNATIONAL, INC. (the "Company"), a Delaware
-------
corporation, hereby grants to Cross Point Limited Partnership, or its permitted
assigns, the right to purchase from the Company, at any time or from time to
time commencing August 2, 1996, and prior to 5:00 P.M., Eastern Standard Time,
on August 1, 2001, up to a total of thirty thousand (30,000) fully paid and
nonassessable shares of the Common Stock, par value $.01 per share, of the
Company for an aggregate purchase price of Three Hundred Dollars ($300)
(computed on the basis of $0.01 per share).
Hereinafter,
(i) said Common Stock, together with any other equity securities which
may be issued by the Company with respect thereto or in substitution
therefor, is referred to as the "Common Stock",
------ -----
(ii) the shares of the Common Stock purchasable hereunder are referred to
as the "Warrant Shares",
------- ------
(iii) the aggregate purchase price payable hereunder for the Warrant
Shares is referred to as the "Aggregate Warrant Price",
--------- ------- -----
(iv) the price payable hereunder for each of the Warrant Shares is
referred to as the "Per Share Warrant Price",
--- ----- ------- -----
(v) this Warrant, and all warrants hereafter issued in exchange or
substitution for this Warrant are referred to as the "Warrant" and
-------
(vi) the holder of this Warrant is referred to as the "Holder".
------
The Per-Share Warrant Price is subject to adjustment as hereinafter
provided; in the event of any such adjustment, the number of Warrant Shares
shall be adjusted by dividing the Aggregate Warrant Price by the Per Share
Warrant Price in effect immediately after such adjustment.
<PAGE>
1. Exercise of Warrant. This Warrant may be exercised, in whole at any
-------------------
time or in part from time to time, commencing August 2, 1996, and prior to 5:00
P.M., Eastern Standard Time then current, on August 1, 2001, by the Holder of
this Warrant by the surrender of this Warrant (with the subscription form at the
end hereof duly executed) at the address set forth in Subsection 9(a) hereof,
together with proper payment of the Aggregate Warrant Price, or the
proportionate part thereof if this Warrant is exercised in part. Payment for
Warrant Shares shall be made by certified or official bank check payable to the
order of the Company, or by wire transfer. If this Warrant is exercised in
part, the Holder is entitled to receive a new Warrant covering the number of
Warrant Shares in respect of which this Warrant has not been exercised and
setting forth the proportionate part of the Aggregate Warrant Price applicable
to such Warrant Shares. Upon such surrender of this Warrant, the Company will
issue a certificate or certificates in the name of the Holder for the number of
shares of the Common Stock to which the Holder shall be entitled.
No Warrant granted herein shall be exercisable after 5:00 p.m. Eastern
Standard Time on the tenth anniversary of the date of issuance.
2. Reservation of Warrant Shares. The Company agrees that, prior to the
-----------------------------
expiration of this Warrant, the Company will at all times have authorized and in
reserve, and will keep available, solely for issuance and delivery upon the
exercise of this Warrant, the shares of the Common Stock as from time to time
shall be receivable upon the exercise of this Warrant.
3. Anti-Dilution Provisions.
------------------------
(a) Dividends and Other Non-Stock Distributions. If, at any time or from
-------------------------------------------
time to time after the date of this Warrant, the Company shall distribute to the
holders of the Common Stock (i) securities, other than shares of the Common
Stock, or (ii) property, other than cash, without payment therefor, with respect
to the Common Stock, then, and in each such case, the Holder, upon the exercise
of this Warrant, shall be entitled to receive the securities and properties
which the Holder would hold on the date of such exercise if, on the date of this
Warrant, the Holder had been the holder of record of the number of shares of the
Common Stock subscribed for upon such exercise and, during the period from the
date of this Warrant to and including the date of such exercise, had retained
such shares and the securities and properties receivable by the Holder during
such period. Notice of each such distribution shall be forthwith mailed to the
Holder.
(b) Stock Dividends; Stock Splits; Etc. If the Company shall hereafter
----------------------------------
(1) pay a dividend or make a distribution on its capital stock in shares of
Common Stock, (ii) subdivide its outstanding shares of Common Stock into a
greater number of shares, (iii) combine its outstanding shares of Common Stock
into a smaller number of shares or (iv) issue by reclassification of its Common
Stock any shares of capital stock of the Company, the Per Share Warrant Price in
effect immediately prior to such action shall be adjusted so that if the Holder
surrendered this Warrant for exercise immediately thereafter the Holder would be
entitled to receive the number of shares of Common Stock or other capital stock
of the Company which would have owned immediately following such action had such
Warrant been exercised immediately prior thereto. An adjustment made pursuant
to this subsection (b) shall become effective immediately after the record date
in the case of a dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
reclassification. If, as a result of an adjustment made pursuant to this
subsection (b), the Holder of this Warrant shall become entitled to receive
shares of two or more classes of capital stock or shares of Common Stock and
other capital stock of the Company, the Board of Directors (whose determination
shall be conclusive and shall be described in a written notice to the Holder of
this Warrant promptly after such adjustment) shall determine the allocation of
the adjusted Per Share Warrant Price between or among shares of such classes
<PAGE>
of capital stock or shares of Common Stock and other capital stock, based upon
the fair market value of such Common Stock and other capital stock.
(c) Consolidations; Mergers; Sales. In case of any consolidation or
------------------------------
merger to which the company is a party other than a merger or consolidation in
which the Company is the continuing corporation, or in case of any sale or
conveyance to another entity or entities of the property of the company as an
entirety or substantially as an entirety, or in the case of any statutory
exchange of securities with another corporation (including any exchange effected
in connection with a merger of a third corporation into the Company), the Holder
shall have the right thereafter to exercise this Warrant to acquire the kind and
amount of securities, cash or other property which it would have owned or have
been entitled to receive immediately after such consolidation, merger, statutory
exchange, sale or conveyance had such Warrant been exercised immediately prior
to the effective date of such consolidation, merger, statutory exchange, sale or
conveyance and in any such case, if necessary, appropriate adjustment shall be
made in the application of the provisions set forth in this Section 3 with
respect to the rights and interests thereafter of the Holder to the end that the
provisions set forth in this Section 3 shall thereafter correspondingly be made
applicable, as nearly as may reasonably be, in relation to any shares of stock
or other securities or property thereafter deliverable on the conversion of this
Warrant. The above provisions of this subsection (c) shall similarly apply to
successive consolidations, mergers, statutory exchanges, sales or conveyances.
Notice of any such consolidation, merger, statutory exchange, sale or conveyance
and of said provisions so proposed to be made, or of any liquidation or
dissolution of the Company, shall be mailed to the Holder not less than 30 days
prior to such event. A sale of all or substantially all of the assets of the
Company for a consideration consisting primarily of securities shall be deemed a
consolidation or merger for the foregoing purposes.
