UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER : 0-23087
STARTEC GLOBAL COMMUNICATIONS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 52-1660985
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
10411 MOTOR CITY DRIVE, BETHESDA, MD 20817
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(301) 365-8959
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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. [X] Yes [] No
Indicate the number of shares outstanding of each of the issuer's classes
of Common Stock, as of the latest practicable date.
OUTSTANDING AS OF
CLASS AUGUST 5, 1998
----- --------------
Common Stock, $.01 par value 8,964,315
<PAGE>
STARTEC GLOBAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES
INDEX TO FORM 10-Q
Page
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Consolidated Statements of Operations ............................. 3
Consolidated Balance Sheets......................................... 4
Consolidated Statements of Cash Flows............................... 5
Notes to Consolidated Financial Statements.......................... 6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ........................... 8
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..... 12
PART II OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS............................................. 12
Item 2. CHANGES IN SECURITIES......................................... 13
Item 3. DEFAULT UPON SENIOR SECURITIES AND USE OF PROCEEDS............ 13
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS........... 13
Item 5. OTHER INFORMATION............................................. 13
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.............................. 13
SIGNATURE .................................................................. 13
EXHIBIT INDEX................................................................ 14
2
<PAGE>
ITEM 1 - FINANCIAL STATEMENTS
STARTEC GLOBAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- --------------------------
1997 1998 1997 1998
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net revenues ............................ $ 16,464 $ 33,461 $ 28,836 $ 63,353
Cost of services ......................... 14,485 28,829 25,250 54,485
-------- -------- -------- --------
Gross margin ............................. 1,979 4,632 3,586 8,868
General and administrative expenses ...... 1,310 4,161 2,461 6,852
Selling and marketing expenses ........... 202 1,113 306 1,761
Depreciation and amortization ............ 118 524 214 708
-------- -------- -------- --------
Income (loss) from operations ............ 349 (1,166) 605 (453)
Interest expense ......................... 135 2,424 252 2,577
Interest income .......................... 4 943 5 1,302
-------- -------- -------- --------
Income (loss) before income tax provision 218 (2,647) 358 (1,728)
Income tax provision ..................... 4 10 7 30
-------- -------- -------- --------
Net income (loss) .................. $ 214 $ (2,657) $ 351 (1,758)
======== ======== ======== ========
Net income (loss) per common share-basic . $ 0.04 $ (0.30) $ 0.06 $ (0.20)
======== ======== ======== ========
Net income (loss) per common share-diluted $ 0.04 $ (0.30) $ 0.06 $ (0.20)
======== ======== ======== ========
Weighted average common shares outstanding -
basic ................................ 5,403 8,942 5,403 8,926
======== ======== ======== ========
Weighted average common shares
outstanding-diluted .................. 5,646 8,942 5,589 8,926
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
3
<PAGE>
STARTEC GLOBAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------- --------------
ASSETS
<S> <C> <C>
CURRENT ASSETS: (Unaudited)
Cash and cash equivalents............................................................. $ 26,114 $ 120,121
Accounts receivable, net of allowance for doubtful accounts of approximately
$2,353 and $2,982 respectively.................................................... 16,980 23,293
Accounts receivable, related party.................................................... 377 778
Other current assets.................................................................. 1,743 1,974
-------------- --------------
Total current assets.............................................................. 45,214 146,166
-------------- --------------
PROPERTY AND EQUIPMENT:
Long distance communications equipment................................................ 3,305 7,010
Computer and office equipment......................................................... 1,024 4,083
Less - Accumulated depreciation and amortization...................................... (1,240) (1,933)
-------------- --------------
3,089 9,160
Construction in progress.............................................................. 2,095 1,087
-------------- --------------
Total property and equipment, net................................................. 5,184 10,247
-------------- --------------
Deferred debt financing costs, net....................................................... 952 6,265
Restricted cash and pledged securities................................................... 180 52,597
-------------- --------------
Total assets...................................................................... $ 51,530 $ 215,275
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.................................................................... $ 15,420 $ 17,595
Accrued expenses.................................................................... 3,728 6,845
Capital lease obligations........................................................... 331 381
-------------- --------------
Total current liabilities......................................................... 19,479 24,821
-------------- --------------
Capital lease obligations, net of current portion........................................ 417 266
Senior notes payable.................................................................... -- 157,917
Notes payable to individuals and other, net of current portion........................... 44 --
-------------- --------------
Total liabilities................................................................. 19,940 183,004
-------------- --------------
COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value, 100,000 shares authorized; no shares issued........ -- --
Common stock, $0.01 par value; 20,000,000 shares authorized at December 31, 1997 and 88 90
June 30, 1998; 8,811,999 shares issued and outstanding at December 31, 1997;
8,964,315 shares issued and outstanding at June 30, 1998............................
Additional paid-in capital............................................................ 35,528 35,832
Warrants.............................................................................. 1,693 3,800
Unearned compensation................................................................. (241) (215)
Accumulated deficit .................................................................. (5,478) (7,236)
-------------- --------------
Total stockholders' equity............................................................ 31,590 32,271
-------------- --------------
Total liabilities and stockholders' equity............................................ $ 51,530 $ 215,275
============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
4
<PAGE>
STARTEC GLOBAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
--------------------------
1997 1998
------ ------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) ............................................. $ 351 $ (1,758)
Adjustments to net income (loss)
Depreciation and amortization ................................. 214 693
Compensation pursuant to stock options ........................ 23 26
Amortization of deferred debt financing costs and debt ........ -- 348
discounts
Changes in operating assets and liabilities:
Accounts receivable, net .................................... (3,909) (6,313)
Accounts receivable, related party .......................... (269) (401)
Other current assets ........................................ (20) (231)
Accounts payable ............................................ 4,032 2,175
Accrued expenses ............................................ 92 3,117
--------- ---------
Net cash provided by (used in) operating activities ...... 514 (2,344)
--------- ---------
INVESTING ACTIVITIES:
Purchases of property and equipment ......................... (184) (5,672)
--------- ---------
Net cash used in investing activities .................... (184) (5,672)
--------- ---------
FINANCING ACTIVITIES:
Net borrowings under receivables-based credit facility ....... 1,106 --
Proceeds from Senior notes and warrants offering ............. -- 160,000
Investments in pledged securities ........................... -- (52,417)
Deferred debt financing costs ................................ -- (5,637)
Proceeds from exercise of employee stock options ............. -- 262
Borrowings under notes payable to individuals and other ...... 650 --
Payments under capital lease obligations ..................... (129) (185)
--------- ---------
Net cash provided by financing activities ............... 1,627 102,023
--------- ---------
Net increase in cash and cash equivalents .................... 1,957 94,007
Cash and cash equivalents at the beginning of the period ..... 148 26,114
--------- ---------
Cash and cash equivalents at the end of the period .......... $ 2,105 $ 120,121
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid ................................................ $ 269 $ 63
========= =========
Income taxes paid ............................................ $ -- $ --
========= =========
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:
Deferred debt financing and offering costs not paid .......... $ 433 --
========= =========
Note payable to individual, converted to common stock ........ $ -- $ 44
========= =========
Equipment acquired under capital lease ....................... $ 378 $ 84
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
5
<PAGE>
STARTEC GLOBAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BUSINESS DESCRIPTION:
ORGANIZATION
Startec Global Communications Corporation (the "Company", formerly Startec,
Inc.), is a Maryland corporation founded in 1989 to provide long-distance
telephone services. The Company currently offers U.S.-originated long-distance
service to residential and carrier customers through a flexible network of owned
and leased transmission facilities, resale arrangements, and foreign termination
arrangements. The Company's marketing targets specific ethnic residential market
segments in the United States that are most likely to seek low-cost
international long-distance service to specific and identifiable country
markets. The Company is headquartered in Bethesda, Maryland.
REORGANIZATION
The Company's board of directors and stockholders have approved a
reorganization pursuant to which the Company's corporate structure will be
realigned to that of a publicly traded Delaware holding company. The
reorganization will consist of the transfer of substantially all of the
Company's assets into a newly incorporated Delaware subsidiary company (" New
Parent"), and the subsequent transfer of those assets to multiple subsidiaries
of the New Parent. After such transfer, the Company will be merged with and into
the New Parent. As of June 30, 1998, the New Parent and its subsidiaries had
been formed, but no transfer of assets had been made. The reorganization is
expected to be completed during the fourth quarter ended December 1998 and will
not have an impact on the consolidated financial statements of the Company.
RISKS AND OTHER IMPORTANT FACTORS
The Company is subject to various risks in connection with the operation of
its business. These risks include, but are not limited to, dependence on
operating agreements with foreign partners, significant foreign and U.S.-based
customers and suppliers, availability of transmission facilities, U.S. and
foreign regulations, international economic and political instability,
dependence on effective billing and information systems, customer attrition, and
rapid technological change. Many of the Company's competitors are significantly
larger and have substantially greater financial, technical, and marketing
resources than the Company; employ larger networks and control transmission
lines; offer a broader portfolio of services; have stronger name recognition and
loyalty; and have long-standing relationships with the Company's target
customers. In addition, many of the Company's competitors enjoy economies of
scale that can result in a lower cost structure for transmission and related
costs, which could cause significant pricing pressures within the long-distance
telecommunications industry. If the Company's competitors were to devote
significant additional resources to the provision of international long-distance
services to the Company's target customer base, the Company's business,
financial condition, and results of operations could be materially adversely
affected.
In the United States, the Federal Communications Commission ("FCC") and
relevant state Public Service Commissions have the authority to regulate
interstate and intrastate telephone service rates, respectively, ownership of
transmission facilities, and the terms and conditions under which the Company's
services are provided. Legislation that substantially revised the U.S.
Communications Act of 1934 was signed into law on February 8, 1997. This
legislation has specific guidelines under which the Regional Bell Operating
Companies ("RBOCs") can provide long-distance services, which will permit the
RBOCs to compete with the Company in providing domestic and international
long-distance services. Further, the legislation, among other things, opens
local service markets to competition from any entity (including long-distance
carriers, such as AT&T, cable television companies and utilities).
Because the legislation opens the Company's markets to additional
competition, particularly from the RBOCs, the Company's ability to compete may
be adversely affected. Moreover, certain Federal and other governmental
regulations may be amended or modified, and any such amendment or modification
could have material adverse effects on the Company's business, results of
operations, and financial condition.
6
<PAGE>
2. SIGNIFICANT ACCOUNTING PRINCIPLES:
GENERAL
In addition to the principles identified below, Note 2 of the Notes to
Financial Statements, as set forth in the Company's Annual Report on Form 10-K,
summarizes the Company's significant accounting principles.
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Revenues for telecommunication services provided to customers are
recognized as services are rendered, net of an allowance for revenue that the
Company estimates will ultimately not be realized. The Company routinely
evaluates its requirements for allowance for doubtful accounts. Upon receipt of
favorable collection data, the Company reduced its allowance for doubtful
accounts by approximately $337,000 during the three-month period ended June 30,
1998. Revenues for return traffic received according to the terms of the
Company's operating agreements with its foreign partners are recognized as
revenue as the return traffic is received and processed.
BASIS OF PREPARATION OF INTERIM FINANCIAL INFORMATION
The financial statements included herein are unaudited and have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission (the "SEC"). Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management, the financial statements reflect all
adjustments (of a normal and recurring nature) which are necessary to present
fairly the financial position, results of operations and cash flows for the
interim periods. These unaudited financial statements should be read in
conjunction with the audited financial statements and notes thereto for the year
ended December 31, 1997, included in the Company's most recently filed Annual
Report on Form 10-K. The results for the six months ended June 30, 1998 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998.
CONCENTRATIONS OF RISK
Financial instruments that potentially subject the Company to a
concentration of credit risk are accounts receivable. Residential accounts
receivable consist of individually small amounts due from geographically
dispersed customers. Carrier accounts receivable represent amounts due from
long-distance carriers. The Company's allowance for doubtful accounts is based
on current market conditions. The Company's four largest carrier customers
represented approximately 44 and 31 percent of gross accounts receivable as of
December 31, 1997, and June 30, 1998, respectively. The Company's five largest
carrier customers represented approximately 33 percent of net revenues for the
six-month period ended June 30, 1998. Purchases from the five largest suppliers
represented approximately 38 percent of cost of services for six-month period
ended June 30, 1998.
NET INCOME PER SHARE
In 1997, the Financial Accounting Standards Board released Statement No.
128, "Earnings Per Share." Statement 128 requires dual presentation of basic and
diluted earnings per share on the face of the statement of operations for all
periods presented. Basic earnings per share excludes dilution and is computed by
dividing income available to common stockholders by the weighted-average number
of common shares outstanding for the period. Diluted earnings per share reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or resulted in
the issuance of common stock that then shared in the earnings of the entity.
Weighted average common and equivalent share amounts are derived as follows:
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-----------------------------------------------------------------
1997 1998 1997 1998
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Weighted average common shares outstanding - basic 5,403 8,942 5,403 8,926
Dilutive effect of stock options and warrants ..... 243 -- 186 --
--------- -------- -------- ---------
Weighted average common shares outstanding -
diluted ....................................... 5,646 8,942 5,589 8,926
========= ======== ======== =========
Per Share Amounts:
Basic ......................................... $ 0.04 $ (0.30) $ 0.06 $ (0.20)
========= ======== ======== =========
Diluted ....................................... $ 0.04 $ (0.30) $ 0.06 $ (0.20)
========= ======== ======== =========
</TABLE>
7
<PAGE>
3. SENIOR NOTES AND WARRANTS OFFERING:
In May 1998, the Company completed the placement of $160 million 12% senior
notes due 2008 and warrants to purchase 200,226 shares of common stock at an
exercise price of $24.20 per share. This placement yielded net proceeds of
approximately $155 million, of which approximately $52 million was used to
purchase U.S. Government obligations which have been pledged to fund the first
six interest payments due on the senior notes, and the remainder of which will
be used to expand and develop the Company's network. The network expansion will
include the purchase of switches and compression equipment, acquisition of fiber
optic cable facilities, and investment in and acquisition of satellite earth
stations. The senior notes are recorded at a discount of $2.1 million to their
face amount to reflect the value attributed to warrants. The senior notes are
unsecured and require semi annual interest payments beginning November 15, 1998.
The senior notes and warrants have certain registration rights.
4. STOCK OPTION PLAN AMENDMENT:
In July 1998 the stockholders approved an amendment to the 1997 Performance
Incentive Plan to increase the number of shares available for issuance from
750,000 shares to 18.5 percent of the outstanding shares of the Company, and to
revise the plan in order to continue to qualify awards thereunder as "
performance - based" compensation not subject to the limitation on deductibility
under Section 162(m) of the Internal Revenue Code.
5. RELATED PARTY TRANSACTION:
During the second quarter of 1998, the company advanced an aggregate of
approximately $737,000 to certain of its employees and officers. The loans bear
interest at a rate of 7.87% per year, and are due and payable on December 31,
1998. The loans are included in other current assets in the accompanying balance
sheet.
6. COMMITMENTS AND CONTINGENCIES:
LITIGATION
Certain claims have been asserted against the Company. In management's
opinion, resolution of these matters will not have a material impact on the
Company's business, financial condition or results of operations, and adequate
provision for any potential losses has been made in the accompanying financial
statements.
7. RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS:
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income," and SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information."
SFAS No. 130 requires "comprehensive income" and the components of "other
comprehensive income," to be reported in the financial statements and/or notes
thereto. As the Company did not have any components of "other comprehensive
income" net income is the same as "total comprehensive income" for all periods
presented.
SFAS No. 131 requires entities to disclose financial and descriptive
information about its reportable operating segments. It also establishes
standards for related disclosures about products and services, geographic areas,
and major customers. SFAS No. 131 is not required for interim financial
reporting purposes during 1998. The Company is in the process of assessing the
additional disclosures, if any, required by SFAS No. 131. However, such adoption
will not impact the Company's results of operations or financial position, since
it relates only to disclosures.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion and analysis of the financial condition and
results of operations should be read in conjunction with the financial
statements, related notes, and other detailed information included elsewhere in
this Quarterly Report on Form 10-Q. This Quarterly Report contains certain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Forward-looking statements are statements other than historical
information or statements of current condition. Some forward looking statements
may be identified by use of such terms as "believes", "anticipates", "intends",
or "expects". These forward-looking statements relate to plans, objectives and
expectations of the Company for future operations. In light of the risks and
uncertainties inherent in all such projected operation matters, the inclusion of
forward-looking statements in this report should not be regarded as
8
<PAGE>
a representation by the company or any other person that the objectives or plans
of the Company will be achieved or that any of the Company's operating
expectations will be realized. The Company's revenues and results of operations
are difficult to forecast and could differ materially from those projected in
the forward-looking statements contained in this report as a result of certain
factors including, but not limited to, dependence on operating agreements with
foreign partners, significant foreign and U.S.-based customers and suppliers,
availability of transmission facilities, U.S. and foreign regulations,
international economic and political instability, dependence on effective
billing and information systems, customer attrition, and rapid technological
change. These factors should not be considered exhaustive; the Company
undertakes no obligation to release publicly the results of any future revisions
it may make to forward-looking statements to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
Results of Operations
The following table sets forth-certain financial data as a percentage of
net revenues for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- --------------------------
1997 1998 1997 1998
------- -------- ---------- ---------
<S> <C> <C> <C> <C>
Net revenues.................................. 100.0 % 100.0 % 100.0 % 100.0 %
Cost of services.............................. 88.0 86.2 87.6 86.0
------- -------- ---------- ---------
Gross margin............................... 12.0 13.8 12.4 14.0
General and administrative expenses........... 8.0 12.4 8.5 10.8
Selling and marketing expenses................ 1.2 3.3 1.1 2.8
Depreciation and amortization................. 0.7 1.6 0.7 1.1
------- -------- ---------- ---------
Income (loss) from operations............. 2.1 (3.5) 2.1 (0.7)
Interest expense.............................. (0.8) (7.2) (0.9) (4.1)
Interest income............................... - 2.8 - 2.1
------- -------- ---------- ---------
Income (loss) before income tax provision.. 1.3 (7.9) 1.2 (2.7)
Income tax provision.......................... - - - (0.1)
======= ======== ========== =========
Net income (loss).......................... 1.3% (7.9)% 1.2% (2.8)%
======= ======== ========== =========
</TABLE>
THREE MONTH PERIOD ENDED JUNE 30, 1998 COMPARED TO THREE MONTH PERIOD ENDED
JUNE 30, 1997
Net Revenues. Net revenues for the three months ended June 30, 1998
increased approximately $17.0 million or 103.3 percent, to approximately $33.5
million from $16.5 million for the three months ended June 30, 1997. Residential
revenue increased in comparative periods by approximately $7.1 million or 120.3
percent, to approximately $13.0 million for the three-month period ended June
30, 1998 from approximately $5.9 million in the second quarter of 1997. The
increase in residential revenue is due to an increase in the number of
residential customers to over 93,500 as of June 30, 1998 from approximately
43,700 as of June 1997. Carrier revenue for the three-month period ended June
30, 1998 increased approximately $10.0 million or 95.2 percent, to approximately
$20.5 million from approximately $10.5 million for the second quarter of 1997.
The increase in carrier revenues is due to the execution of the Company's
strategy to optimize its capacity on its facilities, which has resulted in sales
to new carrier customers and increased sales to existing carrier customers.
Gross Margin. Gross margin increased by approximately $2.6 million to $4.6
million for the three-month period ended June 30, 1998 from $2.0 million for the
three-month period ended June 30, 1997. Gross margin improved as a percentage of
net revenues for the three-month period ended June 30, 1998 to 13.8 percent from
12 percent for the three-month period ended June 30, 1997. Gross margin for the
three-month period ended June 30, 1998 improved due to an increase in the
traffic originated on the Company's own network and improved termination costs.
General and Administrative. General and administrative expenses for the
three-month period ended June 30, 1998 increased 223.1 percent to approximately
$4.2 million from $1.3 million for the three-month period ended June 30, 1997.
As a percentage of net revenues, general and administrative expenses increased
to 12.4 percent from 8.0 percent for the respective periods. The increase was
primarily due to an increase in personnel to 266 at June 30, 1998 from 72 at
June 30, 1997, and to a lesser extent, an increase in billing processing fees.
Selling and Marketing. Selling and marketing expenses for the three-month
period ended June 30, 1998 increased 444.6 percent to approximately $1.1 million
from approximately $201,000 for the three-month period ended June 30, 1997. As a
percentage of net revenues,
9
<PAGE>
selling and marketing expenses increased to 3.3 percent from 1.2 percent for the
respective periods. The increase is primarily due to the Company's efforts to
market to new, and increased efforts to market to existing, customer groups.
Depreciation and Amortization. Depreciation and amortization expenses for
the three-month period ended June 30, 1998 increased to approximately $524,000
from $118,000 for the three-month period ended June 30, 1997, primarily due to
increases in capital expenditures pursuant to the Company's strategy of
expanding its network infrastructure.
Interest. Interest expense for three-month period ended June 30, 1998
increased to approximately $2.4 million from $135,000 for the three-month period
ended June 30, 1997, as a result of a senior notes offering by the Company. The
Company also recorded interest income of approximately $943,000 for the
three-month period ended June 30, 1998 as a result of investing the offering
proceeds.
Net Loss. Net loss was approximately $2.7 million for the three-month
period ended June 30, 1998 as compared to net income of approximately $214,000
for the three-month period ended June 30, 1997.
SIX MONTH PERIOD ENDED JUNE 30, 1998 COMPARED TO SIX MONTH PERIOD ENDED
JUNE 30, 1997
Net Revenues. Net revenues for the six months ended June 30, 1998 increased
approximately $34.6 million or 120.1 percent, to approximately $63.4 million
from $28.8 million for the six months ended June 30, 1997. Residential revenue
increased in comparative periods by approximately $13.7 million or 130.5
percent, to approximately $24.2 million for the six months ended June 30, 1998
from approximately $10.5 million for the six months ended June 30, 1997. The
increase in residential revenue is due to an increase in the number of
residential customers to over 93,500 as of June 1998 from approximately 43,700
as of June 1997. Carrier revenue for the six-month period ended June 30, 1998
increased approximately $20.9 million or 114.2 percent, to approximately $39.2
million from approximately $18.3 million for the six months ended June 30, 1997.
The increase in carrier revenues is due to the execution of the Company's
strategy to optimize its capacity on its facilities, which has resulted in sales
to new carrier customers and increased sales to existing carrier customers.
Gross Margin. Gross margin increased by approximately $5.3 million to $8.9
million for the six-month period ended June 30, 1998 from $3.6 million for the
six-month period ended June 30, 1997. Gross margin improved as a percentage of
net revenues for the six-month period ended June 30, 1998 to 14.0 percent from
12.4 percent for the six-month period ended June 30, 1997. Gross margin for the
six-month period ended June 30, 1998 improved due to an increase in the traffic
originated on the Company's own network, improved termination costs, and the
favorable adjustment to the allowance for doubtful accounts in the second
quarter of 1998.
General and Administrative. General and administrative expenses for the
six-month period ended June 30, 1998 increased 176 percent to approximately $6.9
million from $2.5 million for the six-month period ended June 30, 1997. As a
percentage of net revenues, general and administrative expenses increased to
10.8 percent from 8.5 percent for the respective periods. The increase was
primarily due to an increase in personnel to 266 at June 30, 1998 from 72 at
June 30, 1997, and to a lesser extent, an increase in billing processing fees.
Selling and Marketing. Selling and marketing expenses for the six-month
period ended June 30, 1998 increased 488.2 percent to approximately $1.8 million
from approximately $306,000 for the six-month period ended June 30, 1997. As a
percentage of net revenues, selling and marketing expenses increased to 2.8
percent from 1.1 percent for the respective periods. The increase is primarily
due to the Company's efforts to market to new, and increased efforts to market
to existing, customer groups.
Depreciation and Amortization. Depreciation and amortization expenses for
the six month period ended June 30, 1998 increased to approximately $708,000
from $214,000 for the six-month period ended June 30, 1997, primarily due to
increases in capital expenditures pursuant to the Company's strategy of
expanding its network infrastructure.
Interest. Interest expense for the six-month period ended June 30, 1998
increased to approximately $2.6 million from $252,000 for the six-month period
ended June 30, 1997, as a result of a senior notes offering by the Company. The
Company also recorded interest income of approximately $1.3 million for the
six-month period ended June 30, 1998 as a result of investing the offering
proceeds.
Net Loss. Net loss was approximately $1.8 million for the six-month period
ended June 30, 1998 as compared to a net income of approximately $351,000 in for
the six-month period ended June 30, 1997.
Liquidity and Capital Resources
The Company's liquidity requirements arise from cash used in operating
activities, purchases of network equipment, and payments on outstanding
indebtedness. Prior to the completion of its initial public offering, the
Company financed its activities through capital lease financings, notes payable
from individuals, a credit arrangement with a third party company (since
terminated) and a secured revolving line of credit arrangement with a bank. The
credit facility provides for maximum borrowings of the lesser of $15 million or
85% of eligible accounts receivable, as defined, until maturity on December 31,
1999. The Company may elect to pay quarterly interest payments at the prime
rate, plus 2%, or the adjusted LIBOR, plus 4%. The credit facility is secured by
substantially all of the Company's assets. The credit facility recently was
amended in connection with the senior notes offering and Reorganization. The
amended credit facility has certain key financial covenants that apply only if
the Company attempts to borrow. The Company is currently not in compliance with
these covenants and therefore, would be unable to borrow any amounts under the
credit facility.
10
<PAGE>
The Company completed its initial public offering of 3,277,500 shares of
its common stock in October 1997, the net proceeds of which (after underwriting
discounts, commissions and other professional fees) approximated $35.0 million.
The Company used a portion of the net proceeds to acquire cable facilities and
switching, compression and related telecommunications equipment. Proceeds were
also used for marketing programs, to pay down amounts due under the credit
facility and for working capital and general corporate purposes.
In May 1998, the Company completed the placement of $160 million aggregate
principal amount of 12% senior notes due 2008 and warrants to purchase 200,226
shares of common stock at an exercise price of $24.20 per share. This placement
yielded net proceeds of approximately $155 million, of which approximately $52
million was used to purchase U.S. Government obligations which have been pledged
to fund the first six interest payments due on the senior notes, and the
remainder of which will be used to expand and develop the Company's network. The
network expansion will include the purchase of switches and compression
equipment, acquisition of fiber optic cable facilities, and investment in and
acquisition of satellite earth stations. The senior notes are unsecured and
require semi annual interest payments beginning November 15, 1998. The senior
notes and warrants have certain registration rights.
The Company's cash and cash equivalents increased to approximately $120
million at June 30, 1998 from approximately $26.1 million at December 31, 1997.
Net cash used for operating activities was approximately $2.3 million for the
six-month period ended June 30, 1998, as compared to net cash provided by
operating activities of $514,000 for the six-month period ended June 30, 1997.
The decrease in cash from operations for the six-month period ended June 30,
1998 was primarily the result of the net loss and an increase in accounts
receivable, which was partially offset by increase in accounts payable and
accrued expenses.
Net cash used in investing activities was approximately $5.7 million and
$184,000 for the six months ended June 30, 1998 and 1997, respectively. Net cash
used in investing activities for the six months ended June 30, 1998 was
primarily related to capital expenditures to expand the Company's network
infrastructure.
Net cash provided by financing activities was approximately $102 million
and $1.6 million for the six months ended June 30, 1998 and 1997, respectively.
The cash provided by financing activities for the six months ended June 30, 1998
primarily resulted from the senior notes offering.
As a result of completing the senior note offering, the Company expects
that it will incur negative EBITDA and significant operating losses and net
losses for the next several years as it incurs additional costs associated with
the development and expansion of its marketing programs and its entry into new
markets, the introduction of new telecommunications services, and as a result of
the interest expense associated with its financing activities. The Company's
principal cash requirements will be for capital expenditures related to the
Company's network development plan and for interest payments on the senior
notes. Approximately $52 million of the net proceeds of the senior notes was
used to purchase the pledged securities, which will assure holders of the notes
that they will receive all scheduled cash interest payments through May 15,
2001. The Company may be required to obtain additional financing in order to pay
interest in the senior notes after May 15, 2001 and to repay the notes at their
maturity.
The Company's business strategy contemplates aggregate capital expenditures
(including capital expenditures, working capital and other general corporate
purposes) of approximately $165.8 million through December 31, 2000. Of such
amount, the Company intends to use approximately $152.8 million to fund capital
expenditures to expand and develop the Company's network (including $5.8 million
which has already been allocated to purchase the Los Angeles switch).
During 1998, the Company plans to install a new international gateway
switch in Los Angeles and to redeploy its Washington, D.C. switch to Chicago,
where it will serve as a domestic switch. In addition, the Company plans to
acquire (i) six additional switches during 1998 to be deployed during 1998 and
early 1999 in Chile, France, Germany, Japan, the Netherlands and the United
Kingdom; (ii) nine additional switches during 1999 to be deployed during 1999
and early 2000 in Australia, Belgium, Canada (two), Hong Kong, Italy, Mexico,
Switzerland and Uganda and (iii) four additional switches in 2000 to be
deployed during 2000 and early 2001 in Argentina, Brazil, India and Singapore.
The Company also intends to invest in domestic land-based fiber optic cable
facilities linking the East Coast and West Coast of the United States, and
undersea fiber optic transmission facilities linking North America with Europe,
the Pacific Rim, Asia and Latin America. Moreover, the Company plans to invest
in or acquire two satellite earth stations during 1998 and 1999. From time to
time, however, the Company is presented with marketing opportunities which may
result in the relocation, redeployment, or alternative deployment of the
Company's switches, points-of-presence, and other telecommunications equipment.
After taking into account the net proceeds to the Company from the senior
notes offering and the purchase of the pledged securities together with the
Company's cash on hand and anticipated cash from operations, the Company expects
that it will need approximately $40.0 million of additional financing to
complete its capital spending plan through the end of 2000. Although the Company
believes that it should be able to obtain this required financing from
traditional sources, such as bank lenders, asset-based financiers or equipment
vendors, there can be no assurance the Company will be successful in arranging
such financing on terms its considers acceptable or at all. In the event that
the Company is unable to obtain additional financing, it will be required to
limit or curtail its expansion plans.
<PAGE>
The Company regularly reviews opportunities to further its business
strategy through strategic alliances with, investment in, or acquisitions of
businesses that it believes are complementary to the Company's current and
planned operations. The Company, however, has no present commitments, agreements
or understandings with respect to any particular strategic alliance, acquisition
or investment. The Company's ability to consummate strategic alliances and
acquisitions, and to make investments that may be of strategic significance to
the Company, may require the Company to obtain additional debt and/or equity
financing. There can be no assurance that the Company will be successful in
arranging such financing on terms it considers acceptable or at all.
11
<PAGE>
The implementation of the Company's strategic plan, including the
development and expansion of its network facilities, expansion of its marketing
programs, and funding of operating losses and working capital needs, will
require significant investment. The Company expects that the net proceeds of the
senior notes offering together with cash on hand and cash flow from operations,
will provide the Company with sufficient capital to fund currently planned
capital expenditures and anticipated operating losses through the end of the
first quarter 2000. There can be no assurance that the Company will not need
additional financing sooner than currently anticipated. The need for additional
financing depends on a variety of factors, including the rate and extent of the
Company's expansion and new markets, the cost of an investment in additional
switching and transmission facilities and ownership rights in fiber optic cable,
the incurrence of costs to support the introduction of additional or enhanced
services, and increased sales and marketing expenses. In addition, the Company
may need additional financing to fund unanticipated working capital needs or to
take advantage of unanticipated business opportunities, including acquisitions,
investments or strategic alliances. The amount of the Company's actual future
capital requirements also will depend upon many factors that are not within the
Company's control, including competitive conditions and regulatory or other
government actions. In the event that the Company's plans or assumptions change
or prove to be inaccurate or the net proceeds of this senior notes offering,
together with cash on hand and internally generated funds, prove to be
insufficient to fund the Company's growth and operations, then some or all of
the Company's development and expansion plans could be delayed or abandoned, or
the Company may be required to seek additional financing or to sell assets, to
the extent permitted by the terms of the senior notes.
The Company may seek to raise such additional capital from public or
private equity or debt sources. There can be no assurance that the Company will
obtain additional financing or, if obtained, that it will be able to do so on a
timely basis or on terms favorable to the Company. If the Company is able to
raise additional funds through the incurrence of debt, it would likely become
subject to additional restrictive financial covenants. In the event that the
Company is unable to obtain such additional capital or is unable to obtain such
additional capital on acceptable terms, the Company may be required to reduce
the scope of its expansion, which could adversely affect the Company's business,
financial condition and results of operations, its ability to compete and its
ability to meet its obligations under the senior notes.
Although the Company intends to implement the capital spending plan
described above, it is possible that unanticipated business opportunities may
arise which the Company's management may conclude are more favorable to the
long-term prospects of the Company than those contemplated by the current
capital spending plan. Management will have significant discretion in its
decisions with respect to when and how to utilize the proceeds of the Offering.
The Company has accrued approximately $2.1 million as of June 30, 1998 for
disputed vendor obligations asserted by one of the Company's foreign carriers
for minutes processed in excess of the minutes reflected on the Company's
records. If the Company prevails in its disputes, these amounts or portions
thereof would be credited to operations in the period of resolution. Conversely,
if the Company does not prevail in its disputes, these amounts or portions
thereof may be paid in cash.
The Company's management is currently in the process of assessing the
nature and extent of the potential impact of the Year 2000 issue on its systems
and applications, including its billing, credit and call tracking systems, and
intends to take steps to prevent failures in its systems and applications
relating to Year 2000. Although many of the Company's operating systems are
relatively new and have been certified to the Company as being Year 2000
compliant, there can be no assurance that the Company's systems will not be
adversely affected by the Year 2000 issue. In addition, computers used by the
Company's vendors providing services to the Company or computers used by the
Company's customers that interface with the Company's computer systems may have
Year 2000 problems, any of which may adversely affect the ability of those
vendors to provide services to the Company, or in the case of the Company's
carrier customers, to make payments to the Company. If any of such systems fails
or experiences processing errors, such failures or errors may disrupt or corrupt
the Company's systems. The Company is in the initial stages of verifying the
Year 2000 compliance efforts of the third parties with which the Company's
computer systems interface. Although management has not yet finalized its
analysis, it does not expect that the costs to properly address the Year 2000
issue will have a material adverse effect on its results of operations or
financial position. Failure of any of the Company's systems or applications or
the failure, or errors in, the computer systems of its vendors or carrier
customers could materially adversely affect the Company's business, financial
condition and results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
This requirement is not currently applicable to the Company.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is from time to time involved in litigation incidental to the
conduct of its business. The Company is not part to any lawsuit or proceeding
which, in the opinion of management, is likely to have material adverse effect
on the Company's business, financial condition or results of operations.
12
<PAGE>
ITEM 2. CHANGES IN SECURITIES
On May 21, 1998, the Company issued 160,000 Units (the "Units") consisting
of $160,000,000 aggregate principal amount of 12% Senior Notes due 2008
("Notes") and warrants ("Warrants") to purchase an aggregate of 200,226 shares
of its Common Stock (the "Warrant Shares"). Each Unit consists of (i) $1,000
principal amount of Notes and (ii) a Warrant to purchase 1.25141 Warrant Shares.
The Units were issued and sold by the Company to Lehman Brothers Inc., Goldman,
Sachs & Co. and ING Baring (U.S.) Securities, Inc. (collectively, the "Initial
Purchasers") in a transaction exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act") pursuant to Section
4(2) thereof and subsequently resold by the Initial Purchasers pursuant to Rule
144A and Regulation S.
Each Warrant, when exercised, will entitle the holder thereof to receive
1.25141 fully paid and non-assessable Warrant Shares at an exercise price of
$24.20 per share (the "Exercise Price"). The Exercise Price and the number of
shares of Common Stock issuable upon exercise of a Warrant are both subject to
adjustment in certain circumstances. The Warrants are exercisable to purchase an
aggregate of 200,226 Warrant Shares representing (on a fully diluted basis,
assuming all options, warrants and other stock rights outstanding are exercised
on the date of this Prospectus) approximately 2.0% of the shares of Common
Stock. The Warrants expire by their terms on May 15, 2008.
ITEM 3. DEFAULT UPON SENIOR SECURITIES AND USE OF PROCEEDS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None
ITEM 5. OTHER INFORMATION
None.
ITEM 6.
(a) Exhibits
4.1 Indenture, dated as of May 21, 1998, between the Company and First Union
National Bank, as Trustee.
4.2 Form of 12% Series A Senior Notes due 2008 (included as Exhibit A to
Exhibit 4.1)
4.3 Registration Rights Agreement, dated as of May 21, 1998, among the Company
and Lehman Brothers Inc., Goldman, Scchs & Co., and ING Baring (U.S.)
Securities, Inc.
4.4 Warrant Agreement, dated as of May 21, 1998, by and between the Company
and First Union National Bank, as Warrant Agent
4.5 Form of Warrant (included as Exhibit A to Exhibit 4.4)
4.6 Collateral Pledge and Security Agreement, dated as of May 21, 1998, by and
between the Company and First Union National Bank, as Trustee.
10.21 Agreement by and between Northern Telecom Inc. and the Company, dated as
of December 23, 1997.
10.22 Indefeasible Right of Use Agreement by and between Teleglobe Cantat-3,
Inc. and the Company, dated as of September 15, 1997 (Canus 1 Cable
System).
10.23 Indefeasible Right of Use Agreement by and between Teleglobe Cantat-3,
Inc. and the Company, dated as of September 15, 1997 (Cantat 3 Cable
System).
27.1 Financial Data Schedule
(b) REPORTS ON FORM 8-K
Form 8-K's relating to certain press releases by the Company were filed on
April 8, 1998, April 26, 1998, May 21, 1998 and June 4, 1998.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in Montgomery County,
State of Maryland, on the 14th day of August, 1998.
STARTEC GLOBAL COMMUNICATIONS CORPORATION
-----------------------------------------
(Registrant)
/s/ Prabhav V. Maniyar
------------------
Prabhav V. Maniyar
Chief Financial Officer
13
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
4.1 Indenture, dated as of May 21, 1998, between the Company and First Union
National Bank, as Trustee.
4.2 Form of 12% Series A Senior Notes due 2008 (included as Exhibit A to
Exhibit 4.1)
4.3 Registration Rights Agreement, dated as of May 21, 1998, among the Company
and Lehman Brothers Inc., Goldman, Scchs & Co., and ING Baring (U.S.)
Securities, Inc.
4.4 Warrant Agreement, dated as of May 21, 1998, by and between the Company
and First Union National Bank, as Warrant Agent
4.5 Form of Warrant (included as Exhibit A to Exhibit 4.4)
4.6 Collateral Pledge and Security Agreement, dated as of May 21, 1998, by and
between the Company and First Union National Bank, as Trustee.
10.21 Agreement by and between Northern Telecom Inc. and the Company, dated as
of December 23, 1997.
10.22 Indefeasible Right of Use Agreement by and between Teleglobe Cantat-3,
Inc. and the Company, dated as of September 15, 1997 (Canus 1 Cable
System).
