<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
For the transition period from __________ to __________
Commission file number 0-23253
ITC/\DELTACOM, INC.
---------------------------------
(Exact name of registrant as specified in its charter)
Delaware 58-2301135
- ---------------------------- ------------------------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1791 O.G. Skinner Drive, West Point, GA 31833
- --------------------------------------- ------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (706) 385-8000
------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
-----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at May 12, 1999
---------------------------
Common Stock at $.01 par value 58,000,212 shares
-1-
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1 - Financial Statements
ITC/\DELTACOM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $151,294 $184,167
Restricted assets 14,300 14,300
Accounts receivable:
Customer, net of allowance for uncollectible accounts of
$1,455 and $1,260 in 1999 and 1998, respectively 36,101 34,219
Affiliate 3,174 3,307
Inventory 1,987 1,635
Prepaid expenses 1,341 591
Federal income tax receivables 3,939 3,939
-------- --------
Total current assets 212,136 242,158
-------- --------
PROPERTY, PLANT AND EQUIPMENT, net 284,530 262,050
-------- --------
OTHER LONG-TERM ASSETS:
Intangible assets, net of accumulated amortization of
$6,946 and $6,303 in 1999 and 1998, respectively 62,517 63,160
Restricted assets 6,055 5,735
Other long-term assets 13,885 14,414
-------- --------
Total other long-term assets 82,457 83,309
-------- --------
Total assets $579,123 $587,517
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
-2-
<PAGE>
ITC/\DELTACOM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- -------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable:
Trade $ 12,669 $ 12,810
Construction 10,881 7,233
Accrued interest 11,140 8,049
Accrued compensation 2,673 2,998
Unearned revenue 9,218 11,457
Other accrued liabilities 8,445 8,418
Current portion of long-term debt and capital
lease obligations 1,069 1,075
-------- --------
Total current liabilities 56,095 52,040
-------- --------
LONG-TERM LIABILITIES:
Deferred income taxes 418 418
Long-term debt and capital lease obligations 416,692 416,859
-------- --------
Total long-term liabilities 417,110 417,277
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred Stock, $.01 par value; $7.40
liquidation preference; 5,000,000 shares authorized,
1,480,771 shares issued and outstanding 15 15
Common Stock, $.01 par value; 90,000,000 shares
authorized; 51,649,397 and 51,339,838 shares
issued and outstanding in 1999 and 1998, respectively 516 513
Additional paid-in-capital 167,750 167,023
Accumulated deficit (62,363) (49,351)
-------- --------
Total stockholders' equity 105,918 118,200
-------- --------
Total liabilities and stockholders' equity $579,123 $587,517
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
-3-
<PAGE>
ITC/\DELTACOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except share data)
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
Operating revenues $ 53,034 $ 36,694
Cost of services 26,761 16,873
----------- -----------
Gross margin 26,273 19,821
----------- -----------
Operating expenses:
Selling, operations, and administration 20,268 13,567
Depreciation and amortization 11,168 6,321
----------- -----------
Total operating expenses 31,436 19,888
----------- -----------
Operating loss (5,163) (67)
----------- -----------
Other income (expense):
Interest expense (10,463) (7,499)
Interest income 2,389 2,834
Other income (expense) 225 (2,291)
----------- -----------
Total other expense, net (7,849) (6,956)
----------- -----------
Loss before income taxes and extraordinary item (13,012) (7,023)
Income tax benefit 0 (2,388)
----------- -----------
Loss before extraordinary item (13,012) (4,635)
Extraordinary item - loss on early extinguishment of debt (less
related income tax benefit of $2,133 in 1998) 0 (8,436)
----------- -----------
Net loss $ (13,012) $ (13,071)
=========== ===========
Basic and diluted net loss per common share:
Before extraordinary item $ (0.25) $ (0.09)
Extraordinary item (0.00) (0.17)
----------- -----------
Net loss $ (0.25) $ (0.26)
=========== ===========
Basic and diluted weighted average common
shares outstanding 51,506,644 50,190,058
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
-4-
<PAGE>
ITC/\DELTACOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------
1999 1998
--------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (13,012) $ (13,071)
--------- ---------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 11,168 6,321
Amortization of bond issue costs 490 359
Deferred income taxes 0 (5,011)
Extraordinary item-loss on early extinguishment of
debt 0 10,569
Changes in current operating assets and liabilities:
Accounts receivable, net (1,749) (1,949)
Inventory (352) (491)
Prepaid expenses (750) (681)
Income tax receivable from ITC Holding 0 373
Accounts payable (141) 2,749
Accrued interest 3,091 6,662
Unearned revenue (2,239) 850
Accrued compensation and other accrued liabilities (298) 3,021
--------- ---------
Total adjustments 9,220 22,772
--------- ---------
Net cash (used in) provided by operating activities (3,792) 9,701
--------- ---------
Cash flows from investing activities:
Capital expenditures (32,963) (23,026)
Change in accrued construction costs 3,648 984
Change in restricted assets (320) (937)
Other 0 13
--------- ---------
Net cash used in investing activities (29,635) (22,966)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of 8-7/8% Senior Notes,
net of issuance costs 0 155,170
Repayments of long term debt (173) 0
Proceeds from exercise of common stock options 693 654
Other 34 (191)
--------- ---------
Net cash provided by financing activities 554 155,633
--------- ---------
(Decrease) increase in cash and cash equivalents (32,873) 142,368
Cash and cash equivalents at beginning of period 184,167 94,374
--------- ---------
Cash and cash equivalents at end of period $ 151,294 $ 236,742
========= =========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest $ 7,247 $ 380
========= ========
Cash paid (refunds received) for income taxes,
net of payments $ 46 $ (146)
========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated
statements.
-5-
<PAGE>
ITC/\DELTACOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION, NATURE OF BUSINESS, AND BASIS OF PRESENTATION
Organization
ITC/\DeltaCom, Inc. ("ITC/\DeltaCom" or the "Company") was incorporated on
March 24, 1997 under the laws of the State of Delaware, as a wholly-owned
subsidiary of ITC Holding Company, Inc. ("ITC Holding"), to acquire and operate
certain wholly owned subsidiaries of ITC Holding. On July 25, 1997, upon
receipt of certain regulatory approvals and certain other consents, ITC Holding
completed the reorganization of certain subsidiaries that became wholly owned by
the Company.
Effective October 20, 1997, as part of a further reorganization of ITC
Holding, ITC Holding transferred all of its assets, other than stock in the
Company, and all of its liabilities to another entity and then merged with and
into the Company (the "Merger"). The Company was the surviving corporation in
the Merger.
Nature of Business
The Company provides integrated voice and data telecommunications services
to mid-sized and major regional businesses in the southern United States
("Retail Services") and is a leading regional provider of wholesale long-haul
services to other telecommunications companies ("Carriers' Carrier Services").
Retail Services includes local exchange services, long distance services,
800/888 calling, calling card and operator services, Asynchronous Transfer Mode,
frame relay, high capacity broadband private line services, as well as Internet,
Intranet and Web page hosting and development services, and customer premise
equipment sale, installation and repair. In connection with these businesses,
the Company owns, operates and manages an extensive fiber optic network in the
southern United States.
Basis of Presentation
The accompanying interim consolidated financial statements are unaudited
and have been prepared by Company management in accordance with the rules and
regulations of the Securities and Exchange Commission (the "Commission"). In
the opinion of management, all adjustments considered necessary for the fair
presentation of the unaudited, consolidated financial statements have been
included, and the unaudited, consolidated financial statements present fairly
the financial position and results of operations for the interim periods
presented. These unaudited, consolidated financial statements should be read in
conjunction with the audited, consolidated financial statements and related
footnotes included in the Company's Annual Report on Form 10-K, as filed with
the SEC on March 25, 1999 and as amended by the Company's Form 10-K/A filed with
the SEC on April 30, 1999 (File No. 0-23252).
2. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Long term debt and capital lease obligations at March 31, 1999 and December
31, 1998 consisted of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---------- ------------
<S> <C> <C>
11% Senior Notes $130,000 $130,000
</TABLE>
-6-
<PAGE>
<TABLE>
<S> <C> <C>
8-7/8% Senior Notes 159,857 159,853
9-3/4% Senior Notes 125,000 125,000
Capital lease obligations at varying interest rates,
maturing through June 2006 2,475 2,643
Other 429 438
-------- --------
Total long-term debt and capital leases 417,761 417,934
Less current maturities (1,069) (1,075)
-------- --------
Total $416,692 $416,859
======== ========
</TABLE>
3. COMMITMENTS AND CONTINGENCIES
At March 31, 1999, the Company had entered into agreements with vendors to
purchase approximately $33.9 million of equipment related to the improvement and
installation of switches, other network expansion efforts and certain services.
4. SEGMENT REPORTING
As discussed in Note 1, the Company operates in two business segments: Retail
Services and Carriers' Carrier Services. Summarized financial data by
business segment as of and for the three months ended March 31, 1999 and 1998
are as follows (in thousands):
<TABLE>
<CAPTION>
1999
---------------------------------------------
Carriers'
Carrier Retail Corporate
Segment Segment Segment Consolidated
--------- --------- --------- ------------
<S> <C> <C> <C> <C>
Revenues................................................. $ 16,463 $ 36,571 $ 0 $ 53,034
Gross margin............................................. 13,891 12,382 0 26,273
Selling, operations, and administration.................. 5,140 15,128 0 20,268
Depreciation and amortization............................ 6,269 4,878 21 11,168
Other income (expense), net.............................. 2,614
Interest expense......................................... (10,463)
--------
Loss before income taxes and extraordinary item.......... $(13,012)
========
Identifiable assets...................................... $354,349 $208,106 $16,668 $579,123
======== ======== ======= ========
Capital expenditures, net................................ $ 14,273 $ 15,042 $ 0 $ 29,315
======== ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
1998
---------------------------------------------
Carriers'
Carrier Retail Corporate
Segment Segment Segment Consolidated
--------- --------- --------- ------------
<S> <C> <C> <C> <C>
Revenues.............................................. $ 11,112 $ 25,582 $ 0 $ 36,694
Gross margin.......................................... 9,901 9,920 0 19,821
Selling, operations, and administration............... 3,513 10,054 0 13,567
Depreciation and amortization......................... 4,106 2,194 21 6,321
Other income (expense), net........................... 543
Interest expense...................................... (7,499)
--------
Loss before income taxes and extraordinary item....... $ (7,023)
========
Identifiable assets................................... $333,379 $126,856 $90,504 $550,739
======== ======== ======= ========
Capital expenditures, net............................. $ 9,062 $ 12,980 $ 0 $ 22,042
======== ======== ======= ========
</TABLE>
5. SUBSEQUENT EVENTS
On April 15, 1999, the Company announced the signing of a definitive
agreement to merge with AvData Systems, Inc. ("AvData"), a privately owned data
network management solutions
-7-
<PAGE>
provider based in Atlanta, Georgia. As consideration for the merger, the Company
expects to pay approximately $28.6 million in common stock to the owners of
AvData, subject to certain adjustments, including up to an additional $10
million in common stock if certain performance objectives are met. This
transaction is expected to close in the second quarter of 1999.
On May 12, 1999, the Company completed an underwritten public offering and
sale of 6,037,500 shares of its common stock, yielding net proceeds to the
Company of approximately $120.9 million. The Company intends to use the net
proceeds from this offering (i) to fund an accelerated market expansion of the
Company's telecommunications business, including expansion of the Company's
fiber optic network, expansion of the Company's Internet service provider
("ISP") local telecommunications services and the opening of new sales offices,
and (ii) for additional working capital and other general corporate purposes.
On May 12, 1999, the Company also completed a private offering and sale of
$100 million aggregate principal amount of its 4 1/2% Convertible Subordinated
Notes due May 16, 2006 (the "Notes"), yielding net proceeds to the Company of
approximately $97.0 million. The Notes bear interest at an annual rate of 4 1/2%
payable each May 15 and November 15 beginning November 15, 1999. The Notes are
unsecured general obligations of the Company and are convertible into common
stock at any time after 90 days following the original issuance of the Notes, at
a conversion price of $26.67 per share, subject to adjustment in certain events.
The Company may redeem the Notes or the Company may make the Notes
nonconvertible under certain circumstances before May 17, 2002. The Company
intends to use the net proceeds from this private offering (i) to fund an
accelerated expansion of the Company's fiber optic network and (ii) to purchase
switching equipment, inventory and other electronics and network assets related
to the Company's fiber optic network and to its provision of primary rate
interface connectivity to ISPs.
In May 1999, the Company amended its secured revolving credit facility with
NationsBank, N.A. to permit (i) the merger with AvData, (ii) the issuance of the
common stock in the May 1999 common stock offering and (iii) the issuance of and
payment of interest on the Notes, the redemption of the Notes and the issuance
of common stock upon conversion of the Notes.
On May 13, 1999, the Company's shareholders approved an increase in the
number of options authorized to be granted under the Company's 1997 Stock Option
Plan from 4,815,000 to 7,815,000.
-8-
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
This quarterly report on Form 10-Q contains certain forward-looking
statements that involve risks and uncertainties. In addition, members of the
Company's senior management may, from time to time, make certain forward-looking
statements concerning the Company's operations, performance and other
developments. The Company's actual results could differ materially from those
anticipated in such forward-looking statements as a result of various factors.
The following analysis should be read in conjunction with the Company's Annual
Report on Form 10-K and the financial statements and related notes thereto. The
Company has included data with respect to EBITDA, as adjusted, in the following
analysis because it is a measure commonly used in the Company's industry.
EBITDA, as adjusted, represents earnings before extraordinary item, other income
(expense), net interest, income taxes, depreciation and amortization. EBITDA,
as adjusted, is not a measure of financial performance under generally accepted
accounting principles and should not be considered an alternative to net income
as a measure of performance or to cash flows as a measure of liquidity. EBITDA,
as adjusted, is not necessarily comparable with similarly titled measures for
other companies. See the notes to the unaudited, consolidated financial
statements appearing elsewhere in this report for definitions of certain terms
used in the following analysis.
Overview
The Company provides integrated voice and data telecommunications services
to mid-size and major regional businesses in the southern United States and is a
leading regional provider of wholesale long-haul services to other
telecommunications companies. In connection with these businesses, the Company
owns, operates and manages an extensive fiber optic network in the southern
Unites States. The Company had revenues of $53.0 million and $36.7 million for
the three months ended March 31, 1999 and 1998, respectively.
The Company provides wholesale long-haul services ("Carriers' Carrier
Services") to other telecommunications carriers, including AT&T, Sprint, MCI
WorldCom, Qwest, Cable & Wireless, Frontier and IXC. The Company's Carriers'
Carrier business generated revenues of $16.5 million and $11.1 million for the
three months ended March 31, 1999 and 1998, respectively.
The Company also provides integrated retail telecommunications services to
mid-sized and major regional businesses in a bundled package tailored to the
business customer's specific needs. These services (the "Retail Services")
include local exchange services, long distance services, 800/888 calling,
calling card and operator services, Asynchronous Transfer Mode ("ATM"), frame
relay, high capacity broadband private line services, as well as Internet,
Intranet and Web page hosting and development services and customer premise
equipment sale, installation and repair. At March 31, 1999, the Company
provided Retail Services to over 11,600 business customers in 23 metropolitan
areas and had sold approximately 60,000 access lines, of which approximately
45,300 had been installed. The Company intends to provide a full range of
Retail Services in a total of approximately 42 metropolitan areas throughout the
southern United States over the next two years. The Company's Retail Services
business generated revenue of $36.6 million and $25.6 million for the three
months ended March 31, 1999 and 1998, respectively.
The Company's fiber optic network reaches over 80 points of presence
("POPs") in ten southern states (Alabama, Arkansas, Florida, Georgia, Louisiana,
Mississippi, North Carolina, South Carolina, Tennessee and Texas) and extends
approximately 7,800 route miles, of which approximately 4,150 miles are Company-
owned and approximately 3,650 are owned and operated principally by three public
utilities (Duke Power Company, Florida Power & Light Company and Entergy
Technology Company) and managed and marketed by the Company. The Company
expects to add approximately 700 owned and operated route miles to its fiber
network by the end of 1999 and an additional 1,000 to 1,500 route miles by the
end of 2000 through a combination of construction and long-term dark fiber
leases. At March 31, 1999, the Company's network included one Nortel DMS-250
and six Nortel DMS-500 voice switches, fifteen Ascend 9000 frame relay switches
and seven ATM switches. In addition, the Company has completed physical
collocation of switching equipment in 30 BellSouth markets.
-9-
<PAGE>
During the three months ended March 31, 1999, the Company's operational
highlights included the following:
. the Company opened a new branch office in Macon, Georgia, expanding its
market coverage to 23 southern markets and 24 branch offices operational at
the end of the first quarter, and
. the Company continued its network enhancement efforts with the addition
of an ATM and frame relay switch in Greensboro, North Carolina.
The Company continues to increase its market penetration and capacity by opening
new sales offices, expanding its fiber network and increasing its data and voice
switching capability at a local and regional level.
The Company's continued focus on the growing demand for data products
resulted in continued improvements in its quarterly data services revenue, which
is a component of Retail Services revenue. Data services revenue for the first
quarter of 1999 increased over 200% compared to the first quarter of 1998. The
Company's data services initiatives recently accelerated with the signing of a
definitive merger agreement with AvData Systems, Inc. ("AvData") of Atlanta,
Georgia, on April 15, 1999. AvData provides extensive customer network
monitoring and management of data communications networks to business customers
throughout the United States. The merger with AvData is expected to be
completed in the second quarter of 1999, and is subject to customary closing
conditions, including final board approval.
Pursuant to its interconnection agreement (the "Interconnection Agreement")
with BellSouth Telecommunications, Inc. ("BellSouth"), the Company continued
billing BellSouth during the first three months of 1999 for reciprocal
interconnection charges related to the provision by the Company of facilities-
based local exchange services. A significant amount of such charges are
attributable to call terminations by the Company to customers that are Internet
service providers ("ISPs"). BellSouth has stated that it views termination to
such ISPs as not included under the reciprocal charge arrangements set forth in
the Interconnection Agreement, and has refused to pay compensation for such
terminations either to the Company or to other CLECs operating under similar
interconnection agreements. The Alabama PSC rendered a ruling in favor of the
CLECs on March 4, 1999 and issued an order requiring BellSouth to pay all
withheld reciprocal compensation sums within 20 days. The Alabama PSC ruling is
now on appeal by BellSouth in federal district court. The Company has filed a
similar complaint before the South Carolina PUC. For the three months ended
March 31, 1999 such charges to BellSouth amounted to approximately $3.5 million.
The Company recognized approximately $350,000 of such charges as operating
revenues during the first quarter of 1999, which represents amounts BellSouth is
currently paying, and reserved against the remaining $3.2 million of first
quarter billings. As of March 31, 1999, the Company had reserved for
approximately $9.8 million of cumulative local interconnection billings.
In April 1999, the Company filed a shelf registration statement with
the Securities and Exchange Commission for the issuance from time to time of up
to $300 million in equity securities, including common stock, preferred stock,
shares of preferred stock represented by depositary shares, warrants exercisable
for common stock, preferred stock or depositary shares, subscription rights
evidencing the right to purchase any of these securities and stock purchase
contracts to purchase common stock or preferred stock and stock purchase units.
In May 1999, the Company completed two new securities offerings. The Company
completed an underwritten public offering and sale of 6,037,500 shares of its
common stock, yielding net proceeds to the Company of approximately $120.9
million. The Company also completed a private offering and sale of $100 million
aggregate principal amount of its 4 1/2% convertible subordinated notes due
2006, yielding net proceeds to the Company of approximately $97.0 million. These
proceeds are expected to be used (i) to fund network expansion, primarily in
Tennessee and Texas, (ii) to fund expenditures for additional switching
facilities, (iii) to accelerate the Company's collocation efforts and (iv) for
other general corporate purposes. The Company currently expects capital
expenditures will total approximately $250 to $300 million through 2000.
-10-
<PAGE>
QUARTERLY STATISTICAL HIGHLIGHTS*
<TABLE>
<CAPTION>
March 31, December 31,
STATISTICAL DATA: 1999 1998
---- ----
<S> <C> <C>
Cumulative markets 23 22
Business customers served -
Retail Services 11,600 10,700
Route miles 7,800 7,800
Collocations 30 30
Voice switches 7 7
ATM switches 7 6
Frame relay switches 15 14
Number of employees 1,170 1,125
Lines sold cumulative 60,000 42 ,000
Lines installed cumulative 45,300 32,200
Lines installed/Lines sold percentage 76% 77%
*Data rounded except as to markets, collocations and switches.
</TABLE>
Historical Results of Operations
The following tables set forth certain unaudited financial information data
for the three-month periods ended March 31, 1999 and 1998 for the Carriers'
Carrier Services business and the Retail Services business (in thousands).
<TABLE>
<CAPTION>
CARRIERS' CARRIER SERVICES
--------------------------
Three Months Ended March 31,
1999 % 1998 %
--------- ------ --------- ----
<S> <C> <C> <C> <C>
Revenues $16,463 100% $11,112 100%
Cost of services 2,572 16% 1,211 11%
------- ---- ------- ---
Gross margin 13,891 84% 9,901 89%
------- ---- ------- ---
Operating expenses:
Selling, operations
and administrative 5,140 31% 3,513 31%
Depreciation and
amortization 6,269 38% 4,106 37%
------- ---- ------- ---
Total operating expenses 11,409 69% 7,619 68%
------- ---- ------- ---
Operating income $ 2,482 15% $ 2,282 21%
======= ==== ======= ===
<CAPTION>
RETAIL SERVICES
----------------
Three Months Ended March 31,
1999 % 1998 %
------- ----- ------- ---
<S> <C> <C> <C> <C>
Revenues $36,571 100% $25,582 100%
Cost of services 24,189 66% 15,662 61%
------- ---- ------- ---
Gross margin 12,382 34% 9,920 39%
------- ---- ------- ---
Operating expenses:
Selling, operations
and administrative 15,128 41% 10,054 39%
Depreciation and
amortization 4,878 14% 2,194 9%
------- ---- ------- ---
Total operating expenses 20,006 55% 12,248 48%
------- ---- ------- ---
Operating loss $(7,624) (21)% $(2,328) (9)%
======= ==== ======= ===
</TABLE>
-11-
<PAGE>
THREE MONTHS ENDED MARCH 31, 1999 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1998
Revenues
Total revenue increased $16.3 million (44.4%), from $36.7 million for the
three months ended March 31, 1998 to $53.0 million for the three months ended
March 31, 1999. Revenues from Retail Services increased $11.0 million (43.0%),
from $25.6 million for the three months ended March 31, 1998 to $36.6 million
for the three months ended March 31, 1999. The increase in Retail Services
revenue was attributable to (i) a continued increase in the number of business
customers, from 8,100 as of March 31, 1998 to over 11,600 as of March 31, 1999,
(ii) an increase in revenues from local exchange, local ISP telecommunications
services and data services, (iii) growth in long distance minutes of use
("MOUs"), partially offset by a decrease in the rates per MOU, and (iv)
continued stability in the rate of revenue loss from lost customers from period
to period. The Company continues to experience strong revenue growth rates in
its local and data products and expects this trend to continue through the
remainder of 1999. The Company expects to see revenue growth in the Retail
Services segment in each of the remaining three quarters of 1999 as each of its
service offerings are sold to new and existing customers.
Revenues from Carriers' Carrier Services increased $5.4 million (48.6%),
from $11.1 million for the three months ended March 31, 1998 to $16.5 million
for the three months ended March 31, 1999. The increase in revenue from the
Carriers' Carrier Services segment was driven by (i) increases in the customer
base as a result of the continued increasing demand for bandwidth, (ii)
expansion of owned and operated routes and (iii) growth in commissions derived
from the managed, monitored, and marketed routes. The Company expects to
experience growth in its Carriers' Carrier Services revenue during the remainder
of 1999 as a result of increased demand for bandwidth, offset in part by
competitive pricing of its services.
Cost of Services
Total cost of services increased $9.9 million, from $16.9 million for the
three months ended March 31, 1998 to $26.8 million for the three months ended
March 31, 1999. Cost of services for Retail Services operations increased $8.5
million, from $15.7 million for the three months ended March 31, 1998 to $24.2
million for the three months ended March 31, 1999. The cost of services as a
percentage of revenue for Retail Services operations increased to 66% for the
three months ended March 31, 1999 compared to 61% for the three months ended
March 31, 1998. The increase in the cost of services as a percentage of
revenues from first quarter 1998 compared to first quarter 1999 is due primarily
to (i) the increase in sales of the local resale product, which generally has
lower margins, and (ii) the decrease in long distance rates. The Company
expects to experience modest improvements in the cost of service as a percentage
of revenues as the Company continues to migrate local and long distance services
to its own facilities and as it receives reductions in its off-net costs.
Cost of services for Carriers' Carrier operations increased $1.4 million,
from $1.2 million for the three months ended March 31, 1998 to $2.6 million for
the three months ended March 31, 1999. The cost of services as a percentage of
revenue for Carriers' Carrier operations increased to 16% for the three months
ended March 31, 1999 compared to 11% for the three months ended March 31, 1998.
The increase in the cost of services as a percentage of revenue is due primarily
to the continued migration of several customers to current market rates. The
Company believes the pricing pressures will be offset in the future by an
increasing demand for bandwidth allowing for continued revenue growth.
Selling, Operations and Administration
Total selling, operations and administration expense increased $6.7
million, from $13.6 million (37% as a percentage of revenue) for the three
months ended March 31, 1998 to $20.3 million (38% as a percentage of revenue)
for the three months ended March 31, 1999. Selling, operations and
administration expense attributable to Retail Services increased $5.0 million,
from $10.1 million (39% as a percentage of revenue) for the three months ended
March 31, 1998 to $15.1 million (41% as
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<PAGE>
a percentage of revenue) for the three months ended March 31, 1999. The increase
in selling, operations and administration expense as a percentage of revenue for
the Retail Services segment was attributable to (i) an increase in the number of
employees, (ii) continued geographic expansion and (iii) costs associated with
the expansion of existing service offerings, primarily local services.
Selling, operations and administration expense attributable to the
Carriers' Carrier segment increased $1.6 million, from $3.5 million (31% as a
percentage of revenue) for the three months ended March 31, 1998 to $5.1 million
(31% as a percentage of revenue) for the three months ended March 31, 1999. The
increase in selling, operations, and administration expense for the Carrier's
Carrier segment was primarily due to additions of personnel resulting from the
geographic expansion of the Company's network. The Company expects that by the
fourth quarter of 1999, selling, operations and administration expense measured
as a percentage of revenue should begin to decline, although the actual
expenditures are expected to increase, as the Company begins to experience a
greater return on its investment in personnel and products.
Depreciation and Amortization
Total depreciation and amortization increased $4.9 million, from $6.3
million for the three months ended March 31, 1998 to $11.2 million for the three
months ended March 31, 1999. Retail Services accounted for $2.7 million of the
increase, which was primarily related to the installation of new central office
and other telecommunications equipment. Carriers' Carrier Services operations
accounted for $2.2 million of the increase, primarily attributable to network
expansion. The Company expects depreciation and amortization expense to continue
to increase through the remainder of 1999 as the Company adds new switches and
network facilities as it expands into new markets.
Interest Expense
Total interest expense increased $3.0 million, from $7.5 million for the
three months ended March 31, 1998 to $10.5 million for the three months ended
March 31, 1999. The increase in interest expense is due primarily to interest
on the Company's 8 7/8% Senior Notes (issued March 1998) and 9 3/4% Senior Notes
(issued November 1998). The Company expects interest expense to increase during
the remainder of 1999 due to interest on the 8 7/8% Senior Notes, the 9 3/4%
Senior Notes and the 4 1/2% Convertible Subordinated Notes (issued May 1999).
Interest Income
Total interest income decreased from $2.8 million for the three months
ended March 31, 1998 to $2.4 million for the three months ended March 31, 1999,
as a result of a decrease in short term investments as the Company expended
funds for network facilities.
Other Income (Expense)
In March 1998, upon receipt of the proceeds from the 8 7/8% Senior Notes,
the Company reclassified its interest rate swap from a hedge of an anticipated
transaction to a trading security resulting in a non-cash charge against
earnings of approximately $2.5 million. This change in classification required
ITC/\DeltaCom to record the interest rate swap agreement on the consolidated
balance sheet at fair market value. The interest rate swap is marked to market
on a monthly basis. For the three months ended March 31, 1999 and 1998, the
Company recognized income (expense) from the mark to market of the interest rate
swap of approximately $200,000 and $(2.3) million, respectively.
Extraordinary Loss
ITC/\DeltaCom recorded a pre-tax loss of $10.6 million, or $8.4 million
after tax, related to the redemption of $70 million of its 11% Senior Notes.
The extraordinary loss consisted of a $7.7 million redemption premium and a $2.9
million write-off of related debt issuance costs.
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<PAGE>
EBITDA, as adjusted
EBITDA, as adjusted, decreased $300,000, from $6.3 million for the
three months ended March 31, 1998 to $6.0 million for the three months ended
March 31, 1999. EBITDA, as adjusted, attributable to Retail Services for the
three months ended March 31, 1999 was $(2.7) million compared to $(100,000) for
the three months ended March 31, 1998. EBITDA, as adjusted, attributable to
Retail Services decreased from (0.5)% of revenues for the three months ended
March 31, 1998 to (7.5)% of revenues for the three months ended March 31, 1999.
The decrease in EBITDA, as adjusted, for the Retail Services was mainly
attributable to the Company's increase in its local resale product, which
generally has lower margins, and the addition of new personnel. EBITDA, as
adjusted, attributable to Carriers' Carrier Services increased $2.3 million
during the three months ended March 31, 1999 as compared to the three months
ended March 31, 1998. The increase in EBITDA, as adjusted, for the Carriers'
Carrier segment was primarily attributable to the increased demand for
bandwidth, partially offset by a migration of some customers to current market
rates. The Company expects EBITDA, as adjusted, to increase during the
remainder of 1999 as the Company migrates more of its new and existing traffic
onto its own facilities and as certain of its markets mature.
Liquidity and Capital Resources
The Company generated net cash from operating activities of $(3.8) million
and $9.7 million for the three months ended March 31, 1999 and 1998,
respectively. Changes in working capital were $(2.4) million and $10.5 million
for the three months ended March 31, 1999 and 1998, respectively. The change
for the three months ended March 31, 1999 resulted primarily from a decrease in
accounts payable, unearned revenue and other accrued liabilities and an increase
in accounts receivable, inventory, and prepaid expense, partially offset by an
increase in accrued interest. For the three months ended March 31, 1998, such
changes were primarily due to an increase in accrued interest, accounts payable,
unearned revenue, and accrued liabilities, partially offset by an increase in
accounts receivable, inventory and prepaid expenses.
Cash used in investing activities was $29.6 million and $23.0 million for
the three months ended March 31, 1999 and 1998, respectively. The cash used in
investing activities in the three months ended March 31, 1999 and 1998 was
primarily for the funding of capital expenditures. The Company made capital
expenditures of $29.3 million and $22.0 million for the three months ended March
31, 1999 and 1998, respectively. Of the capital expenditures made during the
three months ended March 31, 1999, $15.0 million related to Retail Services and
$14.3 million related to Carriers' Carrier Services. Of the $22.0 million of
capital expenditures made during the three months ended March 31, 1998, $13.0
million related to Retail Services and $9.0 million related to Carriers' Carrier
Services. The increase in cash used in investing activities results from of the
Company's commitment to expand its existing network and facilities as it
implements its business plan.
Cash provided by financing activities was $554,000 and $155.6 million for
the three months ended March 31, 1999 and 1998, respectively. Cash provided by
financing activities for the three months ended March 31, 1999 consisted
primarily of proceeds from the exercise of common stock options. For the three
months ended March 31, 1998, cash provided by financing activities consisted
primarily of net proceeds of $155.2 million from the sale of the 8 7/8% Senior
Notes.
At March 31, 1999, the Company had entered into agreements with vendors to
purchase approximately $33.9 million of equipment and services, and for the
three months ended March 31, 1999, had made capital expenditures of $29.3
million. The Company currently estimates that its aggregate capital requirements
through 2000 will total approximately $250.0 to $300.0 million (inclusive of the
$33.9 million in commitments as of March 31, 1999). The Company expects to make
substantial capital expenditures thereafter. Capital expenditures through 2000
will be primarily for the following: (i) accelerated expansion of the Company's
fiber optic network in Texas, including Austin and San Antonio, and in
Tennessee, including Memphis, Nashville, Chattanooga and Knoxville; (ii)
continued development and construction of its fiber optic network (including
transmission equipment); (iii) continued addition of facilities-based local
telephone service to its bundle of integrated telecommunications services,
including acquisition and installation of switches
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<PAGE>
and related equipment; (iv) continued addition of switching capacity, electrical
equipment and additional collocation space in connection with the expansion of
ITC/\DeltaCom's ISP local telecommunications services; (v) market expansion and
(vi) infrastructure enhancements, principally for information systems. The
actual amount and timing of the Company's capital requirements may differ
materially from the foregoing estimate as a result of regulatory, technological
and competitive developments (including market developments and new
opportunities), or in the event the Company decides to make acquisitions or
enter into joint ventures and strategic alliances, in the Company's industry.
On April 15, 1999, the Company announced the signing of a definitive
agreement to merge with AvData Systems, Inc. ("AvData"), a privately owned data
network management solutions provider based in Atlanta, Georgia. As
consideration for the merger, the Company expects to pay approximately $28.6
million in common stock to the owners of AvData, subject to certain adjustments,
including up to an additional $10 million in common stock if certain performance
objectives are met. This transaction is expected to close in the second quarter
of 1999.
On May 12, 1999, the Company completed an underwritten public offering and
sale of 6,037,500 shares of its common stock, yielding net proceeds to the
Company of approximately $120.9 million. The Company intends to use the net
proceeds from this offering (i) to fund an accelerated market expansion of the
Company's telecommunications business, including expansion of the Company's
fiber optic network, expansion of the Company's Internet service provider
("ISP") local telecommunications services and the opening of new sales offices
and (ii) for additional working capital and other general corporate purposes.
On May 12, 1999, the Company completed a private offering and sale of $100
million aggregate principal amount of its 4 1/2% Convertible Subordinated Notes
due 2006, yielding net proceeds to the Company of approximately $97.0 million.
The 4 1/2% Convertible Subordinated Notes bear interest at an annual rate of 4
1/2% payable each May 15 and November 15 beginning November 15, 1999. These
notes are unsecured general obligations of the Company and are convertible into
common stock at any time after 90 days following the original issuance of the
notes, at a conversion price of $26.67 per share, subject to adjustment in
certain events. The Company may redeem the notes or the notes may become
nonconvertible under certain circumstances before May 17, 2002. The Company
intends to use the net proceeds from this private offering (i) to fund an
accelerated expansion of the Company's fiber optic network and (ii) to purchase
switching equipment, inventory and other electronics and network assets related
to the Company's fiber optic network and to its provision of primary rate
interface connectivity to ISPs.
In May 1999, the Company amended its secured revolving credit facility with
NationsBank, N.A. to permit (i) the merger with AvData, (ii) the issuance of the
common stock in the May 1999 common stock offering and (iii) the issuance of and
payment of interest on the 4 1/2% Convertible Subordinated Notes, the redemption
of those notes and the issuance of common stock upon conversion of those notes.
No amounts are outstanding under the credit facility.
As of March 31, 1999, the Company had $151.3 million of cash and cash
equivalents excluding restricted investments. The Company believes that
proceeds from the May 1999 common stock offering, proceeds from the May 1999
convertible subordinated notes offering, cash on hand, cash flow from operations
and borrowings expected to be available under the Company's secured revolving
credit facility (the "Credit Facility"), subject to compliance with applicable
covenants, will provide sufficient funds to enable the Company to expand its
business as currently planned. In the event that the Company's plans or
assumptions change or prove to be inaccurate, the foregoing sources of funds may
prove to be insufficient to fund the Company's currently planned growth and
operations. In addition, if the Company successfully completes any
acquisitions, the Company may be required to seek additional capital sooner than
currently anticipated. Additional sources may include equity and debt financing
and other financing agreements, such as vendor financing. There can be no
assurance that the Company will be able to generate sufficient cash flow from
operations or that additional financing arrangements will be available, or if
available, that they can be concluded on terms acceptable to the Company.
Inability to generate or obtain sufficient funds
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<PAGE>
would result in delay or abandonment of some or all of the Company's development
and expansion plans, which could have a material adverse effect on the Company.
Although the Company's liquidity has improved, the Company's level of
indebtedness and debt service obligations significantly increased as a result of
the Company's issuance of the 11% Senior Notes, the 8 7/8% Senior Notes, the 9
3/4% Senior Notes, and the 4 1/2% Convertible Subordinated Notes. The
successful implementation of the Company's strategy, including expansion of its
network and obtaining and retaining a significant number of customers, and
significant and sustained growth in the Company's cash flow are necessary for
the Company to be able to meet its debt service requirements. There can be no
assurance that the Company will successfully implement its strategy or that the
Company will be able to generate sufficient cash flow from operating activities
to improve its earnings before fixed charges, or to meet its debt service
obligations and working capital requirements. The ability of the Company to meet
its obligations will be dependent upon the future performance of the Company,
which will be subject to prevailing economic conditions and to financial,
business and other factors.
YEAR 2000
The Year 2000 Issue. The Year 2000 issue is the result of a computer
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programming practice first utilized during the 1960s when storage space was very
expensive and processing capability was limited. By shortening the year portion
of date field entries to two digits rather than four, programmers could save
valuable storage space and increase data processing speeds. This method of date
entry became the standard method for programmers for mainframes, personal
computers, and hardware, including processor chips. Because of this programming
convention, software, hardware, or firmware may recognize a date field using
''00'' as the year 1900 rather than the year 2000. If left uncorrected, this
could possibly result in system failures, miscalculations, or errors causing
disruptions in software-dependent operations.
ITC/\DeltaCom's Program. ITC/\DeltaCom has undertaken a comprehensive program
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to address the Year 2000 issue with respect to the following:
. ITC/\DeltaCom's information technology and operating systems
(including network switching, customer service, call detail and
billing systems)
. ITC/\DeltaCom's non-information technology systems (such as buildings,
plant, equipment and other infrastructure systems that may contain
embedded microcontroller technology)
. the systems of its major vendors, third party network service
providers, and other material service providers (insofar as they
relate to ITC/\DeltaCom's business)
. ITC/\DeltaCom's major Carrier's Carrier and Retail Services customers.
As explained below, the program involves:
. a wide-ranging assessment of the Year 2000 problems that may affect
ITC/\DeltaCom
. the development of remedies to address the problems discovered in the
assessment phase
. testing of the remedies
. the preparation of contingency plans to deal with failure scenarios.
These steps will vary to meet the particular needs of a system or Company
Division and, in some cases, will overlap. Assessment, for example, is an on-
going element of ITC/\DeltaCom's Year 2000 program.
Assessment Phase. As part of the assessment phase of this program,
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ITC/\DeltaCom has identified substantially all of the major components of the
systems described above. In order to determine the extent to which such systems
are vulnerable to the Year 2000 issue, ITC/\DeltaCom:
. evaluated its internally developed software applications
. inventoried and assessed the facilities and equipment utilized by
ITC/\DeltaCom
. contacted substantially all of its significant hardware, software, and
other equipment vendors, third party network service providers, other
material service providers, and material customers, requesting
detailed, written information related to their Year 2000 compliance
and the compliance status of the products or services they provide to
ITC/\ DeltaCom, if any.
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<PAGE>
In addition, ITC/\DeltaCom performs a Year 2000 readiness assessment of all
potential purchases, leases, or contracts in an effort to prevent the
acquisition of a non-compliant system or facility.
To date, ITC/\DeltaCom has received and analyzed responses from
substantially all of its major vendors and service providers. ITC/\DeltaCom has
also received responses from approximately one-half of its customers to which
inquiries were sent. The responses received included ITC/\DeltaCom's major
Carrier's Carrier and Retail Services customers.
Based upon the responses received to date, and assuming contradictory
responses are not received in the future from the third parties who have been
solicited, ITC/\DeltaCom believes that its third party computer operating
systems dedicated to ITC/\DeltaCom's customer service, call detail records and
billing systems and its Nortel and Ascend system switches are now Year 2000
compliant. ITC/\DeltaCom is in the process of investigating, and intends to
closely monitor, the Year 2000 readiness of the three public utilities that own
and operate approximately 3,650 miles of ITC/\DeltaCom's approximately 7,800-
mile fiber optic network. Two of these utilities have indicated that they
intend to be Year 2000 compliant by year-end and one has stated that its goal is
to be compliant by mid-1999. ITC/\DeltaCom has been informed by the financial
institutions that provide services to ITC/\DeltaCom that they each have
undertaken Year 2000 programs and expect to be Year 2000 compliant.
ITC/\DeltaCom's two largest Carrier's Carrier customers, which together
represented approximately 10% of ITC/\DeltaCom's consolidated revenues for the
three months ended March 31, 1999, have responded that they are on target to
have mission-critical systems Year 2000 compliant by the end of the first
quarter of 1999 in one instance, and by the end of the second quarter of 1999 in
the other instance. Of ITC/\DeltaCom's five largest Retail Services customers,
which represented an aggregate of approximately 12% of ITC/\DeltaCom's
consolidated revenues for the three months ended March 31, 1999, four have
either informed ITC/\DeltaCom or made public disclosures that their mission-
critical systems are now Year 2000 compliant.
Remediation and Testing. Based upon the results of ITC/\DeltaCom's assessment
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efforts, ITC/\ DeltaCom conducted remediation and testing of the at-risk systems
identified by the assessment. The activities conducted during this phase were
intended to affirmatively address potential Year 2000 problems in ITC/\DeltaCom-
developed computer software in its information technology and non-information
technology systems, and then demonstrate that the remediation was effective when
the system is used within normal operating parameters. In this phase,
ITC/\DeltaCom first evaluated a program application and, if a potential Year
2000 problem was identified, steps were taken to remediate the problem, and the
application was then individually tested to confirm that the remediating changes
were effective and did not adversely affect the functionality of that
application. Similar remediation and testing was undertaken with respect to the
hardware and other equipment that operates or is operated by the software.
After the individual applications and system components were remediated and
tested, integrated testing was conducted to demonstrate functional integrated
systems operation.
ITC/\DeltaCom has completed the remediation and testing of its internally
developed code and the systems that operate and are operated by such software,
and ITC/\DeltaCom has placed the remediated systems and software into
production.
After ITC/\DeltaCom completed the internally developed code remediation, it
arranged to conduct laboratory-simulated integrated systems testing in an effort
to demonstrate Year 2000 compliance of its integrated telecommunications systems
as they interface with external systems and the equipment of major vendors,
third party network providers, other material service providers and customers.
This testing effort covers ITC/\DeltaCom's essential network configurations and
integration configurations with the most common network components which are
utilized by customers and other third parties who interconnect with
ITC/\DeltaCom's network. As of March 31, 1999, ITC/\DeltaCom had completed
approximately 65% of the integrated systems testing process. No Year 2000
related failure or errors have been experienced in testing thus far.
ITC/\DeltaCom expects the integrated systems testing will be completed by June
30, 1999.
Contingency Plans. ITC/\DeltaCom continues to develop contingency plans to
- ------------------
handle its most reasonably likely worst case Year 2000 scenarios. ITC/\DeltaCom
anticipates that the bulk of its contingency planning will primarily address
potential year 2000 problems due to failures to remediate major systems
successfully, and the potential failure of ITC/\DeltaCom's interconnecting
carriers' and vendors' Year 2000 remediation efforts.
ITC/\DeltaCom expects to complete preparation of its contingency plans by the
end of the third quarter of 1999. These contingency plans will continue to be
refined and updated through the end of 1999 based upon, among other things,
responses from third party inquiries. A failure to meet this target could
materially impact ITC/\DeltaCom's operations.
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<PAGE>
Program Execution and Oversight. ITC/\DeltaCom has established a Year 2000
- --------------------------------
project office, and ITC/\DeltaCom's executive management reviews ITC/\DeltaCom's
progress on Year 2000 efforts on a monthly basis. The board of directors has
designated the Year 2000 oversight role to the Board's Audit Committee, and that
Committee receives periodic updates and progress reports on ITC/\DeltaCom's Year
2000 preparations.
To execute its Year 2000 program, ITC/\DeltaCom is utilizing both internal
and external resources to identify, correct, reprogram, and test its systems for
Year 2000 compliance. ITC/\DeltaCom's use of internal resources to achieve the
aims of its Year 2000 program has not had a material adverse effect on its
ability to develop new products and services or to maintain and upgrade, if
necessary, its existing products and services. ITC/\DeltaCom's use of external
resources to achieve the aims of its Year 2000 program has not had a material
adverse effect on ITC/\DeltaCom's operations or earnings.
Costs Related to the Year 2000 Issue. ITC/\DeltaCom has incurred, and expects
- -------------------------------------
to incur in the future, internal labor as well as consulting and other expenses
necessary to prepare its systems for the year 2000. Through the end of 1998,
ITC/\DeltaCom incurred approximately $1.1 million in external costs for its Year
2000 program. ITC/\DeltaCom incurred approximately $350,000 during the three
months ended March 31, 1999 and currently estimates that it will incur external
expenses during 1999 to complete its Year 2000 compliance work, which are not
expected to exceed approximately $1 million (inclusive of the $350,000 incurred
during the three months ended March 31, 1999). These costs, which may vary from
the estimates, have been, and will continue to be, expensed as incurred.
Risks Related to the Year 2000 Issue. ITC/\DeltaCom is implementing a detailed
- -------------------------------------
process to minimize the possibility of service interruptions or adverse effects
related to the Year 2000 issue. Although ITC/\DeltaCom's Year 2000 efforts are
intended to minimize the potential adverse effects of the Year 2000 issue on
ITC/\DeltaCom's business and operations, the actual effects of the issue cannot
and will not be known until the Year 2000. Failure by ITC/\DeltaCom and/or its
major vendors, third party network service providers, and other material service
providers and customers to adequately address their respective Year 2000 issues
in a timely manner (insofar as they relate to ITC/\DeltaCom's business) could
have a material adverse effect on ITC/\DeltaCom's business, results of
operations, and financial condition.
Like all telecommunication service providers, ITC/\DeltaCom's ability to
provide service is dependent on its interconnecting carriers and third party
vendors, including non-telecommunications related services providers. If these
third parties fail to achieve Year 2000 compliance on a timely basis,
ITC/\DeltaCom could be adversely impacted by their failure.
There is a potential for some revenue erosion caused by reduced
telecommunications service demand by both Carrier's Carrier customers and Retail
Services customers because of their Year 2000 failures. ITC/\DeltaCom has taken
steps to raise customer awareness of the Year 2000 issue and to encourage its
customers to develop and implement plans to become Year 2000 compliant.
ITC/\DeltaCom's failure to correct a material Year 2000 problem could
result in an interruption or a failure of ITC/\DeltaCom's normal business
activities and operations. Such failures could materially and adversely affect
ITC/\DeltaCom's results of operations, liquidity, and financial condition. At
this time, ITC/\DeltaCom is unable to determine whether the consequences of Year
2000 failures will have a material impact on ITC/\DeltaCom's results of
operations, liquidity, or financial condition due to the general uncertainty
inherent with the Year 2000 problem, caused in part from the uncertainty of the
interconnecting carriers' and vendors' Year 2000 readiness, as well as
uncertainties related to ITC/\DeltaCom's ongoing remediation program.
ITC/\DeltaCom's Year 2000 program is expected to reduce significantly
ITC/\DeltaCom's level of uncertainty about the year 2000 problem and, in
particular, about the year 2000 compliance and readiness of ITC/\DeltaCom's
major vendors, third party network service providers, and other material service
providers and customers. ITC/\DeltaCom believes that, with the internal
implementation of remediated information and network systems, its
interconnecting carriers and primary vendors Year 2000 readiness, and completion
of the Year 2000 compliance plan as scheduled, it will maintain normal
operations for all dates after December 31, 1999.
Effects of Accounting Standards
Statement of Position 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use, provides guidance on accounting for the
costs of computer software developed or obtained for internal use and was
adopted January 1, 1999, with no material impact on the consolidated financial
statements.
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<PAGE>
SFAS No. 133, Accounting for Derivative Instruments and for Hedging
Activities, establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. SFAS No. 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company must formally
document, designate and assess the effectiveness of transactions that receive
hedge accounting. SFAS No. 133 is effective for fiscal years beginning after
June 15, 1999. A company may also implement SFAS No. 133 as of the beginning of
any fiscal quarter after June 15, 1998. SFAS No. 133 cannot be applied
retroactively. SFAS No. 133 must be applied to (i) derivative instruments and
(ii) certain derivative instruments embedded in hybrid contracts that were
issued, acquired, or substantively modified after December 31, 1997. The
Company expects to implement SFAS No. 133 for the fiscal year beginning January
1, 2000, and does not expect the adoption of SFAS No. 133 will have a material
affect on its consolidated financial statements.
Inflation
The Company does not believe that inflation has had a significant impact on
the Company's consolidated operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
ITC/\DeltaCom is exposed to interest rate risk related to its interest rate
swap agreement and its borrowings under the Credit Facility. There were no
borrowings outstanding under the Credit Facility as of March 31, 1999.