(d) Officer's Certificate. Whenever the Per Share Warrant Price is
---------------------
adjusted as provided in this Section 3 and upon any modification of the rights
of the Holder of this warrant in accordance with this Section 3, the Company
shall promptly prepare a certificate of an officer of the Company, setting forth
the Per Share Warrant Price and the number of Warrant Shares after such
adjustment or modification, a brief statement of the facts requiring such
adjustment or modification and the manner of computing the same and cause a copy
of such certificate to be mailed to the Holder.
(e) Notice. If the Board of Directors of the Company shall declare any
------
dividend or other distribution in cash with respect to the Common Stock, other
than out of earned surplus, the Company shall mail notice thereof to the Holder
not less than 15 days prior to the record date fixed for determining
shareholders entitled to participate in such dividend or other distribution.
4. Fully Paid Stock; Taxes. The Company agrees that the shares of the
-----------------------
Common Stock represented by each and every certificate for Warrant Shares
delivered on the exercise of this Warrant shall, at the time of such delivery,
be validly issued and outstanding, fully paid and non-assessable, and not
subject to preemptive rights, and the Company will take all such actions as may
be necessary to assure that the par value or stated value, if any, per share of
the Common Stock is at all times equal to or less than the then Per Share
Warrant Price. The Company further covenants and agrees that it will pay, when
due and payable, any and all Federal and state stamp, original issue or similar
taxes that may be payable, in respect of the issue of any Warrant Share or
certificate therefor.
5. Transfer.
--------
(a) Securities Laws. Neither this Warrant nor the Warrant Shares
---------------
issuable upon the exercise hereof have been registered under the Securities Act
of 1933, as amended (the "Securities Act"), or under any state securities laws
and unless so registered may not be transferred, sold, pledged, hypothecated or
<PAGE>
otherwise disposed of unless an exemption from such registration is available.
In the event Holder desires to transfer this Warrant or any of the Warrant
Shares issued, the Holder must give the Company prior written notice of such
proposed transfer including the name and address of the proposed transferee.
Such transfer may be made only either (i) upon issuance by the Securities and
Exchange Commission (the "Commission") of a ruling, interpretation, opinion or
"no action letter" based upon facts presented to said commission, or (ii) upon
receipt by the Company of an opinion of counsel to the Holder, reasonably
acceptable to the Company both as to such counsel and as to such opinion, in
either case to the effect that the proposed transfer will not violate the
provisions of the Securities Act, or the rules and regulations promulgated under
such act, or in the case of clause (ii) above, to the effect that the Warrant or
Warrant Shares to be sold or transferred has been registered under the
Securities Act and that there is in effect a current prospectus meeting the
requirements of Subsection 10(a) of the Securities Act that is being or will be
delivered to the purchaser or transferee at or prior to the time of delivery of
the certificates evidencing the Warrant or Warrant Stock to be sold or
transferred.
(b) Lock-Up Agreements with Underwriters. In the event of a public
------------------------------------
offering of the Company's securities, the Holder agrees to enter into an
agreement with the underwriter or underwriter's representative for such offering
restricting the sale, transfer or other disposition of this Warrant or the
Warrant Shares to the extent that such agreement is required to be executed by
the underwriter or the underwriter's representative.
(c) Conditions to Transfer. Prior to any such proposed transfer, and as
----------------------
a condition thereto, if such transfer is not made pursuant to an effective
registration statement under the Securities Act, the Holder will, if requested
by the Company, deliver to the Company (i) an agreement by the proposed
transferee to the impression of the restrictive investment legend set forth
herein on the certificate or certificates representing the securities acquired
by such transferee, (ii) an agreement by such transferee that the Company may
place a "stop transfer order" with its transfer agent or registrar, and (iii) an
agreement by the transferee to indemnify the Company to the same extent as set
forth in the next succeeding paragraph.
(d) Indemnity. The Holder acknowledges that the Holder understands the
---------
meaning and legal consequences of this Section 5, and the Holder hereby agrees
to indemnify and hold harmless the Company, its representatives and each officer
and director thereof from and against any and all loss, damage or liability
(including all attorneys' fees and costs incurred in enforcing this indemnity
provision) due to or arising out of (a) the inaccuracy of any representation or
the breach of any warranty of the Holder contained in, or any other breach of,
this Warrant, (b) any transfer of any of the Warrant or the Warrant Shares in
violation of the Securities Act or the rules and regulations promulgated under
such act, (c) any transfer of the Warrant or any of the Warrant Shares not in
accordance with this Warrant or (d) any untrue statement or omission to state
any material fact in connection with the investment representations or with
respect to the facts and representations supplied by the Holder to counsel upon
which its opinion as to a proposed transfer shall have been based.
(e) Transfer. Except as restricted hereby, this Warrant and the Warrant
--------
Shares issued may be transferred by the Holder in whole or in part at any time
or from time to time. Upon surrender of this Warrant to the Company or at the
office of its stock transfer agent, if any, with assignment documentation duly
executed and funds sufficient to pay any transfer tax, and upon compliance with
the foregoing provisions, the Company shall, without charge, execute and deliver
a new Warrant in the name of the assignee named in such instrument of
assignment, and this Warrant shall promptly be canceled. Any assignment,
transfer, pledge, hypothecation or other disposition of this Warrant attempted
contrary to the provisions of this Warrant, or any levy of execution, attachment
or other process attempted upon the Warrant, shall be null and void and without
effect.
<PAGE>
(f) Legend and Stop Transfer Orders. Unless the Warrant Shares have been
-------------------------------
registered under the Securities Act, upon exercise of any part of the Warrant
and the issuance of any of the shares of Warrant Shares, the Company shall
instruct its transfer agent to enter stop transfer orders with respect to such
shares, and all certificates representing Warrant Shares shall bear on the face
thereof substantially the following legend, insofar as is consistent with
Delaware law:
"The shares of common stock represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may not be sold,
offered for sale, assigned, transferred or otherwise disposed of unless
registered pursuant to the provisions of that Act or an opinion of counsel to
the Company is obtained stating that such disposition is in compliance with an
available exemption from such registration."
6. No Registration Rights. The Company shall have no obligation to
----------------------
register any Warrant or Warrant Shares, nor will the Holder have any right to
require that any Warrant Shares be registered, in order to permit any sale or
other disposition thereof in accordance with the registration requirements of
the Securities Act or any state securities laws or regulations.
7. Loss, Etc. of Warrant. Upon receipt of evidence satisfactory to the
---------------------
Company of the loss, theft, destruction or mutilation of this Warrant, and of
indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
shall execute and deliver to the Holder a new Warrant of like date, tenor and
denomination.
8. Warrant Holder Not A Shareholder. Except as otherwise specifically
--------------------------------
provided herein, this Warrant does not confer upon the Holder any right to vote
or to consent to or receive notice as a shareholder of the Company, as such, in
respect of any matters whatsoever, or any other rights or liabilities as a
shareholder, prior to the exercise hereof.