10.23 Indefeasible Right of Use Agreement by and between Teleglobe Cantat-3,
Inc. and the Company, dated as of September 15, 1997 (Cantat 3 Cable
System).
27.1 Financial Data Schedule
14
================================================================================
STARTEC GLOBAL COMMUNICATIONS CORPORATION,
Issuer
to
FIRST UNION NATIONAL BANK,
Trustee
---------------------
Indenture
Dated as of May 21, 1998
---------------------
$160,000,000
12% Senior Notes due 2008
12% Series A Senior Notes due 2008
================================================================================
<PAGE>
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture, dated as of May 21, 1998
Trust Indenture
Act Section Indenture Section
ss.310(a)(1) ............................... 607
(a)(2) ................................ 607
(b) ................................ 608
ss.312(c) ............................... 701
ss.314(a) ............................... 703
(a)(4) ................................ 1008(a)
(c)(1) ................................ 102
(c)(2) ................................ 102
(e) ................................ 102
ss.315(b) ............................... 601
ss.316(a)(last
sentence) ................................ 101 ("Outstanding")
(a)(1)(A) ................................ 502, 512
(a)(1)(B) ................................ 513
(b) ................................ 508
(c) ................................ 104(d)
ss.317(a)(1) ............................... 503
(a)(2) ................................ 504
(b) ................................ 1003
ss. 318(a) ................................ 111
- - -----------------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be
a part of the Indenture.
<PAGE>
TABLE OF CONTENTS
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PARTIES........................................................................................ 1
RECITALS OF THE COMPANY........................................................................ 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions............................................................ 2
Acquired Indebtedness................................................................. 2
Acquired Preferred Stock.............................................................. 2
Act................................................................................... 3
Affiliate............................................................................. 3
Asset Acquisition..................................................................... 3
Asset Disposition..................................................................... 3
Asset Sale............................................................................ 3
Attributable Value.................................................................... 3
Average Life.......................................................................... 4
Board of Directors.................................................................... 4
Board Resolution...................................................................... 4
Business Day.......................................................................... 4
Capital Stock......................................................................... 4
Capitalized Lease Obligation.......................................................... 4
Certificated Notes.................................................................... 5
Change of Control..................................................................... 5
Change of Control Offer............................................................... 5
Change of Control Payment............................................................. 5
Change of Control Payment Date........................................................ 5
Closing Date.......................................................................... 5
Commission............................................................................ 5
Common Stock.......................................................................... 6
Company............................................................................... 6
Company Request....................................................................... 6
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Company Order......................................................................... 6
Consolidated Cash Flow................................................................ 6
Consolidated Fixed Charges............................................................ 6
Consolidated Interest Expense......................................................... 6
Consolidated Net Income............................................................... 7
Consolidated Net Worth................................................................ 7
Corporate Trust Office................................................................ 7
corporation........................................................................... 7
covenant defeasance................................................................... 7
Credit Facilities..................................................................... 8
Cumulative Consolidated Cash Flow..................................................... 8
Cumulative Consolidated Fixed Charges................................................. 8
Cumulative Consolidated Interest Expense.............................................. 8
Currency Agreement.................................................................... 8
Default............................................................................... 8
Defaulted Interest.................................................................... 8
defeasance............................................................................ 8
Depositary............................................................................ 8
Eligible Accounts Receivable.......................................................... 8
Eligible Institution.................................................................. 9
Event of Default...................................................................... 9
Excess Proceeds....................................................................... 9
Excess Proceeds Offer................................................................. 9
Excess Proceeds Payment............................................................... 9
Excess Proceeds Payment Date.......................................................... 9
Exchange Act.......................................................................... 9
Exchange Notes........................................................................ 9
Exchange Offer........................................................................ 9
Exchange Offer Registration Statement................................................. 9
Existing Indebtedness................................................................. 9
Fair Market Value..................................................................... 9
GAAP.................................................................................. 10
Global Notes.......................................................................... 10
Guarantee............................................................................. 10
Holder................................................................................ 10
Incur................................................................................. 10
Incurrence............................................................................ 10
Indebtedness.......................................................................... 10
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Indenture............................................................................. 11
Indirect Participant.................................................................. 11
Initial Notes......................................................................... 11
Initial Purchasers.................................................................... 11
Interest Payment Date................................................................. 11
Interest Rate Agreement............................................................... 11
Interest Rate Protection Obligations.................................................. 11
Investment............................................................................ 11
IRU................................................................................... 12
Issue Date............................................................................ 12
Lien.................................................................................. 12
Liquidated Damages.................................................................... 12
MAOU.................................................................................. 12
Marketable Securities................................................................. 13
Maturity.............................................................................. 13
Maturity Date......................................................................... 13
Net Cash Proceeds..................................................................... 13
Notes................................................................................. 14
Officer's Certificate................................................................. 14
Opinion of Counsel.................................................................... 14
Outstanding........................................................................... 14
Participant........................................................................... 15
Paying Agent.......................................................................... 15
Payment Account....................................................................... 15
Permitted Business.................................................................... 15
Permitted Indebtedness................................................................ 15
Permitted Investment.................................................................. 16
Permitted Liens....................................................................... 16
Person................................................................................ 18
Pledge Account........................................................................ 18
Pledge Agreement...................................................................... 18
Pledged Securities.................................................................... 18
Predecessor Note...................................................................... 18
Preferred Stock....................................................................... 18
Private Placement Legend.............................................................. 18
Pro Forma Consolidated Cash Flow...................................................... 19
Public Equity Offering................................................................ 19
Purchase Price........................................................................ 19
</TABLE>
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Qualified Institutional Buyers........................................................ 19
QIBs.................................................................................. 19
Redeemable Stock...................................................................... 19
Redemption Date....................................................................... 19
Redemption Price...................................................................... 19
Register.............................................................................. 20
Registrar............................................................................. 20
Registration Rights Agreement......................................................... 20
Registration Statement................................................................ 20
Regular Record Date................................................................... 20
Regulation S.......................................................................... 20
Regulation S Certificated Notes....................................................... 20
Regulation S Global Notes............................................................. 20
Regulation S Permanent Global Notes................................................... 20
Regulation S Temporary Global Notes................................................... 20
Responsible Officer................................................................... 20
Restricted Payments................................................................... 20
Restricted Period..................................................................... 20
Restricted Subsidiary................................................................. 21
Rule 144A Certificated Notes.......................................................... 21
Rule 144A Global Notes................................................................ 21
Sale-Leaseback Transaction............................................................ 21
Securities Act........................................................................ 21
Shelf Registration Statement.......................................................... 21
Significant Subsidiary................................................................ 21
Special Record Date................................................................... 21
Stated Maturity....................................................................... 21
Subsidiary............................................................................ 22
Subsidiary Holdings................................................................... 22
Telecommunications Assets............................................................. 22
Tested Transaction.................................................................... 22
Trade Payables........................................................................ 22
Transaction Date...................................................................... 22
Trust Indenture Act................................................................... 22
Trustee............................................................................... 22
Uniform Commercial Code............................................................... 22
United States Dollar Equivalent....................................................... 22
Unrestricted Subsidiary............................................................... 23
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Unrestricted Subsidiary Indebtedness.................................................. 23
U.S. Government Obligations........................................................... 23
U.S. Person........................................................................... 24
Vice President........................................................................ 24
Voting Stock.......................................................................... 24
Wholly Owned.......................................................................... 24
SECTION 102. Compliance Certificates and Opinions................................... 24
SECTION 103. Form of Documents Delivered to Trustee................................. 25
SECTION 104. Acts of Holders........................................................ 25
SECTION 105. Notices, Etc., to Trustee, Company..................................... 27
SECTION 106. Notice to Holders; Waiver.............................................. 27
SECTION 107. Effect of Headings and Table of Contents............................... 28
SECTION 108. Successors and Assigns................................................. 28
SECTION 109. Separability Clause.................................................... 28
SECTION 110. Benefits of Indenture.................................................. 28
SECTION 111. Governing Law.......................................................... 28
SECTION 112. Legal Holidays......................................................... 28
ARTICLE TWO
NOTE FORMS
SECTION 201. Forms Generally........................................................ 29
SECTION 202. Restrictive Legends.................................................... 30
ARTICLE THREE
THE NOTES
SECTION 301. Title and Terms........................................................ 33
SECTION 302. Denominations.......................................................... 34
SECTION 303. Execution, Authentication, Delivery and Dating......................... 34
SECTION 304. Temporary Notes........................................................ 35
SECTION 305. Registration, Registration of Transfer and Exchange.................... 36
SECTION 306. Mutilated, Destroyed, Lost and Stolen Notes............................ 37
SECTION 307. Payment of Interest; Interest Rights Preserved......................... 38
SECTION 308. Persons Deemed Owners.................................................. 39
</TABLE>
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SECTION 309. Cancellation........................................................... 39
SECTION 310. Computation of Interest................................................ 40
SECTION 311. Book-Entry Provisions for Global Notes................................. 40
SECTION 312. Transfer Provisions.................................................... 41
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture................................ 45
SECTION 402. Application of Trust Money............................................. 47
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default...................................................... 47
SECTION 502. Acceleration of Maturity: Rescission and Annulment..................... 49
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee........ 50
SECTION 504. Trustee May File Proofs of Claim....................................... 51
SECTION 505. Trustee May Enforce Claims Without Possession of Notes................. 52
SECTION 506. Application of Money Collected......................................... 52
SECTION 507. Limitation on Suits.................................................... 52
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and In.... 53
SECTION 509. Restoration of Rights and Remedies..................................... 53
SECTION 510. Rights and Remedies Cumulative......................................... 54
SECTION 511. Delay or Omission Not Waiver........................................... 54
SECTION 512. Control by Holders..................................................... 54
SECTION 513. Waiver of Past Defaults................................................ 54
SECTION 514. Waiver of Stay or Extension Laws....................................... 55
ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults..................................................... 55
SECTION 602. Certain Rights of Trustee.............................................. 56
</TABLE>
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SECTION 603. Trustee Not Responsible for Recitals or Issuance of Notes.............. 57
SECTION 604. May Hold Notes......................................................... 58
SECTION 605. Money Held in Trust.................................................... 58
SECTION 606. Compensation and Reimbursement......................................... 58
SECTION 607. Corporate Trustee Required; Eligibility................................ 59
SECTION 608. Resignation and Removal; Appointment of Successor...................... 59
SECTION 609. Acceptance of Appointment by Successor................................. 61
SECTION 610. Merger, Conversion, Consolidation or Succession to Business............ 61
ARTICLE SEVEN
HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Disclosure of Names and Addresses of Holders........................... 62
SECTION 702. Reports by Trustee..................................................... 62
SECTION 703. Reports by Company..................................................... 62
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms................... 63
SECTION 802. Successor Substituted.................................................. 64
SECTION 803. Notes to Be Secured in Certain Events.................................. 64
ARTICLE NINE
SUPPLEMENTAL INDENTURES.......................... 65
SECTION 901. Supplemental Indentures Without Consent of Holders..................... 65
SECTION 902. Supplemental Indentures with Consent of Holders........................ 65
SECTION 903. Execution of Supplemental Indentures................................... 67
SECTION 904. Effect of Supplemental Indentures...................................... 67
SECTION 905. Conformity with Trust Indenture Act.................................... 67
SECTION 906. Reference in Notes to Supplemental Indentures.......................... 67
SECTION 907. Notice of Supplemental Indentures...................................... 68
ARTICLE TEN
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COVENANTS................................. 68
SECTION 1001. Payment of Principal, Premium, if Any, and Interest.................... 68
SECTION 1002. Maintenance of Office or Agency........................................ 68
SECTION 1003. Money for Note Payments to Be Held in Trust............................ 69
SECTION 1004. Corporate Existence.................................................... 70
SECTION 1005. Payment of Taxes and Other Claims...................................... 70
SECTION 1006. Maintenance of Properties.............................................. 71
SECTION 1007. Insurance.............................................................. 71
SECTION 1008. Statement by Officers as to Default.................................... 71
SECTION 1009. Provision of Financial Statements and Reports.......................... 72
SECTION 1010. Repurchase of Notes upon Change of Control............................. 72
SECTION 1011. Limitation on Indebtedness and Preferred Stock of Subsidiaries......... 74
SECTION 1012. Limitation on Restricted Payments...................................... 78
SECTION 1013. Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries................................................ 80
SECTION 1014. Limitation on the Issuance and Sale of Capital Stock of Restricted
Subsidiaries........................................................... 81
SECTION 1015. Limitation on Transactions with Stockholders and Affiliates............ 82
SECTION 1016. Limitation on Liens.................................................... 83
SECTION 1017. Limitation on Asset Sales.............................................. 83
SECTION 1018. Limitation on Issuances of Guarantees of Indebtedness by Restricted
Subsidiaries........................................................... 85
SECTION 1019. Business of the Company; Restriction on Transfers of Existing
Business............................................................... 86
SECTION 1020. Limitation on Investments in Unrestricted Subsidiaries................. 86
SECTION 1021. Limitation on Sale-Leaseback Transactions.............................. 87
SECTION 1022. Waiver of Certain Covenants............................................ 87
ARTICLE ELEVEN
REDEMPTION OF NOTES
SECTION 1101. Right of Redemption.................................................... 87
SECTION 1102. Applicability of Article............................................... 88
SECTION 1103. Election to Redeem; Notice to Trustee.................................. 88
SECTION 1104. Selection by Trustee of Notes to Be Redeemed........................... 88
SECTION 1105. Notice of Redemption................................................... 89
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SECTION 1106. Deposit of Redemption Price............................................ 89
SECTION 1107. Notes Payable on Redemption Date....................................... 90
SECTION 1108. Notes Redeemed in Part................................................. 90
ARTICLE TWELVE
SECURITY
SECTION 1201. Security............................................................... 90
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE..................................... 92
SECTION 1301. Company's Option to Effect Defeasance or Covenant Defeasance........... 92
SECTION 1302. Defeasance and Discharge............................................... 92
SECTION 1303. Covenant Defeasance.................................................... 93
SECTION 1304. Conditions to Defeasance or Covenant Defeasance........................ 93
SECTION 1305. Deposited Money and U.S. Government Obligations to Be Held
in Trust; Other Miscellaneous Provisions............................... 95
SECTION 1306. Reinstatement.......................................................... 95
TESTIMONIUM................................................................................... 95
SIGNATURES AND SEALS.......................................................................... 95
EXHIBIT A Form of Note
EXHIBIT B Form of Certificate to Be Delivered upon Termination of Restricted Period
EXHIBIT C Form of Regulation S Certificate
SCHEDULE A
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<PAGE>
INDENTURE, dated as of May 21, 1998, between STARTEC GLOBAL
COMMUNICATIONS CORPORATION, a corporation duly organized and existing under the
laws of the State of Maryland (herein called the "Company"), having its
principal office at 10411 Motor City Drive, Suite 301, Bethesda, Maryland 20817,
as issuer, and First Union National Bank, a duly organized national banking
association existing under the laws of the United States, as Trustee (the
"Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the issuance of its 12% Senior
Notes due 2008 (the "Initial Notes") and its 12% Series A Senior Notes due 2008
(the "Exchange Notes" and, together with the Initial Notes, the "Notes"), of
substantially the tenor and amount hereinafter set forth, and to provide
therefor, the Company has duly authorized the execution and delivery of this
Indenture.
Upon the issuance of Exchange Notes, if any, or the
effectiveness of the Shelf Registration Statement (as defined herein), this
Indenture will be subject to the provisions of the Trust Indenture Act that are
required to be part of this Indenture and shall, to the extent applicable, be
governed by such provisions.
The Notes are initially being issued, and until the Separation
Date must be traded, as units together with warrants to purchase common stock of
the Company. Each unit will consist of $1,000 principal amount of Notes and a
warrant (collectively, the "Warrants") to purchase 1.25141 shares of common
stock of the Company. The Warrants will be issued pursuant to the Warrant
Agreement.
All things necessary have been done to make the Notes, when
executed by the Company and authenticated and delivered hereunder and duly
issued by the Company, the valid obligations of the Company and to make this
Indenture a valid agreement of the Company, in accordance with their and its
terms.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
the Notes by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Notes, as follows:
<PAGE>
2
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein, and the terms "cash transaction" and
"self-liquidating paper," as used in TIA Section 311, shall have the
meanings assigned to them in the rules of the Commission adopted under
the Trust Indenture Act;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP and except as
otherwise herein expressly provided, the term "generally accepted
accounting principals" with respect to any compilation required or
permitted hereunder shall mean such accounting principles as are
generally accepted, and accepted and adopted by the Company at the date
of the Indenture; and
(d) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision.
"Acquired Indebtedness" or "Acquired Preferred Stock" means
Indebtedness or Preferred Stock, as the case may be, of a Person existing at the
time such Person becomes a Restricted Subsidiary or Indebtedness assumed in
connection with an Asset Acquisition by the Company or a Restricted Subsidiary
and not incurred in connection with, or in anticipation of, such Person becoming
a Restricted Subsidiary or such Asset Acquisition; provided that Indebtedness or
Preferred Stock, as the case may be, of such Person which is redeemed, defeased,
retired or otherwise repaid in full at the time of or immediately upon the
consummation of the transactions by which such Person becomes a Restricted
Subsidiary or such Asset Acquisition shall not be considered as Indebtedness or
Preferred Stock.
<PAGE>
3
"Act," when used with respect to any Holder, has the meaning
specified in Section 104.
"Affiliate" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, is defined to mean
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.
"Asset Acquisition" means (i) an investment by the Company or
any of its Restricted Subsidiaries in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or shall be merged
into or consolidated with the Company or any of its Restricted Subsidiaries or
(ii) an acquisition by the Company or any of its Restricted Subsidiaries of the
property and assets of any Person (other than the Company or any of its
Restricted Subsidiaries) that constitute substantially all of a division or line
of business of such Person.
"Asset Disposition" means the sale or other disposition by the
Company or any of its Restricted Subsidiaries (other than to the Company or
another Restricted Subsidiary of the Company) of (i) all or substantially all of
the Capital Stock of any Restricted Subsidiary of the Company or (ii) all or
substantially all of the assets that constitute a division or line of business
of the Company or any of its Restricted Subsidiaries.
"Asset Sale" means any sale, transfer or other disposition
(including by way of merger, consolidation or Sale-Leaseback Transactions) in
one transaction or a series of related transactions by the Company or any of its
Restricted Subsidiaries to any Person (other than the Company or any of its
Restricted Subsidiaries) of (i) all or any of the Capital Stock of any
Restricted Subsidiary (other than in respect of any director's qualifying shares
or investments by foreign nationals mandated by applicable law), (ii) all or
substantially all of the property and assets of an operating unit or business of
the Company or any of its Restricted Subsidiaries or (iii) any other property
and assets of the Company or any of its Restricted Subsidiaries outside the
ordinary course of business of the Company or such Restricted Subsidiary and, in
each case, that is not governed by Section 801 and which, in the case of any of
clause (i), (ii) or (iii) above, whether in one transaction or a series of
related transactions, (a) have a fair market value in excess of $1.0 million or
(b) are for net proceeds in excess of $1.0 million; provided that sales or other
dispositions of inventory, receivables and other current assets in the ordinary
course of business shall not be included within the meaning of "Asset Sale."
<PAGE>
4
"Attributable Value" means, as to any particular lease under
which any Person is at the time liable other than a Capitalized Lease
Obligation, and at any date as of which the amount thereof is to be determined,
the total net amount of rent required to be paid by such Person under such lease
during the remaining term thereof (whether or not such lease is terminable at
the option of the lessee prior to the end of such term), including any period
for which such lease has been, or may, at the option of the lessor, be extended,
discounted from the last date of such term to the date of determination at a
rate per annum equal to the discount rate which would be applicable to a
Capitalized Lease Obligation with like term in accordance with GAAP. The net
amount of rent required to be paid under any lease for any such period shall be
the aggregate amount of rent payable by the lessee with respect to such period
after excluding amounts required to be paid on account of insurance, taxes,
assessments, utility, operating and labor costs and similar charges.
"Attributable Value" means, as to a Capitalized Lease Obligation under which any
Person is at the time liable and at any date as of which the amount thereof is
to be determined, the capitalized amount thereof that would appear on the face
of a balance sheet of such Person in accordance with GAAP.
"Average Life" means, with respect to any Indebtedness, as at
any date of determination, the quotient obtained by dividing (i) the sum of the
products of (a) the number of years from such date to the date or dates of each
successive scheduled principal payment (including, without limitation, any
sinking fund requirements) of such Indebtedness and (b) the amount of each such
principal payment by (ii) the sum of all such principal payments.
"Board of Directors" means the board of directors of the
Company or its equivalent, including managers or members of a limited liability
company, general partners of a partnership, limited partnership or limited
liability partnership or trustees of a business trust, or any duly authorized
committee thereof.
"Board Resolution" means a copy of a resolution certified by
the secretary or any assistant secretary of the Company to have been duly
adopted by the Board of Directors and to be in full force and effect on the date
of such certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in The City of New
York are authorized or obligated by law or executive order to close.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations, rights in or other equivalents (however
designated, whether voting or non-voting) in equity of such Person, whether now
outstanding or issued after the date of this Indenture, including, without
limitation, all Common Stock and Preferred Stock.
<PAGE>
5
"Capitalized Lease Obligation" means any obligation under a
lease of (or other agreement conveying the right to use) any property (whether
real, personal or mixed) that is required to be classified and accounted for as
a capital lease obligation under GAAP, and, for the purpose of this Indenture,
the amount of such obligation at any date shall be the capitalized amount
thereof at such date, determined in accordance with GAAP.
"Certificated Notes" has the meaning specified in Section 201.
"Change of Control" means such time as (i) a "person" or
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act)
becomes the ultimate "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of more than 50.0% of the total voting power of the then
outstanding Voting Stock of the Company, or after the consummation of the
Reorganization, Subsidiary Holdings; (ii) individuals who at the beginning of
any period of two consecutive calendar years constituted the Board of Directors
(together with any directors who are members of the Board of Directors on the
date hereof and any new directors whose election by the Board of Directors or
whose nomination for election by the Company's stockholders was approved by a
vote of at least two-thirds of the members of the Board of Directors then still
in office who either were members of the Board of Directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the members of such
Board of Directors then in office; (iii) the sale, lease, transfer, conveyance
or other disposition (other than by way of merger or consolidation), in one or a
series of related transactions, of all or substantially all of the assets of the
Company and its Subsidiaries, taken as a whole, to any such "person" or "group"
(other than to the Company or a Restricted Subsidiary); (iv) the merger or
consolidation of the Company with or into another corporation or the merger of
another corporation with or into the Company in one or a series of related
transactions with the effect that, immediately after such transaction, any such
"person" or "group" of persons or entities shall have become the beneficial
owner of securities of the surviving corporation of such merger or consolidation
representing a majority of the total voting power of the then outstanding Voting
Stock of the surviving corporation; or (v) the adoption of a plan relating to
the liquidation or dissolution of the Company; provided, however, that the
consummation of the Reorganization shall not constitute or be deemed to
constitute a "Change of Control."
"Change of Control Offer" has the meaning specified in Section
1010.
"Change of Control Payment" has the meaning specified in
Section 1010.
"Change of Control Payment Date" has the meaning specified in
Section 1010.
"Closing Date" means the date on which the Initial Notes are
originally issued under this Indenture.
<PAGE>
6
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act, or, if at any
time after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Common Stock" means, with respect to any Person, any and all
shares, interests, participations, rights in or other equivalents (however
designated, whether voting or non-voting) of such Person's common stock, whether
now outstanding or issued after the date of this Indenture, including, without
limitation, all series and classes of such common stock.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture, until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request
or order signed in the name of the Company by its chairman, its president, any
Vice President, its treasurer or any assistant treasurer, and delivered to the
Trustee.
"Consolidated Cash Flow" means, for any period, the sum of the
amounts for such period of (i) Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) income taxes, to the extent such amount was deducted in
calculating Consolidated Net Income (other than income taxes (either positive or
negative) attributable to extraordinary and non-recurring gains or losses or
sales of assets), (iv) depreciation expense, to the extent such amount was
deducted in calculating Consolidated Net Income, (v) amortization expense, to
the extent such amount was deducted in calculating Consolidated Net Income, and
(vi) all other non-cash items reducing Consolidated Net Income (excluding any
non-cash charge to the extent that it represents an accrual of or reserve for
cash charges in any future period), less all non-cash items increasing
Consolidated Net Income, all as determined on a consolidated basis for the
Company and its Restricted Subsidiaries in conformity with GAAP.
"Consolidated Fixed Charges" means, for any period,
Consolidated Interest Expense plus dividends declared and payable on Preferred
Stock.
"Consolidated Interest Expense" means, for any period, the
aggregate amount of interest in respect of Indebtedness (including capitalized
interest, amortization of original issue discount on any Indebtedness and the
interest portion of any deferred payment obligation, calculated in accordance
with the effective interest method of accounting; all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing; the net costs associated with Interest Rate Agreements;
and interest on Indebtedness that is Guaranteed or secured by the Company or any
of its Restricted Subsidiaries) and all but the principal component of rentals
in respect of Capitalized Lease Obligations paid,
<PAGE>
7
accrued or scheduled to be paid or to be accrued by the Company and its
Restricted Subsidiaries during such period.
"Consolidated Net Income" means, with respect to any Person,
for any period, the consolidated net income (or loss) of such Person and its
Restricted Subsidiaries for such period as determined in accordance with GAAP,
adjusted, to the extent included in calculating such net income, by excluding,
without duplication, (i) all extraordinary gains or losses, (ii) net income (or
loss) of any Person combined in such Person or one of its Restricted
Subsidiaries on a "pooling of interests" basis attributable to any period prior
to the date of combination, (iii) gains or losses (on an after-tax basis) in
respect of any Asset Sales by such Person or one of its Restricted Subsidiaries,
(iv) the net income of any Restricted Subsidiary of such Person to the extent
that the declaration of dividends or similar distributions by that Restricted
Subsidiary of that income is not at the time permitted, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulations applicable to that
Restricted Subsidiary or its stockholders, (v) any gain or loss realized as a
result of the cumulative effect of a change in accounting principles, (vi) any
amount paid or accrued as dividends on Preferred Stock of the Company or
Preferred Stock of any Restricted Subsidiary owned by Persons other than the
Company and any of its Restricted Subsidiaries, (vii) restructuring charges,
(viii) charges relating to the write-off of acquired in- process research and
development expenses and other intangible assets of a Person in connection with
the application of the purchase method of accounting and (ix) the net income (or
loss) of any Person (other than net income (or loss) attributable to a
Restricted Subsidiary) in which any Person (other than the Company or any of its
Restricted Subsidiaries) has a joint interest, except to the extent of the
amount of dividends or other distributions actually paid to the Company or any
of its Restricted Subsidiaries by such other Person during such period.
"Consolidated Net Worth" means, at any date of determination,
stockholders' equity as set forth on the most recently available quarterly or
annual consolidated balance sheet of the Company and its Subsidiaries (which
shall be as of a date not more than 90 days prior to the date of such
computation), less any amounts attributable to Redeemable Stock or any equity
security convertible into or exchangeable for Indebtedness, the cost of treasury
stock and the principal amount of any promissory notes receivable from the sale
of the Capital Stock of the Company or any of its Subsidiaries, each item to be
determined in conformity with GAAP (excluding the effects of foreign currency
exchange adjustments under Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 52).
"Corporate Trust Office" means the corporate trust operations
office of the Trustee, at which at any particular time its corporate trust
business shall be administered, which office at the date of execution of this
Indenture is located at 800 East Main Street, Lower Mezzanine, Richmond,
Virginia 23219, Attention: Corporate Trust Department.
<PAGE>
8
"corporation" includes corporations, associations, companies
and business trusts.
"covenant defeasance" has the meaning specified in Section
1303.
"Credit Facilities" means one or more debt facilities or
commercial paper facilities with banks or other institutional lenders providing
for revolving credit loans, term loans, receivables financing or securitizations
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables) or letters
of credit, in each case, as amended, restated, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time.
"Cumulative Consolidated Cash Flow" means, for the period
beginning on the Closing Date through and including the end of the last fiscal
quarter (taken as one accounting period) preceding the date of any proposed
Restricted Payment, Consolidated Cash Flow of the Company and its Restricted
Subsidiaries for such period determined on a consolidated basis in accordance
with GAAP.
"Cumulative Consolidated Fixed Charges" means the Consolidated
Fixed Charges of the Company and its Restricted Subsidiaries for the period
beginning on the Closing Date through and including the end of the last fiscal
quarter (taken as one accounting period) preceding the date of any proposed
Restricted Payment, determined on a consolidated basis in accordance with GAAP.
"Cumulative Consolidated Interest Expense" means, for the
period beginning on the Closing Date through and including the end of the last
fiscal quarter (taken as one accounting period) preceding the date of any
proposed Restricted Payment, Consolidated Interest Expense of the Company and
its Restricted Subsidiaries for such period determined on a consolidated basis
in accordance with GAAP.
"Currency Agreement" means any foreign exchange contract,
currency swap agreement and any other arrangement and agreement designed to
provide protection against fluctuations in currency (or currency unit) values.
"Default" means any event that is, or after notice or passage
of time or both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 307.
"defeasance" has the meaning specified in Section 1302.
<PAGE>
9
"Depositary" means The Depository Trust Company, its nominees
and successors or any replacement thereof.
"Eligible Accounts Receivable" means the accounts receivable
(net of any reserves and allowances for doubtful accounts in accordance with
GAAP) of any Person arising in the ordinary course of business that are not more
than 90 days past their due date, as shown on the most recent consolidated
balance sheet of such Person filed with the Commission, all in accordance with
GAAP.
"Eligible Institution" means a commercial banking institution
that has combined capital and surplus of not less than $500.0 million or its
equivalent in foreign currency, and has outstanding debt with a rating of "A-3"
or higher according to Moody's Investors Service, Inc., or "A-" or higher
according to Standard & Poor's Ratings Services (or such similar equivalent
rating by at least one "nationally recognized statistical rating organization"
(as defined in Rule 436 under the Securities Act)), at the time as of which any
investment or rollover therein is made.
"Event of Default" has the meaning specified in Section 501.
"Excess Proceeds" has the meaning specified in Section 1017.
"Excess Proceeds Offer" has the meaning specified in Section
1017.
"Excess Proceeds Payment" has the meaning specified in Section
1017.
"Excess Proceeds Payment Date" has the meaning specified in
Section 1017.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Notes" has the meaning stated in the first recital
of this Indenture and refers to any Exchange Notes containing terms
substantially identical to the Initial Notes (except that such Exchange Notes
shall not contain terms with respect to transfer restrictions and shall be
registered under the Securities Act) that are issued and exchanged for the
Initial Notes in accordance with the Exchange Offer, as provided for in the
Registration Rights Agreement and this Indenture.
"Exchange Offer" means the offer by the Company to the Holders
of the Initial Notes to exchange all of the Initial Notes for Exchange Notes, as
provided for in the Registration Rights Agreement.
<PAGE>
10
"Exchange Offer Registration Statement" means the Exchange
Offer Registration Statement as defined in the Registration Rights Agreement.
"Existing Indebtedness" means Indebtedness outstanding on the
date hereof.
"Fair Market Value" means, with respect to any asset or
property, the sale value that would be obtained in an arm's length transaction
between an informed and willing seller under no compulsion to sell and an
informed and willing buyer under no compulsion to buy.
"GAAP" means generally accepted accounting principles in the
United States as in effect from time to time, including, without limitation,
those set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession of the United States.
"Global Notes" means any of the Rule 144A Global Notes or
Regulation S Global Notes.
"Guarantee" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation of such other Person (whether
arising by virtue of partnership arrangements, or by agreements to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for purposes
of assuring in any other manner the obligee of such Indebtedness or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided that the term "Guarantee" shall
not include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Holder" means a Person in whose name a Note is registered in
the Register.
"Incur" or "Incurrence" means, with respect to any
Indebtedness, to incur, create, issue, assume, Guarantee or otherwise become
liable for or with respect to, or become responsible for, the payment of,
contingently or otherwise, such Indebtedness, including an Incurrence of
Indebtedness by reason of the acquisition of more than 50.0% of the Capital
Stock of any Person; provided that neither the accrual of interest nor the
accretion of original issue discount shall be considered an Incurrence of
Indebtedness.
<PAGE>
11
"Indebtedness" means, with respect to any Person at any date
of determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto), (iv) except with respect to
Trade Payables, all obligations of such Person to pay the deferred and unpaid
purchase price of property or services, which purchase price is due more than
six months after the date of placing such property in service or taking delivery
and title thereto or the completion of such services, (v) all obligations of
such Person as lessee under Capitalized Lease Obligations and the Attributable
Value under any Sale-Leaseback Transaction of such Person, (vi) all Indebtedness
of other Persons secured by a Lien on any asset of such Person, whether or not
such Indebtedness is assumed by such Person; provided that the amount of such
Indebtedness shall be the lesser of (A) the fair market value of such asset at
such date of determination or (B) the amount of such Indebtedness, (vii) all
Indebtedness of other Persons Guaranteed by such Person to the extent such
Indebtedness is Guaranteed by such Person, (viii) the maximum fixed redemption
or repurchase price of Redeemable Stock of the Company or Preferred Stock of any
Restricted Subsidiary at the time of determination and (ix) to the extent not
otherwise included in this definition, obligations under Currency Agreements and
Interest Rate Agreements. The amount of Indebtedness of any Person at any date
shall be the outstanding balance at such date of all unconditional obligations
as described above and, with respect to contingent obligations, the maximum
liability upon the occurrence of the contingency giving rise to the obligation;
provided (x) that the amount outstanding at any time of any Indebtedness issued
with original issue discount is the face amount of such Indebtedness less the
remaining unamortized portion of the original issue discount of such
Indebtedness at such time as determined in conformity with GAAP and (y) that
Indebtedness shall not include any liability for federal, state, local, foreign
or other taxes.
"Indenture" means this instrument and the Pledge Agreement as
originally executed and as they may from time to time be supplemented or amended
by one or more indentures supplemental hereto and pledge agreements supplemental
thereto entered into pursuant to the applicable provisions hereof.
"Indirect Participant" means a Person who holds a beneficial
interest in a Global Note through a Participant.
"Initial Notes" has the meaning stated in the first recital of
this Indenture.
"Initial Purchasers" means Lehman Brothers Inc., Goldman,
Sachs & Co. and ING Baring (U.S.) Securities, Inc.
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12
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Notes.
"Interest Rate Agreement" means any interest rate swap
agreements, interest rate cap agreements, interest rate insurance, and other
arrangements and agreements designed to provide protection against fluctuations
in interest rates.
"Interest Rate Protection Obligations" means the obligations
of any Person pursuant to any Interest Rate Agreements.
"Investment" in any Person means any direct or indirect
advance, loan or other extension of credit (including, without limitation, by
way of Guarantee or similar arrangement; but excluding advances to customers in
the ordinary course of business that are, in conformity with GAAP, recorded as
accounts receivable on the balance sheet of the Company or its Restricted
Subsidiaries) or capital contribution to (by means of any transfer of cash or
other property to others or any payment for property or services for the account
or use of others), or any purchase or acquisition of Capital Stock, bonds,
notes, debentures or other similar instruments issued by, such Person. For
purposes of the definition of "Unrestricted Subsidiary," and Sections 1012 and
1014, (i) "Investment" shall include (a) the fair market value of the assets
(net of liabilities) of any Restricted Subsidiary of the Company at the time
that such Restricted Subsidiary of the Company is designated an Unrestricted
Subsidiary and shall exclude the fair market value of the assets (net of
liabilities) of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary of the Company and (b) the fair
market value, in the case of a sale of Capital Stock in accordance with Section
1014 such that a Person no longer constitutes a Restricted Subsidiary, of the
remaining assets (net of liabilities) of such Person after such sale, and shall
exclude the fair market value of the assets (net of liabilities) of any
Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is
designated a Restricted Subsidiary of the Company and (ii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its fair
market value at the time of such transfer, in each case as determined by the
Board of Directors in good faith.
"IRU" means Indefeasible Right of Use, which is the right to
use a telecommunications system, usually an undersea cable, with most of the
rights and duties of ownership, but without the right to control or manage the
facility and, depending upon the particular agreement, without any right to
salvage or duty to dispose of the system's cable at the end of its useful life.
"Issue Date" means May 21, 1998, the date on which the Initial
Notes are initially issued.
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13
"Lien" means any mortgage, charge, pledge, security interest,
encumbrance, lien (statutory or other), hypothecation, assignment for security
or other encumbrance upon or with respect to any property of any kind
(including, without limitation, any conditional sale or other title retention
agreement or lease in the nature thereof, any sale with recourse against the
seller or any Affiliate of the seller, or any agreement to give any security
interest).
"Liquidated Damages" means all liquidated damages then owing
pursuant to Section 5 of the Registration Rights Agreement.
"MAOU" means Minimum Assignable Ownership Units which is
capacity on a telecommunications system, usually an undersea fiber optic cable,
acquired on an ownership basis.
"Marketable Securities" means: (i) U.S. Government Obligations
which have a remaining weighted average life to maturity of not more than one
year from the date of Investment therein; (ii) any time deposit account, money
market deposit and certificate of deposit maturing not more than 180 days after
the date of acquisition issued by, or time deposit of, an Eligible Institution;
(iii) certificates of deposit, Eurodollar time deposits and bankers' acceptances
with maturity of 90 days or less and overnight bank deposits of any financial
institution that is organized under the laws of the United States of America or
any state hereof, and which bank or trust company has capital, surplus and
undivided profits aggregating in excess of $300.0 million (or, to the extent
non-United States dollar denominated, the United States Dollar Equivalent of
such amount) and has outstanding debt which is rated "A" (or such similar
equivalent rating) or higher by at least one "nationally recognized statistical
rating organization" (as defined in Rule 436 under the Securities Act); (iv)
commercial paper maturing not more than 180 days after the date of acquisition
issued by a corporation (other than an Affiliate of the Company) with a rating,
at the time as of which any investment therein is made, of "P-1" or higher
according to Moody's Investors Service, Inc., or "A-1" or higher according to
Standard & Poor's Ratings Services (or such similar equivalent rating by at
least one "nationally recognized statistical rating organization" (as defined in
Rule 436 under the Securities Act)); (v) auction rate preferred securities whose
rates are reset based on market levels for a par security not more than 90 days
after the date of acquisition with a rating, at the time as of which any
investment therein is made, of "A-3" or higher according to Moody's Investors
Service, Inc., or "A-" or higher according to Standard & Poor's Ratings Services
(or such similar equivalent rating by at least one "nationally recognized
statistical rating organization" (as defined in Rule 436 under the Securities
Act)) and issued by a corporation that is not an Affiliate of the Company; (vi)
any banker's acceptance or money market deposit accounts issued or offered by an
Eligible Institution; (vii) repurchase obligations with a term of not more than
seven days for U.S. Government Obligations entered into with an Eligible
Institution; and (viii) any fund investing exclusively in investments of the
types described in clauses (i) through (vii) above.