Additionally, ITC/\DeltaCom is exposed to fair value risk related to its fixed-
rate, long-term debt. ITC/\DeltaCom's market risk sensitive instruments do not
subject ITC/\DeltaCom to material market risk exposures.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
1.1 Placement Agreement, dated May 6, 1999, by and between
ITC/\DeltaCom, Inc. and Morgan Stanley & Co. Incorporated, for
itself and the other several Placement Agents named therein.
4.1 Registration Rights Agreement, dated as of May 12, 1999, by
and among ITC/\DeltaCom, Inc. and Morgan Stanley & Co.
Incorporated, Credit Suisse First Boston Corporation, First
Union Capital Markets Corp. and NationsBanc Montgomery
Securities LLC.
4.2 Indenture dated as of May 12, 1999, between ITC/\DeltaCom,
Inc. and U.S. Trust, Company of Texas, N.A., a national
banking corporation, as trustee.
4.3 Form of Global Note relating to the 4 1/2% Convertible
Subordinated Notes due 2006 (contained in Indenture filed as
Exhibit 4.2).
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<PAGE>
10.77.6 Third Amendment, dated as of the 6th day of May, 1999, to the First
Amended and Restated Credit Agreement among Interstate FiberNet,
Inc., the Lenders (as defined therein) and NationsBank, N.A.,
successor by merger to NationsBank of Texas, N.A., a national
banking association, as Administrative Lender for itself and the
Lenders.
27.1 Financial Data Schedule
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<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ITC/\DELTACOM, INC.
-------------------
(Registrant)
Date: May 17, 1999 By: /s/ Foster O. McDonald
-----------------------
Foster O. McDonald
President
Date: May 17, 1999 By: /s/ Douglas A. Shumate
-----------------------
Douglas A. Shumate
Senior Vice President and
Chief Financial Officer
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<PAGE>
EXHIBIT 1.1
ITC/\DELTACOM, INC.
PLACEMENT AGREEMENT
May 6, 1999
Morgan Stanley & Co. Incorporated,
for itself and the other
several Placement Agents
named below
1585 Broadway
New York, New York 10036-8293
Ladies and Gentlemen:
ITC/\DeltaCom, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to you (the "Manager") and the other several
purchasers named in Schedule I hereto (collectively with the Manager, the
"Placement Agents") $100,000,000 aggregate principal amount of its 4.50%
Convertible Subordinated Notes due 2006 (the "Notes") to be issued pursuant to
the provisions of an Indenture to be dated as of May 12, 1999 (the "Indenture")
between the Company and U.S. Trust Company of Texas, N.A., Trustee (the
"Trustee"). The Notes will be convertible into shares of common stock of the
Company, par value $0.01 per share (the "Underlying Securities").
The Notes and the Underlying Securities will be offered without
being registered under the Securities Act of 1933, as amended (the "Securities
Act"), to qualified institutional buyers in compliance with the exemption from
registration provided by Rule 144A under the Securities Act.
The Placement Agents and their direct and indirect transferees will
be entitled to the benefits of a Registration Rights Agreement, to be dated the
Closing Date (as defined) and to be substantially in the form attached hereto as
Exhibit A (the "Registration Rights Agreement").
In connection with the sale of the Notes, the Company has prepared a
preliminary offering memorandum (the "Preliminary Memorandum") and will prepare
a final offering memorandum (the "Memorandum") including or incorporating by
reference a description of the terms of the Notes and the Underlying Securities,
the terms of the offering and a description of the Company and its business. As
used herein, the terms "Preliminary Memorandum" and "Memorandum" shall include
the documents incorporated by reference
<PAGE>
2
therein. The terms "supplement", "amendment" and "amend" as used herein with
respect to the Preliminary Memorandum or the Memorandum shall include all
documents deemed to be incorporated by reference in such Memorandum that are
filed subsequent to the date of such Memorandum with the Securities and Exchange
Commission (the "Commission") pursuant to the Securities Exchange Act of 1934,
as amended (the "Exchange Act).
Pursuant to an underwriting agreement (the "Underwriting Agreement")
among the Company and Morgan Stanley & Co. Incorporated, J.C. Bradford & Co.,
Credit Suisse First Boston Corporation, First Union Capital Markets Corp. and
NationsBanc Montgomery Securities LLC, as representatives of the underwriters
named on Schedule I thereto (the "Underwriters"), the Company will issue up to
6,037,500 shares of its Common Stock, par value $.01 per share (the "Shares").
1. Representations and Warranties. The Company represents and
------------------------------
warrants to, and agrees with, you that as of the date hereof:
(a) (i) Each document, if any, filed or to be filed pursuant to the
Exchange Act and incorporated by reference in the Preliminary Memorandum and the
Memorandum complied or will comply when so filed in all material respects with
the Exchange Act and the applicable rules and regulations of the Commission
thereunder and (ii) the Preliminary Memorandum does not contain and the
Memorandum, in the form used by the Placement Agents to confirm sales and on the
Closing Date, will not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this Section 1(a) do not apply to
statements or omissions in the Preliminary Memorandum or the Memorandum based
upon information relating to any Placement Agent furnished to the Company in
writing by such Placement Agent through you expressly for use therein.
(b) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the State of Delaware, has the
corporate power and authority to own its property and to conduct its business as
described in the Preliminary Memorandum and the Memorandum and is duly qualified
to transact business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole; Schedule 1 to the form of opinion of Hogan &
Hartson L.L.P. attached hereto as Exhibit B sets forth each jurisdiction in
which the conduct of the Company's business or its ownership or leasing of
property requires the Company to be qualified as a foreign corporation, other
than jurisdictions in which the failure to be qualified in all such
jurisdictions would not, in the aggregate, have a material adverse effect on the
Company and its subsidiaries, taken as a whole.
<PAGE>
3
(c) Each subsidiary of the Company has been duly incorporated, is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority to own
its property and to conduct its business as described in the Preliminary
Memorandum and the Memorandum and is duly qualified to transact business and is
in good standing in each jurisdiction in which the conduct of its business or
its ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would not have
a material adverse effect on the Company and its subsidiaries, taken as a whole;
Schedule 1 to the form of opinion of Hogan & Hartson L.L.P. attached hereto as
Exhibit B sets forth each jurisdiction in which the conduct of the business of
Interstate FiberNet, Inc. ("Interstate FiberNet") or its ownership or leasing of
property requires Interstate FiberNet to be qualified as a foreign corporation,
other than jurisdictions in which the failure to be qualified in all such
jurisdictions would not, in the aggregate, have a material adverse effect on the
Company and its subsidiaries, taken as a whole. Schedule 1 to the form of
opinion of J. Thomas Mullis, attached hereto as Exhibit E, sets forth each
jurisdiction in which the conduct of the business of ITC/\DeltaCom
Communications, Inc. ("DeltaCom") or its ownership or leasing of property
requires DeltaCom to be qualified as a foreign corporation, other than
jurisdictions in which the failure to be qualified in all such jurisdictions
would not, in the aggregate, have a material adverse effect on the Company and
its subsidiaries, taken as a whole. Interstate FiberNet and DeltaCom are the
only active subsidiaries, direct or indirect, of the Company.
(d) This Agreement has been duly authorized, executed and delivered
by the Company.
(e) The Notes have been duly authorized by the Company and, when
executed and authenticated in accordance with the terms of the Indenture and
delivered to and paid for by the Placement Agents in accordance with the terms
of this Agreement, will (x) be valid and binding obligations of the Company
enforceable against the Company in accordance ith their terms, except as (A) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (B) rights of acceleration, if
applicable, and the availability of equitable remedies may be limited by
equitable principles of general applicability and (y) be entitled to the
benefits of the Indenture.
(f) The Indenture has been duly authorized by the Company and, when
executed and delivered by the Company, will be a valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms except
as (x) the enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (y) rights of
acceleration, if applicable, and the availability of equitable remedies may be
limited by equitable principles of general applicability.
<PAGE>
4
(g) The Registration Rights Agreement has been duly authorized and,
when executed and delivered by the Company, will be a valid and binding
agreement of, the Company, enforceable against the Company in accordance with
its terms except as (x) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally, (y) the
availability of equitable remedies may be limited by equitable principles of
general applicability and (z) the rights to indemnification and contribution
thereunder may be limited by state or federal securities laws or the policies
underlying such laws.
(h) The shares of common stock of the Company outstanding on the
date hereof have been duly authorized and are validly issued, fully paid and
non-assessable.
(i) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Memorandum.
(j) The Underlying Securities reserved for issuance upon conversion
of the Notes have been duly authorized and reserved and, when issued upon
conversion of the Notes in accordance with the terms of the Notes, will be
validly issued, fully paid and non-assessable, and the issuance of the
Underlying Securities will not be subject to any preemptive or similar rights.
(k) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement, the
Indenture, the Registration Rights Agreement and the Notes (collectively, the
"Transaction Documents") and the issuance, sale and delivery of the Notes and
the Underlying Securities will not contravene any provision of applicable law or
the certificate of incorporation or by-laws of the Company or any material
agreement or other material instrument binding upon the Company or any of its
subsidiaries or any judgment, order or decree of any governmental body, agency
or court having jurisdiction over the Company or any of its subsidiaries, and no
permit, license, consent, approval, authorization or order of, or filing,
declaration or qualification with, any governmental body or agency is required
for the performance by the Company of its obligations under the Transaction
Documents, except (i) such as may be required by the securities or Blue Sky laws
of the various states in connection with the offer and sale of the Notes and
(ii) such as are required to be obtained after the date hereof and specifically
set forth in the Transaction Documents. Schedule 2 to the form of opinion of
Hogan & Hartson L.L.P. attached hereto as Exhibit B sets forth all material
agreements and instruments to which the Company or Interstate FiberNet is a
party. Schedule 2 to the form of opinion of J. Thomas Mullis attached hereto as
Exhibit E sets forth all material agreements and instruments to which DeltaCom
is a party.
(l) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the condition,
financial or otherwise, or in the earnings, business or operations of the
Company and its subsidiaries, taken as a whole,
<PAGE>
5
from that set forth in the Memorandum. Furthermore, except in each case as
described in the Memorandum, (i) the Company and its subsidiaries have not
incurred any material liability or obligation, direct or contingent, nor entered
into any material transaction not in the ordinary course of business; (ii)
neither the Company nor any of its subsidiaries has purchased any of the
Company's outstanding capital stock, nor declared, paid or otherwise made any
dividend or distribution of any kind on the Company's capital stock; and (iii)
there has not been any material change in the capital stock, short-term debt or
long-term debt of the Company and its subsidiaries, taken as a whole.
(m) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a party or to
which any of the properties of the Company or any of its subsidiaries is subject
other than proceedings accurately described in all material respects in the
Preliminary Memorandum and the Memorandum and proceedings that would not have a
material adverse effect on the Company and its subsidiaries, taken as a whole,
or on the power or ability of the Company to perform its obligations under the
Transaction Documents or to consummate the transactions contemplated by the
Memorandum.
(n) Neither the Company nor any affiliate (as defined in Rule 501(b)
of Regulation D under the Securities Act, an "Affiliate") of the Company has
directly, or through any agent, (i) sold, offered for sale, solicited offers to
buy or otherwise negotiated in respect of, any security (as defined in the
Securities Act) which is or will be integrated with the sale of the Notes in a
manner that would require the registration under the Securities Act of the Notes
or (ii) engaged in any form of general solicitation or general advertising (as
those terms are used in Regulation D under the Securities Act) in connection
with the offering of the Notes or in any manner involving a public offering
within the meaning of Section 4(2) of the Securities Act.
(o) The Company is not and, after giving effect to the offering and
sale of the Notes and the application of the proceeds thereof as described in
the Memorandum, will not be an "investment company" as such term is defined in
the Investment Company Act of 1940, as amended.
(p) It is not necessary in connection with the offer, sale and
delivery of the Notes to the Placement Agents in the manner contemplated by this
Agreement to register the Notes under the Securities Act or to qualify the
Indenture under the Trust Indenture Act of 1939, as amended.
(q) The Company and each of its subsidiaries (i) have all necessary
consents, authorizations, approvals, orders, certificates and permits of and
from, and have made all declarations and filings with, all federal, state, local
and other governmental, administrative or regulatory authorities, all
self-regulatory organizations and all courts and other tribunals, to
<PAGE>
6
own, lease, license and use their respective properties and assets and to
conduct their respective businesses in the manner described in the Memorandum,
except to the extent that the failure to obtain such consents, authorizations,
approvals, orders, certificates and permits or make such declarations and
filings would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole, and (ii) have not received any notice of
proceedings relating to revocation or modification of any such consent,
authorization, approval, order, certificate or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
have a material adverse effect on the Company and its subsidiaries, taken as a
whole, except as described in or contemplated by the Memorandum.
(r) The Company and each of its subsidiaries (i) are in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants, including all such laws and regulations concerning electromagnetic
radio frequency emissions ("Environmental Laws"), (ii) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permit, license or
approval, except where such noncompliance with Environmental Laws, failure to
receive required permits, licenses or other approvals or failure to comply with
the terms and conditions of such permits, licenses or approvals would not,
singly or in the aggregate, have a material adverse effect on the Company and
its subsidiaries, taken as a whole.
(s) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with Environmental
Laws or any permit, license or approval, any related constraints on operating
activities and any potential liabilities to third parties) which would, singly
or in the aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(t) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(u) The Company and each of its subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned
<PAGE>
7
by them which is material to their respective businesses, in each case free and
clear of all liens, encumbrances and defects, except such as are described in
the Memorandum, such as do not materially affect the value of such property and
do not interfere with the use made and proposed to be made of such property by
them; and any real property and buildings held under lease by them are held
under valid, subsisting and enforceable leases with such exceptions as are not
material and do not materially interfere with the use made and proposed to be
made of such property and buildings by them, in each case except as described in
or contemplated by the Memorandum.
(v) The Company and its subsidiaries own or possess, or can acquire
on reasonable terms, all material patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names currently employed by them in
connection with their businesses as now operated, and neither it nor any of its
subsidiaries has received any notice of infringement of or conflict with
asserted rights of others with respect to any of the foregoing which, singly or
in the aggregate, if the subject of an unfavorable decision, ruling or finding,
would have a material adverse effect on the Company and its subsidiaries, taken
as a whole.
(w) No material labor dispute exists with the employees of the
Company or any of its subsidiaries, except as described in or contemplated by
the Memorandum, or, to its knowledge, is imminent; and it is not aware of any
existing, threatened or imminent labor disturbance by the employees of any of
its principal suppliers, manufacturers or contractors that could result in any
material adverse change in the condition, financial or otherwise, or in the
earnings, business or operations of the Company and its subsidiaries, taken as a
whole.
(x) The Company and each of its subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which they are
engaged; neither the Company nor any of its subsidiaries has been refused any
insurance coverage sought or applied for; and neither the Company nor any of its
subsidiaries has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company
and its subsidiaries, taken as a whole, except as described in or contemplated
by the Memorandum.
(y) The historical financial statements included in the Memorandum
comply as to form in all material respects with the applicable accounting
requirements of the Securities Act and the related published rules and
regulations.
<PAGE>
8
(z) The Company has reviewed its operations and that of its
subsidiaries to evaluate the extent to which the business or operations of the
Company or any of its subsidiaries will be affected by the Year 2000 Problem
(that is, any significant risk that computer hardware or software applications
used by the Company and its subsidiaries will not, in the case of dates or time
periods occurring after December 31, 1999, function at least as effectively as
in the case of dates or time periods occurring prior to January 1, 2000); as a
result of such review, (i) the Company has no reason to believe, and does not
believe, that (A) there are any issues related to the Company's preparedness to
address the Year 2000 Problem that are of a character required to be described
or referred to in the Memorandum which have not been so described in the
Memorandum and (B) the Year 2000 Problem will have a material adverse effect on
the condition, financial or otherwise, or on the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, or result in
any material loss or material interference with the business or operations of
the Company and its subsidiaries, taken as a whole; and (ii) the Company
reasonably believes, after due inquiry, that the suppliers, vendors, customers
or other material third parties used or served by the Company and its
subsidiaries are addressing or will address the Year 2000 Problem in a timely
manner, except to the extent that a failure to address the Year 2000 Problem by
any supplier, vendor, customer or other material third party would not have a
material adverse effect on the condition, financial or otherwise, or on the
earnings, business or operations of the Company and its subsidiaries, taken as a
whole.
(aa) The Notes satisfy the requirements set forth in Rule 144A(d)(3)
under the Securities Act.
2. Offering. You have advised the Company that the Placement Agents
--------
will make an offering of the Notes purchased by the Placement Agents hereunder
on the terms set forth in the Memorandum as soon as practicable after this
Agreement is entered into as in your judgment is advisable.
3. Purchase and Delivery. The Company hereby agrees to sell to the
---------------------
several Placement Agents, and the Placement Agents, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agree, severally and not jointly, to purchase from the
Company the respective principal amount of Notes set forth in Schedule I hereto
opposite their names at a purchase price of 97.25% of the principal amount
thereof plus accrued interest, if any, from May 12, 1999 to the date of payment
and delivery.
The Company hereby agrees that, without the prior written consent of
Morgan Stanley & Co. Incorporated, it will not, for a period of 90 days after
the date of the Memorandum, (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, lend, or
<PAGE>
9
otherwise transfer or dispose of, directly or indirectly, any shares of common
stock or any securities convertible into or exercisable or exchangeable for
common stock, or (ii) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
such shares of common stock, whether any such transaction described in clause
(i) or (ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise, other than (a) the sale of the Shares to the
Underwriters pursuant to the Underwriting Agreement, (b) the sale of the Notes
to the Placement Agents pursuant to the Placement Agreement, (c) the issuance of
the Underlying Securities upon conversion of the Notes, (d) the issuance by the
Company of shares of common stock upon the exercise of an option or warrant or
the conversion of a security, in each case, outstanding on the date hereof and
of which the Underwriters have been advised in writing, (e) the issuance of
additional options to purchase shares of Common Stock pursuant to the Company's
Stock Option Plan or Director Stock Option Plan (as each term is defined in the
Company's Annual Report on Form 10-K, as amended on the date hereof), (f)
transactions relating to shares of Common Stock or other securities acquired in
open market transactions after the completion of the private placement of the
Notes hereunder or (g) the issuance of shares of Common Stock pursuant to the
Agreement and Plan of Merger, dated April 15, 1999, among the Company,
Interstate FiberNet and AvData Systems, Inc.
Payment for the Notes shall be made against delivery of the Notes at
a closing (the "Closing") to be held at the office of Hogan & Hartson L.L.P.,
555 Thirteenth Street, N.W., Washington, D.C. 20004, at 9:00 A.M., local time,
May 12, 1999, or at such other time on the same or such other date, not later
than May 26, 1999, as shall be designated in writing by you. The time and date
of such payment are herein referred to as the "Closing Date". Payment for the
Notes shall be made to the Company in federal funds or other funds immediately
available in New York City.
Certificates for the Notes shall be in definitive form and
registered in such names and in such denominations as you shall request in
writing not less than one full business day prior to the Closing Date. The
certificates evidencing the Notes shall be delivered to you on the Closing Date
for the respective accounts of the several Placement Agents, with any transfer
taxes payable in connection with the transfer of the Notes to the Placement
Agents duly paid, against payment of the purchase price therefor.
4. Conditions to Closing. The several obligations of the Placement
---------------------
Agents under this Agreement to purchase the Notes on the Closing Date will be
subject to the following conditions:
(a) Subsequent to the date of this Agreement and prior to the
Closing Date:
<PAGE>
10
(i) there shall not have occurred any downgrading, nor shall any
notice have been given of any intended or potential downgrading or of any
review for a possible change that does not indicate the direction of the
possible change, in the rating accorded any of the Company's securities by
any "nationally recognized statistical rating organization," as such term
is defined for purposes of Rule 436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or any development
involving a prospective change, in the condition, financial or otherwise,
or in the earnings, business or operations, of the Company and its
subsidiaries, taken as a whole, from that set forth in the Memorandum
that, in your judgment, is material and adverse and that makes it, in your
judgment, impracticable to market the Notes on the terms and in the manner
contemplated in the Memorandum.
(b) You shall have received on the Closing Date a certificate, dated
the Closing Date and signed by an executive officer of the Company, to the
effect set forth in clause (a)(i) above and to the effect that the
representations and warranties of the Company contained in this Agreement are
true and correct in all material respects as of the Closing Date and that the
Company has complied in all material respects with all of the agreements and
satisfied all of the conditions on its part to be performed or satisfied on or
before the Closing Date.
The officer signing and delivering any such certificate may rely
upon the best of his knowledge as to proceedings threatened.
(c) You shall have received on the Closing Date an opinion of Hogan
& Hartson L.L.P., counsel for the Company, dated the Closing Date, in the form
set forth in Exhibit B.
The opinion of Hogan & Hartson L.L.P. shall be rendered to you at
the request of the Company and shall so state therein.
(d) You shall have received on the Closing Date an opinion of
Brantley & Wilkerson, P.C., Alabama communications counsel for the Company,
dated the Closing Date, in the form set forth in Exhibit C.
The opinion of Brantley & Wilkerson, P.C. shall be rendered to you
at the request of the Company and shall so state therein.
(e) You shall have received on the Closing Date an opinion of
Stowers, Hayes, Clark & Roane, Georgia communications counsel for the Company,
dated the Closing Date, in the form set forth in Exhibit D.
<PAGE>
11
The opinion of Stowers, Hayes, Clark & Roane shall be rendered to
you at the request of the Company and shall so state therein.
(f) You shall have received on the Closing Date an opinion of J.
Thomas Mullis, General Counsel of the Company, dated the Closing Date, in the
form set forth in Exhibit E.
The opinion of J. Thomas Mullis shall be rendered to you at the
request of the Company and shall so state therein.
(g) You shall have received on the Closing Date an opinion of
Shearman & Sterling, counsel for the Placement Agents, dated the Closing Date,
in form and substance satisfactory to you.
(h) You shall have received on each of the date hereof and the
Closing Date a letter, dated the date hereof or the Closing Date, as the case
may be, in form and substance satisfactory to you, from Arthur Andersen LLP, the
Company's independent public accountants, containing statements and information
of the type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain financial
information contained in the Memorandum.
(i) The "lock-up" agreements, each substantially in the form of
Exhibit F hereto, between you and certain shareholders, officers and directors
of the Company relating to sales and certain other dispositions of shares of
common stock or certain other securities shall be in full force and effect on
the Closing Date.
(j) Interstate FiberNet, Inc., NationsBank, N.A. and a majority of
the lenders party to the First Amended and Restated Credit Agreement dated as of
February 24, 1998 and as amended as of February 10, 1999 shall have entered into
an amendment thereto, substantially in the form set forth in Exhibit G and such
amendment shall be in full force and effect on the Closing Date.
(k) You shall have received such other certificates and documents as
you or your counsel may request.
5. Covenants of the Company. In further consideration of the
------------------------
agreements of the Placement Agents contained in this Agreement, the Company
covenants as follows:
(a) To furnish to you, without charge, during the period mentioned
in paragraph (c) below, as many copies of the Memorandum, any documents
incorporated by reference therein and any supplements and amendments thereto as
you may reasonably request
<PAGE>
12
and to use its best efforts to deliver such copies to you by 10:00 a.m. (New
York City time) on the business day next following the execution of this
Agreement.
(b) Before amending or supplementing the Preliminary Memorandum or
the Memorandum, to furnish to you a copy of each such proposed amendment or
supplement and not to use any such proposed amendment or supplement to which you
reasonably object.
(c) If, during such period after the date hereof and prior to the
date on which all of the Notes shall have been sold by the Placement Agents, any
event shall occur or condition exist as a result of which it is necessary in
your judgment to amend or supplement the Memorandum in order to make the
statements therein, in the light of the circumstances when the Memorandum is
delivered to a purchaser, not misleading, or if, in the opinion of counsel to
the Placement Agents, it is necessary to amend or supplement the Memorandum to
comply with applicable law, forthwith to prepare and furnish, at its own
expense, to the Placement Agents, either amendments or supplements to the
Memorandum so that the statements in the Memorandum as so amended or
supplemented will not, in the light of the circumstances when the Memorandum is
delivered to a purchaser, be misleading or so that the Memorandum, as so amended
or supplemented, will comply with applicable law.
(d) To endeavor to qualify the Notes for offer and sale under the
securities or Blue Sky laws of such jurisdictions as you shall reasonably
request.
(e) Whether or not any sale of such Notes is consummated, to pay all
expenses incident to the performance of its obligations under this Agreement,
including: (i) the preparation of the Preliminary Memorandum and the Memorandum
and all amendments and supplements thereto, (ii) the preparation, issuance and
delivery of the Notes, (iii) the fees and disbursements of the Company's counsel
and accountants and the Trustee and the Company's transfer agent and each of
their counsel, (iv) the qualification of such Notes under securities or Blue Sky
laws in accordance with the provisions of Section 5(d), including filing fees
and the fees and disbursements of counsel for the Placement Agents in connection
therewith and in connection with the preparation of any Blue Sky or legal
investment memoranda, (v) the printing and delivery to the Placement Agents in
quantities as hereinabove stated of copies of the Preliminary Memorandum and the
Memorandum and any amendments or supplements thereto, (vi) any fees charged by
rating agencies for the rating of such Notes, (vii) all document production
charges and expenses of counsel to the Placement Agents (but not including their
fees for professional services) in connection with the preparation of this
Agreement, (viii) the fees and expenses, if any, incurred in connection with the
admission of such Notes for trading in PORTAL or any other appropriate market
system, (ix) the costs and expenses of the Company relating to investor
presentations on any "road show" undertaken in connection with the marketing of
the Notes, including, without limitation, expenses associated with the
production of road show slides and graphics, fees and expenses of any
consultants
<PAGE>
13
engaged in connection with the road show presentations with the prior approval
of the Company, travel and lodging expense of the representatives and officers
of the Company and any such consultants, and the cost of any aircraft chartered
in connection with the road show, and (x) all other costs and expenses incident
to the performance of the obligations of the Company hereunder for which
provision is not otherwise made in this Section.
(f) Neither the Company nor any Affiliate will sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security (as
defined in the Securities Act) which could be integrated with the sale of the
Notes in a manner which would require the registration under the Securities Act
of such Notes.
(g) Not to solicit any offer to buy or offer or sell the Notes or
the Underlying Securities by means of any form of general solicitation or
general advertising (as those terms are used in Regulation D under the
Securities Act) or in any manner involving a public offering within the meaning
of Section 4(2) of the Securities Act.
(h) While any of the Notes or the Underlying Securities remain
outstanding, the Company will make available, upon request, to any seller of
such Notes or the Underlying Securities the information specified in Rule
144A(d)(4) under the Securities Act, unless the Company is then subject to
Section 13 or 15(d) of the Exchange Act.
(i) To use its best efforts to permit the Notes to be designated
PORTAL securities in accordance with the rules and regulations adopted by the
National Association of Securities Dealers, Inc. relating to trading in the
PORTAL Market.
(j) To use the net proceeds received by it from the sale of the
Notes pursuant to this Agreement in the manner specified in the Memorandum under
the caption "Use of Proceeds."
(k) During the period of two years after the Closing Date, the
Company will not, and will not permit any of its affiliates (as defined in Rule
144 under the Securities Act) to resell any of the Notes or the Underlying
Securities which constitute "restricted securities" under Rule 144 that have
been reacquired by any of them.
6. Offering of Notes; Restrictions on Transfer. Each Placement
-------------------------------------------
Agent, severally and not jointly, represents and warrants to the Company that
such Placement Agent is a qualified institutional buyer as defined in Rule 144A
under the Securities Act (a "QIB"). Each Placement Agent, severally and not
jointly, agrees with the Company that (i) it will not solicit offers for, or
offer or sell, such Notes by any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Securities Act)
or in any manner involving a public offering within the meaning of Section 4(2)
of the Securities Act and (ii) it
<PAGE>
14
will solicit offers for such Notes only from, and will offer such Notes only to,
persons that it reasonably believes to be QIBs.
7. Indemnification and Contribution. (a) The Company agrees to
--------------------------------
indemnify and hold harmless each Placement Agent, and each person, if any, who
controls such Placement Agent within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, or is under common control
with, or is controlled by, such Placement Agent, from and against any and all
losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred by any Placement Agent or any such
controlling or affiliated person in connection with defending or investigating
any such action or claim) caused by any untrue statement or alleged untrue
statement of a material fact contained in the Preliminary Memorandum or the
Memorandum (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto), or caused by any omission or alleged
omission to state therein a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to any Placement Agent furnished to the
Company in writing by such Placement Agent through you expressly for use
therein; provided, however, that the foregoing indemnity agreement with respect
to the Preliminary Memorandum or the Memorandum shall not inure to the benefit
of any Placement Agent (or any other person indemnified pursuant to this
paragraph (a)) to the extent that any such losses, claims, damages or
liabilities result from the fact that such Placement Agent sold securities to a
person to whom there was not sent or given by or on behalf of such Placement
Agent a copy of the Memorandum at or prior to the written confirmation of the
sale of the Notes to such person (if the Company shall have furnished the
Memorandum to such Placement Agent prior to the written confirmation of such
sale), and if the losses, claims, damages or liabilities result from an untrue
statement or alleged untrue statement or an omission or alleged omission
contained in the Preliminary Memorandum that was corrected in the Memorandum.
(b) Each Placement Agent agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors and officers and each
person, if any, who controls the Company within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act to the same extent as
the foregoing indemnity from the Company to such Placement Agent, but only with
reference to information relating to such Placement Agent furnished to the
Company in writing by such Placement Agent through you expressly for use in the
Preliminary Memorandum or the Memorandum or any amendments or supplements
thereto.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to
<PAGE>
15
either paragraph (a) or (b) of this Section 7 above, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
(in addition to any local counsel) for all such indemnified parties and that all
such fees and expenses shall be reimbursed as they are incurred. Such firm shall
be designated in writing by Morgan Stanley & Co. Incorporated in the case of
parties indemnified pursuant to paragraph (a) of this Section 7 above and by the
Company in the case of parties indemnified pursuant to paragraph (b) of this
Section 7 above. The indemnifying party shall not be liable for any settlement
of any proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second and third sentences of this paragraph, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 60 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
(d) To the extent the indemnification provided for in paragraph (a)
or (b) of this Section 7 is unavailable to an indemnified party or insufficient
in respect of any losses, claims, damages or liabilities, then each indemnifying
party under such paragraph, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities (i) in such
<PAGE>
16
proportion as is appropriate to reflect the relative benefits received by the
Company, on the one hand, and the Placement Agents, on the other hand, from the
offering of such Notes 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 the Company on the one hand and the Placement Agents on the
other hand in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Placement Agents on the other hand in connection with the offering of
such Notes shall be deemed to be in the same respective proportions as the net
proceeds from the offering of such Notes (before deducting expenses) received by
the Company and the total discounts and commissions received by the Placement
Agents in respect thereof bear to the aggregate offering price of such Notes.
The relative fault of the Company on the one hand and of the Placement Agents 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 or
alleged omission to state a material fact relates to information supplied by the
Company or by the Placement Agents and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Placement Agents' respective obligations to contribute pursuant to
this Section 7 are several in proportion to the respective principal amount of
Notes they have purchased hereunder, and not joint.
(e) The Company and the Placement Agents agree that it would not be
just or equitable if contribution pursuant to this Section 7 were determined by
pro rata allocation (even if the Placement Agents were treated as one entity for
such purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in paragraph (d) above. The amount paid
or payable by an indemnified party as a result of the losses, claims, damages
and liabilities referred to in paragraph (d) above 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 Placement Agent shall be required to contribute any amount in
excess of the amount by which the total price at which the Notes resold by it in
the initial placement of such Notes were offered to investors exceeds the amount
of any damages that such Placement Agent 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 indemnity and contribution provisions contained in this Section
7 and the representations and warranties of the Company contained in this
Agreement shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement,
<PAGE>
17
(ii) any investigation made by or on behalf of the Placement Agents or any
person controlling the Placement Agents or by or on behalf of the Company, any
of its officers or directors or any person controlling the Company and (iii)
acceptance of and payment for any of the Notes. The remedies provided for in
this Section 7 are not exclusive and shall not limit any rights or remedies
which may otherwise be available to any indemnified party at law or in equity.
8. Termination. This Agreement shall be subject to termination by
-----------
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange, the National Association
of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses (a)(i) through (iv), such event singly or
together with any other such event makes it, in your judgment, impracticable to
market the Notes on the terms and in the manner contemplated in the Memorandum.
9. Miscellaneous. If, on the Closing Date, any one or more of the
-------------
Placement Agents shall fail or refuse to purchase Notes that it or they have
agreed to purchase hereunder on such date, and the aggregate principal amount of
Notes which such defaulting Placement Agent or Placement Agents agreed but
failed or refused to purchase is not more than one-tenth of the aggregate
principal amount of Notes to be purchased on such date, the other Placement
Agents shall be obligated severally in the proportions that the principal amount
of Notes set forth opposite their respective names in Schedule I bears to the
aggregate principal amount of Notes set forth opposite the names of all such
non-defaulting Placement Agents, or in such other proportions as you may
specify, to purchase the Notes which such defaulting Placement Agent or
Placement Agents agreed but failed or refused to purchase on such date; provided
that in no event shall the principal amount of Notes that any Placement Agent
has agreed to purchase pursuant to Section 3 be increased pursuant to this
Section 9 by an amount in excess of one-ninth of such principal amount of Notes
without the written consent of such Placement Agent. If, on the Closing Date,
any Placement Agent or Placement Agents shall fail or refuse to purchase Notes
which it or they have agreed to purchase hereunder on such date and the
aggregate principal amount of Notes with respect to which such default occurs is
more than one-tenth of the aggregate principal amount of Notes to be purchased
on such date and arrangements satisfactory to you and the Company for the
purchase of such Notes are not made within 36 hours after such default, this
Agreement shall terminate without liability on the part of any non-defaulting
Placement Agent or of the Company. In any such case either you or the
<PAGE>
18
Company shall have the right to postpone the Closing Date, but in no event for
longer than seven days, in order that the required changes, if any, in the
Memorandum or in any other documents or arrangements may be effected. Any action
taken under this paragraph shall not relieve any defaulting Placement Agent from
liability in respect of any default of such Placement Agent under this
Agreement.
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
If this Agreement shall be terminated by the Placement Agents, or
any of them, because of any failure or refusal on the part of the Company to
comply with the terms or to fulfill any of the conditions of this Agreement, or
if for any reason the Company shall be unable to perform its obligations under
this Agreement, the Company will reimburse the Placement Agents or such
Placement Agents as have so terminated this Agreement with respect to
themselves, severally, for all out-of-pocket expenses (including the fees and
disbursements of their counsel) reasonably incurred by such Placement Agents in
connection with this Agreement or the offering contemplated hereunder.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
The headings of the sections of this Agreement have been inserted
for convenience of reference only and shall not be deemed a part of this
Agreement.
<PAGE>
19
Please confirm your agreement to the foregoing by signing in the
space provided below for that purpose and returning to us a copy hereof,
whereupon this Agreement shall constitute a binding agreement between us.
Very truly yours,
ITC/\DeltaCom, Inc.
By /s/ Douglas A. Shumate
------------------------------------
Name: Douglas A. Shumate
Title: Chief Financial Officer
Agreed as of the date first above written
Morgan Stanley & Co. Incorporated
Credit Suisse First Boston Corporation
First Union Capital Markets Corp.
NationsBanc Montgomery Securities LLC
By Morgan Stanley & Co. Incorporated
By_________________________________
Name: Katina Dorton
Title: Principal
<PAGE>
SCHEDULE I
Principal Amount
of Notes
Placement Agent To Be Purchased
--------------- ---------------
Morgan Stanley & Co. Incorporated ......................... $ 60,001,000
Credit Suisse First Boston Corporation .................... $ 13,333,000
First Union Capital Markets Corp. ......................... $ 13,333,000
NationsBanc Montgomery Securities LLC ..................... $ 13,333,000
------------
Total ..................................................... $100,000,000
============
<PAGE>
EXHIBIT A
FORM OF REGISTRATION RIGHTS AGREEMENT
[Intentionally Omitted]
<PAGE>
EXHIBIT B
OPINION OF HOGAN & HARTSON L.L.P.
[Intentionally Omitted]
<PAGE>
EXHIBIT C
OPINION OF BRANTLEY & WILKERSON, P.C.
[Intentionally Omitted]
<PAGE>
EXHIBIT D
OPINION OF STOWERS, HAYES, CLARK & ROANE
[Intentionally Omitted]
<PAGE>
EXHIBIT E
OPINION OF J. THOMAS MULLIS
[Intentionally Omitted]
<PAGE>
EXHIBIT F
May_____, 1999
Morgan Stanley & Co. Incorporated
J.C. Bradford & Co.
Credit Suisse First Boston Corporation
First Union Capital Markets Corp.
NationsBanc Montgomery Securities LLC
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Morgan Stanley & Co. Incorporated
Credit Suisse First Boston Corporation
First Union Capital Markets Corp.
NationsBanc Montgomery Securities LLC
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Ladies and Gentlemen:
The undersigned understands that ITC/\DeltaCom, Inc., a Delaware
corporation (the "Company"), proposes to enter into (1) an underwriting
agreement (the "Underwriting Agreement") with Morgan Stanley & Co. Incorporated
("Morgan Stanley"), J.C. Bradford & Co., Credit Suisse First Corporation, First
Union Capital Markets Corp. and NationsBanc Montgomery Securities LLC, as
representatives of the several underwriters (the "Underwriters") named in
Schedule I thereto, providing for the public offering (the "Public Offering") of
shares of the Company's Common Stock (par value $.01 per share) (the "Common
Stock") and (2) a placement agreement (the "Placement Agreement") with Morgan
Stanley, Credit Suisse First Corporation, First Union Capital Markets Corp. and
NationsBanc Montgomery Securities LLC (the "Placement Agents"), providing for
the private placement (the "Private Placement") of the Company's 4.50%
Convertible Subordinated Notes due 2006 (the "Notes").
<PAGE>
To induce the Underwriters that may participate in the Public
Offering and the Placement gents that may participate in the Private Placement
to continue their efforts in connection with the Public Offering and Private
Placement, respectively, and for other good and valuable considerations receipt
of which is hereby acknowledged, the undersigned hereby agrees that, without the
prior written consent of Morgan Stanley on behalf of the Underwriters and the
Placement Agents, it will not, during the period commencing on the date hereof
and ending 90 days after the date of the final prospectus relating to the Public
Offering (the "Prospectus") and the final offering memorandum relating to the
Private Placement (the "Memorandum"), (1) offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, lend, or otherwise
transfer or dispose of, directly or indirectly, any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for Common Stock
or (2) enter into any swap or other arrangement that transfer to another, in
whole or in part, any of the economic consequences of ownership of Common Stock,
whether any such transaction described in clause (1) or (2) above is to be
settled by delivery of Common Stock or other securities, in cash or otherwise.
The foregoing sentence shall not apply to (a) transactions relating to shares of
Common Stock or other securities acquired in open market transactions after the
completion of the Public Offering and the Private Placement, (b) transfers of
Common Stock to the Company, (c) a pledge, grant of security interest or other
encumbrance effected in a bona fide transaction with an unrelated and
unaffiliated pledgee, under a written pledge agreement that provides that the
pledgee shall hold the Common Stock subject to the terms of this Agreement and,
as a condition precedent to such pledge, security interest or other encumbrance,
shall be required to execute and deliver this Agreement and (d) any transfer (i)
to a trust for the benefit of such transferor or such transferor's spouse or
lineal descendants or (ii) by gift, will or intestate succession to such
transferor's spouse or lineal descendants, provided, in each case, that, as a
condition precedent to such transfer, the transferee of any such transfer, or
the trustee or legal guardian on behalf of any such transferee, duly executes
and delivers this Agreement. In addition, the undersigned agrees that, without
the prior written consent of Morgan Stanley on behalf of the Underwriters and
the Placement Agents, it will not, during the period commencing on the dae
hereof and ending 90 days after the date of the Prospectus and Memorandum, make
any demand for or exercise any right with respect to, the registration of any
shares of Common Stock or any security convertible into or exercisable or
exchangeable for Common Stock.
2
<PAGE>
Whether or not the Public Offering or Private Placement actually
occurs depends on a number of factors, including market conditions. Any Public
Offering or Private Placement will only be made pursuant to an Underwriting
Agreement and Placement Agreement, respectively, the terms of which are subject
to negotiation between the Company and the Underwriters or the Placement Agents,
as the case may be.
Very truly yours,
________________________________________
(Signature)
________________________________________
Print Name)
___________________________________ (Address)
Accepted as of the date
first set forth above:
Morgan Stanley & Co. Incorporated
By:________________________________
3
<PAGE>
EXHIBIT G
[Intentionally Omitted]
<PAGE>
EXHIBIT 4.1
REGISTRATION RIGHTS AGREEMENT
by and among
ITC/\DELTACOM, INC.
as Issuer,
and
MORGAN STANLEY & CO. INCORPORATED,
CREDIT SUISSE FIRST BOSTON CORPORATION,
FIRST UNION CAPITAL MARKETS CORP. and
NATIONSBANC MONTGOMERY SECURITIES LLC,
as Placement Agents
Dated May 12, 1999
<PAGE>
THIS REGISTRATION RIGHTS AGREEMENT is made and entered into as of May 12,
1999 by and among ITC/\DeltaCom, Inc., a Delaware corporation (the "Company"),
and Morgan Stanley & Co. Incorporated, Credit Suisse First Boston Corporation,
First Union Capital Markets Corp. and NationsBanc Montgomery Securities LLC (the
"Placement Agents") pursuant to the Placement Agreement, dated May 6, 1999 (the
"Placement Agreement"), among the Company and the Placement Agents. In order to
induce the Placement Agents to enter into the Placement Agreement, the Company
has agreed to provide the registration rights set forth in this Agreement. The
execution of this Agreement is a condition to the closing under the Placement
Agreement.
The Company agrees with the Placement Agents, (i) for their benefit as
Placement Agents and (ii) for the benefit of the beneficial owners (including
the Placement Agents) from time to time of the Notes (as defined herein) and the
beneficial owners from time to time of the Underlying Common Stock (as defined
herein) issued upon conversion of the Notes (each of the foregoing a "Holder"
and together the "Holders"), as follows:
Section 1. Definitions. Capitalized terms used herein without definition
shall have their respective meanings set forth in the Placement Agreement. As
used in this Agreement, the following terms shall have the following meanings:
Affiliate: With respect to any specified person, an "affiliate," as
defined in Rule 144, of such person.
Amendment Effectiveness Deadline Date: See Section 2(d) hereof.
Applicable Conversion Price: The Applicable Conversion Price as of any
date of determination means the Conversion Price in effect as of such date of
determination or, if no Notes are then outstanding, the Conversion Price that
would be in effect were Notes then outstanding.
Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday that is
not a day on which banking institutions in The City of New York are authorized
or obligated by law or executive order to close.
Common Stock: The shares of common stock $0.01 par value of the Company
and any other shares of common stock as may constitute "Common Stock" for
purposes of the Indenture, including the Underlying Common Stock.
Company: The Company shall have the meaning set forth in the first
paragraph of this Agreement and shall also include the Company's successors.
Conversion Price: Conversion Price shall have the meaning assigned such
term in the Indenture.
Damages Accrual Period: See Section 2(e) hereof.
<PAGE>
Damages Payment Date: Each interest payment date under the Indenture in
the case of Notes, and each May 15 and November 15 in the case of the Underlying
Common Stock.
Deferral Notice: See Section 3(i) hereof.
Deferral Period: See Section 3(i) hereof.
Effectiveness Deadline Date: See Section 2(a) hereof.
Effectiveness Period: The period from the later of (a) the Issue Date and
(b) the last date of original issuance of the Notes until expiration of the
holding period applicable to the Registrable Securities held by Holders that are
not Affiliates of the Company under Rule 144(k) under the Securities Act, or
such shorter period ending on the date that all Registrable Securities have
ceased to be Registrable Securities.
Event: See Section 2(e) hereof.
Event Date: See Section 2(e) hereof.
Event Termination Date: See Section 2(e) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.
Filing Deadline Date: See Section 2(a) hereof.
Holder: See the second paragraph of this Agreement.
Indenture: The Indenture dated as of the date hereof between the Company
and United States Trust Company of New York, as trustee, pursuant to which the
Notes are being issued.
Initial Shelf Registration Statement: See Section 2(a) hereof.
Issue Date: May 12, 1999.
Liquidated Damages Amount: See Section 2(e) hereof.
Losses: See Section 6 hereof.
Material Event: See Section 3(i) hereof.
Nonconversion Election: See Section 3.1(a) of the Indenture.
2
<PAGE>
Nonconversion Election Date: See Section 3.1(a) of the Indenture.
Notes: The 4 1/2% Convertible Subordinated Notes due 2006 of the Company
to be purchased pursuant to the Placement Agreement.
Notice and Questionnaire: A written notice delivered to the Company
containing substantially the information called for by the Selling
Securityholder Notice and Questionnaire attached as Annex A to the Offering
Memorandum of the Company issued May 6, 1999 relating to the Notes.
Notice Holder: On any date, any Holder that has delivered a Notice and
Questionnaire to the Company on or prior to such date.
Placement Agents: Morgan Stanley & Co. Incorporated, Credit Suisse First
Boston Corporation, First Union Capital Markets Corp. and NationsBanc Montgomery
Securities LLC.
Placement Agreement: See the first paragraph of this Agreement.
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 under the Securities Act), as
amended or supplemented by any amendment or prospectus supplement, including
post-effective amendments, and all materials incorporated by reference or
explicitly deemed to be incorporated by reference in such Prospectus.
Provisional Redemption: See Section 3.1(a) of the Indenture.
Provisional Redemption Date: See Section 3.1(a) of the Indenture.
Record Holder: (i) With respect to any Damages Payment Date relating to
any Notes as to which any such Liquidated Damages Amount has accrued, the holder
of record of such Note on the record date with respect to the interest payment
date under the Indenture on which such Damages Payment Date shall occur and (ii)
with respect to any Damages Payment Date relating to the Underlying Common Stock
as to which any such Liquidated Damages Amount has accrued, the registered
holder of such Underlying Common Stock fifteen (15) days prior to the next
succeeding Damages Payment Date.
Registrable Securities: The Notes until such Notes have been converted or
exchanged into the Underlying Common Stock, and, at all times subsequent to any
such conversion or exchange, the Underlying Securities and any securities into
or for which such Underlying Common Stock have been converted or exchanged, and
any security issued with respect thereto upon any stock dividend, split or
similar event until, in the case of any such security, (A) the earliest of (i)
its effective registration under the Securities Act and resale in accordance
with the Registration Statement covering it, (ii) expiration of the holding
period that would be applicable thereto under Rule 144(k) under the Securities
Act were it not held by an affiliate of the
3
<PAGE>
Company or (iii) its sale to the public pursuant to Rule 144, and (B) as a
result of the event or circumstance described in any of the foregoing clauses
(i) through (iii), the legends with respect to transfer restrictions required
under the Indenture are removed or removable in accordance with the terms of the
Indenture.
Registration Expenses: See Section 5 hereof.
Registration Statement: Any registration statement of the Company that
covers any of the Registrable Securities pursuant to the provisions of this
Agreement including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all materials incorporated by reference or explicitly deemed to be incorporated
by reference in such registration statement.
Restricted Securities: As this term is defined in Rule 144.
Rule 144: Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or any similar rule or regulation hereafter adopted by the
SEC.
Rule 144A: Rule 144A under the Securities Act, as such Rule may be amended
from time to time, or any similar rule or regulation hereafter adopted by the
SEC.
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 Registration Statement: See Section 2(a) hereof.
Subsequent Shelf Registration Statement: See Section 2(b) hereof.
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: U.S. Trust Company of Texas, N.A. (or any successor entity), the
Trustee under the Indenture.
Underlying Common Stock: The Common Stock into which the Notes are
convertible or issued upon any such conversion.
SECTION 2. Shelf Registration. (a) The Company shall prepare and file or
cause to be prepared and filed with the SEC, as soon as practicable but in any
event by the date (the "Filing Deadline Date") ninety (90) days after the Issue
Date, a Registration Statement for an offering to be made on a delayed or
continuous basis pursuant to Rule 415 of the Securities Act (a "Shelf
Registration Statement") registering the resale from time to time by Holders
thereof of all of the Registrable Securities (the "Initial Shelf Registration
Statement"). The Initial Shelf Registration Statement shall be on Form S-3 or
another appropriate form permitting registration of such
4
<PAGE>
Registrable Securities for resale by such Holders in accordance with the methods
of distribution elected by the Holders and set forth in the Initial Shelf
Registration Statement. The Company shall use its commercially reasonable
efforts to cause the Initial Shelf Registration Statement to be declared
effective under the Securities Act as promptly as is practicable but in any
event by the date (the "Effectiveness Deadline Date") that is six months after
the Issue Date, and to keep the Initial Shelf Registration Statement (or any
Subsequent Shelf Registration Statement) continuously effective under the
Securities Act until the expiration of the Effectiveness Period. At the time the
Initial Shelf Registration Statement is declared effective, each Holder that
became a Notice Holder on or prior to the date ten (10) Business Days prior to
such time of effectiveness shall be named as a selling securityholder in the
Initial Shelf Registration Statement and the related Prospectus in such a manner
as to permit such Holder to deliver such Prospectus to purchasers of Registrable
Securities in accordance with applicable law. None of the Company's security
holders (other than the Holders of Registrable Securities) shall have the right
to include any of the Company's securities in the Shelf Registration Statement.