9. Communications. No notice or other communication under this Warrant
--------------
shall be effective unless the same is in writing and is delivered personally,
mailed by first-class mail, postage prepaid, or mailed by nationally recognized
overnight courier (e.g., Federal Express), addressed to:
----
(a) the Company at 67 South Bedford Street, Suite 100E, Burlington,
Massachusetts 01803, or such other address as the Company has designated in
writing to the Holder, or
(b) the Holder at 900 Chelmsford Street, Lowell, Massachusetts 01851,
or such other address as the Holder has designated in writing to the Company.
Any such notice shall be effective upon receipt.
10. Headings. The headings of this Warrant have been inserted as a matter
--------
of convenience and shall not affect the construction hereof.
11. Applicable Law. This Warrant shall be governed by and construed in
--------------
accordance with the internal substantive laws of the Commonwealth of
Massachusetts.
IN WITNESS WHEREOF, FAX INTERNATIONAL, INC., has caused this Warrant to be
signed by its President and its corporate seal to be hereunto affixed as of the
date first set forth above.
ATTEST: FAX INTERNATIONAL, INC.
<PAGE>
- ------------------------ By:
----------------------------------
Douglas J. Ranalli, President
[Corporate Seal]
<PAGE>
SUBSCRIPTION
------------
The undersigned, Crossing Point Limited Partnership pursuant to the
provisions of the foregoing Warrant, hereby agrees to subscribe for the purchase
of 30,000 shares of the Common Stock of FAX INTERNATIONAL, INC. covered by said
Warrant, and makes payment therefor in full at the price per share provided by
said Warrant.
By: Cross Point Limited Partnership
One Industrial ______ Corp.
Dated: August 2, 1996 Signature:_____________________________
Address: 900 Clelmsford Street
Lowell MA 01851
______________________________________
ASSIGNMENT
----------
FOR VALUE RECEIVED _______________________ hereby sells, assigns and
transfers unto _____________ the foregoing Warrant and all rights evidenced
thereby, and does irrevocably constitute and appoint __________________ attorney
to transfer said Warrant on the books of FAX INTERNATIONAL, INC.
Dated: ___________________ Signature:__________________________
Address:____________________________
PARTIAL ASSIGNMENT
------------------
FOR VALUE RECEIVED ______________________ hereby assigns and transfers unto
______________ the right to purchase _______ shares of the Common Stock of FAX
INTERNATIONAL, INC. by the foregoing Warrant, and a proportionate part of said
Warrant and the rights evidenced hereby, and does irrevocably constitute and
appoint ______________________ attorney to transfer that part of said Warrant on
the books of FAX INTERNATIONAL, INC.
Dated: ___________________ Signature:________________________________
Address:__________________________________
__________________________________
<PAGE>
PEABODY & BROWN
A LAW PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
101 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110-1832
(617) 345-1000
VIA CAB
August 2, 1996
Ellis Telford, Esq.
FAX International, Inc.
67 South Bedford Street
Suite 100E
Burlington, MA 01803-5152
RE: Proposed Lease of Space at 900 Chelmsford Street, Lowell,
Massachusetts by FAX International, Inc.
----------------------------------------------------------------
Dear Ellis:
Enclosed herewith are four execution counterparts of the above-referenced
proposed Lease, together with one execution counterpart of the Term Note
referred to in Attachment A of the proposed Lease. Please arrange to have the
proposed Lease (all four counterparts) and the Term Note executed by an
authorized officer of FAX International, Inc. and deliver the same to Luis
Alvarado of Cross Point Limited Partnership for execution on behalf of Cross
Point Limited Partnership. The execution by Cross Point Limited Partnership of
the proposed Lease and the Term Note is subject to the understanding between
Cross Point Limited Partnership and FAX International, Inc. that the proposed
Lease and the Term Note shall not be effective and binding upon the parties
unless and until Cross Point Limited Partnership receives the following
documents executed by all other parties in form satisfactory to Cross Point
Limited Partnership in its sole discretion:
1. The Agreement between Cross Point Limited Partnership and FAX
International, Inc. regarding the shares of Common Stock of FAX
International, Inc. to be acquired by Cross Point Limited Partnership.
2. Subordination Agreement by and among Cross Point Limited Partnership,
Singapore Telecommunications Limited and FAX International, Inc.
3. Guaranty of Lease from Ascom Nexion Inc.
4. Lease Termination Agreement by and between Ascom Nexion Inc. and Cross
Point Limited Partnership.
<PAGE>
Please get back to us with any questions and/or comments you (or Singapore
Telecommunications Limited) may have with regard to the draft of the
Subordination Agreement that was delivered to you under cover letter dated July
30, 1996.
Please call me if you have any questions with regard to this matter.
Sincerely,
Matthew R. Lynch
MRL/mbd
Enclosures
cc: Luis Alvarado (w/Encls. via overnight mail)
Craig D. Mills, P.C. (w/Encls.)
William C. Lance, P.C. (w/out Encls.)
Accepted and agreed to:
- ----------------------
Cross Point Limited Partnership Fax International, Inc.
By: One Industrial Avenue Corp.
By: ___________________________ By:______________________________
Luis Alvardo Ellis Telford
Corporate Counsel
<PAGE>
EXHIBIT 10.25
NEITHER THIS CONVERTIBLE TERM NOTE NOR THE SHARES OF COMMON STOCK OF UNIFI
COMMUNICATIONS, INC. (THE "COMPANY") INTO WHICH IT MAY BE CONVERTED HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY STATE SECURITIES
LAWS, AND CONSEQUENTLY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, TRANSFERRED
OR OTHERWISE DISPOSED OF ABSENT AN EFFECTIVE REGISTRATION STATEMENT UNDER
APPLICABLE FEDERAL AND STATE SECURITIES LAWS COVERING SUCH SECURITY(IES) OR AN
OPINION OF LEGAL COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED.
CONVERTIBLE TERM NOTE
Lowell, Massachusetts
$2,049,315.00 April 1, 1997
FOR VALUE RECEIVED, the undersigned UNIFI Communications, Inc., a Delaware
corporation having a principal place of business at 900 Chelmsford Street, Suite
312, Lowell, Massachusetts 01851 ("Maker") promises to pay to the order of
Control Data Systems, Inc., a Delaware corporation at its office at 4201
Lexington Avenue North, Arden Hills, Minnesota 55126-6198 ("Holder") or at such
other place as Holder may from time to time designate in writing, the principal
sum of Two Million Forty, Nine Thousand Three Hundred Fifteen Dollars
($2,049,315.00) together with interest on the unpaid principal balance hereof
from time to time at a rate per annum equal to fourteen percent (14%).
1. Maturity. If not sooner paid pursuant to paragraph 2 below or
--------
otherwise, or converted pursuant to paragraph 3 or 4 below, all outstanding
principal and accrued and unpaid interest thereon shall be due and payable to
Holder no later than 6:00 p.m. Eastern time on April 1, 2000 or, if such date is
not a business day, then by 6:00 p.m. Eastern time on the first business day
following such date (the "Maturity Date").
2. Payment of Interest. Interest on the outstanding principal balance of
-------------------
this Note shall accrue at a rate per annum of fourteen percent (14%) and shall
be payable semiannually on October 1 and April 1 of each calendar year,
commencing with October 1, 1997. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months, and, in the case of a partial
month, the actual number of days elapsed.