<PAGE>
14
"Maturity," when used with respect to any Notes, means the
date on which the principal of such Notes or an installment of principal becomes
due and payable as therein or herein provided, whether at the Stated Maturity or
by declaration of acceleration, notice of redemption or otherwise.
"Maturity Date" means May 15, 2008.
"Net Cash Proceeds" means, (a) with respect to any Asset Sale,
the proceeds of such Asset Sale in the form of cash or cash equivalents,
including payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or cash equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any Restricted
Subsidiary of the Company) and proceeds from the conversion of other property
received when converted to cash or cash equivalents, net of: (i) brokerage
commissions, finders' fees and other fees and expenses (including fees and
expenses of counsel, accountants and investment bankers and other advisors)
related to such Asset Sale, (ii) provisions for all taxes payable as a result of
such Asset Sale without regard to the consolidated results of operations of the
Company and its Restricted Subsidiaries, taken as a whole (after taking into
account any available offsetting tax credits or deductions and any tax sharing
arrangements), (iii) payments made to repay Indebtedness or any other obligation
outstanding at the time of such Asset Sale that either (A) is secured by a Lien
on the property or assets sold or (B) is required to be paid as a result of such
sale and (iv) appropriate amounts to be provided by the Company or any
Restricted Subsidiary of the Company as a reserve against any contingent
liabilities associated with such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale, all as determined in conformity with GAAP, and
(b) with respect to any issuance or sale of Capital Stock, the proceeds of such
issuance or sale in the form of cash or cash equivalents, including payments in
respect of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form of
cash or cash equivalents (except to the extent such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary of the Company)
and proceeds from the conversion of other property received when converted to
cash or cash equivalents, net of attorneys' fees, finders' fees, accountants'
fees, underwriters' or placement agents' fees, discounts or commissions and
brokerage, consultant and other fees incurred in connection with such issuance
or sale and net of taxes paid or payable as a result thereof.
"Notes" means any of the Notes as defined in the first recital
of this Indenture and more particularly means any Notes authenticated and
delivered under this Indenture.
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15
"Officer's Certificate" means a certificate signed by the
chairman, the president, a Vice President, the treasurer, an assistant
treasurer, the secretary or an assistant secretary of the Company, and delivered
to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who
may be counsel for the Company, including an employee of the Company, and who
shall be acceptable to the Trustee.
"Outstanding," when used with respect to Notes, means, as of
the date of determination, all Notes theretofore authenticated and delivered
under this Indenture, except:
(i) Notes theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Notes, or portions thereof, for whose payment or
redemption money in the necessary amount has been theretofore deposited
with the Trustee or any Paying Agent (other than the Company) in trust
or set aside and segregated in trust by the Company (if the Company
shall act as its own Paying Agent) for the Holders of such Notes;
provided that, if such Notes are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture or provision
therefor satisfactory to the Trustee has been made;
(iii) Notes, except to the extent provided in Sections 1302
and 1303, with respect to which the Company has effected defeasance
and/or covenant defeasance as provided in Article Thirteen; and
(iv) Notes which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Notes have been authenticated
and delivered pursuant to this Indenture, other than any such Notes in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Notes are held by a bona fide purchaser in
whose hands the Notes are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Notes have given any request, demand,
authorization, direction, consent, notice or waiver hereunder, and for the
purpose of making the calculations required by Section 313 of the TIA, Notes
owned by the Company or any other obligor upon the Notes or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in making such calculation or in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Notes which a
Responsible Officer of the Trustee actually knows to be so owned shall be so
disregarded. Notes so owned which have been pledged in good faith may be
regarded as
<PAGE>
16
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Notes and that the pledgee is not
the Company or any other obligor upon the Notes or any Affiliate of the Company
or such other obligor.
"Participant" means, with respect to the Depositary or its
nominee, an institution that has an account therewith.
"Paying Agent" means any Person (including the Company acting
as Paying Agent) authorized by the Company to pay the principal of (and premium,
if any) or interest on any Notes on behalf of the Company. The initial Paying
Agent shall be the Trustee.
"Payment Account" has the meaning specified in Section 402.
"Permitted Business" means any business involving voice, data
and other telecommunications services.
"Permitted Indebtedness" has the meaning specified in Section
1011(b).
"Permitted Investment" means (i) an Investment in a Restricted
Subsidiary or a Person which will, upon the making of such Investment, become a
Restricted Subsidiary or be merged or consolidated with or into or transfer or
convey all or substantially all its assets to, the Company or a Restricted
Subsidiary; (ii) any Investment in Marketable Securities or Pledged Securities;
(iii) payroll, travel and similar advances to cover matters that are expected at
the time of such advances ultimately to be treated as expenses in accordance
with GAAP; (iv) loans or advances to officers and employees that do not in the
aggregate exceed $1.5 million at any time outstanding; (v) stock, obligations or
securities received in satisfaction of judgments; (vi) Investments in any Person
received as consideration for Asset Sales to the extent permitted under Section
1017; (vii) Investments in any Person at any one time outstanding (measured on
the date each such Investment was made without giving effect to subsequent
changes in value) in an aggregate amount not to exceed the greater of (A) $35.0
million or (B) 15.0% of the Company's total consolidated assets; (viii)
Investments in deposits with respect to leases or utilities provided to third
parties in the ordinary course of business; (ix) Investments in Currency
Agreements and Interest Rate Agreements on commercially reasonable terms entered
into by the Company or any of its Restricted Subsidiaries in the ordinary course
of business in connection with the operation of the business of the Company or
its Restricted Subsidiaries; provided that such agreements do not increase the
Indebtedness of the obligor outstanding at any time other than as a result of
fluctuations in foreign currency exchange rates or interest rates or by reason
of fees, indemnities and compensation payable thereunder; (x) repurchases or
redemptions by the Company of Capital Stock from officers and other employees of
the Company or any of its Subsidiaries or their authorized representatives upon
the death, disability or termination of employment of such individuals, in an
aggregate amount not exceeding $1.0 million in any
<PAGE>
17
calendar year and $3.0 million from the date of this Indenture; and (xi)
Investments in evidences of Indebtedness, securities or other property received
from another Person by the Company or any of its Restricted Subsidiaries in
connection with any bankruptcy proceeding or by reason of a composition or
readjustment of debt or a reorganization of such Person or as a result of
foreclosure, perfection or enforcement of any Lien in exchange for evidences of
Indebtedness, securities or other property of such Person held by the Company or
any of its Subsidiaries, or for other liabilities or obligations of such Person
to the Company or any of its Subsidiaries that were created, in accordance with
the terms of this Indenture.
"Permitted Liens" means (i) Liens for taxes, assessments,
governmental charges or claims that are being contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted and
for which a reserve or other appropriate provision, if any, as shall be required
in conformity with GAAP shall have been made; (ii) statutory Liens of landlords
and carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or
other similar Liens arising in the ordinary course of business and with respect
to amounts not yet delinquent or being contested in good faith by appropriate
legal proceedings promptly instituted and diligently conducted and for which a
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made; (iii) Liens incurred or deposits made
in the ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security; (iv) Liens incurred
or deposits made to secure the performance of tenders, bids, leases, statutory
or regulatory obligations, bankers' acceptances, surety and appeal bonds,
government or other contracts, performance and return- of-money bonds and other
obligations of a similar nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money); (v) easements,
rights-of-way, municipal and zoning ordinances and similar charges,
encumbrances, title defects or other irregularities that do not materially
interfere with the ordinary course of business of the Company or any of its
Restricted Subsidiaries; (vi) Liens (including extensions and renewals thereof)
upon real or personal property purchased or leased after the Closing Date;
provided that (a) such Lien is created solely for the purpose of securing
Indebtedness Incurred in compliance with Section 1011 (1) to finance the cost
(including the cost of design, development, construction, acquisition,
installation or integration) of the item of property or assets subject thereto
and such Lien is created prior to, at the time of or within six months after the
later of the acquisition, the completion of construction or the commencement of
full operation of such property or (2) to refinance any Indebtedness previously
so secured, (b) the principal amount of the Indebtedness secured by such Lien
does not exceed 100.0% of such cost and (c) any such Lien shall not extend to or
cover any property or assets other than such item of property or assets and any
improvements on such item; (vii) leases or subleases granted to others that do
not materially interfere with the ordinary course of business of the Company and
its Restricted Subsidiaries, taken as a whole; (viii) Liens encumbering property
or assets under construction arising from progress or partial payments by a
customer of the Company or its Restricted Subsidiaries relating to such property
or assets; (ix) any interest or title of a lessor in the
<PAGE>
18
property subject to any Capitalized Lease Obligation or operating lease; (x)
Liens arising from filing Uniform Commercial Code financing statements regarding
leases; (xi) Liens on property of, or on shares of stock or Indebtedness of, any
corporation existing at the time such corporation becomes, or becomes a part of,
any Restricted Subsidiary; provided that such Liens do not extend to or cover
any property or assets of the Company or any Restricted Subsidiary other than
the property or assets acquired and were not created in contemplation of such
transaction; (xii) Liens in favor of the Company or any Restricted Subsidiary;
(xiii) Liens arising from the rendering of a final judgment or order against the
Company or any Restricted Subsidiary of the Company that does not give rise to
an Event of Default; (xiv) Liens securing reimbursement obligations with respect
to letters of credit that encumber documents and other property relating to such
letters of credit and the products and proceeds thereof; (xv) Liens in favor of
customs and revenue authorities arising as a matter of law to secure payment of
customs duties in connection with the importation of goods; (xvi) Liens
encumbering customary initial deposits and margin deposits and other Liens that
are either within the general parameters customary in the industry or incurred
in the ordinary course of business, in each case, securing Indebtedness under
Interest Rate Agreements and Currency Agreements; (xvii) Liens arising out of
conditional sale, title retention, consignment or similar arrangements for the
sale of goods entered into by the Company or any of its Restricted Subsidiaries
in the ordinary course of business in accordance with the past practices of the
Company and its Restricted Subsidiaries prior to the Closing Date; (xviii) Liens
existing on the Closing Date or securing the Notes or any Guarantee of the
Notes; (xix) Liens granted after the Closing Date on any assets or Capital Stock
of the Company or its Restricted Subsidiaries created in favor of the Holders;
(xx) Liens securing Indebtedness which is incurred to refinance secured
Indebtedness which is permitted to be Incurred under clause (viii) of paragraph
(b) of Section 1011; provided that such Liens do not extend to or cover any
property or assets of the Company or any Restricted Subsidiary other than the
property or assets securing the Indebtedness being refinanced; and (xxi) Liens
securing Indebtedness under Credit Facilities incurred in compliance with clause
(iv) of paragraph (b) of Section 1011.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Pledge Account" means an account established with the Trustee
pursuant to the terms of the Pledge Agreement for the deposit of the Pledged
Securities purchased by the Company with a portion of the net proceeds from the
offering of the Notes.
"Pledge Agreement" means the Collateral Pledge and Security
Agreement, dated as of the date of this Indenture, from the Company to the
Trustee, governing the Pledge Account and the disbursement of funds therefrom.
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19
"Pledged Securities" means the securities purchased by the
Company with a portion of the net proceeds from the offering of the Notes, which
shall consist of U.S. Government Obligations, to be deposited in the Pledge
Account. The Pledged Securities may be held in book entry form through First
Union National Bank acting as securities intermediary.
"Predecessor Note" of any particular Note means 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 306 in exchange for a mutilated
security or in lieu of a lost, destroyed or stolen Note shall be deemed to
evidence the same debt as the mutilated, lost, destroyed or stolen Note.
"Preferred Stock" means, with respect to any Person, any and
all shares, interests, participations, rights or other equivalents (however
designated, whether voting or non-voting) of such Person's preferred or
preference stock, whether now outstanding or issued after the date of the
Indenture, including, without limitation, all series and classes of such
preferred or preference stock.
"Private Placement Legend" has the meaning specified in
Section 202.
"Pro Forma Consolidated Cash Flow" means, for any period, the
Consolidated Cash Flow of the Company for such period calculated on a pro forma
basis to give effect to any Asset Disposition or Asset Acquisition not in the
ordinary course of business (including acquisitions of other Persons by merger,
consolidation or purchase of Capital Stock) during such period as if such Asset
Disposition or Asset Acquisition had taken place on the first day of such
period, including any related financing transactions and also giving pro forma
effect to any other Indebtedness repaid or discharged during such period other
than with respect to working capital borrowings.
"Public Equity Offering" means an underwritten primary public
offering of Common Stock of the Company pursuant to an effective registration
statement under the Securities Act.
"Purchase Price" has the meaning set forth in Section 1010.
"Qualified Institutional Buyers" or "QIBs" has the meaning set
forth in Section 201.
"Redeemable Stock" means any class or series of Capital Stock
of any Person that by its terms (or by the terms of any security into which it
is exchangeable) or otherwise is (i) required to be redeemed on or prior to the
date that is 123 days after the date of the Stated Maturity of the Notes, (ii)
redeemable at the option of the holder of such class or series of
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20
Capital Stock at any time on or prior to the date that is 123 days after the
date of the Stated Maturity of the Notes or (iii) convertible into or
exchangeable for Capital Stock referred to in clause (i) or (ii) above or
Indebtedness having a scheduled maturity on or prior to the date that is 123
days after the date of the Stated Maturity of the Notes; provided that any
Capital Stock that would not constitute Redeemable Stock but for provisions
thereof giving holders thereof the right to require such Person to repurchase or
redeem such Capital Stock upon the occurrence of an "asset sale" or "change of
control" occurring on or prior to the date that is 123 days after the date of
the Stated Maturity of the Notes shall not constitute Redeemable Stock if the
"asset sale" or "change of control" provisions applicable to such Capital Stock
are no more favorable to the holders of such Capital Stock than the provisions
contained in Sections 1010 and 1017 and such Capital Stock specifically provides
that such Person will not repurchase or redeem any such stock pursuant to such
provisions on or prior to the date that is 123 days after the date of the
Company's repurchase of such Notes as are required to be repurchased pursuant to
Sections 1010 and 1017.
"Redemption Date," when used with respect to any Note to be
redeemed, in whole or in part, means the date fixed for such redemption by or
pursuant to this Indenture.
"Redemption Price," when used with respect to any Note to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Register" and "Registrar" have the respective meanings
specified in Section 305.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of this Indenture, by and among the Initial
Purchasers and the Company, concerning the registration and exchange of the
Notes, a conformed copy of which has been delivered to the Trustee.
"Registration Statement" means the Registration Statement as
defined in the Registration Rights Agreement.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the May 1 or November 1 (whether or not a Business Day), as
the case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Certificated Notes" has the meaning specified in
Section 201.
"Regulation S Global Notes" has the meaning specified in
Section 201.
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21
"Regulation S Permanent Global Notes" has the meaning
specified in Section 201.
"Regulation S Temporary Global Notes" has the meaning
specified in Section 201.
"Reorganization" means the reorganization of the Company into
a Delaware holding company structure consisting of the transfer of substantially
all of the Company's assets to lower-tiered subsidiaries and the merger of the
Company with and into Subsidiary Holdings, which will be the owner of all of the
outstanding capital stock of the newly formed lower-tier subsidiaries.
"Responsible Officer," when used with respect to the Trustee,
means any officer of its corporate trust department or similar group 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 knowledge of and familiarity with the
particular subject.
"Restricted Payments" has the meaning specified in Section
1012.
"Restricted Period" has the meaning specified in Section 201.
"Restricted Subsidiary" means any Subsidiary of the Company
other than an Unrestricted Subsidiary.
"Rule 144A Certificated Notes" has the meaning specified in
Section 201.
"Rule 144A Global Notes" has the meaning specified in Section
201.
"Sale-Leaseback Transaction" of any person means an
arrangement with any lender, investor or other Person ("Investor") or to which
such Investor is a party providing for the lease by such Person of any property
or asset of such Person which has been or is being sold or transferred by such
Person after the acquisition thereof or the completion of construction or
commencement of operation thereof to such Investor or to any Person to whom
funds have been or are to be advanced by such Investor on the security of such
property or asset. The stated maturity of such arrangement shall be the date of
the last payment of rent or any other amount due under such arrangement prior to
the first date on which such arrangements may be terminated by the lessee
without payment of a penalty.
"Securities Act" means the Securities Act of 1933, as amended.
"Separability Legend" has the meaning specified in Section
202.
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22
"Separation Date" means the earliest to occur of (i) November
15, 1998, (ii) the effectiveness of the Exchange Offer Registration Statement or
the Shelf Registration Statement, (iii) the occurrence of an Exercise Event (as
defined in the Warrant Agreement) and (iv) such other date determined by Lehman
Brothers, Inc. The occurrence of the Separation Date shall be confirmed to the
Trustee by the delivery of an Officer's Certificate.
"Shelf Registration Statement" means the Shelf Registration as
defined in the Registration Rights Agreement.
"Significant Subsidiary" means a Restricted Subsidiary that is
a "significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X under
the Securities Act and the Exchange Act.
"Special Record Date" for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity" means, (i) with respect to any debt
security, the date specified in such debt security as the fixed date on which
the final installment of principal of such debt security is due and payable and
(ii) with respect to any scheduled installment of principal of or interest on
any debt security, the date specified in such debt security as the fixed date on
which such installment is due and payable.
"Subsidiary" means, with respect to any Person, any
corporation, association or other business entity of which more than 50.0% of
the outstanding Voting Stock is owned, directly or indirectly, by such Person
and one or more other Subsidiaries of such Person.
"Subsidiary Holdings" means, Startec Global Holding
Corporation, a Delaware corporation all the outstanding capital stock of which
is owned by the Company.
"Telecommunications Assets" means, with respect to any Person,
equipment and other properties or assets (whether tangible or intangible) used
in the telecommunications business including, without limitation, rights with
respect to IRUs, MAOUs or minimum investment units (or similar interests) in
fiber optic cable and international or domestic telecommunications switches or
other transmission facilities, including monitoring and related administrative
support facilities (or Common Stock of a Person that becomes a Restricted
Subsidiary, the assets of which consist primarily of any such Telecommunications
Assets), in each case purchased, or acquired through a Capitalized Lease
Obligation, by the Company or a Restricted Subsidiary after the Closing Date.
"Tested Transaction" has the meaning stated in the definition
of "United States Dollar Equivalent".
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23
"Trade Payables" means any accounts payable or any other
indebtedness or monetary obligation to trade creditors created, assumed or
Guaranteed by the Company or any of its Restricted Subsidiaries arising in the
ordinary course of business in connection with the acquisition of goods and
services.
"Transaction Date" means, with respect to the Incurrence of
any Indebtedness by the Company or any of its Restricted Subsidiaries, the date
such Indebtedness is to be Incurred and with respect to any Restricted Payment,
the date such Restricted Payment is to be made.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act
of 1939, as amended as in force at the date as of which this Indenture was
executed, except as provided in Section 905.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Uniform Commercial Code" means the Uniform Commercial Code as
in effect in New York State.
"United States Dollar Equivalent" means, with respect to any
monetary amount in a currency other than the United States dollar, at any time
for the determination thereof, the amount of United States dollars obtained by
converting such foreign currency involved in such computation into United States
dollars at the spot rate for the purchase of United States dollars with the
applicable foreign currency as quoted by Reuters at approximately 11:00 a.m.
(New York City time) on the date not more than two business days prior to such
determination. For purposes of determining whether any Indebtedness can be
incurred (including Permitted Indebtedness), any Investment can be made and any
transaction described in Section 1015 can be undertaken (a "Tested
Transaction"), the United States Dollar Equivalent of such Indebtedness,
Investment or transaction described in Section 1015 will be determined on the
date Incurred, made or undertaken and no subsequent change in the United States
Dollar Equivalent shall cause such Tested Transaction to have been Incurred,
made or undertaken in violation of this Indenture.
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Company that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate
any Restricted Subsidiary of the Company (including any newly acquired or newly
formed Subsidiary of the Company) to be an Unrestricted Subsidiary unless such
Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property
of, the Company or any Restricted Subsidiary; provided that (A) that the
Subsidiary to be so designated
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24
has total assets of $1,000 or less or (B) if such Subsidiary has assets greater
than $1,000, that such designation would be permitted under Section 1012, and
such Subsidiary is not liable, directly or indirectly, with respect to any
Indebtedness other than Unrestricted Subsidiary Indebtedness. The Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary of the Company; provided that immediately after giving effect to such
designation (x) the Company could Incur $1.00 of additional Indebtedness under
the first paragraph of Section 1011 and (y) no Default or Event of Default shall
have occurred and be continuing. Any such designation by the Board of Directors
shall be evidenced to the Trustee by promptly filing with the Trustee a copy of
the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions.
"Unrestricted Subsidiary Indebtedness" means Indebtedness of
any Unrestricted Subsidiary (i) as to which neither the Company nor any
Restricted Subsidiary is directly or indirectly liable (by virtue of the Company
or any such Restricted Subsidiary being the primary obligor on, guarantor of, or
otherwise liable in any respect to, such Indebtedness) and (ii) which, upon the
occurrence of a default with respect thereto, does not result in, or permit any
holder of any Indebtedness of the Company or any Restricted Subsidiary to
declare, a default on such Indebtedness of the Company or any Restricted
Subsidiary or cause the payment thereof to be accelerated or payable prior to
its Stated Maturity.
"U.S. Government Obligations" has the meaning specified in
Section 1304.
"U.S. Person" has the meaning given to such term in Regulation
S under the Securities Act.
"Vice President," when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
"Voting Stock" means with respect to any Person, 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.
"Warrant Agreement" means the Warrant Agreement, dated as of
May 21, 1998, between the Company and First Union National Bank, as Warrant
Agent.
"Warrants" means warrants to purchase (subject to adjustment
in certain instances) an aggregate of 200,226 shares of common stock of the
Company, to be issued to the Warrant Agreement.
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25
"Wholly Owned," with respect to any Subsidiary, means a
Subsidiary of the Company if all of the outstanding Capital Stock in such
Subsidiary (other than any director's qualifying shares or Investments by
foreign nationals mandated by applicable law) is owned by the Company or one or
more Wholly Owned Subsidiaries of the Company.
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee
to take any action under any provision of this Indenture, the Company shall
furnish to the Trustee an Officer's Certificate stating that all conditions
precedent, if any, provided for in this Indenture (including any covenant
compliance with which constitutes a condition precedent) 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, if any, have been
complied with, except that in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture relating to such particular application or request, no
additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than pursuant to
Section 1008(a)) shall include:
(1) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual,
he or she has made such examination or investigation as is necessary to enable
him or her 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, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters
<PAGE>
26
and one or more other such Persons as to other matters, and any such Person may
certify or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
SECTION 104. Acts of Holders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agents duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner that the Trustee deems sufficient.
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27
(c) The principal amount and serial numbers of Notes held by
any Person, and the date of holding the same, shall be proved by the Register.
(d) If the Company shall solicit from the Holders of Notes any
request, demand, authorization, direction, notice, consent, waiver or other Act,
the Company may, at its option, by or pursuant to a Board Resolution, fix in
advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other Act,
but the Company shall have no obligation to do so. Notwithstanding TIA Section
316(c), such record date shall be the record date specified in or pursuant to
such Board Resolution, which shall be a date not earlier than the date 30 days
prior to the first solicitation of Holders generally in connection therewith and
not later than the date such solicitation is completed. If such a record date is
fixed, such request, demand, authorization, direction, notice, consent, waiver
or other Act may be given before or after such record date, but only the Holders
of record at the close of business on such record date shall be deemed to be
Holders for the purposes of determining whether Holders of the requisite
proportion of Outstanding Notes have authorized or agreed or consented to such
request, demand, authorization, direction, notice, consent, waiver or other Act,
and for that purpose the Outstanding Notes shall be computed as of such record
date; provided that no such request, demand, authorization, direction, notice,
consent, waiver or other Act by, the Holders on such record date shall be deemed
effective unless it shall become effective pursuant to the provisions of this
Indenture not later than eleven months after the record date.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Note shall bind every future
Holder of the same Note and the Holder of every Note issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Note.
SECTION 105. Notices, Etc., to Trustee, Company.
Any request, demand, authorization, direction, notice,
consent, waiver or Act of Holders or other document provided or permitted by
this Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or filed in
writing to or with the Trustee at its Corporate Trust Office, or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office
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28
specified in the first paragraph of this Indenture, or at any other address
previously furnished in writing to the Trustee by the Company.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice of any event to
Holders by the Company or the Trustee, such notice shall be sufficiently given
(unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to each Holder affected by such event, at his
address as it appears in the Register, not later than the latest date, and not
earlier than the earliest date, prescribed for the giving of such notice. In any
case where notice to Holders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed, to any particular Holder shall
affect the sufficiency of such notice with respect to other Holders. Any notice
mailed to a Holder in the manner herein prescribed shall be conclusively deemed
to have been received by such Holder, whether or not such Holder actually
receives such notice. Where this Indenture provides for notice in any manner,
such notice may be waived in writing by the Person entitled to receive such
notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
In case by reason of the suspension of or irregularities in
regular mail service or by reason of any other cause, it shall be impracticable
to mail notice of any event to Holders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice for every purpose hereunder.
SECTION 107. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
SECTION 108. Successors and Assigns.
All covenants and agreements made by the Company set forth in
this Indenture shall bind its successors and assigns, whether so expressed or
not.
SECTION 109. Separability Clause.
In case any provision in this Indenture or in the Notes shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
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29
SECTION 110. 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
Notes Registrar and their successors hereunder, and the Holders, any benefit or
any legal or equitable right, remedy or claim under this Indenture.
SECTION 111. Governing Law.
This Indenture and the Notes shall be governed by and
construed in accordance with the laws of the State of New York. Upon the
issuance of Exchange Notes, if any, or the effectiveness of the Shelf
Registration Statement, this Indenture will be subject to these provisions of
the Trust Indenture Act that are required to be part of this Indenture and
shall, to the extent applicable, be governed by such provisions. Each of the
parties hereto submits to the jurisdiction of the U.S. federal and any New York
state court located in the Borough of Manhattan, The City and State of New York
with respect to any actions brought against it as defendant in any suit, action
or proceeding arising out of or relative to this Indenture or the Notes and
waives any rights to which it may be entitled on account of place of residence
or domicile.
SECTION 112. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date
or Stated Maturity or Maturity of any Note shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Notes) payment
of principal (or premium, if any) or interest 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 such Interest Payment Date or Redemption Date, or at the Stated
Maturity or Maturity; provided that no interest shall accrue for the period from
and after such Interest Payment Date, Redemption Date, Stated Maturity or
Maturity, as the case may be.
ARTICLE TWO
NOTE FORMS
SECTION 201. Forms Generally.
The Notes and the Trustee's certificate of authentication
shall be substantially in the form annexed hereto as Exhibit A with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture. The Notes may have
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30
notations, legends or endorsements required by law, stock exchange agreements to
which the Company is subject or usage. The Company shall approve the form of the
Notes and any notation, legend or endorsement on the Notes. Each Note shall be
dated the date of its authentication.
The terms and provisions contained in the form of the Notes
annexed hereto as Exhibit A shall constitute, and are hereby expressly made, a
part of this Indenture. 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.
Notes offered and sold to "qualified institutional buyers"
("Qualified Institutional Buyers" or "QIBs") as defined in and in reliance on
Rule 144A under the Securities Act shall be issued initially in the form of one
or more permanent global Notes in registered form, substantially in the form set
forth in Exhibit A (the "Rule 144A Global Notes"), registered in the name of the
Depositary or the nominee of the Depositary, deposited with the Trustee, as
custodian for the Depositary, duly executed by the Company and authenticated by
the Trustee as hereinafter provided. The aggregate principal amount of the Rule
144A Global Notes may from time to time be increased or decreased by adjustments
made on the records of the Trustee, as custodian for the Depositary or its
nominee, in accordance with the instructions given by the Holder thereof, as
hereinafter provided.
Notes offered and sold in offshore transactions in reliance on
Regulation S under the Securities Act shall be issued initially in the form of
one or more temporary global Notes ("Regulation S Temporary Global Note") in
registered form substantially in the form set forth in Exhibit A, registered in
the name of the Depositary or the nominee of the Depositary for credit to the
subscribers' respective accounts at Euroclear and CEDEL, deposited with the
Trustee, as custodian for the Depositary, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. At any time on or after
the later of (x) the Separation Date and (y) June 29, 1998, (the "Restricted
Period"), upon receipt by the Trustee and the Company of a certificate
substantially in the form of Exhibit B hereto, one or more permanent global
Notes in registered form substantially in the form set forth in Exhibit A (the
"Regulation S Permanent Global Notes"; and together with the Regulation S
Temporary Global Notes, the "Regulation S Global Notes"), duly executed by the
Company and authenticated by the Trustee as hereinafter provided, shall be
deposited with the Trustee, as custodian for the Depositary, and the Registrar
shall reflect on its books and records the date and a decrease in the principal
amount of the Regulation S Temporary Global Note in an amount equal to the
principal amount of the beneficial interest in the Regulation S Temporary Global
Note transferred. During the Restricted Period, beneficial interests in the
Regulation S Temporary Global Note may be held only through Euroclear or CEDEL
(as indirect participants in the depository).
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31
Notes issued pursuant to Section 312 in exchange for interests
in Rule 144A Global Notes shall be issued in the form of permanent certificated
Notes in registered form in substantially the form set forth in Exhibit A (the
"Rule 144A Certificated Notes"). Notes issued pursuant to Section 312 in
exchange for interests in the Regulation S Global Notes shall be in the form of
permanent certificated Notes in registered form substantially in the form set
forth in Exhibit A (the "Regulation S Certificated Notes").
The Regulation S Certificated Notes and Rule 144A Certificated
Notes are sometimes collectively herein referred to as the "Certificated Notes".
The Rule 144A Global Notes and the Regulation S Global Notes are sometimes
collectively referred to herein as the "Global Notes". Ownership of beneficial
interests in Global Notes will be limited to Participants or Indirect
Participants.
The definitive Notes shall be typed, printed, lithographed or
engraved or produced by any combination of these methods or may be produced in
any other manner permitted by the rules of any securities exchange on which the
Notes may be listed, all as determined by the officers executing such Notes, as
evidenced by their execution of such Notes.
SECTION 202. Restrictive Legends.
Unless and until a Note is exchanged for an Exchange Note in
connection with an effective Registration Statement pursuant to the Registration
Rights Agreement, Rule 144A Global Notes, Regulation S Temporary Global Notes
and each Rule 144A Certificated Note shall bear the following legend (the
"Private Placement Legend") on the face thereof:
THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
OR OTHER SECURITIES LAWS. NEITHER THIS NOTE NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF
THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING ITS
NOTE IN AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 904 OF REGULATION S
UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE
DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY
RULE 144(k) UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION
THEREUNDER) AFTER THE LATER OF
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32
THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS NOTE) OR
THE LAST DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS
THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF THIS NOTE) AND (Y) SUCH
LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE
RESTRICTION TERMINATION DATE") OFFER, SELL OR OTHERWISE TRANSFER THIS
NOTE EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT,
(C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S.
PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM
THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND; PROVIDED THAT THE COMPANY, THE TRUSTEE AND THE REGISTRAR SHALL
HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER, IN EACH OF
THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE
FORM APPEARING ON THE OTHER SIDE OF THIS NOTE IS COMPLETED AND
DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. IN CONNECTION WITH ANY
TRANSFER OF THIS NOTE WITHIN THE TIME PERIOD REFERRED TO ABOVE, 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
THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER
AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE
THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
Until the Separation Date, each Note also shall bear the
following legend (the "Separability Legend"):
UNTIL THE SEPARATION DATE (AS DEFINED), THIS NOTE HAS BEEN ISSUED AS,
AND MUST BE TRANSFERRED AS, A UNIT TOGETHER WITH THE
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33
ASSOCIATED WARRANTS TO PURCHASE COMMON STOCK OF THE COMPANY. EACH UNIT
CONSISTS OF $1,000 PRINCIPAL AMOUNT OF NOTES AND A WARRANT TO PURCHASE
1.25141 SHARES OF COMMON STOCK OF THE COMPANY, SUBJECT TO ADJUSTMENT
UNDER CERTAIN CIRCUMSTANCES. A COPY OF THE WARRANT AGREEMENT PURSUANT
TO WHICH THE WARRANTS HAVE BEEN ISSUED IS AVAILABLE FROM THE COMPANY
UPON REQUEST.
Each Global Note, whether or not an Exchange Note, shall also
bear the following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED, BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, 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 TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY OR SUCH OTHER REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN SECTIONS 311 AND 312 OF THE INDENTURE.
ARTICLE THREE
THE NOTES
SECTION 301. Title and Terms.
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34
The aggregate principal amount of Notes which may be
authenticated and delivered under this Indenture is limited to $160,000,000,
except for Notes authenticated and delivered upon registration of transfer of,
or in exchange for, or in lieu of, other Notes pursuant to Section 303, 304,
305, 306, 906, 1010, 1017 or 1108.
The Initial Notes shall be known and designated as the "12%
Senior Notes due 2008" of the Company and the Exchange Notes shall be known and
designated as the "12% Series A Senior Notes due 2008" of the Company. The
Stated Maturity of the principal of the Notes shall be May 15, 2008 and they
shall bear interest at the rate of 12% per annum, payable on May 15 and November
15 of each year, commencing on November 15, 1998, until the principal thereof is
paid or duly provided for. Interest on the Notes will accrue from the most
recent Interest Payment Date for which interest has been paid or, if no interest
has been paid, from the Issue Date.
The principal of (and premium and Liquidated Damages, if any)
and interest on the Notes shall be payable at the office or agency of the
Company maintained for such purpose pursuant to Section 1002, or, at the option
of the Company, interest may be paid by check mailed to addresses of the Persons
entitled thereto as such addresses shall appear on the Register; provided that
all payments with respect to the Global Notes and Certificated Notes the Holders
of which have given wire transfer instructions to the Company will be required
to be made by wire transfer of immediately available funds to the accounts
specified by the Holders thereof.
The Notes shall be redeemable as provided in Article Eleven.
SECTION 302. Denominations.
The Notes shall be issuable only in fully registered form,
without coupons, and only in denominations of $1,000 in principal amount and any
integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Notes shall be executed on behalf of the Company by its
chairman, its president, chief financial officer or any Vice President. The
signature of any of these officers on the Notes may be manual or facsimile
signatures of the present or any future such authorized officer and may be
imprinted or otherwise reproduced on the Notes.
Notes bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Notes or did
not hold such offices at the date of such Notes.
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35
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Initial Notes executed by
the Company to the Trustee for authentication, together with a Company Order for
the authentication and delivery of such Initial Notes directing the Trustee to
authenticate the Notes and certifying that all conditions precedent to the
issuance of Notes contained herein have been fully complied with, and the
Trustee in accordance with such Company Order shall either at one time or from
time to time pursuant to such instruction as may be described therein,
authenticate and deliver such Notes as in this Indenture provided and not
otherwise. The Trustee shall, upon receipt of a Company Order, authenticate for
original issue Exchange Notes in an aggregate principal amount not to exceed
$160,000,000; provided that such Exchange Notes shall be issuable only upon the
valid surrender for cancellation of Initial Notes of a like aggregate principal
amount in accordance with an Exchange Offer pursuant to the Registration Rights
Agreement and a Company Order for the authentication of such securities
certifying that all conditions precedent to the issuance have been complied with
(including the effectiveness of a registration statement related thereto). In
each case, the Trustee shall be entitled to receive an Officer's Certificate and
an Opinion of Counsel of the Company that it may reasonably request in
connection with such authentication of Notes. Such order shall specify the
amount of Notes to be authenticated and the date on which the original issue of
Initial Notes or Exchange Notes is to be authenticated.
Each Note shall be dated the date of its authentication.
No Note shall be entitled to any benefit under this Indenture
or be valid or obligatory for any purpose unless there appears on such Note a
certificate of authentication, substantially in the form provided for in Exhibit
A, duly executed by the Trustee by manual signature of an authorized officer,
and such certificate upon any Note shall be conclusive evidence, and the only
evidence, that such Note has been duly authenticated and delivered hereunder and
is entitled to the benefits of this Indenture.
In case the Company, pursuant to Article Eight, shall be
consolidated or merged with or into any other Person or shall convey, transfer,
lease or otherwise dispose of its properties and assets substantially as an
entirety in a transaction or a series of transactions to any Person, and the
successor Person resulting from such consolidation, or surviving such merger, or
into which the Company shall have been merged, or the Person which shall have
received a conveyance, transfer, lease or other disposition as aforesaid, shall
have executed an indenture supplemental hereto with the Trustee pursuant to
Article Eight, any of the Notes authenticated or delivered prior to such
consolidation, merger, conveyance, transfer, lease or other disposition may,
from time to time, at the request of the successor Person, be exchanged for
other Notes executed in the name of the successor Person with such changes in
phraseology and form as may be appropriate, but otherwise in substance of like
tenor as the Notes surrendered for such exchange and of like principal amount;
and the Trustee, upon Company Request of the successor Person, shall
authenticate and deliver Notes as specified in such request for the purpose of
such
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36
exchange. If Notes shall at any time be authenticated and delivered in any new
name of a successor Person pursuant to this Section in exchange or substitution
for or upon registration of transfer of any Notes, such successor Person, at the
option of the Holders but without expense to them, shall provide for the
exchange of all Notes at the time Outstanding for Notes authenticated and
delivered in such new name.
SECTION 304. Temporary Notes.
Pending the preparation of definitive Notes, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Notes which are printed, lithographed, typewritten, mimeographed or
otherwise produced, in any authorized denomination, substantially of the tenor
of the definitive Notes in lieu of which they are issued and with such
appropriate insertions, omissions, substitutions and other variations as the
officers executing such Notes may determine, as conclusively evidenced by their
execution of such Notes.
If temporary Notes are issued, the Company shall cause
definitive Notes to be prepared without unreasonable delay. After the
preparation of definitive Notes, the temporary Notes shall be exchangeable for
definitive Notes upon surrender of the temporary Notes at the office or agency
of the Company designated for such purpose pursuant to Section 1002 without
charge to the Holder. Upon surrender for cancellation of any one or more
temporary Notes, the Company shall execute and upon Company Order the Trustee
shall authenticate and deliver in exchange therefor a like principal amount of
definitive Notes of authorized denominations. Until so exchanged, the temporary
Notes shall in all respects be entitled to the same benefits under this
Indenture as definitive Notes.
SECTION 305. Registration, Registration of Transfer and
Exchange.
The Company shall cause to be kept at the Corporate Trust
Office of the Trustee a register (the register maintained in such office and in
any other office or agency designated pursuant to Section 1002 being herein
sometimes referred to as the "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 Register shall be in written form or any
other form capable of being converted into written form within a reasonable
time. At all reasonable times, the Register shall be open to inspection by the
Trustee. The Trustee is hereby initially appointed as security registrar (the
"Registrar") for the purpose of registering Notes and transfers of Notes as
herein provided.