(b) If the Initial Shelf Registration Statement or any Subsequent Shelf
Registration Statement ceases to be effective for any reason at any time during
the Effectiveness Period (other than because all Registrable Securities
registered thereunder shall have been resold pursuant thereto or shall have
ceased to be Registrable Securities), the Company shall use its reasonable
efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within thirty (30) days of such
cessation of effectiveness amend the Shelf Registration Statement in a manner
reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional Shelf Registration Statement
covering all of the securities that as of the date of such filing are
Registrable Securities (a "Subsequent Shelf Registration Statement"). If a
Subsequent Shelf Registration Statement is filed, the Company shall use
reasonable efforts to cause the Subsequent Shelf Registration Statement to
become effective as promptly as is practicable after such filing and to keep
such Registration Statement (or subsequent Shelf Registration Statement)
continuously effective until the end of the Effectiveness Period.
Notwithstanding the foregoing, in the event the Company has given a notice of
Provisional Redemption or Nonconversion Election it shall use its reasonable
efforts to ensure that the Shelf Registration Statement be effective and
available for use at all times prior to the Provisional Redemption Date or
Nonconversion Election Date, as the case may be.
(c) The Company shall supplement and amend the Shelf Registration
Statement if required by the rules, regulations or instructions applicable to
the registration form used by the Company for such Shelf Registration Statement,
if required by the Securities Act or, to the extent to which the Company does
not reasonably object, as reasonably requested by the Placement Agents or by the
Trustee on behalf of the registered Holders or by any managing underwriter in
the event of an underwritten offering.
(d) Each Holder of Registrable Securities agrees that if such Holder
wishes to sell Registrable Securities pursuant to a Shelf Registration Statement
and related Prospectus, it will do so only in accordance with this Section 2(d)
and Section 3(i). Each Holder of Registrable Securities wishing to sell
Registrable Securities pursuant to a Shelf Registration Statement and related
Prospectus agrees to deliver a Notice and Questionnaire to the Company at least
three (3)
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Business Days prior to any intended distribution of Registrable Securities under
the Shelf Registration Statement. From and after the date the Initial Shelf
Registration Statement is declared effective, the Company shall, as promptly as
practicable after the date a Notice and Questionnaire is delivered, and in any
event upon the later of (x) five (5) Business Days after such date or (y) five
(5) Business Days after the expiration of any Deferral Period in effect when the
Notice and Questionnaire is delivered or put into effect within five (5)
Business Days of such delivery date, (i) if required by applicable law, file
with the SEC a post-effective amendment to the Shelf Registration Statement or
prepare and, if required by applicable law, file a supplement to the related
Prospectus or a supplement or amendment to any document incorporated therein by
reference or file any other required document so that the Holder delivering such
Notice and Questionnaire is named as a selling securityholder in the Shelf
Registration Statement and the related Prospectus in such a manner as to permit
such Holder to deliver such Prospectus to purchasers of the Registrable
Securities in accordance with applicable law and, if the Company shall file a
post-effective amendment to the Shelf Registration Statement, use reasonable
efforts to cause such post-effective amendment to be declared effective under
the Securities Act as promptly as is practicable, but in any event by the date
(the "Amendment Effectiveness Deadline Date") that is forty-five (45) days after
the date such post-effective amendment is required by this clause to be filed;
(ii) provide such Holder copies of any documents filed pursuant to Section
2(d)(i); and (iii) notify such Holder as promptly as practicable after the
effectiveness under the Securities Act of any post-effective amendment filed
pursuant to Section 2(d)(i); provided, that if such Notice and Questionnaire is
delivered during a Deferral Period, the Company shall so inform the Holder
delivering such Notice and Questionnaire and shall take the actions set forth in
clauses (i), (ii) and (iii) above upon expiration of the Deferral Period in
accordance with Section 3(i). Notwithstanding anything contained herein to the
contrary, (i) the Company shall be under no obligation to name any Holder that
is not a Notice Holder as a selling securityholder in any Registration Statement
or related Prospectus and (ii) the Amendment Effectiveness Deadline Date shall
be extended by up to ten (10) Business Days from the expiration of a Deferral
Period (and the Company shall incur no obligation to pay Liquidated Damages
during such extension) if such Deferral Period shall be in effect on the
Amendment Effectiveness Deadline Date.
(e) The parties hereto agree that the Holders of Registrable Securities
will suffer damages, and that it would not be feasible to ascertain the extent
of such damages with precision, if (i) the Initial Shelf Registration Statement
has not been filed on or prior to the Filing Deadline Date, (ii) the Initial
Shelf Registration Statement has not been declared effective under the
Securities Act on or prior to the Effectiveness Deadline Date, (iii) the Company
has failed to perform its obligations set forth in Section 2(d) within the time
period required therein or (iv) the aggregate duration of Deferral Periods in
any period exceeds the number of days permitted in respect of such period
pursuant to Section 3(i) hereof or (each of the events of a type described in
any of the foregoing clauses (i) through (iv) are individually referred to
herein as an "Event," and the Filing Deadline Date in the case of clause (i),
the Effectiveness Deadline Date in the case of clause (ii), the date by which
the Company is required to perform its obligations set forth in Section 2(d) in
the case of clause (iii) (including the filing of any post-effective amendment
prior to the Amendment Effectiveness Deadline Date) and the date on which the
aggregate duration of Deferral Periods in any period exceeds the number of days
permitted by Section 3(i) hereof in the case of clause (iv) being referred to
herein as an "Event Date"). Events shall be deemed to
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continue until the "Event Termination Date," which shall be the following dates
with respect to the respective types of Events: the date the Initial Shelf
Registration Statement is filed in the case of an Event of the type described in
clause (i), the date the Initial Shelf Registration Statement is declared
effective under the Securities Act in the case of an Event of the type described
in clause (ii), the date the Company performs its obligations set forth in
Section 2(d) in the case of an Event of the type described in clause (iii)
(including, without limitation, the date the relevant post-effective amendment
to the Shelf Registration Statement is declared effective under the Securities
Act), and termination of the Deferral Period that caused the limit on the
aggregate duration of Deferral Periods in a period set forth in Section 3(i) to
be exceeded in the case of the commencement of an Event of the type described in
clause (iv).
Accordingly, commencing on (and including) any Event Date and ending on
(but excluding) the next date on which there are no Events that have occurred
and are continuing (a "Damages Accrual Period"), the Company agrees to pay, as
liquidated damages and not as a penalty, an amount (the "Liquidated Damages
Amount"), payable on the Damages Payment Dates to Record Holders of Notes that
are Registrable Securities and of shares of Underlying Common Stock issued upon
conversion of Notes that are Registrable Securities, as the case may be,
accruing, for each portion of such Damages Accrual Period beginning on and
including a Damages Payment Date (or, in respect of the first time that the
Liquidated Damages Amount is to be paid to Holders on a Damages Payment Date as
a result of the occurrence of any particular Event, from the Event Date) and
ending on but excluding the first to occur of (A) the date of the end of the
Damages Accrual Period or (B) the next Damages Payment Date, at a rate per annum
equal to one-half of one percent (0.5 %) of the aggregate principal amount of
such Notes and the Applicable Conversion Price of such shares of Underlying
Common Stock, as the case may be, in each case determined as of the Business Day
immediately preceding the next Damages Payment Date; provided, that in the case
of a Damages Accrual Period that is in effect solely as a result of an Event of
the type described in clause (iii) of the immediately preceding paragraph, such
Liquidated Damages Amount shall be paid only to the Holders that have delivered
Notice and Questionnaires that caused the Company to incur the obligations set
forth in Section 2(d) the non-performance of which is the basis of such Event,
provided further, that any Liquidated Damages Amount accrued with respect to any
Note or portion thereof called for redemption on a redemption date or converted
into Underlying Common Stock on a conversion date prior to the Damages Payment
Date, shall, in any such event, be paid instead to the Holder who submitted such
Note or portion thereof for redemption or conversion on the applicable
redemption date or conversion date, as the case may be, on such date (or
promptly following the conversion date, in the case of conversion).
Notwithstanding the foregoing, no Liquidated Damages Amounts shall accrue as to
any Registrable Security from and after the earlier of (x) the date such
security is no longer a Registrable Security and (y) expiration of the
Effectiveness Period. The rate of accrual of the Liquidated Damages Amount with
respect to any period shall not exceed the rate provided for in this paragraph
notwithstanding the occurrence of multiple concurrent Events. Following the cure
of all Events requiring the payment by the Company of Liquidated Damages Amounts
to the Holders of Registrable Securities pursuant to this Section, the accrual
of Liquidated Damages Amounts will cease (without in any way limiting the effect
of any subsequent Event requiring the payment of Liquidated Damages Amount by
the Company).
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The Trustee shall be entitled, on behalf of Holders of Notes or Underlying
Common Stock, to seek any available remedy for the enforcement of this
Agreement, including for the payment of any Liquidated Damages Amount.
Notwithstanding the foregoing, the parties agree that the sole damages payable
for a violation of the terms of this Agreement with respect to which liquidated
damages are expressly provided shall be such liquidated damages. Nothing shall
preclude a Notice Holder or Holder of Registrable Securities from pursuing or
obtaining specific performance or other equitable relief with respect to this
Agreement.
All of the Company's obligations set forth in this Section 2(e) that are
outstanding with respect to any Registrable Security at the time such security
ceases to be a Registrable Security shall survive until such time as all such
obligations with respect to such security have been satisfied in full
(notwithstanding termination of this Agreement pursuant to Section 8(k)).
The parties hereto agree that the liquidated damages provided for in this
Section 2(e) constitute a reasonable estimate of the damages that may be
incurred by Holders of Registrable Securities by reason of the failure of the
Shelf Registration Statement to be filed or declared effective or available for
effecting resales of Registrable Securities in accordance with the provisions
hereof.
Section 3. Registration Procedures. In connection with the registration
obligations of the Company under Section 2 hereof, the Company shall:
(a) Before filing any Registration Statement or Prospectus or any
amendments or supplements thereto with the SEC, furnish to the Placement Agents
and counsel to the Placement Agents copies of all such documents proposed to be
filed and use reasonable efforts to reflect in each such document when so filed
with the SEC such comments as the Placement Agents and counsel to the Placement
Agents reasonably shall propose within three (3) Business Days of the delivery
of such copies to the Placement Agents and counsel to the Placement Agents.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement continuously effective for the applicable period
specified in Section 2(a); cause the related Prospectus to be supplemented by
any required Prospectus supplement, and as so supplemented to be filed pursuant
to Rule 424 (or any similar provisions then in force) under the Securities Act;
and use its reasonable best efforts to comply with the provisions of the
Securities Act applicable to it with respect to the disposition of all
securities covered by such Registration Statement during the Effectiveness
Period in accordance with the intended methods of disposition by the sellers
thereof set forth in such Registration Statement as so amended or such
Prospectus as so supplemented.
(c) As promptly as practicable (i) give notice to the Holders, counsel to
the Notice Holders and the Placement Agents when any Prospectus, Prospectus
supplement, Registration Statement or post-effective amendment to a Registration
Statement has been filed with the SEC and, with respect to a Registration
Statement or any post-effective amendment, when the same has been declared
effective and (ii) give notice to the Notice Holders, counsel to the Notice
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<PAGE>
Holders and the Placement Agents (A) of any request, following the effectiveness
of the Initial Shelf Registration Statement under the Securities Act, by the SEC
or any other federal or state governmental authority for amendments or
supplements to any Registration Statement or related Prospectus or for
additional information, (B) of the issuance by the SEC or any other federal or
state governmental authority of any stop order suspending the effectiveness of
any Registration Statement or the initiation or threatening of any proceedings
for that purpose, (C) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from qualification
of any of the Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose, (D) of the
occurrence of (but not the nature of or details concerning) a Material Event and
(E) of the determination by the Company that a post-effective amendment to a
Registration Statement will be filed with the SEC, which notice may, at the
discretion of the Company (or as required pursuant to Section 3(i)), state that
it constitutes a Deferral Notice, in which event the provisions of Section 3(i)
shall apply.
(d) Use reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement or the lifting of any
suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction in which they have been
qualified for sale, in either case at the earliest possible moment.
(e) If reasonably requested by the Placement Agents or any Notice Holder,
as promptly as practicable incorporate in a Prospectus supplement or
post-effective amendment to a Registration Statement such information as the
Placement Agents or such Notice Holder shall, on the basis of an opinion of
nationally-recognized counsel experienced in such matters, determine to be
required to be included therein and make any required filings of such Prospectus
supplement or such post-effective amendment; provided, that the Company shall
not be required to take any actions under this Section 3(e) that are not, in the
reasonable opinion of counsel for the Company, in compliance with applicable
law.
(f) As promptly as practicable furnish to each Notice Holder and each of
the Placement Agents, without charge, at least one (1) conformed copy of the
Registration Statement and any amendment thereto, including financial statements
but excluding schedules, all documents incorporated or deemed to be incorporated
therein by reference and all exhibits (unless requested in writing to the
Company by such Notice Holder or the Placement Agents, as the case may be).
(g) During the Effectiveness Period, deliver to each Notice Holder in
connection with any sale of Registrable Securities pursuant to a Registration
Statement, without charge, as many copies of the Prospectus or Prospectuses
relating to such Registrable Securities (including each preliminary prospectus)
and any amendment or supplement thereto as such Notice Holder may reasonably
request; and the Company hereby consents (except during such periods that a
Deferral Notice is outstanding and has not been revoked) to the use of such
Prospectus or each amendment or supplement thereto by each Notice Holder in
connection with any offering and sale of the Registrable Securities covered by
such Prospectus or any amendment or supplement thereto in the manner set forth
therein.
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<PAGE>
(h) Prior to any public offering of the Registrable Securities pursuant to
the Shelf Registration Statement, register or qualify or cooperate with the
Notice Holders in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Notice Holder reasonably requests
in writing (which request may be included in the Notice and Questionnaire);
prior to any public offering of the Registrable Securities pursuant to the Shelf
Registration Statement, keep each such registration or qualification (or
exemption therefrom) effective during the Effectiveness Period in connection
with such Notice Holder's offer and sale of Registrable Securities pursuant to
such registration or qualification (or exemption therefrom) and do any and all
other acts or things necessary or advisable to enable the disposition in such
jurisdictions of such Registrable Securities in the manner set forth in the
relevant Registration Statement and the related Prospectus; provided, that the
Company will not be required to (i) qualify as a foreign corporation or as a
dealer in securities in any jurisdiction where it would not otherwise be
required to qualify but for this Agreement or (ii) take any action that would
subject it to general service of process in suits or to taxation in any such
jurisdiction where it is not then so subject.
(i) Upon (A) the issuance by the SEC of a stop order suspending the
effectiveness of the Shelf Registration Statement or the initiation of
proceedings with respect to the Shelf Registration Statement under Section 8(d)
or 8(e) of the Securities Act, (B) the occurrence of any event or the existence
of any fact (a "Material Event") as a result of which any Registration Statement
shall 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, or any Prospectus shall 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, in the light of the circumstances
under which they were made, not misleading, or (C) the occurrence or existence
of any pending corporate development that, in the reasonable discretion of the
Company, makes it appropriate to suspend the availability of the Shelf
Registration Statement and the related Prospectus, (i) in the case of clause (B)
above, subject to the next sentence, as promptly as practicable prepare and
file, if necessary pursuant to applicable law, a post-effective amendment to
such Registration Statement or a supplement to the related Prospectus or any
document incorporated therein by reference or file any other required document
that would be incorporated by reference into such Registration Statement and
Prospectus so that such Registration Statement does 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
such Prospectus does 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, in the light of the circumstances under which they were
made, not misleading, as thereafter delivered to the purchasers of the
Registrable Securities being sold thereunder, and, in the case of a
post-effective amendment to a Registration Statement, subject to the next
sentence, use its reasonable efforts to cause it to be declared effective as
promptly as is practicable, and (ii) give notice to the Notice Holders that the
availability of the Shelf Registration Statement is suspended (a "Deferral
Notice") and, upon receipt of any Deferral Notice, each Notice Holder agrees not
to sell any Registrable Securities pursuant to the Registration Statement until
such Notice Holder's receipt of copies of the supplemented or amended Prospectus
provided for in clause (i) above, or until it
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is advised in writing by the Company that the Prospectus may be used, and has
received copies of any additional or supplemental filings that are incorporated
or deemed incorporated by reference in such Prospectus. The Company will use
reasonable best efforts to ensure that the use of the Prospectus may be resumed
(x) in the case of clause (A) above, as promptly as is practicable, (y) in the
case of clause (B) above, as soon as, in the sole judgment of the Company,
public disclosure of such Material Event would not be prejudicial to or contrary
to the interests of the Company or, if necessary to avoid unreasonable burden or
expense, as soon as practicable thereafter and (z) in the case of clause (C)
above, as soon as, in the discretion of the Company, such suspension is no
longer appropriate. Notwithstanding the foregoing, in the event the Company has
given notice of a Provisional Redemption or Nonconversion Election it shall use
its reasonable efforts to ensure the use of the Prospectus may be resumed in the
case of clause (A), (B) or (C) above as promptly as is practicable. The Company
shall be entitled to exercise its right under this Section 3(i) to suspend the
availability of the Shelf Registration Statement or any Prospectus, without
incurring or accruing any obligation to pay liquidated damages pursuant to
Section 2(e), for a period not to exceed 60 days in any three-month period or
not to exceed an aggregate 90 days in any 12-month period (such period during
which the availability of the Registration Statement and any Prospectus is
suspended being the "Deferral Period").
(j) If requested in writing in connection with a disposition of
Registrable Securities pursuant to a Registration Statement, make reasonably
available for inspection during normal business hours by a representative for
the Notice Holders of such Registrable Securities and any broker-dealers,
attorneys and accountants retained by such Notice Holders, all relevant
financial and other records, pertinent corporate documents and properties of the
Company and its subsidiaries, and cause the appropriate officers, directors and
employees of the Company and its subsidiaries to make reasonably available for
inspection during normal business hours all relevant information reasonably
requested by such representative for the Notice Holders or any such
broker-dealers, attorneys or accountants in connection with such disposition, in
each case as is customary for similar "due diligence" examinations; 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 and shall be used solely for the purposes of
exercising rights under this Agreement, unless (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 any Registration
Statement or the use of any Prospectus referred to in this Agreement), (iii)
such information becomes generally available to the public other than as a
result of a disclosure or failure to safeguard by any such person or (iv) such
information becomes available to any such person from a source other than the
Company and such source is not bound by a confidentiality agreement, and
provided further, that the foregoing inspection and information gathering shall,
to the greatest extent possible, be coordinated on behalf of all the Notice
Holders and the other parties entitled thereto by the counsel referred to in
Section 5.
(k) Use its reasonable best efforts to comply with all applicable rules
and regulations of the SEC and make generally available to its securityholders
earning statements (which need
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not be audited) satisfying the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder (or any similar rule promulgated under the Securities
Act) no later than 45 days after the end of any 3-month period (or 90 days after
the end of any 12-month period if such period is a fiscal year) commencing on
the first day of the first fiscal quarter of the Company commencing after the
effective date of a Registration Statement, which statements shall cover said
periods.
(l) In the case of registration of resales of the Notes, cause the
Indenture to be qualified under the Trust Indenture Act of 1939, as amended (the
"TIA"), cooperate with the Trustee and the Notice Holders to effect such changes
to the Indenture 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 best
efforts to cause the Trustee to execute, all 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;
(m) Cooperate with each Notice Holder to facilitate the timely preparation
and delivery of certificates representing Registrable Securities sold or to be
sold pursuant to a Registration Statement, which certificates shall not bear any
restrictive legends, and cause such Registrable Securities to be in such
denominations as are permitted by the Indenture and registered in such names as
such Notice Holder may request in writing at least two (2) Business Days prior
to any sale of such Registrable Securities.
(n) Provide a CUSIP number for all Registrable Securities covered by each
Registration Statement not later than the effective date of such Registration
Statement and provide the Trustee and the transfer agent for the Common Stock
with printed certificates for the Registrable Securities that are in a form
eligible for deposit with The Depository Trust Company.
(o) Use its reasonable best efforts to cause the Underlying Common Stock
to be listed on any securities exchange or any automated quotation system on
which similar securities issued by the Company are then listed, to the extent
the Underlying Common Stock satisfies applicable listing requirements;
(p) Provide such information as is required for any filings required to be
made with the National Association of Securities Dealers, Inc.
(q) Upon (i) the filing of the Initial Registration Statement and (ii) the
effectiveness of the Initial Registration Statement, announce the same, in each
case by release to Reuters Economic Services and Bloomberg Business News.
Section 4. Holder's Obligations. Each Holder agrees, by acquisition of the
Registrable Securities, that no Holder of Registrable Securities shall be
entitled to sell any of such Registrable Securities pursuant to a Registration
Statement or to receive a Prospectus relating thereto, unless such Holder has
furnished the Company with a Notice and Questionnaire as required pursuant to
Section 2(d) hereof (including the information required to be included in such
Notice and Questionnaire) and the information set forth in the next sentence.
Each Notice Holder agrees promptly to furnish to the Company all information
required to be disclosed in
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order to make the information previously furnished to the Company by such Notice
Holder not misleading and any other information regarding such Notice Holder and
the distribution of such Registrable Securities as the Company may from time to
time reasonably request. Any sale of any Registrable Securities by any Holder
shall constitute a representation and warranty by such Holder that the
information relating to such Holder and its plan of distribution is as set forth
in the Prospectus delivered by such Holder in connection with such disposition,
that such Prospectus does not as of the time of such sale contain any untrue
statement of a material fact relating to or provided by such Holder or its plan
of distribution and that such Prospectus does not as of the time of such sale
omit to state any material fact relating to or provided by such Holder or its
plan of distribution necessary to make the statements in such Prospectus, in the
light of the circumstances under which they were made, not misleading.
Section 5. Registration Expenses. The Company shall bear all fees and
expenses incurred in connection with the performance by the Company of its
obligations under Sections 2 and 3 of this Agreement whether or not any of the
Registration Statements are declared effective. Such fees and expenses shall
include, without limitation, (i) all registration and filing fees (including,
without limitation, fees and expenses (x) with respect to filings required to be
made with the National Association of Securities Dealers, Inc. and (y) of
compliance with federal and state securities or Blue Sky laws (including,
without limitation, reasonable fees and disbursements of the counsel specified
in the next sentence in connection with Blue Sky qualifications of the
Registrable Securities under the laws of such jurisdictions as the Notice
Holders of a majority of the Registrable Securities being sold pursuant to a
Registration Statement may designate), (ii) printing expenses (including,
without limitation, expenses of printing certificates for Registrable Securities
in a form eligible for deposit with The Depository Trust Company), (iii)
duplication expenses relating to copies of any Registration Statement or
Prospectus delivered to any Holders hereunder, (iv) fees and disbursements of
counsel for the Company in connection with the Shelf Registration Statement, (v)
the fees and disbursements of the independent public accountants of the Company,
including the expenses of any special audits or "cold comfort" letters required
by or incident to such performance and compliance, (vi) reasonable fees and
disbursements of the Trustee and of the registrar and transfer agent for the
Common Stock and their respective counsel and (vii) Securities Act liability
insurance obtained by the Company in its sole discretion. In addition, the
Company shall bear or reimburse the Notice Holders for the reasonable fees and
disbursements of one firm of legal counsel for the Holders, which shall
initially be Shearman & Sterling, but which may, with the written consent of the
Placement Agents (which shall not be unreasonably withheld), be another
nationally recognized law firm experienced in securities law matters designated
by the Company. In addition, the Company shall pay the internal expenses of the
Company (including, without limitation, all salaries and expenses of officers
and employees performing legal or accounting duties), the expense of any annual
audit, the fees and expenses incurred in connection with the listing of the
Registrable Securities on any securities exchange on which similar securities of
the Company are then listed and the fees and expenses of any person, including
special experts, retained by the Company. Notwithstanding the provisions of this
Section 5, each seller of Registrable Securities shall pay selling expenses and
all registration expenses to the extent required by applicable law.
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Section 6. Indemnification.
(a) Indemnification by the Company. The Company shall indemnify and hold
harmless each Notice Holder and each person, if any, who controls any Notice
Holder (within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act) from and against any losses, liabilities, claims,
damages and expenses (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) (collectively, "Losses"), arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement or Prospectus or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or based upon any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, provided,
however, that the Company shall not be liable in any such case to the extent
that any such Losses arise out of or are based upon an untrue statement or
alleged untrue statement contained in or omission or alleged omission from any
of such documents in reliance upon and conformity with any of the information
relating to the Holders furnished to the Company in writing by a Holder
expressly for use therein; provided further, that the indemnification contained
in this paragraph shall not inure to the benefit of any Holder of Registrable
Securities (or to the benefit of any person controlling such Holder) on account
of any such Losses arising out of or based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any preliminary
prospectus provided in each case the Company has completed with its several
obligations under Section 3(a) hereof if either (A) (i) such Holder failed to
send or deliver a copy of the Prospectus with or prior to the delivery of
written confirmation of the sale by such Holder to the person asserting the
claim from which such Losses arise and (ii) the Prospectus would have corrected
such untrue statement or alleged untrue statement or such omission or alleged
omission, or (B) (x) such untrue statement or alleged untrue statement, omission
or alleged omission is corrected in an amendment or supplement to the Prospectus
and (y) having previously been furnished by or on behalf of the Company with
copies of the Prospectus as so amended or supplemented, such Holder thereafter
fails to deliver such Prospectus as so amended or supplemented, with or prior to
the delivery of written confirmation of the sale of a Registrable Security to
the person asserting the claim from which such Losses arise.
(b) Indemnification by Holders of Registrable Securities. Each Holder
agrees severally and not jointly to indemnify and hold harmless the Company and
its respective directors and officers, and each person, if any, who controls the
Company (within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act) or any other Holder, from and against all Losses
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in any Registration Statement or Prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or arising out
of or based upon any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with information furnished to the Company in
writing by such Holder expressly for use in such Registration Statement or
Prospectus or
14
<PAGE>
amendment or supplement thereto. In no event shall the liability of any selling
Holder of Registrable Securities hereunder be greater in amount than the dollar
amount of the proceeds received by such Holder upon the sale of the Registrable
Securities pursuant to the Registration Statement giving rise to such
indemnification obligation.
(c) Conduct of Indemnification Proceedings. In case any proceeding
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to either of the two
preceding paragraphs, such person (the "indemnified party") shall promptly
notify the person against whom such indemnity may be sought (the "indemnifying
party") in writing and the indemnifying party, upon request of the indemnified
party, shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the reasonable fees and disbursements
of such counsel related to such proceeding. In any such proceeding, any
indemnified party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such indemnified party
unless (i) the indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the indemnifying party
and the indemnified party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests between
them. It is understood that the indemnifying party shall not, in respect of the
legal expenses of any indemnified party in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the fees and
expenses of more than one separate firm (in addition to any local counsel) for
all indemnified parties, and that all such fees and expenses shall be reimbursed
as they are incurred. Such separate firm shall be designated in writing by, in
the case of parties indemnified pursuant to Section 6(a), the Holders of a
majority (with Holders of Notes deemed to be the Holders, for purposes of
determining such majority, of the number of shares of Underlying Common Stock
into which such Notes are or would be convertible or exchangeable as of the date
on which such designation is made) of the Registrable Securities covered by the
Registration Statement held by Holders that are indemnified parties pursuant to
Section 6(a) and, in the case of parties indemnified pursuant to Section 6(b),
the Company. The indemnifying party shall not be liable for any settlement of
any proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if it any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel and the indemnified party would be entitled thereto pursuant to the
second and third sentences of this paragraph, the indemnifying party agrees that
it shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 60 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder
15
<PAGE>
by such indemnified party, unless such settlement includes an unconditional
release of such indemnified party from all liability on claims that are the
subject matter of such proceeding.
(d) Contribution. To the extent that the indemnification provided for in
this Section 6 is unavailable to an indemnified party under Section 6(a) or 6(b)
hereof in respect of any Losses or is insufficient to hold such indemnified
party harmless, then each applicable 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 (i) in such proportion as is
appropriate to reflect the relative benefits received by the indemnifying party
or parties on the one hand and the indemnified party or parties on the other
hand or (ii) if the allocation provided in 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 to the relative fault
of the indemnifying party or parties on the one hand and of the indemnified
party or parties on the other hand in connection with the statements or
omissions that resulted in such Losses, as well as any other relevant equitable
considerations. Benefits received by the Company shall be deemed to be equal to
the total net proceeds from the initial placement pursuant to the Placement
Agreement (before deducting expenses) of the Registrable Securities to which
such Losses relate. Benefits received by any Holder shall be deemed to be equal
to the value of receiving Registrable Securities that are registered under the
Securities Act. The relative fault of the Holders on the one hand and the
Company 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 or alleged omission to state a material fact relates to information
supplied by the Holders or by the Company, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Holders' respective obligations to contribute
pursuant to this paragraph are several in proportion to the respective number of
Registrable Securities they have sold pursuant to a Registration Statement, and
not joint.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by pro rata
allocation or by any other method or allocation that does not take into account
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
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 this Section 6(d), an
indemnifying party that is a selling Holder of Registrable Securities shall not
be required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities sold by such indemnifying party and
distributed to the public were offered to the public exceeds the amount of any
damages that such indemnifying party 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.
16
<PAGE>
(e) The indemnity, contribution and expense reimbursement obligations of
the parties hereunder shall be in addition to any liability any indemnified
party may otherwise have hereunder, under the Placement Agreement or otherwise.
(f) The indemnity and contribution provisions contained in this Section 6
shall remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on behalf of
any Holder or any person controlling any Holder, or the Company, or the
Company's officers or directors or any person controlling the Company and (iii)
the sale of any Registrable Securities by any Holder.
Section 7. Information Requirements. (a) The Company covenants that, if at
any time before the end of the Effectiveness Period the Company is not subject
to the reporting requirements of the Exchange Act, it will cooperate with any
Holder of Registrable Securities and take such further reasonable action as any
Holder of Registrable Securities may reasonably request in writing (including,
without limitation, making such reasonable representations as any such Holder
may reasonably request), all to the extent required from time to time to enable
such Holder to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144 and
Rule 144A under the Securities Act and customarily taken in connection with
sales pursuant to such exemptions. Upon the written request of any Holder of
Registrable Securities, the Company shall deliver to such Holder a written
statement as to whether it has complied with such filing requirements, unless
such a statement has been included in the Company's most recent report filed
pursuant to Section 13 or Section 15(d) of Exchange Act. Notwithstanding the
foregoing, nothing in this Section 7 shall be deemed to require the Company to
register any of its securities (other than the Common Stock) under any section
of the Exchange Act.
Section 8. Miscellaneous.
(a) No Conflicting Agreements. The Company is not, as of the date hereof,
a party to, nor shall it, on or after the date of this Agreement, enter into,
any agreement with respect to its securities that conflicts with the rights
granted to the Holders of Registrable Securities in this Agreement. The Company
represents and warrants that the rights granted to the Holders of Registrable
Securities hereunder do not in any way conflict with the rights granted to the
holders of the Company's securities under any other agreements.
(b) 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, unless the Company has obtained the written consent of Holders of a
majority of the then outstanding Underlying Common Stock constituting
Registrable Securities (with Holders of Notes deemed to be the Holders, for
purposes of this Section, of the number of outstanding shares of Underlying
Common Stock into which such Notes are or would be convertible or exchangeable
as of the date on which such consent is requested). 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 Registrable
Securities whose securities are being sold pursuant to a Registration
17
<PAGE>
Statement and that does not directly or indirectly affect the rights of other
Holders of Registrable Securities may be given by Holders of at least a majority
of the Registrable Securities being sold by such Holders pursuant to such
Registration Statement; provided, that the provisions of this sentence may not
be amended, modified, or supplemented except in accordance with the provisions
of the immediately preceding sentence. Each Holder of Registrable Securities
outstanding at the time of any such amendment, modification, supplement, waiver
or consent or thereafter shall be bound by any such amendment, modification,
supplement, waiver or consent effected pursuant to this Section 8(b), whether or
not any notice, writing or marking indicating such amendment, modification,
supplement, waiver or consent appears on the Registrable Securities or is
delivered to such Holder.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall he made in writing by hand delivery, by telecopier, by
courier guaranteeing overnight delivery or by first-class mail, return receipt
requested, and shall be deemed given (i) when made, if made by hand delivery,
(ii) upon confirmation, if made by telecopier, (iii) one (1) Business Day after
being deposited with such courier, if made by overnight courier or (iv) on the
date indicated on the notice of receipt, if made by first-class mail, to the
parties as follows:
(1) if to a Holder of Registrable Securities that is not a Notice
Holder, at the address for such Holder then appearing in the Note
Register (as defined in the Indenture);
(2) if to a Notice Holder, at the most current address given by such
Holder to the Company in a Notice and Questionnaire or any amendment
thereto;
(3) if to the Company, to:
ITC/\DeltaCom, Inc.
1791 O.G. Skinner Drive
West Point, Georgia 31833
Attention: Douglas A. Shumate
Telecopy No.: (706) 645-8989
and
Hogan & Hartson L.L.P.
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Attention: Nancy J. Kellner
Telecopy No.: (202) 637-5910
(4) if to any Placement Agent to:
Morgan Stanley & Co. Incorporated
1585 Broadway
18
<PAGE>
New York, New York
Attention: Equity Capital Markets
Telecopy No.: (212) 761-0356
and
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: Andrew R. Schleider
Telecopy No.: (212) 848-7179
(5) if to counsel for the Placement Agents or counsel for the Notice
Holders, to Shearman & Sterling at the above address and telecopy
number (or as otherwise requested by the Notice Holders).
or to such other address as such person may have furnished to the other persons
identified in this Section 8(c) in writing in accordance herewith.
(d) Approval of Holders. Whenever the consent or approval of Holders of a
specified percentage of Registrable Securities is required hereunder,
Registrable Securities held by the Company or its affiliates (as such term is
defined in Rule 405 under the Securities Act) (other than the Placement Agents
or subsequent Holders of Registrable Securities if such subsequent Holders are
deemed to be such affiliates solely by reason of their holdings of such
Registrable Securities) shall not be counted in determining whether such consent
or approval was given by the Holders of such required percentage.
(e) Successors and Assigns. Any person who purchases any Registrable
Securities from the Placement Agents shall be deemed, for purposes of this
Agreement, to be an assignee of the Placement Agents. This Agreement shall inure
to the benefit of and be binding upon the successors and assigns of each of the
parties and shall inure to the benefit of and be binding upon each Holder of any
Registrable Securities.
(f) 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 original and all of which taken together
shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES THEREOF.
19
<PAGE>
(i) Severability. If any term provision, covenant or restriction of this
Agreement is held 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 thereby, and the parties hereto shall use their best 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
being intended that all of the rights and privileges of the parties shall be
enforceable to the fullest extent permitted by law.
(j) 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 and the registration rights granted by the
Company with respect to the Registrable Securities. Except as provided in the
Placement Agreement, 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 Registrable
Securities. This Agreement supersedes all prior agreements and undertakings
among the parties with respect to such registration rights. No party hereto
shall have any rights, duties or obligations other than those specifically set
forth in this Agreement.
In no event shall the method of distribution of the Registrable
Securities take the form of an underwritten offering without prior agreement of
the Company.
(k) Termination. This Agreement and the obligations of the parties
hereunder shall terminate upon the end of the Effectiveness Period, except for
any liabilities or obligations under Section 4, 5 or 6 hereof and the
obligations to make payments of and provide for liquidated damages under Section
2(e) hereof to the extent such damages accrue prior to the end of the
Effectiveness Period, each of which shall remain in effect in accordance with
its terms.
20
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
ITC/\DELTACOM, INC.
By /s/ Andrew M. Walker
--------------------------
Name: Andrew M. Walker
Title: Chief Executive Officer
Confirmed and accepted as of
the date first above written:
MORGAN STANLEY & CO. INCORPORATED
CREDIT SUISSE FIRST BOSTON CORPORATION
FIRST UNION CAPITAL MARKETS CORP.
NATIONSBANC MONTGOMERY SECURITIES LLC
By: MORGAN STANLEY & CO. INCORPORATED
By: /s/ Katina Dorton
-------------------------
Name: Katina Dorton
Title: Principal
<PAGE>
EXHIBIT 4.2
ITC/\DELTACOM, INC.
TO
U.S. TRUST COMPANY OF TEXAS, N.A.,
Trustee
INDENTURE
Dated as of May 12, 1999
4 1/2% Convertible Subordinated Notes due 2006
<PAGE>
ITC/\DELTACOM, INC.
Reconciliation and Tie Between the Trust Indenture Act of 1939 and
Indenture, dated as of May 12, 1999, between ITC/\DeltaCom, Inc. and U.S. Trust
Company of Texas, N.A., as Trustee.
Trust Indenture Act Section Indenture Section
Sec.310(a)(1)...............................................................8.11
(a)(2)......................................................................8.11
(a)(3)............................................................Not Applicable
(a)(4)............................................................Not Applicable
(a)(5)......................................................................8.11
(b)....................................................................8.6; 8.10
Sec.311(a)..................................................................8.13
(b).........................................................................8.13
(b)(2)......................................................................8.13
Sec.312(a)...........................................................6.1; 6.2(a)
(b).......................................................................6.2(b)
(c).......................................................................6.2(c)
Sec.313(a)................................................................6.3(a)
(b).......................................................................6.3(a)
(c).......................................................................6.3(a)
(d).......................................................................6.3(b)
Sec.314(a)...................................................................6.4
(b)...............................................................Not Applicable
(c)(1)......................................................................16.5
(c)(2)......................................................................16.5
(c)(3)............................................................Not Applicable
(d)...............................................................Not Applicable
(e).........................................................................16.5
Sec.315(a)...................................................................8.1
(b)..........................................................................8.5
(c)..........................................................................8.1
(d)..........................................................................8.1
(d)(1).......................................................................8.1
(d)(2).......................................................................8.2
(d)(3).......................................................................8.2
(e)..........................................................................7.8
Sec.316(a)...................................................................7.7
(a)(1)(A)....................................................................7.7
(a)(1)(B)....................................................................7.7
(a)(2)............................................................Not Applicable
(b)..........................................................................7.4
Sec.317(a)(1)................................................................7.5
(a)(2).......................................................................7.5
(b)..........................................................................5.4
Sec.318(a)..................................................................16.7
- ---------------
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 I
DEFINITIONS ...........................................................1
Section 1.1 Definitions .........................................1
8-7/8% Senior Notes..............................................1
9 3/4% Senior Notes..............................................1
11% Senior Notes.................................................1
Affiliate........................................................2
Board of Directors...............................................2
Business Day.....................................................2
Closing Price....................................................2
Commission.......................................................2
Common Stock.....................................................2
Company..........................................................2
Conversion Price.................................................2
Corporate Trust Office...........................................2
Custodian........................................................2
Default..........................................................2
Defaulted Interest...............................................3
Depositary.......................................................3
Designated Senior Indebtedness...................................3
Event of Default.................................................3
Exchange Act.....................................................3
Fundamental Change...............................................3
Fundamental Change Expiration Time...............................3
Global Note......................................................3
Indebtedness.....................................................3
Indenture........................................................4
Institutional Accredited Investor................................4
Liquidated Damages Amount........................................4
Make-Whole Payment...............................................4
Nonconversion Election...........................................4
Nonconversion Election Date......................................4
Note or Notes....................................................4
Note register....................................................4
Noteholder or holder.............................................4
Notice Date......................................................5
Officers' Certificate............................................5
Opinion of Counsel...............................................5
Optional Redemption..............................................5
Outstanding......................................................5
Payment Blockage Notice..........................................5
Person...........................................................5
Placement Agents.................................................5
Portal Market....................................................5
Predecessor Note.................................................5
Provisional Redemption...........................................6
Provisional Redemption Date......................................6
QIB..............................................................6
Registration Rights Agreement....................................6
Representative...................................................6
<PAGE>
Responsible Officer..............................................6
Restricted Securities............................................6
Rule 144A........................................................6
Securities Act...................................................6
Senior Indebtedness..............................................6
Significant Subsidiary...........................................7
Subsidiary.......................................................7
Trading Day......................................................7
Trigger Event....................................................7
Trust Indenture Act or TIA.......................................7
Trustee..........................................................7
ARTICLE II
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES......7
Section 2.1 Designation Amount and Issue of Notes ..............7
Section 2.2 Form of Notes ......................................7
Section 2.3 Date and Denomination of Notes; Payments of
Interest (including Liquidated Damages
Amount, if any)....................................8
Section 2.4 Execution of Notes .................................9
Section 2.5 Exchange and Registration of Transfer of Notes;
Restrictions on Transfer; Depositary ..............9
Section 2.6 Mutilated, Destroyed, Lost or Stolen Notes ........15
Section 2.7 Temporary Notes ...................................16
Section 2.8 Cancellation of Notes Paid, Etc. ..................16
Section 2.9 CUSIP Numbers .....................................16
ARTICLE III
REDEMPTION OF NOTES AND NONCONVERSION ELECTION........................16
Section 3.1 ...................................................16
Section 3.2 Notice of Redemptions or Nonconversion Election;
Selection of Notes for Redemption ...............17
Section 3.3 Payment of Notes Called for Redemption ............19
Section 3.4 Conversion Arrangement on Call for Redemption .....20
Section 3.5 Redemption at Option of Holders ...................20
ARTICLE IV
SUBORDINATION OF NOTES................................................22
Section 4.1 Agreement of Subordination ........................22
Section 4.2 Payments to Noteholders ...........................22
Section 4.3 Subrogation of Notes ..............................24
Section 4.4 Authorization to Effect Subordination .............25
Section 4.5 Notice to Trustee .................................25
Section 4.6 Trustee's Relation to Senior Indebtedness .........25
Section 4.7 No Impairment of Subordination ....................26
Section 4.8 Certain Conversions Not Deemed Payment ............26
Section 4.9 Article Applicable to Paying Agents ...............26
Section 4.10 Senior Indebtedness Entitled to Rely ..............26
Section 4.11 Reliance on Judicial Order or Certificate of
Liquidating Agent ...............................26
Section 4.12 Trustee's Compensation Not Prejudiced..............27
ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY...................................27
-ii-
<PAGE>
Section 5.1 Payment of Principal, Premium and Interest ........27
Section 5.2 Maintenance of Office or Agency ...................27
Section 5.3 Appointments to Fill Vacancies in Trustee's Office 27
Section 5.4 Provisions as to Paying Agent .....................27
Section 5.5 Existence .........................................28
Section 5.6 Maintenance of Properties .........................28
Section 5.7 Payment of Taxes and Other Claims .................28
Section 5.8 Rule 144A Information Requirement .................29
Section 5.9 Stay, Extension and Usury Laws ....................29
Section 5.10 Compliance Certificate ............................29
ARTICLE VI
NOTEHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE.........29
Section 6.1 Noteholders' Lists .................................29
Section 6.2 Preservation and Disclosure of Lists ...............30
Section 6.3 Reports by Trustee .................................30
Section 6.4 Reports by Company .................................30
ARTICLE VII
REMEDIES OF THE TRUSTEE AND NOTEHOLDERS ON AN EVENT OF DEFAULT........31
Section 7.1 Events of Default ..................................31
Section 7.2 Payments of Notes on Default; Suit Therefor ........32
Section 7.3 Application of Monies Collected by Trustee .........33
Section 7.4 Proceedings by Noteholder ..........................34
Section 7.5 Proceedings by Trustee .............................34
Section 7.6 Remedies Cumulative and Continuing .................34
Section 7.7 Direction of Proceedings and Waiver of Defaults by
Majority of Noteholders ...........................34
Section 7.8 Undertaking to Pay Costs ...........................35
ARTICLE VIII
CONCERNING THE TRUSTEE................................................35
Section 8.1 General ..........................................35
Section 8.2 Certain Rights of Trustee ........................35
Section 8.3 Individual Rights of Trustee .....................36
Section 8.4 Trustee's Disclaimer .............................36
Section 8.5 Notice of Default ................................36
Section 8.6 Conflicting Interests of Trustee .................36
Section 8.7 Compensation and Indemnity .......................36
Section 8.8 Replacement of Trustee ...........................37
Section 8.9 Successor Trustee by Merger, Etc. ................38
Section 8.10 Eligibility ......................................38
Section 8.11 Money Held in Trust ..............................38
Section 8.12 Withholding Taxes ................................38
Section 8.13 Preferential Collection of Claims ................38
Section 8.14 Trustee's Application for Instructions from the
Company ..........................................38
ARTICLE IX
CONCERNING THE NOTEHOLDERS............................................39
Section 9.1 Action by Noteholders ............................39
Section 9.2 Proof of Execution by Noteholders ................39
-iii-
<PAGE>
Section 9.3 Who Are Deemed Absolute Owners ...................39
Section 9.4 Company-Owned Notes Disregarded ..................39
Section 9.5 Revocation of Consents; Future Holders Bound .....39
ARTICLE X
NOTEHOLDERS' MEETINGS.................................................40
Section 10.1 Purpose of Meetings ..............................40
Section 10.2 Call of Meetings by Trustee ......................40
Section 10.3 Call of Meetings by Company or Noteholders .......40
Section 10.4 Qualifications for Voting ........................40
Section 10.5 Regulations ......................................41
Section 10.6 Voting ...........................................41
Section 10.7 No Delay of Rights by Meeting ....................41
Section 10.8 Exercise of Rights of Trustee or Noteholders
May Not be Hindered or Delayed by Call
of Meeting ......................................41
Section 10.9 Procedures Not Exclusive .........................42
ARTICLE XI
SUPPLEMENTAL INDENTURES...............................................42
Section 11.1 Supplemental Indentures Without Consent of
Noteholders .....................................42
Section 11.2 Supplemental Indenture with Consent of
Noteholders .....................................43
Section 11.3 Effect of Supplemental Indenture .................43
Section 11.4 Notation on Notes ................................44
Section 11.5 Evidence of Compliance of Supplemental Indenture
to Be Furnished to Trustee ......................44
ARTICLE XII
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE.....................44
Section 12.1 Company May Consolidate, Etc., on Certain Terms ..44
Section 12.2 Successor Corporation to Be Substituted ..........44
Section 12.3 Opinion of Counsel to Be Given Trustee ...........45
ARTICLE XIII
SATISFACTION AND DISCHARGE OF INDENTURE...............................45
Section 13.1 Discharge of Indenture ...........................45
Section 13.2 Deposited Monies to Be Held in Trust by Trustee ..45
Section 13.3 Paying Agent to Repay Monies Held ................45
Section 13.4 Return of Unclaimed Monies .......................46
Section 13.5 Reinstatement ....................................46
ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS.......46
Section 14.1 Indenture and Notes Solely Corporate Obligations .46
ARTICLE XV
CONVERSION OF NOTES...................................................46
Section 15.1 Right to Convert .................................46
Section 15.2 Exercise of Conversion Privilege; Issuance of
Common Stock on Conversion; No Adjustment
for Interest or Dividends........................47
Section 15.3 Cash Payments in Lieu of Fractional Shares .......48
Section 15.4 Conversion Price .................................48
Section 15.5 Adjustment of Conversion Price ...................48
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Section 15.6 Effect of Reclassification, Consolidation, Merger
or Sale .........................................54
Section 15.7 Taxes on Shares Issued ...........................54
Section 15.8 Reservation of Shares; Shares to Be Fully Paid;
Compliance with Governmental Requirements;
Listing of Common Stock...........................54
Section 15.9 Responsibility of Trustee ........................55
Section 15.10 Notice to Holders Prior to Certain Actions .......55
ARTICLE XVI
MISCELLANEOUS PROVISIONS..............................................56
Section 16.1 Provisions Binding on Company's Successors .......56
Section 16.2 Official Acts by Successor Corporation ...........56
Section 16.3 Addresses for Notices, Etc. ......................56
Section 16.4 Governing Law ....................................57
Section 16.5 Evidence of Compliance with Conditions Precedent;
Certificates to Trustee .........................57
Section 16.6 Legal Holidays ...................................57
Section 16.7 Trust Indenture Act ..............................57
Section 16.8 No Security Interest Created .....................58
Section 16.9 Benefits of Indenture ............................58
Section 16.10 Table of Contents, Headings, Etc. ................58
Section 16.11 Authenticating Agent .............................58
Section 16.12 Execution in Counterparts ........................58
Exhibit A: Form of Note
Exhibit B: Form of Institutional Accredited Investor Letter
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INDENTURE
INDENTURE, dated as of May 12, 1999, between ITC/\DeltaCom, Inc., a
Delaware corporation (hereinafter called the "Company," as more fully set forth
in Section 1.1), and U.S. Trust Company of Texas, N.A., a national banking
corporation, as trustee hereunder (hereinafter called the "Trustee," as more
fully set forth in Section 1.1).