3. Overdue Payments. To the extent lawful, any payment of principal or
----------------
interest not made when due shall bear interest until paid at a rate per annum
equal to two percent (2%) in excess of the above-stated rate.
4. Redemption at Option of Holder. In the event that Maker shall effect
------------------------------
an initial public offering by it of shares of its conu-non stock, $0.01 par
value per share ("Common Stock"), then at any time on and after April 1, 1999
and prior to the Maturity Date, Holder may demand payment of all (but not less
than all) of the outstanding principal balance of this Note together with all
accrued and unpaid interest thereon. Any such demand by Holder shall be in
writing to Maker at its address listed above (Attention: Chief Financial
Officer). Upon receipt of Holder's written notice demanding payment, Maker
shall make such payment to Holder, against surrender by Holder to Maker of the
<PAGE>
original of this Note, no later than the fifth (5th) business day following
Maker's receipt of Holder's notice.
5. Conversion into Common Stock. In the event that Maker shall effect an
----------------------------
initial public offering by it of shares of Common Stock at any time prior to the
Maturity Date, Holder shall have the right to convert all (but not less than
all) of the outstanding principal balance of this Note together with all accrued
and unpaid interest thereon into shares ("Conversion Shares") of Common Stock at
a conversion price per share equal to the lesser of (i) the price per share to
------
the public of the shares of Common Stock sold by Maker in such initial public
offering, or (ii) Fifteen Dollars ($15.00) per share. Any such conversion shall
be effected by Holder providing notice thereof in writing to Maker at its
address first listed above (Attention: Chief Financial Officer), which notice
shall be irrevocable by Holder, and stating a date, not less than thirty (30)
day, s after the date such notice is received by Maker, for the closing of the
conversion. At such closing, to take place at the offices of Maker set forth
above, Maker shall deliver one or more certificates representing the Conversion
Shares to Holder against receipt of the original of this Note from Holder.
Notwithstanding the date of actual closing, the conversion by Holder shall be
deemed to have occurred on and as of the date Maker receives the required
written notice thereof from Holder. Upon conversion of this Note into Common
Stock by Holder as aforesaid, all obligations of Maker hereunder as to payment
of principal and interest shall cease and be of no further force or effect, and
Maker's sole obligation thereafter shall be to deliver the certificates)
representing the Conversion Shares to Holder against receipt of the original of
this Note.
6. This Note may be prepaid, in whole or from time to time in part,
without premium or penalty.
7. All payments hereunder shall be in lawful money of the United States
which shall be legal tender for public and private debts at the time of payment.
8. If any of the following events ("Events of Default") occurs:
(a) failure by Maker to pay the principal of this Note when same
becomes due and payable, or the failure by Maker to pay interest on this
Note when same becomes I due and payable and such failure continues for a
period of ten (10) days;
(b) default by Maker in performance of any of its other obligations
under this Note, which default shall not have been remedied within thirty
(30) days after Maker shall have received written notice of such default by
Holder;
(c) the liquidation or dissolution of Maker;
(d) the entry of a decree or order by a court having competent
jurisdiction adjudging Maker bankrupt or insolvent, or approving as
properly filed a petition seeking arrangement, adjustment or composition of
or in respect of Maker under federal bankruptcy laws or any other
applicable federal or state law, or appointing a receiver, liquidator,
assignee, trustee or other similar official of Maker or its assets, and the
continuance of any such decree or order unstayed and in effect for a period
of sixty (60) consecutive days; or
(e) the institution by Maker of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of
bankruptcy or insolvency proceedings
2
<PAGE>
against it, or the filing by it of a petition seeking relief under federal
bankruptcy laws or any other applicable federal or state law or the
appointment with its consent of a receiver, liquidator, assignee, trustee
or other similar official of Maker or its assets, or the making by it of an
assignment for the benefit of creditors generally (provided, that in the
case of any such filing or appointment that is involuntary, the applicable
proceeding or appointment is not dismissed or terminated, respectively,
within sixty (60) days), or the admission by it in writing of its inability
to pay its debts generally as they become due;
then (unless all Events of Default shall theretofore have been remedied) Holder
may, at its option, by written notice to Maker, declare due and payable the
entire amount of outstanding principal and accrued interest then remaining
unpaid thereon, whereupon the same shall forthwith become due and payable.
9. This Note is executed as a sealed instrument and shall be governed by
and construed and enforced in accordance with the internal domestic laws of the
Commonwealth of Massachusetts, without reference to its conflict of laws
provisions.
IN WITNESS WHEREOF, Maker has caused this Convertible Term Note to be
executed by its duly authorized representative and its corporate seal to be
hereunto affixed as of the date first above written.
UNIFI COMMUNICATIONS, INC.
ATTEST:
By:
___________________________
_________________________
Title:
_________________________
[Corporate Seal]
3
<PAGE>
EXHIBIT 10.26
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND NEITHER THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT AND PURSUANT TO AN EFFECTIVE REGISTRATION OR QUALIFICATION UNDER APPLICABLE
STATE SECURITIES LAWS, OR PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION AND/OR
QUALIFICATION, AND, IF AN EXEMPTION SHALL BE APPLICABLE, THE HOLDER SHALL HAVE
DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION
AND/OR QUALIFICATION IS NOT REQUIRED.
VOID AFTER 5:00 P.M. EASTERN TIME ON APRIL 1, 2007.
WARRANT TO PURCHASE COMMON STOCK
OF
UNIFI COMMUNICATIONS, INC.
FOR VALUE RECEIVED, UNIFI COMMUNICATIONS, INC., a Delaware corporation,
(the "Company") hereby grants to Control Data Systems, Inc., or its permitted
-------
assigns, the right to purchase from the Company, at any time or from time to
time commencing April 1, 1997, and prior to 5:00 P.M., Eastern Time, on April 1,
2007, up to a total of Fifty Six Thousand Four Hundred Six (56,406) (subject to
adjustment as provided in Section 3 below) fully paid and nonassessable shares
of the Common Stock, par value $.01 per share, of the Company for an aggregate
purchase price of Fourteen Thousand One Hundred One Dollars and Fifty Cents
($14,101.50) (computed on the basis of $0.25 per share).
Hereinafter,
(i) said Common Stock, together with any other equity securities which
may be issued by the Company with respect thereto or in substitution
therefor, is referred to as the "Common Stock,"
------ -----
(ii) the shares of the Common Stock purchasable hereunder are referred
to as the "Warrant Shares,"
------- -------
(iii) the aggregate purchase price payable hereunder for the Warrant
Shares is referred to as the "Aggregate Warrant Price,"
--------- ------- -----
(iv) the price payable hereunder for each of the Warrant Shares is
referred to as the "Per Share Warrant Price,"
--- ----- ------- ------
(v) this Warrant, and all warrants hereafter issued in exchange or
substitution for this Warrant are referred to as the "Warrant" and
-------
<PAGE>
(vi) the holder of this Warrant is referred to as the "Holder."