Upon surrender for registration of transfer of any Note at the
office or agency of the Company designated pursuant to Section 1002, the Company
shall execute, and the Trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or
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37
more new Notes of any authorized denomination or denominations of a like
aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other
Notes of any authorized denomination and of a like aggregate principal amount,
upon surrender of the Notes to be exchanged at such office or agency. Whenever
any Notes are so surrendered for exchange, the Company shall execute, and the
Trustee shall, upon receipt of a Company Order, authenticate and deliver, the
Notes which the Holder making the exchange is entitled to receive; provided that
no exchange of Initial Notes for Exchange Notes shall occur until an Exchange
Offer Registration Statement shall have been declared effective by the
Commission, the Trustee shall have received an Officer's Certificate confirming
that the Exchange Offer Registration Statement has been declared effective by
the Commission and the Initial Notes to be exchanged for the Exchange Notes
shall be cancelled by the Trustee.
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.
Every Note presented or surrendered for registration of
transfer or for exchange shall be duly endorsed and be accompanied by a written
instrument of transfer, in form satisfactory to the Company and the Registrar,
duly executed by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange or redemption of Notes, but the Company or the Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Notes, other than exchanges pursuant to Section 304, 906, 1010, 1017
or 1108 not involving any transfer.
The Company shall not be required (i) to issue, register the
transfer of or exchange any Note during a period beginning at the opening of
business 15 days before the selection of Notes to be redeemed under Section 1104
and ending at the close of business on the day of such mailing of the relevant
notice of redemption, or (ii) to register the transfer of or exchange any Note
so selected for redemption in whole or in part, except the unredeemed portion of
any Note being redeemed in part.
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SECTION 306. Mutilated, Destroyed, Lost and Stolen Notes.
If (i) any mutilated Note is surrendered to the Trustee, or
(ii) the Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Note, and there is delivered to the Company
and the Trustee such security or indemnity as may be required by them to save
each of them harmless, then, in the absence of notice to the Company or the
Trustee that such Note has been acquired by a bona fide purchaser, the Company
shall execute and upon Company Order the Trustee shall authenticate and deliver,
in exchange for any such mutilated Note or in lieu of any such destroyed, lost
or stolen Note, a new Note of like tenor and principal amount, bearing a number
not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Note has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Note, pay such Note.
Upon the issuance of any new Note under this Section 306, 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 (including the fees and expenses of the Trustee) connected therewith.
Every new Note issued pursuant to this Section 306 in lieu of
any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all benefits of this Indenture equally and proportionately
with any and all other Notes duly issued hereunder.
The provisions of this Section 306 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Interest on any Note which is payable, and is punctually paid
or duly provided for, on any Interest Payment Date shall be paid to the Person
in whose name such Note (or Predecessor Notes) is registered at the close of
business on the Regular Record Date (or if a Predecessor Note is outstanding on
such Regular Record Date, such Predecessor Note) for such interest at the office
or agency of the Company maintained for such purpose pursuant to Section 1002
or, at the option of the Company, interest may be paid by check mailed to the
address of the Person entitled thereto as such address shall appear on the
Register; provided that all payments with respect to Global Notes and
Certificated Notes the Holders of which have given
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39
wire transfer instructions to the Company will be required to be made by wire
transfer of immediately available funds to the accounts specified by the Holders
thereof.
Any interest on any Note which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date shall
forthwith cease to be payable to the Holder on the Regular Record Date by virtue
of having been such Holder, and such defaulted interest and (to the extent
lawful) interest on such defaulted interest at the rate borne by the Notes (such
defaulted interest and interest thereon herein collectively called "Defaulted
Interest") may 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 ("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
proposed to be paid on each Note and the date of the proposed
payment, and at the same time the Company shall deposit with
the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or
shall make arrangements satisfactory to the Trustee for such
deposit prior to the date of the proposed payment, such money
when deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest as in this clause
provided. Thereupon the Trustee shall fix a Special Record
Date for the payment of such Defaulted Interest which shall be
not more than 15 days and not less than 10 days prior to the
date of the proposed payment and not less than 10 days after
the receipt by the Trustee of the notice of the proposed
payment. The Trustee shall promptly notify the 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
given in the manner provided for in Section 106 not less than
10 days prior to such Special Record Date. Notice of the
proposed payment of such Defaulted Interest and the Special
Record Date therefor having been so given, such Defaulted
Interest shall be paid to the Persons in whose names the Notes
(or their respective Predecessor Notes) are registered at the
close of business on such Special Record Date and shall no
longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted
Interest in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Notes may
be listed, and upon such notice as may be required by such
exchange, if, after notice given in writing by the Company to
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40
the Trustee of the proposed payment pursuant to this clause,
such manner of payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section 307, each
Note delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Note shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Note.
SECTION 308. Persons Deemed Owners.
Prior to the due presentment of a Note for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Note is registered as the owner of such
Note for the purpose of receiving payment of principal of (and premium, if any)
and (subject to Sections 305 and 307) interest on such Note and for all other
purposes whatsoever, whether or not such Note be overdue, and none of the
Company, the Trustee or any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 309. Cancellation.
All Notes surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to, and promptly cancelled by, the Trustee. The Company may at any
time deliver to the Trustee for cancellation any Notes previously authenticated
and delivered hereunder which the Company may have acquired in any manner
whatsoever, and may deliver to the Trustee (or to any other Person for delivery
to the Trustee) for cancellation any Notes previously authenticated hereunder
which the Company has not issued and sold, and all Notes so delivered shall be
promptly cancelled by the Trustee. If the Company shall so acquire any of the
Notes, however, such acquisition shall not operate as a redemption or
satisfaction of the Indebtedness represented by such Notes unless and until the
same are surrendered to the Trustee for cancellation. No Notes shall be
authenticated in lieu of or in exchange for any Notes cancelled as provided in
this Section, except as expressly permitted by this Indenture. All cancelled
Notes held by the Trustee shall be disposed of by the Trustee in accordance with
its customary procedures and certification of their disposal delivered to the
Company unless by Company Order the Company shall direct that cancelled Notes be
returned to it after being appropriately designated as cancelled.
SECTION 310. Computation of Interest.
Interest on the Notes shall be computed on the basis of a
360-day year of twelve 30-day months.
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SECTION 311. Book-Entry Provisions for Global Notes.
(a) Each Global Note initially shall (i) be registered in the
name of the Depositary for such Global Notes or the nominee of such Depositary,
(ii) be delivered to the Trustee as custodian for such Depositary and (iii) bear
legends as set forth in Section 202.
Except as provided in Section 311(b), owners of beneficial
interests in the Global Notes will not have Notes registered in their names,
will not receive physical delivery of Notes in certificated form and will not be
considered the registered owner or Holder thereof under this Indenture for any
purpose.
Members of, or Participants in, the Depositary shall have no
rights under this Indenture with respect to any Global Note, and the Depositary
may be treated by the Company, the Trustee and any agent of the Company or the
Trustee as the absolute owner of such Global Note for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or impair, as between the Depositary and its Participants, the operation of
customary practices governing the exercise of the rights of a beneficial owner
of any Note. The registered Holder of a Global Note may grant proxies and
otherwise authorize any person, including Participants and persons that may hold
interests through Participants, to take any action which a Holder is entitled to
take under this Indenture or the Notes.
(b) Interests of beneficial owners in a Global Note may be
transferred in accordance with the applicable rules and procedures of the
Depositary and the provisions of Section 312. Transfers of a Global Note shall
be limited to transfers of such Global Note in whole, but not in part, to the
Depositary, a nominee of the Depositary, its successors or their respective
nominees. Interests of beneficial owners in the Global Notes may be transferred
in accordance with the rules and procedures of the Depositary and the provisions
of Section 312 hereof. Rule 144A Certificated Notes and Regulation S
Certificated Notes shall be transferred to beneficial owners in exchange for
their beneficial interests in the Rule 144A Global Note(s) or the Regulation S
Global Note(s), as the case may be, if (i) the Depositary (A) notifies the
Company that it is unwilling or unable to continue as depository for the Global
Notes and the Company thereupon fails to appoint a successor depository or (B)
has ceased to be a clearing agency registered under the Exchange Act; (ii) there
shall have occurred and be continuing an Event of Default with respect to the
Notes; or (iii) the Company, at its option, notifies the Trustee in writing that
it elects to cause issuance of the Notes in certificated form; provided that in
no event shall the Regulation S Temporary Global Note be exchanged by the
Company for Certificated Notes prior to (x) the end of the Restricted Period and
(y) receipt by the Trustee and the Company of a certificate substantially in the
form of Exhibit B hereto. In connection with a transfer of an entire Global Note
to beneficial owners pursuant to clause (i), (ii) or (iii) of this
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42
paragraph (b), the applicable Global Note shall be deemed to be surrendered to
the Trustee for cancellation, and the Company shall execute, and the Trustee
shall authenticate and deliver, to each beneficial owner identified by the
Depositary in exchange for its beneficial interest in the applicable Global
Note, an equal aggregate principal amount of Rule 144A Certificated Notes (in
the case of the Rule 144A Global Note) or Regulation S Certificated Notes (in
the case of the Regulation S Global Note), as the case may be, of authorized
denominations.
(c) Any beneficial interest in one of the Global Notes that is
transferred to a Person who takes delivery in the form of an interest in the
other Global Note will, upon transfer, cease to be an interest in such Global
Note and become an interest in the other Global Note and, accordingly, will
thereafter be subject to all transfer restrictions, if any, and other procedures
applicable to beneficial interests in such other Global Note for as long as it
remains such an interest.
(d) Any Rule 144A Certificated Note delivered in exchange for
an interest in the Rule 144A Global Note pursuant to paragraph (b) of this
Section shall, unless such exchange is made on or after the date which is two
years following the date hereof, or such shorter period of time as permitted
under Rule 144(k) under the Securities Act, and except as otherwise provided in
Section 312, bear the Private Placement Legend.
SECTION 312. Transfer Provisions.
Unless and until a Note is exchanged for an Exchange Note in
connection with an effective Registration Statement pursuant to the Registration
Rights Agreement, the following provisions shall apply:
(a) Transfers to QIBs. The following provisions shall apply
with respect to the registration of any proposed transfer of a Rule
144A Certificated Note or an interest in the Rule 144A Global Note to a
QIB (excluding Non-U.S. Persons):
(i) If the Note to be transferred consists of (x)
Rule 144A Certificated Notes, the Registrar shall register the
transfer if such transfer is being made by a proposed
transferor who has checked the box provided for on the form of
Note stating, or has otherwise advised the Company and the
Registrar in writing, that the sale has been made in
compliance with the provisions of Rule 144A to a transferee
who has signed the certification provided for on the form of
Note stating, or has otherwise advised the Company and the
Registrar in writing, that it is purchasing the Note for its
own account (or an account with respect to which it exercises
sole investment discretion) and that each of it and any such
account is a QIB, and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has
received such information regarding the Company as it
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43
has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the
transferor is relying upon its foregoing representations in
order to claim the exemption from registration provided by
Rule 144A or (y) an interest in the Rule 144A Global Note, the
transfer of such interest may be effected only through the
book-entry system maintained by the Depositary.
(ii) If the proposed transferee is a Participant,
and the Note to be transferred consists of Rule 144A
Certificated Notes, upon receipt by the Registrar of the
documents referred to in clause (i)(x) and instructions given
in accordance with the Depositary's and the Registrar's
procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount of
the Rule 144A Global Note in an amount equal to the principal
amount of the Rule 144A Certificated Notes to be transferred,
and the Trustee shall cancel the Rule 144A Certificated Note
so transferred.
(b) Transfers of Interests in the Regulation S Temporary
Global Note to QIBs. The following provisions shall apply with respect
to registration of any proposed transfer of interests in the Regulation
S Temporary Global Note:
(i) The Registrar shall register the transfer of
any Note (x) if the proposed transferee is a Non-U.S. Person
and the proposed transferor has delivered to the Registrar a
certificate substantially in the form of Exhibit C hereto or
(y) if the proposed transferee is a QIB and the proposed
transferor has checked the box provided for on the form of
Note stating, or has otherwise advised the Company and the
Registrar in writing, that the sale has been made in
compliance with the provisions of Rule 144A to a transferee
who has signed the certification provided for on the form of
Note stating, or has otherwise advised the Company and the
Registrar in writing, that it is purchasing the Note for its
own account or an account with respect to which it exercises
sole investment discretion and that each of it and any such
account is a QIB within the meaning of Rule 144A, and is aware
that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding
the Company as it has requested pursuant to Rule 144A or has
determined not to request such information and that it is
aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from
registration provided by Rule 144A.
(ii) If the proposed transferee is a Participant,
upon receipt by the Registrar of the documents referred to in
clause (i)(x) above and instructions given in accordance with
the Depositary's and the Registrar's procedures, the
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Registrar shall reflect on its books and records the date and
an increase in the principal amount of the Rule 144A Global
Note in an amount equal to the principal amount of the
Regulation S Temporary Global Note to be transferred, and the
Trustee shall decrease the amount of the Regulation S
Temporary Global Note.
(c) Transfers of Interests in the Regulation S Permanent
Global Note or Regulation S Certificated Notes to U.S. Persons. The
following provisions shall apply with respect to registration of any
proposed transfer of interests in the Regulation S Permanent Global
Note or Regulation S Certificated Notes to U.S. Persons:
(i) The Registrar shall register the transfer of
any such Note without requiring any additional certification.
(ii) (A) If the proposed transferor is a Participant
holding a beneficial interest in the Regulation S Permanent
Global Note, upon receipt by the Registrar of instructions in
accordance with the Depositary's and the Registrar's
procedures, the Registrar shall reflect on its books and
records the date and a decrease in the principal amount of the
Regulation S Permanent Global Note in an amount equal to the
principal amount of the beneficial interest in the Regulation
S Permanent Global Note to be transferred, and (B) if the
proposed transferee is a Participant, upon receipt by the
Registrar of instructions given in accordance with the
Depositary's and the Registrar's procedures, the Registrar
shall reflect on its books and records the date and an
increase in the principal amount of the Rule 144A Global Note
in an amount equal to the principal amount of the Regulation S
Certificated Notes or the Regulation S Permanent Global Note,
as the case may be, to be transferred, and the Trustee shall
cancel the Certificated Note, if any, so transferred or
decrease the amount of the Regulation S Permanent Global Note.
(d) Transfers to Non-U.S. Persons at Any Time. The following
provisions shall apply with respect to any transfer of a Note to a
Non-U.S. Person:
(i) Prior to the later of (x) the Separation Date
and (y) June 29, 1998, the Registrar shall register any
proposed transfer of a Note to a Non-U.S. Person upon receipt
of a certificate substantially in the form of Exhibit C hereto
from the proposed transferor.
(ii) On and after the later of (x) the Separation
Date and (y) June 29, 1998, the Registrar shall register any
proposed transfer to any Non-U.S. Person if the Note to be
transferred is a Rule 144A Certificated Note or an interest in
the
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Rule 144A Global Note, upon receipt of a certificate
substantially in the form of Exhibit C hereto from the
proposed transferor.
(iii) (A) If the proposed transferor is a Participant
holding a beneficial interest in the Rule 144A Global Note,
upon receipt by the Registrar of the documents, if any,
required by paragraph (ii) and instructions in accordance with
the Depositary's and the Registrar's procedures, the Registrar
shall reflect on its books and records the date and a decrease
in the principal amount of the Rule 144A Global Note in an
amount equal to the principal amount of the beneficial
interest in the Rule 144A Global Note to be transferred, and
(B) if the proposed transferee is a Participant, upon receipt
by the Registrar of instructions given in accordance with the
Depositary's and the Registrar's procedures, the Registrar
shall reflect on its books and records the date and an
increase in the principal amount of the Regulation S Global
Note in an amount equal to the principal amount of the Rule
144A Certificated Notes or the Rule 144A Global Note, as the
case may be, to be transferred, and the Trustee shall cancel
the Certificated Note, if any, so transferred or decrease the
amount of the Rule 144A Global Note.
(e) Private Placement Legend. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the
Registrar shall deliver Notes that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Notes bearing the
Private Placement Legend, the Registrar shall deliver only Notes that
bear the Private Placement Legend unless either (i)(A) the
circumstances contemplated by the fourth paragraph of Section 201 or
Section 312(d)(ii) exist or (B) the requested transfer is after the
time period referred to in Rule 144(k) under the Securities Act or (ii)
there is delivered to the Registrar an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that neither
such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities Act.
(f) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the
restrictions on transfer of such Note set forth in this Indenture and
in the Private Placement Legend and agrees that it shall transfer such
Note only as provided in this Indenture. The Registrar shall not
register a transfer of any Note unless such transfer complies with the
restrictions on transfer of such Note set forth in this Indenture. In
connection with any transfer of Notes, each Holder agrees by its
acceptance of the Notes to furnish the Registrar or the Company such
certifications, legal opinions or other information as either of them
may reasonably require to confirm that such transfer is being made
pursuant to an exemption from, or a transaction not subject to, the
registration requirements of the Securities Act;
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46
provided that the Registrar shall not be required to determine (but may
rely on a determination made by the Company with respect to) the
sufficiency of any such certifications, legal opinions or other
information.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 311 or this Section
312. The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon the
giving of reasonable written notice to the Registrar.
SECTION 313. Separation of Notes and Warrants.
(a) Prior to the Separation Date, no Notes may be sold,
assigned or otherwise transferred to any Person unless, simultaneously
with such transfer, the Trustee receives confirmation from the Warrant
Agent for the Warrants that the Holder of the Notes has requested a
transfer of the related Warrants to the same transferee.
(b) On or after the Separability Date, the Holder of a Note
containing a Separability Legend may surrender such Note accompanied by
a written application to the Trustee, duly executed by the Holder, for
a new Note or Notes not containing a Separability Legend. Whether or
not the Holder obtains a new Note, from and after the Separability
Date, the Separability Legend shall have no further force and effect.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of
further effect as to all Outstanding Notes (except as to surviving rights of
registration of transfer or exchange of the Notes, as expressly provided for
herein or pursuant hereto) and the Trustee, at the expense of the Company, shall
execute proper instruments acknowledging satisfaction and discharge of this
Indenture when:
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(1) either:
(A) All Notes theretofore authenticated and delivered (other
than (i) Notes which have been destroyed, lost or stolen and
which have been replaced or repaid as provided in Section 306
and (ii) Notes for whose payment money has theretofore been
deposited in trust with the Trustee or any Paying Agent or
segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as
provided in Section 1003) have been delivered to the Trustee
for cancellation; or
(B) all Notes not theretofore delivered to the Trustee for
cancellation (other than Notes which have been destroyed, lost
or stolen and which have been replaced or paid as provided in
Section 306)
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity within one year, or
(iii) are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Company, and the Company, in the
case of (i), (ii) and (iii) above, has irrevocably deposited or caused to be
deposited with the Trustee as trust funds in trust for such purpose in an amount
sufficient to pay and discharge the entire Indebtedness on such Notes not
theretofore delivered to the Trustee for cancellation, for principal (and
premium, if any), accrued interest and Liquidated Damages, if any, on the Notes
to the date of such deposit (in the case of Notes which have become due and
payable) or to the Stated Maturity or Redemption Date, as the case may be,
together with irrevocable written instructions from the Company directing the
Trustee to apply such funds to the payment thereof at Stated Maturity or
redemption, as the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Company to the Trustee under Section 606 and,
if money shall have been deposited with the Trustee pursuant to subclause (b) of
clause (1) of this Section, the obligations of the Trustee under Section 402 and
the last paragraph of Section 1003 shall survive.
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SECTION 402. Application of Trust Money.
On or prior to the effective date of this Indenture, the
Trustee shall establish a segregated, non-interest bearing corporate trust
account (the "Payment Account") maintained by the Trustee for the benefit of the
Holders in which all amounts paid to the Trustee for the benefit of the Holders
in respect of the Notes will be held (except for amount designated to be
deposited into the Pledge Account) and from which the Trustee (if the Trustee is
the Paying Agent) shall make payments to the Holders in accordance with this
Indenture and the Notes. Subject to the provisions of the last paragraph of
Section 1003, all money deposited with the Trustee pursuant to Section 401 and
otherwise pursuant to this Indenture shall be held in trust and applied by it,
in accordance with the provisions of the Notes and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal (and premium, if any) and interest for whose
payment such money has been deposited with the Trustee.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(1) default in the payment of interest or Liquidated Damages,
if any, on any Note when due and payable as to any Interest Payment
Date falling on or prior to May 15, 2001; or
(2) default in the payment of interest or Liquidated Damages,
if any, on any Note when due and payable as to any Interest Payment
Date following after May 15, 2001, and any such failure continues for a
period of 30 days; or
(3) default in the payment of the principal of (or premium, if
any, on) any Note at its Stated Maturity, upon acceleration, redemption
or otherwise; or
(4) default in the payment of principal or interest or
Liquidated Damages, if any, on any Note required to be purchased
pursuant to an Excess Proceeds Offer as
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described in Section 1017 or pursuant to a Change of Control Offer as
described in Section 1010; or
(5) failure to perform or comply with the provisions of
Section 801; or
(6) default in the performance or breach of any covenant or
agreement of the Company in this Indenture or under the Notes (other
than a default in the performance, or breach, of a covenant or
agreement which is specifically dealt with elsewhere in this Section),
and continuance of such default or breach for a period of 30
consecutive days after there has been given to the Company by the
Trustee or the Holders of at least 25.0% or more in aggregate principal
amount of the Notes then Outstanding a written notice specifying such
default or breach; or
(7) (A) there shall have occurred with respect to any issue or
issues of Indebtedness of the Company or any Restricted Subsidiary
having an outstanding principal amount of $5.0 million or more in the
aggregate for all such issues of all such Persons, whether such
Indebtedness now exists or shall hereafter be created, (I) an event of
default that has caused the Holder thereof to declare such Indebtedness
to be due and payable prior to its Stated Maturity and such
Indebtedness has not been discharged in full or such acceleration has
not been rescinded or annulled by the expiration of any applicable
grace period and/or (II) the failure to make a principal payment at the
final (but not any interim) fixed Maturity Date thereon and such
defaulted payment shall not have been made, waived or extended by the
expiration of any applicable grace period; or
(8) any final judgment or order (not covered by insurance) for
the payment of money in excess of $5.0 million in the aggregate for all
such final judgments or orders against all such Persons (treating any
deductibles, self-insurance or retention as not so covered) shall be
rendered against the Company or any Restricted Subsidiary and shall not
be paid or discharged, and there shall be any period of 30 consecutive
days following entry of the final judgment or order that causes the
aggregate amount for all such final judgments or orders outstanding and
not paid or discharged against all such Persons to exceed $5.0 million
during which a stay of enforcement of such final judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect; or
(9) a court having jurisdiction in the premises enters a
decree or order for (A) relief in respect of the Company or any of its
Significant Subsidiaries in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect,
(B) appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official of the Company or any of its
Significant Subsidiaries or for all or substantially all of the
property and assets of the Company or any of its Significant
Subsidiaries or (C) the winding up or liquidation of the affairs of the
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Company or any of its Significant Subsidiaries and, in each case, such
decree or order shall remain unstayed and in effect for a period of 30
consecutive days; or
(10) the Company or any of its Significant Subsidiaries (A)
commences a voluntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or consents to the
entry of an order for relief in an involuntary case under any such law,
(B) consents to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Company or any of its Significant Subsidiaries or for
all or substantially all of the property and assets of the Company or
any of its Significant Subsidiaries or (C) effects any general
assignment for the benefit of creditors; or
(11) the Company asserts in writing that the Pledge Agreement
ceases to be in full force and effect before payment in full of the
obligations thereunder.
SECTION 502. Acceleration of Maturity: Rescission and
Annulment.
If an Event of Default (other than an Event of Default
specified in Section 501(9) or 501(10)) occurs and is continuing, then and in
every such case the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Notes Outstanding, by a notice in writing to the Company
(and to the Trustee if such notice given by such Holders), may, and the Trustee
at the request of such Holders shall, declare the principal of, premium, if any,
and accrued but unpaid interest and Liquidated Damages, if any, on all the Notes
to be immediately due and payable. Upon any such declaration of acceleration,
such principal of, premium, if any, accrued interest and Liquidated Damages, if
any, shall become immediately due and payable. If an Event of Default specified
in Section 501(9) or 501(10) occurs, then the principal of, premium, if any,
accrued interest and Liquidated Damages, if any, shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder.
At any time after a declaration of acceleration has been made,
the Holders of at least a majority in aggregate principal amount of the Notes
Outstanding, by written notice to the Company and the Trustee, may waive all
past defaults and rescind and annul such declaration and its consequences if:
(1) all existing Events of Default, other than the nonpayment
of amounts of principal of, premium, if any, accrued and unpaid
interest and Liquidated Damages, if any, on the Notes which have become
due solely by such declaration of acceleration, have been cured or
waived (subject to the limitations set forth in Section 513); and
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(2) the rescission, in the Opinion of Counsel, would not
conflict with any judgment or decrees of a court of competent
jurisdiction.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Notwithstanding the preceding paragraph, in the event a
declaration of acceleration in respect of the Notes because an Event of Default
specified in Section 501(7) shall have occurred and be continuing, such
declaration of acceleration shall be automatically annulled if the default
triggering such Event of Default has been remedied or cured by the Company
and/or the relevant Significant Subsidiaries or waived by the Holders of the
relevant Indebtedness within 60 days after the declaration of acceleration with
respect thereto.
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee.
The Company covenants that if
(a) default is made in the payment of any installment of
interest and Liquidated Damages, if any, on any Note when such interest
becomes due and payable and such default continues for a period of 30
days, or
(b) default is made in the payment of the principal of (or
premium, if any, on) any Note at the Maturity thereof,
the Company shall pay to the Trustee for the benefit of the Holders of such
Notes, the whole amount then due and payable on such Notes for principal (and
premium, if any) and interest, and (Liquidated Damages, if any) and interest on
any overdue principal (and premium, if any) and, to the extent that payment of
such interest shall be legally enforceable, upon any overdue installment of
interest and Liquidated Damages, 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 the reasonable compensation, fees,
expenses, disbursements and advances of the Trustee, its agents and counsel and
any other amounts due the Trustee or any predecessor Trustee.
If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company or any other obligor upon the Notes and
collect the moneys adjudged or decreed to be payable in the manner provided by
law out of the property of the Company or any other obligor upon the Notes,
wherever situated.
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If an Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights and the rights
of the Holders by such appropriate judicial proceedings as the Trustee shall
deem most effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid of
the exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relative to the Company or any other obligor upon the
Notes or the property of the Company or of such other obligor or their
creditors, 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 on the Company
for the payment of overdue principal, premium, if any, interest or Liquidated
Damages, if any) shall be entitled and empowered, by intervention in such
proceeding or otherwise,
(i) to file and prove a claim for the whole amount of
principal (and premium and Liquidated Damages, if any) and interest
owing and unpaid in respect of the Notes and to file such other papers
or documents and take other actions as the Trustee may deem necessary
or advisable in order to have the claims of the Trustee (including any
claim for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel) and of the Holders
allowed in such judicial proceeding, and
(ii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee or any Predecessor Trustee under Section 606.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Notes or the rights of any Holder thereof, or to authorize the Trustee to vote
in respect of the claim of any Holder in any such proceeding.
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53
SECTION 505. Trustee May Enforce Claims Without Possession of
Notes.
All rights of action and claims under this Indenture or the
Notes may be prosecuted and enforced by the Trustee without the possession of
any of the Notes or the production thereof in any proceeding relating thereto,
and any such proceeding instituted by the Trustee shall be brought in its own
name and as trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of the reasonable compensation, fees, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Notes in respect of which such judgment
has been recovered.
SECTION 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article
shall be applied in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of principal
(or premium, if any, or Liquidated Damages, if any) or interest, upon
presentation of the Notes and the notation thereon of the payment if only
partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 606;
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest (and Liquidated
Damages, if any) on the Notes in respect of which or for the benefit of
which such money has been collected, ratably, without preference or
priority of any kind, according to the amounts due and payable on such
Notes for principal (and premium and Liquidated Damages, if any) and
interest, respectively; and
THIRD: The balance, if any, to the Person or Persons entitled
thereto.
SECTION 507. Limitation on Suits.
Except to enforce the right to receive payment of principal or
premium, if any, or interest or Liquidated Damages, if any, when due, no Holder
of any Notes shall have any right to institute any proceeding, judicial or
otherwise, with respect to this Indenture, or for the appointment of a receiver
or trustee, or for any other remedy hereunder, unless the following conditions
have been met:
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
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(2) the Holders of not less than 25% in aggregate principal
amount of the Outstanding Notes shall have made written request to the
Trustee to pursue the remedy in respect of such Event of Default in its
own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
indemnity satisfactory to the Trustee against any costs, expenses and
liabilities to be incurred in compliance with such request;
(4) the Trustee has failed to institute any such proceeding
for 60 days after its receipt of such notice, request and offer of
indemnity; and
(5) during such 60-day period, no direction inconsistent with
such written request has been given to the Trustee by the Holders of a
majority or more in aggregate principal amount of the Outstanding
Notes;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 508. Unconditional Right of Holders to Receive
Principal, Premium and Interest.
Notwithstanding any other provision in this Indenture, the
Holder of any Note shall have the right, which is absolute and unconditional, to
receive payment, as provided herein (including, if applicable, Article Thirteen)
and in such Note of the principal of (and premium, if any) and (subject to
Section 307) accrued interest (and Liquidated Damages, if any) on the Stated
Maturities expressed in such Note (or, in the case of redemption, on the
Redemption Date) and to institute suit for the enforcement of any such payment
on or after such Stated Maturity, and such rights shall not be impaired without
the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
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SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes in the last paragraph
of Section 306, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any
Note to exercise any right or remedy accruing upon any Event of Default shall
impair any such right or remedy or constitute a waiver of any such Event of
Default or an acquiescence therein. Every right and remedy given by this Article
or by law to the Trustee or to the Holders may be exercised from time to time,
and as often as may be deemed expedient, by the Trustee or by the Holders, as
the case may be.
SECTION 512. Control by Holders.
The Holders of not less than a majority in aggregate principal
amount of the Outstanding Notes shall have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred on the Trustee, provided that
(1) the Trustee need not take any action that conflicts with
law or this Indenture, which might involve the Trustee in personal
liability or which, in the good faith determination of the Trustee, may
be unduly prejudicial to rights Holders not joining in the giving of
such direction, and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in aggregate principal
amount of the Outstanding Notes may on behalf of the Holders of all the Notes
waive any past default hereunder and its consequences, except a default
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(1) in respect of the payment of the principal of (or premium
or Liquidated Damages, if any) or interest on any Note, or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Note affected.
Upon any such waiver, such default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon.
SECTION 514. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do
so) that it shall not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law and covenants that it shall not hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults.
Within 90 days after the occurrence of any Default hereunder
known to the Trustee, the Trustee shall transmit in the manner and to the extent
provided in TIA Section 313(c), notice of such Default hereunder of the Trustee,
unless such Default shall have been cured or waived; provided, however, that,
except in the case of a Default in the payment of the principal of (or premium,
if any) or interest on any Note, the Trustee shall be protected in withholding
such notice if and so long as the board of directors, the executive committee or
a trust committee of directors and/or Responsible Officers of the Trustee in
good faith determines that the withholding of such notice is in the interest of
the Holders; and provided further that in the case of any Default of the
character specified in Section 501(7), no such notice to Holders shall be given
until at least 30 days after the occurrence thereof.
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In case an Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.
SECTION 602. Certain Rights of Trustee.
Subject to the provisions of TIA Sections 315(a) through
315(d):
(1) 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 party or parties;
(2) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(3) 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, require and rely upon an
Officer's Certificate;
(4) the Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(5) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee reasonable security or
indemnity against any loss, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(6) 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
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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;
(7) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder;
(8) the Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Indenture;
(9) any permissive right or power available to the Trustee
under this Indenture or any supplement hereto shall not be construed to
be a mandatory duty or obligation;
(10) the Trustee shall not be charged with knowledge of any
matter (including any default, other than as described in Section
501(1), (2) or (3)) unless and except to the extent actually known to a
Responsible Officer of the Trustee or to the extent written notice
thereof is received by the Trustee at the Corporate Trust Office; and
(11) the Trustee shall have no liability for any inaccuracy in
the books or records of, or for any actions or omissions of, DTC,
Euroclear or CEDEL or any depository acting on behalf of any of them.
The Trustee shall not be required 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.
The Trustee shall not be required to examine any of the
reports and documents filed with it pursuant to Sections 703 or 1009 to
determine whether or not the Company is in compliance with the covenants set
forth at Sections 1010 through 1021.
SECTION 603. Trustee Not Responsible for Recitals or Issuance
of Notes.
The recitals contained in this Indenture and in the Notes,
except for the Trustees certificates of authentication, shall be taken as the
statements of the Company, and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Notes, except that the Trustee
represents that it is duly authorized to execute and deliver this Indenture,
authenticate the Notes and perform its
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obligations hereunder and that the statements made by it in a Statement of
Eligibility on Form T- 1 supplied to the Company are true and accurate, subject
to the qualifications set forth therein. The Trustee shall not be accountable
for the use or application by the Company of Notes or the proceeds thereof.
SECTION 604. May Hold Notes.
The Trustee, any Paying Agent, any Registrar or any other
agent of the Company or of the Trustee, in its individual or any other capacity,
may become the owner or pledgee of Notes and, subject to TIA Sections 310(b) and
311, may otherwise deal with the Company with the same rights it would have if
it were not Trustee, Paying Agent, Registrar or such other agent.
SECTION 605. Money Held in Trust.
Money held by the Trustee in trust hereunder shall be
segregated from other funds. The Trustee shall be under no liability for
interest on any money received by it hereunder.
SECTION 606. Compensation and Reimbursement.
The Company agrees:
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder and under the
Pledge Agreement (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an
express trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture and under the Pledge
Agreement (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its gross negligence
or bad faith; and
(3) to indemnify the Trustee and its officers, directors,
employees, attorneys-in-fact and agents for, and to hold it harmless
against, any loss, liability or expense incurred without gross
negligence or bad faith on its part, arising out of or in connection
with the acceptance and administration of its duties under the Pledge
Agreement or the acceptance or administration of this trust, including
the costs and expenses of defending
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itself against any claim or liability in connection with the exercise
or performance of any of its powers or duties hereunder.
The obligations of the Company under this Section to
compensate the Trustee, to pay or reimburse the Trustee for expenses,
disbursements and advances and to indemnify and hold harmless the Trustee shall
constitute additional indebtedness hereunder and shall survive the resignation
or removal of the Trustee and the satisfaction and discharge of this Indenture.
As security for the performance of such obligations of the Company, the Trustee
shall have a claim prior to the Notes upon all property and funds held or
collected by the Trustee as such, except funds held in trust for the payment of
principal of (and premium, if any) or interest on particular Notes.
When the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 501(8) or (9), the
expenses (including the reasonable charges and expenses of its counsel) of and
the compensation for such services are intended to constitute expenses of
administration under any applicable federal or state bankruptcy, insolvency or
other similar law; provided, however, that if any such amounts are not paid as
expenses of administration, they may be collected by the Trustee as amounts
payable to it pursuant to Section 506.
The provisions of this Section 606 shall survive the
termination of this Indenture.
SECTION 607. Corporate Trustee Required; Eligibility.
There shall be at all times a Trustee hereunder which shall be
eligible to act as Trustee under TIA Section 310(a)(1) and shall have a combined
capital and surplus of at least $50 million. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of federal, state, territorial or District of Columbia supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 607, it shall resign immediately in the manner and
with the effect hereinafter specified in this Article.
SECTION 608. Resignation and Removal; Appointment of
Successor.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 609.
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(b) The Trustee may resign at any time by giving written
notice thereof to the Company. If the instrument of acceptance by a successor
Trustee required by Section 609 shall not have been delivered to the Trustee
within 30 days after the giving of such notice of resignation, the resigning
Trustee may petition any court of competent jurisdiction for the appointment of
a successor Trustee.
(c) The Trustee may be removed at any time by Act of the
Holders of not less than a majority in aggregate principal amount of the
Outstanding Notes, delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of
TIA Section 310(b) after written request therefor by the Company or by
any Holder who has been a bona fide Holder of a Note for at least six
months, or
(2) the Trustee shall cease to be eligible under Section 607
and shall fail to resign after written request therefor by the Company
or by any Holder who has been a bona fide Holder of a Note for at least
six months, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company, by a Board Resolution, may remove the
Trustee, or (ii) subject to TIA Section 315(e), any Holder who has been a bona
fide Holder of a Note for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any cause, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority in aggregate principal amount of
the Outstanding Notes delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee and supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so appointed
by the Company or the Holders and accepted appointment in the manner hereinafter
provided, any Holder who has been a bona fide Holder of a Note for at least
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six months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to the
Holders in the manner provided for in Section 106. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
SECTION 609. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on request of the
Company or the successor Trustee, such retiring Trustee shall, upon payment of
its charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder. Upon request of any such successor
Trustee, the Company shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor Trustee all such rights,
powers and trusts.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
SECTION 610. Merger, Conversion, Consolidation or Succession
to Business.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to all or substantially all of the
corporate trust business of the Trustee, shall be the successor of the Trustee
hereunder (provided such corporation shall be otherwise qualified and eligible
under this Article), without the execution or filing of any paper or any further
act on the part of any of the parties hereto. In case any Notes shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Notes so authenticated with the same effect
as if such successor Trustee had itself authenticated such Notes. In case at
that time any of the Notes shall not have been authenticated, any successor
Trustee may authenticate such Notes either in the name of any predecessor
hereunder or in the name of the successor Trustee. In all such cases such
certificates shall have the full force and effect which this Indenture provides
for the certificate of authentication of the Trustee shall have; provided,
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however, that the right to adopt the certificate of authentication of any
predecessor Trustee or to authenticate Notes in the name of any predecessor
Trustee shall apply only to its successor or successors by merger, conversion or
consolidation.
ARTICLE SEVEN
HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Disclosure of Names and Addresses of Holders.
Every Holder of Notes, by receiving and holding the same,
agrees with the Company and the Trustee that none of the Company or the Trustee
or any agent of either of them shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the Holders
in accordance with TIA Section 312, regardless of the source from which such
information was derived, and that the Trustee shall not be held accountable by
reason of mailing any material pursuant to a request made under TIA Section
312(b).
SECTION 702. Reports by Trustee.
Within 60 days after May 15 of each year commencing with the
first May 15 after the first issuance of Notes, the Trustee shall transmit to
the Holders, in the manner and to the extent provided in TIA Section 313(c), a
brief report dated as of such May 15 if required by TIA Section 313(a).
SECTION 703. Reports by Company.