WITNESSETH:
WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the issue of its 4 1/2% Convertible Subordinated Notes due 2006 (the
"Notes"), in an aggregate principal amount not to exceed $100,000,000 and, to
provide the terms and conditions upon which the Notes are to be authenticated,
issued and delivered, the Company has duly authorized the execution and delivery
of this Indenture; and
WHEREAS, the Notes, the certificate of authentication to be borne by the
Notes, a form of assignment, a form of option to elect repayment upon a
Fundamental Change, and a form of conversion notice to be borne by the Notes are
to be substantially in the forms hereinafter provided for; and
WHEREAS, all acts and things necessary to make the Notes, when executed by
the Company and authenticated and delivered by the Trustee or a duly authorized
authenticating agent, as in this Indenture provided, the valid, binding and
legal obligations of the Company, and to constitute these presents a valid
agreement according to its terms, have been done and performed, and the
execution of this Indenture and the issue hereunder of the Notes have in all
respects been duly authorized.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which the Notes
are, and are to be, authenticated, issued and delivered, and in consideration of
the premises and of the purchase and acceptance of the Notes by the holders
thereof, the Company covenants and agrees with the Trustee for the equal and
proportionate benefit of the respective holders from time to time of the Notes
(except as otherwise provided below), as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. The terms defined in this Section 1.1 (except as
herein otherwise expressly provided or unless the context otherwise requires)
for all purposes of this Indenture and of any indenture supplemental hereto
shall have the respective meanings specified in this Section 1.1. All other
terms used in this Indenture that are defined in the Trust Indenture Act or
which are by reference therein defined in the Securities Act (except as herein
otherwise expressly provided or unless the context otherwise requires) shall
have the meanings assigned to such terms in said Trust Indenture Act and in said
Securities Act as in force at the date of the execution of this Indenture. The
words "herein," "hereof," "hereunder," and words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
Subdivision. The terms defined in this Article include the plural as well as the
singular.
8 7/8% Senior Notes: The term "8 7/8% Senior Notes" shall mean the 8 7/8%
Senior Notes due 2008 of the Company issued under an indenture dated March 3,
1998.
9 3/4% Senior Notes: The term "9 3/4% Senior Notes" shall mean the 9 3/4%
Senior Notes due 2008 of the Company issued under an indenture dated November 5,
1998.
11% Senior Notes: The term "11% Senior Notes" shall mean the 11% Senior
Notes due 2007 of the Company issued under an indenture dated June 3, 1997.
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Affiliate: The term "Affiliate" of any specified Person 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," (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as applied to
any Person, means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
Board of Directors: The term "Board of Directors" shall mean the Board of
Directors of the Company or a committee of such Board duly authorized to act for
it hereunder.
Business Day: The term "Business Day" shall mean each Monday, Tuesday,
Wednesday, Thursday and Friday which is not a day on which the commercial banks
in The City of New York or the city in which the Corporate Trust Office is
located are authorized by law to close.
Closing Price: The term "Closing Price" shall have the meaning specified
in Section 15.5(h)(1).
Commission: The term "Commission" shall mean the Securities and Exchange
Commission.
Common Stock: The term "Common Stock" shall mean any stock of any class
of the Company which has no preference in respect of dividends or of amounts
payable in the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company and which is not subject to redemption by the Company.
Subject to the provisions of Section 15.6, however, shares issuable on
conversion of Notes shall include only shares of the class designated as common
stock of the Company at the date of this Indenture or shares of any class or
classes resulting from any reclassification or reclassifications thereof and
which have no preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Company and which are not subject to redemption by the Company; provided
that if at any time there shall be more than one such resulting class, the
shares of each such class then so issuable shall be substantially in the
proportion which the total number of shares of such class resulting from all
such reclassifications bears to the total number of shares of all such classes
resulting from all such reclassifications.
Company: The term "Company" shall mean ITC DeltaCom, Inc., a Delaware
corporation, having its principal office at 1791 O.G. Skinner Drive, West Point,
Georgia 31833 and, subject to the provisions of Article XII, shall include its
successors and assigns.
Conversion Price: The term "Conversion Price" shall have the meaning
specified in Section 15.4.
Corporate Trust Office: The term "Corporate Trust Office" or other
similar term, shall mean the principal office of the Trustee at which at any
particular time its corporate trust business shall be principally administered,
which office is, at the date as of which this Indenture is dated, located at 114
West 47th Street, New York, New York 10036, Attention: Corporate Trust
Administration (ITC DeltaCom, Inc. 4 1/2% Convertible Subordinated Notes due
2006).
Credit Agreement: The term "Credit Agreement" shall mean the First Amended
and Restated Credit Agreement among Interstate FibertNet, Inc., NationsBank of
Texas, N.A., as administrative lender, and the lenders party thereto, as such
agreement may be amended, supplemented or modified from time to time.
Custodian: The term "Custodian" shall mean U.S. Trust Company of Texas,
N.A., as custodian with respect to the Notes in global form, or any successor
entity thereto.
Default: The term "default" shall mean any event that is, or after notice
or passage of time, or both, would be, an Event of Default.
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Defaulted Interest: The term "Defaulted Interest" shall have the meaning
specified in Section 2.3.
Depositary: The term "Depositary" shall mean, with respect to the Notes
issuable or issued in whole or in part in global form, the Person specified in
Section 2.5(d) as the Depositary with respect to such Notes, until a successor
shall have been appointed and become such pursuant to the applicable provisions
of this Indenture, and thereafter, "Depositary" shall mean or include such
successor.
Designated Senior Indebtedness: The term "Designated Senior Indebtedness"
shall mean the Company's credit facility pursuant to the Credit Agreement, the
11% Senior Notes, the 9 3/4% Senior Notes, the 8 7/8% Senior Notes and any
Senior Indebtedness in which the instrument creating or evidencing the same or
the assumption or guarantee thereof (or related agreements or documents to which
the Company is a party) expressly provides that such Senior Indebtedness shall
be "Designated Senior Indebtedness" for purposes of this Indenture (provided
that such instrument, agreement or other document may place limitations and
conditions on the right of such Senior Indebtedness to exercise the rights of
Designated Senior Indebtedness). If any payment made to any holder of any
Designated Senior Indebtedness or its Representative with respect to such
Designated Senior Indebtedness is rescinded or must otherwise be returned by
such holder or Representative upon the insolvency, bankruptcy or reorganization
of the Company or otherwise, the reinstated Indebtedness of the Company arising
as a result of such rescission or return shall constitute Designated Senior
Indebtedness effective as of the date of such recission or return.
Event of Default: The term "Event of Default" shall mean any event
specified in Section 7.1(a), (b), (c), (d) or (e).
Exchange Act: The term "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
Fundamental Change: The term "Fundamental Change" shall mean the
occurrence of any transaction or event in connection with which all or
substantially all of the Common Stock shall be exchanged for, converted into,
acquired for or constitute solely the right to receive consideration (whether by
means of an exchange offer, liquidation, tender offer, consolidation, merger,
combination, reclassification, recapitalization or otherwise) which is not all
or substantially all common stock listed (or, upon consummation of or
immediately following such transaction or event, which will be listed) on a
United States national securities exchange or approved for quotation on the
Nasdaq National Market or any similar United States system of automated
dissemination of quotations of securities prices.
Fundamental Change Expiration Time: The term "Fundamental Change
Expiration Time" shall have the meaning set forth in Section 3.5(b).
Global Note: The term "Global Note" shall have the meaning set forth in
Section 2.5(b).
Indebtedness: The term "Indebtedness" shall mean, with respect to any
Person, and without duplication:
(a) all indebtedness, obligations and other liabilities (contingent or
otherwise) of such Person for borrowed money (including obligations in
respect of overdrafts, foreign exchange contracts, currency exchange
agreements, interest rate protection agreements, and any loans or advances
from banks, whether or not evidenced by notes or similar instruments, and
all commitment, standby and other fees due and payable to financial
institutions with respect to credit facilities available to such Person)
or evidenced by bonds, debentures, notes or similar instruments (whether
or not the recourse of the lender is to the whole of the assets of such
Person or to only a portion thereof), and all obligations of such Person
issued or assumed as the deferred purchase price of property or services
other than any account payable or other accrued current liability or
obligation incurred in the ordinary course of business in connection with
the obtaining of materials or services;
(b) all reimbursement obligations and other liabilities (contingent or
otherwise) of such Person with respect to letters of credit, bank
guarantees or bankers' acceptances;
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(c) all obligations and liabilities (contingent or otherwise) in respect
of leases of real or personal property or other assets of such Person
required, in conformity with generally accepted accounting principles, to
be accounted for as capitalized lease obligations on the balance sheet of
such Person and all obligations and other liabilities (contingent or
otherwise) under any lease or related document (including a purchase
agreement) in connection with the lease of real property which provides
that such Person is contractually obligated to purchase or cause a third
party to purchase the leased property and thereby guarantee a minimum
residual value of the leased property to the lessor and the obligations of
such Person under such lease or related documents to purchase or to cause
a third party to purchase such leased property;
(d) all obligations of such Person (contingent or otherwise) with respect
to an interest rate or other swap, cap or collar agreement or other
similar instrument or agreement or foreign currency hedge, exchange,
purchase or similar instrument or agreement;
(e) all direct or indirect guaranties or similar agreements by such Person
in respect of, and obligations or liabilities (contingent or otherwise) of
such Person to purchase or otherwise acquire or otherwise assure a
creditor against loss in respect of, indebtedness, obligations or
liabilities of another Person of the kind described in clauses (a) through
(d);
(f) any indebtedness or other obligations described in clauses (a) through
(e) secured by any mortgage, pledge, lien or other encumbrance existing on
property which is owned or held by such Person, regardless of whether the
indebtedness or other obligation secured thereby shall have been assumed
by such Person; and
(g) any and all deferrals, renewals, extensions and refundings of, or
amendments, modifications or supplements to, any indebtedness, obligation
or liability of the kind described in clauses (a) through (f).
Indenture: The term "Indenture" shall mean this instrument as originally
executed or, if amended or supplemented as herein provided, as so amended or
supplemented.
Institutional Accredited Investor: The term "Institutional Accredited
Investor" shall mean an institutional "accredited investor" within the meaning
of Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
Liquidated Damages Amount: The term "Liquidated Damages Amount" shall
have the meaning specified in Section 2(e) of the Registration Rights Agreement.
Make-Whole Payment: The term "Make-Whole Payment" shall have the meaning
specified in Section 3.1(a).
Nonconversion Election: The term "Nonconversion Election" shall have the
meaning specified in Section 3.1(a).
Nonconversion Election Date: The term "Nonconversion Election Date" shall
have the meaning specified in Section 3.1(a).
Note or Notes: The term "Note" or "Notes" shall mean any Note or Notes,
as the case may be, authenticated and delivered under this Indenture, including
the Global Note.
Note register: The term "Note register" shall have the meaning specified
in Section 2.5(a).
Noteholder or holder: The terms "Noteholder" or "holder" as applied to any
Note, or other similar terms (but excluding the term "beneficial holder"), shall
mean any Person in whose name at the time a particular Note is registered on the
Notes registrar's books.
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Notice Date: The term "Notice Date" shall have the meaning specified in
Section 3.1(a).
Officers' Certificate: The term "Officers' Certificate," when used with
respect to the Company, shall mean a certificate signed by both (a) the
President, the Chief Executive Officer, the Chief Financial Officer, Executive
or Senior Vice President or any Vice President (whether or not designated by a
number or number or words or words added before or after the title "Vice
President") and (b) the Treasurer or any Assistant Treasurer or the Secretary or
any Assistant Secretary of the Company or two officers listed in clause (a).
Each Officers' Certificate (other than the certificate provided pursuant to the
Trust Indenture Act Section 314(a)(4)) shall include the statements provided for
in Trust Indenture Act Section 314(e).
Opinion of Counsel: The term "Opinion of Counsel" shall mean an opinion
in writing signed by legal counsel, who may be an employee of or counsel to the
Company, that meets the requirements of Section 16.5 hereof. Each such Opinion
of Counsel shall include the statements provided for in Trust Indenture Act
Section 314(e).
Optional Redemption: The term "Optional Redemption" shall have the
meaning specified in Section 3.1(b).
outstanding: The term "outstanding," when used with reference to Notes,
shall, subject to the provisions of Section 9.4, mean, as of any particular
time, all Notes authenticated and delivered by the Trustee under this Indenture,
except
(a) Notes theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(b) Notes, or portions thereof, (i) for the redemption of which
monies in the necessary amount shall have been deposited in trust with the
Trustee or with any paying agent (other than the Company) or (ii) which shall
have been otherwise discharged in accordance with Article XIII;
(c) Notes in lieu of which, or in substitution for which, other
Notes shall have been authenticated and delivered pursuant to the terms of
Section 2.6; and
(d) Notes converted into Common Stock pursuant to Article XV and
Notes deemed not outstanding pursuant to Article III.
Payment Blockage Notice: The term "Payment Blockage Notice" shall have
the meaning specified in Section 4.2.
Person: The term "Person" shall mean a corporation, an association, a
partnership, a limited liability company, an individual, a joint venture, a
joint stock company, a trust, or any other entity or organization, including
government or political subdivision or agency or instrumentality thereof.
Placement Agents: The term "Placement Agents" shall mean Morgan Stanley &
Co. Incorporated, Credit Suisse First Boston Corporation, First Union Capital
Markets Corp. and NationsBanc Montgomery Securities LLC.
Portal Market: The term "Portal Market" shall mean The Portal Market
operated by the National Association of Securities Dealers, Inc. or any
successor thereto.
Predecessor Note: The term "Predecessor Note" of any particular Note
shall mean every previous Note evidencing all or a portion of the same debt as
that evidenced by such particular Note; and, for the purposes of this
definition, any Note authenticated and delivered under Section 2.6 in lieu of a
lost, destroyed or stolen Note shall be deemed to evidence the same debt as the
lost, destroyed or stolen Note that it replaces.
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Provisional Redemption: The term "Provisional Redemption" shall have the
meaning specified in Section 3.1(a).
Provisional Redemption Date: The term "Provisional Redemption Date" shall
have the meaning specified in Section 3.1(a).
QIB: The term "QIB" shall mean a "qualified institutional buyer" as
defined in Rule 144A.
Registration Rights Agreement: The term "Registration Rights Agreement"
shall mean that certain Registration Rights Agreement, dated as of May 12, 1999,
between the Company and the Placement Agents, and certain permitted assigns
specified therein, as amended from time to time in accordance with its terms.
Representative: The term "Representative" shall mean (a) the indenture
trustee or other trustee, agent or representative for any Senior Indebtedness or
(b) with respect to any Senior Indebtedness that does not have any such trustee,
agent or other representative, (i) in the case of such Senior Indebtedness
issued pursuant to an agreement providing for voting arrangements as among the
holders or owners of such Senior Indebtedness, any holder or owner of such
Senior Indebtedness acting with the consent of the required Persons necessary to
bind such holders or owners of such Senior Indebtedness and (ii) in the case of
all other such Senior Indebtedness, the holder or owner of such Senior
Indebtedness.
Responsible Officer: The term "Responsible Officer," when used with
respect to the Trustee, shall mean the chairman or any vice chairman of the
board of directors, the chairman or any vice chairman of the executive committee
of the board of directors, the chairman of the trust committee, the president,
any vice president, any assistant vice president, the secretary, any assistant
secretary, the treasurer, any assistant treasurer, the cashier, any assistant
cashier, any trust officer or assistant trust officer, the controller or any
assistant controller or any other officer of the Trustee in its Corporate Trust
Department customarily performing functions similar to those performed by any of
the above-designated officers and in each case having direct responsibility for
the administration of this Indenture and also means, with respect to a
particular corporate trust matter, any other officer to whom such matter is
referred because of his or her knowledge of and familiarity with the particular
subject.
Restricted Securities: The term "Restricted Securities" shall have the
meaning specified in Section 2.5(d).
Rule 144A: The term "Rule 144A" shall mean Rule 144A as promulgated under
the Securities Act.
Securities Act: The term "Securities Act" shall mean the Securities Act of
1933, as amended.
Senior Indebtedness: The term "Senior Indebtedness" shall mean the
principal of, premium, if any, interest (including all interest accruing
subsequent to the commencement of any bankruptcy or similar proceeding, whether
or not a claim for post-petition interest is allowable as a claim in any such
proceeding) and rent payable on or in connection with, and all fees, costs,
expenses and other amounts accrued or due on or in connection with, Indebtedness
of the Company, whether outstanding on the date of this Indenture or thereafter
created, incurred, assumed, guaranteed or in effect guaranteed by the Company
(including all deferrals, renewals, extensions or refundings of, or amendments,
modifications or supplements to, the foregoing), unless in the case of any
particular Indebtedness the instrument creating or evidencing the same or the
assumption or guarantee thereof expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes or expressly provides that such
Indebtedness is pari passu with or junior to the Notes. Notwithstanding the
foregoing, the term "Senior Indebtedness" shall not include any Indebtedness of
the Company to any of its Subsidiaries. If any payment made to any holder of any
Senior Indebtedness or its Representative with respect to such Senior
Indebtedness is rescinded or must otherwise be returned by such holder or
Representative upon the insolvency, bankruptcy or reorganization of the Company
or otherwise, the reinstated Indebtedness of the Company arising as a result of
such rescission or return shall constitute Senior Indebtedness effective as of
the date of such rescission or return.
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Significant Subsidiary: The term "Significant Subsidiary" shall mean, as
of any date of determination, a Subsidiary of the Company that would constitute
a "significant subsidiary" as such term is defined under Rule 1-02 of Regulation
S-X of the Commission.
Subsidiary: The term "Subsidiary" shall mean, with respect to any Person,
any corporation, association or other business entity of which more than 50% of
the voting power of the outstanding capital stock of any class or kind
ordinarily having the power to vote for the election of directors, managers or
other voting members of the governing body of such Person is owned, directly or
indirectly, by such Person and one or more other Subsidiaries of such Person.
Trading Day: The term "Trading Day" shall have the meaning specified in
Section 15.5(h)(5).
Trigger Event: The term "Trigger Event" shall have the meaning specified
in Section 15.5(d).
Trust Indenture Act: The terms "Trust Indenture Act" or "TIA" shall mean
the Trust Indenture Act of 1939, as amended, as it was in force at the date of
execution of this Indenture, except as provided in Sections 11.3 and 15.6.
Trustee: The term "Trustee" shall mean U.S. Trust Company of Texas, N.A.
until a successor replaces it in accordance with the provisions of Article
of this Indenture and thereafter means such successor.
The definitions of certain other terms are as specified in Sections 2.5
and 3.5 and Article.
ARTICLE II
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES
Section 2.1. Designation Amount and Issue of Notes. The Notes shall be
designated as "4 1/2% Convertible Subordinated Notes due 2006." Notes not to
exceed the aggregate principal amount of $100,000,000 (except pursuant to
Sections 2.5, 2.6, 3.3, 3.5 and 15.2 hereof) upon the execution of this
Indenture, or from time to time thereafter, may be executed by the Company and
delivered to the Trustee for authentication, and the Trustee shall thereupon
authenticate and deliver said Notes to or upon the written order of the Company,
signed by its (a) Chief Executive Officer, President, Chief Financial Officer,
Executive or Senior Vice President or any Vice President (whether or not
designated by a number or numbers or word or words added before or after the
title "Vice President") and (b) Treasurer or Assistant Treasurer or its
Secretary or any Assistant Secretary, or by two officers listed in clause (a),
without any further action by the Company hereunder.
Section 2.2. Form of Notes. The Notes and the Trustee's certificate of
authentication to be borne by such Notes shall be substantially in the form set
forth in Exhibit A, which is incorporated in and made a part of this Indenture.
Any of the Notes may have such letters, numbers or other marks of
identification and such notations, legends and endorsements as the officers
executing the same may approve (execution thereof to be conclusive evidence of
such approval) and as are not inconsistent with the provisions of this
Indenture, or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any
securities exchange or automated quotation system on which the Notes may be
listed, or to conform to usage.
Any Note in global form shall represent such of the outstanding Notes as
shall be specified therein and shall provide that it shall represent the
aggregate amount of outstanding Notes from time to time endorsed thereon and
that the aggregate amount of outstanding Notes represented thereby may from time
to time be increased or reduced to reflect transfers or exchanges permitted
hereby. Any endorsement of a Note in global form to reflect the amount of any
increase or decrease in the amount of outstanding Notes represented thereby
shall be made by the Trustee or the Custodian, at the direction of the Trustee,
in such manner and upon instructions given by the holder of such Notes in
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accordance with this Indenture. Payment of principal of and interest (including
Liquidated Damages Amount, if any) and premium, if any, on any Note in global
form shall be made to the holder of such Note.
The terms and provisions contained in the form of Note attached as Exhibit
A hereto shall constitute, and are hereby expressly made, a part of this
Indenture and, to the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
Section 2.3 Date and Denomination of Notes; Payments of Interest
(including Liquidated Damages Amount, if any). The Notes shall be issuable in
registered form without coupons in denominations of $1,000 principal amount and
integral multiples thereof. Every Note shall be dated the date of its
authentication and shall bear interest from the applicable date in each case as
specified on the face of the form of Note attached as Exhibit A hereto. Interest
on the Notes shall be computed on the basis of a 360-day year comprised of
twelve (12) 30-day months.
The Person in whose name any Note (or its Predecessor Note) is registered
on the Note register at the close of business on any record date with respect to
any interest payment date shall be entitled to receive the interest (including
Liquidated Damages Amount, if any) payable on such interest payment date, except
(i) that the interest (including Liquidated Damages Amount, if any) payable upon
redemption (unless the date of redemption is an interest payment date) will be
payable to the Person to whom principal is payable and (ii) as set forth in the
next succeeding sentence. In the case of any Note (or portion thereof) which is
converted into Common Stock during the period from (but excluding) a record date
to (but excluding) the next succeeding interest payment date either (i) if such
Note (or portion thereof) has been called for redemption on a redemption date
which occurs during such period, or is to be redeemed in connection with a
Fundamental Change on a Repurchase Date (as defined in Section 3.5) which occurs
during such period, the Company shall not be required to pay interest on such
interest payment date in respect of any such Note (or portion thereof) except to
the extent required to be paid upon redemption of such Note or portion thereof
pursuant to Section 3.3 or 3.5 hereof or (ii) if otherwise, any Note (or portion
thereof) submitted for conversion during such period shall be accompanied by
funds equal to the interest payable on such succeeding interest payment date on
the principal amount so converted. Interest (including Liquidated Damages
Amount, if any) shall be payable at the office of the Company maintained by the
Company for such purposes in the Borough of Manhattan, The City of New York,
which shall initially be an office or agency of the Trustee and may, as the
Company shall specify to the paying agent in writing by each record date, be
paid either (i) by check mailed to the address of the Person entitled thereto as
it appears in the Note register (provided that the holder of Notes with an
aggregate principal amount in excess of $10,000,000 shall, at the written
election of such holder, be paid by wire transfer in immediately available
funds) or (ii) by transfer to an account maintained by such Person located in
the United States; provided, however, that payments to the Depositary will be
made by wire transfer of immediately available funds to the account of the
Depositary or its nominee. The term "record date" with respect to any interest
payment date shall mean May 1 or November 1 preceding the relevant May 15 or
November 15, respectively.
Any interest (including Liquidated Damages Amount, if any) on any Note
which is payable, but is not punctually paid or duly provided for, on any May 15
or November 15 (herein called "Defaulted Interest") shall forthwith cease to be
payable to the Noteholder on the relevant record date by virtue of his having
been such Noteholder; and such Defaulted Interest shall be paid by the Company,
at its election in each case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Notes (or their respective Predecessor Notes)
are registered at the close of business on a special record date for the payment
of such Defaulted Interest, which shall be fixed in the following manner. The
Company shall notify the Trustee in writing of the amount of Defaulted Interest
to be paid on each Note and the date of the payment (which shall be not less
than twenty-five (25) days after the receipt by the Trustee of such notice,
unless the Trustee shall consent to an earlier date), and at the same time the
Company shall deposit with the Trustee an amount of money equal to the aggregate
amount to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date of
the proposed payment, such money when deposited to be held in trust for the
benefit of the Person entitled to such Defaulted Interest as in this clause
provided. Thereupon the Trustee shall fix a special record date for the payment
of such Defaulted Interest which shall be not more than
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fifteen (15) days and not less than ten (10) days prior to the date of the
proposed payment, and not less than ten (10) days after the receipt by the
Trustee of the notice of the proposed payment, the Trustee shall promptly notify
the Company of such special record date and, in the name and at the expense of
the Company, shall cause notice of the proposed payment of such Defaulted
Interest and the special record date therefor to be mailed, first-class postage
prepaid, to each Noteholder at his address as it appears in the Note register,
not less than ten (10) days prior to such special record date. Notice of the
proposed payment of such Defaulted Interest and the special record date therefor
having been so mailed, such Defaulted Interest shall be paid to the Persons in
whose names the Notes (or their respective Predecessor Notes) were registered at
the close of business on such special record date and shall no longer be payable
pursuant to the following clause (2) of this Section 2.3.
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any securities
exchange or automated quotation system on which the Notes may be listed or
designated for issuance, and upon such notice as may be required by such
exchange or automated quotation system, if, after notice given by the Company to
the Trustee of the proposed payment pursuant to this clause, such manner of
payment shall be deemed practicable by the Trustee.
Section 2.4. Execution of Notes. The Notes shall be (a) signed in the name
and on behalf of the Company by the manual or facsimile signature of its Chief
Executive Officer, President, Chief Financial Officer, any Executive or Senior
Vice President or any Vice President (whether or not designated by a number or
numbers or word or words added before or after the title "Vice President") or
Treasurer and (b) attested by the manual or facsimile signature of its Secretary
or any of its Assistant Secretaries or its Finance Director or any of its
Assistant Treasurers or any other officer listed in clause (a) (which may be
printed, engraved or otherwise reproduced thereon, by facsimile or otherwise).
Only such Notes as shall bear thereon a certificate of authentication
substantially in the form set forth on the form of Note attached as Exhibit A
hereto, manually executed by the Trustee (or an authenticating agent appointed
by the Trustee as provided by Section 16.11), shall be entitled to the benefits
of this Indenture or be valid or obligatory for any purpose. Such certificate by
the Trustee (or such an authenticating agent) upon any Note executed by the
Company shall be conclusive evidence that the Note so authenticated has been
duly authenticated and delivered hereunder and that the holder is entitled to
the benefits of this Indenture.
In case any officer of the Company who shall have signed any of the Notes
shall cease to be such officer before the Notes so signed shall have been
authenticated and delivered by the Trustee, or disposed of by the Company, such
Notes nevertheless may be authenticated and delivered or disposed of as though
the person who signed such Notes had not ceased to be such officer of the
Company; and any Note may be signed on behalf of the Company by such persons as,
at the actual date of the execution of such Note, shall be the proper officers
of the Company, although at the date of the execution of this Indenture any such
person was not such an officer.
Section 2.5 Exchange and Registration of Transfer of Notes; Restrictions
on Transfer; Depositary
(a) The Company shall cause to be kept at the Corporate Trust Office
a register (the register maintained in such office and in any other office or
agency of the Company designated pursuant to Section 5.2 being herein sometimes
collectively referred to as the "Note register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Notes and of transfers of Notes. The Note register shall be in
written form or in any form capable of being converted into written form within
a reasonably prompt period of time. The Trustee is hereby appointed "Note
register" for the purpose of registering Notes and transfers of Notes as herein
provided. The Company may appoint one or more co-registrars in accordance with
Section 5.2.
Upon surrender for registration of transfer of any Note to the Note
registrar or any co-registrar, and satisfaction of the requirements for such
transfer set forth in this Section 2.5, the Company shall execute, and the
Trustee shall authenticate and deliver, in the name of the designated transferee
or transferees, one or more new Notes of any authorized denominations and of a
like aggregate principal amount and bearing such restrictive legends as may be
required by this Indenture.
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Notes may be exchanged for other Notes of any authorized denominations and
of a like aggregate principal amount, upon surrender of the Notes to be
exchanged at any such office or agency maintained by the Company pursuant to
Section 5.2. Whenever any Notes are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the Notes which
the Noteholder making the exchange is entitled to receive bearing registration
numbers not contemporaneously outstanding.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Company, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
All Notes presented or surrendered for registration of transfer or for
exchange, redemption or conversion shall (if so required by the Company or the
Note registrar) be duly endorsed, or be accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company, and the Notes shall
be duly executed by the Noteholder thereof or his attorney duly authorized in
writing.
No service charge shall be made for any registration of transfer or
exchange of Notes, but the Company may require payment of a sum sufficient to
cover any tax, assessment or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes.
Neither the Company nor the Trustee nor any Note registrar shall be
required to exchange or register a transfer of (a) any Notes for a period of
fifteen (15) days next preceding any selection of Notes to be redeemed or (b)
any Notes or portions thereof called for redemption pursuant to Section 3.2 or
(c) any Notes or portions thereof surrendered for conversion pursuant to Article
XV or (d) any Notes or portions thereof tendered for redemption (and not
withdrawn) pursuant to Section 3.5.
(b) So long as the Notes are eligible for book-entry settlement with
the Depositary, or unless otherwise required by law, all Notes that, upon
initial issuance are beneficially owned by QIBs or as a result of a sale or
transfer after initial issuance are beneficially owned by QIBs, will be
represented by one or more Notes in global form registered in the name of the
Depositary or the nominee of the Depositary (the "Global Note"), except as
otherwise specified below. The transfer and exchange of beneficial interests in
any such Global Note shall be effected through the Depositary in accordance with
this Indenture and the procedures of the Depositary therefor. The Trustee shall
make appropriate endorsements to reflect increases or decreases in the principal
amounts of any such Global Note as set forth on the face of the Note ("Principal
Amount") to reflect any such transfers. Except as provided below, beneficial
owners of a Global Note shall not be entitled to have certificates registered in
their names, will not receive or be entitled to receive physical delivery of
certificates in definitive form and will not be considered holders of such Notes
in global form.
(c) So long as the Notes are eligible for book-entry settlement, or
unless otherwise required by law, upon any transfer of a definitive Note to a
QIB in accordance with Rule 144A, and upon receipt of the definitive Note or
Notes being so transferred, together with a certification, substantially in the
form on the reverse of the Note, from the transferor that the transfer is being
made in compliance with Rule 144A (or other evidence satisfactory to the
Trustee), the Trustee shall make an endorsement on the Global Note to reflect an
increase in the aggregate Principal Amount of the Notes represented by such Note
in global form, and the Trustee shall cancel such definitive Note or Notes in
accordance with the standing instructions and procedures of the Depositary, the
aggregate Principal Amount of the Notes represented by such Note in global form
to be increased accordingly; provided that no definitive Note, or portion
thereof, in respect of which the Company or an Affiliate of the Company held any
beneficial interest shall be included in such Note in global form until such
definitive Note is freely tradable in accordance with Rule 144(k); provided
further that the Trustee shall issue Notes in definitive form upon any transfer
of a beneficial interest in the Note in global form to the Company or any
Affiliate of the Company.
Upon any transfer of a Note to an Institutional Accredited Investor (other
than pursuant to a registration statement that has been declared effective under
the Securities Act), such Institutional Accredited Investor shall, prior to such
transfer, furnish to the Company and/or the Trustee a signed letter containing
representations and agreements relating to restrictions on transfer
substantially in the form set forth in Exhibit B to this Indenture. Upon any
transfer
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of a beneficial interest in the Global Note to an Institutional Accredited
Investor, the Trustee shall make an endorsement on the Global Note to reflect a
decrease in the aggregate Principal Amount of the Notes represented by such Note
in global form, and the Company shall execute a definitive Note or Notes in
exchange therefore, and the Trustee, upon receipt of such definitive Note or
Notes and the written order of the Company, shall authenticate and deliver such,
definitive Note or Notes.
Any Note in global form may be endorsed with or have incorporated in the
text thereof such legends or recitals or changes not inconsistent with the
provisions of this Indenture as may be required by the Custodian, the Depositary
or by the National Association of Securities Dealers, Inc. in order for the
Notes to be tradeable on The Portal Market or as may be required for the Notes
to be tradeable on any other market developed for trading of securities pursuant
to Rule 144A or required to comply with any applicable law or any regulation
thereunder or with the rules and regulations of any securities exchange or
automated quotation system upon which the Notes may be listed or traded or to
conform with any usage with respect thereto, or to indicate any special
limitations or restrictions to which any particular Notes are subject.
(d) Every Note that bears or is required under this Section 2.5(d)
to bear the legend set forth in this Section 2.5(d) (together with any Common
Stock issued upon conversion of the Notes and required to bear the legend set
forth in Section 2.5(e), collectively, the "Restricted Securities") shall be
subject to the restrictions on transfer set forth in this Section 2.5(d)
(including those set forth in the legend set forth below) unless such
restrictions on transfer shall be waived by written consent of the Company, and
the holder of each such Restricted Security, by such holder's acceptance
thereof, agrees to be bound by all such restrictions on transfer. As used in
Sections 2.5(d) and 2.5(e), the term "transfer" encompasses any sale, pledge,
transfer or other disposition whatsoever of any Restricted Security.
Until the expiration of the holding period applicable to sales thereof
under Rule 144(k) under the Securities Act (or any successor provision), any
certificate evidencing such Note (and all securities issued in exchange therefor
or substitution thereof, other than Common Stock, if any, issued upon conversion
thereof, which shall bear the legend set forth in Section 2.5(e), if applicable)
shall bear a legend in substantially the following form, unless such Note has
been sold pursuant to a registration statement that has been declared effective
under the Securities Act (and which continues to be effective at the time of
such transfer), or unless otherwise agreed by the Company in writing, with
written notice thereof to the Trustee:
THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, 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 IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2),
(3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED
INVESTOR"); (2) AGREES THAT IT WILL NOT, PRIOR TO EXPIRATION OF THE
HOLDING PERIOD APPLICABLE TO SALES OF THE NOTE EVIDENCED HEREBY UNDER RULE
144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), RESELL OR
OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE
UPON CONVERSION OF SUCH NOTE EXCEPT (A) TO ITC DELTACOM, INC. OR ANY
SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE
WITH RULE 144A
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UNDER THE SECURITIES ACT, (C) TO AN INSTITUTIONAL ACCREDITED INVESTOR
THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO U.S. TRUST COMPANY OF TEXAS,
N.A., AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THE NOTE EVIDENCED HEREBY (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM SUCH TRUSTEE OR A SUCCESSOR TRUSTEE, AS
APPLICABLE), (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY
RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (E) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH
TRANSFER); (3) AGREES THAT PRIOR TO SUCH TRANSFER (OTHER THAN A TRANSFER
PURSUANT TO CLAUSE (2)(E) ABOVE), IT WILL FURNISH TO U.S. TRUST COMPANY OF
TEXAS, N.A., AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS IT 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; AND (4) AGREES THAT IT WILL DELIVER TO
EACH PERSON TO WHOM THE NOTE EVIDENCED HEREBY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THE NOTE EVIDENCED HEREBY PRIOR TO THE EXPIRATION OF THE
HOLDING PERIOD APPLICABLE TO SALES OF THE NOTE EVIDENCED HEREBY UNDER RULE
144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), THE HOLDER
MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO
THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO U.S. TRUST
COMPANY OF TEXAS, N.A., AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS
APPLICABLE). IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO U.S. TRUST
COMPANY OF TEXAS, N.A., AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS
APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS
IT 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. THIS LEGEND WILL BE
REMOVED UPON THE EARLIER OF THE TRANSFER OF THE NOTE EVIDENCED HEREBY
PURSUANT TO CLAUSE (2)(E) ABOVE OR UPON ANY TRANSFER OF THE NOTES
EVIDENCED HEREBY UNDER RULE 144(k) UNDER THE
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SECURITIES ACT (OR ANY SUCCESSOR PROVISION). AS USED HEREIN, THE TERMS
"UNITED STATES" AND "UNITED STATES PERSON" HAVE THE MEANINGS GIVEN TO THEM
BY REGULATION S UNDER THE SECURITIES ACT.
Any Note (or security issued in exchange or substitution therefor) as to
which such restrictions on transfer shall have expired in accordance with their
terms or as to conditions for removal of the foregoing legend set forth therein
have been satisfied may, upon surrender of such Note for exchange to the Note
registrar in accordance with the provisions of this Section 2.5, be exchanged
for a new Note or Notes, of like tenor and aggregate principal amount, which
shall not bear the restrictive legend required by this Section 2.5(d).
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in the second paragraph of Section 2.5(c) and in this
Section 2.5(d)), a Note in global form may not be transferred as a whole or in
part 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.
The Depositary shall be a clearing agency registered under the Exchange
Act. The Company initially appoints The Depository Trust Company to act as
Depositary with respect to the Notes in global form. Initially, the Global Note
shall be issued to the Depositary, registered in the name of Cede & Co., as the
nominee of the Depositary, and deposited with the Custodian for Cede & Co.
If at any time the Depositary for a Note in global form notifies the
Company that it is unwilling or unable to continue as Depositary for such Note,
the Company may appoint a successor Depositary with respect to such Note. If a
successor Depositary is not appointed by the Company within ninety (90) days
after the Company receives such notice, the Company will execute, and the
Trustee, upon receipt of an Officers' Certificate for the authentication and
delivery of Notes, will authenticate and deliver, Notes in certificated form, in
aggregate principal amount equal to the principal amount of such Note in global
form, in exchange for such Note in global form.
If a Note in certificated form is issued in exchange for any portion of a
Note in global form after the close of business at the office or agency where
such exchange occurs on any record date and before the opening of business at
such office or agency on the next succeeding interest payment date, interest
will not be payable on such interest payment date in respect of such Note, but
will be payable on such interest payment date, subject to the provisions of
Section 2.3, only to the Person to whom interest in respect of such portion of
such Note in global form is payable in accordance with the provisions of this
Indenture.
Notes in certificated form issued in exchange for all or a part of a Note
in global form pursuant to this Section 2.5 shall be registered in such names
and in such authorized denominations as the Depositary, pursuant to instructions
from its direct or indirect participants or otherwise, shall instruct the
Trustee. Upon execution and authentication, the Trustee shall deliver such Notes
in certificated form to the Persons in whose names such Notes in certificated
form are so registered.
At such time as all interests in a Note in global form have been redeemed,
converted, canceled, exchanged for Notes in certificated form, or transferred to
a transferee who receives Notes in certificated form thereof, such Note in
global form shall, upon receipt thereof, be canceled by the Trustee in
accordance with standing procedures and instructions existing between the
Depositary and the Custodian. At any time prior to such cancellation, if any
interest in a global Note is exchanged for Notes in certificated form, redeemed,
converted, repurchased or canceled, exchanged for Notes in certificated form or
transferred to a transferee who receives Notes in certificated form therefor or
any Note in certificated form is exchanged or transferred for part of a Note in
global form, the principal amount of such Note in global form shall, in
accordance with the standing procedures and instructions existing between the
Depositary and the Custodian, be appropriately reduced or increased, as the case
may be, and an endorsement shall be made on such Note in global form, by the
Trustee or the Custodian, at the direction of the Trustee, to reflect such
reduction or increase.
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(e) Until the expiration of the holding period applicable to sales
thereof under Rule 144(k) under the Securities Act (or any successor provision),
any stock certificate representing Common Stock issued upon conversion of any
Note shall bear a legend in substantially the following form, unless such Common
Stock has been sold pursuant to a registration statement that has been declared
effective under the Securities Act (and which continues to be effective at the
time of such transfer) or such Common Stock has been issued upon conversion of
Notes that have been transferred pursuant to a registration statement that has
been declared effective under the Securities Act, or unless otherwise agreed by
the Company in writing with written notice thereof to the transfer agent:
THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAWS, 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 IN THE FOLLOWING SENTENCE. THE HOLDER HEREOF
AGREES THAT, UNTIL THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO
SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(k) UNDER THE
SECURITIES ACT (OR ANY SUCCESSOR PROVISION), (1) IT WILL NOT RESELL OR
OTHERWISE TRANSFER THE COMMON STOCK EVIDENCED HEREBY EXCEPT (A) TO
ITC DELTACOM, INC. OR ANY SUBSIDIARY THEREOF, (B) TO A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN
COMPLIANCE WITH RULE 144A, (C) TO AN INSTITUTIONAL "ACCREDITED INVESTOR"
(AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT)
THAT PRIOR TO SUCH TRANSFER, FURNISHES TO AMERICAN STOCK TRANSFER & TRUST
COMPANY, AS TRANSFER AGENT (OR A SUCCESSOR TRANSFER AGENT, AS APPLICABLE),
A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING
TO THE RESTRICTIONS ON TRANSFER OF THE COMMON STOCK EVIDENCED HEREBY (THE
FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRANSFER AGENT OR A
SUCCESSOR TRANSFER AGENT, AS APPLICABLE), (D) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), OR (E) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE
EFFECTIVE AT THE TIME OF SUCH TRANSFER); (2) PRIOR TO SUCH TRANSFER (OTHER
THAN A TRANSFER PURSUANT TO CLAUSE (1)(E) ABOVE), IT WILL FURNISH TO
AMERICAN STOCK TRANSFER & TRUST COMPANY, AS TRANSFER AGENT (OR A SUCCESSOR
TRANSFER AGENT, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR
OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION
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NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT; AND
(3) IT WILL DELIVER TO EACH PERSON TO WHOM THE COMMON STOCK EVIDENCED
HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 1(E)
ABOVE) A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THIS LEGEND
WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE COMMON STOCK
EVIDENCED HEREBY PURSUANT TO CLAUSE (1)(E) ABOVE OR UPON ANY TRANSFER OF
THE COMMON STOCK EVIDENCED HEREBY AFTER THE EXPIRATION OF THE HOLDING
PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE
144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION). AS USED
HEREIN, THE TERMS "UNITED STATES" AND "UNITED STATES PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
Any such Common Stock as to which such restrictions on transfer shall have
expired in accordance with their terms or as to which the conditions for removal
of the foregoing legend set forth therein have been satisfied may, upon
surrender of the certificates representing such shares of Common Stock for
exchange in accordance with the procedures of the transfer agent for the Common
Stock, be exchanged for a new certificate or certificates for a like number of
shares of Common Stock, which shall bear the restrictive legend required by this
Section 2.5(e).
(f) Any Note or Common Stock issued upon the conversion or exchange
of a Note that, prior to the expiration of the holding period applicable to
sales thereof under Rule 144(k) under the Securities Act (or any successor
provision), is purchased or owned by the Company or any Affiliate thereof may
not be resold by the Company or such Affiliate unless registered under the
Securities Act or resold pursuant to an exemption from the registration
requirements of the Securities Act in a transaction which results in such Notes
or Common Stock, as the case may be, no longer being "restricted securities" (as
defined under Rule 144).
Section 2.6. Multilated, Destroyed, Lost or Stolen Notes. In case any Note
shall become mutilated or be destroyed, lost or stolen, the Company in its
discretion may execute, and upon its written request the Trustee or an
authenticating agent appointed by the Trustee shall authenticate and make
available for delivery, a new Note, bearing a number not contemporaneously
outstanding, in exchange and substitution for the mutilated Note, or in lieu of
and in substitution for the Note so destroyed, lost or stolen. In every case the
applicant for a substituted Note shall furnish to the Company, to the Trustee
and, if applicable, to such authenticating agent such security or indemnity as
may be required by them to save each of them harmless for any loss, liability,
cost or expense caused by or connected with such substitution, and, in every
case of destruction, loss or theft, the applicant shall also furnish to the
Company, to the Trustee and, if applicable, to such authenticating agent
evidence to their satisfaction of the destruction, loss or theft of such Note
and of the ownership thereof.
Following receipt by the Trustee or such authenticating agent, as the case
may be, of satisfactory security or indemnity and evidence, as described in the
preceding paragraph, the Trustee or such authenticating agent may authenticate
any such substituted Note and make available for delivery such Note. Upon the
issuance of any substituted Note, the Company may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses connected therewith. In case any Note
which has matured or is about to mature or has been called for redemption or has
been tendered for redemption (and not withdrawn) or is about to be converted
into Common Stock shall become mutilated or be destroyed, lost or stolen, the
Company may, instead of issuing a substitute Note, pay or authorize the payment
of or convert or authorize the conversion of the same (without surrender thereof
except in the case of a mutilated Note), as the case may be, if the applicant
for such payment or conversion shall furnish to the Company, to the Trustee and,
if applicable, to such authenticating agent such security or indemnity as may be
required by them to save each of them harmless for any loss, liability, cost or
expense caused by or connected with such substitution, and, in case of
destruction, loss or theft,
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evidence satisfactory to the Company, the Trustee and, if applicable, any paying
agent or conversion agent of the destruction, loss or theft of such Note and of
the ownership thereof.
Every substitute Note issued pursuant to the provisions of this Section
2.6 by virtue of the fact that any Note is destroyed, lost or stolen shall
constitute an additional contractual obligation of the Company, whether or not
the destroyed, lost or stolen Note shall be found at any time, and shall be
entitled to all the benefits of (but shall be subject to all the limitations set
forth in) this Indenture equally and proportionately with any and all other
Notes duly issued hereunder. To the extent permitted by law, all Notes shall be
held and owned upon the express condition that the foregoing provisions are
exclusive with respect to the replacement or payment or conversion of mutilated,
destroyed, lost or stolen Notes and shall preclude any and all other rights or
remedies notwithstanding any law or statute existing or hereafter enacted to the
contrary with respect to the replacement or payment or conversion of negotiable
instruments or other securities without their surrender.
Section 2.7. Temporary Notes. Pending the preparation of Notes in
certificated form, the Company may execute and the Trustee or an authenticating
agent appointed by the Trustee shall, upon the written request of the Company,
authenticate and deliver temporary Notes (printed or lithographed). Temporary
Notes shall be issuable in any authorized denomination, and substantially in the
form of the Notes in certificated form, but with such omissions, insertions and
variations as may be appropriate for temporary Notes, all as may be determined
by the Company. Every such temporary Note shall be executed by the Company and
authenticated by the Trustee or such authenticating agent upon the same
conditions and in substantially the same manner, and with the same effect, as
the Notes in certificated form. Without unreasonable delay the Company will
execute and deliver to the Trustee or such authenticating agent Notes in
certificated form (other than in the case of Notes in global form) and thereupon
any or all temporary Notes (other than any such Note in global form) may be
surrendered in exchange therefor, at each office or agency maintained by the
Company pursuant to Section 5.2 and the Trustee or such authenticating agent
shall authenticate and make available for delivery in exchange for such
temporary Notes an equal aggregate principal amount of Notes in certificated
form. Such exchange shall be made by the Company at its own expense and without
any charge therefor. Until so exchanged, the temporary Notes shall in all
respects be entitled to the same benefits and subject to the same limitations
under this Indenture as Notes in certificated form authenticated and delivered
hereunder.
Section 2.8 Cancellation of Notes Paid, Etc. All Notes surrendered for the
purpose of payment, redemption, conversion, exchange or registration of transfer
shall, if surrendered to the Company or any paying agent or any Note registrar
or any conversion agent, be surrendered to the Trustee and promptly canceled by
it, or, if surrendered to the Trustee, shall be promptly canceled by it, and no
Notes shall be issued in lieu thereof except as expressly permitted by any of
the provisions of this Indenture. The Trustee shall dispose of such canceled
Notes in accordance with its customary procedures. If the Company shall acquire
any of the Notes, such acquisition shall not operate as a redemption or
satisfaction of the indebtedness represented by such Notes unless and until the
same are delivered to the Trustee for cancellation.
Section 2.9 CUSIP Numbers. The Company in issuing the Notes may use
"CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use
"CUSIP" numbers in notices of redemption as a convenience to Noteholders;
provided that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Notes or as contained in
any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Notes, and any such redemption shall not
be affected by any defect in or omission of such numbers. The Company will
promptly notify the Trustee of any change in the "CUSIP" numbers.
ARTICLE III
REDEMPTION OF NOTES AND NONCONVERSION ELECTION
Section 3.1 (a) Provisional Redemption or Nonconversion Election by the
Company. (1) The Company may redeem the Notes (a "Provisional Redemption"), in
whole or in part, at any time prior to May
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17, 2002, upon notice as set forth in Section 3.2, at a redemption price equal
to $1,000 per Note to be redeemed plus accrued and unpaid interest, if any
(including Liquidated Damages Amount, if any), to the date of redemption (the
"Provisional Redemption Date") or (2) the Company may terminate the
convertibility of the Notes (a "Nonconversion Election") after 30 days' notice
as set forth in Section 3.2, at any time prior to May 17, 2002, in each case, if
(i) the closing price of the Common Stock shall have exceeded 150% of the
Conversion Price then in effect for at least 20 Trading Days in any consecutive
30-Trading Day period ending on the Trading Day prior to the date of mailing of
the notice of redemption or Nonconversion Election pursuant to Section 3.2 (the
"Notice Date") and (ii) the shelf registration statement covering resales of the
Notes and the Common Stock issuable upon conversion of the Notes is effective
and available for use and is expected to remain effective and available for use
for the 30 days immediately following the Notice Date.
Upon any such Provisional Redemption or Nonconversion Election, the
Company shall make an additional payment in cash (the "Make-Whole Payment") with
respect to the Notes called for redemption (or all Notes, in the case of a
Nonconversion Election) to holders on the Notice Date in an amount equal to
$212.60 per $1,000 Note, less the amount of any interest actually paid on such
Note prior to the Notice Date. The Company shall make the Make-Whole Payment on
all Notes called for Provisional Redemption (or all Notes, in the case of a
Nonconversion Election), including any Notes converted into Common Stock
pursuant to the terms hereof after the Notice Date and prior to the Provisional
Redemption Date or the date the Nonconversion Election takes effect (the
"Nonconversion Election Date").
(b) Optional Redemption by the Company. At any time on or after May 17,
2002, and prior to maturity, the Notes may be redeemed at the option of the
Company (an "Optional Redemption"), in whole or in part, upon notice as set
forth in Section 3.2, at the following optional redemption prices (expressed as
percentages of the principal amount), together in each case with accrued and
unpaid interest, if any (including Liquidated Damages Amount, if any), to, but
excluding, the date fixed for redemption.