-------
1. Exercise of Warrant. This Warrant may be exercised, in whole at any
-------------------
time to time, commencing April 1, 1997, and prior to 5:00 P.M., Eastern Time on
April 1, 2007, by the Holder of this Warrant by the surrender of this Warrant
(with the subscription form at the end hereof duly executed) at the address set
forth in Subsection 8(a) hereof, together with proper payment of the Aggregate
Warrant Price, or the proportionate part thereof if this Warrant is exercised in
part. The number of Warrant Shares for which this Warrant may be exercised (the
"Exercise Rate") shall be subject to adjustment from time to time as set forth
in Section 3 below. Payment for Warrant Shares shall be made by (i) certified
or official bank check payable to the order of the Company, (ii) wire transfer
of funds to the account of the Company, (iii) by surrendering principal
indebtedness of the Company evidences by that certain 14% Convertible Term Note
of the Company dated April 1, 1997 issued to Control Data Systems, Inc. in an
amount equal to the Aggregate Warrant Price, or the proportionate part thereof
if this Warrant is exercised in part, or (iv) by surrendering, in a "net
exercise," Warrant Shares with an aggregate Current Market Value (as defined
below) equal to the Aggregate Warrant Price, or the proportionate part thereof
if this Warrant is exercised in part. If this Warrant is exercised in part, the
Holder is entitled to receive a new Warrant covering the number of Warrant
Shares in respect of which this Warrant has not been exercised and setting forth
the proportionate part of the Aggregate Warrant Price applicable to such Warrant
Shares. Upon such surrender of this Warrant, the Company will issue a
certificate or certificates in the name of the Holder for the number of shares
of the Common Stock to which the Holder shall be entitled.
No Warrant granted herein shall be exercisable after 5:00 p.m. Eastern Time
on April 1, 2007.
2. Reservation of IA@arrant Shares. The Company agrees that, prior to
--------------------------------
the expiration of this Warrant, the Company will at all times have authorized
and in reserve, and will keep available, solely for issuance and delivery upon
the exercise of this Warrant, the shares of the Common Stock as from time to
time shall be receivable upon the exercise of this Warrant.
3. Anti-Dilution Provisions.
------------------------
(a) Adjustment for Change in Capital Stock. If, after the date hereof, the
--------------------------------------
Company:
(i) pays a dividend or makes a distribution on its Common Stock in
shares of its Common Stock;
(ii) subdivides its outstanding shares of Common Stock into a greater
number of shares;
(iii) combines its outstanding shares of Common Stock into a smaller
number of shares;
(iv) pays a dividend or makes a distribution on its Common Stock in
shares of its Capital Stock (as defined below) (other than Common Stock or
rights, warrants, or options for its Common Stock to the extent such
issuance or distribution is covered by this Section 3); or
2
<PAGE>
(v) issues by reclassification of its Common Stock any shares of its
Capital Stock (other than rights, warrants or options for its Common
Stock);
then the Exercise Rate in effect immediately prior to such action shall be
adjusted that the Holder of this Warrant thereafter exercised may receive the
number of shares of Capital Stock of the Company which such Holder would have
owned immediately following ch action if such Holder had exercised this Warrant
immediately prior to such action or mediates prior to the record date applicable
thereto, if any.
The adjustment shall become effective immediately after the record date in
the case of a dividend or distribution and immediately after the effective date
in the case of a subdivision, combination or reclassification. In the event
that such dividend or distribution is not so paid or made or such subdivision,
combination or reclassification is not effected, the exercise Rate shall again
be adjusted to be the Exercise Rate which would then be in effect if such record
date or effective date had not been so fixed.
If after an adjustment the Holder of this Warrant upon exercise of such
Warrant may receive shares of two or more classes of Capital Stock of the
Company, the Exercise Rate hall thereafter be subject to adjustment upon the
occurrence of an action taken with respect to ny such class of Capital Stock as
is contemplated by this Section 3 with respect to the Common Stock, on terms
comparable to those applicable to Common Stock in this Section 3.
(b) Adjustment for Rights Issue or Sale of Common Stock Below Current
-----------------------------------------------------------------
Market Value. If, at any time or from time to time, after the date hereof, the
- ------------
Company i) distributes any rights, warrants or options to holders of Common
Stock entitling them to purchase shares of Common Stock (other than securities
of the Company pursuant to "poison pills to the extent such issuance or
distribution is covered by paragraph (h) below) at a price per hare less than
the Current Market Value as of the Time of Determination (as defined paragraph
(p) of this Section 3) or (ii) sells any Common Stock or any securities
convertible into r exchangeable or exercisable for the Common Stock (other than
pursuant to (1) the exercise of he Warrant, (2) any options, warrants or rights
outstanding as of the date of this Agreement, 3) without limiting any options,
warrants or rights outstanding pursuant to the immediately receding clause (2),
any directors' plans and employee stock option or purchase plans approved by the
Company's Board of Directors, (4) the issuance of Common Stock or options
warrants or rights to persons or entities providing financing to the Company or
any of its subsidiaries as a condition to the provision of such financing, (5)
any registered public offering or (6) any security convertible into, or
exchangeable or exercisable for, the Common Stock as to which the issuance
thereof has previously been the subject of any required adjustment pursuant to
this Section 3) at a price per share less than the Current Market Value
immediately prior to any adjustment required pursuant to this Section 3, the
Exercise Rate shall be adjusted in accordance with the formula:
E = Ex (O+N)
-------
(0 + (N x P/M))
where:
E = the adjusted Exercise Rate;
E = the current Exercise Rate;
3
<PAGE>
O = the number of shares of Common Stock outstanding on the record date
for the distribution to which this paragraph (b) is being applied or on the date
of sale of Common Lock at a price per share less than the Current Market Value
immediately prior to any adjustment to which this paragraph (b) applies, as the
case may be;
N = the number of additional shares of Common Stock issuable upon exercise
of all rights, warrants and options so distributed or the number of shares of
Common Stock so sold or the maximum stated number of shares of Common Stock
issuable upon the conversion, change, or exercise of any such convertible,
exchangeable or exercisable securities, as the case may be;
P = the price per share of the additional shares of Common Stock upon the
exercise of any such rights, options or warrants so distributed or pursuant to
any such convertible, exchangeable or exercisable securities so sold or the sale
price of the shares so sold, as the case may be; and
M = the Current Market Value as of the Time of Determination or at the
time of sale, as the case may be, minus, with respect to a distribution of
rights, warrants or options, in case any other distribution has occurred to
which paragraph (a)(iv) applies or (ii) any other distribution has occurred to
which paragraph (c) applies, and with respect Lo which, in either case, (x) the
record date shall occur on or before the record date for the distribution to
which is paragraph (b) applies and (y) the Ex-Dividend Time shall occur on or
after the date of the time of Determination for the distribution to which this
paragraph (b) applies, the fair market value (on the record date for the
distribution to which this paragraph (b) applies) of (1) the capital Stock of
the Company distributed in respect of each share of Common Stock in such
paragraph (a)(iv) distribution and (2) the assets of the Company or debt
securities or any rights, warrants or options to purchase securities of the
Company distributed in respect of each share of Common Stock in such paragraph
(c) distribution.