The Company shall:
(1) file with the Trustee, within 15 days after the Company is
required to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports (or copies
of such portions of any of the foregoing as the Commission may from
time to time by rules and regulations prescribe) which the Company may
be required to file with the Commission pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934; or, if the
Company is not required to file information, documents or reports
pursuant to either of said Sections, then it shall file with the
Trustee and the Commission, in accordance with rules and regulations
prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports which may
be required pursuant to Section 13 of the Securities Exchange Act of
1934 in respect of a security listed and registered on a
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national securities exchange as may be prescribed from time to time in
such rules and regulations;
(2) file with the Trustee and the Commission, in accordance
with rules and regulations prescribed from time to time by the
Commission, such additional information, documents and reports with
respect to compliance by the Company with the conditions and covenants
of this Indenture as may be required from time to time by such rules
and regulations; and
(3) transmit by mail to all Holders, in the manner and to the
extent provided in TIA Section 313(c), within 30 days after the filing
thereof with the Trustee, such summaries of any information, documents
and reports required to be filed by the Company pursuant to paragraphs
(1) and (2) of this Section as may be required by rules and regulations
prescribed from time to time by the Commission.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on Certain
Terms.
The Company shall not consolidate with, or merge with or into,
or sell, convey, transfer, lease or otherwise dispose of all or substantially
all of its property and assets (as an entirety or substantially as an entirety
in one transaction or a series of related transactions) to, any Person or permit
any Person to merge with or into the Company and the Company shall not permit
any of its Restricted Subsidiaries to enter into any such transaction or series
of transactions if such transaction or series of transactions, in the aggregate,
would result in the sale, assignment, conveyance, transfer, lease or other
disposition of all or substantially all of the properties and assets of the
Company or the Company and its Restricted Subsidiaries, taken as a whole, to any
other Person or Persons, unless:
(1) either (A) the Company shall be the continuing Person or
(B) the Person (if other than the Company) formed by such consolidation
or into which the Company is merged or that acquired or leased such
property and assets of the Company (i) shall be a corporation organized
and validly existing under the laws of the United States of America or
any jurisdiction thereof and (ii) shall expressly assume, by an
indenture supplemental hereto, duly executed and delivered to the
Trustee, all of the obligations of the Company with respect to all the
Notes and under this Indenture;
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(2) immediately after giving effect to such transaction on a
pro forma basis, no Default or Event of Default shall have occurred and
be continuing;
(3) immediately after giving effect to such transaction on a
pro forma basis, the Company, or any Person becoming the successor
obligor of the Notes, shall have a Consolidated Net Worth equal to or
greater than the Consolidated Net Worth of the Company immediately
prior to such transaction;
(4) immediately after giving effect to such transaction on a
pro forma basis, the Company, or any Person becoming the successor
obligor of the Notes, as the case may be, could Incur at least $1.00 of
Indebtedness under paragraph (a) of Section 1011; and
(5) the Company delivers to the Trustee an Officer's
Certificate (attaching the arithmetic computations to demonstrate
compliance with clauses (3) and (4) above) and an Opinion of Counsel,
each stating that such consolidation, merger or transfer and such
supplemental indenture complies with this Article and that all
conditions precedent herein provided for relating to such transaction
have been complied with;
provided, however, that clauses (3) and (4) above shall not apply if, in the
good faith determination of the Board of Directors of the Company, whose
determination shall be evidenced by a Board Resolution, the principal purpose of
such transaction is to change the state of incorporation of the Company;
provided further that any such transaction shall not have as one of its purposes
the evasion of the foregoing limitations; provided further that clauses (3), (4)
and (5) above shall not apply to the Reorganization.
SECTION 802. Successor Substituted.
Upon any consolidation of the Company with or merger of the
Company with or into any other corporation or any conveyance, transfer or lease
of the properties and assets of the Company substantially as an entirety to any
Person in accordance with Section 801, the successor Person formed by such
consolidation or into which the Company is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor Person had been named as the Company herein,
and in the event of any such conveyance or transfer, the Company (which term
shall for this purpose mean the Person named as the "Company" in the first
paragraph of this Indenture or any successor Person which shall theretofore
become such in the manner described in Section 801), except in the case of a
lease, shall be discharged of all obligations and covenants under this Indenture
and the Notes and may be dissolved and liquidated.
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SECTION 803. Notes to Be Secured in Certain Events.
If, upon any such consolidation of the Company with, or merger
of the Company into, any other corporation, or upon any conveyance, lease or
transfer of the property of the Company substantially as an entirety to any
other Person, any property or assets of the Company would thereupon become
subject to any Lien, then unless such Lien could be created pursuant to Section
1016 without equally and ratably securing the Notes, the Company, prior to or
simultaneously with such consolidation, merger, conveyance, lease or transfer,
will, as to such property or assets, secure the Notes Outstanding (together
with, if the Company shall so determine any other Indebtedness of the Company
now existing or hereinafter created which is not subordinate in right of payment
to the Notes) equally and ratably with (or prior to) the Indebtedness which upon
such consolidation, merger, conveyance, lease or transfer is to become secured
as to such property or assets by such Lien, or shall cause such Notes to be so
secured.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of
Holders.
Without the consent of any Holders, the Company, when
authorized by a Board Resolution, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants of
the Company contained herein and in the Notes; or
(2) to add to the covenants of the Company for the benefit of
the Holders or to surrender any right or power herein conferred upon
the Company; or
(3) to add any additional Events of Default; or
(4) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee pursuant to the requirements of
Section 609; or
(5) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture; provided that
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such action shall not adversely affect the interests of the Holders in
any material respect, or
(6) to secure the Notes pursuant to the requirements of
Section 803 or Section 1016 or otherwise.
SECTION 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Notes, by Act of said Holders
delivered to the Company and the Trustee, the Company, when authorized by a
Board Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Note affected thereby:
(i) change the Stated Maturity of the principal of, or any
installment of interest on, any Note;
(ii) reduce the principal amount of, or premium, if any, or
interest on any Note or extend the time for payment of interest on, or
alter the redemption provisions of, any Note;
(iii) change the place or currency of payment of principal of,
or premium, if any, or interest on any Note;
(iv) impair the right of any Holder to receive payment of,
principal of and interest on such Holder's Notes on or after the due
dates therefor or to institute suit for the enforcement of any payment
on or after the Stated Maturity (or, in the case of a redemption, on or
after the Redemption Date) of any Note;
(v) reduce the percentage of Outstanding Notes the consent of
whose Holders is necessary to modify, amend, waive, supplement or
consent to take any action under this Indenture or the Notes;
(vi) waive a default in the payment of principal of, premium,
if any, or accrued and unpaid interest or Liquidated Damages, if any,
on the Notes;
(vii) reduce or change the rate or time for payment of
interest on the Notes;
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(viii) reduce or change the rate or time for payment of
Liquidated Damages, if any;
(ix) modify any provisions of any Guarantees in a manner
adverse to the Holders; or
(x) modify any provisions of this Section 902 or Sections 513
and 1022, except to increase the percentage or aggregate principal
amount of Outstanding Notes the consent of whose holders is necessary
for waiver of compliance with this Indenture or to provide that certain
other provisions of this Indenture cannot be modified or waived without
the consent of the Holder of each Outstanding Note affected thereby.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by,
any supplemental indenture permitted by this Article or the modifications
thereby of the trusts created by this Indenture, the Trustee shall be entitled
to receive, and shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of such supplemental indenture is authorized or
permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such supplemental indenture which affects the Trustees own
rights, duties or immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes; and
every Holder of Notes theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to the Article
shall conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. Reference in Notes to Supplemental Indentures.
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Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Notes so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and upon Company Order authenticated and delivered by the Trustee in
exchange for Outstanding Notes.
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SECTION 907. Notice of Supplemental Indentures.
Promptly after the execution by the Company and the Trustee of
any supplemental indenture pursuant to the provisions of Section 902, the
Company shall give notice thereof to the Holders of each Outstanding Note
affected thereby, in the manner provided for in Section 106, setting forth in
general terms the substance of such supplemental indenture.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if Any, and
Interest.
The Company covenants and agrees for the benefit of the
Holders that it shall duly and punctually pay the principal of (and premium, if
any) and interest (and Liquidated Damages, if any) on the Notes in accordance
with the terms of the Notes and this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company shall maintain, in The City of New York, an office
or agency where Notes may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of the
Notes and this Indenture may be served. The office of the Trustee located at 40
Broad Street, 5th Floor, Suite 550, New York, New York 10004 shall be such
office or agency of the Company, unless the Company shall designate and maintain
some other office or agency for one or more of such purposes. In addition, the
Company shall maintain an office or agency where the Notes may be presented or
surrendered for payment (which shall be the Corporate Trust Office of the
Trustee, unless the Company shall designate and maintain some other office or
agency for one or more such purposes). The Company shall give prompt written
notice to the Trustee of any change in the location of any such office or
agency. If, at any time, the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind any such designation;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in The
City of New York for such purposes. The Company shall give prompt written
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notice to the Trustee of any such designation or rescission and any change in
the location of any such other office or agency.
SECTION 1003. Money for Note Payments to Be Held in Trust.
If the Company shall, at any time, act as its own Paying
Agent, it shall, on or before each due date of the principal of (or premium or
Liquidated Damages, if any) or interest on any of the Notes, segregate and hold
in trust for the benefit of the Persons entitled thereto a sum sufficient to pay
the principal of (or premium or Liquidated Damages, if any) or interest so
becoming due until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and shall promptly notify the Trustee in writing of its
action or failure so to act.
Whenever the Company shall have one or more Paying Agents for
the Notes, it shall, on or before each due date of the principal of (or premium,
if any) or interest (or Liquidated Damages, if any) on any Notes, deposit with a
Paying Agent a sum sufficient to pay the principal (and premium and Liquidated
Damages, if any) or interest so becoming due, such sum to be held in trust for
the benefit of the Persons entitled to such principal, premium or interest, and
(unless such Paying Agent is the Trustee) the Company shall promptly notify the
Trustee in writing of such action or any failure so to act.
The Company shall cause each Paying Agent (other than the
Trustee) to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee, subject to the provisions of this
Section 1003, that such Paying Agent shall:
(1) hold all sums held by it for the payment of the principal
of (and premium and Liquidated Damages, if any) or interest on Notes in
trust for the benefit of the Persons entitled thereto until such sums
shall be paid to such Persons or otherwise disposed of as herein
provided;
(2) give the Trustee written notice of any default by the
Company (or any other obligor upon the Notes) in the making of any
payment of principal (and premium, if any) or interest (and Liquidated
Damages, if any) on the Notes; and
(3) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same terms as those upon which such sums
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were held by the Company or such Paying Agent; and, upon such payment by any
Paying Agent to the Trustee, such Paying Agent shall be released from all
further liability with respect to such sums.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of (or
premium or Liquidated Damages, if any) or interest on any Note and remaining
unclaimed for two years after such principal, premium, interest or Liquidated
Damages has become due and payable shall be paid to the Company on Company
Request, or (if then held by the Company) shall be discharged from such trust;
and the Holder shall thereafter, as an unsecured general creditor, look only to
the Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in the Borough of Manhattan, The City of New York, notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining shall be repaid to the Company.
SECTION 1004. Corporate Existence.
Subject to Article Eight and the Reorganization, the Company
shall do or cause to be done all things necessary to preserve and keep in full
force and effect the corporate existence, rights (charter and statutory) and
franchises of the Company and each Significant Subsidiary; provided, however,
that the Company shall not be required to preserve any such right or franchise
if the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and its
Subsidiaries as a whole and that the loss thereof is not disadvantageous in any
material respect to the Holders.
SECTION 1005. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (a) all taxes, assessments
and governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary and (b)
all lawful claims for labor, materials and supplies, which, if unpaid, would be
expected to by law become a lien (other than a Permitted Lien) upon the property
of the Company or any Subsidiary; provided, however, that the Company shall not
be required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings.
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SECTION 1006. Maintenance of Properties.
The Company shall cause all properties owned by the Company or
any Subsidiary or used or held for use in the conduct of its business or the
business of any Subsidiary to be maintained and kept in good condition, repair
and working order and supplied with all necessary equipment and shall 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 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 Subsidiary and
not disadvantageous in any material respect to the Holders.
SECTION 1007. Insurance.
The Company shall at all times keep all of its and its
Subsidiaries properties which are of an insurable nature insured with insurers,
believed by the Company to be responsible, against loss or damage to the extent
that property of similar character is usually so insured by corporations
similarly situated and owning like properties.
SECTION 1008. Statement by Officers as to Default.
(a) The Company shall deliver to the Trustee, within 120 days
after the end of each fiscal year, an Officer's Certificate from the principal
executive officer, principal financial officer or principal accounting officer
to the effect that a review has been conducted of the activities of the Company
and the Company's performance under this Indenture, and that the Company has
fulfilled its obligations thereunder or, if there has been a default in the
fulfillment of any such obligation, specifying each such default and the nature
and status thereof. For purposes of this Section 1008(a), such compliance shall
be determined without regard to any period of grace or requirement of notice
under this Indenture.
(b) When any Default has occurred and is continuing under this
Indenture, or if the trustee for or the Holder of any other evidence of
Indebtedness of the Company or any Subsidiary gives any notice or takes any
other action with respect to a claimed default (other than with respect to
Indebtedness in the principal amount of less than $1,000,000) the Company shall
deliver to the Trustee by registered or certified mail or by telegram, telex or
facsimile transmission an Officer's Certificate specifying such event, notice or
other action within five Business Days of its occurrence.
(c) When any Registration Default (as defined in the
Registration Rights Agreement) occurs, the Company shall immediately deliver to
the Trustee by registered or
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certified mail or by telegram, telex or facsimile transmission an Officer's
Certificate specifying the nature of such Registration Default. In addition, the
Company shall deliver to the Trustee on each Interest Payment Date during the
continuance of a Registration Default and on the Interest Payment Date following
the cure of a Registration Default, an Officer's Certificate specifying the
amount of Liquidated Damages which have accrued and which are then owing under
the Registration Rights Agreement.
SECTION 1009. Provision of Financial Statements and Reports.
(a) After the Company has completed the Exchange Offer, the
Company shall file on a timely basis with the Commission, to the extent such
filings are accepted by the Commission and whether or not the Company has a
class of securities registered under the Exchange Act, the annual reports,
quarterly reports and other documents that the Company would be required to file
if it were subject to Section 13 or 15 of the Exchange Act. All such annual
reports shall include the geographic segment financial information contemplated
by Item 101(d) of Regulation S-K under the Securities Act, and all such
quarterly reports shall provide the same type of interim financial information
that, as of the date of this Indenture, is the Company's practice to provide.
(b) The Company shall also be required (i) to file with the
Trustee, and provide to each Holder, without cost to such Holder, copies of such
reports and documents within 15 days after the date on which the Company files
such reports and documents with the Commission or the date on which the Company
would be required to file such reports and documents if the Company were so
required and (ii) if filing such reports and documents with the Commission is
not accepted by the Commission or is prohibited under the Exchange Act, to
supply at the Company's cost copies of such reports and documents to any
prospective Holder promptly upon request.
SECTION 1010. Repurchase of Notes upon Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder
shall have the right to require the Company to repurchase such Holder's Notes in
whole or in part (the "Change of Control Offer"), at a purchase price (the
"Purchase Price") in cash in an amount equal to 101.0% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the
date of purchase (subject to the right of Holders of record to receive interest
on the relevant Interest Payment Date) (the "Change of Control Payment") in
accordance with the procedures set forth in paragraphs (c) and (d) of this
Section.
(b) [Reserved]
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(c) Within 30 days following any Change of Control, the
Company shall give to each Holder and the Trustee in the manner provided in
Section 106 a written notice stating:
(i) that a Change of Control has occurred, that the Change of
Control Offer is being made pursuant to this Section 1010 and that all
Notes validly tendered will be accepted for payment;
(ii) the circumstances and relevant facts regarding such
Change of Control (including but not limited to information with
respect to pro forma historical income, cash flow and capitalization
after giving effect to such Change of Control);
(iii) the Purchase Price and date of purchase (which shall be
a Business Day no earlier than 30 days nor later than 60 days from the
date such notice is mailed) (the "Change of Control Payment Date");
(iv) that any Note not tendered will continue to accrue
interest pursuant to its terms;
(v) that, unless the Company defaults in the payment of the
Change of Control Payment, any Note accepted for payment pursuant to
the Change of Control Offer shall cease to accrue interest and
Liquidated Damages, if any, on and after the Change of Control Payment
Date;
(vi) that Holders electing to have any Note or portion thereof
purchased pursuant to the Change of Control Offer will be required to
surrender such Note, together with the form entitled "Option of the
Holder to Elect Purchase" on the reverse side of such Note completed,
to the Paying Agent at the address specified in the notice prior to the
close of business on the Business Day immediately preceding the Change
of Control Payment Date;
(vii) that Holders shall be entitled to withdraw their
election if the Paying Agent receives, not later than the close of
business on the third Business Day immediately preceding the Change of
Control Payment Date, a telegram, facsimile transmission or letter
setting forth the name of such Holder, the principal amount of Notes
delivered for purchase and a statement that such Holder is withdrawing
his election to have such Notes purchased; and
(viii) that Holders whose Notes are being purchased only in
part will be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered; provided that each Note
purchased and each new Note issued shall be in a principal amount of
$1,000 or integral multiples thereof.
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(d) [Reserved].
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77
(e) On the Change of Control Payment Date, the Company shall:
(i) accept for payment Notes or portions thereof tendered
pursuant to the Change of Control Offer;
(ii) deposit with the Paying Agent money sufficient to pay the
purchase price of all Notes or portions thereof so accepted; and
(iii) deliver, or cause to be delivered, to the Trustee, all
Notes or portions thereof so accepted together with an Officer's
Certificate specifying the Notes or portions thereof accepted for
payment by the Company. The Paying Agent shall promptly mail, to the
Holders so accepted, payment in an amount equal to the purchase price,
and the Trustee shall promptly authenticate and mail to such Holders a
new Note equal in principal amount to any unpurchased portion of the
Notes surrendered; provided that each Note purchased and each new Note
issued shall be in a principal amount of $1,000 or integral multiples
thereof. The Company shall publicly announce the results of the Change
of Control Offer on or as soon as practicable after the Change of
Control Payment Date. For purposes of this Section 1010, the Trustee
shall act as Paying Agent.
The Company shall not be required to make a Change of Control
Offer upon a Change of Control if a third party makes a Change of Control Offer
in the manner, at the times and otherwise in compliance with the requirements
applicable to a Change of Control Offer made by the Company and purchases all
Notes validly tendered and not withdrawn under such Change of Control Offer.
The Company shall comply with Rule 14e-1 under the Exchange
Act and any other rules and regulations thereunder to the extent such rules and
regulations are applicable in the event that a Change of Control occurs and the
Company is required to repurchase the Notes under this Section 1010.
SECTION 1011. Limitation on Indebtedness and Preferred Stock
of Subsidiaries.
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, Incur any Indebtedness or, in the case of Restricted
Subsidiaries, issue or have outstanding Preferred Stock (other than Acquired
Preferred Stock); provided, however, that the Company may Incur Indebtedness if,
immediately thereafter, the ratio of (i) the aggregate principal amount (or
accreted value, as the case may be) of Indebtedness of the Company and its
Restricted Subsidiaries on a consolidated basis outstanding as of the
Transaction Date to (ii) the Pro Forma Consolidated Cash Flow for the preceding
two full fiscal quarters multiplied by two, determined on a pro forma basis as
if any such Indebtedness had been Incurred and the proceeds
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thereof had been applied at the beginning of such two fiscal quarters, would be
greater than zero and less than 5.0 to 1.
(b) The foregoing limitations of paragraph (a) of this
covenant will not apply to any of the following Indebtedness ("Permitted
Indebtedness"), each of which shall be given independent effect:
(i) Indebtedness of the Company evidenced by the Notes;
(ii) Indebtedness of the Company or any Restricted Subsidiary
outstanding on the Issue Date;
(iii) Indebtedness of the Company or any Restricted Subsidiary
under one or more Credit Facilities, in an aggregate principal amount
at any one time outstanding not to exceed the greater of (x) $50.0
million and (y) 85.0% of Eligible Accounts Receivable;
(iv) Indebtedness of the Company or any Restricted Subsidiary
Incurred to finance the cost (including the cost of design,
development, construction, acquisition, licensing, installation or
integration) of Telecommunications Assets;
(v) Indebtedness of a Restricted Subsidiary owed to and held
by the Company or another Restricted Subsidiary, except that (A) any
transfer of such Indebtedness by the Company or a Restricted Subsidiary
(other than to the Company or another Restricted Subsidiary) and (B)
the sale, transfer or other disposition by the Company or any
Restricted Subsidiary of Capital Stock of a Restricted Subsidiary which
is owed Indebtedness by another Restricted Subsidiary shall, in each
case, be an Incurrence of Indebtedness by such Restricted Subsidiary,
subject to the other provisions of this Indenture;
(vi) Indebtedness of the Company owed to and held by a
Restricted Subsidiary which is unsecured and subordinated in right to
the payment and performance to the obligations of the Company under
this Indenture and the Notes, except that the limitations of paragraph
(a) of this Section 1011 shall apply to such Indebtedness at such time
as (A) any transfer of such Indebtedness by a Restricted Subsidiary
(other than to another Restricted Subsidiary) and (B) the sale,
transfer or other disposition by the Company or any Restricted
Subsidiary of Capital Stock of a Restricted Subsidiary which is owed
such Indebtedness by the Company, subject to other provisions of this
Indenture;
(vii) Indebtedness of the Company or a Restricted Subsidiary
issued in exchange for, or the net proceeds of which are used to
refinance (whether by amendment, renewal,
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79
extension or refunding), then outstanding Indebtedness of the Company
or a Restricted Subsidiary, other than Indebtedness Incurred under
clauses (iii), (v), (vi), (viii), (ix), (xi) and (xii) of this
paragraph, and any refinancings thereof in an amount not to exceed the
amount so refinanced or refunded (plus premiums, accrued interest and
reasonable fees and expenses); provided that such new Indebtedness
shall only be permitted under this clause (vii) if: (A) in case the
Notes are refinanced in part or the Indebtedness to be refinanced is
pari passu with the Notes, such new Indebtedness, by its terms or by
the terms of any agreement or instrument pursuant to which such new
Indebtedness is issued or remains outstanding, is expressly made pari
passu with, or subordinate in right of payment to, the remaining Notes,
(B) in case the Indebtedness to be refinanced is subordinated in right
of payment to the Notes, such new Indebtedness, by its terms or by the
terms of any agreement or instrument pursuant to which such new
Indebtedness is issued or remains outstanding, is expressly made
subordinate in right of payment to the Notes at least to the extent
that the Indebtedness to be refinanced is subordinated to the Notes and
(C) such new Indebtedness, determined as of the date of Incurrence of
such new Indebtedness, does not mature prior to the Stated Maturity of
the Indebtedness to be refinanced or refunded, and the Average Life of
such new Indebtedness is at least equal to the remaining Average Life
of the Indebtedness to be refinanced or refunded; and provided further
that in no event may Indebtedness of the Company be refinanced by means
of any Indebtedness of any Restricted Subsidiary pursuant to this
clause (vii);
(viii) Indebtedness of (x) the Company not to exceed, at any
one time outstanding, 2.00 times the Net Cash Proceeds from the
issuance and sale, other than to a Subsidiary, of Common Stock (other
than Redeemable Stock) of the Company (less the amount of such proceeds
used to make Restricted Payments as provided in clause (iii) or (iv) of
the second paragraph of Section 1012) and (y) the Company not to
exceed, at one time outstanding, the fair market value of any
Telecommunications Assets acquired by the Company in exchange for
Common Stock of the Company issued after the Issue Date; provided,
however, that in determining the fair market value of any such
Telecommunications Assets so acquired, if the estimated fair market
value of such Telecommunications Assets exceeds (A) $2.0 million (as
estimated in good faith by the Board of Directors), then the fair
market value of such Telecommunications Assets will be determined by a
majority of the Board of Directors of the Company, which determination
will be evidenced by a resolution thereof, and (B) $10.0 million (as
estimated in good faith by the Board of Directors), then the Company
shall deliver to the Trustee a written appraisal as to the fair market
value of such Telecommunications Assets prepared by a nationally
recognized investment banking or public accounting firm (or, if no such
investment banking or public accounting firm is qualified to prepare
such an appraisal, by a nationally recognized appraisal firm); and
provided further that, except with respect to Acquired Indebtedness,
such Indebtedness does not mature prior to the
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Stated Maturity of the Notes and the Average Life of such Indebtedness
is longer than that of the Notes;
(ix) Indebtedness of the Company or any Restricted Subsidiary
(A) in respect of performance, surety or appeal bonds or letters of
credit supporting trade payables, in each case provided in the ordinary
course of business, (B) under Currency Agreements and Interest Rate
Agreements covering Indebtedness of the Company; provided that such
agreements do not increase the Indebtedness of the obligor outstanding
at any time other than as a result of fluctuations in foreign currency
exchange rates or interest rates or by reason of fees, indemnities and
compensation payable thereunder and (C) arising from agreements
providing for indemnification, adjustment of purchase price or similar
obligations, or from Guarantees or letters of credit, surety bonds or
performance bonds securing any obligations of the Company or any of its
Restricted Subsidiaries pursuant to such agreements, in any case
Incurred in connection with the disposition of any business, assets or
Restricted Subsidiary of the Company (other than Guarantees of
Indebtedness Incurred by any Person acquiring all or any portion of
such business, assets or Restricted Subsidiary for the purpose of
financing such acquisition), in a principal amount not to exceed the
gross proceeds actually received by the Company or any Restricted
Subsidiary in connection with such disposition;
(x) Indebtedness of the Company, to the extent that the net
proceeds thereof are promptly (A) used to repurchase Notes tendered in
a Change of Control Offer or (B) deposited to defease all of the Notes
pursuant to Article Thirteen;
(xi) Indebtedness of a Restricted Subsidiary represented by a
Guarantee of the Notes permitted by and made in accordance with Section
1018; and
(xii) Indebtedness of the Company or any Restricted Subsidiary
in addition to that permitted to be incurred pursuant to clauses (i)
through (xi) above in an aggregate principal amount not in excess of
$10.0 million (or, to the extent not denominated in United States
dollars, the United States Dollar Equivalent thereof) at any one time
outstanding.
(c) For purposes of determining any particular amount of
Indebtedness under this Section 1011, Guarantees, Liens or obligations with
respect to letters of credit and other credit enhancements supporting
Indebtedness otherwise included in the determination of such particular amount
shall not be included; provided, however, that the foregoing shall not in any
way be deemed to limit the provisions of Section 1018. For purposes of
determining compliance with this Section 1011, in the event that an item of
Indebtedness meets the criteria of more than one of the types of Indebtedness
described in the above clauses, the Company, in its sole discretion may, at the
time of such Incurrence, (i) classify such item of Indebtedness under and
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81
comply with either of paragraph (a) or (b) of this covenant (or any of such
definitions), as applicable, (ii) classify and divide such item of Indebtedness
into more than one of such paragraphs (or definitions), as applicable and (iii)
elect to comply with such paragraphs (or definitions), as applicable in any
order.
SECTION 1012. Limitation on Restricted Payments.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, (i) (A) declare or pay any dividend or
make any distribution in respect of the Company's Capital Stock to the holders
thereof (other than stock splits, dividends or distributions payable solely in
shares of Capital Stock (other than Redeemable Stock) of the Company or in
options, warrants or other rights to acquire such shares of Capital Stock) or
(B) declare or pay any dividend or make any distribution in respect of the
Capital Stock of any Restricted Subsidiary to any Person other than dividends
and distributions payable to the Company or any Restricted Subsidiary or to all
holders of Capital Stock of such Restricted Subsidiary on a pro rata basis; (ii)
purchase, redeem, retire or otherwise acquire for value any shares of Capital
Stock of the Company (including options, warrants or other rights to acquire
such shares of Capital Stock) held by any Person or any shares of Capital Stock
of any Restricted Subsidiary (including options, warrants and other rights to
acquire such shares of Capital Stock) held by any Affiliate of the Company
(other than a wholly owned Restricted Subsidiary) or any holder (or any
Affiliate thereof) of 5.0% or more of the Company's Capital Stock; (iii) make
any voluntary or optional principal payment, or voluntary or optional
redemption, repurchase, defeasance, or other acquisition or retirement for
value, of Indebtedness of the Company that is subordinated in right of payment
to the Notes; or (iv) make any Investment, other than a Permitted Investment, in
any Person (such payments or any other actions described in clauses (i) through
(iv) being collectively "Restricted Payments") if, at the time of, and after
giving effect to, the proposed Restricted Payment:
(A) a Default or Event of Default shall have occurred
and be continuing;
(B) the Company could not Incur at least $1.00 of
Indebtedness under paragraph (a) of Section 1011; and
(C) the aggregate amount of all Restricted Payments
declared or made from and after the Closing Date would
exceed the sum of:
(1) Cumulative Consolidated Cash Flow minus
200.0% of Cumulative Consolidated Fixed Charges;
(2) 100.0% of the aggregate Net Cash Proceeds
from the issue or sale to a Person, which is not a
Subsidiary of the Company, of Capital Stock of
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the Company (other than Redeemable Stock) or of debt
securities of the Company which have been converted
into or exchanged for such Capital Stock (except to
the extent such Net Cash Proceeds are used to Incur
new Indebtedness outstanding pursuant to clause (viii)
of paragraph (b) of Section 1011); and
(3) to the extent any Permitted Investment that
was made after the Closing Date is sold for cash or
otherwise liquidated or repaid for cash, the lesser of
(i) the cash return of capital with respect to such
Permitted Investment (less the cost of disposition, if
any) and (ii) the initial amount of such Permitted
Investment.
The foregoing provision shall not be violated by reason of:
(i) the payment of any dividend within 60 days after the date of declaration
thereof if, at said date of declaration, such payment would comply with the
foregoing paragraph; (ii) the redemption, repurchase, defeasance or other
acquisition or retirement for value of Indebtedness that is subordinated in
right of payment to the Notes including a premium, if any, and accrued and
unpaid interest and Liquidated Damages, if any, with the net proceeds of, or in
exchange for, Indebtedness Incurred under clause (viii) of paragraph (b) of
Section 1011; (iii) the repurchase, redemption or other acquisition of Capital
Stock of the Company in exchange for, or out of the Net Cash Proceeds of a
substantially concurrent (A) capital contribution to the Company or (B) issuance
and sale of shares of Capital Stock (other than Redeemable Stock) of the Company
(except to the extent such proceeds are used to incur new Indebtedness
outstanding pursuant to clause (viii) of paragraph (b) of Section 1011); (iv)
the acquisition of Indebtedness of the Company which is subordinated in right of
payment to the Notes in exchange for, or out of the proceeds of, a substantially
concurrent (A) capital contribution to the Company or (B) issuance and sale of
shares of the Capital Stock of the Company (other than Redeemable Stock) (except
to the extent such proceeds are used to incur new Indebtedness outstanding
pursuant to clause (viii) of paragraph (b) of Section 1011); (v) payments or
distributions to dissenting stockholders in accordance with applicable law,
pursuant to or in connection with a consolidation, merger or transfer of assets
that complies with Article Eight; (vi) other Restricted Payments not to exceed
$2.0 million; and (vii) investments in any Telecommunications Assets acquired in
exchange for Capital Stock of the Company (other than Redeemable Stock) issued
after the Issue Date or with the Net Cash Proceeds from the concurrent issuance
and sale of Capital Stock of the Company (other than Redeemable Stock); provided
that, except in the case of clause (i), no Default or Event of Default shall
have occurred and be continuing or occur as a consequence of the actions or
payments set forth therein.
Each Restricted Payment permitted pursuant to the immediately
preceding paragraph (other than the Restricted Payment referred to in clause
(ii) thereof) and the Net Cash Proceeds from any capital contributions to the
Company or issuance of Capital Stock referred to
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in clauses (iii), (iv) and (vii) of the immediately preceding paragraph, shall
be included in calculating whether the conditions of clause (C) of the first
paragraph of this Section 1012 have been met with respect to any subsequent
Restricted Payments. In the event the proceeds of an issuance of Capital Stock
of the Company are used for the redemption, repurchase or other acquisition of
the Notes, then the Net Cash Proceeds of such issuance shall be included in
clause (C) of the first paragraph of this Section 1012 only to the extent such
proceeds are not used for such redemption, repurchase or other acquisition of
the Notes.
SECTION 1013. Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries.
So long as any of the Notes are Outstanding, the Company shall
not, and shall not permit any Restricted Subsidiary to, create or otherwise
cause or suffer to exist or become effective any consensual encumbrance or
restriction of any kind on the ability of any Restricted Subsidiary to do any
one of the following:
(i) pay dividends or make any other distributions on any
Capital Stock of such Restricted Subsidiary owned by the Company or any
other Restricted Subsidiary;
(ii) pay any Indebtedness owed to the Company or any other
Restricted Subsidiary;
(iii) make loans or advances to the Company or any other
Restricted Subsidiary; or
(iv) transfer any of its property or assets to the Company or
any other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances
or restrictions:
(i)existing on the Closing Date in this Indenture or any other
agreements or instruments in effect on the Closing Date, and any
extensions, refinancings, renewals or replacements of such agreements;
provided that the encumbrances and restrictions in any such extensions,
refinancings, renewals or replacements are no less favorable in any
material respect to the Holders than those encumbrances or restrictions
that are then in effect and that are being extended, refinanced,
renewed or replaced;
(ii) contained in the terms of any Indebtedness or any
agreement pursuant to which such Indebtedness was issued (or, in the
case of Acquired Preferred Stock, terms of such Acquired Preferred
Stock) if the encumbrance or restriction applies only in the event of a
default with respect to a financial covenant contained in such
Indebtedness or
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84
agreement (or, in the case of Acquired Preferred Stock, upon the
default in the payment of dividends upon such Acquired Preferred Stock)
and such encumbrance or restriction is not materially more
disadvantageous to the Holders than is customary in comparable
financings (as determined by the Company) and the Company determines
that any such encumbrance or restriction will not materially affect the
Company's ability to make principal or interest payments on the Notes;
(iii) existing under or by reason of applicable law;
(iv) existing with respect to any Person or the property or
assets of such Person acquired by the Company or any Restricted
Subsidiary, existing at the time of such acquisition and not incurred
in contemplation thereof, which encumbrances or restrictions are not
applicable to any Person or the property or assets of any Person other
than such Person or the property or assets of such Person so acquired;
(v) in the case of clause (iv) of the first paragraph of this
Section 1013, (A) that restrict in a customary manner the subletting,
assignment or transfer of any property or asset that is, or is subject
to, a lease, purchase mortgage obligation, license, conveyance or
contract or similar property or asset, (B) existing by virtue of any
transfer of, agreement to transfer, option or right with respect to, or
Lien on, any property or assets of the Company or any Restricted
Subsidiary not otherwise prohibited by this Indenture or (C) arising or
agreed to in the ordinary course of business, not relating to any
Indebtedness, and that do not, individually or in the aggregate,
detract from the value of property or assets of the Company or any
Restricted Subsidiary in any manner material to the Company or any
Restricted Subsidiary; or
(vi) with respect to a Restricted Subsidiary and imposed
pursuant to an agreement that has been entered into for the sale or
disposition of all or substantially all of the Capital Stock of, or
property and assets of, such Restricted Subsidiary.
Nothing contained in this Section 1013 shall prevent the
Company or any Restricted Subsidiary from (1) creating, incurring, assuming or
suffering to exist any Liens otherwise permitted in Section 1016 or (2)
restricting the sale or other disposition of property or assets of the Company
or any of its Restricted Subsidiaries that secure Indebtedness of the Company or
any of its Restricted Subsidiaries.
SECTION 1014. Limitation on the Issuance and Sale of Capital
Stock of Restricted Subsidiaries.
The Company shall not, and shall not permit any Restricted
Subsidiary, directly or indirectly, to issue, transfer, convey, sell, lease or
otherwise dispose of any shares of Capital
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85
Stock (including options, warrants or other rights to purchase shares of such
Capital Stock) of such or any other Restricted Subsidiary (other than to the
Company or a wholly owned Restricted Subsidiary or in respect of any director's
qualifying shares or sales of shares of Capital Stock to foreign nationals
mandated by applicable law) to any Person unless (A) the Net Cash Proceeds from
such issuance, transfer, conveyance, sale, lease or other disposition are
applied in accordance with Section 1017, (B) immediately after giving effect to
such issuance, transfer, conveyance, sale, lease or other disposition, such
Restricted Subsidiary would no longer constitute a Restricted Subsidiary and (C)
any Investment in such Person remaining after giving effect to such issuance,
transfer, conveyance, sale, lease or other disposition would have been permitted
to be made under Section 1012 if made on the date of such issuance, transfer,
conveyance, sale, lease or other disposition (valued as provided in the
definition of "Investment" contained in Section 101); provided, however, that
notwithstanding the foregoing, the Company may, and may permit its Restricted
Subsidiaries to, issue, transfer, convey, sell or otherwise dispose of Capital
Stock (other than Redeemable Stock) (including options, warrants or other rights
to purchase shares of such Capital Stock) of such or any other Restricted Cable
Subsidiary so long as (x) immediately after such transaction, the Company and/or
its Restricted Subsidiaries continue to beneficially own at least a majority of
the Voting Stock of such Restricted Cable Subsidiary and (y) the Net Cash
Proceeds from such transaction are applied in accordance with the provisions of
Section 1017. For purposes of the foregoing, a "Restricted Cable Subsidiary"
shall mean any Restricted Subsidiary of the Company organized after the Closing
Date for the purpose of designing, developing, constructing, acquiring,
licensing, owning and/or operating fiber optic cable or similar transmission
systems used in the telecommunications business.
SECTION 1015. Limitation on Transactions with Stockholders and
Affiliates.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, enter into, renew or extend any
transaction (including, without limitation, the purchase, sale, lease or
exchange of property or assets, or the rendering of any service) with any holder
(or any Affiliate of such holder) of 10.0% or more of any class of Capital Stock
of the Company or any Restricted Subsidiary or with any Affiliate of the Company
or any Restricted Subsidiary, unless the following conditions have been met:
(i)such transaction or series of transactions is on terms no
less favorable to the Company or such Restricted Subsidiary than those
that could be obtained in a comparable arm's-length transaction with a
Person that is not such a holder or an Affiliate;
(ii) if such transaction or series of transactions involves
aggregate consideration in excess of $2.0 million, then such
transaction or series of transactions is approved by a majority of the
Board of Directors of the Company (including a majority
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of the disinterested members thereof, if any) and is evidenced by a
resolution thereof; and
(iii) if such transaction or series of transactions involves
aggregate consideration in excess of $10.0 million, then the Company or
such Restricted Subsidiary shall deliver to the Trustee a written
opinion as to the fairness to the Company or such Restricted Subsidiary
of such transaction from a financial point of view from a nationally
recognized investment banking firm (or, if an investment banking firm
is generally not qualified to give such an opinion, by a nationally
recognized appraisal firm or accounting firm).
The foregoing limitation does not limit, and will not apply to
(i) any transaction between the Company and any of its Restricted Subsidiaries
or between or among Restricted Subsidiaries; (ii) the payment or reimbursement
of reasonable and customary regular fees and expenses to directors of the
Company who are not employees of the Company; (iii) any Restricted Payments not
prohibited by Section 1012; (iv) loans and advances to officers or employees of
the Company and its Subsidiaries not exceeding at any one time outstanding $1.5
million in the aggregate; (v) employment and similar agreements entered into
between the Company or any of its Restricted Subsidiaries with their respective
employees in the ordinary course of business; and (vi) operating and similar
agreements entered into in the ordinary course of the Company's business.