If redeemed during the period beginning May 17, 2002 and ending on May 14,
2003, at a redemption price of 102.571% and if redeemed during the 12-month
period beginning May 15:
Year Redemption Price
---- ----------------
2003..................101.929%
2004..................101.286%
2005..................100.643%
and 100% at May 15, 2006; provided that if the date fixed for redemption is
after an interest payment record date and on or before May 15 or November 15,
then the interest payable on such date shall be paid to the holder of record on
the preceding May 1 or November 1, respectively.
Section 3.2 Notice of Redemptions or Nonconversion Election; Selection of
Notes for Redemption. In case the Company shall desire to exercise the right to
redeem all or, as the case may be, any part of the Notes (Provisional Redemption
or Optional Redemption), or make a Nonconversion Election for all Notes, each
pursuant to Section 3.1, it shall fix a date for redemption or the Nonconversion
Election Date, as the case may be, and it or, at its written request received by
the Trustee not fewer than forty-five (45) days prior (or such shorter period of
time as may be acceptable to the Trustee) to the date fixed for redemption or
the Nonconversion Election Date, as the case may be, the Trustee in the name of
and at the expense of the Company, shall publish in certain newspapers a notice
pursuant to Section 16.3 and mail or cause to be mailed a notice of such
redemption or Nonconversion Election, as the case may be, not fewer than thirty
(30) nor, in the case of a Provisional Redemption or Nonconversion Election,
more than sixty (60) days prior to the date fixed for redemption or the
Nonconversion Election Date, as the case may be, to the holders of Notes so to
be redeemed as a whole or in part, or all Notes, in the case of a Nonconversion
Election, at their last addresses as the same appear on the Note register;
provided that if the Company shall give such notice, it shall also give written
notice, and written notice of the Notes to be redeemed in the case of a
redemption, to the Trustee. The Company may not give notice of any redemption of
any of the Notes or Nonconversion Election if a default in payment of interest
on the Notes has occurred and is continuing. Such mailing shall be by first
class mail and by publication in certain newspapers pursuant to Section 16.3.
The notice if mailed in
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the manner herein provided shall be conclusively presumed to have been duly
given, whether or not the holder receives such notice. In any case, failure to
give such notice by mail or any defect in the notice to the holder of any Note
designated for redemption as a whole or in part or all holders, in the case of a
Nonconversion Election, shall not affect the validity of the proceedings for the
redemption or Nonconversion Election of any other Note.
In the case of a redemption, each notice of redemption shall specify the
aggregate principal amount of Notes to be redeemed, the CUSIP number or numbers
of the Notes being redeemed, the date fixed for redemption (which shall be a
Business Day), whether or not such redemption is a Provisional Redemption or an
Optional Redemption, the redemption price at which Notes are to be redeemed, the
place or places of payment, that payment will be made upon presentation and
surrender of such Notes, that interest accrued to the date fixed for redemption
will be paid as specified in said notice, and that on and after said date
interest thereon or on the portion thereof to be redeemed will cease to accrue.
Such notice shall also state the current Conversion Price and the date on which
the right to convert such Notes or portions thereof into Common Stock will
expire. If such redemption is a Provisional Redemption, such notice shall also
state the amount of the Make-Whole Payment. If fewer than all the Notes are to
be redeemed, the notice of redemption shall identify the Notes to be redeemed
(including CUSIP numbers, if any). In case any Note is to be redeemed in part
only, the notice of redemption shall state the portion of the principal amount
thereof to be redeemed and shall state that, on and after the date fixed for
redemption, upon surrender of such Note, a new Note or Notes in principal amount
equal to the unredeemed portion thereof will be issued.
On or prior to the redemption date specified in the notice of redemption
given as provided in this Section 3.2, the Company will deposit with the Trustee
or with one or more paying agents (or, if the Company is acting as its own
paying agent, set aside, segregate and hold in trust as provided in Section 5.4)
(i) an amount of money in immediately available funds sufficient to redeem on
the redemption date all the Notes (or portions thereof) so called for redemption
(other than those theretofore surrendered for conversion into Common Stock) at
the appropriate redemption price, together with accrued interest to, but
excluding, the date fixed for redemption and (ii) with respect to Notes called
for Provisional Redemption pursuant to Section 3.1(a), an amount of money
sufficient to pay the Make-Whole Payment for all the Notes (or portions thereof)
called for redemption (including those surrendered for conversion into Common
Stock after the Notice Date and prior to the Provisional Redemption Date);
provided that if such payment is made on the redemption date it must be received
by the Trustee or paying agent, as the case may be, by 10:00 a.m. New York City
time on such date. If any Note called for redemption is converted pursuant
hereto prior to such redemption, any money deposited with the Trustee or any
paying agent or so segregated and held in trust for the redemption of such Note
shall be paid to the Company upon its written request, or, if then held by the
Company, shall be discharged from such trust; provided that, with respect to a
Provisional Redemption, any money so deposited for payment of the Make-Whole
Payment shall remain segregated and held in trust for payment of the Make-Whole
Payment which shall be made on all Notes called for Provisional Redemption,
including Notes converted into shares of Common Stock after the Notice Date and
prior to the Provisional Redemption Date.
Whenever any Notes are to be redeemed, the Company will give the Trustee
written notice in the form of an Officers' Certificate not fewer than forty-five
(45) days (or such shorter period of time as may be acceptable to the Trustee)
prior to the redemption date as to the aggregate principal amount of Notes to be
redeemed. In the case of a Provisional Redemption or Nonconversion Election, the
Company shall provide the Trustee an Officers' Certificate stating that the
conditions under the first paragraph of Section 3.1(a) have been met.
If fewer than all the Notes are to be redeemed, the Trustee shall select
the Notes or portions thereof of the Global Note or the Notes in certificated
form to be redeemed (in principal amounts of $1,000 or integral multiples
thereof), by lot or by another method the Trustee deems fair and appropriate.
Upon any redemption of fewer than all Notes, the Company and the Trustee
may (but need not), solely for purposes of determining the pro rata allocation
among such Notes as are unconverted and outstanding at the time of redemption,
treat as outstanding any Notes surrendered for conversion during the period of
fifteen (15) days next preceding the mailing of a notice of redemption and may
(but need not) treat as outstanding any Note authenticated and delivered during
such period in exchange for the unconverted portion of any Note converted in
part during such period.
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In the case of a Nonconversion Election, the notice of Nonconversion
Election shall specify that all of the Notes are to be made nonconvertible, the
CUSIP number or numbers of the Notes and the date on which the right to convert
the Notes into Common Stock will expire (which shall be a Business Day). Such
notice shall also state the current Conversion Price and the amount of the
Make-Whole Payment.
In the case of a Nonconversion Election, on or prior to the Nonconversion
Election Date specified in the notice of Nonconversion Election given as
provided in this Section 3.2, the Company will deposit with the Trustee or with
one or more paying agents (or, if the Company is acting as its own paying agent,
set aside, segregate and hold in trust as provided in Section 5.4) an amount of
money sufficient to pay the Make-Whole Payment for all the Notes (including
those surrendered for conversion into Common Stock after the Notice Date and
prior to the Nonconversion Election Date); provided that if such payment is made
on the Nonconversion Election Date it must be received by the Trustee or paying
agent, as the case may be, by 10:00 a.m. New York City time on such date.
Section 3.3 Payment of Notes Called for Redemption; Payment of Make-Whole
Payment. If notice of redemption has been given as above provided, the Notes or
portion of Notes with respect to which such notice has been given shall, unless
converted into Common Stock pursuant to the terms hereof, become due and payable
on the date fixed for redemption and at the place or places stated in such
notice at the applicable redemption price, together with interest accrued to
(but excluding) the date fixed for redemption, and on and after said date
(unless the Company shall default in the payment of such Notes at the redemption
price, together with interest accrued to said date) interest on the Notes or
portion of Notes so called for redemption shall cease to accrue and such Notes
shall cease after the close of business on the Business Day next preceding the
date fixed for redemption to be convertible into Common Stock and, except as
provided in Sections 8.11 and 13.4, to be entitled to any benefit or security
under this Indenture, and the holders thereof shall have no right in respect of
such Notes except the right to receive the redemption price thereof and unpaid
interest to (but excluding) the date fixed for redemption and, with respect to
Notes called for Provisional Redemption, the Make-Whole Payment; provided that,
with respect to a Provisional Redemption, the holder of any Notes converted into
Common Stock pursuant to the terms hereof after the Notice Date and prior to the
Provisional Redemption Date shall have the right to the Make-Whole Payment, if
any, with respect to such Notes regardless of the conversion of such Notes. On
presentation and surrender of such Notes at a place of payment in said notice
specified, the said Notes or the specified portions thereof shall be paid and
redeemed by the Company at the applicable redemption price, together with
interest accrued thereon to (but excluding) the date fixed for redemption and,
with respect to Notes called for Provisional Redemption (including Notes
converted into Common Stock pursuant to the terms hereof after the Notice Date
and prior to the Provisional Redemption Date), the Make-Whole Payment; provided
that, if the applicable redemption date is an interest payment date, the
semi-annual payment of interest becoming due on such date shall be payable to
the holders of such Notes registered as such on the relevant record date instead
of the holders surrendering such Notes for redemption on such date.
Upon presentation of any Note redeemed in part only, the Company shall
execute and the Trustee shall authenticate and make available for delivery to
the holder thereof, at the expense of the Company, a new Note or Notes, of
authorized denominations, in principal amount equal to the unredeemed portion of
the Notes so presented.
If notice of Nonconversion Election has been given as provided above, the
holders of record on the Notice Date, including holders of any Notes converted
into Common Stock pursuant to the terms hereof after the Notice Date and prior
to the Nonconversion Election Date regardless of conversion of such Notes, shall
have the right to the Make-Whole Payment. The Make-Whole Payment shall be
payable on the Nonconversion Election Date at the office of the Company
maintained by the Company for such purposes in the Borough of Manhattan, The
City of New York, which shall initially be an office or agency of the Trustee
and may, as the Company shall specify to the paying agent in writing by each
record date, be paid either (i) by check mailed to the address of the Person
entitled thereto as it appears in the Note register (provided that the holder of
Notes with an aggregate principal amount in excess of $10,000,000 shall, at the
written election of such holder, be paid by wire transfer in immediately
available funds) or (ii) by transfer to an account maintained by such Person
located in the United States; provided, however, that payments to the Depositary
will be made by wire transfer of immediately available funds to the account of
the Depositary or its nominee.
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Notwithstanding the foregoing, the Trustee shall not redeem any Notes or
mail any notice of redemption or Nonconversion Election during the continuance
of a default in payment of interest on the Notes. If any Note called for
redemption shall not be so paid upon surrender thereof for redemption, the
principal and premium, if any (including the Make-Whole Payment, if any), shall,
until paid or duly provided for, bear interest from the date fixed for
redemption at the rate borne by the Note and such Note shall remain convertible
into Common Stock until the principal and premium, if any, (including the
Make-Whole Payment, if any), shall have been paid or duly provided for. In the
case of a Nonconversion Election, if the Make-Whole Payment shall not be so paid
on the Nonconversion Election Date, the Make-Whole Payment shall, until paid or
duly provided for, bear interest from the Nonconversion Election Date at the
rate borne by the Note and such Note shall remain convertible into Common Stock
until the Make-Whole Payment, if any, shall have been paid or duly provided for.
Section 3.4 Conversion Arrangement on Call for Redemption. In connection
with any redemption of Notes, the Company may arrange for the purchase and
conversion of any Notes by an agreement with one or more investment bankers or
other purchasers to purchase such Notes by paying to the Trustee in trust for
the Noteholders, on or before the date fixed for redemption, an amount not less
than the applicable redemption price, together with interest accrued to (but
excluding) the date fixed for redemption, of such Notes and, in connection with
a Provisional Redemption, the Make-Whole Payment. Notwithstanding anything to
the contrary contained in this Article III, the obligation of the Company to pay
the redemption price of such Notes, together with interest accrued to (but
excluding) the date fixed for redemption and, in connection with a Provisional
Redemption, the Make-Whole Payment, shall be deemed to be satisfied and
discharged to the extent such amount is so paid by such purchasers. If such an
agreement is entered into, a copy of which will be filed with the Trustee prior
to the date fixed for redemption, any Notes not duly surrendered for conversion
by the holders thereof may, at the option of the Company, be deemed, to the
fullest extent permitted by law, acquired by such purchasers from such holders
and (notwithstanding anything to the contrary contained in Article XV)
surrendered by such purchasers for conversion, all as of immediately prior to
the close of business on the date fixed for redemption (and the right to convert
any such Notes shall be extended through such time), subject to payment of the
above amount as aforesaid (including the Make-Whole Payment, if any, with
respect to all Notes called for Provisional Redemption). At the direction of the
Company, the Trustee shall hold and dispose of any such amount paid to it in the
same manner as it would monies deposited with it by the Company for the
redemption of Notes. Without the Trustee's prior written consent, no arrangement
between the Company and such purchasers for the purchase and conversion of any
Notes shall increase or otherwise affect any of the powers, duties,
responsibilities or obligations of the Trustee as set forth in this Indenture.
Section 3.5 Redemption at Option of Holders.
(a) If there shall occur a Fundamental Change at any time prior to
maturity of the Notes, then each Noteholder shall have the right, at such
holder's option, to require the Company to redeem all of such holder's Notes, or
any portion thereof that is an integral multiple of $1,000 principal amount, on
the date (the "Repurchase Date") that is thirty (30) days after the date of the
Company Notice (as defined in Section 3.5(b) below) of such Fundamental Change
(or, if such 30th day is not a Business Day, the immediately preceding Business
Day) at a redemption price equal to 100% of the principal amount thereof,
together with accrued interest to (but excluding) the Repurchase Date; provided
that, if such Repurchase Date is after May 1 or November 1 and on or before May
15 or November 15, then the interest payable on the Repurchase Date shall be
paid to the holders of record of the Notes on the next preceding May 1 or
November 1, respectively.
Upon presentation of any Note redeemed in part only, the Company shall
execute and, upon the Company's written direction to the Trustee, the Trustee
shall authenticate and deliver to the holder thereof, at the expense of the
Company, a new Note or Notes, of authorized denominations, in principal amount
equal to the unredeemed portion of the Notes so presented.
(b) On or before the 30th day after the occurrence of a Fundamental
Change, the Company or, at its written request (which must be received by the
Trustee at least five (5) Business Days prior to the date the Trustee is
requested to give notice as described below, unless the Trustee shall agree in
writing to a shorter period), the Trustee in the name of and at the expense of
the Company, shall mail or cause to be mailed to all holders of
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record on the date of the Fundamental Change a notice (the "Company Notice") of
the occurrence of such Fundamental Change and of the redemption right at the
option of the holders arising as a result thereof. Such notice shall be mailed
in the manner and with the effect set forth in the first paragraph of Section
3.2 (without regard for the time limits set forth therein) and be published
pursuant to Section 16.3. If the Company shall give such notice, the Company
shall also deliver a copy of the Company Notice to the Trustee at such time as
it is mailed to Noteholders.
Each Company Notice shall specify the circumstances constituting the
Fundamental Change, the Repurchase Date, the price at which the Company shall be
obligated to redeem Notes, that the holder must exercise the redemption right on
or prior to the close of business on the Repurchase Date (the "Fundamental
Change Expiration Time"), that the holder shall have the right to withdraw any
Notes surrendered prior to the Fundamental Change Expiration Time, a description
of the procedure which a Noteholder must follow to exercise such redemption
right and to withdraw any surrendered Notes, the place or places where the
holder is to surrender such holder's Notes, and the amount of interest accrued
on each Note to the Repurchase Date.
No failure of the Company to give the foregoing notices and no defect
therein shall limit the Noteholders' redemption rights or affect the validity of
the proceedings for the repurchase of the Notes pursuant to this Section 3.5.
(c) For a Note to be so repaid at the option of the holder, the
Company must receive at the office or agency of the Company maintained for that
purpose or, at the option of such holder, the Corporate Trust Office, such Note
with the form entitled "Option to Elect Repayment Upon A Fundamental Change" on
the reverse thereof duly completed, together with such Notes duly endorsed for
transfer, on or before the Fundamental Change Expiration Time. All questions as
to the validity, eligibility (including time of receipt) and acceptance of any
Note for repayment shall be determined by the Company, whose determination shall
be final and binding absent manifest error.
(d) On or prior to the Repurchase Date, the Company will deposit
with the Trustee or with one or more paying agents (or, if the Company is acting
as its own paying agent, set aside, segregate and hold in trust as provided in
Section 5.4) an amount of money sufficient to repay on the Repurchase Date all
the Notes to be repaid on such date at the appropriate redemption price,
together with accrued interest to (but excluding) the Repurchase Date; provided
that if such payment is made on the Repurchase Date it must be received by the
Trustee or paying agent, as the case may be, by 10:00 a.m. New York City time,
on such date. Payment for Notes surrendered for redemption (and not withdrawn)
prior to the Fundamental Change Expiration Time will be made promptly (but in no
event more than five (5) Business Days) following the Repurchase Date by mailing
checks for the amount payable to the holders of such Notes entitled thereto as
they shall appear on the registry books of the Company.
(e) In the case of a reclassification, change, consolidation,
merger, combination, sale or conveyance to which Section 15.6 applies, in which
the Common Stock of the Company is changed or exchanged as a result into the
right to receive stock, securities or other property or assets (including cash),
which includes shares of Common Stock of the Company or another Person that are,
or upon issuance will be, traded on a United States national securities exchange
or approved for trading on an established automated over-the-counter trading
market in the United States and such shares constitute at the time such change
or exchange becomes effective in excess of 50% of the aggregate fair market
value of such stock, securities or other property or assets (including cash) (as
determined by the Company, which determination shall be conclusive and binding),
then the Person formed by such consolidation or resulting from such merger or
which acquires such assets, as the case may be, shall execute and deliver to the
Trustee a supplemental indenture (accompanied by an Opinion of Counsel stating
that, in addition to the requirements of Section 16.5, such supplemental
indenture complies with the Trust Indenture Act as in force at the date of
execution of such supplemental indenture) modifying the provisions of this
Indenture relating to the right of holders of the Notes to cause the Company to
repurchase the Notes following a Fundamental Change, including without
limitation the applicable provisions of this Section 3.5 and the definitions of
Common Stock and Fundamental Change, as appropriate, as determined in good faith
by the Company (which determination shall be conclusive and binding), to make
such provisions apply to the common stock and the issuer thereof if different
from the Company and Common Stock of the Company (in lieu of the Company and the
Common Stock of the Company).
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(f) The Company will comply with the provisions of Rule 13e-4 and
any other tender offer rules under the Exchange Act to the extent then
applicable in connection with the redemption rights of the holders of Notes in
the event of a Fundamental Change.
ARTICLE IV
SUBORDINATION OF NOTES
Section 4.1 Agreement of Subordination. The Company covenants and agrees,
and each holder of Notes issued hereunder by its acceptance thereof likewise
covenants and agrees, that all Notes shall be issued subject to the provisions
of this Article IV; and each Person holding any Note, whether upon original
issue or upon registration of transfer, assignment or exchange thereof, accepts
and agrees to be bound by such provisions.
The payment of the principal of, premium, if any, and interest (including
Liquidated Damages Amount, if any) on all Notes (including, but not limited to,
the redemption price and Make-Whole Payment, if any, with respect to the Notes
called for redemption in accordance with Section 3.2 or submitted for redemption
in accordance with Section 3.5, as the case may be, and the Make-Whole Payment,
if any, with respect to all the Notes in connection with a Nonconversion
Election, as provided in this Indenture) issued hereunder shall, to the extent
and in the manner hereinafter set forth, be subordinated and subject in right of
payment to the prior payment in full in cash or other payment satisfactory to
the holders of Senior Indebtedness of all Senior Indebtedness, whether
outstanding at the date of this Indenture or thereafter incurred.
No provision of this Article IV shall prevent the occurrence of any
default or Event of Default hereunder.
Section 4.2 Payments to Noteholders. No payment shall be made with respect
to the principal of, premium, if any, or interest (including Liquidated Damages
Amount, if any) on the Notes (including, but not limited to, the redemption
price and Make-Whole Payment, if any, with respect to the Notes to be called for
redemption in accordance with Section 3.2 or submitted for redemption in
accordance with Section 3.5, as the case may be, and the Make-Whole Payment, if
any, with respect to all the Notes in connection with a Nonconversion Election,
as provided in this Indenture), except payments and distributions made by the
Trustee as permitted by the first or second paragraph of Section 4.5, if:
(i) a default in the payment of principal, premium, if any,
interest, rent or other obligations in respect of Designated Senior Indebtedness
occurs and is continuing (a "Payment Default"), unless and until such Payment
Default shall have been cured or waived or shall have ceased to exist; or
(ii) a default, other than a Payment Default, on any Designated
Senior Indebtedness occurs and is continuing that then permits holders of such
Designated Senior Indebtedness to accelerate its maturity and the Trustee
receives a written notice of the default (a "Payment Blockage Notice") from a
holder of Designated Senior Indebtedness, a Representative of Designated Senior
Indebtedness or the Company (a "Non-Payment Default").
If the Trustee receives any Payment Blockage Notice pursuant to clause
(ii) above, no subsequent Payment Blockage Notice shall be effective for
purposes of this Section 4.2 unless and until (A) at least 365 days shall have
elapsed since the initial effectiveness of the immediately prior Payment
Blockage Notice and (B) all scheduled payments of principal, premium, if any,
and interest (including Liquidated Damages Amount, if any) on the Notes that
have come due have been paid in full in cash. No Non-Payment Default that
existed or was continuing on the date of delivery of any Payment Blockage Notice
to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice, unless such Non-Payment Default is based upon facts or events arising
after the date of delivery of such Payment Blockage Notice.
The Company may and shall resume payments on and distributions in respect
of the Notes upon:
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(1) in the case of a Payment Default, the date upon which any such
Payment Default is cured or waived or ceases to exist, or
(2) in the case of a Non-Payment Default, the earlier of (a) the date
upon which such default is cured or waived or ceases to exist or (b)
179 days after the applicable Payment Blockage Notice is received by
the Trustee if the maturity of such Designated Senior Indebtedness
has not been accelerated and no Payment Default with respect to any
Designated Senior Indebtedness has occurred which has not been cured
or waived (in which case clause (1) shall be applicable),
unless this Article IV otherwise prohibits the payment or distribution at the
time of such payment or distribution.
Upon any payment by the Company, or distribution of assets of the Company
of any kind or character, whether in cash, property or securities, to creditors
upon any dissolution or winding up or liquidation or reorganization of the
Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due or to become due upon all
Senior Indebtedness shall first be paid in full in cash or other payment
satisfactory to the holders of such Senior Indebtedness, or payment thereof in
accordance with its terms provided for in cash or other payment satisfactory to
the holders of such Senior Indebtedness before any payment is made on account of
the principal of, premium, if any, or interest (including Liquidation Damages
Amount, if any) on the Notes (except payments made pursuant to Article XIII from
monies deposited with the Trustee pursuant thereto prior to commencement of
proceedings for such dissolution, winding up, liquidation or reorganization);
and upon any such dissolution or winding up or liquidation or reorganization of
the Company or bankruptcy, insolvency, receivership or other proceeding, any
payment by the Company, or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, to which the holders of the
Notes or the Trustee would be entitled, except for the provisions of this
Article IV, shall (except as aforesaid) be paid by the Company or by any
receiver, trustee in bankruptcy, liquidating trustee, agent or other Person
making such payment or distribution, or by the holders of the Notes or by the
Trustee under this Indenture if received by them or it, directly to the holders
of Senior Indebtedness (pro rata to such holders on the basis of the respective
amounts of Senior Indebtedness held by such holders, or as otherwise required by
law or a court order) or their Representative or Representatives, or to the
trustee or trustees under any indenture pursuant to which any instruments
evidencing any Senior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay all Senior Indebtedness in
full in cash or other payment satisfactory to the holders of such Senior
Indebtedness, after giving effect to any concurrent payment or distribution to
or for the holders of Senior Indebtedness, before any payment or distribution is
made to the holders of the Notes or to the Trustee.
For purposes of this Article IV, the words, "cash, property or securities"
shall not be deemed to include shares of stock of the Company as reorganized or
readjusted, or securities of the Company or any other corporation provided for
by a plan of reorganization or readjustment, the payment of which is
subordinated at least to the extent provided in this Article IV with respect to
the Notes to the payment of all Senior Indebtedness which may at the time be
outstanding; provided that (i) the Senior Indebtedness is assumed by the new
corporation, if any, resulting from any reorganization or readjustment, and (ii)
the rights of the holders of Senior Indebtedness (other than leases which are
not assumed by the Company or the new corporation, as the case may be) are not,
without the consent of such holders, altered by such reorganization or
readjustment. The consolidation of the Company with, or the merger of the
Company into, another Person or the liquidation or dissolution of the Company
following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another Person upon the terms and conditions
provided for in Article XII shall not be deemed a dissolution, winding-up,
liquidation or reorganization for the purposes of this Section 4.2 if such other
Person shall, as a part of such consolidation, merger, conveyance or transfer,
comply with the conditions stated in Article XII.
In the event of the acceleration of the Notes because of an Event of
Default, no payment or distribution shall be made to the Trustee or any holder
of Notes in respect of the principal of, premium, if any, or interest (including
Liquidated Damages Amount, if any) on the Notes (including, but not limited to,
the redemption price and the Make-Whole Payment, if any, with respect to the
Notes called for redemption in accordance with Section 3.2 or submitted for
redemption at the option of the holder in accordance with Section 3.5, as the
case may be, and the Make-Whole
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Payment, if any, with respect to all the Notes in connection with a
Nonconversion Election, as provided in this Indenture), except payments and
distributions made by the Trustee as permitted by the first or second paragraph
of Section 4.5, until all Senior Indebtedness has been paid in full in cash or
other payment satisfactory to the holders of Senior Indebtedness or such
acceleration is rescinded in accordance with the terms of this Indenture. If
payment of the Notes is accelerated because of an Event of Default, the Company
or the Trustee shall promptly notify holders of Designated Senior Indebtedness
of the acceleration.
In the event that, notwithstanding the foregoing provisions, any payment
or distribution of assets of the Company of any kind or character, whether in
cash, property or securities (including, without limitation, by way of setoff or
otherwise), prohibited by the foregoing provisions in this Section 4.2, shall be
received by the Trustee or the holders of the Notes before all Senior
Indebtedness is paid in full in cash or other payment satisfactory to the
holders of such Senior Indebtedness, or provision is made for such payment
thereof in accordance with its terms in cash or other payment satisfactory to
the holders of such Senior Indebtedness, such payment or distribution shall be
held in trust for the benefit of and shall be paid over or delivered to the
holders of Senior Indebtedness or their Representative or Representatives, or to
the trustee or trustees under any indenture pursuant to which any instruments
evidencing any Senior Indebtedness may have been issued, as their respective
interests may appear, as calculated by the Company, for application to the
payment of any Senior Indebtedness remaining unpaid to the extent necessary to
pay all Senior Indebtedness in full in cash or other payment satisfactory to the
holders of such Senior Indebtedness, after giving effect to any concurrent
payment or distribution to or for the holders of such Senior Indebtedness.
Nothing in this Section 4.2 shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 8.7. This Section 4.2 shall be subject to
the further provisions of Section 4.5.
Section 4.3 Subrogation of Notes. Subject to the payment in full of all
Senior Indebtedness, the rights of the holders of the Notes shall be subrogated
to the extent of the payments or distributions made to the holders of such
Senior Indebtedness pursuant to the provisions of this Article IV (equally and
ratably with the holders of all indebtedness of the Company that by its express
terms, is subordinated to other indebtedness of the Company to substantially the
same extent as the Notes are subordinated and is entitled to like rights of
subrogation) to the rights of the holders of Senior Indebtedness to receive
payments or distributions of cash, property or securities of the Company
applicable to the Senior Indebtedness until the principal, premium, if any, and
interest (including Liquidated Damages Amount, if any) on the Notes shall be
paid in full; and, for the purposes of such subrogation, no payments or
distributions to the holders of the Senior Indebtedness of any cash, property or
securities to which the holders of the Notes or the Trustee would be entitled
except for the provisions of this Article IV, and no payment over pursuant to
the provisions of this Article IV, to or for the benefit of the holders of
Senior Indebtedness by holders of the Notes or the Trustee, shall, as among the
Company, its creditors other than holders of Senior Indebtedness, and the
holders of the Notes, be deemed to be a payment by the Company to or on account
of the Senior Indebtedness; and no payments or distributions of cash, property
or securities to or for the benefit of the holders of the Notes pursuant to the
subrogation provisions of this Article IV, which would otherwise have been paid
to the holders of Senior Indebtedness, shall be deemed to be a payment by the
Company to or for the account of the Notes. It is understood that the provisions
of this Article IV are and are intended solely for the purposes of defining the
relative rights of the holders of the Notes, on the one hand, and the holders of
the Senior Indebtedness, on the other hand.
Nothing contained in this Article IV or elsewhere in this Indenture or in
the Notes is intended to or shall impair, as among the Company, its creditors
other than the holders of Senior Indebtedness, and the holders of the Notes, the
obligation of the Company, which is absolute and unconditional, to pay to the
holders of the Notes the principal of, premium, if any, and interest (including
Liquidated Damages Amount, if any) on the Notes as and when the same shall
become due and payable in accordance with their terms, or is intended to or
shall affect the relative rights of the holders of the Notes and creditors of
the Company other than the holders of the Senior Indebtedness, nor shall
anything herein or therein prevent the Trustee or the holder of any Note from
exercising all remedies otherwise permitted by applicable law upon default under
this Indenture, subject to the rights, if any, under this Article IV of the
holders of Senior Indebtedness in respect of cash, property or securities of the
Company received upon the exercise of any such remedy.
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Upon any payment or distribution of assets of the Company referred to in
this Article IV, the Trustee, subject to the provisions of Section 8.1, and the
holders of the Notes shall be entitled to rely upon any order or decree made by
any court of competent jurisdiction in which such bankruptcy, dissolution,
winding up, liquidation or reorganization proceedings are pending, or a
certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent
or other Person making such payment or distribution, delivered to the Trustee or
to the holders of the Notes, for the purpose of ascertaining the Persons
entitled to participate in such distribution, the holders of the Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon and all other facts pertinent thereto or to this Article IV.
Section 4.4 Authorization to Effect Subordination. Each holder of a Note,
by its acceptance thereof, authorizes and directs the Trustee on the holder's
behalf to take such action as may be necessary or appropriate to effectuate the
subordination as provided in this Article IV and appoints the Trustee to act as
the holder's attorney-in-fact for any and all such purposes. If the Trustee does
not file a proper proof of claim or proof of debt in the form required in any
proceeding referred to in the third paragraph of Section 7.2 hereof at least
thirty (30) days before the expiration of the time to file such claim, the
holders of any Senior Indebtedness or their representatives are hereby
authorized to file an appropriate claim for and on behalf of the holders of the
Notes.
Section 4.5 Notice to Trustee. The Company shall give prompt written
notice in the form of an Officers' Certificate to a Responsible Officer of the
Trustee and to any paying agent of any fact known to the Company that would
prohibit the making of any payment of monies to or by the Trustee or any paying
agent in respect of the Notes pursuant to the provisions of this Article IV.
Notwithstanding the provisions of this Article IV or any other provision of this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any facts that would prohibit the making of any payment of monies to or by the
Trustee in respect of the Notes pursuant to the provisions of this Article IV,
unless and until a Responsible Officer of the Trustee shall have received
written notice thereof at the Corporate Trust Office from the Company (in the
form of an Officers' Certificate) or a Representative or a holder or holders of
Senior Indebtedness or from any trustee thereof; and before the receipt of any
such written notice, the Trustee, subject to the provisions of Section 8.1,
shall be entitled in all respects to assume that no such facts exist; provided
that if on a date not less than two Business Days prior to the date upon which
by the terms hereof any such monies may become payable for any purpose
(including, without limitation, the payment of the principal of, or premium, if
any, or interest (including Liquidated Damages Amount, if any) on any Note) the
Trustee shall not have received, with respect to such monies, the notice
provided for in this Section 4.5, then, anything herein contained to the
contrary notwithstanding, the Trustee shall have full power and authority to
apply monies received to the purpose for which they were received, and shall not
be affected by any notice to the contrary that may be received by it on or after
such prior date.
Notwithstanding anything in this Article IV to the contrary, nothing shall
prevent any payment by the Trustee to the Noteholders of monies deposited with
it pursuant to Section 13.1, and any such payment shall not be subject to the
provisions of Section 4.1 or 4.2.
The Trustee, subject to the provisions of Section 8.1, shall be entitled
to rely on the delivery to if of a written notice by a Representative or a
person representing himself to be a holder of Senior Indebtedness (or a trustee
on behalf of such holder) to establish that such notice has been given by a
Representative or a holder of Senior Indebtedness or a trustee on behalf of any
such holder or holders. The Trustee shall not be required to make any payment or
distribution to or on behalf of a holder of Senior Indebtedness pursuant to this
Article IV unless it has received satisfactory evidence as to the amount of
Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article IV and, if such
evidence is not furnished to the Trustee, the Trustee may defer any payment to
such Person pending judicial determination as to the right of such Person to
receive such payment.
Section 4.6 Trustee's Relation to Senior Indebtedness. The Trustee, in its
individual capacity, shall be entitled to all the rights set forth in this
Article IV in respect of any Senior Indebtedness at any time held by it, to the
same extent as any other holder of Senior Indebtedness, and nothing in Section
8.13 or elsewhere in this Indenture shall deprive the Trustee of any of its
rights as such holder.
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With respect to the holders of Senior Indebtedness, the Trustee undertakes
to perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article IV, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness and, subject to the
provisions of Section 8.1, the Trustee shall not be liable to any holder of
Senior Indebtedness (i) for any failure to make any payments or distributions to
such holder or (ii) if it shall pay over or deliver to holders of Notes, the
Company or any other Person money or assets to which any holder of Senior
Indebtedness shall be entitled by virtue of this Article IV or otherwise.
Section 4.7 No Impairment of Subordination. 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 noncompliance by the Company with the
terms, provisions and covenants of this Indenture, regardless of any knowledge
thereof which any such holder may have or otherwise be charged with.
Section 4.8 Certain Conversions Not Deemed Payment. For the purposes of
this Article IV only, (1) the issuance and delivery of junior securities upon
conversion of Notes in accordance with Article XV shall not be deemed to
constitute a payment or distribution on account of the principal of, premium, if
any, or interest (including Liquidated Damages Amount, if any) on Notes or on
account of the purchase or other acquisition of Notes, and (2) the payment,
issuance or delivery of cash (except in satisfaction of fractional shares
pursuant to Section 15.3), property or securities (other than junior securities)
upon conversion of a Note shall be deemed to constitute payment on account of
the principal of, premium, if any, or interest (including Liquidated Damages
Amount, if any) on such Note. For the purposes of this Section 4.8, the term
"junior securities" means (a) shares of any stock of any class of the Company or
(b) securities of the Company that are subordinated in right of payment to all
Senior Indebtedness that may be outstanding at the time of issuance or delivery
of such securities to substantially the same extent as, or to a greater extent
than, the Notes are so subordinated as provided in this Article. Nothing
contained in this Article IV or elsewhere in this Indenture or in the Notes is
intended to or shall impair, as among the Company, its creditors (other than
holders of Senior Indebtedness) and the Noteholders, the right, which is
absolute and unconditional, of the Holder of any Note to convert such Note in
accordance with Article XV.
Section 4.9 Article Applicable to Paying Agents. If at any time any paying
agent other than the Trustee shall have been appointed by the Company and be
then acting hereunder, the term "Trustee" as used in this Article shall (unless
the context otherwise requires) be construed as extending to and including such
paying agent within its meaning as fully for all intents and purposes as if such
paying agent were named in this Article in addition to or in place of the
Trustee; provided, however, that the first paragraph of Section 4.5 shall not
apply to the Company or any Affiliate of the Company if it or such Affiliate
acts as paying agent.
The Trustee shall not be responsible for the actions or inactions of any
other paying agents (including the Company if acting as its own paying agent)
and shall have no control of any funds held by such other paying agents.
Section 4.10 Senior Indebtedness Entitled to Rely. The holders of Senior
Indebtedness (including, without limitation, Designated Senior Indebtedness)
shall have the right to rely upon this Article IV, and no amendment or
modification of the provisions contained herein shall diminish the rights of
such holders unless such holders shall have agreed in writing thereto.
Section 4.11 Reliance on Judicial Order or Certificate of Liquidating
Agent. Upon any payment or distribution of assets of the Company referred to in
this Article, the Trustee and the Noteholders shall be entitled to rely upon any
order or decree entered by any court of competent jurisdiction in which such
insolvency, bankruptcy, receivership, liquidation, reorganization, distribution,
winding up or similar case or proceeding is pending, or a certificate of the
trustee in bankruptcy, liquidating trustee, custodian, receiver, assignee for
the benefit of creditors, agent or other Person making such payment or
dissolution, delivered to the Trustee or to the Noteholders, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness and other indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article.
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Section 4.12 Trustee's Compensation Not Prejudiced. Nothing in this
Article IV will apply to amounts due to the Trustee pursuant to other sections
of this Indenture.
ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY
Section 5.1 Payment of Principal, Premium and Interest. The Company
covenants and agrees that it will duly and punctually pay or cause to be paid
the principal of and premium, if any (including the redemption price and
Make-Whole Payment, if any, upon redemption and Make-Whole Payment, if any, upon
a Nonconversion Election, pursuant to Article III), and interest (including
Liquidated Damages Amount, if any), on each of the Notes at the places, at the
respective times and in the manner provided herein and in the Notes.
Section 5.2 Maintenance of Office or Agency. The Company will maintain an
office or agency in the Borough of Manhattan, The City of New York, where the
Notes may be surrendered for registration of transfer or exchange or for
presentation for payment or for conversion or redemption and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency not
designated or appointed by the Trustee. 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 Corporate Trust Office of the Trustee in the
Borough of Manhattan, The City of New York.
The Company may also from time to time designate co-registrars and one or
more offices or agencies where the Notes may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations. The
Company will give prompt written notice 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 Trustee as paying agent, Note
registrar, Custodian and conversion agent and the Corporate Trust Office of the
Trustee in the Borough of Manhattan, The City of New York as the office or
agency of the Company for each of the aforesaid purposes.
So long as the Trustee is the Note registrar, the Trustee agrees to mail,
or cause to be mailed, the notices set forth in Section 8.8. If co-registrars
have been appointed in accordance with this Section, the Trustee shall mail such
notices only to the Company and the holders of Notes it can identify from its
records.
Section 5.3 Appointments to Fill Vacancies in Trustee's Office. The
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee,
will appoint, in the manner provided in Section 8.8, a Trustee, so that there
shall at all times be a Trustee hereunder.
Section 5.4 Provisions as to Paying Agent.
(a) If the Company shall appoint a paying agent other than the
Trustee, or if the Trustee shall appoint such a paying agent, the Company will
cause such paying agent to execute and deliver to the Trustee an instrument in
which such agent shall agree with the Trustee, subject to the provisions of this
Section 5.4:
(1) that it will hold all sums held by it as such agent for
the payment of the principal of and premium, if any, or interest on the Notes
(whether such sums have been paid to it by the Company or by any other obligor
on the Notes) in trust for the benefit of the holders of the Notes;
(2) that it will give the Trustee notice of any failure by the
Company (or by any other obligor on the Notes) to make any payment of the
principal of and premium, if any, or interest on the Notes when the same shall
be due and payable; and
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(3) that at any time during the continuance of an Event of
Default, upon request of the Trustee, it will forthwith pay to the Trustee all
sums so held in trust.
The Company shall, on or before each due date of the principal of,
premium, if any, or interest on the Notes, deposit with the paying agent a sum
sufficient to pay such principal, premium, if any, or interest, and (unless such
paying agent is the Trustee) the Company will promptly notify the Trustee of any
failure to take such action; provided that if such deposit is made on the due
date, such deposit shall be received by the paying agent by 10:00 a.m. New York
City time, on such date.
(b) If the Company shall act as its own paying agent, it will, on or
before each due date of the principal of, premium, if any, or interest
(including Liquidated Damages Amount, if any) on the Notes, set aside, segregate
and hold in trust for the benefit of the holders of the Notes a sum sufficient
to pay such principal, premium, if any, or interest (including Liquidated
Damages Amount, if any) so becoming due and will promptly notify the Trustee of
any failure to take such action and of any failure by the Company (or any other
obligor under the Notes) to make any payment of the principal of, premium, if
any, or interest (including Liquidated Damages Amount, if any) on the Notes when
the same shall become due and payable.
(c) Anything in this Section 5.4 to the contrary notwithstanding,
the Company may, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture, or for any other reason, pay or cause to be paid to
the Trustee all sums held in trust by the Company or any paying agent hereunder
as required by this Section 5.4, such sums to be held by the Trustee upon the
trusts herein contained and upon such payment by the Company or any paying agent
to the Trustee, the Company or such paying agent shall be released from all
further liability with respect to such sums.
(d) Anything is this Section 5.4 to the contrary notwithstanding,
the agreement to hold sums in trust as provided in this Section 5.4 is subject
to Sections 13.3 and 13.4.
The Trustee shall not be responsible for the actions of any other
paying agents (including the Company if acting as its own paying agent) and
shall have no control of any funds held by such other paying agents.
Section 5.5 Existence. Subject to Article XII, the Company will do or
cause to be done all things necessary to preserve and keep in full force and
effect its existence and rights (charter and statutory); provided, however, that
the Company shall not be required to preserve any such right if the Company
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Company and that the loss thereof is not
disadvantageous in any material respect to the holders.
Section 5.6 Maintenance of Properties. The Company will cause all
properties used or useful in the conduct of its business or the business of any
Significant Subsidiary to be maintained and kept in good condition, repair and
working order and supplied with all necessary equipment and will cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that nothing in this Section shall
prevent the Company from discontinuing the operation or maintenance of any of
such properties if such discontinuance is, in the judgment of the Company,
desirable in the conduct of its business or the business of any Significant
Subsidiary and not disadvantageous in any material respect to the holders.
Section 5.7 Payment of Taxes and Other Claims. The Company will pay or
discharge, or cause to be paid or discharged, before the same may become
delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon the Company or any Significant Subsidiary or upon the income,
profits or property of the Company or any Significant Subsidiary, (ii) all
claims for labor, materials and supplies which, if unpaid, might by law become a
lien or charge upon the property of the Company or any Significant Subsidiary
and (iii) all stamps and other duties, if any, which may be imposed by the
United States or any political subdivision thereof or therein in connection with
the issuance, transfer, exchange or conversion of any Notes or with respect to
this Indenture;
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provided, however, that, in the case of clauses (i) and (ii), the Company shall
not be required to pay or discharge or cause to be paid or discharged any such
tax, assessment, charge or claim (A) if the failure to do so will not, in the
aggregate, have a material adverse impact on the Company, or (B) if the amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
Section 5.8 Rule 144A Information Requirement. Within the period prior to
the expiration of the holding period applicable to sales thereof under Rule
144(k) under the Securities Act (or any successor provision), the Company
covenants and agrees that it shall, during any period in which it is not subject
to Section 13 or 15(d) under the Exchange Act, make available to any holder or
beneficial holder of Notes or any Common Stock issued upon conversion thereof
which continue to be Restricted Securities in connection with any sale thereof
and any prospective purchaser of Notes or such Common Stock from such holder or
beneficial holder, the information required pursuant to Rule 144A(d)(4) under
the Securities Act upon the request of any holder or beneficial holder of the
Notes or such Common Stock and it will take such further action as any holder or
beneficial holder of such Notes or such Common Stock may reasonably request, all
to the extent required from time to time to enable such holder or beneficial
holder to sell its Notes or Common Stock without registration under the
Securities Act within the limitation of the exemption provided by Rule 144A, as
such Rule may be amended from time to time. Upon the request of any holder or
any beneficial holder of the Notes or such Common Stock, the Company will
deliver to such holder a written statement as to whether it has complied with
such requirements.
Section 5.9 Stay, Extension and Usury Laws. The Company covenants (to the
extent that it may lawfully do so) that it shall not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension or 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 (including Liquidated Damages Amount, if any) on the Notes as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of this Indenture and the
Company (to the extent it may lawfully do so) hereby expressly waives all
benefit or advantage of any such law, and covenants that it will not, by resort
to any such law, hinder, delay or impede the execution of any power herein
granted to the Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
Section 5.10 Compliance Certificate. The Company shall deliver to the
Trustee, within one hundred twenty (120) days after the end of each fiscal year
of the Company, a certificate signed by either the principal executive officer,
principal financial officer or principal accounting officer of the Company,
stating whether or not to the best knowledge of the signer thereof the Company
is in default in the performance and observance of any of the terms, provisions
and conditions of this Indenture (without regard to any period of grace or
requirement of notice provided hereunder) and, if the Company shall be in
default, specifying all such defaults and the nature and the status thereof of
which the signer may have knowledge.
The Company will deliver to the Trustee, forthwith (and in any event
within five Business Days) upon becoming aware of any default in the performance
or observance of any covenant, agreement or condition contained in this
Indenture, any event which, with notice or the lapse of time or both, would
constitute an Event of Default or any Event of Default, an Officers' Certificate
specifying with particularity such default or Event of Default and further
stating what action the Company has taken, is taking or proposes to take with
respect thereto.
Any notice required to be given under this Section 5.10 shall be delivered
to a Responsible Officer of the Trustee at its Corporate Trust Office.
ARTICLE VI
NOTEHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE
Section 6.1 Noteholders' Lists. The Company covenants and agrees that it
will furnish or cause to be furnished to the Trustee, semiannually, not more
than fifteen (15) days after each May 1 and November 1 in each year beginning
with November 1, 1999, and at such other times as the Trustee may request in
writing, within thirty
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(30) days after receipt by the Company of any such request (or such lesser time
as the Trustee may reasonably request in order to enable it to timely provide
any notice to be provided by it hereunder), a list in such form as the Trustee
may reasonably require of the names and addresses of the holders of Notes as of
a date not more than fifteen (15) days (or such other date as the Trustee may
reasonably request in order to so provide any such notices) prior to the time
such information is furnished, except that no such list need be furnished by the
Company to the Trustee so long as the Trustee is acting as the sole Note
registrar.
Section 6.2 Preservation and Disclosure of Lists.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, all information as to the names and addresses of the
holders of Notes contained in the most recent list furnished to it as provided
in Section 6.1 or maintained by the Trustee in its capacity as Note registrar or
co-registrar in respect of the Notes, if so acting. The Trustee may destroy any
list furnished to it as provided in Section 6.1 upon receipt of a new list so
furnished.
(b) The rights of Noteholders to communicate with other holders of
Notes with respect to their rights under this Indenture or under the Notes, and
the corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Noteholder, by receiving and holding the same, agrees with
the Company and the Trustee that neither the Company nor the Trustee nor any
agent of either of them shall be held accountable by reason of any disclosure of
information as to names and addresses of holders of Notes made pursuant to the
Trust Indenture Act.
Section 6.3 Reports by Trustee.
(a) Within sixty (60) days after May 15 of each year commencing with
the year 2000, the Trustee shall transmit to holders of Notes such reports dated
as of May 15 of the year in which such reports are made concerning the Trustee
and its actions under this Indenture as may be required pursuant to the Trust
Indenture Act at the times and in the manner provided pursuant thereto.
(b) A copy of such report shall, at the time of such transmission to
holders of Notes, be filed by the Trustee with each stock exchange and automated
quotation system upon which the Notes are listed and with the Company. The
Company will promptly notify the Trustee in writing when the Notes are listed on
any stock exchange or automated quotation system or delisted therefrom.
Section 6.4 Reports by Company. The Company shall file with the Trustee
(and the Commission if at any time after the Indenture becomes qualified under
the Trust Indenture Act), and transmit to holders of Notes, such information,
documents and other reports and such summaries thereof, as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided
pursuant to such Act, whether or not the Notes are governed by such Act;
provided that any such information, documents or reports required to be filed
with the Commission pursuant to Section 13 or 15(d) of the Exchange Act shall be
filed with the Trustee within fifteen (15) days after the same is so required to
be filed with the Commission. Delivery of such reports, information and
documents to the Trustee is for informational purposes only and the Trustee's
receipt of such shall not constitute constructive notice of any information
contained therein or determinable from information contained therein, including
the Company's compliance with any of its covenants hereunder (as to which the
Trustee is entitled to rely exclusively on Officers' Certificates).