The Board of Directors of the Company shall reasonably and in good faith
determine fair market values for the purposes of this paragraph (b), which
determination shall be conclusive absent manifest error.
The adjustment shall become effective immediately after the record date for
the determination of stockholders entitled to receive the rights, warrants or
options to which this paragraph (b) applies or upon consummation of the sale of
Common Stock, as the case may be. o the extent that shares of Common Stock are
not delivered after the expiration of such rights r warrants, the Exercise Rate
shall be readjusted to the Exercise Rate which would otherwise in effect had the
adjustment made upon the issuance of such rights or warrants been made the basis
of delivery of only the number of shares of Common Stock actually delivered. In
ts or warrants are not so issued, the Exercise Rate shall again be adjusted to
be the Exercise Rate which would then be in effect if such date fixed for
determination of stockholders entitled to receive such rights or warrants had
not been so fixed.
No adjustment shall be made under this paragraph (b) if the application of
the formula stated above in this paragraph (b) would result in a value of E'
that is lower than the value of E.
(c) Adjustment for Other Distributions. If, after the date hereof, the
----------------------------------
Company distributes to holders of its Common Stock any of its assets or debt
securities or any rights, warrants, or options to purchase Common Stock of the
Company, including securities or sh, but excluding (i) distributions that would
be permitted by the debt agreements (including dentures) and (ii) distributions
of Capital Stock referred to in paragraph (a) and distributions rights, warrants
or options referred to in paragraph (b), the Exercise Rate shall be adjusted in
accordance with the formula:
4
<PAGE>
E = E x M
---
M-F
where:
E = the adjusted Exercise Rate;
E = the current Exercise Rate;
M = the Current Market Value, minus in case any other distribution has
-----
occurred to which paragraph (a) (iv) applies, with respect to which (i) the
record date shall occur on or before the record date for the distribution to
which this paragraph (c) applies and (ii) the Exdividend Time shall occur on or
after the date of the Time of Determination for the distribution which this
paragraph (c) applies, the fair market value (on the record date for the
distribution to which this paragraph (c) applies) of any Capital Stock of the
Company distributed in respect of each share of Common Stock in such paragraph
(a) (iv) distribution; d
F = the fair market value (on the record date for the distribution to
which this paragraph (c) applies) of the assets, securities, rights, warrants or
options to be distributed in respect of each share of Common Stock in the
distribution to which this paragraph (c) is being applied (including, in the
case of cash dividends or other cash distributions giving rise to an adjustment,
all such cash distributed concurrently).
The Board of Directors of the Company shall reasonably and in good faith
determine by a board resolution, the fair market value of all property (other
than cash) distributed for the purposes of this paragraph (c).
The adjustment shall become effective immediately after the record date for
the termination of stockholders entitled to receive the distributions to which
this paragraph (c) applies. in the event that such distribution is not so made,
the Exercise Rate shall again be used to be the Exercise Rate which would then
be in effect if such record date had not been fixed.
In the event that, with respect to any distribution to which this paragraph
(c) would otherwise apply, "F" is equal to or greater than "M", then the
adjustment provided by is paragraph (c) shall not be made and in lieu thereof
the provisions of paragraph (h) shall apply to such distribution.
(d) When Adjustment May Be Deferred. No adjustment in the Exercise Rate
-------------------------------
need be made unless the adjustment would require a change of at least 1.0% in
the Exercise Rate. Any adjustments that are not made shall be carried forward
and taken into count in any subsequent adjustment. However, with respect to a
dividend of the Company's Capital Stock (or rights to acquire such Capital
Stock) adjustments can be deferred only until, and must be made by, the earlier
of (i) three years from the date of such stock dividend and (ii) e date as of
which the aggregate stock dividends for which adjustments have not been made
total at least 1.0% of the then issued and outstanding Common Stock with respect
to which such stock dividends were distributed.
All calculations under this Section 3 shall be made to the nearest 1/1000th
of a share.
(e) When No Adjustment Required. No adjustment need be made for rights to
---------------------------
purchase Common Stock pursuant to a Company plan for reinvestment of dividends
or interest.
5
<PAGE>
No adjustment need be made for a change in the par value or no par value of
the Common Stock.
(f) Notice of Adjustment. Whenever the Exercise Rate is adjusted, the
--------------------
Company shall promptly mail to the Holder of this Warrant at the address
appearing in Section 8(b) below a notice of the adjustment.
(g) Notice of Certain Transactions. If:
------------------------------
(i) the Company takes any action that would require an adjustment in
the Exercise Rate pursuant to paragraphs (a), (b) or (c) (unless no
adjustment is to occur pursuant to paragraph (e)); or
(ii) the Company takes any action that would require a supplemental
warrant agreement pursuant to paragraph (h); or
(iii) there is a liquidation or dissolution of the Company;
then the Company shall mail to the Holder of this Warrant at the address
appearing in Section b) hereof a notice stating the proposed record date for a
dividend or distribution or the proposed effective date of a subdivision,
combination, reclassification, consolidation, sale, merger, binding share
exchange, transfer, liquidation or dissolution, as the case may be. The Company
shall file and give the notice at least 15 days before such date. Failure to
file or give the notice or any defect in it shall not affect the validity of the
transaction.
(h) Reorganization of Company; Special Distributions. If the Company, in a
------------------------------------------------
single transaction or through a series of related transactions, consolidates
with r merges with or into any other person or transfers (by lease, assignment,
sale or otherwise) all r substantially all of its properties and assets to
another person or group of affiliated persons there than a sale of all or
substantially all of the assets of the Company in a transaction in which the
holders of Common Stock immediately prior to such transaction do not receive
securities, cash, or other assets of the Company or any other person) or is a
party to a merger or binding share exchange which reclassifies or changes its
outstanding Common Stock, the company covenants that prior to entering into such
transaction, the person obligated to deliver securities, cash or other assets
upon exercise of this Warrant will enter into a supplemental arrant agreement.
If the issuer of securities deliverable upon exercise of this Warrant is an
affiliate of the successor Company, that issuer shall join in the supplemental
warrant agreement.
The supplemental warrant agreement shall provide that the Holder of this
arrant may exercise it for the kind and amount of securities, cash or other
assets which such older would have received immediately after the consolidation,
merger, binding share exchange or transfer if such Holder had exercised this
Warrant immediately before the effective ate of the transaction, assuming (to
the extent applicable) that such Holder (i) was not a constituent person or an
affiliate of a constituent person to such transaction; and (ii) made no
selection with respect thereto. The supplemental warrant agreement shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 3. The successor
Company shall mail to the Holder of this Warrant at the address appearing in
Section 8(b) below a notice briefly describing the supplemental Warrant
agreement.