SECTION 1016. Limitation on Liens.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist
any Lien (other than Permitted Liens) on any of its assets or properties of any
character (including, without limitation, licenses and trademarks), or any
shares of Capital Stock or Indebtedness of any Restricted Subsidiary, whether
owned at the date of this Indenture or thereafter acquired, or any income,
profits or proceeds therefrom, or assign or otherwise convey any right to
receive income thereof, without making effective provision for all of the Notes
and all other amounts ranking pari passu with the Notes to be directly secured
equally and ratably with the obligation or liability secured by such Lien or, if
such obligation or liability is subordinated to the Notes and other amounts
ranking pari passu with the Notes, without making provision for the Notes and
such other amounts to be directly secured prior to the obligation or liability
secured by such Lien.
SECTION 1017. Limitation on Asset Sales.
The Company shall not, and shall not permit any Restricted
Subsidiary to, make any Asset Sale unless (i) the Company or the Restricted
Subsidiary, as the case may be, receives consideration at the time of such Asset
Sale at least equal to the fair market value of the assets
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sold or disposed of as determined by the good faith judgment of the Board of
Directors evidenced by a Board Resolution and (ii) at least 75.0% of the
consideration received for such Asset Sale consists of cash or cash equivalents
or the assumption of unsubordinated Indebtedness.
The Company shall, or shall cause the relevant Restricted
Subsidiary to, within 360 days after the date of receipt of the Net Cash
Proceeds from an Asset Sale, (i) (A) apply an amount equal to such Net Cash
Proceeds to permanently repay unsubordinated Indebtedness of the Company or
Indebtedness of any Restricted Subsidiary, in each case, owing to a Person other
than the Company or any of its Restricted Subsidiaries or (B) invest an equal
amount, or the amount not so applied pursuant to clause (A), in property or
assets of a nature or type or that are used in a business (or in a Person having
property and assets of a nature or type, or engaged in a business) similar or
related to the nature or type of the property and assets of, or the business of,
the Company and its Restricted Subsidiaries existing on the date of such
investment (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and evidenced by a Board Resolution) and (ii)
apply (no later than the end of the 360-day period referred to above) such
excess Net Cash Proceeds (to the extent not applied pursuant to clause (i)) as
provided in the following paragraphs of this Section 1017. The amount of such
Net Cash Proceeds required to be applied (or to be committed to be applied)
during such 360-day period referred to above in the preceding sentence and not
applied as so required by the end of such period shall constitute "Excess
Proceeds".
If, as of the first day of any calendar month, the aggregate
amount of Excess Proceeds not theretofore subject to an Excess Proceeds Offer
(as defined below) totals at least $10.0 million, the Company must, not later
than the 30th Business Day thereafter, make an offer (an "Excess Proceeds
Offer") to purchase from the Holders on a pro rata basis an aggregate principal
amount of Notes equal to the Excess Proceeds on such date, at a purchase price
equal to 100.0% of the principal amount of the Notes, plus, in each case,
accrued and unpaid interest and Liquidated Damages, if any, to the date of
purchase (the "Excess Proceeds Payment").
The Company shall commence an Excess Proceeds Offer by mailing
a notice to the Trustee and each Holder stating: (i) that the Excess Proceeds
Offer is being made pursuant to this Section 1017 and that all Notes validly
tendered will be accepted for payment on a pro rata basis; (ii) the purchase
price and the date of purchase (which shall be a Business Day no earlier than 30
days nor later than 60 days from the date such notice is mailed) (the "Excess
Proceeds Payment Date"); (iii) that any Note not tendered will continue to
accrue interest pursuant to its terms; (iv) that, unless the Company defaults in
the payment of the Excess Proceeds Payment, any Note accepted for payment
pursuant to the Excess Proceeds Offer shall cease to accrue interest and
Liquidated Damages, if any, on and after the Excess Proceeds Payment Date; (v)
that Holders electing to have a Note purchased pursuant to the Excess Proceeds
Offer will be required to surrender the Note, together with the form entitled
"Option of the Holder to Elect
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Purchase" on the reverse side of the Note completed, to the Paying Agent at the
address specified in the notice prior to the close of business on the Business
Day immediately preceding the Excess Proceeds Payment Date; (vi) that Holders
shall be entitled to withdraw their election if the Paying Agent receives, not
later than the close of business on the third Business Day immediately preceding
the Excess Proceeds Payment Date, a telegram, facsimile transmission or letter
setting forth the name of such Holder, the principal amount of Notes delivered
for purchase and a statement that such Holder is withdrawing his election to
have such Notes purchased; and (vii) that Holders whose Notes are being
purchased only in part will be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered; provided that each Note purchased
and each new Note issued shall be in a principal amount of $1,000 or integral
multiples thereof.
On the Excess Proceeds Payment Date, the Company shall (i)
accept for payment on a pro rata basis Notes or portions thereof tendered
pursuant to the Excess Proceeds Offer; (ii) deposit with the Paying Agent money
sufficient to pay the purchase price of all Notes or portions thereof so
accepted; and (iii) deliver, or cause to be delivered, to the Trustee all Notes
or portions thereof so accepted together with an Officer's Certificate
specifying the Notes or portions thereof accepted for payment by the Company.
The Paying Agent shall promptly mail to the Holders of Notes so accepted payment
in an amount equal to the purchase price, and the Trustee shall promptly
authenticate and mail to such Holders a new Note equal in principal amount to
any unpurchased portion of the Note surrendered; provided that each Note
purchased and each new Note issued shall be in a principal amount of $1,000 or
integral multiples thereof. To the extent that the aggregate principal amount of
Notes tendered is less than the Excess Proceeds, the Company may use any
remaining Excess Proceeds for general corporate purposes. The Company shall
publicly announce the results of the Excess Proceeds Offer as soon as
practicable after the Excess Proceeds Payment Date. For purposes of this Section
1017, the Trustee shall act as the Paying Agent.
The Company shall comply with Rule 14e-1 under the Exchange
Act and any other rules and regulations thereunder to the extent such rules and
regulations are applicable, in the event that such Excess Proceeds are received
by the Company under this Section 1017 and the Company is required to repurchase
Notes as described above.
SECTION 1018. Limitation on Issuances of Guarantees of
Indebtedness by Restricted Subsidiaries.
The Company shall not permit any Restricted Subsidiary,
directly or indirectly, to Guarantee, assume or in any other manner become
liable with respect to any Indebtedness of the Company, other than Indebtedness
under Credit Facilities incurred under clause (iii) of paragraph (b) in Section
1011, unless (i) such Restricted Subsidiary simultaneously executes and delivers
a supplemental indenture to this Indenture providing for a Guarantee of the
Notes on
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terms substantially similar to the Guarantee of such Indebtedness, except that
if such Indebtedness is by its express terms subordinated in right of payment to
the Notes, any such assumption, Guarantee or other Liability of such Restricted
Subsidiary with respect to such Indebtedness shall be subordinated in right of
payment to such Restricted Subsidiary's assumption, Guarantee or other liability
with respect to the Notes substantially to the same extent as such Indebtedness
is subordinated to the Notes and (ii) such Restricted Subsidiary waives, and
shall not in any manner whatsoever claim or take the benefit or advantage of,
any rights of reimbursement, indemnity or subrogation or any other rights
against the Company or any other Restricted Subsidiary as a result of any
payment by such Restricted Subsidiary under its Guarantee.
Notwithstanding the foregoing, any Guarantee by a Restricted
Subsidiary may provide by its terms that it will be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer,
to any Person not an Affiliate of the Company, of all of the Company's and each
Restricted Subsidiary's Capital Stock in, or all or substantially all of the
assets of, such Restricted Subsidiary (which sale, exchange or transfer is not
prohibited by this Indenture) or (ii) the release or discharge of the guarantee
which resulted in the creation of such Guarantee, except a discharge or release
by or as a result of payment under such Guarantee.
SECTION 1019. Business of the Company; Restriction on
Transfers of Existing Business.
The Company shall not, and shall not permit any Restricted
Subsidiary to, be principally engaged in any business or activity other than a
Permitted Business. In addition, the Company and any Restricted Subsidiary shall
not be permitted to, directly or indirectly, transfer to any Unrestricted
Subsidiary (i) any of the material licenses, agreements or instruments, permits
or authorizations used in the Permitted Business of the Company and any
Restricted Subsidiary on the Closing Date or (ii) any material portion of the
"property and equipment" (as such term is used in the Company's consolidated
financial statements) of the Company or any Significant Subsidiary used in the
licensed service areas of the Company and any Restricted Subsidiary as they
exist on the Closing Date.
SECTION 1020. Limitation on Investments in Unrestricted
Subsidiaries.
The Company shall not make, and shall not permit any of its
Restricted Subsidiaries to make, any Investments in Unrestricted Subsidiaries
if, at the time thereof, the aggregate amount of such Investments together with
any other Restricted Payments made after the Closing Date would exceed the
amount of Restricted Payments then permitted to be made pursuant to Section
1012. Any Investments in Unrestricted Subsidiaries permitted to be made pursuant
to this covenant (i) shall be treated as the making of a Restricted Payment in
calculating
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the amount of Restricted Payments made by the Company or a Subsidiary and (ii)
may be made in cash or property (if made in property, the Fair Market Value
thereof as determined by the Board of Directors of the Company (whose
determination shall be conclusive and evidenced by a Board Resolution) shall be
deemed to be the amount of such Investment for the purpose of clause (i) of this
Section 1020).
SECTION 1021. Limitation on Sale-Leaseback Transactions.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, enter into any Sale-Leaseback Transaction with
respect to any property of the Company or any of its Restricted Subsidiaries.
Notwithstanding the foregoing, the Company may enter into
Sale-Leaseback Transactions; provided, however, that (a) the Attributable Value
of such Sale-Leaseback Transaction shall be deemed to be Indebtedness of the
Company and (b) after giving pro forma effect to any such Sale-Leaseback
Transaction and the foregoing clause (a), the Company would be able to incur
$1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to
paragraph (a) of Section 1011.
SECTION 1022. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with
any term, provision or condition set forth in Section 803 or Sections 1007
through 1021, inclusive, if before or after the time for such compliance the
Holders of at least a majority in aggregate principal amount of the Outstanding
Notes, by Act of such Holders, waive such compliance in such instance with such
term, provision or condition, but no such waiver shall extend to or affect such
term, provision or condition except to the extent so expressly waived, and,
until such waiver shall become effective, the obligations of the Company and the
duties of the Trustee in respect of any such term, provision or condition shall
remain in full force and effect.
ARTICLE ELEVEN
REDEMPTION OF NOTES
SECTION 1101. Right of Redemption.
(a) The Notes may be redeemed, at the election of the Company,
in whole or in part, at any time or from time to time, on or after May 15, 2003,
subject to the conditions and at the Redemption Prices specified in the form of
Note, together with accrued and unpaid interest and Liquidated Damages, if any,
thereon to the Redemption Date.
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91
(b) Notwithstanding the foregoing, prior to May 15, 2001, the
Company may redeem up to 35% of the originally issued aggregate principal amount
of the Notes on one or more occasions with the Net Cash Proceeds of one or more
Public Equity Offerings at a redemption price equal to 112% of the aggregate
principal amount thereof, plus accrued and unpaid interest, if any, and
Liquidated Damages, if any, thereon to the Redemption Date; provided that,
immediately after giving effect to such redemption, at least 65.0% of the
originally issued aggregate principal amount of the Notes remains Outstanding;
and provided further that notice of such redemptions shall be given within 60
days of the date of closing of any such Public Equity Offering.
SECTION 1102. Applicability of Article.
Redemption of Notes at the election of the Company or
otherwise, as permitted or required by any provision of this Indenture, shall be
made in accordance with such provision and this Article.
SECTION 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Notes pursuant to
Section 1101 shall be evidenced by a Board Resolution. In case of any redemption
at the election of the Company, the Company shall, at least 60 days prior to the
Redemption Date fixed by the Company (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee in writing of such Redemption
Date and of the Redemption Price and of the principal amount of Notes to be
redeemed and shall deliver to the Trustee such documentation and records as
shall enable the Trustee to select the Notes to be redeemed pursuant to Section
1104.
SECTION 1104. Selection by Trustee of Notes to Be Redeemed.
If less than all the Notes are to be redeemed, the particular
Notes to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Notes not previously called
for redemption, in compliance with the requirements of the principal national
securities exchange, if any, on which the Notes are listed or, if the Notes are
not listed on a national securities exchange, on a pro rata basis, by lot or by
such other method as the Trustee in its sole discretion shall deem fair and
appropriate and which may provide for the selection for redemption of portions
of the principal of Notes; provided, however, that no Note of $1,000 or less in
principal amount at maturity shall be redeemed in part.
The Trustee shall promptly notify the Company in writing of
the Notes selected for redemption and, in the case of any Notes selected for
partial redemption, the principal amount thereof to be redeemed.
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92
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to redemption of Notes shall relate,
in the case of any Note redeemed or to be redeemed only in part, to the portion
of the principal amount of such Note which has been or is to be redeemed.
SECTION 1105. Notice of Redemption.
Notice of redemption shall be given in the manner provided for
in Section 106 not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Notes to be redeemed.
All notices of redemption shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest to
the Redemption Date payable as provided in Section 1107, if any;
(3) if less than all Outstanding Notes are to be redeemed, the
identification (and, in the case of a partial redemption, the principal
amounts) of the particular Notes to be redeemed;
(4) in case any Note is to be redeemed in part only, the
notice which relates to such Note shall state that on and after the
Redemption Date, upon surrender of such Note, the Holder shall receive,
without charge, a new Note or Notes of authorized denominations for the
principal amount thereof remaining unredeemed;
(5) that on the Redemption Date the Redemption Price (and
accrued interest, if any, to the Redemption Date payable as provided in
Section 1107) will become due and payable upon each such Note, or the
portion thereof, to be redeemed, and that interest thereon will cease
to accrue on and after said date; and
(6) the place or places where such Notes are to be surrendered
for payment of the Redemption Price and accrued interest, if any.
Notice of redemption of Notes to be redeemed at the election
of the Company shall be given by the Company or, at the Company's written
request, by the Trustee in the name and at the expense of the Company.
SECTION 1106. Deposit of Redemption Price.
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93
Prior to any Redemption Date, the Company shall deposit with
the Trustee or with a Paying Agent (or, if the Company is acting as its own
Paying Agent, segregate and hold in trust as provided in Section 1003) an amount
of money sufficient to pay the Redemption Price of, and Liquidated Damages, if
any, and accrued interest on, all the Notes which are to be redeemed on that
date.
SECTION 1107. Notes Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Notes
so to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified (together with Liquidated Damages and accrued
interest, if any, to the Redemption Date), and from and after such date (unless
the Company shall default in the payment of the Redemption Price and accrued
interest) such Notes shall cease to bear interest. Upon surrender of any such
Note for redemption in accordance with said notice, such Note shall be paid by
the Company at the Redemption Price, together with Liquidated Damages and
accrued interest, if any, to the Redemption Date; provided, however, that
installments of interest whose Stated Maturity is on or prior to the Redemption
Date shall be payable to the Holders of such Notes, or one or more Predecessor
Notes, registered as such at the close of business on the relevant Regular
Record Dates according to their terms and the provisions of Section 307.
If any Note called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) and
accrued interest shall, until paid, bear interest from the Redemption Date at
the rate borne by the Notes.
SECTION 1108. Notes Redeemed in Part.
Any Note which is to be redeemed only in part (pursuant to the
provisions of this Article Eleven) shall be surrendered at the office or agency
of the Company maintained for such purpose pursuant to Section 1002 (with, if
the Company or the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company and the Trustee duly
executed by, the Holder thereof or such Holder's attorney duly authorized in
writing), and the Company shall execute, and the Trustee shall upon Company
Order authenticate and deliver to the Holder of such Note without service
charge, a new Note or Notes, of any authorized denomination as requested by such
Holder, in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Note so surrendered.
ARTICLE TWELVE
SECURITY
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SECTION 1201. Security.
(a) On the Closing Date, the Company shall purchase, and, at
all times, subject to the Pledge Agreement, shall maintain Pledged Securities
pledged to the Trustee as security for the benefit of the Holders in such amount
as will be sufficient upon receipt of scheduled interest and/or principal
payments of such Pledged Securities, in the opinion of a nationally recognized
firm of independent public accountants selected by the Company, to provide for
payment in full of the first six scheduled interest payments due on the
outstanding Notes. The Pledged Securities shall be pledged by the Company to the
Trustee for the benefit of the Holders and shall be held by the Trustee in the
Pledge Account pending disposition pursuant to the Pledge Agreement.
(b) Each Holder, by its acceptance of a Note, consents and
agrees to the terms of the Pledge Agreement (including, without limitation, the
provisions providing for foreclosure and release of the Pledged Securities) as
the same may be in effect or may be amended from time to time in accordance with
its terms, and authorizes and directs the Trustee to enter into the Pledge
Agreement and to perform its respective obligations and exercise its respective
rights thereunder in accordance therewith. The Company shall do or cause to be
done all such acts and things as may be necessary or proper, or as may be
required by the provisions of the Pledge Agreement, to assure and confirm to the
Trustee the security interest in the Pledged Securities contemplated hereby, by
the Pledge Agreement or any part thereof, as from time to time constituted, so
as to render the same available for the security and benefit of this Indenture
and of the Notes secured hereby, according to the intent and purposes herein
expressed. The Company shall take, or shall cause to be taken, any and all
actions reasonably required (and any action reasonably requested by the Trustee)
to cause the Pledge Agreement to create and maintain, as security for the
obligations of the Company under this Indenture and the Notes, valid and
enforceable first priority liens in and on all the Pledged Securities, in favor
of the Trustee, superior to and prior to the rights of third Persons and subject
to no other Liens.
(c) The release of any Pledged Securities pursuant to the
Pledge Agreement will not be deemed to impair the security under this Indenture
in contravention of the provisions hereof if and to the extent the Pledged
Securities are released pursuant to this Indenture and the Pledge Agreement. To
the extent applicable, the Company shall cause TIA Section 314(d) relating to
the release of property or securities from the Lien and security interest of the
Pledge Agreement (other than pursuant to Sections 7(e) and 7(g) thereof) and
relating to the substitution therefor of any property or securities to be
subjected to the Lien and security interest of the Pledge Agreement to be
complied with. Any certificate or opinion required by TIA Section 314(d) may be
made by an officer of the Company, except in cases where TIA Section 314(d)
requires that such certificate or opinion be made by an independent Person,
which Person shall be an independent engineer, appraiser or other expert
selected by the Company.
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(d) The Trustee, in its sole discretion and without the
consent of the Holders, may, and at the request of the Holders of at least 25%
in aggregate principal amount of Notes then outstanding shall, on behalf of the
Holders, take all actions it deems necessary or appropriate in order to (i)
enforce any of the terms of the Pledge Agreement and (ii) collect and receive
any and all amounts payable in respect of the obligations of the Company
thereunder. The Trustee shall have the power to institute and to maintain such
suits and proceedings as the Trustee in its sole discretion may deem expedient
to preserve or protect its interests and the interests of the Holders in the
Pledged Securities (including the power to institute and maintain suits or
proceedings to restrain the enforcement of or compliance with any legislative or
other governmental enactment, rule or order that may be unconstitutional or
otherwise invalid if the enforcement of, or compliance with, such enactment,
rule or order would impair the security interest hereunder or be prejudicial to
the interests of the Holders or of the Trustee).
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1301. Company's Option to Effect Defeasance or
Covenant Defeasance.
The Company may, at its option by Board Resolution, at any
time, with respect to the Notes, elect to have either Section 1302 or Section
1303 be applied to all Outstanding Notes upon compliance with the conditions set
forth below in this Article Thirteen.
SECTION 1302. Defeasance and Discharge.
Upon the Company's exercise under Section 1301 of the option
applicable to this Section 1302, the Company shall be deemed to have been
discharged from its obligations with respect to all Outstanding Notes on the
date the conditions set forth in Section 1304 are satisfied (hereinafter,
"defeasance"). For this purpose, such defeasance means that the Company shall be
deemed to have paid and discharged the entire indebtedness represented by the
Outstanding Notes, which shall thereafter be deemed to be "Outstanding" only for
the purposes of Section 1305 and the other Sections of this Indenture referred
to in (A) and (B) below, and to have satisfied all its other obligations under
such Notes and this Indenture insofar as such Notes are concerned (and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (A) the rights of Holders of
Outstanding Notes to receive payments (solely from monies deposited in trust) in
respect of the principal of, premium, if any, accrued interest and Liquidated
Damages, if any, on such Notes when such payments are due, (B) the Company's
obligations with respect to such Notes under Sections 304, 305, 306, 1002
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96
and 1003, (C) the rights, powers, trusts, duties and immunities of the Trustee
hereunder and (D) this Article Thirteen. Subject to compliance with this Article
Thirteen, the Company may exercise its option under this Section 1302
notwithstanding the prior exercise of its option under Section 1303 with respect
to the Notes.
SECTION 1303. Covenant Defeasance.
Upon the Company's exercise under Section 1301 of the option
applicable to this Section 1303, the Company shall be released from its
obligations under any covenant contained in Section 801(3) and (4) and Section
803 and in Sections 1007 through 1022 with respect to the Outstanding Notes on
and after the date the conditions set forth below are satisfied (hereinafter,
"covenant defeasance"), and the Notes shall thereafter be deemed not to be
"Outstanding" for the purposes of any direction, waiver, consent or declaration
or Act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "Outstanding" for all other purposes
hereunder. For this purpose, such covenant defeasance means that, with respect
to the Outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section
501(6), but, except as specified above, the remainder of this Indenture and such
Notes shall be unaffected thereby.
SECTION 1304. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either
Section 1302 or Section 1303 to the Outstanding Notes:
(1) The Company shall irrevocably have deposited or caused to
be deposited with the Trustee (or another trustee satisfying the
requirements of Section 607 who shall agree to comply with the
provisions of this Article Thirteen applicable to it) as trust funds in
trust for the purpose of making the following payments, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders of such Notes, (A) cash in United States dollars, (B) U.S.
Government Obligations or (C) a combination thereof, in such amounts as
will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, and which shall
be applied by the Trustee (or other qualifying trustee) to pay and
discharge, the principal of (and premium, if any), accrued interest and
Liquidated Damages, if any, on the Outstanding Notes on the Stated
Maturity (or Redemption Date, if applicable) of such principal (and
premium, if any) or installment of interest and Liquidated Damages, if
any; provided that the Trustee shall
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have been irrevocably instructed to apply such money or the proceeds of
such U.S. Government Obligations to said payments with respect to the
Notes. Before such a deposit, the Company may give to the Trustee, in
accordance with Section 1103 hereof, a notice of its election to redeem
all of the Outstanding Notes at a future date in accordance with
Article Eleven hereof, which notice shall be irrevocable. Such
irrevocable redemption notice, if given, shall be given effect in
applying the foregoing. For this purpose, "U.S. Government Obligations"
means securities that are (x) direct obligations of the United States
for the timely payment of which its full faith and credit is pledged or
(y) obligations of a Person controlled or supervised by and acting as
an agency or instrumentality of the United States the timely payment of
which is unconditionally guaranteed as a full faith and credit
obligation by the United States, which, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall
also include a depository receipt issued by a "bank" (as defined in
Section 3(a)(2) of the Securities Act), as custodian with respect to
any such U.S. Government Obligation or a specific payment of principal
of or interest on any such U.S. Government Obligation held by such
custodian for the account of the holder of such depository receipt,
provided that (except as required by law) such custodian is not
authorized to make any deduction from the amount payable to the holder
of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of
principal of or interest on the U.S. Government Obligation evidenced by
such depository receipt.
(2) No Default or Event of Default with respect to the
Notes shall have occurred and be continuing on the date of such deposit
or, insofar as an event of bankruptcy under paragraph (9) or (10) of
Section 501 hereof is concerned, at any time during the period ending
on the 123rd day after the date of such deposit.
(3) [Reserved]
(4) Such defeasance or covenant defeasance shall not result
in a breach or violation of, or constitute a default under any material
agreement or instrument (other than this Indenture) to which the
Company is a party or by which it is bound.
(5) In the case of an election under Section 1302, the
Company shall have delivered to the Trustee an Opinion of Counsel
stating that (x) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or (y) since May
21, 1998, there has been a change in the applicable federal income tax
law, in either case to the effect, and based thereon such opinion shall
confirm, that Holders will not recognize income, gain or loss for
federal income tax purposes as a result of such defeasance and will be
subject to federal income tax on the same amounts, in the same
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manner and at the same times as would have been the case if such
defeasance had not occurred.
(6) In the case of an election under Section 1303, the
Company shall have delivered to the Trustee an Opinion of Counsel to
the effect that the Holders will not recognize income, gain or loss for
federal income tax purposes as a result of such covenant defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
covenant defeasance had not occurred.
(7) The Company shall have delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to either the defeasance
under Section 1302 or the covenant defeasance under Section 1303 (as
the case may be) have been complied with.
SECTION 1305. Deposited Money and U.S. Government Obligations
to Be Held in Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section
1003, all money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee (or other qualifying trustee, collectively for
purposes of this Section 1305, the "Trustee") pursuant to Section 1304 in
respect of the Outstanding Notes shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Notes and this Indenture, to
the payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Holders of
such Notes of all sums due and to become due thereon in respect of principal
(and premium, if any) and interest, but such money need not be segregated from
other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Governmental
Obligations deposited pursuant to Section 1304 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders.
Anything in this Article Thirteen to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon Company Request any money or U.S. Government Obligations held by it as
provided in Section 1304 which, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent defeasance or covenant
defeasance, as applicable, in accordance with this Article.
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SECTION 1306. Reinstatement.
If the Trustee or any Paying Agent is unable to apply any
money in accordance with Section 1305 by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Company's obligations under this Indenture and the
Notes shall be revived and reinstated as though no deposit had occurred pursuant
to Section 1302 or 1303, as the case may be, until such time as the Trustee or
Paying Agent is permitted to apply all such money in accordance with Section
1305; provided, however, that if the Company makes any payment of principal of
(or premium, if any) or interest on 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.
This Indenture may be signed in any number of counterparts
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Indenture.
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IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the day and year first above written.
STARTEC GLOBAL COMMUNICATIONS
CORPORATION
By:_________________________________
Name:
Title:
FIRST UNION NATIONAL BANK, Trustee
By:_________________________________
Name:
Title:
<PAGE>
Exhibit A
FORM OF FACE OF NOTE
STARTEC GLOBAL COMMUNICATIONS CORPORATION
12% [Series A] Senior Note due 2008
[CUSIP] [CINS] ____________
No. _________ $ ____________
STARTEC GLOBAL COMMUNICATIONS CORPORATION, a Maryland
corporation (herein called the "Company," which term includes any successor
Person under the Indenture hereinafter referred to), for value received, hereby
promises to pay to __________________ or registered assigns, the principal sum
of ___ United States dollars on May 15, 2008, at the office or agency of the
Company referred to below, and to pay interest thereon on November 15, 1998 and
semi-annually thereafter, on November 15 and May 15 in each year, from May 21,
1998 or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, at the rate of 12% per annum, until the principal
hereof is paid or duly provided for, and (to the extent lawful) to pay on demand
interest on any overdue interest at the rate borne by the Notes from the date on
which such overdue interest becomes payable to the date payment of such interest
has been made or duly provided for. The interest so payable, and punctually paid
or duly provided for, on any Interest Payment Date will, as provided in such
Indenture, be paid to the Person in whose name this Note (or one or more
Predecessor Notes) is registered at the close of business on the Regular Record
Date for such interest, which shall be the November 1 or May 1 (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for shall forthwith
cease to be payable to the Holder on such Regular Record Date, and such
Defaulted Interest, and (to the extent lawful) interest on such Defaulted
Interest at the rate borne by the Notes, may be paid to the Person in whose name
this Note (or one or more Predecessor Notes) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders of Notes not
less than 10 days prior to such Special Record Date, or may be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Notes may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in said Indenture.
The Holder of this Note is entitled to the benefits of the
Registration Rights Agreement, dated as of May 21, 1998 (the "Registration
Rights Agreement"), between the Company and the Initial Purchasers named
therein. In the event that either (i) the Company fails to file with the
Commission any of the Registration Statements required by the Registration
Rights Agreement on or before the date specified therein for such filing, (ii)
any of such Registration Statements is not declared effective by the Commission
on or prior to the date
<PAGE>
A-2
specified for such effectiveness in the Registration Rights Agreement (the
"Effectiveness Target Date"), (iii) the Exchange Offer has not been consummated
within 30 days after the Effectiveness Target Date with respect to the Exchange
Offer Registration Statement or (iv) any Registration Statement required by the
Registration Rights Agreement is filed and declared effective but thereafter
ceases to be effective or fails to be usable for its intended purpose without
being succeeded within five business days by a post-effective amendment to such
Registration Statement that cures such failure and that is declared effective
within such five business day period (each such event referred to in clauses (i)
through (iv) above, a "Registration Default"), additional cash interest
("Liquidated Damages") shall accrue to each Holder of the Notes commencing upon
the occurrence of such Registration Default in an amount equal to .50% per annum
of the principal amount of Notes held by such Holder. The amount of Liquidated
Damages will increase by an additional .50% per annum of the principal amount of
Notes with respect to each subsequent 90-day period (or portion thereof) until
all Registration Defaults have been cured, up to a maximum rate of Liquidated
Damages of 1.50% per annum of the principal amount of Notes. All accrued
Liquidated Damages will be paid to Holders by the Company in the same manner as
interest is paid pursuant to the Indenture. Following the cure of all
Registration Defaults relating to any particular Transfer Restricted Securities
(as defined in the Registration Rights Agreement), the accrual of Liquidated
Damages with respect to such Transfer Restricted Securities will cease.*
The principal of (and premium and Liquidated Damages, if any)
and interest on the Notes shall be payable at the office or agency of the
Company maintained for such purpose (which shall initially be the Office of the
Trustee located at 40 Broad Street, Fifth Floor, Suite 550, New York, New York,
10004, unless the Company shall designate and maintain some other office or
agency for such purpose), and, at the option of the Company, interest may be
paid by check mailed to addresses of the holders as such address appears in the
Register; provided that all payments with respect to the Global Notes and
Certificated Notes, the Holders of which have given wire transfer instructions
to the Company, will be required to be made by wire transfer of immediately
available funds to the accounts specified by the Holders thereof.
Reference is hereby made to the further provisions of this
Note set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly
executed by the Trustee referred to on the reverse hereof by manual signature,
this Note shall not be entitled to any benefit under the Indenture, or be valid
or obligatory for any purpose.
- - --------
* To be included in Initial Notes.
<PAGE>
A-3
<PAGE>
A-4
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed.
STARTEC GLOBAL COMMUNICATIONS
CORPORATION
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
Dated: ______________________
This is one of the 12% [Series A] Senior Notes due 2008 referred to in the
within-mentioned Indenture.
-------------------------------
First Union National Bank
By:_________________________________
Authorized Signatory
<PAGE>
A-5
FORM OF REVERSE SIDE OF NOTE
STARTEC GLOBAL COMMUNICATIONS CORPORATION
12% [Series A] Senior Note due 2008
This Note is one of a duly authorized issue of securities of
the Company designated as its 12% [Series A] Senior Notes due 2008 (herein
called the "Notes"), limited (except as otherwise provided in the Indenture
referred to below) in aggregate principal amount to $160,000,000, which may be
issued under an indenture (herein called the "Indenture") dated as of May 21,
1998 between the Company and First Union National Bank, trustee (herein called
the "Trustee," which term includes any successor trustee under the Indenture),
to which Indenture and all indentures supplemental thereto reference is hereby
made for a statement of the respective rights, limitations of rights, duties,
obligations and immunities thereunder of the Company, the Trustee and the
Holders of the Notes, and of the terms upon which the Notes are, and are to be,
authenticated and delivered.
The Notes are subject to redemption upon not less than 30 nor
more than 60 days' prior notice, in whole or in part, at any time or from time
to time on or after May 15, 2003, at the election of the Company, at Redemption
Prices (expressed in percentages of principal amount thereof), plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the Redemption Date
(subject to the right of Holders of record on the relevant Regular Record Date
to receive interest due on an Interest Payment Date that is on or prior to the
Redemption Date), if redeemed during the 12-month period commencing on May 15,
of the years set forth below:
Redemption
Year Price
---- -----
2003........................... 106.00%
2004........................... 104.00
2005........................... 102.00
2006 (and thereafter).......... 100.00%
Notwithstanding the foregoing, prior to May 15, 2001, the
Company may on any one or more occasions redeem up to 35% of the originally
issued aggregate principal amount of Notes at a redemption price of 112% of the
aggregate principal amount thereof, plus accrued
<PAGE>
A-6
and unpaid interest and Liquidated Damages, if any, thereon, to the Redemption
Date, with the Net Cash Proceeds of one or more Public Equity Offerings;
provided that at least 65% of the originally issued principal amount of the
Notes remains outstanding immediately after the occurrence of such redemption;
and provided further that notice of such redemption shall be given within 60
days of the closing of any such Public Equity Offering.
Upon the occurrence of a Change of Control, the Holder of this
Note may require the Company, subject to certain limitations provided in the
Indenture, to repurchase all or any part of this Note at a purchase price in
cash in an amount equal to 101% of the principal amount thereof plus accrued and
unpaid interest and Liquidated Damages, if any.
Under certain circumstances, in the event the Net Cash
Proceeds received by the Company from an Asset Sale, which proceeds are not used
to (i) (A) apply an amount equal to such Net Cash Proceeds to permanently repay
unsubordinated Indebtedness of the Company or Indebtedness of any Restricted
Subsidiary, in each case owing to a Person other than the Company or any of its
Restricted Subsidiaries or (B) invest an equal amount, or the amount not so
applied pursuant to clause (A), in property or assets of a nature or type or
that are used in a business (or in a Person having property and assets of a
nature or type, or engaged in a business) similar or related to the nature or
type of the property and assets of, or the business of, the Company and its
Restricted Subsidiaries existing on the date of such investment (as determined
in good faith by the Board of Directors, whose determination shall be conclusive
and evidenced by a Board Resolution) and (ii) apply (no later than the end of
the 360-day period immediately following the date of receipt of the Net Cash
Proceeds from an Asset Sale) such excess Net Cash Proceeds (to the extent not
applied pursuant to clause (i)) in accordance with the Indenture, and which
proceeds equal or exceed a specified amount, the Company shall be required to
make an offer to all Holders to purchase the maximum principal amount of Notes,
in an integral multiple of $1,000, that may be purchased out of such amount at a
purchase price in cash equal to 100.0% of the principal amount thereof, plus
accrued, unpaid interest and Liquidated Damages, if any, to the date of
purchase, in accordance with the Indenture. Holders of Notes that are subject to
any offer to purchase shall receive an Excess Proceeds Offer from the Company
prior to any related Excess Proceeds Payment Date.
In the case of any redemption or repurchase of Notes, interest
and Liquidated Damages installments, if any, whose Stated Maturity is on or
prior to the Redemption Date or Excess Proceeds Payment Date will be payable to
the Holders of such Notes, or one or more Predecessor Notes, of record at the
close of business on the relevant Regular Record Date referred to on the face
hereof. Notes (or portions thereof) for whose redemption and payment provision
is made in accordance with the Indenture shall cease to bear interest from and
after the Redemption Date or Excess Proceeds Payment Date, as the case may be.
<PAGE>
A-7
In the event of redemption or repurchase of this Note in part
only, a new Note or Notes for the unredeemed portion hereof shall be issued in
the name of the Holder hereof upon the cancellation hereof.
If an Event of Default shall occur and be continuing, the
principal of all the Notes may be declared due and payable in the manner and
with the effect provided in the Indenture.
The Indenture contains provisions for defeasance at any time
of (a) the entire Indebtedness of the Company on this Note and (b) certain
restrictive covenants and the related Defaults and Events of Default, upon
compliance by the Company with certain conditions set forth therein, which
provisions apply to this Note.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Notes at the time Outstanding.
Additionally, the Indenture permits that, without notice to or consent of any
Holder, the Company and the Trustee together may amend or supplement the
Indenture or this Note to: (i) evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants of the Company
contained herein and in the Notes; (ii) add to the covenants of the Company for
the benefit of the Holders or to surrender any right or power conferred upon the
Company by the Indenture; (iii) add any additional Events of Default; (iv)
evidence and provide for the acceptance of appointment by a successor Trustee
under the Indenture; (v) cure any ambiguity, correct or supplement any provision
in the Indenture which may be inconsistent with any other provision therein, or
make any other provisions with respect to matters or questions arising under the
Indenture; provided that such action shall not adversely affect the interests of
the Holders in any material respect; or (vi) secure the Notes. The Indenture
also contains provisions permitting the Holders of specified percentages in
aggregate principal amount of the Notes at the time Outstanding, on behalf of
the Holders of all the Notes, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by or on behalf of the Holder of
this Note shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange herewith or in lieu hereof whether or not notation of such
consent or waiver is made upon this Note.
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, premium, if any,
interest and Liquidated Damages, if any, on this Note at the times, place, and
rate, and in the coin or currency, herein prescribed.
<PAGE>
A-8
If less than all the Notes are to be redeemed, the particular
Notes to be redeemed shall be selected not more than 60 days prior to the
Redemption Date in compliance with the requirements of the principal national
securities exchange, if any, on which the Notes are listed or, if the Notes are
not listed on a national securities exchange, on a pro rata basis, by lot or by
such other method as the Trustee in its sole discretion shall deem fair and
appropriate and which may provide for the selection for redemption of portions
of the principal of Notes.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Note is registrable on the
Register of the Company, upon surrender of this Note for registration of
transfer at the office or agency of the Company maintained for such purpose in
The City of New York or at the Corporate Trust Office of the Trustee, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Registrar duly executed by, the Holder
hereof or his attorney duly authorized in writing, and thereupon one or more new
Notes, of authorized denominations and for the same aggregate principal amount,
will be issued to the designated transferee or transferees.
The Notes are issuable only in registered form without coupons
in denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, the Notes are
exchangeable for a like aggregate principal amount of Notes of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any registration of
transfer or exchange of Notes, but the Company or the Trustee may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
Prior to the time of due presentment of this Note for
registration of transfer, the Company, the Trustee and any agent of the Company
or the Trustee may treat the Person in whose name this Note is registered on the
Register as the owner hereof for all purposes, whether or not this Note be
overdue, and neither the Company, the Trustee nor any agent shall be affected by
notice to the contrary.
THIS NOTE SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
Interest on this Note shall be computed on the basis of a
360-day year of twelve 30-day months. All capitalized terms used in this Note
which are defined in the Indenture shall have the meanings assigned to them in
the Indenture.