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ARTICLE VII
REMEDIES OF THE TRUSTEE AND NOTEHOLDERS
ON AN EVENT OF DEFAULT
Section 7.1 Events of Default. In case one or more of the following Events
of Default (whatever the reason for such Event of Default and whether it shall
be voluntary or involuntary or be effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body) shall have occurred and be continuing:
(a) default in the payment of any installment of interest (including
Liquidated Damages Amount, if any) upon any of the Notes as and when the same
shall become due and payable, and continuance of such default for a period of
thirty (30) days, whether or not such payment is permitted under Article IV
hereof; or
(b) default in the payment of the principal of or premium, if any
(including the Make-Whole Payment, if any), on any of the Notes as and when the
same shall become due and payable either at maturity or in connection with any
redemption or Nonconversion Election pursuant to Article III, by acceleration or
otherwise, whether or not such payment is permitted under Article IV hereof; or
(c) failure on the part of the Company duly to observe or perform
any other of the covenants or agreements on the part of the Company in the Notes
or in this Indenture (other than a covenant or agreement a default in whose
performance or whose breach is elsewhere in this Section 7.1 specifically dealt
with) continued for a period of sixty (60) days after the date on which written
notice of such failure, requiring the Company to remedy the same, shall have
been given to the Company by the Trustee, or the Company and a Responsible
Officer of the Trustee by the holders of at least twenty-five percent (25%) in
aggregate principal amount of the Notes at the time outstanding determined in
accordance with Section 9.4; or
(d) the Company or any Significant Subsidiary shall commence a
voluntary case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or any Significant Subsidiary or its or such
Significant Subsidiary's debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
Significant Subsidiary or any substantial part of the property of the Company or
any Significant Subsidiary, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it or any Significant Subsidiary, or shall
make a general assignment for the benefit of creditors, or shall fail generally
to pay its debts as they become due; or
(e) an involuntary case or other proceeding shall be commenced
against the Company or any Significant Subsidiary seeking liquidation,
reorganization or other relief with respect to it or any Significant Subsidiary
or its or such Significant Subsidiary's debts under any bankruptcy, insolvency
or other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
Significant Subsidiary or any substantial part of the property of the Company or
any Significant Subsidiary, and such involuntary case or other proceeding shall
remain undismissed and unstayed for a period of ninety (90) consecutive days;
then, and in each and every such case (other than an Event of Default specified
in Section 7.1(d) or (e) with respect to the Company), unless the principal of
all of the Notes shall have already become due and payable, either the Trustee
or the holders of not less than twenty-five percent (25%) in aggregate principal
amount of the Notes then outstanding hereunder determined in accordance with
Section 9.4, by notice in writing to the Company (and to the Trustee if given by
Noteholders), may declare the principal of and premium, if any, on all the Notes
and the interest accrued thereon (including Liquidated Damages Amount, if any)
to be due and payable immediately, and upon any such declaration the same shall
become and shall be immediately due and payable, anything in this Indenture or
in the Notes contained to the contrary notwithstanding. If an Event of Default
specified in Section 7.1(d) or (e) with respect to the Company occurs, the
principal of all the Notes and the interest accrued thereon shall (including
Liquidated Damages Amount, if any) be immediately and automatically due and
payable without necessity of further action. This provision, however, is subject
to the conditions that if, at any time after the principal of the Notes shall
have been so declared due and payable, and before any judgment or decree for the
payment of the monies due shall have been obtained or entered as hereinafter
provided, the Company shall pay or shall deposit with the Trustee a sum
sufficient to pay all matured installments of interest upon (including
Liquidated Damages Amount, if any) all Notes and the principal of and premium,
if any, on any and all Notes which shall have become due otherwise than by
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acceleration (with interest on overdue installments of interest (including
Liquidated Damages Amount, if any) (to the extent that payment of such interest
is enforceable under applicable law) and on such principal and premium, if any,
at the rate borne by the Notes, to the date of such payment or deposit) and
amounts due to the Trustee pursuant to Section 8.7, and if any and all defaults
under this Indenture, other than the nonpayment of principal of and premium, if
any, and accrued interest on (including Liquidated Damages Amount, if any) Notes
which shall have become due by acceleration, shall have been cured or waived
pursuant to Section 7.7, then and in every such case the holders of a majority
in aggregate principal amount of the Notes then outstanding, by written notice
to the Company and to the Trustee, may waive all defaults or Events of Default
and rescind and annul such declaration and its consequences; but no such waiver
or rescission and annulment shall extend to or shall affect any subsequent
default or Event of Default, or shall impair any right consequent thereon. The
Company shall notify a Responsible Officer of the Trustee, promptly (and in any
event within five Business Days) upon becoming aware thereof, of any Event of
Default.
In case the Trustee shall have proceeded to enforce any right under this
Indenture and such proceedings shall have been discontinued or abandoned because
of such waiver or rescission and annulment or for any other reason or shall have
been determined adversely to the Trustee, then and in every such case the
Company, the holders of Notes, and the Trustee shall be restored respectively to
their several positions and rights hereunder, and all rights, remedies and
powers of the Company, the holders of Notes, and the Trustee shall continue as
though no such proceeding had been taken.
Section 7.2 Payments of Notes on Default; Suit Therefor. The Company
covenants that (a) in case default shall be made in the payment of any
installment of interest upon (including Liquidated Damages Amount, if any) any
of the Notes as and when the same shall become due and payable, and such default
shall have continued for a period of thirty (30) days, or (b) in case default
shall be made in the payment of the principal of or premium, if any, on any of
the Notes as and when the same shall have become due and payable, whether at
maturity of the Notes or in connection with any redemption, upon a declaration
of acceleration or otherwise and upon demand of the Trustee, the Company will
pay to the Trustee, for the benefit of the holders of the Notes, the whole
amount that then shall have become due and payable on all such Notes for
principal and premium, if any, or interest (including Liquidated Damages Amount,
if any), as the case may be, with interest upon the overdue principal and
premium, if any, and (to the extent that payment of such interest is enforceable
under applicable law) upon the overdue installments of interest (including
Liquidated Damages Amount, if any) at the rate borne by the Notes; and, in
addition thereto, such further amount as shall be sufficient to cover the costs
and expenses of collection, including reasonable compensation to the Trustee,
its agents, attorneys and counsel, and all other amounts due the Trustee under
Section 8.6. Until such demand by the Trustee, the Company may pay the principal
of and premium, if any, and interest on (including Liquidated Damages Amount, if
any) the Notes to the registered holders, whether or not the Notes are overdue.
In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor on the Notes
and collect in the manner provided by law out of the property of the Company or
any other obligor on the Notes wherever situated the monies adjudged or decreed
to be payable.
In case there shall be pending proceedings for the bankruptcy or for the
reorganization of the Company or any other obligor on the Notes under Title 11
of the United States Code, or any other applicable law, or in case a receiver,
assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or
similar official shall have been appointed for or taken possession of the
Company or such other obligor, the property of the Company or such other
obligor, or in the case of any other judicial proceedings relative to the
Company or such other obligor upon the Notes, or to the creditors or property of
the Company or such other obligor, the Trustee, irrespective of whether the
principal of the Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Trustee shall have made
any demand pursuant to the provisions of this Section 7.2, shall be entitled and
empowered, by intervention in such proceedings or otherwise, to file and prove a
claim or claims for the whole amount of principal, premium, if any, and interest
(including Liquidated Damages Amount, if any) owing and unpaid in respect of the
Notes, and, in case of any judicial proceedings, to 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 and of the
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Noteholders allowed in such judicial proceedings relative to the Company or any
other obligor on the Notes, its or their creditors, or its or their property,
and to collect and receive any monies or other property payable or deliverable
on any such claims, and to distribute the same after the deduction of any
amounts due the Trustee under Section 8.7; and any receiver, assignee or trustee
in bankruptcy or reorganization, liquidator, custodian or similar official is
hereby authorized by each of the Noteholders 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 Noteholders, to pay to the Trustee any amount due it
for reasonable compensation, expenses, advances and disbursements, including
counsel fees incurred by it up to the date of such distribution. To the extent
that such payment of reasonable compensation, expenses, advances and
disbursements out of the estate in any such proceedings shall be denied for any
reason, payment of the same shall be secured by a lien on, and shall be paid out
of, any and all distributions, dividends, monies, securities and other property
which the holders of the Notes may be entitled to receive in such proceedings,
whether in liquidation or under any plan of reorganization or arrangement or
otherwise.
All rights of action and of asserting claims under this Indenture, or
under any of the Notes, may be enforced by the Trustee without the possession of
any of the Notes, or the production thereof at any trial or other proceeding
relative thereto, and any such suit or proceeding instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent and
counsel, be for the ratable benefit of the holders of the Notes.
In any proceedings brought by the Trustee (and in any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the holders
of the Notes, and it shall not be necessary to make any holders of the Notes
parties to any such proceedings.
Section 7.3 Application of Monies Collected by Trustee. Any monies
collected by the Trustee pursuant to this Article VII shall be applied in the
following order, at the date or dates fixed by the Trustee for the distribution
of such monies, upon presentation of the several Notes, and stamping thereon the
payment, if only partially paid, and upon surrender thereof, if fully paid:
First: To the payment of all amounts due the Trustee under Section
8.7;
Second: Subject to the provisions of Article IV, in case the
principal of the outstanding Notes shall not have become due and be
unpaid, to the payment of interest on (including Liquidated Damages
Amount, if any) the Notes in default in the order of the maturity of the
installments of such interest, with interest (to the extent that such
interest has been collected by the Trustee) upon the overdue installments
of interest (including Liquidated Damages Amount, if any) at the rate
borne by the Notes, such payments to be made ratably to the Persons
entitled thereto;
Third: Subject to the provisions of Article IV, in case the
principal of the outstanding Notes shall have become due, by declaration
or otherwise, and be unpaid to the payment of the whole amount then owing
and unpaid upon the Notes for principal and premium, if any, and interest
(including Liquidated Damages Amount, if any), with interest on the
overdue principal and premium, if any, and (to the extent that such
interest has been collected by the Trustee) upon overdue installments of
interest (including Liquidated Damages Amount, if any) at the rate borne
by the Notes; and in case such monies shall be insufficient to pay in full
the whole amounts so due and unpaid upon the Notes, then to the payment of
such principal and premium, if any, and interest (including Liquidated
Damages Amount, if any) without preference or priority of principal and
premium, if any, over interest (including Liquidated Damages Amount, if
any), or of interest (including Liquidated Damages Amount, if any) over
principal and premium, if any, or of any installment of interest over any
other installment of interest, or of any Note over any other Note, ratably
to the aggregate of such principal and premium, if any, and accrued and
unpaid interest; and
Fourth: Subject to the provisions of Article IV, to the payment of
the remainder, if any, to the Company.
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Section 7.4 Proceedings by Noteholder. No holder of any Note shall have
any right by virtue of or by availing of any provision of this Indenture to
institute any suit, action or proceeding in equity or at law upon or under or
with respect to this Indenture, or for the appointment of a receiver, trustee,
liquidator, custodian or other similar official, or for any other remedy
hereunder, unless such holder previously shall have given to the Trustee written
notice of an Event of Default and of the continuance thereof, as hereinbefore
provided, and unless also the holders of not less than twenty-five percent (25%)
in aggregate principal amount of the Notes then outstanding shall have made
written request upon the Trustee to institute such action, suit or proceeding in
its own name as Trustee hereunder and shall have offered to the Trustee such
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby, and the Trustee for sixty (60) days after its
receipt of such notice, request and offer of indemnity, shall have neglected or
refused to institute any such action, suit or proceeding and no direction
inconsistent with such written request shall have been given to the Trustee
pursuant to Section 7.7; it being understood and intended, and being expressly
covenanted by the taker and holder of every Note with every other taker and
holder and the Trustee, that no one or more holders of Notes shall have any
right in any manner whatever by virtue of or by availing of any provision of
this Indenture to affect, disturb or prejudice the rights of any other holder of
Notes, or to obtain or seek to obtain priority over or preference to any other
such holder, or to enforce any right under this Indenture, except in the manner
herein provided and for the equal, ratable and common benefit of all holders of
Notes (except as otherwise provided herein). For the protection and enforcement
of this Section 7.4, each and every Noteholder and the Trustee shall be entitled
to such relief as can be given either at law or in equity.
Notwithstanding any other provision of this Indenture and any provision of
any Note, the right of any holder of any Note to receive payment of the
principal of and premium, if any (including the redemption price and Make-Whole
Payment, if any, upon redemption and the Make-Whole Payment, if any, upon a
Nonconversion Election, pursuant to Article III), and accrued interest on
(including Liquidated Damages Amount, if any) such Note, on or after the
respective due dates expressed in such Note or in the event of redemption, or to
institute suit for the enforcement of any such payment on or after such
respective dates against the Company shall not be impaired or affected without
the consent of such holder.
Anything in this Indenture or the Notes to the contrary notwithstanding,
the holder of any Note, without the consent of either the Trustee or the holder
of any other Note, in its own behalf and for its own benefit, may enforce, and
may institute and maintain any proceeding suitable to enforce, its rights of
conversion as provided herein.
Section 7.5 Proceedings by Trustee. In case of an Event of Default, the
Trustee may, in its discretion, proceed to protect and enforce the rights vested
in it by this Indenture by such appropriate judicial proceedings as are
necessary to protect and enforce any of such rights, either by suit in equity or
by action at law or by proceeding in bankruptcy or otherwise, whether for the
specific enforcement of any covenant or agreement contained in this Indenture or
in aid of the exercise of any power granted in this Indenture, or to enforce any
other legal or equitable right vested in the Trustee by this Indenture or by
law.
Section 7.6 Remedies Cumulative and Continuing. Except as provided in
Section 2.6, all powers and remedies given by this Article VII to the Trustee or
to the Noteholders shall, to the extent permitted by law, be deemed cumulative
and not exclusive of any thereof or of any other powers and remedies available
to the Trustee or the holders of the Notes, by judicial proceedings or
otherwise, to enforce the performance or observance of the covenants and
agreements contained in this Indenture, and no delay or omission of the Trustee
or of any holder of any of the Notes to exercise any right or power accruing
upon any default or Event of Default occurring and continuing as aforesaid shall
impair any such right or power, or shall be construed to be a waiver of any such
default or any acquiescence therein; and, subject to the provisions of Section
7.4, every power and remedy given by this Article VII or by law to the Trustee
or to the Noteholders may be exercised from time to time, and as often as shall
be deemed expedient, by the Trustee or by the Noteholders.
Section 7.7 Direction of Proceedings and Waiver of Defaults by Majority of
Noteholders. The holders of a majority in aggregate principal amount of the
Notes at the time outstanding determined in accordance with Section 9.4 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 (a) such direction shall not
be in conflict with any rule of law or with this Indenture, (b) the Trustee may
take any other
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action which is not inconsistent with such direction, (c) the Trustee may
decline to take any action that would benefit some Noteholder to the detriment
of other Noteholder and (d) the Trustee may refuse to follow any direction that
may involve the Trustee in personal liability. The holders of a majority in
aggregate principal amount of the Notes at the time outstanding determined in
accordance with Section 9.4 may, on behalf of the holders of all of the Notes,
waive any past default or Event of Default hereunder and its consequences except
(i) a default in the payment of interest (including Liquidated Damages Amount,
if any) or premium, if any, on, or the principal of, the Notes, (ii) a failure
by the Company to convert any Notes into Common Stock, (iii) a default in the
payment of the redemption price or Make-Whole Payment, if any, pursuant to
Article III or (iv) a default in respect of a covenant or provisions hereof
which under Article XI cannot be modified or amended without the consent of the
holders of each or all Notes then outstanding or affected thereby. Upon any such
waiver, the Company, the Trustee and the holders of the Notes shall be restored
to their former positions and rights hereunder; but no such waiver shall extend
to any subsequent or other default or Event of Default or impair any right
consequent thereon. Whenever any default or Event of Default hereunder shall
have been waived as permitted by this Section 7.7, said default or Event of
Default shall for all purposes of the Notes and this Indenture be deemed to have
been cured and to be not continuing; but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon.
Section 7.8 Undertaking to Pay Costs. All parties to this Indenture agree,
and each holder of any Note by his acceptance thereof shall be deemed to have
agreed, that any court may, in its discretion, require, 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, the filing by any
party litigant in such suit of an undertaking to pay the costs of such suit and
that such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees and expenses, against any party litigant in such
suit, having due regard to the merits and good faith of the claims or defenses
made by such party litigant; provided that the provisions of this Section 7.8
(to the extent permitted by law) shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Noteholder, or group of Noteholders,
holding in the aggregate more than ten percent in principal amount of the Notes
at the time outstanding determined in accordance with Section 9.4, or to any
suit instituted by any Noteholder for the enforcement of the payment of the
principal of or premium, if any, or interest on any Note on or after the due
date expressed in such Note or to any suit for the enforcement of the right to
convert any Note in accordance with the provisions of Article XV.
ARTICLE VIII
CONCERNING THE TRUSTEE
Section 8.1 General. The duties and responsibilities of the Trustee shall
be as provided by the TIA and as set forth herein. Notwithstanding the
foregoing, 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. Whether or not herein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Article VIII.
Section 8.2 Certain Rights of Trustee. Subject to TIA Sections 315(a)
through (d):
(i) the Trustee may rely, and shall be protected in acting or
refraining from acting, upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper person. The Trustee need not investigate any fact or matter
stated in any such document;
(ii) before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel, which shall conform to
Section 16.5. 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;
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(iii) the Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any attorney or
agent appointed with due care;
(iv) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or
direction of any of the holders, unless such holders shall have offered to
the Trustee reasonable security or indemnity against the costs, expenses
and liabilities that might be incurred by it in compliance with such
request or direction;
(v) the Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within its
rights or powers or for any action it takes or omits to take in accordance
with the written direction of the holders of a majority in principal
amount of the outstanding Notes relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this
Indenture;
(vi) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate; and
(vii) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit,
and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and
premises of the Company personally or by agent or attorney.
Section 8.3 Individual Rights of Trustee. The Trustee, in its individual
or any other capacity, may become the owner or pledgee of Notes and may
otherwise deal with the Company or its Affiliates with the same rights it would
have if it were not the Trustee. Any registrar, co-registrar, paying agent,
conversion agent or authenticating agent may do the same with like rights.
However, the Trustee is subject to TIA Sections 310(b) and 311.
Section 8.4 Trustee's Disclaimer. The Trustee (i) makes no representation
as to the validity or adequacy of this Indenture or the Notes, (ii) shall not be
accountable for the Company's use or application of the proceeds from the Notes
and (iii) shall not be responsible for any statement in the Notes other than its
certificate of authentication.
Section 8.5 Notice of Default. If any Default or any Event of Default
occurs and is continuing and if such Default or Event of Default is known to a
Responsible Officer of the Trustee, the Trustee shall mail to each holder in the
manner and to the extent provided in TIA Section 313(c) notice of the Default or
Event of Default within 45 days after it occurs, unless such Default or Event of
Default has been cured; provided, however, that, except in the case of a default
in the payment of the principal of, premium, if any, or interest (including
Liquidated Damages Amount, if any) on any Note, the Trustee shall be protected
in withholding such notice if and so long as the board of directors, the
executive committee or a trust committee of directors and/or Responsible
Officers of the Trustee in good faith determine that the withholding of such
notice is in the interest of the Noteholders.
Section 8.6 Conflicting Interests of Trustee. If the Trustee has or shall
acquire a conflicting interest within the meaning of the TIA, the Trustee shall
either eliminate such interest or resign, to the extent and in the manner
provided by, and subject to the provisions of the TIA and this Indenture.
Section 8.7 Compensation and Indemnity. The Company shall pay to the
Trustee such compensation as shall be agreed upon in writing for its services.
The compensation of the Trustee shall not be limited by any law on compensation
of a trustee of an express trust. The Company shall reimburse the Trustee upon
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request for all reasonable out-of-pocket expenses and advances incurred or made
by the Trustee. Such expenses shall include the reasonable compensation and
expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities, obligations, damages, penalties, judgments, actions, suits,
proceedings, reasonable costs and expenses (including reasonable fees and
disbursements of counsel) of any kind whatsoever which may be incurred by the
Trustee in connection with any investigative, administrative or judicial
proceeding (whether or not such indemnified party is designated a party to such
proceeding) arising out of or in connection with the acceptance or
administration of its duties under this Indenture; provided, however, that the
Company need not reimburse any expense or indemnify against any loss,
obligation, damage, penalty, judgment, action, suit, proceeding, reasonable cost
or expense (including reasonable fees and disbursements of counsel) of any kind
whatsoever which may be incurred by the Trustee in connection with any
investigative, administrative or judicial proceeding (whether or not such
indemnified party is designated a party to such proceeding) in which it is
determined that the Trustee acted with negligence, bad faith or willful
misconduct. The Trustee shall notify the Company promptly of any claim for which
it may seek indemnity. Failure by the Trustee to so notify the Company shall not
relieve the Company of its obligations hereunder, unless the Company is
materially prejudiced thereby. The Company shall defend the claim and the
Trustee shall cooperate in the defense. Unless otherwise set forth herein, 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 consent, which consent shall not be unreasonably withheld.
To secure the Company's payment obligations in this Section 8.7, the
Trustee shall have a lien prior to the Notes on all money or property held or
collected by the Trustee, in its capacity as Trustee, except money or property
held in trust to pay principal of, premium, if any, and interest on particular
Notes.
If the Trustee incurs expenses or renders services after the occurrence of
an Event of Default specified in clause (d) or (e) of Section 7.1, the expenses
and the compensation for the services will be intended to constitute expenses of
administration under Title 11 of the United States Bankruptcy Code or any
applicable federal or state law for the relief of debtors.
Section 8.8 Replacement of Trustee. A resignation or removal of the
Trustee and appointment of a successor Trustee shall become effective only upon
the successor Trustee's acceptance of appointment as provided in this Section
8.8.
The Trustee may resign at any time by so notifying the Company in writing
at least 30 days prior to the date of the proposed resignation. The holders of a
majority in principal amount of the outstanding Notes may remove the Trustee by
so notifying the Trustee in writing and may appoint a successor Trustee with the
consent of the Company. The Company may remove the Trustee if: (i) the Trustee
is no longer eligible under Section 8.10; (ii) the Trustee is adjudged a
bankrupt or an insolvent; (iii) a receiver or other public officer takes charge
of the Trustee or its property; or (iv) 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 promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the holders
of a majority in principal amount of the outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company. If
the successor Trustee does not deliver its written acceptance required by the
next succeeding paragraph of this Section 8.8 within 30 days after the retiring
Trustee resigns or is removed, the retiring Trustee, the Company or the holders
of a majority in principal amount of the outstanding Notes may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Immediately after the delivery of
such written acceptance, subject to the lien provided in Section 8.7, (i) the
retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, (ii) the resignation or removal of the retiring Trustee shall
become effective and (iii) 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 holder.
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If the Trustee is no longer eligible under Section 8.10, any holder who
satisfies the requirements of TIA Section 310(b) may petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
The Company shall give notice of any resignation and any removal of the
Trustee and each appointment of a successor Trustee to all holders. Each notice
shall include the name of the successor Trustee and the address of its Corporate
Trust Office.
Notwithstanding replacement of the Trustee pursuant to this Section 8.8,
the Company's obligation under Section 8.7 shall continue for the benefit of the
retiring Trustee.
Section 8.9 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 be the successor Trustee with
the same effect as if the successor Trustee had been named as the Trustee
herein.
Section 8.10 Eligibility. This Indenture shall always have a Trustee who
satisfies the requirements of TIA Section 310(a)(1). The Trustee (or the bank
holding company to which the Trustee is a member) shall have a combined capital
and surplus of at least $25 million as set forth in its most recent published
annual report of condition.
Section 8.11 Money Held in Trust. Subject to the provisions of Section
13.4 and Section 4.2, all monies received by the Trustee shall, until used or
applied as herein provided, be held in trust for the purposes for which they
were received. The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law and except for money held in trust under Article XIII of
this Indenture.
Section 8.12 Withholding Taxes. The Trustee, as agent for the Company,
shall exclude and withhold from each payment of principal and interest and other
amounts due hereunder or under the Notes any and all withholding taxes
applicable thereto as required by law. The Trustee agrees to act as such
withholding agent and, in connection therewith, whenever any present or future
taxes or similar charges are required to be withheld with respect to any amounts
payable in respect of the Notes, to withhold such amounts and timely pay the
same to the appropriate authority in the name of and on behalf of the holders of
the Notes, that it will file any necessary withholding tax returns or statements
when due, and that, as promptly as possible after the payment thereof, it will
deliver to each holder of a Note appropriate documentation showing the payment
thereof, together with such additional documentary evidence as such holders may
reasonably request from time to time.
Section 8.13 Preferential Collection of Claims. If and when the Trustee
shall be or become a creditor of the Company (or any other obligor upon the
Notes), the Trustee shall be subject to the provisions of the Trust Indenture
Act regarding the collection of the claims against the Company (or any such
other obligor).
Section 8.14 Trustee's Application for Instructions from the Company. Any
application by the Trustee for written instructions from the Company (other than
with regard to any action proposed to be taken or omitted to be taken by the
Trustee that affects the rights of the holders of the Notes or holders of Senior
Indebtedness under this Indenture, including, without limitation, under Article
IV hereof) may, at the option of the Trustee, set forth in writing any action
proposed to be taken or omitted by the Trustee under this Indenture and the date
on and/or after which such action shall be taken or such omission shall be
effective. The Trustee shall not be liable for any action taken by, or omission
of, the Trustee in accordance with a proposal included in such application on or
after the date specified in such application (which date shall not be less than
three (3) Business Days after the date any officer of the Company actually
receives such application, unless any such officer shall have consented in
writing to any earlier date) unless prior to taking any such action (or the
effective date in the case of an omission), the Trustee shall have received
written instructions in response to such application specifying the action to be
taken or omitted.
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ARTICLE IX
CONCERNING THE NOTEHOLDERS
Section 9.1 Action by Noteholders. Whenever in this Indenture it is
provided that the holders of a specified percentage in aggregate principal
amount of the Notes may take any action (including the making of any demand or
request, the giving of any notice, consent or waiver or the taking of any other
action), the fact that at the time of taking any such action, the holders of
such specified percentage have joined therein may be evidenced (a) by any
instrument or any number of instruments of similar tenor executed by Noteholders
in person or by agent or proxy appointed in writing, or (b) by the record of the
holders of Notes voting in favor thereof at any meeting of Noteholders duly
called and held in accordance with the provisions of Article X, or (c) by a
combination of such instrument or instruments and any such record of such a
meeting of Noteholders. Whenever the Company or the Trustee solicits the taking
of any action by the holders of the Notes, the Company or the Trustee may fix in
advance of such solicitation, a date as the record date for determining holders
entitled to take such action. The record date shall be not more than fifteen
(15) days prior to the date of commencement of solicitation of such action.
Section 9.2 Proof of Execution by Noteholders. Subject to the provisions
of Sections 8.1, 8.2 and 10.5, proof of the execution of any instrument by a
Noteholder or its agent or proxy shall be sufficient if made in accordance with
such reasonable rules and regulations as may be prescribed by the Trustee or in
such manner as shall be satisfactory to the Trustee. The holding of Notes shall
be proved by the registry of such Notes or by a certificate of the Note
registrar.
The record of any Noteholders' meeting shall be proved in the manner
provided in Section 10.6.
Section 9.3 Who Are Deemed Absolute Owners. The Company, the Trustee, any
paying agent, any conversion agent and any Note registrar may deem the Person in
whose name such Note shall be registered upon the Note register to be, and may
treat it as, the absolute owner of such Note (whether or not such Note shall be
overdue and notwithstanding any notation of ownership or other writing thereon)
for the purpose of receiving payment of or on account of the principal of,
premium, if any, and interest on such Note, for conversion of such Note and for
all other purposes; and neither the Company nor the Trustee nor any paying agent
nor any conversion agent nor any Note registrar shall be affected by any notice
to the contrary. All such payments so made to any holder for the time being, or
upon his order, shall be valid, and, to the extent of the sum or sums so paid,
effectual to satisfy and discharge the liability for monies payable upon any
such Note.
Section 9.4 Company-Owned Notes Disregarded. In determining whether the
holders of the requisite aggregate principal amount of Notes have concurred in
any direction, consent, waiver or other action under this Indenture, Notes which
are owned by the Company or any other obligor on the Notes or any Affiliate of
the Company or any other obligor on the Notes shall be disregarded and deemed
not to be outstanding for the purpose of any such determination; provided that,
for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, consent, waiver or other action, only Notes which
a Responsible Officer knows are so owned shall be so disregarded. Notes so owned
which have been pledged in good faith may be regarded as outstanding for the
purposes of this Section 9.4 if the pledgee shall establish to the satisfaction
of the Trustee the pledgee's right to vote such Notes and that the pledgee is
not the Company, any other obligor on the Notes or any Affiliate of the Company
or any such other obligor. In the case of a dispute as to such right, any
decision by the Trustee taken upon the advice of counsel shall be full
protection to the Trustee. Upon request of the Trustee, the Company shall
furnish to the Trustee promptly an Officers' Certificate listing and identifying
all Notes, if any, known by the Company to be owned or held by or for the
account of any of the above described Persons; and, subject to Section 8.1, the
Trustee shall be entitled to accept such Officers' Certificate as conclusive
evidence of the facts therein set forth and of the fact that all Notes not
listed therein are outstanding for the purpose of any such determination.
Section 9.5 Revocation of Consents; Future Holders Bound. At any time
prior to (but not after) the evidencing to the Trustee, as provided in Section
9.1, of the taking of any action by the holders of the percentage in aggregate
principal amount of the Notes specified in this Indenture in connection with
such action, any holder of a Note which is shown by the evidence to be included
in the Notes the holders of which have consented to such action
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may, by filing written notice with the Trustee at its Corporate Trust Office and
upon proof of holding as provided in Section 9.2, revoke such action so far as
concerns such Note. Except as aforesaid, any such action taken by the holder of
any Note shall be conclusive and binding upon such holder and upon all future
holders and owners of such Note and of any Notes issued in exchange or
substitution therefor, irrespective of whether any notation in regard thereto is
made upon such Note or any Note issued in exchange or substitution therefor.
ARTICLE X
NOTEHOLDERS' MEETINGS
Section 10.1 Purpose of Meetings. A meeting of Noteholders may be called
at any time and from time to time pursuant to the provisions of this Article X
for any of the following purposes:
(1) to give any notice to the Company or to the Trustee or to give
any directions to the Trustee permitted under this Indenture, or to consent to
the waiving of any default or Event of Default hereunder and its consequences,
or to take any other action authorized to be taken by Noteholders pursuant to
any of the provisions of Article VII;
(2) to remove the Trustee and nominate a successor trustee pursuant
to the provisions of Article VIII;
(3) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 11.2; or
(4) to take any other action authorized to be taken by or on behalf
of the holders of any specified aggregate principal amount of the Notes under
any other provision of this Indenture or under applicable law.
Section 10.2 Call of Meetings by Trustee. The Trustee may at any time call
a meeting of Noteholders to take any action specified in Section 10.1, to be
held at such time and at such place as the Trustee shall determine. Notice of
every meeting of the Noteholders, setting forth the time and the place of such
meeting and in general terms the action proposed to be taken at such meeting and
the establishment of any record date pursuant to Section 9.1, shall be mailed to
holders of Notes at their addresses as they shall appear on the Note register.
Such notice shall also be mailed to the Company. Such notices shall be mailed
not less than twenty (20) nor more than ninety (90) days prior to the date fixed
for the meeting.
Any meeting of Noteholders shall be valid without notice if the holders of
all Notes then outstanding are present in person or by proxy or if notice is
waived before or after the meeting by the holders of all Notes outstanding, and
if the Company and the Trustee are either present by duly authorized
representatives or have, before or after the meeting, waived notice.
Section 10.3 Call of Meetings by Company or Noteholders. In case at any
time the Company, pursuant to a resolution of its Board of Directors, or the
holders of at least ten percent (10%) in aggregate principal amount of the Notes
then outstanding, shall have requested the Trustee to call a meeting of
Noteholders, by written request setting forth in reasonable detail the action
proposed to be taken at the meeting, and the Trustee shall not have mailed the
notice of such meeting within twenty (20) days after receipt of such request,
then the Company or such Noteholders may determine the time and the place for
such meeting and may call such meeting to take any action authorized in Section
10.1, by mailing notice thereof as provided in Section 10.2.
Section 10.4 Qualifications for Voting. To be entitled to vote at any
meeting of Noteholders a person shall (a) be a holder of one or more Notes on
the record date pertaining to such meeting or (b) be a person appointed by an
instrument in writing as proxy by a holder of one or more Notes on the record
date pertaining to such meeting. The only persons who shall be entitled to be
present or to speak at any meeting of Noteholders shall be the persons
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entitled to vote at such meeting and their counsel and any representatives of
the Trustee and its counsel and any representatives of the Company and its
counsel.
Section 10.5 Regulations. Notwithstanding any other provisions of this
Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Noteholders, in regard to proof of the holding of
Notes and of the appointment of proxies, and in regard to the appointment and
duties of inspectors of votes, the submission and examination of proxies,
certificates and other evidence of the right to vote, and such other matters
concerning the conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Noteholders as provided in Section 10.3, in which case the Company
or the Noteholders calling the meeting, as the case may be, shall in like manner
appoint a temporary chairman. A permanent chairman and a permanent secretary of
the meeting shall be elected by vote of the holders of a majority in principal
amount of the Notes represented at the meeting and entitled to vote at the
meeting.
Subject to the provisions of Section 9.4, at any meeting each Noteholder
or proxyholder shall be entitled to one vote for each $1,000 principal amount of
Notes held or represented by him; provided, however, that no vote shall be cast
or counted at any meeting in respect of any Note challenged as not outstanding
and ruled by the chairman of the meeting to be not outstanding. The chairman of
the meeting shall have no right to vote other than by virtue of Notes held by
him or instruments in writing as aforesaid duly designating him as the proxy to
vote on behalf of other Noteholders. Any meeting of Noteholders duly called
pursuant to the provisions of Section 10.2 or 10.3 may be adjourned from time to
time by the holders of a majority of the aggregate principal amount of Notes
represented at the meeting, whether or not constituting a quorum, and the
meeting may be held as so adjourned without further notice.
Section 10.6 Voting. The vote upon any resolution submitted to any meeting
of Noteholders shall be by written ballot on which shall be subscribed the
signatures of the holders of Notes or of their representatives by proxy and the
principal amount of the Notes held or represented by them. The permanent
chairman of the meeting shall appoint two inspectors of votes who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
duplicate of all votes cast at the meeting. A record in duplicate of the
proceedings of each meeting of Noteholders shall be prepared by the secretary of
the meeting and there shall be attached to said record the original reports of
the inspectors of votes on any vote by ballot taken thereat and affidavits by
one or more persons having knowledge of the facts setting forth a copy of the
notice of the meeting and showing that said notice was mailed as provided in
Section 10.2. The record shall show the principal amount of the Notes voting in
favor of or against any resolution. The record shall be signed and verified by
the affidavits of the permanent chairman and secretary of the meeting and one of
the duplicates shall be delivered to the Company and the other to the Trustee to
be preserved by the Trustee, the latter to have attached thereto the ballots
voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
Section 10.7 No Delay of Rights by Meeting. Nothing in this Article X
contained shall be deemed or construed to authorize or permit, by reason of any
call of a meeting of Noteholders or any rights expressly or impliedly conferred
hereunder to make such call, any hindrance or delay in the exercise of any right
or rights conferred upon or reserved to the Trustee or to the Noteholders under
any of the provisions of this Indenture or of the Notes.
Section 10.8 Exercise of Rights of Trustee or Noteholders May Not be
Hindered or Delayed by Call of Meeting. Nothing contained in this Article X will
be deemed or construed to authorize or permit, by reason of any call of a
meeting of Noteholders or any rights expressly or impliedly conferred hereunder
to make such call, any hindrance or delay in the exercise of any right or rights
conferred upon or reserved to the Trustee or to the Noteholders under any of the
provisions of this Indenture or the Notes.
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Section 10.9 Procedures Not Exclusive. The procedures set forth in this
Article X are not exclusive and the rights and obligations of the Company, the
Trustee and the Noteholders under other Articles of this Indenture will in no
way be limited by the provisions of this Article X.
ARTICLE XI
SUPPLEMENTAL INDENTURES
Section 11.1 Supplemental Indentures Without Consent of Noteholders. The
Company, when authorized by the resolutions of the Board of Directors (as
evidenced by a Board Resolution delivered to the Trustee), and the Trustee may,
from time to time, and at any time enter into an indenture or indentures
supplemental hereto for one or more of the following purposes:
(a) to make provision with respect to the conversion rights of the
holders of Notes pursuant to the requirements of Section 15.6 and the redemption
obligations of the Company pursuant to the requirements of Section 3.5(e);
(b) subject to Article IV, to convey, transfer, assign, mortgage or
pledge to the Trustee as security for the Notes, any property or assets;
(c) to evidence the succession of another Person to the Company, or
successive successions, and the assumption by the successor Person of the
covenants, agreements and obligations of the Company pursuant to Article XII;
(d) to add to the covenants of the Company such further covenants,
restrictions or conditions as the Board of Directors and the Trustee shall
consider to be for the benefit of the holders of Notes, and to make the
occurrence, or the occurrence and continuance, of a default in any such
additional covenants, restrictions or conditions a default or an Event of
Default permitting the enforcement of all or any of the several remedies
provided in this Indenture as herein set forth; provided, however, that in
respect of any such additional covenant, restriction or condition, such
supplemental indenture may provide for a particular period of grace after
default (which period may be shorter or longer than that allowed in the case of
other defaults) or may provide for an immediate enforcement upon such default or
may limit the remedies available to the Trustee upon such default;
(e) to provide for the issuance under this Indenture of Notes in
coupon form (including Notes registrable as to principal only) and to provide
for exchangeability of such Notes with the Notes issued hereunder in fully
registered form and to make all appropriate changes for such purpose;
(f) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture that may be defective or
inconsistent with any other provision contained herein or in any supplemental
indenture, or to make such other provisions in regard to matters or questions
arising under this Indenture that shall not materially adversely affect the
interests of the holders of the Notes;
(g) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Notes; or
(h) to modify, eliminate or add to the provisions of this Indenture
to such extent as shall be necessary to effect the qualifications of this
Indenture under the Trust Indenture Act, or under any similar federal statute
hereafter enacted.
Upon the written request of the Company, accompanied by a copy of the
resolutions of the Board of Directors certified by its Secretary or Assistant
Secretary authorizing the execution of any supplemental indenture, the Trustee
is hereby authorized to join with the Company in the execution of any such
supplemental indenture, to
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make any further appropriate agreements and stipulations that may be therein
contained and to accept the conveyance, transfer and assignment of any property
thereunder, but the Trustee shall not be obligated to, but may in its
discretion, enter into any supplemental indenture that affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this Section
11.1 may be executed by the Company and the Trustee without the consent of the
holders of any of the Notes at the time outstanding, notwithstanding any of the
provisions of Section 11.2.
Notwithstanding any other provision of the Indenture or the Notes, the
Registration Rights Agreement and the obligation to pay Liquidated Damages
Amount thereunder may be amended, modified or waived in accordance with the
provisions of the Registration Rights Agreement.
Section 11.2 Supplemental Indenture with Consent of Noteholders. With the
consent (evidenced as provided in Article IX) of the holders of not less than a
majority in aggregate principal amount of the Notes at the time outstanding, the
Company, when authorized by the resolutions of the Board of Directors, and the
Trustee may, from time to time and at any time, enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Indenture or
any supplemental indenture or of modifying in any manner the rights of the
holders of the Notes; provided, however, that no such supplemental indenture
shall (i) extend the fixed maturity of any Note, or reduce the rate or extend
the time of payment of interest thereon, or reduce the principal amount thereof
or premium, if any, thereon, or reduce any amount payable on redemption thereof,
or impair the right of any Noteholder to institute suit for the payment thereof,
or make the principal thereof or interest or premium, if any, thereon payable in
any coin or currency other than that provided in the Notes, or modify the
provisions of this Indenture with respect to the subordination of the Notes in a
manner adverse to the Noteholders in any material respect, or change the
obligation of the Company to redeem any Note upon the happening of a Fundamental
Change in a manner adverse to the holder of Notes, or impair the right to
convert the Notes into Common Stock subject to the terms set forth herein,
including Section 15.6, in each case, without the consent of the holder of each
Note so affected, or (ii) reduce the aforesaid percentage of Notes, the holders
of which are required to consent to any such supplemental indenture, without the
consent of the holders of all Notes then outstanding.
Upon the written request of the Company, accompanied by a copy of the
resolutions of the Board of Directors certified by its Secretary or Assistant
Secretary and authorizing the execution of any such supplemental indenture, and
upon the filing with the Trustee of evidence of the consent of Noteholders as
aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture unless such supplemental indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion, but shall not be obligated to, enter
into such supplemental indenture.
It shall not be necessary for the consent of the Noteholders under this
Section 11.2 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
Section 11.3 Effect of Supplemental Indenture. Any supplemental indenture
executed pursuant to the provisions of this Article XI shall comply with the
Trust Indenture Act, as then in effect, provided that this Section 11.3 shall
not require such supplemental indenture or the Trustee to be qualified under the
Trust Indenture Act prior to the time such qualification is in fact required
under the terms of the Trust Indenture Act or the Indenture has been qualified
under the Trust Indenture Act, nor shall it constitute any admission or
acknowledgment by any party to such supplemental indenture that any such
qualification is required prior to the time such qualification is in fact
required under the terms of the Trust Indenture Act or the Indenture has been
qualified under the Trust Indenture Act. Upon the execution of any supplemental
indenture pursuant to the provisions of this Article XI, this Indenture shall be
and be deemed to be modified and amended in accordance therewith and the
respective rights, limitation of rights, obligations, duties and immunities
under this Indenture of the Trustee, the Company and the holders of Notes shall
thereafter be determined, exercised and enforced hereunder, subject in all
respects to such modifications and amendments and all the term and conditions of
any such supplemental indenture shall be and be deemed to be part of the terms
and conditions of this Indenture for any and all purposes.
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Section 11.4 Notation on Notes. Notes authenticated and delivered after
the execution of any supplemental indenture pursuant to the provisions of this
Article XI may bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company or the Trustee shall
so determine, new Notes so modified as to conform, in the opinion of the Trustee
and the Board of Directors, to any modification of this Indenture contained in
any such supplemental indenture may, at the Company's expense, be prepared and
executed by the Company, authenticated by the Trustee (or an authenticating
agent duly appointed by the Trustee pursuant to Section 16.11) and delivered in
exchange for the Notes then outstanding, upon surrender of such Notes then
outstanding.
Section 11.5 Evidence of Compliance of Supplemental Indenture to Be
Furnished to Trustee. Prior to entering into any supplemental indenture, the
Trustee may request and shall be fully protected in relying on an Officers'
Certificate and an Opinion of Counsel meeting the requirements set forth in
Section 16.5 as conclusive evidence that any supplemental indenture executed
pursuant hereto complies with the requirements of this Article XI. The Opinion
of Counsel shall also state that the Supplemental Indenture will be valid and
binding upon the Company, subject to customary exceptions.
ARTICLE XII
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
Section 12.1 Company May Consolidate, Etc., on Certain Terms. Subject to
the provisions of Section 12.2, nothing contained in this Indenture or in any of
the Notes shall prevent any consolidation or merger of the Company with or into
any other Person or Persons (whether or not affiliated with the Company), or
successive consolidations or mergers in which the Company or its successor or
successors shall be a party or parties, or shall prevent any sale, conveyance or
lease (or successive sales, conveyances or leases) of all or substantially all
of the property of the Company, to any other Person (whether or not affiliated
with the Company), authorized to acquire and operate the same and that shall be
organized under the laws of the United States of America, any state thereof or
the District of Columbia; provided that upon any such consolation, merger, sale,
conveyance or lease, the due and punctual payment of the principal of and
premium, if any, and interest (including Liquidated Damages Amount, if any) on
all of the Notes, according to their tenor and the due and punctual performance
and observance of all of the covenants and conditions of this Indenture to be
performed by the Company, shall be expressly assumed, by supplemental indenture
satisfactory in form to the Trustee, executed and delivered to the Trustee by
the Person (if other than the Company) formed by such consolidation, or into
which the Company shall have been merged, or by the Person that shall have
acquired or leased such property, and such supplemental indenture shall provide
for the applicable conversion rights set forth in Section 15.6.
Section 12.2 Successor Corporation to Be Substituted. In case of any such
consolidation, merger, sale, conveyance or lease and upon the assumption by the
successor Person, by supplemental indenture, executed and delivered to the
Trustee and satisfactory in form to the Trustee, of the due and punctual payment
of the principal of and premium, if any, and interest on all of the Notes and
the due and punctual performance of all of the covenants and conditions of this
Indenture to be performed by the Company, such successor Person shall succeed to
and be substituted for the Company, with the same effect as if it had been named
herein as the party of this first part. Such successor Person thereupon may
cause to be signed, and may issue either in its own name or in the name of
ITC/\DeltaCom, Inc. any or all of the Notes, issuable hereunder that
theretofore shall not have been signed by the Company and delivered to the
Trustee; and, upon the order of such successor Person instead of the Company and
subject to all the terms, conditions and limitations in this Indenture
prescribed, the Trustee shall authenticate and shall deliver, or cause to be
authenticated and delivered, any Notes that previously shall have been signed
and delivered by the officers of the Company to the Trustee for authentication,
and any Notes that such successor Person thereafter shall cause to be signed and
delivered to the Trustee for that purpose. All the Notes so issued shall in all
respects have the same legal rank and benefit under this Indenture as the Notes
theretofore or thereafter issued in accordance with the terms of this Indenture
as though all of such Notes had been issued at the date of the execution hereof.
In the event of any such consolidation, merger, sale, conveyance or lease, the
Person named as the
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"Company" in the first paragraph of this Indenture or any successor that shall
thereafter have become such in the manner prescribed in this Article XII may be
dissolved, wound up and liquidated at any time thereafter and such Person shall
be released from its liabilities as obligor and maker of the Notes and from its
obligations under this Indenture.
In case of any such consolidation, merger, sale, conveyance or lease, such
changes in phraseology and form (but not in substance) may be made in the Notes
thereafter to be issued as may be appropriate.
Section 12.3 Opinion of Counsel to Be Given Trustee. The Trustee shall
receive an Officers' Certificate and an Opinion of Counsel as conclusive
evidence that any such consolidation, merger, sale, conveyance or lease and any
such assumption complies with the provisions of this Article XII.
ARTICLE XIII
SATISFACTION AND DISCHARGE OF INDENTURE
Section 13.1 Discharge of Indenture. When (a) the Company shall deliver to
the Trustee for cancellation all Notes theretofore authenticated (other than any
Notes that have been destroyed, lost or stolen and in lieu of or in substitution
for which other Notes shall have been authenticated and delivered) and not
theretofore canceled, or (b) all the Notes not theretofore canceled or delivered
to the Trustee for cancellation shall have become due and payable, or are by
their terms to become due and payable within one year or are to be called for
redemption within one year under arrangements satisfactory to the Trustee for
the giving of notice of redemption, and the Company shall deposit with the
Trustee, in trust, funds sufficient to pay at maturity or upon redemption of all
of the Notes (other than any Notes that shall have been mutilated, destroyed,
lost or stolen and in lieu of or in substitution for which other Notes shall
have been authenticated and delivered) not theretofore canceled or delivered to
the Trustee for cancellation, including principal and premium, if any, and
interest due or to become due to such date of maturity or redemption date, as
the case may be, accompanied by a verification report, as to the sufficiency of
the deposited amount, from an independent certified accountant or other
financial professional satisfactory to the Trustee, and if the Company shall
also pay or cause to be paid all other sums payable hereunder by the Company,
then this Indenture shall cease to be of further effect (except as to (i)
remaining rights of registration of transfer, substitution and exchange and
conversion of Notes, (ii) rights hereunder of Noteholders to receive payments of
principal of and premium, if any, and interest on, the Notes and the other
rights, duties and obligations of Noteholders, as beneficiaries hereof with
respect to the amounts, if any, so deposited with the Trustee and (iii) the
rights, obligations and immunities of the Trustee hereunder), and the Trustee,
on written demand of the Company accompanied by an Officers' Certificate and an
Opinion of Counsel as required by Section 16.5 and at the cost and expense of
the Company, shall execute proper instruments acknowledging satisfaction of and
discharging this Indenture; the Company, however, hereby agreeing to reimburse
the Trustee for any costs or expenses thereafter reasonably and properly
incurred by the Trustee and to compensate the Trustee for any services
thereafter reasonably and properly rendered by the Trustee in connection with
this Indenture or the Notes.
Section 13.2 Deposited Monies to Be Held in Trust by Trustee. Subject to
Section 13.4, all monies deposited with the Trustee pursuant to Section 13.1,
provided such deposit was not in violation of Article IV, shall be held in trust
for the sole benefit of the Noteholders and not to be subject to the
subordination provisions of Article IV, and such monies shall be applied by the
Trustee to the payment, either directly or through any paying agent (including
the Company if acting as its own paying agent), to the holders of the particular
Notes for the payment or redemption of which such monies have been deposited
with the Trustee, of all sums due and to become due thereon for principal and
interest and premium, if any.
Section 13.3 Paying Agent to Repay Monies Held. Upon the satisfaction and
discharge of this Indenture, all monies then held by any paying agent of the
Notes (other than the Trustee) shall, upon written request of the Company set
forth in an Officer's Certificate, be repaid to it or paid to the Trustee, and
thereupon such paying agent shall be released from all further liability with
respect to such monies.
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Section 13.4 Return of Unclaimed Monies. Subject to the requirements of
applicable law, any monies deposited with or paid to the Trustee for payment of
the principal of, premium, if any, or interest on Notes and not applied but
remaining unclaimed by the holders of Notes for two years after the date upon
which the principal of, premium, if any, or interest on such Notes, as the case
may be, shall have become due and payable, shall be repaid to the Company by the
Trustee on demand and all liability of the Trustee shall thereupon cease with
respect to such monies; and the holder of any of the Notes shall thereafter look
only to the Company for any payment that such holder may be entitled to collect
unless an applicable abandoned property law designates another Person.