6
<PAGE>
If the Company makes a distribution to all holders of its Common Stock of
any of its assets, or debt securities or any rights, warrants or options to
purchase securities of the Company that, but for the provisions of the last
paragraph of paragraph (c), would result in an adjustment in the Exercise Rate
pursuant to the provisions of paragraph (c), then, from and after the record
date for determining the holders of Common Stock entitled to receive the
distribution, the Holder of this Warrant that exercises such Warrant in
accordance with its rms will upon such exercise be entitled to receive, in
addition to the Warrant Shares into which this Warrant is exercisable, the kind
and amount of securities, cash or other assets comprising the distribution that
such Holder would have received if such Holder had exercised is Warrant
immediately prior to the record date for determining the holders of Common Stock
entitled to receive the distribution (whether or not this Warrant was then
exercisable hereunder).
If this paragraph (h) applies, neither paragraph (a), (b), (c) nor (d)
shall apply.
(1) Adjustment for Tax Purposes. The Company may make such creases in the
---------------------------
Exercise Rate, in addition to those otherwise required by this Section, as it
insiders to be advisable in order that any event treated for Federal income tax
purposes as a dividend of stock or stock rights shall not be taxable to the
recipients.
(j) Specificity of Adjustment. Irrespective of any adjustments in the
-------------------------
number or kind of shares purchasable upon the exercise of this Warrant, Warrant
Certificates heretofore or thereafter issued may continue to express the same
number and kind of Warrant Shares as are stated on this Warrant Certificate.
(k) Adjustments to Par Value. Subject to receiving shareholder approval,
------------------------
the Company shall make such adjustments to the par value of the Common Stock in
order that, upon exercise of this Warrant, the Warrant Shares will be fully paid
and nonassessable.
(l) Voluntary Adjustment. The Company from time to time may increase the
--------------------
Exercise Rate by any number and for any period of time (provided that such
--------
period not less than 20 Business Days). Whenever the Exercise Rate is so
increased, the Company all mail to the Holder at the address appearing in
Section 8(b) a notice of the increase. The Company shall give the notice at
least 15 days before the date the increased Exercise Rate takes effect. The
notice shall state the increased Exercise Rate and the period it will be in
effect. A voluntary increase in the Exercise Rate does not change or adjust the
Exercise Rate otherwise in effect as determined by this Section 3.
(m) No other Adjustment For Dividends. Except as provided in this Section
---------------------------------
3, no payment or adjustment will be made for dividends on any Common Stock.
(n) Priority of Adjustments. If this Section 3 requires adjustments to
-----------------------
Exercise Rate under more than one of paragraphs (a)(iv), (b) or (c), and the
record dates for the distributions giving rise to such adjustments shall occur
on the same date, then such adjustments shall be made by applying, first, the
provisions of paragraph (a), second, the revisions of paragraph (c) and, third,
the provisions of paragraph (b).
(o) Multiple Adjustments. After an adjustment to the Exercise Rate rider
--------------------
this Section 3, any subsequent event requiring an adjustment under this Section
3 shall cause an adjustment to the Exercise Rate as so adjusted.
7
<PAGE>
(p) Definitions. "Capital Stock" means, with respect to any corporation,
----------- -------------
any and all shares, interests, rights to purchase, warrants, options,
participations r other equivalents of or interests (however designated) in stock
issued by that corporation.
"Current Market Value" per share of Common Stock or of any other Securities
--------------------
at any date shall be (1) if the security is not registered under the Exchange
Act, (i) the value of the security determined in good faith by the Company's
Board of Directors, based on the most recently completed arm's length
transaction between the Company and a person other than an affiliate of the
Company, or (2) if the security is registered under the Exchange Act, the
average of the daily closing bid prices for each Business Day during the period
commencing 15 Business Days before such date and ending on the date one day
prior to such date or, if the security has been registered under the Exchange
Act for less than 15 consecutive Business Days before such date, then the
average of the daily closing bid prices for all of the Business Days before
such, date for which daily Closing bidprices are available. If the market price
is not determinable for at least 10 Business Days in such period, the Current
Market Value of the security shall be determined as if the security was not
registered under the Exchange Act.
"Time of Determination" means the time and date of the earlier of (i) the
---------------------
determination of stockholders entitled to receive rights, warrants, or options
or a distribution, each case, to which paragraphs (b) and (c) apply and (ii) the
time ("Ex-Dividend Time") immediately prior to the commencement of "ex-dividend"
----------------
trading for such rights, warrants or distribution on such national or regional
exchange or market on which the Common Stock is enlisted or quoted.
(q) Notice. If the Board of Directors of the Company shall declare any
------
dividend or other distribution in cash with respect to the Common Stock, other
than out of earned surplus, the Company shall mail notice thereof to the Holder
not less than 15 days prior the record date fixed for determining shareholders
entitled to participate in such dividend or other distribution.
4. Fully Paid Stock; Taxes. The Company agrees that the shares of the
-----------------------
Common Stock represented by each and every certificate for Warrant Shares
delivered on the exercise of this Warrant shall, at the time of such delivery,
be validly issued and outstanding, fully paid and non-assessable, and not
subject to preemptive rights, and the Company will take all such actions as may
be necessary to assure that the par value or stated value, if any, per hare of
the Common Stock is at all times equal to or less than the then Per Share
Warrant Price. The Company further covenants and agrees that it will pay, when
due and payable, any and all federal and state stamp, original issue or similar
taxes that may be payable in respect of the sue of any Warrant Share or
certificate therefor.
5. Transfer.
--------
(a) Securities Laws. Neither this Warrant nor the Warrant Shares suable
---------------
upon the exercise hereof have been registered under the Securities Act of 1933,
as mended (the "Securities Act"), or under any state securities laws and unless
so registered may not be transferred, sold, pledged, hypothecated or otherwise
disposed of unless an exemption rom such registration is available. In the
event the Holder desires to transfer this Warrant or any of the Warrant Shares
issued, the Holder must give the Company prior written notice of such proposed
transfer including the name and address of the proposed transferee. Such
transfer may be made only either (i) upon issuance by the Securities and
Exchange Commission the "Commission") of a ruling, interpretation, opinion or
"no action letter" based upon facts resented to said commission, or (ii) upon
receipt by the Company of an opinion of counsel to the Holder, reasonably
acceptable to the Company both as to
8
<PAGE>
such counsel and as to such pinion, in either case to the effect that the
proposed transfer will not violate the provisions of the Securities Act, or the
rules and regulations promulgated under such act, or in the case of clause (ii)
above, to the, effect that the Warrant or Warrant Shares to be sold or
transferred has been registered under the Securities Act and that there is in
effect a current prospectus meeting e requirements of Subsection 10(a) of the
Securities Act that is being or will be delivered to e purchaser or transferee
at or prior to the time of delivery of the certificates evidencing the arrant or
Warrant Stock to be sold or transferred.