<PAGE>
A-9
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby
sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- - ----------------------------------
- - --------------------------------------------------------------------------------
(Please print or typewrite name and address including zip code of assignee)
- - --------------------------------------------------------------------------------
the within Warrant and all rights thereunder, hereby irrevocably constituting
and appointing
attorney to transfer such Warrant on the books of the Company with full power of
substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL WARRANTS OTHER THAN WARRANTS,
REGULATION S PERMANENT GLOBAL WARRANTS AND
REGULATION S PERMANENT CERTIFICATED WARRANTS]
In connection with any transfer of this Warrant occurring
prior to the date which is the earlier of the date of an effective Registration
Statement or the end of the period referred to in Rule 144(k) under the
Securities Act, the undersigned confirms that without utilizing any general
solicitation or general advertising that:
[Check One]
|_| (a) this Warrant is being transferred in compliance with the exemption
from registration under the Securities Act of 1933, as amended, provided
by Rule 144A thereunder.
or
|_| (b) this Warrant is being transferred other than in accordance with (a)
above and documents are being furnished which comply with the conditions
of transfer set forth in this Warrant and the Warrant Agreement.
<PAGE>
A-10
If neither of the foregoing boxes is checked, the Warrant Agreement shall not be
obligated to register this Warrant in the name of any Person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 3.2 of the Warrant Agreement shall
have been satisfied.
Date:__________________________ ____________________________________
NOTICE: The signature to this
assignment must correspond with the
name as written upon the face of the
within-mentioned instrument in every
particular, without alteration or
any change whatsoever.
Signature Guarantee1___________________
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Warrant for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, as amended, and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the undersigned has requested pursuant to
Rule 144A or has determined not to request such information and that it is aware
that the transferor is relying upon the undersigned's foregoing representations
in order to claim the exemption from registration provided by Rule 144A.
Date:__________________________ ____________________________________
NOTICE: To be executed by an
executive officer
- - --------
1 The Holder's signature must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the 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 Registrar in addition to
or in substitution for STAMP, all in accordance with the Securities
Exchange Act of 1934, as amended.
<PAGE>
A-11
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Warrant purchased by the Company
pursuant to Section 1010 or Section 1017 of the Indenture, check the Box: [ ]
If you wish to have a portion of this Warrant purchased by the
Company pursuant to Section 1010 or Section 1017 of the Indenture, state the
amount (in original principal amount) below:
$_________________________.
Date:____________________
Your Signature: ________________
(Sign exactly as your name appears on the other side of this Warrant)
Signature Guarantee1_____________
- - --------
1 The Holder's signature must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the 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 Registrar in addition to
or in substitution for STAMP, all in accordance with the Securities
Exchange Act of 1934, as amended.
<PAGE>
Exhibit B
Form of Certificate
to Be Delivered upon
Termination of Restricted Period
[DATE]
First Union National Bank
800 East Main St., Lower Mezzanine
Richmond, Virginia 23219
Attention: Corporate Trust Department
Re: Startec Global Communications Corporation (the "Company")
12% Senior Notes due 2008 (the "Notes")
----------------------------------------------------------
Ladies and Gentlemen:
This letter relates to $__________ principal amount of Notes
represented by the offshore global note certificate (the "Regulation S Global
Note"). Pursuant to Section 201 of the Indenture dated as of May 21, 1998
relating to the Notes (the "Indenture"), we hereby certify that (1) we are the
beneficial owner of such principal amount of Notes represented by the Regulation
S Global Note and (2) we are a Non-U.S. Person to whom the Notes could be
transferred in accordance with Rule 904 of Regulation S promulgated under the
Securities Act of 1933, as amended ("Regulation S"). Accordingly, you are hereby
requested to issue a Regulation S Permanent Global Note representing the
undersigned's interest in the principal amount of Notes represented by the
Global Note, all in the manner provided by the Indenture.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By:______________________________
Authorized Signature
<PAGE>
Exhibit C
Form of Regulation S Certificate
[DATE]
First Union National Bank
800 East Main St., Lower Mezzanine
Richmond, Virginia 23219
Attention: Corporate Trust Department
Re: Startec Global Communications Corporation (the "Company")
12% Senior Notes due 2008 (the "Notes")
----------------------------------------------------------
Ladies and Gentlemen:
This Certificate relates to our proposed transfer of
$__________ principal amount of Notes issued under the Indenture dated as of May
21, 1998 relating to the Notes. Terms are used in this Certificate as defined in
Regulation S under the Securities Act of 1933, as amended (the "Securities
Act"). We hereby certify as follows:
1. The offer of the Notes was not made to a person in the
United States (unless such person or the account held by it for which
it is acting is excluded from the definition of "U.S. person" pursuant
to Rule 902(o) of Regulation S under the circumstances described in
Rule 902(i)(3) of Regulation S) or specifically targeted at an
identifiable group of U.S. citizens abroad.
2. Either (a) at the time the buy order was originated, the
buyer was outside the United States or we and any person acting on our
behalf reasonably believed that the buyer was outside the United States
or (b) the transaction was executed in, on or through the facilities of
a designated offshore securities market, and neither we nor any person
acting on our behalf knows that the transaction was pre-arranged with a
buyer in the United States.
3. Neither we, any of our affiliates, nor any person acting on
our or their behalf, has made any directed selling efforts in the
United States.
4. The proposed transfer of Notes is not part of a plan or
scheme to evade the registration requirements of the Securities Act.
<PAGE>
C-2
5. If we are a dealer or a person receiving a selling
concession or other fee or remuneration in respect of the Notes, and
the proposed transfer takes place before the completion of the
Regulation S Global Note Exchange Offer referred to in the Indenture,
or we are an officer or director of the Company or a distributor, we
certify that the proposed transfer is being made in accordance with the
provisions of Rule 904(c) of Regulation S.
You and the Company are entitled to rely upon this Certificate
and are irrevocably authorized to produce this Certificate or a copy hereof to
any interested party in any administrative or legal proceeding or official
inquiry with respect to the matters covered hereby.
Very truly yours,
[NAME OF SELLER]
By:__________________________
Authorized Signature
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of May 21, 1998
Among
STARTEC GLOBAL COMMUNICATIONS CORPORATION
and
LEHMAN BROTHERS INC.
GOLDMAN, SACHS & CO.
and
ING BARING (U.S.) SECURITIES, INC.
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
1. Definitions........................................... 3
2. Securities Subject to this Agreement.................. 5
3. Registered Exchange Offer............................. 5
4. Shelf Registration.................................... 7
5. Liquidated Damages.................................... 8
6. Registration Procedures............................... 8
7. Registration Expenses................................. 16
8. Indemnification and Contribution...................... 16
9. Rule 144A............................................. 19
10. Participation in Underwritten Registrations........... 19
11. Selection of Underwriters............................. 19
12. Miscellaneous......................................... 20
<PAGE>
This Registration Rights Agreement (this "Agreement") is made
and entered into as of May 21, 1998 by and among Startec Global Communications
Corporation, a Maryland corporation (the "Company") and Lehman Brothers Inc.,
Goldman, Sachs & Co. and ING Baring (U.S.) Securities, Inc.
(each an "Initial Purchaser" and together the "Initial Purchasers").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of May 18, 1998, among the Company and the Initial
Purchasers (the "Purchase Agreement"), which provides for the sale by the
Company to the Initial Purchasers of 160,000 units (the "Units") consisting of
$160,000,000 principal amount of the Company's 12% Senior Notes due 2008 (the
"Notes") and warrants (the "Warrants") to purchase an aggregate of 200,226
shares of the Company's common stock, $.01 par value (the "Common Stock").
Capitalized terms used but not specifically defined herein have the respective
meanings ascribed thereto in the Purchase Agreement. As an inducement to the
Initial Purchasers to enter into the Purchase Agreement and in satisfaction of a
condition to the Initial Purchasers' obligations thereunder, the Company agrees
with the Initial Purchasers, for the benefit of the holders of the Notes
(together with the Initial Purchasers, the "Holders"), as follows:
1. Definitions. As used in this Agreement, the following
capitalized terms shall have the following meanings:
Broker-Dealer: Any broker or dealer registered under
the Exchange Act.
Closing Date: The date on which the Notes are issued
and sold to the Initial Purchasers.
Commission: The Securities and Exchange Commission.
Consummate, Consummation or Consummated: A Registered
Exchange Offer shall be deemed "Consummated" for purposes of this
Agreement upon the occurrence of (i) the filing and effectiveness under
the Securities Act of the Exchange Offer Registration Statement
relating to the Exchange Notes to be issued in the Exchange Offer, (ii)
the keeping of the Exchange Offer open for a period not less than the
minimum period required pursuant to Section 3(b) hereof, and (iii) the
delivery by the Company of the Exchange Notes in the same aggregate
principal amount as the aggregate principal amount of Transfer
Restricted Securities that were validly tendered by Holders thereof
pursuant to the Exchange Offer.
Liquidated Damages Payment Date: With respect to the
Notes, each Interest Payment Date until the earlier of (i) the date on
which Liquidated Damages no longer are payable or (ii) the final Stated
Maturity of the Notes.
Effectiveness Target Date: As defined in Section 5.
Exchange Act: The Securities Exchange Act of 1934, as
amended.
Exchange Notes: The Notes to be issued pursuant to
the Indenture in the Exchange Offer.
<PAGE>
Exchange Offer: The registration by the Company under
the Securities Act of the Exchange Notes pursuant to which the Company
offers the Holders of all outstanding Transfer Restricted Securities
the opportunity to exchange all such outstanding Transfer Restricted
Securities held by such Holders for Exchange Notes in an aggregate
principal amount equal to the aggregate principal amount of the
Transfer Restricted Securities tendered in such exchange offer by such
Holders.
Exchange Offer Registration Statement: The
Registration Statement relating to the Exchange Offer, including the
Prospectus which forms a part thereof.
Exempt Resales: The transactions in which the Initial
Purchasers propose to sell the Notes to certain "qualified
institutional buyers," as such term is defined in Rule 144A under the
Securities Act and to certain non-U.S. Persons in off-shore
transactions pursuant to Regulation S under the Securities Act.
Holders: As defined in Section 2(b) hereof.
Indenture: The Indenture, dated as of the date
hereof, between the Company and First Union National Bank, as trustee
(the "Trustee"), pursuant to which the Notes are to be issued, as such
Indenture may be amended or supplemented from time to time in
accordance with the terms thereof.
Initial Purchasers: As defined in the preamble
hereto.
NASD: National Association of Securities Dealers,
Inc.
Person: An individual, partnership, corporation,
limited liability company or partnership, trust or unincorporated
organization, or a government or agency or political subdivision
thereof.
Prospectus: The prospectus included in a Registration
Statement, as may be amended or supplemented by any prospectus
supplement and by all other amendments thereto, including
post-effective amendments.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of
the Company relating to (a) an offering of Exchange Notes pursuant to
an Exchange Offer or (b) the registration for resale of Transfer
Restricted Securities pursuant to the Shelf Registration Statement
which is filed pursuant to the provisions of this Agreement, in either
case, including the Prospectus included therein, all amendments and
supplements thereto (including post-effective amendments).
Securities Act: The Securities Act of 1933, as
amended.
Shelf Filing Deadline: As defined in Section 4
hereof.
4
<PAGE>
Shelf Registration Statement: As defined in Section 4
hereof.
Stated Maturity: (i) with respect to any debt
security, the date specified in such debt security as the fixed date on
which the final installment of principal of such debt security is due
and payable and (ii) with respect to any scheduled installment of
principal of or interest on any debt security, the date specified in
such debt security as the fixed date on which such installment is due
and payable.
TIA: The Trust Indenture Act of 1939, as amended.
Transfer Restricted Securities: Each Note, until the
earliest to occur of (a) the date on which such Note has been properly
tendered for exchange (and accepted by the Company) by a Person other
than a Broker-Dealer for Exchange Notes pursuant to the Exchange Offer,
(b) following the exchange by a Broker-Dealer in the Exchange Offer of
such Note for one or more Exchange Notes, the date on which such
Exchange Notes are sold to a purchaser who receives from such
Broker-Dealer on or prior to the date of such sale a copy of the
Prospectus contained in the Exchange Offer Registration Statement, (c)
the date on which the Registration Statement registering such Notes has
been declared effective under the Securities Act and such Notes have
disposed of in accordance with the Shelf Registration Statement or (d)
the date on which such Notes are eligible to be distributed to the
public pursuant to Rule 144 under the Securities Act;
Underwritten Registration or Underwritten Offering: A
registration or offering in which securities of the Company are sold to
an underwriter (in the case of a "firm commitment" underwritten
offering) for reoffering to the public.
2. Securities Subject to this Agreement.
(a) Transfer Restricted Securities. The securities
that are entitled to the benefits of this Agreement are the Transfer Restricted
Securities.
(b) Holders of Transfer Restricted Securities. A
Person is deemed to be a holder of Transfer Restricted Securities (each, a
"Holder") whenever such Person owns Transfer Restricted Securities.
3. Registered Exchange Offer.
(a) Unless the Exchange Offer shall not be
permissible under applicable law
or Commission policy (after the procedures set forth in Section 6(a) below have
been complied with) or one of the events set forth in Section 4(a)(ii) has
occurred the Company shall (i) cause to be filed with the Commission promptly
after the Closing Date, but in no event later than 90 days after the Closing
Date, a Registration Statement under the Securities Act relating to the Exchange
Notes and the Exchange Offer, (ii) use its reasonable best efforts to cause such
Registration Statement to be declared effective no later than 150 days after the
Closing Date, (iii) in connection with the foregoing, file (A) all pre-effective
amendments to such Registration Statement as may be necessary in order to cause
such Registration Statement to become effective, (B) if applicable, a
post-effective amendment to such Registration
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Statement pursuant to Rule 430A under the Securities Act and (C) cause all
necessary filings in connection with the registration and qualification of the
Exchange Notes to be made under the Blue Sky laws of such jurisdictions as are
necessary to permit the Consummation of the Exchange Offer, and (iv) use its
reasonable best efforts to cause the Exchange Offer to be consummated on or
prior to 30 days after the date on which the Exchange Offer Registration
Statement was declared effective by the Commission. The Exchange Offer shall be
on the appropriate form of Registration Statement permitting registration of the
Exchange Notes to be offered in exchange for the Transfer Restricted Securities
and to permit resales of Exchange Notes held by Broker-Dealers as contemplated
by Section 3(c) below. The 90, 150 and 30-day periods referred to in (i), (ii)
and (iii) of this Section 3(a) shall not include any period during which the
Company is seeking a "no-action" letter or other favorable decision from the
Commission pursuant to Section 6(a)(i) below.
(b) The Company shall use its reasonable best efforts
to cause the Exchange Offer Registration Statement to be effective continuously
and shall keep the Exchange Offer open for a period of not less than the minimum
period required under applicable federal and state securities laws to Consummate
the Exchange Offer; provided, however, that in no event shall such period be
less than 20 business days. The Company shall cause the Exchange Offer to comply
in all material respects with all applicable federal and state securities laws.
No securities other than the Exchange Notes shall be included in the Exchange
Offer Registration Statement.
(c) The Company shall indicate in a "Plan of
Distribution" section contained in the Prospectus contained in the Exchange
Offer Registration Statement that any Broker-Dealer who holds Notes that are
Transfer Restricted Securities and that were acquired for its own account as a
result of market-making activities or other trading activities (other than
Transfer Restricted Securities acquired directly from the Company) may exchange
such Notes pursuant to the Exchange Offer; however, such Broker-Dealer may be
deemed to be an "underwriter" within the meaning of Section 2(11) of the
Securities Act and must, therefore, deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales of the
Exchange Notes received by such Broker-Dealer in the Exchange Offer, which
prospectus delivery requirement may be satisfied by the delivery by such
Broker-Dealer of the Prospectus contained in the Exchange Offer Registration
Statement. Such "Plan of Distribution" section shall also contain all other
information with respect to such resales by Broker-Dealers that the Commission
may require in order to permit such resales pursuant thereto, but such "Plan of
Distribution" shall not name any such Broker-Dealer or disclose the amount of
Exchange Notes held by any such Broker-Dealer except to the extent required by
the Commission as a result of a change in policy announced after the date of
this Agreement or as required by the Securities Act.
The Company shall use its reasonable best efforts to keep the
Exchange Offer Registration Statement continuously effective, supplemented and
amended as required by the provisions of Section 6(c) below to the extent
necessary to ensure that it is available for resales of Exchange Notes acquired
by Broker-Dealers for their own accounts as a result of market-making activities
or other trading activities, and to ensure that it conforms with the
requirements of this Agreement, the Securities Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of
180 days from the date on which the Exchange Offer is Consummated.
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The Company shall provide sufficient copies of the latest
version of such Prospectus to Broker-Dealers promptly upon request at any time
during such 180-day period in order to facilitate such resales.
4. Shelf Registration.
(a) Shelf Registration. If (i) the Company is not
permitted to file an Exchange Offer Registration Statement or to consummate the
Exchange Offer because the Exchange Offer is not permitted by applicable law or
Commission policy (after the procedures set forth in Section 6(a) below have
been complied with), (ii) any Holder of Transfer Restricted Securities that is a
"qualified institutional buyer" (as defined in Rule 144A under the Securities
Act) or an institutional "accredited investor" (as defined in Rule 501(A)(l),
(2), (3) or (7) under the Securities Act) shall notify the Company at least 20
business days prior to the Consummation of the Exchange Offer (A) that such
Holder is prohibited by applicable law or Commission policy or action from
participating in the Exchange Offer, or (B) that such Holder may not resell the
Exchange Notes acquired by it in the Exchange Offer to the public without
delivering a prospectus and that the Prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales by such
Holder, or (C) that such Holder is a Broker-Dealer and holds Notes acquired
directly from the Company or one of its "Affiliates" (as such term is defined in
the Indenture), (iii) the Exchange Offer is not, for any reason, consummated
within 180 days after the Closing Date or (iv) the Exchange Offer has been
completed and in the opinion of counsel for the Initial Purchasers, a
Registration Statement must be filed and a prospectus must be delivered by the
Initial Purchasers in connection with any offering or sale of Transfer
Restricted Securities, the Company will use its reasonable best efforts to:
(x) cause to be filed a shelf registration
statement pursuant to Rule 415 under the Securities Act, which may be
an amendment to the Exchange Offer Registration Statement (in either
event, the "Shelf Registration Statement"), within 60 days of the
earliest to occur of (i) through (iv) above; and
(y) cause such Shelf Registration Statement
to be declared effective by the Commission on or prior to the 150th day
after such obligation arises (the "Shelf Filing Deadline").
The Company shall use its reasonable best efforts to keep such Shelf
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Sections 6(b) and (c) hereof to the extent
necessary to ensure that it is available for resales of Transfer Restricted
Securities by the Holders of Transfer Restricted Securities entitled to the
benefit of this Section 4(a), and to ensure that it conforms with the
requirements of this Agreement, the Securities Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period
ending on the second anniversary of the Closing Date.
(b) Provision by Holders of Certain Information in
Connection with the Shelf Registration Statement. No Holder of Transfer
Restricted Securities may include any of its Transfer Restricted Securities in
any Shelf Registration Statement pursuant to this Agreement unless and until
such Holder furnishes to the Company in writing, within 20 Business Days after
receipt of a request therefor, such information as the Company may reasonably
request, or which is required under the Securities Act,
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<PAGE>
for use in connection with any Shelf Registration Statement or Prospectus or
preliminary Prospectus included therein. No Holder of Transfer Restricted
Securities shall be entitled to Liquidated Damages pursuant to Section 5 hereof
unless and until such Holder shall have provided all such reasonably requested
information. Each Holder as to which any Shelf Registration Statement is being
effected agrees to furnish promptly to the Company all information required to
be disclosed in order to make the information previously furnished to the
Company by such Holder not materially misleading.
5. Liquidated Damages.
(a) If (i) the Company fails to file with the
Commission any of the Registration Statements required by this Agreement on or
before the date specified for such filing in this Agreement, (ii) any of such
Registration Statements is not declared effective by the Commission on or prior
to the date specified for such effectiveness in this Agreement (the
"Effectiveness Target Date"), (iii) the Exchange Offer has not been Consummated
within 30 days after the Effectiveness Target Date with respect to the Exchange
Offer Registration Statement or (iv) any Registration Statement required by this
Agreement is filed and declared effective but shall thereafter cease to be
effective or fails to be usable for its intended purpose without being succeeded
within five business days by a post-effective amendment to such Registration
Statement that cures such failure and that is itself immediately declared
effective (each such event referred to in clauses (i) through (iv) above, a
"Registration Default"), additional cash interest ("Liquidated Damages") shall
accrue to each Holder of the Notes commencing upon the occurrence of such
Registration Default in an amount equal to .50% per annum of the principal
amount of Notes held by such Holder. The amount of Liquidated Damages will
increase by an additional .50% per annum of the principal amount of Notes with
respect to each subsequent 90-day period (or portion thereof) until all
Registration Defaults have been cured, up to a maximum rate of Liquidated
Damages of 1.50% per annum of the principal amount of Notes. All accrued
Liquidated Damages will be paid to Holders by the Company in the same manner as
interest is paid pursuant to the Indenture. Following the cure of all
Registration Defaults relating to any particular Transfer Restricted Securities,
the accrual of Liquidated Damages with respect to such Transfer Restricted
Securities will cease.
All obligations of the Company set forth in the preceding
paragraph that have accrued and are outstanding with respect to any Transfer
Restricted Security at the time such security ceases to be a Transfer Restricted
Security shall survive until such time as all such obligations with respect to
such Transfer Restricted Security shall have been satisfied in full.
(b) The Company shall notify the Trustee within one
business day after each and every date on which an event occurs in respect of
which Liquidated Damages are required to be paid (an "Event Date"). Liquidated
Damages shall be paid by depositing Liquidated Damages with the Trustee, in
trust, for the benefit of the Holders of the Notes, on or before the applicable
Interest Payment Date (whether or not any payment other than Liquidated Damages
is payable on such Notes), in immediately available funds in sums sufficient to
pay the Liquidated Damages then due to such Holders. Each obligation to pay
Liquidated Damages shall be deemed to accrue from the applicable date of the
occurrence of the Registration Default
6. Registration Procedures.
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<PAGE>
(a) Exchange Offer Registration Statement. In
connection with the Exchange Offer, the Company shall comply with all of the
provisions of Section 6(c) below, shall use its reasonable best efforts to
effect such Exchange Offer to permit the sale of Transfer Restricted Securities
being sold in accordance with the intended method or methods of distribution
thereof, and shall comply with all of the following provisions, other than
paragraph (ii) of this Section 6(a), which condition shall be performed only by
the Holders:
(i) If, in the reasonable opinion of counsel
to the Company, there is a question as to whether the Exchange Offer is
permitted by applicable law or Commission policy or action, the Company
hereby agrees to seek a "no-action letter" or other favorable decision
from the Commission allowing the Company to Consummate an Exchange
Offer for such Notes. The Company hereby agrees to pursue the issuance
of such a letter or decision to the Commission staff level but shall
not be required to take commercially unreasonable action to effect a
change of Commission policy. The Company hereby agrees, however, to (A)
participate in telephonic conferences with the Commission, (B) deliver
to the Commission staff an analysis prepared by counsel to the Company
setting forth the legal bases, if any, upon which such counsel has
concluded that such an Exchange Offer should be permitted and (C)
diligently pursue a resolution (which need not be favorable) by the
Commission staff of such submission.
(ii) As a condition to its participation in
the Exchange Offer pursuant to the terms of this Agreement, each Holder
of Transfer Restricted Securities shall furnish, upon the request of
the Company, prior to the Consummation thereof, a written
representation to the Company (which may be contained in the letter of
transmittal contemplated by the Exchange Offer Registration Statement)
to the effect that (A) such Holder is not an "Affiliate" of the Company
(as "Affiliate" is defined in the Indenture), (B) such Holder is not
engaged in, does not intend to engage in, and has no arrangement or
understanding with any Person to participate in, a distribution of the
Exchange Notes to be issued in the Exchange Offer and (C) such Holder
is acquiring the Exchange Notes in its ordinary course of business.
Each Holder hereby acknowledges and agrees that any Broker-Dealer and
any such Holder using the Exchange Offer to participate in a
distribution of the Exchange Notes (1) could not, under Commission
policy or action as in effect on the date of this Agreement, rely on
the position of the Commission enunciated in Morgan Stanley and Co.,
Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation
(available May 13, 1988), as interpreted in the Commission's letter to
Shearman & Sterling dated July 2, 1993, and similar "no-action letters"
(including Brown & Wood LLP (available February 7, 1997), and any
"no-action letter" obtained pursuant to clause (i) above), and (2) must
comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a resale transaction and that
such a resale transaction should be covered by an effective
registration statement containing the selling security holder
information required by Items 507 or 508, as applicable, of Regulation
S-K if the resales are of Exchange Notes obtained by such Holder in
exchange for Transfer Restricted Securities acquired by such Holder
directly from the Company.
(iii) Prior to the effectiveness of the
Exchange Offer Registration Statement, the Company shall provide a
supplemental letter to the Commission (A) stating that the Company is
registering the Exchange Offer in reliance on the position of the
Commission enunciated in Exxon Capital Holdings Corporation (available
May 13, 1988), Morgan Stanley
9
<PAGE>
and Co., Inc. (available June 5, 1991), Brown & Wood LLP (available
February 7, 1997) and, if applicable, any "no-action letter" obtained
pursuant to clause (i) above and (B) including a representation that
the Company has not entered into any arrangement or understanding with
any Person to distribute the Exchange Notes to be received in the
Exchange Offer and that, to the best of the Company's information and
belief, each Holder participating in the Exchange Offer is acquiring
the Exchange Notes in its ordinary course of business and has no
arrangement or understanding with any Person to participate in the
distribution of the Exchange Notes received in the Exchange Offer.
(b) Shelf Registration Statement. In connection with
the Shelf Registration Statement, the Company shall comply with all the
provisions of Section 6(c) below and shall use its reasonable best efforts to
effect such registration to permit the sale of the Transfer Restricted
Securities being sold in accordance with the intended method or methods of
distribution thereof, and pursuant thereto, the Company will, as expeditiously
as possible, prepare and file with the Commission a Registration Statement on
any appropriate form which is available for the sale of the Transfer Restricted
Securities in accordance with the intended method or methods of distribution
thereof.
(c) General Provisions. In connection with any
Registration Statement and any Prospectus required by this Agreement to permit
the sale or resale of Transfer Restricted Securities (including, without
limitation, any Registration Statement and the related Prospectus required to
permit resales of Transfer Restricted Securities by Broker-Dealers), the Company
shall:
(i) use its reasonable best efforts to keep
such Registration Statement continuously effective and provide all
requisite financial statements for the period specified in Section 3 or
4 of this Agreement, as applicable; upon the occurrence of any event
that would cause any such Registration Statement or the Prospectus
contained therein (A) to contain a material misstatement or omission or
(B) not to be effective and usable for resale of Transfer Restricted
Securities during the period required by Section 4 of this Agreement,
the Company shall file promptly an appropriate amendment to such
Registration Statement, in the case of clause (A), correcting any such
misstatement or omission, and, in the case of either clause (A) or (B),
use its reasonable best efforts to cause such amendment to be declared
effective and such Registration Statement and the related Prospectus to
become usable for their intended purpose(s) as soon as practicable
thereafter;
(ii) prepare and file with the Commission
such amendments and post-effective amendments to the Registration
Statement as may be necessary to keep the Registration Statement
effective for the applicable period set forth in Section 3 or 4 hereof,
as applicable, or such shorter period as will terminate when all
Transfer Restricted Securities covered by such Registration Statement
have been sold; cause the Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented, to be filed pursuant to
Rule 424 under the Securities Act, and to comply fully with the
applicable provisions of Rules 424 and 430A under the Securities Act in
a timely manner; and comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with
the intended method or methods of distribution by the sellers thereof
set forth in such Registration Statement or supplement to the
Prospectus;
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(iii) in the case of a Shelf Registration
Statement, advise the underwriter(s), if any, and selling Holders
promptly and, if requested by such Persons, to confirm such advice in
writing, (A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to any
Registration Statement or any post-effective amendment thereto, when
the same has been declared effective, (B) of any request by the
Commission for amendments to the Registration Statement or amendments
or supplements to the Prospectus or for additional information relating
thereto, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement under the
Securities Act or of the suspension by any state securities commission
of the qualification of the Transfer Restricted Securities for offering
or sale in any jurisdiction, or the initiation of any proceeding for
any of the foregoing purposes, (D) of the existence of any fact or the
happening of any event that makes any statement of a material fact made
in the Registration Statement, the Prospectus, any amendment or
supplement thereto, or any document incorporated by reference therein
untrue, or that requires the making of any additions to or changes in
the Registration Statement or the Prospectus in order to make the
statements therein not misleading. If, at any time, the Commission
shall issue any stop order suspending the effectiveness of the
Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification
or exemption from qualification of the Transfer Restricted Securities
under state securities or Blue Sky laws, the Company shall use its
reasonable best efforts to obtain the withdrawal or lifting of such
order at the earliest possible time;
(iv) in the case of a Shelf Registration
Statement, furnish to each of the selling or exchanging Holders and
each of the underwriter(s), if any, before filing with the Commission,
copies of any Registration Statement or any Prospectus included therein
or any amendments or supplements to any such Registration Statement or
Prospectus (including all documents incorporated by reference after the
initial filing of such Registration Statement), which documents will be
subject to the review of such Holders and underwriter(s), if any, for a
period of at least three business days, and the Company will not file
any such Registration Statement or Prospectus or any amendment or
supplement to any such Registration Statement or Prospectus (including
all such documents incorporated by reference) to which selling Holders
of a majority in Liquidation Amount of Transfer Restricted Securities
covered by such Registration Statement or the underwriter(s), if any,
shall reasonably object within three business days after the receipt
thereof. A selling Holder or underwriter, if any, shall be deemed to
have reasonably objected to such filing if such Registration Statement,
amendment, Prospectus or supplement, as applicable, as proposed to be
filed, contains a material misstatement or omission;
(v) subject to a three business day review
and objection period as provided in Section 6(a)(iv) of this Agreement,
in the case of a Shelf Registration Statement, promptly prior to the
filing of any document that is to be incorporated by reference into a
Registration Statement or Prospectus, provide copies of such document
to the selling Holders and to the underwriter(s), if any, make the
Company's representatives available for discussion of such document and
other customary due diligence matters, and include such information in
such document prior to the filing thereof as such selling Holders or
underwriter(s), if any, reasonably may request;
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<PAGE>
(vi) in the case of a Shelf Registration
Statement, make available at reasonable times for inspection by the
selling Holders, any underwriter participating in any disposition
pursuant to such Registration Statement, and any attorney or accountant
retained by such selling Holders or any of the underwriter(s), all
financial and other records, pertinent corporate documents and
properties of the Company and cause the Company's officers, directors
and employees to supply all information reasonably requested by any
such Holder, underwriter, attorney or accountant in connection with
such Registration Statement subsequent to the filing thereof and prior
to its effectiveness;
(vii) in the case of a Shelf Registration
Statement, if requested by any selling Holders or the underwriter(s),
if any, promptly incorporate in any Registration Statement or
Prospectus, pursuant to a supplement or post-effective amendment if
necessary, such information as such selling Holders and underwriter(s),
if any, may reasonably request to have included therein, including,
without limitation, information relating to the "Plan of Distribution"
of the Transfer Restricted Securities, information with respect to the
principal amount of Transfer Restricted Securities being sold, the
purchase price being paid therefor and any other terms of the offering
of the Transfer Restricted Securities to be sold in such offering; and
make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after the Company is
notified of the matters to be incorporated in such Prospectus
supplement or post-effective amendments;
(viii) use its reasonable best efforts to
cause the Transfer Restricted Securities covered by the Registration
Statement to be rated with the appropriate rating agencies, if so
requested by the Holders of a majority in aggregate principal amount of
Notes covered thereby or the underwriter(s), if any;
(ix) in the case of a Shelf Registration
Statement, furnish to each selling Holder and each of the
underwriter(s), if any, without charge, at least one copy of the
Registration Statement, as first filed with the Commission, and of each
amendment thereto, including all documents incorporated by reference
therein and all exhibits (including exhibits incorporated therein by
reference);
(x) in the case of a Shelf Registration
Statement, deliver to each selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons reasonably may request; the Company
hereby consents to the use of the Prospectus and any amendment or
supplement thereto by each of the selling Holders and each of the
underwriter(s), if any, in connection with the offering and the sale of
the Transfer Restricted Securities covered by the Prospectus or any
amendment or supplement thereto;
(xi) in the case of a Shelf Registration
Statement, enter into such agreements (including an underwriting
agreement), and make such representations and warranties, and take all
such other actions in connection therewith in order to expedite or
facilitate the disposition of the Transfer Restricted Securities
pursuant to any Registration Statement contemplated by this Agreement,
all to such extent as may be reasonably requested by any Initial
Purchaser or by any Holder of Transfer Restricted Securities or
underwriter in
12
<PAGE>
connection with any sale or resale pursuant to any Registration
Statement contemplated by this Agreement; and in connection with an
Underwritten Registration, the Company shall:
(A) upon request, furnish to each
selling Holder and each underwriter, if any, in such substance
as they may reasonably request and as are customarily made by
issuers to underwriters in primary underwritten debt
offerings, upon the date of the effectiveness of the Shelf
Registration Statement:
(1) a certificate, dated
the date of the effectiveness of the Shelf
Registration Statement, signed by (y) the Chairman of
the Board, its President or a Vice President and (z)
the Chief Financial Officer of the Company,
confirming, as of the date thereof, such matters as
such parties may reasonably request;
(2) an opinion, dated the
date of the effectiveness of the Shelf Registration
Statement, of counsel for the Company, covering such
matters as such parties may reasonably request and
containing such qualifications and assumptions as are
customary for such opinions, and in any event
including a statement to the effect, generally, that
such counsel has participated in conferences with
officers and other representatives of the Company,
representatives of the independent public accountants
for the Company, the Initial Purchasers'
representatives and the Initial Purchasers' counsel
in connection with the preparation of such
Registration Statement and the related Prospectus and
have considered the matters required to be stated
therein and the statements contained therein,
although such counsel has not independently verified
the accuracy, completeness or fairness of such
statements; and that such counsel advises that, on
the basis of the foregoing (relying as to materiality
upon facts provided to such counsel by officers and
other representatives of the Company and without
independent investigation or verification), no facts
came to such counsel's attention that caused such
counsel to believe that the applicable Registration
Statement, at the time such Registration Statement or
any post-effective amendment thereto became
effective, contained an untrue statement of a
material fact or omitted to state a material fact
required to be stated therein or necessary to make
the statements therein not misleading, or that the
Prospectus contained in such Registration Statement
as of its date, contained an untrue statement of a
material fact or omitted to state a material fact
necessary in order to make the statements therein, in
light of the circumstances under which they were
made, not misleading. Without limiting the foregoing,
such counsel may state further that such counsel
assumes no responsibility for, and has not
independently investigated or verified, the accuracy,
completeness or fairness of the financial statements,
notes and schedules and other statistical or
financial data included in any Registration Statement
contemplated by this Agreement or the related
Prospectus; and
(3) a comfort letter, dated
the date of the effectiveness of the Shelf
Registration Statement, from the Company's
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<PAGE>
independent accountants, in the form and covering
matters of the type customarily covered in comfort
letters to underwriters in connection with primary
underwritten debt offerings.
(B) set forth in full or
incorporate by reference in the underwriting agreement, if
any, the indemnification provisions and procedures of Section
8 hereof with respect to all parties to be indemnified
pursuant to said Section; and
(C) deliver such other documents
and certificates as may be reasonably requested by such
parties to evidence compliance with clause (A) above and with
any customary conditions contained in the underwriting
agreement or other agreement entered into by the Company
pursuant to this clause (xi), if any.
If, at any time, the representations and
warranties of the Company contemplated in clause (A)(1) above
cease to be true and correct, the Company shall so advise each
of the Initial Purchasers and the underwriter(s), if any, and
each selling Holder promptly and, if requested by such
Persons, shall confirm such advice in writing;
(xii) in the case of a Shelf Registration
Statement, prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders, the underwriter(s), if
any, and their respective counsel in connection with the registration
and qualification of the Transfer Restricted Securities under the
applicable securities or Blue Sky laws of such jurisdictions as the
selling Holders or underwriter(s) may reasonably request and do any and
all other acts or things reasonably necessary or advisable to enable
the disposition in such jurisdictions of the Transfer Restricted
Securities covered by the Shelf Registration Statement; provided,
however, that none of the Company or any of its subsidiaries shall be
required to register or qualify as a foreign corporation where it is
not now so qualified or to take any action that would subject it to the
service of process in suits or to taxation, other than as to matters
and transactions relating to the Registration Statement, in any
jurisdiction where it is not now so subject;
(xiii) in the case of a Shelf Registration
Statement, shall issue, upon the request of any Holder of Transfer
Restricted Securities covered by the Shelf Registration Statement,
Exchange Notes in the same amount as the Transfer Restricted Securities
surrendered to the Company by such Holder in exchange therefor or being
sold by such Holder; such Exchange Notes to be registered in the name
of such Holder or in the name of the purchaser(s) of such Exchange
Notes, as the case may be; in return, the Transfer Restricted
Securities held by such Holder shall be surrendered to the Company for
cancellation;
(xiv) in the case of a Shelf Registration
Statement, cooperate with the selling Holders and the underwriter(s),
if any, to facilitate the timely preparation and delivery of
certificates representing Transfer Restricted Securities to be sold and
not bearing any restrictive legends; and enable such Transfer
Restricted Securities to be in such denominations and registered in
such names as the Holders or the underwriter(s), if any, may reasonably
request at least two business days prior to any sale of Transfer
Restricted Securities made by such underwriter(s);
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(xv) use its reasonable best efforts to cause
the Transfer Restricted Securities covered by the Registration
Statement to be registered with or approved by such other governmental
agencies or authorities as may be reasonably necessary to enable the
seller or sellers thereof or the underwriter(s), if any, to consummate
the disposition of such Transfer Restricted Securities, subject to the
proviso contained in clause (xii) above;
(xvi) if any fact or event contemplated by
clause (c)(iii)(D) above shall exist or have occurred, prepare a
supplement or post-effective amendment to the Registration Statement or
related Prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to
the purchasers of Transfer Restricted Securities, the Prospectus will
not contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading;
(xvii) provide CUSIP numbers for all Transfer
Restricted Securities not later than the effective date of the
Registration Statement and provide certificates for the Transfer
Restricted Securities;
(xviii) cooperate and assist in any filings
required to be made with the NASD and in the performance of any due
diligence investigation by any underwriter that is required to be
retained in accordance with the rules and regulations of the NASD, and
use its reasonable best efforts to cause such Registration Statement to
become effective and approved by such governmental agencies or
authorities as may be necessary to enable the Holders selling Transfer
Restricted Securities to consummate the disposition of such Transfer
Restricted Securities; provided, however, that none of the Company or
any of its subsidiaries shall be required to register or qualify as a
foreign corporation where it is not now so qualified or to take any
action that would subject it to the service of process in suits or to
taxation, other than as to matters and transactions relating to the
Registration Statement, in any jurisdiction where it is not now so
subject;
(xix) otherwise use its reasonable best
efforts to comply with all applicable rules and regulations of the
Commission, and make generally available to its security holders, as
soon as practicable, a consolidated earnings statement meeting the
requirements of Rule 158 (which need not be audited) for the
twelve-month period (A) commencing at the end of any fiscal quarter in
which Transfer Restricted Securities are sold to underwriters in a
"firm commitment" or "best efforts" Underwritten Offering or (B) if not
sold to underwriters in such an offering, beginning with the first
month of the Company's first fiscal quarter commencing after the
effective date of the Registration Statement,
(xx) cause the Indenture to be qualified
under the TIA not later than the effective date of the first
Registration Statement required by this Agreement, and, in connection
therewith, cooperate with the Trustee and the Holders to effect such
changes to the Indenture as may be required for such 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 that may be required to effect such changes and all other
forms and documents required to be filed with the Commission to enable
such Indenture to be so qualified in a timely manner; and
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<PAGE>
(xxi) provide promptly to each Holder upon
request each document filed with the Commission pursuant to the
requirements of Section 13 and Section 15 of the Exchange Act.