Section 13.5 Reinstatement. If the Trustee or the paying agent is unable
to apply any money in accordance with Section 13.2 by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit had
occurred pursuant to Section 13.1 until such time as the Trustee or the paying
agent is permitted to apply all such money in accordance with Section 13.2;
provided, however, that if the Company makes any payment of interest on or
principal of any Note following the reinstatement of its obligations, the
Company shall be subrogated to the rights of the holders of such Notes to
receive such payment from the money held by the Trustee or paying agent.
ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS
Section 14.1 Indenture and Notes Solely Corporate Obligations. No recourse
for the payment of the principal of or premium, if any, or interest on any Note,
or for any claim based thereon or otherwise in respect thereof, and no recourse
under or upon any obligation, covenant or agreement of the Company in this
Indenture or in any supplemental indenture or in any Note, or because of the
creation of any indebtedness represented thereby, shall be had against any
incorporator, stockholder, employee, agent, officer, director or subsidiary, as
such, past, present or future, of the Company or of any successor corporation,
either directly or through the Company or any successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it being expressly understood that all such
liability is hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture and the issue of the Notes.
ARTICLE XV
CONVERSION OF NOTES
Section 15.1 Right to Convert. Subject to and upon compliance with the
provisions of this Indenture, including, without limitation, Article IV, the
holder of any Note shall have the right, at its option, at any time after 90
days following the original issuance of the Notes hereunder through the close of
business on the final maturity date of the Notes (except that, with respect to
any Note or portion of a Note that shall be called for redemption, such right
shall terminate, except as provided in Section 15.2 or Section 3.4, at the close
of business on the Business Day next preceding the date fixed for redemption of
such Note or portion of a Note unless the Company shall default in payment due
upon redemption thereof to convert the principal amount of any such Note, or any
portion of such principal amount which is $1,000 or an integral multiple
thereof, into that number of fully paid and non-assessable shares of Common
Stock (as such shares shall then be constituted) obtained by dividing the
principal amount of the Note or portion thereof surrendered for conversion by
the Conversion Price in effect at such time, by surrender of the Note so to be
converted in whole or in part in the manner provided, together with any required
funds, in Section 15.2. Notwithstanding the foregoing, the holders' right to
convert the Notes shall terminate on the Nonconversion Election Date pursuant to
Section 3.1 unless the Company shall default in payment of the Make-Whole
Payment in connection therewith. A Note in respect of which a holder is
exercising its option to require redemption upon a Fundamental Change pursuant
to Section 3.5 may be converted only if such holder withdraws its election to
exercise in accordance with Section 3.5. A holder of Notes is not entitled to
any rights of a holder of Common Stock until such holder has
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converted his Notes to Common Stock, and only to the extent such Notes are
deemed to have been converted to Common Stock under this Article XV.
Section 15.2 Exercise of Conversion Privilege; Issuance of Common Stock on
Conversion; No Adjustment for Interest or Dividends. In order to exercise the
conversion privilege with respect to any Note in certificated form, the holder
of any such Note to be converted in whole or in part shall surrender such Note,
duly endorsed, at an office or agency maintained by the Company pursuant to
Section 5.2, accompanied by the funds, if any, required by the penultimate
paragraph of this Section 15.2, and shall give written notice of conversion in
the form provided on the Notes (or such other notice which is acceptable to the
Company) to the office or agency that the holder elects to convert such Note or
the portion thereof specified in said notice. Such notice shall also state the
name or names (with address or addresses) in which the certificate or
certificates for shares of Common Stock which shall be issuable on such
conversion shall be issued, and shall be accompanied by transfer taxes, if
required pursuant to Section 15.7. Each such Note surrendered for conversion
shall, unless the shares issuable on conversion are to be issued in the same
name as the registration of such Note, be duly endorsed by, or be accompanied by
instruments of transfer in form satisfactory to the Company duly executed by,
the holder or his duly authorized attorney.
In order to exercise the conversion privilege with respect to any interest
in a Note in global form, the holder must complete the appropriate instruction
form for conversion pursuant to the Depository's book-entry conversion program,
deliver by book-entry delivery an interest in such Note in global form, furnish
appropriate endorsements and transfer documents if required by the Company or
the Trustee or conversion agent, and pay the funds, if any, required by this
Section 15.2 and any transfer taxes if required pursuant to Section 15.7.
As promptly as practicable after satisfaction of the requirements for
conversion set forth above, subject to compliance with any restrictions on
transfer if shares issuable on conversion are to be issued in a name other than
that of the Noteholder (as if such transfer were a transfer of the Note or Notes
(or portion thereof) so converted), the Company shall issue and shall deliver to
such holder at the office or agency maintained by the Company for such purpose
pursuant to Section 5.2, a certificate or certificates for the number of full
shares of Common Stock issuable upon the conversion of such Note or portion
thereof in accordance with the provisions of this Article and a check or cash in
respect of any fractional interest in respect of a share of Common Stock arising
upon such conversion, as provided in Section 15.3. In case any Note of a
denomination greater than $1,000 shall be surrendered for partial conversion,
and subject to Section 2.3, the Company shall execute and the Trustee shall
authenticate and deliver to the holder of the Note so surrendered, without
charge to him, a new Note or Notes in authorized denominations in an aggregate
principal amount equal to the unconverted portion of the surrendered Note.
Each conversion shall be deemed to have been effected as to any such Note
(or portion thereof) on the date on which the requirements set forth above in
this Section 15.2 have been satisfied as to such Note (or portion thereof), and
the Person in whose name any certificate or certificates for shares of Common
Stock shall be issuable upon such conversion shall be deemed to have become on
said date the holder of record of the shares represented thereby; provided,
however, that any such surrender on any date when the stock transfer books of
the Company shall be closed shall constitute the Person in whose name the
certificates are to be issued as the record holder thereof for all purposes on
the next succeeding day on which such stock transfer books are open, but such
conversion shall be at the Conversion Price in effect on the date upon which
such Note shall be surrendered.
Any Note or portion thereof surrendered for conversion during the period
from the close of business on the record date for any interest payment date to
the close of business on the Business Day next preceding the following interest
payment date shall (unless such Note or portion thereof being converted shall
have been called for redemption on a redemption date that occurs during the
period from the close of business on such record date to the close of business
on the Business Day next preceding the following interest payment date) be
accompanied by payment, in same day funds or other funds acceptable to the
Company, of an amount equal to the interest otherwise payable on such interest
payment date on the principal amount being converted; provided, however, that no
such payment need be made if there shall exist at the time of conversion a
default in the payment of interest on the Notes. Except as provided above in
this Section 15.2, no payment or other adjustment shall be made for interest
accrued on any Note converted or for dividends on any shares issued upon the
conversion of such Note as provided in this Article.
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Upon the conversion of an interest in a Note in global form, the Trustee
(or other conversion agent appointed by the Company), or the Custodian at the
direction of the Trustee (or other conversion agent appointed by the Company),
shall make a notation on such Note in global form as to the reduction in the
principal amount represented thereby. The Company shall notify the Trustee in
writing of any conversions of Notes effected through any conversion agent other
than the Trustee.
Section 15.3 Cash Payments in Lieu of Fractional Shares. No fractional
shares of Common Stock or scrip representing fractional shares shall be issued
upon conversion of Notes. If more than one Note shall be surrendered for
conversion at one time by the same holder, the number of full shares that shall
be issuable upon conversion shall be computed on the basis of the aggregate
principal amount of the Notes (or specified portions thereof to the extent
permitted thereby) so surrendered. If any fractional share of stock would be
issuable upon the conversion of any Note or Notes, the Company shall make an
adjustment and payment therefor in cash at the current market price thereof to
the holder of Notes. The current market price of a share of Common Stock shall
be the Closing Price on the last Business Day immediately preceding the day on
which the Notes (or specified portions thereof) are deemed to have been
converted.
Section 15.4 Conversion Price. The conversion price shall be as specified
in the form of Note (herein called the "Conversion Price") attached as Exhibit A
hereto, subject to adjustment as provided in this Article XV.
Section 15.5 Adjustment of Conversion Price. The Conversion Price shall be
adjusted from time to time by the Company as follows:
(a) In case the Company shall hereafter pay a dividend or make a
distribution to all holders of the outstanding Common Stock in shares of Common
Stock, the Conversion Price in effect at the opening of business on the date
following the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution shall be reduced by multiplying such
Conversion Price by a fraction the numerator of which shall be the number of
shares of the Common Stock outstanding at the close of business on the date
fixed for such determination and the denominator of which shall be the sum of
such number of shares and the total number of shares constituting such dividend
or other distribution, such reduction to become effective immediately after the
opening of business on the day following the date fixed for such determination.
The Company will not pay any dividend or make any distribution on shares of
Common Stock held in the treasury of the Company. If any dividend or
distribution of the type described in this Section 15.5(a) is declared but not
so paid or made, the Conversion Price shall again be adjusted to the Conversion
Price that would then be in effect if such dividend or distribution had not been
declared.
(b) In case the Company shall issue rights or warrants to all
holders of its outstanding shares of Common Stock entitling them (for a period
expiring within forty-five (45) days after the date fixed for determination of
stockholders entitled to receive such rights or warrants) to subscribe for or
purchase shares of Common Stock at a price per share less than the Current
Market Price (as defined below) on the date fixed for determination of
stockholders entitled to receive such rights or warrants, the Conversion Price
shall be adjusted so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the date fixed
for determination of stockholders entitled to receive such rights or warrants by
a fraction the numerator of which shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for determination of
stockholders entitled to receive such rights and warrants plus the number of
shares that the aggregate offering price of the total number of shares so
offered would purchase at such Current Market Price, and the denominator of
which shall be the number of shares of Common Stock outstanding on the date
fixed for determination of stockholders entitled to receive such rights and
warrants plus the total number of additional shares of Common Stock offered for
subscription or purchase. Such adjustment shall be successively made whenever
any such rights and warrants are issued, and shall become effective immediately
after the opening of business on the day following the date fixed for
determination of stockholders entitled to receive such rights or warrants. To
the extent that shares of Common Stock are not delivered after the expiration of
such rights or warrants, the Conversion Price shall be readjusted to the
Conversion Price that would then be in effect had the adjustments 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 Price shall again be
adjusted to
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be the Conversion Price that would then be in effect if such date fixed for the
determination of stockholders entitled to receive such rights or warrants had
not been fixed. In determining whether any rights or warrants entitle the
holders to subscribe for or purchase shares of Common Stock at less than such
Current Market Price, and in determining the aggregate offering price of such
shares of Common Stock, there shall be taken into account any consideration
received by the Company for such rights or warrants, the value of such
consideration, if other than cash, to be determined by the Board of Directors.
(c) In case outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Conversion Price in effect
at the opening of business on the day following the day upon which such
subdivision becomes effective shall be proportionately reduced, and conversely,
in case outstanding shares of Common Stock shall be combined into a smaller
number of shares of Common Stock, the Conversion Price in effect at the opening
of business on the day following the day upon which such combination becomes
effective shall be proportionately increased, such reduction or increase, as the
case may be, to become effective immediately after the opening of business on
the day following the day upon which such subdivision or combination becomes
effective.
(d) In case the Company shall, by dividend or otherwise, distribute
to all holders of its Common Stock shares of any class of capital stock of the
Company (other than any dividends or distributions to which Section 15.5(a)
applies) or evidences of its indebtedness or assets (including securities, but
excluding any rights or warrants referred to in Section 15.5(b), and excluding
any dividend or distribution (x) paid exclusively in cash or (y) referred to in
Section 15.5(a) (any of the foregoing hereinafter in this Section 15.5(d) called
the "Securities")), then, in each such case (unless the Company elects to
reserve such Securities for distribution to the Noteholders upon the conversion
of the Notes so that any such holder converting Notes will receive upon such
conversion, in addition to the shares of Common Stock to which such holder is
entitled, the amount and kind of such Securities which such holder would have
received if such holder had converted its Notes into Common Stock immediately
prior to the Record Date (as defined in Section 15.5(h) for such distribution of
the Securities)), the Conversion Price shall be reduced so that the same shall
be equal to the price determined by multiplying the Conversion Price in effect
on the Record Date with respect to such distribution by a fraction the numerator
of which shall be the Current Market Price per share of the Common Stock on such
Record Date less the fair market value (as determined by the Board of Directors,
whose determination shall be conclusive, and described in a resolution of the
Board of Directors) on the Record Date of the portion of the Securities so
distributed applicable to one share of Common Stock and the denominator of which
shall be the Current Market Price per share of the Common Stock, such reduction
to become effective immediately prior to the opening of business on the day
following such Record Date; provided, however, that in the event the then fair
market value (as so determined) of the portion of the Securities so distributed
applicable to one share of Common Stock is equal to or greater than the Current
Market Price of the Common Stock on the Record Date, in lieu of the foregoing
adjustment, adequate provision shall be made so that each Noteholder shall have
the right to receive upon conversion the amount of Securities such holder would
have received had such holder converted each Note on the Record Date. In the
event that such dividend or distribution is not so paid or made, the Conversion
Price shall again be adjusted to be the Conversion Price that would then be in
effect if such dividend or distribution had not been declared. If the Board of
Directors determines the fair market value of any distribution for purposes of
this Section 15.5(d) by reference to the actual or when issued trading market
for any securities, it must in doing so consider the prices in such market over
the same period used in computing the Current Market Price of the Common Stock.
Rights or warrants distributed by the Company to all holders of Common
Stock entitling the holders thereof to subscribe for or purchase shares of the
Company's capital stock (either initially or under certain circumstances), which
rights or warrants, until the occurrence of a specified event or events
("Trigger Event"): (i) are deemed to be transferred with such shares of Common
Stock; (ii) are not exercisable; and (iii) are also issued in respect of future
issuances of Common Stock, shall be deemed not to have been distributed for
purposes of this Section 15.5 (and no adjustment to the Conversion Price under
this Section 15.5 will be required) until the occurrence of the earliest Trigger
Event, whereupon such rights and warrants shall be deemed to have been
distributed and an appropriate adjustment (if any is required) to the Conversion
Price shall be made under this Section 15.5(d). If any such right or warrant,
including any such existing rights or warrants distributed prior to the date of
this Indenture, are subject to events, upon the occurrence of which such rights
or warrants become exercisable to purchase different securities,
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evidences of indebtedness or other assets, then the date of the occurrence of
any and each such event shall be deemed to be the date of distribution and
record date with respect to new rights or warrants with such rights (and a
termination or expiration of the existing rights or warrants without exercise by
any of the holders thereof). In addition, in the event of any distribution (or
deemed distribution) of rights or warrants, or any Trigger Event or other event
(of the type described in the preceding sentence) with respect thereto that was
counted for purposes of calculating a distribution amount for which an
adjustment to the Conversion Price under this Section 15.5 was made, (1) in the
case of any such rights or warrants that shall all have been redeemed or
repurchased without exercise by any holders thereof, the Conversion Price shall
be readjusted upon such final redemption or repurchase to give effect to such
distribution or Trigger Event, as the case may be, as though it were a cash
distribution, equal to the per share redemption or repurchase price received by
a holder or holders of Common Stock with respect to such rights or warrants
(assuming such holder had retained such rights or warrants), made to all holders
of Common Stock as of the date of such redemption or repurchase, and (2) in the
case of such rights or warrants that shall have expired or been terminated
without exercise by any holders thereof, the Conversion Price shall be
readjusted as if such rights and warrants had not been issued.
For purposes of this Section 15.5(d) and Sections 15.5(a) and (b), any
dividend or distribution to which this Section 15.5(d) is applicable that also
includes shares of Common Stock, or rights or warrants to subscribe for or
purchase shares of Common Stock (or both), shall be deemed instead to be (1) a
dividend or distribution of the evidences of indebtedness, assets or shares of
capital stock other than such shares of Common Stock or rights or warrants (and
any Conversion Price reduction required by this Section 15.5(d) with respect to
such dividend or distribution shall then be made) immediately followed by (2) a
dividend or distribution of such shares of Common Stock or such rights or
warrants (and any further Conversion Price reduction required by Sections
15.5(a) and (b) with respect to such dividend or distribution shall then be
made), except (A) the Record Date of such dividend or distribution shall be
substituted as "the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution" and "the date fixed for such
determination" within the meaning of Sections 15.5(a) and (b), and (B) any
shares of Common Stock included in such dividend or distribution shall not be
deemed "outstanding at the close of business on the date fixed for such
determination" within the meaning of Section 15.5(a).
(e) In case the Company shall, by dividend or otherwise, distribute
to all holders of its Common Stock cash (excluding (x) any quarterly cash
dividend on the Common Stock to the extent the aggregate cash dividend per share
of Common Stock in any fiscal quarter does not exceed the greater of (A) the
amount per share of Common Stock of the next preceding quarterly cash dividend
on the Common Stock to the extent that such preceding quarterly dividend did not
require any adjustment of the Conversion Price pursuant to this Section 15.5(e)
(as adjusted to reflect subdivisions, or combinations of the Common Stock), and
(B) 3.75% of the arithmetic average of the Closing Price (determined as set
forth in Section 15.5(h)) during the ten Trading Days (as defined in Section
15.5(h)) immediately prior to the date of declaration of such dividend, and (y)
any dividend or distribution in connection with the liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary), then, in such
case, the Conversion Price shall be reduced so that the same shall equal the
price determined by multiplying the Conversion Price in effect immediately prior
to the close of business on such record date by a fraction the numerator of
which shall be the Current Market Price of the Common Stock on the record date
less the amount of cash so distributed (and not excluded as provided above)
applicable to one share of Common Stock and the denominator of which shall be
such Current Market Price of the Common Stock, such reduction to be effective
immediately prior to the opening of business on the day following the record
date; provided, however, that in the event the portion of the cash so
distributed applicable to one share of Common Stock is equal to or greater than
the Current Market Price of the Common Stock on the record date, in lieu of the
foregoing adjustment, adequate provision shall be made so that each Noteholder
shall have the right to receive upon conversion the amount of cash such holder
would have received had such holder converted each Note on the record date. In
the event that such dividend or distribution is not so paid or made, the
Conversion Price shall again be adjusted to be the Conversion Price that would
then be in effect if such dividend or distribution had not been declared. If any
adjustment is required to be made as set forth in this Section 15.5(e) as a
result of a distribution that is a quarterly dividend, such adjustment shall be
based upon the amount by which such distribution exceeds the amount of the
quarterly cash dividend permitted to be excluded pursuant hereto. If an
adjustment is required to be made as set forth in this Section 15.5(e) above as
a result of a distribution that is not a quarterly dividend, such adjustment
shall be based upon the full amount of the distribution.
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(f) In case a tender or exchange offer made by the Company or any
Subsidiary for all or any portion of the Common Stock shall expire and such
tender or exchange offer (as amended upon the expiration thereof) shall require
the payment to stockholders of consideration per share of Common Stock having a
fair market value (as determined by the Board of Directors, whose determination
shall be conclusive and described in a resolution of the Board of Directors)
that as of the last time (the "Expiration Time") tenders or exchanges may be
made pursuant to such tender or exchange offer (as it may be amended) exceeds
the Current Market Price of the Common Stock on the Trading Day next succeeding
the Expiration Time, the Conversion Price shall be reduced so that the same
shall equal the price determined by multiplying the Conversion Price in effect
immediately prior to the Expiration Time by a fraction the numerator of which
shall be the number of shares of Common Stock outstanding (including any
tendered or exchanged shares) on the Expiration Time multiplied by the Current
Market Price of the Common Stock on the Trading Day next succeeding the
Expiration Time and the denominator of which shall be the sum of (x) the fair
market value (determined as aforesaid) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum specified in the terms
of the tender or exchange offer) of all shares validly tendered or exchanged and
not withdrawn as of the Expiration Time (the shares deemed so accepted, up to
any such maximum, being referred to as the "Purchased Shares") and (y) the
product of the number of shares of Common Stock outstanding (less any Purchased
Shares) on the Expiration Time and the Current Market Price of the Common Stock
on the Trading Day next succeeding the Expiration Time, such reduction to become
effective immediately prior to the opening of business on the day following the
Expiration Time. In the event that the Company is obligated to purchase shares
pursuant to any such tender or exchange offer, but the Company is permanently
prevented by applicable law from effecting any such purchases or all such
purchases are rescinded, the Conversion Price shall again be adjusted to be the
Conversion Price that would then be in effect if such tender or exchange offer
had not been made.
(g) In case of a tender or exchange offer made by a Person other
than the Company or any Subsidiary for an amount that increases the offeror's
ownership of Common Stock to more than twenty-five percent (25%) of the Common
Stock outstanding and shall involve the payment by such Person of consideration
per share of Common Stock having a fair market value (as determined by the Board
of Directors, whose determination shall be conclusive, and described in a
resolution of the Board of Directors) at the last time (the "Offer Expiration
Time") tenders or exchanges may be made pursuant to such tender or exchange
offer (as it shall have been amended) that exceeds the Current Market Price of
the Common Stock on the Trading Day next succeeding the Offer Expiration Time,
and in which, as of the Offer Expiration Time the Board of Directors is not
recommending rejection of the offer, the Conversion Price shall be reduced so
that the same shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the Offer Expiration Time by a fraction the
numerator of which shall be the number of shares of Common Stock outstanding
(including any tendered or exchanged shares) on the Offer Expiration Time
multiplied by the Current Market Price of the Common Stock on the Trading Day
next succeeding the Offer Expiration Time and the denominator of which shall be
the sum of (x) the fair market value (determined as aforesaid) of the aggregate
consideration payable to stockholders based on the acceptance (up to any maximum
specified in the terms of the tender or exchange offer) of all shares validly
tendered or exchanged and not withdrawn as of the Offer Expiration Time (the
shares deemed so accepted, up to any such maximum, being referred to as the
"Accepted Purchased Shares") and (y) the product of the number of shares of
Common Stock outstanding (less any Accepted Purchased Shares) on the Offer
Expiration Time and the Current Market Price of the Common Stock on the Trading
Day next succeeding the Offer Expiration Time, such reduction to become
effective immediately prior to the opening of business on the day following the
Offer Expiration Time. In the event that such Person is obligated to purchase
shares pursuant to any such tender or exchange offer, but such Person is
permanently prevented by applicable law from effecting any such purchases or all
such purchases are rescinded, the Conversion Price shall again be adjusted to be
the Conversion Price which would then be in effect if such tender or exchange
offer had not been made. Notwithstanding the foregoing, the adjustment described
in this Section 15.5(g) shall not be made if, as of the Offer Expiration Time,
the offering documents with respect to such offer disclose a plan or intention
to cause the Company to engage in any transaction described in Article XII.
(h) For purposes of this Section 15.5, the following terms shall
have the meaning indicated:
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(1) "Closing Price" with respect to any securities on any day
shall mean the closing sale price, regular way, on such day or, in case no such
sale takes place on such day, the average of the reported closing bid and asked
prices, regular way, in each case as quoted on the Nasdaq National Market or, if
such security is not quoted or listed or admitted to trading on such Nasdaq
National Market, on the principal national security exchange or quotation system
on which such security is quoted or listed or admitted to trading or, if not
quoted or listed or admitted to trading on any national securities exchange or
quotation system, the average of the closing bid and asked prices of such
security on the over-the-counter market on the day in question as reported by
the National Quotation Bureau Incorporated, or a similar generally accepted
reporting service, or if not so available, in such manner as furnished by any
New York Stock Exchange member firm selected from time to time by the Board of
Directors for that purpose, or a price determined in good faith by the Board of
Directors or, to the extent permitted by applicable law, a duly authorized
committee thereof, whose determination shall be conclusive.
(2) "Current Market Price" shall mean the average of the daily
Closing Prices per share of Common Stock for the ten consecutive Trading Days
immediately prior to the date in question; provided, however, that (1) if the
"ex" date (as hereinafter defined) for any event (other than the issuance or
distribution or Fundamental Change requiring such computation) that requires an
adjustment to the Conversion Price pursuant to Section 15.5(a), (b), (c), (d),
(e), (f) or (g) occurs during such ten consecutive Trading Days, the Closing
Price for each Trading Day prior to the "ex" date for such other event shall be
adjusted by multiplying such Closing Price by the same fraction by which the
Conversion Price is so required to be adjusted as a result of such other event,
(2) if the "ex" date for any event (other than the issuance, distribution or
Fundamental Change requiring such computation) that requires an adjustment to
the Conversion Price pursuant to Section 15.5(a), (b), (c), (d), (e), (f) or (g)
occurs on or after the "ex" date for the issuance or distribution requiring such
computation and prior to the day in question, the Closing Price for each Trading
Day on and after the "ex" date for such other event shall be adjusted by
multiplying such Closing Price by the reciprocal of the fraction by which the
Conversion Price is so required to be adjusted as a result of such other event,
and (3) if the "ex" date for the issuance, distribution or Fundamental Change
requiring such computation is prior to the day in question, after taking into
account any adjustment required pursuant to clause (1) or (2) of this proviso,
the Closing Price for each Trading Day on or after such "ex" date shall be
adjusted by adding thereto the amount of any cash and the fair market value (as
determined by the Board of Directors or, to the extent permitted by applicable
law, a duly authorized committee thereof in a manner consistent with any
determination of such value for purposes of Section 15.5(d), (f) or (g), whose
determination shall be conclusive and described in a resolution of the Board of
Directors or such duly authorized committee thereof, as the case may be) of the
evidences of indebtedness, shares of capital stock or assets being distributed
applicable to one share of Common Stock as of the close of business on the day
before such "ex" date. For purposes of any computation under Section 15.5(f) or
(g), the Current Market Price of the Common Stock on any date shall be deemed to
be the average of the daily Closing Prices per share of Common Stock for such
day and the next two succeeding Trading Days; provided, however, that if the
"ex" date for any event (other than the tender or exchange offer requiring such
computation) that requires an adjustment to the Conversion Price pursuant to
Section 15.5(a), (b), (c), (d), (e), (f) or (g) occurs on or after the
Expiration Time or Offer Expiration Time, as the case may be, for the tender or
exchange offer requiring such computation and prior to the day in question, the
Closing Price for each Trading Day on and after the "ex" date for such other
event shall be adjusted by multiplying such Closing Price by the reciprocal of
the fraction by which the Conversion Price is so required to be adjusted as a
result of such other event. For purpose of this paragraph, the term "ex" date,
(1) when used with respect to any issuance or distribution, means the first date
on which the Common Stock trades, regular way, on the relevant exchange or in
the relevant market from which the Closing Price was obtained without the right
to receive such issuance or distribution, (2) when used with respect to any
subdivision or combination of shares of Common Stock, means the first date on
which the Common Stock trades, regular way, on such exchange or in such market
after the time at which such subdivision or combination becomes effective, and
(3) when used with respect to any tender or exchange offer means the first date
on which the Common Stock trades, regular way, on such exchange or in such
market after the Offer Expiration Time of such offer.
(3) "fair market value" shall mean the amount which a willing
buyer would pay a willing seller in an arm's-length transaction.
(4) "Record Date" shall mean, with respect to any dividend,
distribution or other transaction or event in which the holders of Common Stock
have the right to receive any cash, securities or other
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property or in which the Common Stock (or other applicable security) is
exchanged for or converted into any combination of cash, securities or other
property, the date fixed for determination of stockholders entitled to receive
such cash, securities or other property (whether such date is fixed by the Board
of Directors or by statute, contract or otherwise).
(5) "Trading Day" shall mean (x) if the applicable security is
quoted on the Nasdaq National Market, a day on which trades may be made thereon
or (y) if the applicable security is listed or admitted for trading on the New
York Stock Exchange or another national security exchange, a day on which the
New York Stock Exchange or another national security exchange is open for
business or (z) if the applicable security is not so listed, admitted for
trading or quoted, any day other than a Saturday or Sunday or a day on which
banking institutions in the State of New York are authorized or obligated by law
or executive order to close.
(i) The Company may make such reductions in the Conversion Price, in
addition to those required by Sections 15.5(a), (b), (c), (d), (e), (f) or (g)
as the Board of Directors considers to be advisable to avoid or diminish any
income tax to holders of Common Stock or rights to purchase Common Stock
resulting from any dividend or distribution of stock (or rights to acquire
stock) or from any event treated as such for income tax purposes.
To the extent permitted by applicable law, the Company from time to time
may reduce the Conversion Price by any amount for any period of time if the
period is at least twenty (20) days, the reduction is irrevocable during the
period and the Board of Directors shall have made a determination that such
reduction would be in the best interests of the Company, which determination
shall be conclusive. Whenever the Conversion Price is reduced pursuant to the
preceding sentence, the Company shall mail to holders of record of the Notes a
notice of the reduction at least fifteen (15) days prior to the date the reduced
Conversion Price takes effect, and such notice shall state the reduced
Conversion Price and the period during which it will be in effect.
(j) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least one percent
(1%) in such price; provided, however, that any adjustments that by reason of
this Section 15.5(j) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Article XV shall be made by the Company and shall be made to the nearest cent or
to the nearest one-hundredth (1/100) of a share, as the case may be. No
adjustment need be made for rights to purchase Common Stock pursuant to a
Company plan for reinvestment of dividends or interest. To the extent the Notes
become convertible into cash, assets, property or securities (other than capital
stock of the Company), no adjustment need be made thereafter as to the cash,
assets, property or such securities. Interest will not accrue on the cash.
(k) Whenever the Conversion Price is adjusted as herein provided,
the Company shall promptly file with the Trustee and any conversion agent other
than the Trustee an Officers' Certificate setting forth the Conversion Price
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment. Unless and until a Responsible Officer of the Trustee shall
have received such Officers' Certificate, the Trustee shall not be deemed to
have knowledge of any adjustment of the Conversion Price and may assume without
inquiry that the last Conversion Price of which it has knowledge is still in
effect. Promptly after delivery of such certificate, the Company shall prepare a
notice of such adjustment of the Conversion Price setting forth the adjusted
Conversion Price and the date on which each adjustment becomes effective and
shall mail such notice of such adjustment of the Conversion Price to the holder
of each Note at his last address appearing on the Note register provided for in
Section 2.5 of this Indenture, within twenty (20) days after execution thereof.
Failure to deliver such notice shall not affect the legality or validity of any
such adjustment.
(l) In any case in which this Section 15.5 provides that an
adjustment shall become effective immediately after a record date for an event,
the Company may defer until the occurrence of such event (i) issuing to the
holder of any Note converted after such record date and before the occurrence of
such event the additional shares of Common Stock issuable upon such conversion
by reason of the adjustment required by such event over and above the Common
Stock issuable upon such conversion before giving effect to such adjustment and
(ii) paying to such holder any amount in cash in lieu of any fraction pursuant
to Section 15.3.
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(m) For purposes of this Section 15.5, the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common Stock. The Company
will not pay any dividend or make any distribution on shares of Common Stock
held in the treasury of the Company.
Section 15.6 Effect of Reclassification, Consolidation, Merger or Sale. If
any of the following events occur, namely (i) any reclassification or change of
the outstanding shares of Common Stock (other than a subdivision or combination
to which Section 15.5(c) applies), (ii) any consolidation, merger or combination
of the Company with another Person as a result of which holders of Common Stock
shall be entitled to receive stock, other securities or other property or assets
(including cash) with respect to or in exchange for such Common Stock, or (iii)
any sale or conveyance of all or substantially all of the properties and assets
of the Company to any other Person as a result of which holders of Common Stock
shall be entitled to receive stock, other securities or other property or assets
(including cash) with respect to or in exchange for such Common Stock, then the
Company or the successor or purchasing Person, as the case may be, shall execute
with the Trustee a supplemental indenture (which shall comply with the Trust
Indenture Act as in force at the date of execution of such supplemental
indenture) providing that such Note shall be convertible into the kind and
amount of shares of stock, other securities or other property or assets
(including cash) receivable upon such reclassification, change, consolidation,
merger, combination, sale or conveyance by a holder of a number of shares of
Common Stock issuable upon conversion of such Notes (assuming, for such
purposes, a sufficient number of authorized shares of Common Stock available to
convert all such Notes) immediately prior to such reclassification, change,
consolidation, merger, combination, sale or conveyance assuming such holder of
Common Stock did not exercise his rights of election, if any, as to the kind or
amount of securities, cash or other property receivable upon such
reclassification, change, consolidation, merger, combination, sale or conveyance
(provided that, if the kind or amount of stock, other securities or other
property or assets (including cash) receivable upon such reclassification,
change, consolidation, merger, combination, sale or conveyance is not the same
for each share of Common Stock in respect of which such rights of election shall
not have been exercised ("non-electing share")), then for the purposes of this
Section 15.6 the kind and amount of securities, cash or other property
receivable upon such reclassification, change, consolidation, merger,
combination, sale or conveyance for each non-electing share shall be deemed to
be the kind and amount so receivable per share by a plurality of the
non-electing shares. Such supplemental indenture shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Article.
The Company shall cause notice of the execution of such supplemental
indenture to be mailed to each holder of Notes, at its address appearing on the
Note register provided for in Section 2.5 of this Indenture, within twenty (20)
days after execution thereof. Failure to deliver such notice shall not affect
the legality or validity of such supplemental indenture.
The above provisions of this Section shall similarly apply to successive
reclassifications, changes, consolidations, mergers, combinations, sales and
conveyances.
If this Section 15.6 applies to any event or occurrence, Section 15.5
shall not apply.
Section 15.7 Taxes on Shares Issued. The issue of stock certificates on
conversions of Notes shall be made without charge to the converting Noteholder
for any tax in respect of the issue thereof. The Company shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issue and delivery of stock in any name other than that of the holder of
any Note converted, and the Company shall not be required to issue or deliver
any such stock certificate unless and until the Person or Persons requesting the
issue 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 15.8 Reservation of Shares; Shares to Be Fully Paid; Compliance
with Governmental Requirements; Listing of Common Stock. The Company shall
provide, free from preemptive rights, out of its authorized but unissued shares
or shares held in treasury, sufficient shares of Common Stock to provide for the
conversion of the Notes from time to time as such Notes are presented for
conversion.
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Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the shares of Common Stock
issuable upon conversion of the Notes, the Company will take all corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue shares of such Common Stock at such
adjusted Conversion Price.
The Company covenants that all shares of Common Stock which may be issued
upon conversion of Notes will upon issue be fully paid and non-assessable by the
Company and free from all taxes, liens and charges with respect to the issue
thereof.
The Company covenants that, if any shares of Common Stock to be provided
for the purpose of conversion of Notes hereunder require registration with or
approval of any governmental authority under any federal or state law before
such shares may be validly issued upon conversion, the Company will in good
faith and as expeditiously as possible endeavor to secure such registration or
approval, as the case may be.
The Company further covenants that, if at any time the Common Stock shall
be listed on the Nasdaq National Market or any other national securities
exchange or automated quotation system, the Company will, if permitted by the
rules of such exchange or automated quotation system, list and keep listed, so
long as the Common Stock shall be so listed on such exchange or automated
quotation system, all Common Stock issuable upon conversion of the Note;
provided, however, that, if the rules of such exchange or automated quotation
system permit the Company to defer the listing of such Common Stock until the
first conversion of the Notes into Common Stock in accordance with the
provisions of this Indenture, the Company covenants to list such Common Stock
issuable upon conversion of the Notes in accordance with the requirements of
such exchange or automated quotation system at such time.
Section 15.9 Responsibility of Trustee. The Trustee and any other
conversion agent shall not at any time be under any duty or responsibility to
any holder of Notes to determine the Conversion Price or whether any facts exist
which may require any adjustment of the Conversion Price, or with respect to the
nature or extent or calculation of any such adjustment when made, or with
respect to the method employed, or herein or in any supplemental indenture
provided to be employed, in making the same. The Trustee and any other
conversion agent shall not be accountable with respect to the validity or value
(or the kind or amount) of any shares of Common Stock, or of any securities or
property, which may at any time be issued or delivered upon the conversion of
any Note; and the Trustee and any other conversion agent make no representations
with respect thereto. Neither the Trustee nor any conversion agent shall be
responsible for any failure of the Company to issue, transfer or deliver any
shares of Common Stock or stock certificates or other securities or property or
cash upon the surrender of any Note for the purpose of conversion or to comply
with any of the duties, responsibilities or covenants of the Company contained
in this Article. Without limiting the generality of the foregoing, neither the
Trustee nor any conversion agent shall be under any responsibility to determine
the correctness of any provisions contained in any supplemental indenture
entered into pursuant to Section 15.6 relating either to the kind or amount of
shares of stock or securities or property (including cash) receivable by
Noteholders upon the conversion of their Notes after any event referred to in
such Section 15.6 or to any adjustment to be made with respect thereto, but,
subject to the provisions of Section 8.1, may accept as conclusive evidence of
the correctness of any such provisions, and shall be protected in relying upon,
the Officers' Certificate (which the Company shall be obligated to file with the
Trustee prior to the execution of any such supplemental indenture) with respect
thereto.
Section 15.10 Notice to Holders Prior to Certain Actions. In case:
(a) the Company shall declare a dividend (or any other distribution)
on its Common Stock that would require an adjustment in the Conversion Price
pursuant to Section 15.5; or
(b) the Company shall authorize the granting to the holders of all
or substantially all of its Common Stock of rights or warrants to subscribe for
or purchase any share of any class or any other rights or warrants; or
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(c) of any reclassification or reorganization of the Common Stock of
the Company (other than a subdivision or combination of its outstanding Common
Stock, or a change in par value, or from par value to no par value, or from no
par value to par value), or of any consolidation or merger to which the Company
is a party and for which approval of any stockholders of the Company is
required, or of the sale or transfer of all or substantially all of the assets
of the Company or any Significant Subsidiary; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company or any Significant Subsidiary;
the Company shall cause to be filed with the Trustee and to be mailed to each
holder of Notes at his address appearing on the Note register provided for in
Section 2.5 of this Indenture, as promptly as possible but in any event at least
ten (10) days prior to the applicable date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution or rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled
to such dividend, distribution or rights are to be determined, or (y) the date
on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up is expected to become effective or occur,
and the date as of which it is expected that holders of Common Stock of record
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up. Failure to give such notice,
or any defect therein, shall not affect the legality or validity of such
dividend, distribution, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up.
ARTICLE XVI
MISCELLANEOUS PROVISIONS
Section 16.1 Provisions Binding on Company's Successors. All the
covenants, stipulations, promises and agreements by the Company contained in
this Indenture shall bind its successors and assigns whether so expressed or
not.
Section 16.2 Official Acts by Successor Corporation. Any act or proceeding
by any provision of this Indenture authorized or required to be done or
performed by any board, committee or officer of the Company shall and may be
done and performed with like force and effect by the like board, committee or
officer of any Person that shall at the time be the lawful sole successor of the
Company.
Section 16.3 Addresses for Notices, Etc. Any notice or demand which by any
provision of this Indenture is required or permitted to be given or served by
the Trustee or by the holders of Notes on the Company shall be deemed to have
been sufficiently given or made, for all purposes, if given or served by being
deposited postage prepaid by registered or certified mail in a post office
letter box addressed (until another address is filed by the Company with the
Trustee) to ITC/\DeltaCom, Inc., 1791 O.G. Skinner Drive, West Point Georgia
31833, Attention: Chief Financial Officer. Any notice, direction, request or
demand hereunder to or upon the Trustee shall be deemed to have been
sufficiently given or made, for all purposes, if given or served by being
deposited, postage prepaid, by registered or certified mail in a post office
letter box addressed to the Corporate Trust Office, which office is, at the date
as of which this Indenture is dated, located at 114 West 47th Street, New York,
New York 10036, Attention: Corporate Trust Administration (ITC/\DeltaCom,
Inc., 4 1/2% Convertible Subordinated Notes due 2006).
The Trustee, by notice to the Company, may designate additional or
different addresses for subsequent notices or communications.
Any notice or communication mailed to a Noteholder shall be mailed to him
by first class mail, postage prepaid, at his address as it appears on the Note
register and shall be sufficiently given to him if so mailed within the time
prescribed. In respect of notices pursuant to Sections 3.1, 3.2 and 3.5, in
addition to notices sent by mail as set forth in the first sentence of this
paragraph, the Company shall publish or the Trustee shall cause to be published
such notice in New York City and in London on a Business Day in an English
language leading newspaper, customarily
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published on each Business Day in morning editions, whether or not it shall be
published in Saturday, Sunday or holiday editions, such as The Wall Street
Journal (Eastern edition) and the Financial Times.
Failure to mail a notice or communication to a Noteholder or any defect in
it shall not affect its sufficiency with respect to other Noteholders. If a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Noteholders shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
In case by reason of the suspension of regular mail service or by reason
of any other cause it shall be impracticable to give such notice by mail, then
such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
Section 16.4 Governing Law. This Indenture and each Note shall be deemed
to be a contract made under the laws of the State of New York, and for all
purposes shall be construed in accordance with the laws of the State of New
York. The Trustee, the Company and the Noteholders agree to submit to the
jurisdiction of the courts of the state of New York in any action or proceeding
arising out of or relating to this Indenture or the Notes.
Section 16.5 Evidence of Compliance with Conditions Precedent;
Certificates to Trustee. Upon any application or demand by the Company to the
Trustee to take any action under any of the provisions of this Indenture, the
Company shall furnish to the Trustee an Officers' Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, and an Opinion of Counsel stating that,
in the opinion of such counsel, all such conditions precedent have been complied
with.
Each certificate or opinion provided for in this Indenture and delivered
to the Trustee with respect to compliance with a condition or covenant provided
for in this Indenture shall include: (1) a statement that the person making such
certificate or opinion has read such covenant or condition; (2) a brief
statement as to the nature and scope of the examination or investigation upon
which the statement or opinion contained in such certificate or opinion is
based; (3) 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
informed opinion as to whether or not such covenant or condition has been
complied with; and (4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
Section 16.6 Legal Holidays. In any case in which the date of maturity of
interest on or principal of the Notes or the date fixed for redemption of any
Note will not be a Business Day, then payment of such interest on or principal
of the Notes need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made on the date of
maturity or the date fixed for redemption, and no interest shall accrue for the
period from and after such date.
Section 16.7 Trust Indenture Act. This Indenture is hereby made subject
to, and shall be governed by, the provisions of the Trust Indenture Act required
to be part of and to govern indentures qualified under the Trust Indenture Act;
provided, however, that, unless otherwise required by law, notwithstanding the
foregoing, this Indenture and the Notes issued hereunder shall not be subject to
the provisions of subsections (a)(1), (a)(2), and (a)(3) of Section 314 of the
Trust Indenture Act as now in effect or as hereafter amended or modified;
provided further that this Section 16.7 shall not require this Indenture or the
Trustee to be qualified under the Trust Indenture Act prior to the time such
qualification is in fact required under the terms of the Trust Indenture Act,
nor shall it constitute any admission or acknowledgment by any party to the
Indenture that any such qualification is required prior to the time such
qualification is in fact required under the terms of the Trust Indenture Act. If
any provision hereof limits, qualifies or conflicts with another provision
hereof which is required to be included in an indenture qualified under the
Trust Indenture Act, such required provision shall control.
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Section 16.8 No Security Interest Created. Nothing in this Indenture or in
the Notes, expressed or implied, shall be construed to constitute a security
interest under the Uniform Commercial Code or similar legislation, as now or
hereafter enacted and in effect, in any jurisdiction in which property of the
Company or its subsidiaries is located.
Section 16.9 Benefits of Indenture. Nothing in this Indenture or in the
Notes, express or implied, shall give to any Person, other than the parties
hereto, any paying agent, any authenticating agent, any Note registrar and their
successors hereunder, the holders of Notes and the holders of Senior
Indebtedness, any benefit or any legal or equitable right, remedy or claim under
this Indenture.
Section 16.10 Table of Contents, Headings, Etc. The table of contents and
the titles and headings of the articles and sections of this Indenture have been
inserted for convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.
Section 16.11 Authenticating Agent. The Trustee may appoint an
authenticating agent that shall be authorized to act on its behalf, and subject
to its direction, in the authentication and delivery of Notes in connection with
the original issuance thereof and transfers and exchanges of Notes hereunder,
including under Sections 2.4, 2.5, 2.6, 2.7, 3.3 and 3.5, as fully to all
intents and purposes as though the authenticating agent had been expressly
authorized by this Indenture and those Sections to authenticate and deliver
Notes. For all purposes of this Indenture, the authentication and delivery of
Notes by the authenticating agent shall be deemed to be authentication and
delivery of such Notes "by the Trustee" and a certificate of authentication
executed on behalf of the Trustee by an authenticating agent shall be deemed to
satisfy any requirement hereunder or in the Notes for the Trustee's certificate
of authentication. Such authenticating agent shall at all times be a Person
eligible to serve as trustee hereunder pursuant to Section 8.11.
Any corporation into which any authenticating agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any authenticating agent
shall be a party, or any corporation succeeding to the corporate trust business
of any authenticating agent, shall be the successor of the authenticating agent
hereunder, if such successor corporation is otherwise eligible under this
Section 16.11, without the execution or filing of any paper or any further act
on the part of the parties hereto or the authenticating agent or such successor
corporation.
Any authenticating agent may at any time resign by giving written notice
of resignation to the Trustee and to the Company. The Trustee may at any time
terminate the agency of any authenticating agent by giving written notice of
termination to such authenticating agent and to the Company. Upon receiving such
a notice of resignation or upon such a termination, or in case at any time any
authenticating agent shall cease to be eligible under this Section, the Trustee
shall either promptly appoint a successor authenticating agent or itself assume
the duties and obligations of the former authenticating agent under this
Indenture and, upon such appointment of a successor authenticating agent, if
made, shall give written notice of such appointment of a successor
authenticating agent to the Company and shall mail notice of such appointment of
a successor authenticating agent to all holders of Notes as the names and
addresses of such holders appear on the Note register.
The Company agrees to pay to the authenticating agent from time to time
such reasonable compensation for its services as shall be agreed upon in writing
between the Company and the authenticating agent.
The provisions of Sections 8.2, 8.3, 8.4, 9.3 and this Section 16.11 shall
be applicable to any authenticating agent.
Section 16.12 Execution in Counterparts. This Indenture may be executed in
any number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.
U.S. Trust Company of Texas, N.A. hereby accepts the trusts in this
Indenture declared and provided, upon the terms and conditions herein above set
forth.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed.
ITC DELTACOM, INC.
By: /s/ Andrew M. Walker
------------------------------------
Name: Andrew M. Walker
-------------------------------
Title: Chief Executive Officer
-------------------------------
U.S. TRUST COMPANY OF TEXAS, N.A.,
as Trustee
By: /s/ Louis P. Young
------------------------------------
Name: Louis P. Young
-------------------------------
Title: Authorized Signatory
------------------------------
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EXHIBIT A
[For Global Note only: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW
YORK)(THE "DEPOSITARY," WHICH TERM INCLUDES ANY SUCCESSOR DEPOSITARY FOR THE
CERTIFICATES) TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE
OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DEPOSITARY
AND ANY PAYMENT HEREIN IS MADE TO CEDE & CO. (OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INSOFAR AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.]
THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, 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
IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A)) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT)
("INSTITUTIONAL ACCREDITED INVESTOR"); (2) AGREES THAT IT WILL NOT, PRIOR TO
EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE NOTE EVIDENCED
HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION),
RESELL OR OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY OR THE COMMON STOCK
ISSUABLE UPON CONVERSION OF SUCH NOTE EXCEPT (A) TO ITC DELTACOM, INC. OR ANY
SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144A UNDER THE SECURITIES ACT, (C) TO AN INSTITUTIONAL ACCREDITED INVESTOR
THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO U.S. TRUST COMPANY OF TEXAS, N.A., AS
TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THE NOTE EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH
TRUSTEE OR A SUCCESSOR TRUSTEE, AS APPLICABLE), (D) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE)
OR (E) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF
SUCH TRANSFER), (3) AGREES
A-1
<PAGE>
THAT PRIOR TO SUCH TRANSFER (OTHER THAN A TRANSFER PURSUANT TO CLAUSE (2)(E)
ABOVE), IT WILL FURNISH TO U.S. TRUST COMPANY OF TEXAS, N.A., AS TRUSTEE (OR A
SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS IT 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 AND (4) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THE NOTE EVIDENCED HEREBY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THE NOTE EVIDENCED HEREBY PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD
APPLICABLE TO SALES OF THE NOTE EVIDENCED HEREBY UNDER RULE 144(k) UNDER THE
SECURITIES ACT (OR ANY SUCCESSOR PROVISION), THE HOLDER MUST CHECK THE
APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH
TRANSFER AND SUBMIT THIS CERTIFICATE TO U.S. TRUST COMPANY OF TEXAS, N.A., AS
TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE). IF THE PROPOSED TRANSFEREE IS
AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO U.S. TRUST COMPANY OF TEXAS, N.A., AS TRUSTEE (OR A SUCCESSOR
TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS IT 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. THIS LEGEND WILL BE REMOVED
UPON THE EARLIER OF THE TRANSFER OF THE NOTE EVIDENCED HEREBY PURSUANT TO CLAUSE
(2)(E) ABOVE OR UPON ANY TRANSFER OF THE NOTES EVIDENCED HEREBY UNDER RULE
144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION). AS USED HEREIN,
THE TERMS "UNITED STATES" AND "UNITED STATES PERSON" HAVE THE MEANINGS GIVEN TO
THEM BY REGULATION S UNDER THE SECURITIES ACT.
A-2
<PAGE>
ITC/\DELTACOM, INC.