(b) Lock-Up Agreements with Underwriters. In the event of a public
------------------------------------
offering of the Company's securities, the Holder agrees to enter into an
agreement with the underwriter or underwriter's representative for such offering
restricting the sale, transfer or her disposition of this Warrant or the Warrant
Shares to the extent that such agreement is required to be executed by the
underwriter or the underwriter's representative.
(c) Conditions to Transfer. Prior to any such proposed transfer, and a
----------------------
condition thereto, if such transfer is not made pursuant Lo an effective
registration statement under the Securities Act, the Holder will, if requested
by the Company, deliver to the Company (i) an agreement by the proposed
transferee to the impression of the restrictive vestment legend set forth herein
on the certificate or certificates representing the securities required by such
transferee, (ii) an agreement by such transferee that the Company may place a
top transfer order" with its transfer a ent or registrar, and (iii) an agreement
by the transferee indemnify the Company to the same extent as set forth in the
next succeeding paragraph.
(d) Indemnity. The Holder acknowledges that the Holder understands the
---------
meaning and legal consequences of this Section 5, and the Holder hereby agrees
to indemnify and hold harmless the Company, its representatives and each officer
and director thereof from and against any and all loss, damage or liability
(including all attorneys fees and costs incurred in enforcing this indemnity
provision) due to or arising out of (a) the accuracy of any representation or
the breach of any warranty of the Holder contained in, or v other breach of,
this Warrant, (b) any transfer of any of the Warrant or the Warrant Shares
violation of the Securities Act or the rules and regulations promulgated under
such act, (c) y transfer of the Warrant or any of the Warrant Shares not in
accordance with this Warrant or any untrue statement or omission to state any
material fact in connection with the estment representations or with respect to
the facts and representations supplied by the older to counsel upon which its
opinion as to a proposed transfer shall have been based.
(e) Transfer. Except as restricted hereby, this Warrant and the arrant
--------
Shares issued may be transferred by the Holder in whole or in part at any time
or from me to time. Upon surrender of this Warrant to the Company or at the
office of its stock transfer agent, if any, with assignment documentation duly
executed and funds sufficient to pay any transfer tax, and upon compliance with
the foregoing provisions, the Company shall, without charge, execute and deliver
a new Warrant in the name of the assignee named in such strument of assignment,
and this Warrant shall promptly be canceled. Any assignment, transfer, pledge,
hypothecation or other disposition of this Warrant attempted contrary to the
provisions of this Warrant, or any levy of execution, attachment or other
process attempted upon the Warrant, shall be null and void and without effect.
(f) Legend and Stop Transfer Orders. Unless the Warrant Shares ave been
-------------------------------
registered under the Securities Act, upon exercise of any part of the Warrant
and the issuance of any of the shares of Warrant Shares, the Company shall
instruct its transfer agent to enter stop transfer orders
9
<PAGE>
with respect to such shares, and all certificates representing Warrant ares
shall bear on the face thereof substantially the following legend, insofar as is
consistent with Delaware law:
"The shares of common stock represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may not be
sold, offered for sale, assigned, transferred or otherwise disposed of
unless registered pursuant to the provisions of that Act or an opinion of
counsel to the Company is obtained stating that such disposition is in
compliance with an available exemption from such registration."
6. Loss, Etc. of Warrant. Upon receipt of evidence satisfactory to the
---------------------
Company of the loss, theft, destruction or mutilation of this Warrant, and of
indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
shall execute and deliver to the Holder new Warrant of like date, tenor and
denomination.
7. Warrant Holder Not A Shareholder. Except as otherwise specifically
--------------------------------
provided herein, this Warrant does not confer upon the Holder any right to vote
or to consent or receive notice as a shareholder of the Company, as such, in
respect of any matters whatsoever, or any other rights or liabilities as a
shareholder, prior to the exercise hereof.
8. Communications. No notice or other communication under this Warrant
--------------
all be effective unless the same is in writing and is delivered personally,
mailed by first-class mail, postage prepaid, or mailed by nationally recognized
overnight courier (e.g. Federal Express), addressed to:
(a) the Company at 900 Chelmsford Street, Suite 312, Lowell, MA 01851,
attn: Counsel, or such other address as the Company has designated in writing to
the Holder, or
(b) the Holder at 4201 Lexington Avenue North, Arden Hills, Minnesota
35126-6198, or such other address as the Holder has designated in writing to the
Company.
Any such notice shall be effective upon receipt.
9. Headings. The headings of this Warrant have been inserted as a matter
--------
of convenience and shall not affect the construction hereof.
10. Applicable Law. This Warrant shall be governed by and construed in
--------------
accordance with the internal substantive laws of the State of Delaware.
IN WITNESS WHEREOF, UNIFI COMMUNICATIONS, INC., has caused this Warrant to
be signed by its duly authorized representative and its corporate seal to be
hereunto affixed as of the 1st day of April, 1997.
ATTEST: UNIFI COMMUNICATIONS, INC.
____________________ By: _______________________________
Name:
Title:
10
<PAGE>
SUBSCRIPTION
------------
The undersigned, ____________________, pursuant to the provisions of the
foregoing Warrant, hereby agrees to subscribe for the purchase of __________
shares of the Common Stock of UNIFI COMMUNICATIONS, INC., covered by said
Warrant, and makes payment therefor in full at the price per share provided by
said Warrant.
Dated: ______________________ Signature:
______________________
Address:
______________________
______________________
ASSIGNMENT
----------
FOR VALUE RECEIVED _________________ hereby sells, assigns and transfers
unto ________________ the foregoing Warrant and all rights evidenced thereby,
and does irrevocably constitute and appoint ______________ attorney to transfer
said Warrant on the books of UNIFI Communications, INC.
Dated: ______________________ Signature:
______________________
Address:
______________________
______________________
PARTIAL ASSIGNMENT
------------------
FOR VALUE RECEIVED _________________ hereby assigns and transfers unto
_______________ the right to purchase ___________ shares of the Common Stock of
UNIFI COMMUNICATIONS, INC. by the foregoing Warrant, and a proportionate part of
said Warrant and the rights evidenced hereby, and does irrevocably constitute
and appoint attorney to transfer that part of said Warrant on the books of UNIFI
COMMUNICATIONS, INC.
Dated: ______________________ Signature:
______________________
Address:
______________________
______________________
11
<PAGE>
EXHIBIT 21.1
Schedule A
----------
<TABLE>
<CAPTION>
Subsidiaries of the Company: Organized under the laws of:
- --------------------------- ---------------------------
<S> <C>
1. Fax International Japan, Inc. Japan
2. Fax International (Europe) Ltd. United Kingdom
3. Fax International S.A.R.L. France
4. Fax International GmgH Germany
5. Fax International Korea Co., Ltd. Republic of Korea
6. Fax International Hong Kong Limited Hong Kong
7. Fax International Telecommunications
Software (Beijing) Co., Ltd. People's Republic of China
8. Fax International de Mexico S. De R.L. de C.V. Mexico
9. Fax International Taiwan Co., Ltd. Taiwan
10. Fax International Holdings, Inc. Delaware, USA
</TABLE>
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.
Boston, Massachusetts
April 17, 1997