Each Holder agrees that by its acquisition of a
Transfer Restricted Security, upon receipt of any notice from the
Company of the existence of any fact of the kind described in Section
6(c)(iii)(D) hereof, such Holder will forthwith discontinue disposition
of Transfer Restricted Securities pursuant to the applicable
Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 6(c)(xvi)
hereof, or until it is advised in writing (the "Advice") by the Company
that the use of the Prospectus may be resumed, and has received copies
of any additional or supplemental filings that are incorporated by
reference in the Prospectus. If so directed by the Company, each Holder
will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies then in such Holder's possession, of
the Prospectus covering such Transfer Restricted Securities that was
current at the time of receipt of such notice. In the event the Company
shall give any such notice, the time period regarding the effectiveness
of such Registration Statement set forth in Section 3 or 4 hereof, as
applicable, shall be extended by the number of days during the period
from and including the date of the giving of such notice pursuant to
Section 6(c)(iii)(D) hereof to and including the date when each selling
Holder covered by such Registration Statement shall have received the
copies of the supplemented or amended Prospectus contemplated by
Section 6(c)(xvi) hereof or shall have received the Advice.
7. Registration Expenses.
All expenses incident to the Company's performance of or
compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses (including filings
made by any Initial Purchaser or Holder with the NASD (and, if applicable, the
fees and expenses of any "qualified independent underwriter" and its counsel
that may be required by the rules and regulations of the NASD)); (ii) all fees
and expenses of compliance with federal securities and applicable state Blue Sky
or securities laws; (iii) all expenses of printing (including printing
certificates for the Exchange Notes to be issued in the Exchange Offer and
printing of Prospectuses), and associated messenger and delivery services and
telephone; (iv) all fees and disbursements of counsel for the Company; (v) all
application and filing fees in connection with listing Notes on a national
securities exchange or automated quotation system; and (vi) all fees and
disbursements of independent certified public accountants of the Company
(including the expenses of any special audit and comfort letters required by or
incident to such performance).
The Company will, in any event, bear its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expenses of any annual
audit and the fees and expenses of any Person, including special experts,
retained by the Company.
8. Indemnification and Contribution.
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(a) In connection with a Shelf Registration Statement
or in connection with any delivery of a Prospectus contained in an Exchange
Offer Registration Statement by any participating Broker-Dealer or Initial
Purchaser, as applicable, who seeks to sell Exchange Notes, the Company shall
indemnify and hold harmless each Holder of Transfer Restricted Securities
included within any such Shelf Registration Statement and each participating
Broker-Dealer or Initial Purchaser selling Exchange Notes or Notes pursuant to
the Shelf Registration Statement, and each Person, if any, who controls any such
Person within the meaning of Section 15 of the Securities Act (each, a
"Participant") from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof (including, but not limited to, any
loss, claim, damage, liability or action relating to purchases and sales of
Notes or Exchange Notes) to which such Participant or controlling person may
become subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, (i) any
untrue statement or alleged untrue statement of a material fact contained in any
preliminary Prospectus, Registration Statement or Prospectus, or in any
amendment or supplement thereto or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and shall reimburse each Participant
promptly upon demand for any legal or other expenses reasonably incurred by such
Participant in connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action as such expenses are
incurred; provided however that the Company shall not be liable in any such case
to the extent that any such loss, claim, damage, liability or action directly or
indirectly arises out of, or is based upon, any untrue statement or alleged
untrue statement or omission or alleged omission made in any such Registration
Statement or any prospectus forming part thereof or in any such amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company by or on behalf of any Participant specifically for inclusion
therein. The foregoing indemnity agreement is in addition to any liability which
the Company may otherwise have to any Participant.
(b) Each Participant, severally and not jointly,
shall indemnify and hold harmless the Company, its directors, officers,
employees or agents and each Person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act, from and against any loss, claim,
damage or liability, joint or several, or any action in respect thereof, to
which the Company or any such director, officer, employees or agents or
controlling person may become subject, under the Securities Act or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary Prospectus, Registration Statement or
Prospectus, or in any amendment or supplement thereto or (ii) the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, but in each case
only to the extent that the untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company by or on behalf of that Participant
specifically for inclusion herein, and shall reimburse the Company and any such
director, officer, employees or agents or controlling person promptly on demand
for any legal or other expenses reasonably incurred by the Company or any such
director, officer, employees or agents or controlling person in connection with
investigating or defending or preparing to defend against any such loss, claim,
damage, liability or action as such expenses are incurred. The foregoing
indemnity agreement is in addition to any liability which any Participant may
otherwise have to the Company or any such director, officer, employee, agent or
controlling person.
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(c) Promptly after receipt by an indemnified party
under this Section 8 of notice of any claim or the commencement of any action,
the indemnified party shall, if a claim in respect thereof is to be made against
the indemnifying party under this Section 8, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 8 except to the extent it has
been materially prejudiced by such failure and, provided further, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under Section 8(a) or
8(b) hereof. If any such claim or action shall be brought against an indemnified
party, and it shall have notified the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it wishes, jointly with any other similarly notified indemnifying party, to
assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to the indemnified
party of its election to assume the defense of such claim or action, the
indemnifying party shall not be liable to the indemnified party under this
Section 8 for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, that the indemnified party shall have
the right to employ counsel to represent jointly the indemnified party and those
other Participants and its respective officers, employees and controlling
persons who may be subject to liability arising out of any claim in respect of
which indemnity may be sought by the Participants by an indemnified party
against the indemnifying party under this Section 8 if, in the reasonable
judgment of the indemnified party it is advisable for the indemnified party and
those Participants, officers, employees and controlling persons to be jointly
represented by separate counsel, and in that event the fees and expenses of such
separate counsel shall be paid by the indemnifying party. In no event shall the
indemnifying parties be liable for the fees and expenses of more than one
counsel (in addition to local counsel) for all indemnified parties in connection
with any proceeding or related proceedings. Each indemnified party, as a
condition of the indemnity agreements contained in Section 8(a) and 8(b) hereof,
shall use its best efforts to cooperate with the indemnifying party in the
defense of any such action or claim. No indemnifying party shall (i) without the
prior written consent of the indemnified parties (which consent shall not be
unreasonably withheld), settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding, or (ii) be liable for any
settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with its written
consent or if there is a final judgment for the plaintiff in any such action,
the indemnifying party agrees to indemnify and hold harmless any indemnified
party from and against any loss or liability by reason of such settlement or
judgment in accordance with this Section 8.
(d) If the indemnification provided for in this
Section 8 shall for any reason be unavailable to or insufficient to hold
harmless an indemnified party under Section 8(a) or 8(b) in respect of any loss,
claim, damage or liability, or any action in respect thereof, referred to
therein, then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, in such proportion as shall be appropriate to reflect the relative
fault of the Company on the one hand and the Participants on the other with
respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other relevant
18
<PAGE>
equitable considerations. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company or the Participants, the intent of the
parties and their relative knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the Participants
agree that it would not be just and equitable if contributions pursuant to this
Section 8(d) were to be determined by pro rata allocation (even if the
Participants were treated as one entity for such purpose) or by any other method
of allocation which does not take into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as a
result of the loss, claim, damage or liability, or action in respect thereof,
referred to above in this Section 8(d) shall be deemed to include, subject to
limitations set forth above, for purposes of this Section 8(d), 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 8(d), no Participant shall be required to indemnify
or contribute any amount in excess of the amount by which proceeds received by
such Participant from an offering of the Notes exceeds the amount of any damages
which such Participant has otherwise paid or become liable to pay by reason of
any 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 Participants'
obligations to contribute as provided in this Section 8(d) are several and not
joint. The remedies provided for in this Section 8 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.
9. Rule 144A.
The Company hereby agrees with each Holder, for so long as any
Transfer Restricted Securities remain outstanding, to make available to any
Holder or beneficial owner of Transfer Restricted Securities in connection with
any sale thereof and any prospective purchaser of such Transfer Restricted
Securities from such Holder or beneficial owner, the information required by
Rule 144A(d)(4) under the Securities Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A.
10. Participation in Underwritten Registrations.
No Holder may participate in any Underwritten Registration
hereunder unless such Holder (a) agrees to sell such Holder's Transfer
Restricted Securities on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all reasonable questionnaires, powers of attorney,
indemnities, underwriting agreements, "lock-up" agreements and other documents
required under the terms of such underwriting arrangements.
11. Selection of Underwriters.
The Holders of Transfer Restricted Securities covered by the
Shelf Registration Statement who desire to do so may sell such Transfer
Restricted Securities in an Underwritten Offering. In any such Underwritten
Offering, the investment banker or investment bankers and manager or managers
that will administer the offering will be selected by the Holders of a majority
in aggregate principal amount of the
19
<PAGE>
Transfer Restricted Securities included in such offering; provided, that such
investment bankers and managers must be reasonably satisfactory to the Company.
12. Miscellaneous.
(a) Remedies. The Company agrees that monetary
damages (including Liquidated Damages) would not be adequate
compensation for any loss incurred by reason of a breach by it of the
provisions of this Agreement and hereby agrees to waive the defense in
any action for specific performance that a remedy at law would be
adequate.
(b) No Inconsistent Agreements. The Company will not
on or after the date of this Agreement enter into any agreement with
respect to its securities that is inconsistent with the rights granted
to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders hereunder do not
in any way conflict with and are not inconsistent with the rights
granted to the holders of the Company's securities under any agreement
in effect on the date hereof.
(c) Adjustments Affecting the Transfer Restricted
Securities. The Company will not take any action, or permit any change
to occur, with respect to Transfer Restricted Securities that would
materially and adversely affect the ability of the Holders to
Consummate any Exchange Offer unless such action or change is required
by applicable law.
(d) Amendments and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and waivers or
consents to or departures from the provisions hereof may not be given
unless the Company has obtained the written consent of Holders of a
majority of the outstanding principal amount of Transfer Restricted
Securities. Notwithstanding the foregoing, a waiver or consent to
departure from the provisions hereof that relates exclusively to the
rights of Holders whose securities are being tendered pursuant to the
Exchange Offer and that does not affect directly or indirectly the
rights of other Holders whose securities are not being tendered
pursuant to such Exchange Offer may be given by the Holders of a
majority of the outstanding principal amount of Transfer Restricted
Securities being tendered or registered.
(e) Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing by
hand-delivery, first-class mail (registered or certified, return
receipt requested), telex, telecopier, or air courier guaranteeing
overnight delivery:
(i) if to a Holder, at the address of such
Holder maintained by the Registrar under the Indenture; and
(ii) if to the Company:
Startec Global Communications
Corporation
10411 Motor City Drive
Suite 301
Bethesda, MD 20817
20
<PAGE>
Attention: Prabhav V. Maniyar,
Chief Financial Officer
Facsimile: (301) 365-1744
with a copy to:
Schnader Harrison Segal & Lewis LLP
1225 Eye Street, N.W.
Washington, D.C. 20005-3914
Attention: Robert B. Murphy, Esq.
Facsimile: (202) 775-8741
All such notices and communications shall be deemed
to have been duly given: at the time delivered by hand, if personally
delivered; five business days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when
receipt acknowledged, if telecopied; and on the next business day, if
timely delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other
communications shall be concurrently delivered by the Person giving the
same to the Trustee at the address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the successors and assigns
of each of the parties, including without limitation and without the
need for an express assignment, subsequent Holders of Transfer
Restricted Securities; provided, however, that this Agreement shall not
inure to the benefit of or be binding upon a successor or assign of a
Holder unless and to the extent such successor or assign acquired
Transfer Restricted Securities from such Holder.
(g) Counterparts. This Agreement may be executed in
any number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the
same agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
(i) Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York,
without regard to the conflict of law rules thereof.
(j) Severability. In the event that any one or more
of the provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the validity,
legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be
affected or impaired thereby.
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(k) Entire Agreement. This Agreement together with
the Purchase Agreement and the Indenture is intended by the parties as
a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties
hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those
set forth or referred to herein with respect to the registration rights
granted by the Company with respect to the Transfer Restricted
Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
(l) Required Consents. Whenever the consent or
approval of Holders of a specified percentage of Transfer Restricted
Securities is required hereunder, Transfer Restricted Securities held
by the Company or its affiliates (as such term is defined in Rule 405
under the Securities Act) shall not be counted in determining whether
such consent or approval was given by the Holders of such required
percentage.
22
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
STARTEC GLOBAL COMMUNICATIONS
CORPORATION
By:_____________________________
Name:
Title:
LEHMAN BROTHERS INC.
By:____________________________
Name:
Title:
GOLDMAN, SACHS & CO.
By:____________________________
Name:
Title:
ING BARING (U.S.) SECURITIES, INC.
By:____________________________
Name:
Title:
23
WARRANT AGREEMENT
Dated as of
May 21, 1998
between
STARTEC GLOBAL COMMUNICATIONS CORPORATION
and
FIRST UNION NATIONAL BANK,
as Warrant Agent
- - --------------------------------------------------------------------------------
Warrants for
Common Stock of
STARTEC GLOBAL COMMUNICATIONS CORPORATION
- - --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1
Definitions.............................. 1
SECTION 1.1. Definitions......................................... 1
SECTION 1.2. Other Definitions................................... 5
ARTICLE 2
Warrant Certificates......................... 6
SECTION 2.1. Form and Dating..................................... 6
SECTION 2.2. Legends............................................. 8
SECTION 2.3. Transfer Provisions................................. 11
SECTION 2.4. Execution and Countersignature...................... 15
SECTION 2.5. Certificate Register................................ 16
SECTION 2.6. Separation of Warrants and Notes.................... 16
SECTION 2.7. Transfer and Exchange............................... 16
SECTION 2.8. Replacement Certificates............................ 18
SECTION 2.9. Temporary Certificates.............................. 18
SECTION 2.10. Cancellation........................................ 18
ARTICLE 3
Exercise Terms............................ 19
SECTION 3.1. Exercise Price...................................... 19
SECTION 3.2. Exercise Periods; Restrictions on Exercise.......... 19
SECTION 3.3. Expiration.......................................... 19
SECTION 3.4. Manner of Exercise.................................. 20
SECTION 3.5. Issuance of Warrant Shares.......................... 20
SECTION 3.6. Fractional Warrant Shares........................... 21
SECTION 3.7. Reservation of Warrant Shares....................... 21
SECTION 3.8. Compliance with Law................................. 22
ARTICLE 4
Antidilution Provisions........................ 22
SECTION 4.1. Changes in Common Stock............................. 22
SECTION 4.2. Cash Dividends and Other Distributions.............. 23
SECTION 4.3. Rights Issue to All Holders of Common Stock......... 23
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Page
----
SECTION 4.4. Other Issuances of Common Stock or Rights........... 24
SECTION 4.5. Combination; Liquidation............................ 25
SECTION 4.6. Other Events........................................ 26
SECTION 4.7. Superseding Adjustment.............................. 26
SECTION 4.8. Minimum Adjustment.................................. 27
SECTION 4.9. Notice of Adjustment................................ 27
SECTION 4.10. Notice of Certain Transactions...................... 28
SECTION 4.11. Adjustment to Warrant Certificate................... 28
SECTION 4.12. Exceptions to Antidilution Provisions............... 29
ARTICLE 5
Registration Rights.......................... 30
SECTION 5.1. Effectiveness of Registration Statement............. 30
SECTION 5.2. Suspension.......................................... 31
SECTION 5.3. Demand Registration; Repurchase of Warrants......... 31
SECTION 5.4. Liquidated Damages.................................. 33
SECTION 5.5. Blue Sky............................................ 34
SECTION 5.6. Accuracy of Disclosure.............................. 35
SECTION 5.7. Indemnification..................................... 35
SECTION 5.8. Additional Acts..................................... 39
SECTION 5.9. Expenses............................................ 39
SECTION 5.10. Listing of Warrant Shares........................... 39
ARTICLE 6
Warrant Agent............................. 39
SECTION 6.1. Appointment of Warrant Agent........................ 39
SECTION 6.2. Right and Duties of Warrant Agent................... 40
SECTION 6.3. Individual Rights of Warrant Agent.................. 41
SECTION 6.4. Warrant Agent's Disclaimer.......................... 41
SECTION 6.5. Compensation and Indemnity.......................... 41
SECTION 6.6. Successor Warrant Agent............................. 41
ARTICLE 7
Remedies............................... 43
SECTION 7.1. Defaults............................................ 43
SECTION 7.2. Payment Obligations................................. 43
SECTION 7.3. Remedies............................................ 43
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Page
----
ARTICLE 8
Miscellaneous............................. 44
SECTION 8.1. Financial Statements and Reports of the Company..... 44
SECTION 8.2. Third Party Beneficiaries........................... 44
SECTION 8.3. Rights of Holders................................... 44
SECTION 8.4. Amendment........................................... 44
SECTION 8.5. Notices............................................. 45
SECTION 8.6. Governing Law....................................... 46
SECTION 8.7. Successors.......................................... 46
SECTION 8.8. Multiple Originals.................................. 46
SECTION 8.9. Table of Contents................................... 46
SECTION 8.10. Severability........................................ 46
EXHIBIT A Form of Face of Warrant Certificate
EXHIBIT B Form of Certificate To Be Delivered Upon Exchange
Or Registration of Transfer of Warrants
APPENDIX A List of Financial Experts
iii
<PAGE>
WARRANT AGREEMENT dated as of May 21, 1998 (this "Agreement"),
between STARTEC GLOBAL COMMUNICATIONS CORPORATION, a Maryland corporation (the
"Company"), and FIRST UNION NATIONAL BANK, as Warrant Agent (the "Warrant
Agent").
The Company desires to issue the warrants (the "Warrants")
described herein which will initially entitle the holders thereof (the
"Holders") to purchase an aggregate of 200,226 shares of common stock, par value
$0.01 per share (the "Common Stock"), of the Company at a purchase price of
$24.20 per share subject to the adjustments described herein, in connection with
an offering of 160,000 units (the "Units"), each consisting of (i) $1,000
aggregate principal amount of 12% Senior Notes due 2008 (collectively, the
"Notes") issued by the Company pursuant to the provisions of the Indenture (as
defined below), and (ii) a Warrant initially entitling the Holder to purchase
1.25141 shares of Common Stock, subject to adjustment as provided herein. In
connection with the sale of the Units, an aggregate of 160,000 Warrants will be
issued to the purchasers of the Units.
The Notes and Warrants included in each Unit will not become
separately transferable until the earliest to occur of (i) November 15, 1998,
(ii) an Exercise Event, (iii) the date the Exchange Offer Registration Statement
(as defined in the Indenture) or the Shelf Registration Statement (as defined in
the Indenture) is declared effective by the Commission (as defined) or (iv) such
other date, as Lehman Brothers Inc. shall determine (the "Separation Date").
The Company further desires the Warrant Agent to act on behalf
of the Company in connection with the issuance of the Warrants as provided
herein and the Warrant Agent is willing to so act.
Each party agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders of Warrants:
ARTICLE 1
Definitions
SECTION 1.1. Definitions.
"Affiliate" of any Person means any other Person, directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For the purposes of this definition, "control" when
used with respect to any Person means the power to direct the management and
policies of such Person, directly or indirectly, whether
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through the ownership of voting securities, by contract or otherwise; provided,
however, that beneficial ownership of 10% or more of the voting securities of a
Person shall be decreed to be control of such Person. The terms "controlling"
and "controlled" have meanings correlative to the foregoing.
"Board" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board of Directors.
"Business Day" means each day that is not a Saturday, a Sunday
or a day on which banking institutions are not required to be open in the State
of New York.
"Cashless Exercise Ratio" means a fraction, the numerator of
which is the excess of the Current Market Value per share of Common Stock on the
Exercise Date over the Exercise Price per share as of the Exercise Date and the
denominator of which is the Current Market Value per share of the Common Stock
on the Exercise Date.
"Change of Control" means such time as (i) a "person" or
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act)
becomes the ultimate "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of more than 50.0% of the total voting power of the then
outstanding Voting Stock of the Company, or after the consummation of the
Reorganization, Subsidiary Holdings; (ii) individuals who at the beginning of
any period of two consecutive calendar years constituted the Board of Directors
(together with any directors who are members of the Board of Directors on the
date hereof and any new directors whose election by the Board of Directors or
whose nomination for election by the Company's stockholders was approved by a
vote of at least two-thirds of the members of the Board of Directors then still
in office who either were members of the Board of Directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the members of such
Board of Directors then in office; (iii) the sale, lease, transfer, conveyance
or other disposition (other than by way of merger or consolidation), in one or a
series of related transactions, of all or substantially all of the assets of the
Company and its Subsidiaries, taken as a whole, to any such "person" or "group"
(other than to the Company or a Restricted Subsidiary); (iv) the merger or
consolidation of the Company with or into another corporation or the merger of
another corporation with or into the Company in one or a series of related
transactions with the effect that, immediately after such transaction, any such
"person" or "group" of persons or entities shall have become the beneficial
owner of securities of the surviving corporation of such merger or consolidation
representing a majority of the total voting power of the then outstanding Voting
Stock of the surviving corporation; or (v) the adoption of a plan relating to
the liquidation or dissolution of the Company; provided, however, that the
consummation of the Reorganization shall not constitute or be deemed to
constitute a "Change of Control."
2
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"Combination" means an event (other than the Reorganization)
in which the Company consolidates with, merges with or into, or sells all or
substantially all of its assets to another Person.
"Commission" means the Securities and Exchange Commission, or
any successor agency or body performing substantially similar functions.
"Current Market Value" per share of Common Stock or any other
security of the Company at any date means: (i) if the security is not of a class
registered under the Exchange Act, (a) the value of the security, determined in
good faith by the Board and certified in a resolution of the Board, based on the
most recently completed arm's-length transaction between the Company and a
Person other than an Affiliate of the Company, the closing of which occurred on
such date or within the six-month period preceding such date, or (b) if no such
transaction shall have occurred on such date or within such six-month period,
the value of the security as determined by an independent Financial Expert; or
(ii) if the security is of a class registered under the Exchange Act, the
average of the last reported sale price of the Common Stock (or the equivalent
in an over-the-counter market) for each Business Day during the period
commencing 15 Business Days before such date and ending on the date one day
prior to such date, or if the security of a class registered under the Exchange
Act for less than 15 consecutive Business Days before such date, the average of
the daily closing bid prices (or such equivalent) for all of the Business Days
before such date for which daily closing bid prices are available (provided,
however, that if the closing bid price is not determinable for at least 10
Business Days in such period, then clause (i) above and not this clause (ii)
shall be used to determine Current Market Value; provided, however, that if the
Warrant Shares requested to be included in a Demand Registration Statement shall
be underlying an unexercised Warrant, then Current Market Value shall be
calculated as aforesaid, but shall have deducted therefrom the exercise price of
the related Warrant.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exercise Date" means, for a given Warrant, the day on which
such Warrant is exercised pursuant to Section 3.4.
"Exercise Event" means, with respect to each Warrant as to
which such event is applicable, the earlier of: (i) a Change of Control and (ii)
any date when the Company (A) consolidates or merges into or with another Person
(but only where holders of Common Stock receive consideration in exchange for
all or part of such Common Stock other than common stock in the surviving
Person) if the Common Stock (or other securities) thereafter issuable upon
exercise of the Warrants will not be registered under the Exchange Act or (B)
sells all or substantially all of its assets to another Person if the Common
Stock (or other securities) thereafter issuable upon exercise of the Warrants
will not be registered under the Exchange
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Act; provided, that the events in (A) and (B) will not be deemed to have
occurred if the consideration for the Common Stock in either such transaction
consists solely of cash. Notwithstanding anything herein to the contrary, the
consummation of the Reorganization shall not constitute an Exercise Event.
"Financial Expert" means one of the Persons listed in Appendi
A hereto.
"Indenture" means the Indenture dated as of May 21, 1998,
between the Company and the Trustee, with respect to the Notes, as it may be
amended or supplemented from time to time.
"Independent Financial Expert" means a Financial Expert that
does not, and whose directors, executive officers and 5% stockholders do not,
have a direct or indirect financial interest in the Company or any of its
subsidiaries or Affiliates, which has not been for at least five years and, at
the time it is called upon to give independent financial advice to the Company,
is not (and none of its directors, executive officers or 5% stockholders is) a
promoter, director, or officer of the Company or any of its subsidiaries or
Affiliates. The Independent Financial Expert may be compensated and indemnified
by the Company for opinions or services it provides as an Independent Financial
Expert.
"Indirect Participant" means a Person who holds a beneficial
interest in a Global Note through a Participant.
"Issue Date" means May 21, 1998.
"Officer" means the Chairman of the Board, the President, any
Vice President, the Treasurer, or an Assistant Treasurer, or the Secretary or an
Assistant Secretary of the Company.
"Participant" means, with respect to DTC or its nominee, an
institution that has an account therewith.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Reorganization" means the reorganization of the Company into
a Delaware holding company structure consisting of the transfer of substantially
all of the Company's assets to lower-tiered subsidiaries and the merger of the
Company with and into Subsidiary Holdings, which will be the owner of all of the
outstanding capital stock of the newly formed lower-tier subsidiaries.
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"Securities Act" means the Securities Act of 1933, as amended.
"Transfer Restricted Securities" shall have the meaning set
forth in Section 5.4(a) hereof.
"Trustee" means First Union National Bank, or any successor
trustee under the Indenture.
"Voting Stock" is defined to mean with respect to any Person,
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.
"Warrant Certificates" mean the registered certificates
(including without limitation, the global certificates) issued by the Company
under this Agreement representing the Warrants.
"Warrant Shares" mean the shares of Common Stock (and any
other securities) for which the Warrants are exercisable.
SECTION 1.2. Other Definitions.
Defined in
Term Section
---- -------
"Agreement"............................. Recitals
"Cashless Exercise"..................... 3.4
"Certificate Registrar.................. 2.5
"Common Stock".......................... Recitals
"Communications Act".................... 3.2(b)
"Company"............................... Recitals
"Delivering Seller"..................... 5.7(a)
"Demand Registration Statement"......... 5.3
"DTC" or "Depository"................... 2.2(b)
"Effectiveness Target Date"............. 5.4(a)
"Event Date"............................ 5.4(b)
"Exercise Price"........................ 3.1
"Expiration Date"....................... 3.2(c)
"FCC Rules"............................. 3.2(b)
"Holders"............................... Recitals
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"Indemnified Parties"................... 5.7(a)
"Liquidated Damages".................... 5.4(a)
"Liquidated Damages Payment Date"....... 5.4(a)
"Notes"................................. Recitals
"Participants".......................... 2.7(b)
"Reference Security".................... 4.12(v)
"Registrar"............................. 3.7
"Separability Legend"................... 2.2(a)
"Separation Date"....................... Recitals
"Successor Company"..................... 4.5(a)
"Transfer Agent"........................ 3.5
"Units"................................. Recitals
"Warrant Agent"......................... Recitals
"Warrant Registration Statement"........ 5.1
"Warrants".............................. Recitals
All terms used herein with their initial letters capitalized
and not otherwise defined herein are used herein with the meaning given those
terms in the Indenture.
SECTION 1.3. Rules of Construction. Unless the text
otherwise requires:
(i) a defined term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the
meaning assigned to it in accordance with generally accepted accounting
principles as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation; and
(v) words in the singular include the plural and words in
the plural include the singular.
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ARTICLE 2
Warrant Certificates
SECTION 2.1. Form and Dating. Each Warrant Certificate shall
be issued in registered form only, substantially in the form of Exhibit A. The
Warrant Certificates may have notations, legends or endorsements required by
law, stock exchange rule, agreements to which the Company is subject, if any, or
usage (including CUSIP numbers) (provided that any such notation, legend or
endorsement is in a form acceptable to the Company) and shall bear the legends
required by Section 2.2. Each Warrant Certificate shall be dated the date of its
countersignature.
The terms and provisions contained in the form of Warrant
annexed hereto as Exhibit A shall constitute, and are hereby expressly made, a
part of this Warrant Agreement. To the extent applicable, the Company and the
Warrant Agent, by their execution and delivery of this Warrant Agreement, agree
to such terms and provisions and to be bound thereby.
Warrants offered and sold to "qualified institutional buyers"
("Qualified Institutional Buyers" or "QIBs") as defined in and in reliance on
Rule 144A under the Securities Act shall be issued initially in the form of one
or more permanent global Warrant Certificates in registered form, substantially
in the form set forth in Exhibit A (the "Rule 144A Global Warrants"), registered
in the name of the Depositary or the nominee of the Depositary, deposited with
the Warrant Agent, as custodian for the Depositary, duly executed by the Company
and countersigned by the Warrant Agent as hereinafter provided. The aggregate
number of Warrants represented by the Rule 144A Global Warrant may from time to
time be increased or decreased by adjustments made on the records of the Warrant
Agent, as custodian for the Depositary or its nominee, in accordance with the
instructions given by the Holder thereof, as hereinafter provided.
Warrants offered and sold in offshore transactions in reliance
on Regulation S under the Securities Act shall be issued initially in the form
of one or more temporary global Warrant Certificates ("Regulation S Temporary
Global Warrants") in registered form substantially in the form set forth in
Exhibit A, registered in the name of the Depositary or the nominee of the
Depositary for credit to the subscribers' respective accounts at Euroclear and
CEDEL, deposited with the Warrant Agent, as custodian for the Depositary, duly
executed by the Company and countersigned by the Warrant Agent as hereinafter
provided. At any time on or after May 21, 1999 (the "Restricted Period"), upon
receipt by the Warrant Agent and the Company of a certificate substantially in
the form of Exhibit B hereto, one or more permanent global Warrant Certificates
in registered form substantially in the form set forth in Exhibit B (the
"Regulation S Permanent Global Warrants"; and together with the Regulation S
Temporary Global Warrants, the "Regulation S Global Warrants"), duly executed by
the
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Company and countersigned by the Warrant Agent as hereinafter provided, shall be
deposited with the Warrant Agent, as custodian for the Depositary, and the
Warrant Agent shall reflect on its books and records the date and a decrease in
the number of Warrants represented by the Regulation S Temporary Global Warrant
in an amount equal to the number of Warrants with respect to which the
beneficial interest in the Regulation S Temporary Global Warrant has been
transferred. During the Restricted Period, beneficial interests in the
Regulation S Temporary Global Note may be held only through Euroclear or CEDEL
(as indirect participants in the depository).
Warrants in definitive form issued pursuant to Section 2.3 in
exchange for interests in Rule 144A Global Warrants shall be issued in the form
of permanent certificated Warrants in registered form in substantially the form
set forth in Exhibit A (the "Rule 144A Certificated Warrants"). Warrants in
definitive form issued pursuant to Section 2.3 in exchange for interests in the
Regulation S Global Warrants shall be in the form of permanent certificated
Warrants in registered form substantially in the form set forth in Exhibit A
(the "Regulation S Certificated Warrants").
The Regulation S Certificated Warrants and Rule 144A
Certificated Warrants are sometimes collectively herein referred to as the
"Certificated Warrants". The Rule 144A Global Warrants and the Regulation S
Global Warrants are sometimes collectively referred to herein as the "Global
Warrants". Ownership of beneficial interests in Global Warrants will be limited
to Participants or Indirect Participants.
The definitive Warrant Certificates shall be typed, printed,
lithographed or engraved or produced by any combination of these methods or may
be produced in any other manner permitted by the rules of any securities
exchange on which the Warrants may be listed, all as determined by the officers
executing such Warrant Certificates, as evidenced by their execution of such
Warrant Certificates.
SECTION 2.2. Legends. (a) Each Warrant Certificate issued
prior to the Separation Date shall bear the following legend (the "Separability
Legend"):
UNTIL THE SEPARATION DATE (AS DEFINED), THIS WARRANT HAS BEEN ISSUED
AS, AND MUST BE TRANSFERRED AS, A UNIT TOGETHER WITH THE ASSOCIATED 12%
SENIOR NOTES DUE 2008 (THE "NOTES") OF THE COMPANY. EACH UNIT CONSISTS
OF $1,000 PRINCIPAL AMOUNT OF NOTES AND A WARRANT TO PURCHASE 1.25141
SHARES OF COMMON STOCK OF THE COMPANY, SUBJECT TO ADJUSTMENT UNDER
CERTAIN CIRCUMSTANCES. A COPY OF THE WARRANT AGREEMENT PURSUANT TO
WHICH THE WARRANTS HAVE BEEN ISSUED IS AVAILABLE FROM THE COMPANY UPON
REQUEST.
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The Company shall give written notice to the Warrant Agent of the
occurrence of the Separation Date.
(b) Except as provided in Section 2.3(e), each Warrant
Certificate (and each certificate representing Warrant Shares issued upon
exercise of Warrants) shall bear the following legend (the "Private Placement
Legend") on the face thereof:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
OR OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF
THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING ITS
INTEREST IN THIS SECURITY IN AN "OFFSHORE TRANSACTION" PURSUANT TO RULE
904 OF REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL
NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF
TIME AS PERMITTED BY RULE 144(k) UNDER THE SECURITIES ACT OR ANY
SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE
DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON
WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) AND (Y) SUCH LATER DATE,
IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION
TERMINATION DATE") OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY
EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO
A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT
OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S
9
<PAGE>
UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, (3) IF THIS
SECURITY WAS ACQUIRED IN AN OFFSHORE TRANSACTION PURSUANT TO REGULATION
S, AGREES THAT, DURING THE DISTRIBUTION COMPLIANCE PERIOD (AS DEFINED
IN REGULATION S), THE HOLDER WILL NOT CONDUCT HEDGING TRANSACTIONS
INVOLVING THESE SECURITIES EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT
AND (4) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY
IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND;
PROVIDED THAT THE COMPANY AND THE WARRANT AGENT SHALL HAVE THE RIGHT
PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER, IN EACH OF THE FOREGOING
CASES, TO REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM
APPEARING AS AN EXHIBIT TO THE WARRANT AGREEMENT, A COPY OF WHICH IS
AVAILABLE UPON REQUEST TO THE COMPANY AND THE WARRANT AGENT, IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE WARRANT AGENT. IN
CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN THE TIME PERIOD
REFERRED TO ABOVE, 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 THE WARRANT AGENT. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
[THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT AND THE WARRANT MAY NOT BE
EXERCISED BY OR ON BEHALF OF ANY U.S. PERSON UNLESS REGISTERED UNDER
THE ACT OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. IN ORDER
TO EXERCISE THIS WARRANT, THE HOLDER MUST FURNISH TO THE COMPANY AND
THE WARRANT AGENT EITHER (A) A WRITTEN CERTIFICATION THAT IT IS NOT A
U.S. PERSON AND THE WARRANT IS NOT BEING EXERCISED ON BEHALF OF A U.S.
PERSON OR (B) A WRITTEN OPINION OF COUNSEL TO THE EFFECT THAT THE
SECURITIES DELIVERED UPON EXERCISE OF THE WARRANT HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OR
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THAT THE DELIVERY OF SUCH SECURITIES IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.]1
(c) Each Global Warrant issued in global form and deposited
with DTC shall bear the following legend:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY
("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF
DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
WARRANT AGREEMENT REFERRED TO HEREIN.
(d) Each Warrant Certificate shall bear the following legend:
THE EXERCISE OF THIS WARRANT (AND THE OWNERSHIP OF
COMMON STOCK ISSUABLE UPON THE EXERCISE THEREOF) MAY
BE LIMITED BY STARTEC GLOBAL COMMUNICATIONS
CORPORATION IN ORDER TO ENSURE COMPLIANCE WITH THE
RULES, REGULATIONS AND POLICIES OF THE FEDERAL
COMMUNICATIONS COMMISSION, AND THIS WARRANT WILL NOT
BE EXERCISABLE BY ANY HOLDER IF SUCH EXERCISE WOULD
CAUSE STARTEC GLOBAL COMMUNICATIONS CORPORATION TO BE
IN VIOLATION OF THE
- - --------
1. To be inserted on Regulation S Global Warrants, and Regulation S Certificated
Warrants.
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COMMUNICATIONS ACT OF 1934 OR THE RULES, REGULATIONS
AND POLICIES OF THE FEDERAL COMMUNICATIONS
COMMISSION.
SECTION 2.3. Transfer Provisions. Unless and until the Warrant
Registration Statement (as defined herein) or the Demand Registration Statement
(as defined herein) is declared effective by the Commission, the following
provisions shall apply:
(a) The following provisions shall apply with respect to the
registration of any proposed transfer of a Rule 144A Certificated
Warrant or an interest in the Rule 144A Global Warrant to a QIB
(excluding Non-U.S. Persons):
(i) If the Warrant to be transferred consists of
(x) a Rule 144A Certificated Warrant, the Warrant Agent shall
register the transfer if such transfer is being made by a
proposed transferor who has checked the box provided for on
the form of Warrant stating, or has otherwise advised the
Company and the Warrant Agent in writing, that the sale has
been made in compliance with the provisions of Rule 144A to a
transferee who has signed the certification provided for on
the form of Warrant stating, or has otherwise advised the
Company and the Warrant Agent in writing, that it is
purchasing the Warrant for its own account (or an account with
respect to which it exercises sole investment discretion) and
that each of it and any such account is a QIB, and is aware
that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding
the Company as it has requested pursuant to Rule 144A or has
determined not to request such information and that it is
aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from
registration provided by Rule 144A or (y) an interest in the
Rule 144A Global Warrant, the transfer of such interest may be
effected only through the book-entry system maintained by the
Depositary.
(ii) If the proposed transferee is a Participant,
and the Warrant to be transferred consists of a Rule 144A
Certificated Warrant, upon receipt by the Warrant Agent of the
documents referred to in clause (i)(x) and instructions given
in accordance with the Depositary's and the Warrant Agent's
procedures, the Warrant Agent shall reflect on its books and
records the date and an increase in the Rule 144A Global
Warrant in an amount equal to the number of Rule 144A
Certificated
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Warrants to be transferred, and the Warrant Agent shall cancel
the Rule 144A Certificated Warrant so transferred.
(b) Transfers of Interests in the Regulation S Temporary
Global Warrant to QIBs. The following provisions shall apply with
respect to registration of any proposed transfer of interests in the
Regulation S Temporary Global Warrant:
(i) The