4 1/2% CONVERTIBLE SUBORDINATED NOTE DUE 2006
CUSIP: 450 31T AJ3
No.: __________ $___________________
ITC/\DeltaCom, Inc., a corporation duly organized and validly existing
under the laws of the State of Delaware (herein called the "Company", which term
includes any successor corporation under the Indenture referred to on the
reverse hereof), for value received hereby promises to pay to
___________________________________________ or its registered assigns, the
principal sum of _______________________________________________________
($___________) on May 15, 2006, at the office or agency of the Company
maintained for that purpose in accordance with the terms of the Indenture, or,
at the option of the holder of this Note, at the Corporate Trust Office, in such
coin or currency of the United States of America as at the time of payment shall
be legal tender for the payment of public and private debts, and to pay
interest, semi-annually on May 15 and November 15 of each year, commencing
November 15, 1999, on said principal sum at said office or agency, in like coin
or currency, at the rate per annum of 4 1/2%, from May 15 or November 15, as the
case may be, next preceding the date of this Note to which interest has been
paid or duly provided for, unless the date hereof is a date to which interest
has been paid or duly provided for, in which case from the date of this Note, or
unless no interest has been paid or duly provided for on the Notes, in which
case from May 12, 1999, until payment of said principal sum has been made or
duly provided for. Notwithstanding the foregoing, if the date hereof is after
any May 1 or November 1, as the case may be, and before the following May 15 or
November 15, this Note shall bear interest from such May 15 or November 15;
provided, however, that if the Company shall default in the payment of interest
due on such May 15 or November 15, then this Note shall bear interest from the
next preceding May 15 or November 15, to which interest has been paid or duly
provided for or, if no interest has been paid or duly provided for on such Note,
from May 12, 1999. The interest payable on the Note pursuant to the Indenture on
any May 15 or November 15 will be paid to the Person entitled thereto as it
appears in the Note register at the close of business on the record date, which
shall be the May 1 or November 1 (whether or not a Business Day) next preceding
such May 15 or November 15, as provided in the Indenture; provided that any such
interest not punctually paid or duly provided for shall be payable as provided
in the Indenture. Interest may, at the option of the Company, be paid either (i)
by check mailed to the registered address of such Person (provided that the
holder of Notes with an aggregate principal amount in excess of $10,000,000
shall, at the written election of such holder, be paid by wire transfer of
immediately available funds) or (ii) by transfer to an account maintained by
such Person located in the United States; provided, however, that payments to
the Depositary will be made by wire transfer of immediately available funds to
the account of the Depositary or its nominee.
A-3
<PAGE>
Reference is made to the further provisions of this Note set forth on the
reverse hereof, including, without limitation, provisions subordinating the
payment of principal of and premium, if any, and interest on the Notes to the
prior payment in full of all Senior Indebtedness, as defined in the Indenture,
and provisions giving the holder of this Note the right to convert this Note
into Common Stock of the Company on the terms and subject to the limitations
referred to on the reverse hereof and as more fully specified in the Indenture.
Such further provisions shall for all purposes have the same effect as though
fully set forth at this place.
This Note shall be deemed to be a contract made under the laws of the
State of New York, and for all purposes shall be construed in accordance with
and governed by the laws of said State.
This Note shall not be valid or become obligatory for any purpose until
the certificate of authentication hereon shall have been manually signed by the
Trustee or a duly authorized authenticating agent under the Indenture.
A-4
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
and delivered.
ITC/\DELTACOM, INC.
By:_____________________________________
Name:
Title:
Attest:_________________________________
Name:___________________________________
Title:__________________________________
Dated:_____________________________
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the 4 1/2% Convertible Subordinated Notes due 2006 described in
the within-named Indenture.
U.S. TRUST COMPANY OF TEXAS, N.A., as Trustee
By:__________________________________________
Authorized Signatory
By:__________________________________________
As Authenticating Agent
(if different from Trustee)
[Reverse of Note on Next Page]
A-5
<PAGE>
[FORM OF REVERSE OF NOTE]
ITC/\DELTACOM, INC.
4 1/2% CONVERTIBLE SUBORDINATED NOTE DUE 2006
This Note is one of a duly authorized issue of Notes of the Company,
designated as its 4 1/2% Convertible Subordinated Notes due 2006 (herein called
the "Notes"), limited to the aggregate principal amount of $100,000,000, all
issued or to be issued under and pursuant to an indenture dated as of May 12,
1999 (herein called the "Indenture"), between the Company and U.S. Trust Company
of Texas, N.A., as trustee (herein called the "Trustee"), to which Indenture and
all indentures supplemental thereto reference is hereby made for a description
of the rights, limitations of rights, obligations, duties and immunities
thereunder of the Trustee, the Company and the holders of the Notes.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of, premium, if any, and accrued
interest (including Liquidated Damages Amount (as defined in the Indenture), if
any) on all Notes may be declared, and upon said declaration shall become, due
and payable, in the manner, with the effect and subject to the conditions
provided in the Indenture.
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of not less than a majority in aggregate
principal amount of the Notes at the time outstanding, evidenced as in the
Indenture provided, to execute supplemental indentures adding any provisions to
or changing in any manner or eliminating any of the provisions of the Indenture
or of any supplemental indenture or modifying in any manner the rights of the
holders of the Notes; provided, however, that no such supplemental indenture
shall (i) extend the fixed maturity of any Note, or reduce the rate or extend
the time of payment of interest thereon, or reduce the principal amount thereof
or premium, if any, thereon, or reduce any amount payable on redemption thereof,
or impair the right of any Noteholder to institute suit for the payment thereof,
or make the principal thereof or interest or premium, if any, thereon payable in
any coin or currency other than that provided in the Note, or modify the
provisions of the Indenture with respect to the subordination of the Notes in a
manner adverse to the Noteholders in any material respect, or change the
obligation of the Company to make redemption of any Note upon the happening of a
Fundamental Change (as defined in the Indenture) in a manner adverse to the
holder of the Notes, or impair the right to convert the Notes into Common Stock
subject to the terms set forth in the Indenture, including Section 15.6 thereof,
without the consent of the holder of each Note so affected or (ii) reduce the
aforesaid percentage of Notes, the holders of which are required to consent to
any such supplemental indenture, without the consent of the holders of all Notes
then outstanding. Subject to the provisions of the Indenture, the holders of a
majority in aggregate principal amount of the Notes at the time outstanding may
on behalf of the holders of all of the Notes waive any past default or Event of
Default under the Indenture and its consequences except a default in the payment
of interest (including Liquidated Damages
A-6
<PAGE>
Amount, if any) or any premium on or the principal of any of the Notes, a
default in the payment of redemption price pursuant to Article III or a failure
by the Company to convert any Notes into Common Stock of the Company or a
default in respect of a covenant or provisions hereof which under Article XI
cannot be modified without the consent of the holders of each or all Notes then
outstanding or affected thereby. Any such consent or waiver by the holder of
this Note (unless revoked as provided in the Indenture) shall be conclusive and
binding upon such holder and upon all future holders and owners of this Note and
any Notes which may be issued in exchange or substitute hereof, irrespective of
whether or not any notation thereof is made upon this Note or such other Notes.
The indebtedness evidenced by the Notes is, to the extent and in the
manner provided in the Indenture, expressly subordinate and subject in right of
payment to the prior payment in full of all Senior Indebtedness of the Company,
as defined in the Indenture, whether outstanding at the date of the Indenture or
thereafter incurred, and this Note is issued subject to the provisions of the
Indenture with respect to such subordination. Each holder of this Note, by
accepting the same, agrees to and shall be bound by such provisions and
authorizes the Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate the subordination so provided and appoints the Trustee
his attorney-in-fact for such purpose.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and interest
(including Liquidated Damages Amount, if any) on this Note at the place, at the
respective times, at the rate and in the coin or currency herein prescribed.
Interest on the Notes shall be computed on the basis of a 360-day year of
twelve 30-day months.
The Notes are issuable in fully registered form without coupons in
denominations of $1,000 and any integral multiple of $1,000. At the office or
agency of the Company referred to on the face hereof, and in the manner and
subject to the limitations provided in this Indenture, without payment of any
service charge but with payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any registration or
exchange of Notes, Notes may be exchanged for a like aggregate principal amount
of Notes of other authorized denominations.
The Company may redeem the Notes (a "Provisional Redemption"), in whole or
in part, at any time prior to May 17, 2002, upon notice as set forth in the
Indenture, at a redemption price equal to $1,000 per Note to be redeemed plus
accrued and unpaid interest, if any (including Liquidated Damages Amount, if
any), to the date of redemption (the "Provisional Redemption Date") or (2) the
Company may terminate the convertibility of the Notes (a "Nonconversion
Election") after 30 days' notice at any time prior to May 17, 2002, in either
case, if (i) the closing price of the Common Stock shall have exceeded 150% of
the Conversion Price then in effect for at least 20 Trading Days in any
consecutive 30-Trading Day period ending on the Trading Day
A-7
<PAGE>
prior to the date of mailing of the notice of redemption or Nonconversion
Election (the "Notice Date") and (ii) the shelf registration statement covering
resales of the Notes and the Common Stock issuable upon conversion of the Notes
is effective and available for use and is expected to remain effective and
available for use for the 30 days immediately following the Notice Date.
Upon any such Provisional Redemption or Nonconversion Election, the
Company shall make an additional payment in cash (the "Make-Whole Payment") with
respect to the Notes called for redemption (or all Notes, in the case of a
Nonconversion Election) to holders on the Notice Date in an amount equal to
$212.60 per $1,000 Note, less the amount of any interest actually paid on such
Note prior to the Notice Date. The Company shall make the Make-Whole Payment on
all Notes called for Provisional Redemption (or all Notes, in the case of a
Nonconversion Election), including any Notes converted into Common Stock
pursuant to the terms hereof after the Notice Date and prior to the Provisional
Redemption Date or the Nonconversion Election Date.
At any time on or after May 17, 2002, and prior to maturity, the Notes may
be redeemed at the option of the Company, in whole or in part, upon notice as
set forth in the Indenture, at the following optional redemption prices
(expressed as percentages of the principal amount), together in each case with
accrued and unpaid interest, if any (including Liquidated Damages Amount, if
any) to, but excluding, the date fixed for redemption.
If redeemed during the period beginning May 17, 2002 and ending on May 14,
2003, at a redemption price of 102.571% and if redeemed during the 12-month
period beginning May 15:
Year Redemption Price
---- ----------------
2003..................................................101.929%
2004..................................................101.286%
2005..................................................100.643%
and 100% at May 15, 2006; provided that if the date fixed for redemption is
after an interest payment record date and on or before May 15 or November 15,
then the interest payable on such date shall be paid to the holder of record on
the preceding May 1 or November 1, respectively.
The Company shall not give notice of any redemption if a default in the
payment of interest on the Notes has occurred and is continuing.
The Notes are not subject to redemption through the operation of any
sinking fund.
If a Fundamental Change occurs at any time prior to maturity of the Notes,
the Notes will be redeemable on the 30th day after notice thereof at the option
of the holder at a redemption price equal to 100% of the principal amount
thereof, together with accrued interest to (but excluding) the date of
redemption; provided that, if such Repurchase Date is May 15 or November 15, the
interest payable on such date shall be paid to the holder of record of the Notes
on the preceding May 1 or November 1, respectively. The Notes will be redeemable
in multiples
A-8
<PAGE>
of $1,000 principal amount. The Company shall mail to all holders of record of
the Notes a notice of the occurrence of a Fundamental Change and of the
redemption right arising as a result thereof on or before the 30th day after the
occurrence of such Fundamental Change. For a Note to be so repaid at the option
of the holder, the Company must receive at the office or agency of the Company
maintained for that purpose in accordance with the terms of the Indenture, such
Note with the form entitled "Option to Elect Repayment Upon a Fundamental
Change" on the reverse thereof duly completed, together with such Notes duly
endorsed for transfer, on or before the 30th day after the date of such notice
(or if such 30th day is not a Business Day, the immediately preceding Business
Day).
Subject to the provisions of the Indenture, the holder hereof has the
right, at its option, at any time after 90 days following the original issuance
of any Notes through the close of business on the final maturity date of the
Notes, or, as to all or any portion hereof called for redemption, prior to the
close of business on the Business Day immediately preceding the date fixed for
redemption (unless the Company shall default in payment due upon redemption
thereof) to convert the principal hereof or any portion of such principal which
is $1,000 or an integral multiple thereof into that number of shares of the
Company's Common Stock, as said shares shall be constituted at the date of
conversion, obtained by dividing the principal amount of this Note or portion
thereof to be converted by the Conversion Price of $26.670 or such Conversion
Price as adjusted from time to time as provided in the Indenture, upon surrender
of this Note, together with a conversion notice as provided in the Indenture, to
the Company at the office or agency of the Company maintained for that purpose
in accordance with the terms of the Indenture, or at the option of such holder,
the Corporate Trust Office, and, unless the shares issuable on conversion are to
be issued in the same name as this Note, duly endorsed by, or accompanied by
instruments of transfer in form satisfactory to the Company duly executed by,
the holder or by his duly authorized attorney. Notwithstanding the foregoing,
the holder's right to convert this Note shall terminate on the Nonconversion
Election Date (unless the Company shall default in payment of the Make Whole
Payment) if the Company makes a Nonconversion Election in accordance with the
Indenture. No adjustment in respect of interest or dividends will be made upon
any conversion; provided, however, that if this Note shall be surrendered for
conversion during the period from the close of business on any record date for
the payment of interest to the close of business on the Business Day preceding
the interest payment date, this Note (unless it or the portion being converted
shall have been called for redemption during the period from the close of
business on any record date for the payment of interest to the close of business
on the Business Day preceding the interest payment date) must be accompanied by
an amount, in same day funds or other funds acceptable to the Company, equal to
the interest payable on such interest payment date on the principal amount being
converted. No fractional shares will be issued upon any conversion, but an
adjustment in cash will be made, as provided in the Indenture, in respect of any
fraction of a share which would otherwise be issuable upon the surrender of any
Note or Notes for conversion. A Note in respect of which a holder is exercising
its right to require redemption upon a Fundamental Change may be converted only
if such holder withdraws its election to exercise such right in accordance with
the terms of the Indenture.
A-9
<PAGE>
Upon due presentment for registration of transfer of this Note at the
office or agency of the Company maintained for that purpose in accordance with
the terms of the Indenture, or at the option of the holder of this Note, at the
Corporate Trust Office, a new Note or Notes of authorized denominations for an
equal aggregate principal amount will be issued to the transferee in exchange
thereof; subject to the limitations provided in the Indenture, without charge
except for any tax or other governmental charge imposed in connection therewith.
The Company, the Trustee, any authenticating agent, any paying agent, any
conversion agent and any Note registrar may deem and treat the registered holder
hereof as the absolute owner of this Note (whether or not this note shall be
overdue and notwithstanding any notation of ownership or other writing hereon
made by anyone other than the Company or any Note registrar), for the purpose of
receiving payment hereof, or on account hereof, for the conversion hereof and
for all other purposes, and neither the Company nor the Trustee nor any other
authenticating agent nor any paying agent nor other conversion agent nor any
Note registrar shall be affected by any notice to the contrary. All payments
made to or upon the order of such registered holder shall, to the extent of the
sum or sums paid, satisfy and discharge liability for monies payable on this
Note.
No recourse for the payment of the principal of or any premium or interest
on this Note, or for any claim based hereon or otherwise in respect hereof; and
no recourse under or upon any obligation, covenant or agreement of the Company
in the Indenture or any indenture supplemental thereto or in any Note, or
because of the creation of any indebtedness represented thereby, shall be had
against any incorporator, stockholder, employee, agent, officer or director or
subsidiary, as such, past, present or future, of the Company or of any successor
Person, either directly or through the Company or any successor Person, whether
by virtue of any constitution, statute or rule of law or by the enforcement of
any assessment or penalty or otherwise, all such liability being, by acceptance
hereof and as part of the consideration for the issue hereof, expressly waived
and released.
This Note shall be deemed to be a contract made under the laws of New
York, and for all purposes shall be construed in accordance with the laws of New
York, without regard to principles of conflicts of laws.
Terms used in this Note and defined in the Indenture are used herein as
therein defined.
A-10
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription of the face of
this Note, shall be construed as though they were written out in full according
to applicable laws or regulations.
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT + ___________________ Custodian ___________________
TEN ENT - as tenant by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right under Uniform Gifts to Minors Act
of survivorship and not as tenants in common______________________________________________
(State)
</TABLE>
Additional abbreviations may also be used
though not in the above list.
A-11
<PAGE>
CONVERSION NOTICE
TO: ITC/\DELTACOM, INC.
The undersigned registered owner of this Note hereby irrevocable exercises
the option to convert this Note, or the portion thereof (which is $1,000 or an
integral multiple thereof) below designated, into shares of Common Stock of
ITC/\DeltaCom, Inc. in accordance with the terms of the Indenture referred to in
this Note, and directs that the shares issuable and deliverable upon such
conversion, together with any check in payment for fractional shares and any
Notes representing any unconverted principal amount hereof, be issued and
delivered to the registered holder hereof unless a different name has been
indicated below. If shares or any portion of this Note not converted are to be
issued in the name of a person other than the undersigned, the undersigned will
provide the appropriate information below and pay all transfer taxes payable
with respect thereto. Any amount required to be paid to the undersigned on
account of interest accompanies this Note.
Dated:_____________________________
____________________________________________
____________________________________________
Signature(s)
Signature(s) must be guaranteed by an
"eligible guarantor institution" meeting the
requirements of the Note registrar, which
requirements include membership or
participation in the Security Transfer Agent
Medallion Program ("STAMP") or such other
"signature guarantee program" as may be
determined by the Note registrar in addition
to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act
of 1934, as amended.
____________________________________________
Signature Guarantee
A-12
<PAGE>
Fill in the registration of shares of Common Stock if to be issued, and Notes if
to be delivered, other than to and in the name of the registered holder:
___________________________________
(Name)
___________________________________
(Street Address)
___________________________________
(City, State and Zip Code)
Please print name and address
Principal amount to be converted
(if less than all): $________________________
Social Security or Other Taxpayer
Identification Number:________________________
A-13
<PAGE>
OPTION TO ELECT REPAYMENT
UPON A FUNDAMENTAL CHANGE
TO: ITC/\DELTACOM, INC.
The undersigned registered owner of this Note hereby irrevocably
acknowledges receipt of a notice from ITC/\DeltaCom, Inc. (the "Company") as to
the occurrence of a Fundamental Change with respect to the Company and requests
and instructs the Company to repay the entire principal amount of this Note, or
the portion thereof (which is $1,000 or an integral multiple thereof) below
designated, in accordance with the terms of the Indenture referred to in this
Note at the redemption price, together with accrued interest to, but excluding,
such date, to the registered holder hereof.
Date:______________________________ _______________________________________
____________________________________________
Signature(s)
NOTICE: The above signatures of the
holder(s) hereof must correspond with the
name as written upon the face of the Note in
every particular without alteration or
enlargement or any change whatever.
Principal amount to be repaid (if less than
all):
$__________________
____________________________________________
Social Security or Other
Taxpayer Identification Number
A-14
<PAGE>
ASSIGNMENT
For value received _________________________ hereby sell(s), assign(s) and
transfer(s) unto _________________________ (Please insert social security or
other Taxpayer Identification Number of assignee) the within Note, and hereby
irrevocably constitutes and appoints _________________________ attorney to
transfer the said Note on the books of the Company, with full power of
substitution in the premises.
In connection with any transfer of the Note within the United States or
to, or for the account of, U.S. persons (in each case as defined in Regulation S
under the Securities Act) and within the period prior to the expiration of the
holding period applicable to sales thereof under Rule 144(k) under the
Securities Act (or any successor provision) (other than any transfer pursuant to
a registration statement that has been declared effective under the Securities
Act), the undersigned confirms that such Note is being transferred:
|_| To ITC/\DeltaCom, Inc. or a subsidiary thereof; or
|_| Pursuant to and in compliance with Rule 144A under the Securities
Act of 1933, as amended; or
|_| To an Institutional Accredited Investor pursuant to and in
compliance with the Securities Act of 1933, as amended, in a minimum
denomination of $100,000; or
|_| Pursuant to and in compliance with Rule 144 under the Securities Act
of 1933, as amended;
and unless the box below is checked, the undersigned confirms that such Note 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.
Dated:
Signature(s)
Signature(s) must be guaranteed by an
"eligible guarantor institution" meeting the
requirements of the Note registrar, which
requirements include membership or
participation in the Security
A-15
<PAGE>
Transfer Agent Medallion Program ("STAMP")
or such other "signature guarantee program"
as may be determined by the Note registrar
in addition to, or in substitution for,
STAMP, all in accordance with the
Securities Exchange Act of 1934, as
amended.
____________________________________________
Signature Guarantee
NOTICE: The signature of the conversion notice, the option to elect repayment
upon a Fundamental Change or the assignment must correspond with the name as
written upon the face of the Note in every particular without alteration or
enlargement or any change whatever.
A-16
<PAGE>
EXHIBIT B
ITC/\DeltaCom, Inc.
1791 O.G. Skinner Drive
West Point, GA 31833
U.S. Trust Company of New York, N.A.
114 W. 47th Street
New York, New York 10036
Ladies and Gentlemen:
In connection with our proposed purchase of 4 1/2% Convertible
Subordinated Notes due 2006 (the "Notes"), of ITC/\DeltaCom, Inc., a Delaware
corporation (the "Company"), we confirm that:
1. We understand that any subsequent transfer of Notes or the Common
Stock of the Company issuable upon conversion of the Notes (the
"Common Stock", and together with the Notes, the "Securities") is
subject to certain restrictions and conditions set forth in the
Indenture relating to the Notes (the "Indenture ") and the
undersigned agrees to be bound by, and not to resell, pledge or
otherwise transfer the Securities except in compliance with the
Securities Act of 1933, as amended (the "Securities Act "), and all
applicable state securities laws.
2. We understand that the offer and sale of the Securities have not
been registered under the Securities Act or pursuant to any state
securities laws, and that the Securities may therefore not be
offered or sold within the United States or to, for the account or
benefit of, U.S. persons 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, we will do so only (i) to the Company or any
subsidiary thereof, (ii) inside the United States in accordance with
Rule 144A promulgated under the Securities Act to a "qualified
institutional buyer" (as defined therein), (iii) to an
"institutional accredited investor" (as defined below), that, prior
to such transfer, furnishes (or has furnished on its behalf by a
United States broker-dealer) to the Trustee (as defined in the
Indenture) a signed letter containing certain representations and
agreements relating to the restrictions on transfer of the
Securities (the form of which letter can be obtained from the
Trustee), (iv) pursuant to the exemption from registration provided
by Rule 144 promulgated under the Securities Act (if applicable), or
(v) pursuant to an effective registration statement under the
B-1
<PAGE>
Securities Act, and we further agree to provide to any person
purchasing any of the Securities from us a notice advising such
purchaser that any resale of the Securities are restricted as stated
herein.
3. We understand that, on any proposed resale of any Securities, we
will be required to furnish to the Trustee and the Company such
certification, written legal opinions and other information as the
Trustee and the Company may reasonably require to confirm that the
proposed sale complies with the foregoing restrictions. We further
understand that the Notes purchased by us will bear a legend to the
foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D promulgated 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 Notes, and we and any accounts for
which we are acting are each able to bear the economic risk of our
or their investment, as the case may be.
5. We are acquiring the Notes purchased by us for our 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.
The Company and the Trustee and their respective counsel 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 proceeding 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.
(Name of Purchaser)
By:_________________________________________
Name:_______________________________________
Title:______________________________________
Address:____________________________________
____________________________________________
____________________________________________
B-2
<PAGE>
EXHIBIT 10.77.6
THIRD AMENDMENT
TO
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
-------------------------------------------
THIS THIRD AMENDMENT TO THE FIRST AMENDED AND RESTATED CREDIT AGREEMENT
(this "Amendment") is dated as of the 6th day of May, 1999, and entered into
among Interstate FiberNet, Inc., a Delaware corporation (herein, together with
its successors and assigns, called the "Borrower"), the Lenders (as defined in
the Credit Agreement as defined below), and NATIONSBANK, N.A., successor by
merger to NationsBank of Texas, N.A., a national banking association, as
Administrative Lender for itself and the Lenders (the "Administrative Lender").
WITNESSETH:
----------
WHEREAS, the Borrower, the Lenders and the Administrative Lender entered
into a First Amended and Restated Credit Agreement, dated as of February 24,
1998, as amended by that certain First Amendment to the First Amended and
Restated Credit Agreement, dated as of November 2, 1998, and as further amended
by that certain Second Amendment to Credit Agreement, dated as of February 8,
1999 (as amended, and as further amended, restated or otherwise modified from
time to time, the "Credit Agreement");
WHEREAS, the Borrower has notified the Administrative Lender and the
Lenders that it intends to consummate an acquisition in excess of $10,000,000
(the "Proposed Acquisition") and thus requires the consent of Majority Lenders
in accordance with the terms of Section 8.05(b) of the Credit Agreement, as
described in the letter from Ms. Sara L. Plunkett, to Mr. Derrick Bell, dated as
of April 29, 1999 attached hereto as Exhibit A;
---------
WHEREAS, the Parent has notified the Administrative Lender of its proposal
to make certain securities offerings and Parent and Borrower propose to amend
the Credit Agreement in connection with such offerings as hereinafter described;
WHEREAS, the Lenders, the Administrative Lender and the Borrower have
agreed to amend the Credit Agreement upon the terms and conditions set forth
below;
NOW, THEREFORE, for valuable consideration hereby acknowledged, the
Borrower, the Lenders and the Administrative Lender agree as follows:
SECTION 1.
(a) Definitions, in general. Unless specifically defined or redefined
-----------------------
below, capitalized terms used herein shall have the meanings ascribed thereto in
the Credit Agreement.
<PAGE>
(b) Definition of 1999 Convertible Subordinated Notes. A new definition of
-------------------------------------------------
"1999 Convertible Subordinated Notes" on page 15 of the Credit Agreement is
added in alphabetical order as follows:
"1999 Convertible Subordinated Notes" means those certain
$100,000,000 principal amount of 4.5% convertible subordinated notes
due May 15, 2006 evidencing unsecured indebtedness issued by the
Parent in May of 1999, in accordance with the terms of Section
8.02(c) hereof.
(c) Definition of Optional Redemption Rights. The definition of "Optional
----------------------------------------
Redemption Rights" on page 16 of the Credit Agreement is restated in its
entirety as follows:
"Optional Redemption Rights" means the option of the Parent to
redeem (and, in the case of the 1999 Convertible Subordinated Notes,
render such notes non-convertible) not more than (i) 35% of the
outstanding 1997 Senior Notes for an amount not to exceed 111% of
the principal amount being redeemed, (ii) 35% of the outstanding
1998 Senior Notes for an amount not to exceed 108.875% of the
principal amount being redeemed, (iii) 35% of the outstanding 1998 9
3/4% Senior Notes for an amount not to exceed 109.750% of the
principal amount being redeemed, and (iv) 100% of the outstanding
1999 Convertible Subordinated Notes not to exceed $121,260,000, in
each case of (i) through (iv) above, only as permitted in accordance
with the terms of Section 8.07(h) hereof.
(d) Definition of Repayment Event. A new definition of "Repayment Event"
-----------------------------
on page 18 of the Credit Agreement is added in alphabetical order as follows:
"Repayment Event" means any event or circumstance which meets
any of the following criteria: (i) causes or requires any mandatory
redemption (other than a mandatory redemption of the 1999
Convertible Subordinated Notes as a result of a noteholder's failure
to exercise such noteholder's conversion option in an amount not to
exceed $121,260,000), prepayment or other repayment in full
(excluding any scheduled repayments) of any Debt for Borrowed Money
in an aggregate amount of $1,000,000 or more, (ii) permits the
holders of any Debt for Borrowed Money in an aggregate amount of
$1,000,000 or more to redeem such Debt for Borrowed Money, to demand
the prepayment of such Debt for Borrowed Money or to demand the
repayment in full of such Debt for Borrowed Money (other than on the
scheduled maturity thereof), or (iii) causes, requires or permits
the holders of such Debt for Borrowed Money to require any
defeasance of such Debt for Borrowed Money.
(e) Definition of Senior Debt. The definition of "Senior Debt" on page 19
-------------------------
of the Credit Agreement is restated in its entirety as follows:
-2-
<PAGE>
"Senior Debt" means, on any date of determination, Total Debt
on such date minus the sum of (a) the aggregate outstanding
principal amount of the 1997 Senior Notes, 1998 Senior Notes, the
1998 9 3/4% Senior Notes and the 1999 Convertible Subordinated
Notes, plus (b) to the extent included in Total Debt, accrued and
unpaid interest on the 1997 Senior Notes, 1998 Senior Notes, the
1998 9 3/4% Senior Notes and the 1999 Convertible Subordinated
Notes, plus (c) all Permitted Subordinated Debt.
SECTION 2. Amendment to Section 2.05(b). Section 2.05(b) on page 24 of the
----------------------------
Credit Agreement is hereby amended and restated in its entirety to read as
follows:
(b) Public or Private Issuance of Equity. To the extent that
the Parent, the Borrower or any of its Subsidiaries consummates any
public or private issuance of equity (this provision in and of
itself not constituting permission to do so), then the Parent, the
Borrower and its Subsidiaries shall, to the extent that the total
number of shares so issued after May 1, 1999 exceeds 14,433,531
shares of Parent's Capital Stock (composed of 9,150,000 shares to be
issued under the Parent's existing shelf offering, plus up to
3,749,531shares of Parent's Capital Stock that could be issued upon
the conversion of the 1999 Convertible Subordinated Notes, plus up
to 1,544,000 shares of the Parent's Capital Stock to be issued in
connection with the acquisition of AvData Systems, Inc.),
immediately use 50% of the net proceeds of such shares in excess of
14,443,531 shares to repay the Obligations under the Revolving Loan.
SECTION 3. Section 2.05(c). Section 2.05(c) on page 25 of the Credit
---------------
Agreement is hereby amended and restated in its entirety to read as follows:
(c) Public or Private Issuance of Debt. To the extent that the
Parent, the Borrower or any of its Subsidiaries consummates any
public or private issuance of Debt (this provision in and of itself
not constituting permission to do so), then the Parent, the Borrower
and its Subsidiaries shall immediately use 50% of the net proceeds
of any such transaction in excess of $100,000,000 (excluding the
1997 Senior Notes, the 1998 Senior Notes and the 1998 9 3/4% Senior
Notes but including the 1999 Convertible Subordinated Notes) to
repay the Obligations under the Revolving Loan.
SECTION 4. Section 6.14. Section 6.14 on page 53 of the Credit Agreement
------------
is hereby amended and restated in its entirety to read as follows:
6.14. Subsidiary Creation or Acquisition. Subject to Section
8.05, if and for so long as any of the 1997 Senior Notes, 1998
Senior Notes, the 1998 9 3/4% Senior Notes or the 1999
-3-
<PAGE>
Convertible Subordinated Notes are outstanding, none of the Parent,
the Borrower or any Subsidiary may create or acquire any Subsidiary
without the prior written consent of the Administrative Lender.
SECTION 5. Section 8.02. Section 8.02 on page 59 of the Credit Agreement
------------
is hereby amended and restated in its entirety to read as follows:
8.02. Debt for Borrowed Money. The Borrower shall not, and
shall not permit the Parent or any Subsidiary of the Borrower to,
create, assume, incur or otherwise become or remain obligated in
respect of, or permit to be outstanding, or suffer to exist any Debt
for Borrowed Money, except:
(a) with respect to the Parent, the Borrower and its
Subsidiaries, Debt for Borrowed Money under the Loan Papers;
(b) with respect to the Parent, the Borrower and its
Subsidiaries, Debt for Borrowed Money in existence on the Closing
Date described on Schedule 8.02 hereto and not otherwise permitted
-------------
pursuant to this Section 8.02 in the principal amounts and as such
Debt for Borrowed Money exists as of the Closing Date;
(c) with respect to the Parent (i) up to $100,000,000 in
1999 Convertible Subordinated Notes, on terms and conditions
acceptable to Administrative Lender, (ii) the 1998 9 3/4% Senior
Notes; (iii) the 1998 Senior Notes, and (iv) the 1997 Senior Notes;
(d) provided that no Default or Event of Default exists
or would result from the incurrence thereof, with respect to the
Borrower and the wholly owned Subsidiaries of the Borrower, Debt
owed to each other; and
(e) provided that no Default or Event of Default exists
or would result from the incurrence thereof, Debt constituting
Capital Leases or purchase money Debt in an aggregate amount over
the term of this Agreement not to exceed $5,000,000, incurred by the
Borrower or any Subsidiary in connection with any acquisition
permitted to be made in accordance with the terms of Section 8.05(b)
hereof.
SECTION 6. Section 8.05(b). Section 8.05(b) on page 61 of the Credit
---------------
Agreement is hereby amended and restated in its entirety to read as follows:
(b) acquire any assets, Property or business of any other
Person, or participate in any joint venture, except (i) the Borrower
and the
-4-
<PAGE>
Subsidiaries of the Borrower may acquire assets and Property
acquired in the ordinary course of business, (ii) provided that no
Default or Event of Default exists both before and after giving
effect to such acquisition, and Borrower complies fully with
Sections 6.12, 8.04(e) and 8.05(d) hereof, Permitted Acquisitions
may be consummated if either (I) (A) the total purchase price (which
may be paid in cash or Capital Stock of the Parent) for any one such
acquisition is less than $10,000,000, and (B) the aggregate purchase
price (which may be paid in cash or Capital Stock of the Parent) for
all such Permitted Acquisitions over the term of the Agreement is
less than $25,000,000, or (II) the Majority Lenders give their prior
written approval to such acquisition, and (iii) after delivery of
prior written notice to the Administrative Lender, the Borrower or
any wholly owned direct or indirect Subsidiary of the Borrower that
has executed an Unlimited Guaranty of the Obligations hereunder may
acquire assets, Property or business from any other wholly owned
direct or indirect Subsidiary of the Borrower that has executed an
Unlimited Guaranty of the Obligations hereunder;
SECTION 7. Sections 8.07(b) and (c). Sections 8.07(b) and (c) on pages 62
------------------------
and 63 of the Credit Agreement are hereby amended and restated in their entirety
to read as follows:
(b) so long as
(i) there exists no Default or Event of Default
both before and after giving effect to any such
Restricted Payment (except an Event of Default under
Section 9.01(b) hereof), and
(ii) with respect to any such distribution
relating to the 1997 Senior Notes, the date any such
Distribution is made is the later of (A) June 30, 2000
and (B) such time as the balance of the Interest Reserve
Escrow Account is zero,
then the Borrower may declare, make and pay Restricted Payments
constituting Dividends to the Parent in an amount not to exceed the
scheduled cash interest due and payable on the outstanding 1997
Senior Notes, the 1998 Senior Notes, the 1998 9 3/4% Senior Notes,
and the 1999 Convertible Subordinated Notes, and
(c) So long as each of the following is true: (i) the
Borrower has been unable to make a Restricted Payment
constituting a dividend to the Parent pursuant to Section
8.07(b)(i) above for more than 180 consecutive days, and (ii)
there exists at such time no Default or Event of Default under
any of Section 9.01(a), Section 9.01(f) with respect to the
Parent, the Borrower or
-5-
<PAGE>
any Significant Subsidiary, or Section 9.01(u) hereof, and
(iii) the Lenders or the Administrative Lender have not
exercised their rights under Section 9.02(a) hereof, and (iv)
the date of such Restricted Payment is prior to the Maturity
Date,
then the Borrower may declare, make and pay Restricted Payments
constituting Dividends to the Parent in an amount not to exceed the
scheduled cash interest due and payable on the outstanding1998
Senior Notes, the 1998 9 3/4% Senior Notes, and the 1999 Convertible
Subordinated Notes, and
SECTION 8. Section 8.07(f). Section 8.07(f) on page 63 of the Credit
---------------
Agreement is hereby amended and restated in its entirety to read as follows:
(f) The Parent may make payments of scheduled cash interest on
(i) the outstanding 1997 Senior Notes (A) to the extent such
payments are made from funds in the Interest Reserve Escrow Account,
(B) to the extent the Parent receives permitted Distributions from
the Borrower for such purpose in accordance with the terms of
Sections 8.07(b), (c) and (d) hereof, or (C) to the extent it
receives funds from sources other than the Borrower and its
Subsidiaries, (ii) the outstanding 1998 Senior Notes to the extent
the Parent (A) receives permitted Distributions from the Borrower
for such purpose in accordance with the terms of Sections 8.07(b)
and (c) hereof, and (B) receives funds from sources other than the
Borrower and its Subsidiaries, (iii) the outstanding 1998 9 3/4%
Senior Notes to the extent the Parent (A) receives permitted
Distributions from the Borrower for such purpose in accordance with
the terms of Sections 8.07(b) and (c) hereof, and (B) receives funds
from sources other than the Borrower and its Subsidiaries, and (iv)
the outstanding 1999 Convertible Subordinated Notes to the extent
the Parent (A) receives permitted Distributions from the Borrower
for such purpose in accordance with the terms of Sections 8.07(b)
and (c) hereof, or (B) receives funds from sources other than the
Borrower and its Subsidiaries, and
SECTION 9. Section 8.07(h). Section 8.07(h) on page 64 of the Credit
---------------
Agreement is hereby amended and restated in its entirety to read as follows:
(h) So long as there exists no Default or Event of Default
both before and after giving effect to any such Restricted Payment,
Borrower may make Restricted Payments in the form of Dividends to
Parent such that the Parent may exercise its Optional Redemption
Rights for a
-6-
<PAGE>
redemption price (including charges, accrued interest, expenses and
penalties) in the aggregate not in excess of $316,413,437, and
SECTION 10. Section 8.13. Section 8.13 on page 65 of the Credit Agreement
------------
is hereby amended and restated in its entirety to read as follows:
8.13. Limitation on Restrictive Agreements. Except those
written agreements entered into in connection with the 1997 Senior
Notes, the 1998 Senior Notes, the 1998 9 3/4% Senior Notes and the
1999 Convertible Subordinated Notes and in effect on May 15, 1999,
the Borrower shall not, and shall not permit the Parent or any
Subsidiary of the Borrower to, enter into any indenture, agreement,
instrument, financing document or other arrangement which, directly
or indirectly, prohibits or restrains, or has the effect of
prohibiting or restraining, or imposes materially adverse conditions
upon: (a) the incurrence of indebtedness, (b) the granting of Liens,
(c) the making or granting of Guarantees, (d) the payment of
dividends or Distributions, (e) the purchase, redemption or
retirement of any Capital Stock, (f) the making of loans or
advances, (g) transfers or sales of property or assets (including
Capital Stock) by the Parent, the Borrower or any of its
Subsidiaries, (h) the making of Investments, or (i) any change of
control or management.
SECTION 11. Amendment of Section 8.10 of the Credit Agreement. Section
-------------------------------------------------
8.10 of the Credit Agreement shall be deleted in its entirety and the following
Section 8.10 shall be substituted in its stead:
8.10. Capital Stock. The Borrower shall not, and shall not permit
the Parent or any Subsidiary of the Borrower to (a) make or permit any
transfer, assignment, distribution, mortgage, pledge or gift of any shares
of Pledged Stock, except to the Borrower or another wholly owned direct or
indirect Subsidiary of the Borrower that has executed an Unlimited
Guaranty of the Obligations and (b) issue any Capital Stock other than (i)
the common stock of the Parent issued prior to May 1, 1999, (ii)
14,443,531shares of Parent's Capital Stock (composed of 9,150,000 shares
to be issued under the Parent's existing shelf offering, plus up to
3,749,531shares of Parent's Capital Stock that could be issued upon the
conversion of the 1999 Convertible Subordinated Notes, plus up to
1,544,000 shares of the Parent's Capital Stock to be issued in connection
with the acquisition of AvData Systems, Inc.) to be issued after May 1,
1999, (iii) stock options and common stock (issued pursuant to the
exercise of any such stock options) pursuant to the 1997 Directors Stock
Option Plan and the 1997 Stock Option Plan of the Parent, (iv) common
stock of the Parent upon the exercise of outstanding options issued by ITC
Holding, (v) preferred stock of the Parent (and the common stock into
which such preferred stock will be convertible pursuant to the terms
thereof) to SCANA Communications, Inc. pursuant to an earn-out agreement
described in the Offering Memorandum of the Parent dated May 29, 1997, and
-7-
<PAGE>
(vi) Capital Stock of the Parent issued in connection with acquisitions
permitted under Section 8.05(b)(ii)(I).
SECTION 12. Amendment of Section 8.14 of the Credit Agreement. Section
-------------------------------------------------
8.14 on page 65 of the Credit Agreement shall be deleted in its entirety and the
following Section 8.14 shall be substituted in its stead:
8.14. Amendment of 1997 Senior Notes, 1998 Senior Notes, 1998 9 3/4%
Senior Notes and 1999 Convertible Subordinated Notes. The Borrower shall
not, and shall not permit the Parent or any Subsidiary of the Borrower to,
amend, waive or consent to any deviation from any term or provision of any
documentation or agreements relating to the 1997 Senior Notes, the 1998
Senior Notes, the 1998 9 3/4% Senior Notes or the 1999 Convertible
Subordinated Notes.
SECTION 13. Section 9.01(g). Section 9.01(g) on page 67 of the Credit
---------------
Agreement is hereby amended and restated in its entirety to read as follows:
(g) Any of the following shall occur: (i) The Borrower or any other
Obligor shall fail to pay any Debt (other than Debt under the Loan Papers)
in an aggregate amount of $1,000,000 or more when due (whether by
scheduled maturity, required prepayment, acceleration, demand, or
otherwise), and such failure shall continue after the applicable grace
period, if any, specified in the agreement or instrument relating to such
Debt; or (ii) the Borrower or any other Obligor shall fail to perform or
observe any term or covenant contained in any agreement or instrument
relating to any such Debt, when required to be performed or observed, and
such failure shall continue after the applicable grace period, if any,
specified in such agreement or instrument, and can result in acceleration
of the maturity of such Debt or any Repayment Event; or (iii) any such
Debt shall be declared to be due and payable, or required to be prepaid,
mandatorily redeemed or repurchased (other than by a regularly scheduled
required prepayment), prior to the stated maturity thereof or any
Repayment Event shall have occurred; or (iv) there shall exist a breach by
any Obligor under one or more material contracts the effect of which could
reasonably be expected to cause a Material Adverse Change;
SECTION 14. Consent to Proposed Acquisition. Subject to the terms and
-------------------------------
conditions set forth below in this Section 14, Administrative Lender and
Majority Lenders hereby consent to the acquisition described in Exhibit A
---------
hereto, so long as:
(a) There exists no Default or Event of Default at the time of execution
of this Third Amendment and after giving effect to the Proposed
Acquisition;
-8-
<PAGE>
(b) The Borrower complies with the requirements of Sections 6.12,
8.04(e), 8.05(b) and 8.05(d) of the Credit Agreement and all other
terms and conditions of the Loan Papers; and
(c) The Proposed Acquisition is consummated during the period of May 1,
1999 through December 31, 1999.
SECTION 15. Conditions Precedent. This Third Amendment shall not be
--------------------
effective until the Administrative Lender shall have received:
(a) executed signature pages from the Borrower, the Administrative
Lender and Majority Lenders;
(b) copies of resolutions authorizing the execution, delivery and
performance of this Third Amendment by the Borrower; and
(c) such other documents, instruments, and certificates, in form and
substance satisfactory to the Administrative Lender and Majority
Lenders, as the Administrative Lender and the Majority Lenders shall
deem necessary or appropriate in connection with this Third
Amendment and the transactions contemplated hereby.
SECTION 16. Representations and Warranties. The Borrower represents and
------------------------------
warrants to the Lenders and the Administrative Lender that (a) this Third
Amendment is a Loan Paper under the Credit Agreement and constitutes its legal,
valid, and binding obligation, enforceable in accordance with the terms hereof
(subject as to enforcement of remedies to any applicable bankruptcy,
reorganization, moratorium, or other laws or principles of equity affecting the
enforcement of creditors' rights generally), (b) there exists no Default or
Event of Default under the Credit Agreement, (c) its representations and
warranties set forth in the Credit Agreement and other Loan Papers are true and
correct on the date hereof, (d) it has complied with all agreements and
conditions to be complied with by it under the Credit Agreement and the other
Loan Papers by the date hereof, and (e) the Credit Agreement, as amended hereby,
and the other Loan Papers remain in full force and effect.
SECTION 17. Entire Agreement; Ratification. THE CREDIT AGREEMENT AS
------------------------------
AMENDED HEREBY AND THE OTHER LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENT OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN THE PARTIES. EXCEPT AS MODIFIED OR SUPPLEMENTED HEREBY, THE CREDIT
AGREEMENT, THE OTHER LOAN PAPERS AND ALL OTHER DOCUMENTS AND AGREEMENTS EXECUTED
IN CONNECTION THEREWITH SHALL CONTINUE IN FULL FORCE AND EFFECT.
-9-
<PAGE>
SECTION 18. Counterparts. This Third Amendment may be executed in any
------------
number of counterparts, all of which taken together shall constitute one and the
same instrument. In making proof hereof, it shall not be necessary to produce or
account for any counterpart other than one signed by the party against which
enforcement is sought.
SECTION 19. GOVERNING LAW. THIS THIRD AMENDMENT AND ALL OTHER LOAN PAPERS
-------------
SHALL BE DEEMED TO BE CONTRACTS MADE IN DALLAS, TEXAS, AND SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS (WITHOUT GIVING
EFFECT TO CONFLICTS OF LAWS) AND THE UNITED STATES OF AMERICA. WITHOUT EXCLUDING
ANY OTHER JURISDICTION, THE BORROWER AGREES THAT THE FEDERAL COURTS OF TEXAS
LOCATED IN DALLAS, TEXAS, WILL HAVE JURISDICTION OVER PROCEEDINGS IN CONNECTION
HEREWITH. TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE BORROWER HEREBY WAIVES ANY
RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE (WHETHER A CLAIM IN
TORT, CONTRACT, EQUITY, OR OTHERWISE) ARISING UNDER OR RELATING TO THIS THIRD
AMENDMENT, THE OTHER LOAN PAPERS, OR ANY RELATED MATTERS, AND AGREES THAT ANY
SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
===============================================================================
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.
===============================================================================
-10-
<PAGE>
IN WITNESS WHEREOF, this Third Amendment to the Credit Agreement is
executed as of the date first set forth above.
THE BORROWER:
INTERSTATE FIBERNET, INC.
/s/ Sara L. Plunkett
-----------------------------------
By: Sara L. Plunkett
Its: Vice President -- Finance
ADMINISTRATIVE LENDER:
NATIONSBANK, N.A., as
Administrative Lender
/s/ Derrick C. Bell
-----------------------------------
By: Derrick C. Bell
Its: Vice President
LENDERS:
NATIONSBANK, N.A., individually as
a Lender
/s/ Derrick C. Bell
-----------------------------------
By: Derrick C. Bell
Its: Vice President
-11-
<PAGE>
AMSOUTH BANK
-----------------------------------
By:
------------------------------
Its:
------------------------------
BANK AUSTRIA CREDITANSTALT
CORPORATE FINANCE, INC.
/s/ Robert M. Biringer
-----------------------------------
By: Robert M. Biringer
------------------------------
Its: Executive Vice President
------------------------------
/s/ Carl G. Drake
-----------------------------------
By: Carl G. Drake
------------------------------
Its: Vice President
------------------------------
MEESPIERSON CAPITAL CORP.
-----------------------------------
By:
------------------------------
Its:
------------------------------
-----------------------------------
By:
------------------------------
Its:
------------------------------
-12-
<PAGE>
STATE STREET BANK AND TRUST
COMPANY
/s/ Hamilton H. Wood, Jr.
-----------------------------------
By: Hamilton H. Wood, Jr.
Its: Vice President
FIRST UNION NATIONAL BANK, formerly
known as Corestates Bank, N.A.
/s/ C. Mark Hedrick
-----------------------------------
By: C. Mark Hedrick
------------------------------
Its: Vice President
------------------------------
REGIONS BANK
/s/ Edwin P. Wilson
-----------------------------------
By: Edwin P. Wilson
------------------------------
Its: Senior Vice President
------------------------------
-13-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This financial data schedule contains summary financial information extracted
from the unaudited, consolidated balance sheets of ITC/\DeltaCom, Inc. as March
31, 1999 and the related unaudited consolidated statements of operations for the
three months ended March 31, 1999. This information is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 151,294
<SECURITIES> 0
<RECEIVABLES> 40,730
<ALLOWANCES> 1,455
<INVENTORY> 1,987
<CURRENT-ASSETS> 212,136
<PP&E> 348,848
<DEPRECIATION> 64,318
<TOTAL-ASSETS> 579,123
<CURRENT-LIABILITIES> 56,095
<BONDS> 416,692
0
15
<COMMON> 516
<OTHER-SE> 105,387
<TOTAL-LIABILITY-AND-EQUITY> 579,123
<SALES> 53,034
<TOTAL-REVENUES> 53,034
<CGS> 26,761
<TOTAL-COSTS> 58,197
<OTHER-EXPENSES> 225
<LOSS-PROVISION> 286
<INTEREST-EXPENSE> 10,463
<INCOME-PRETAX> (13,012)
<INCOME-TAX> 0
<INCOME-CONTINUING> (13,012)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,012)
<EPS-PRIMARY> (.25)
<EPS-DILUTED> (.25)
</TABLE>
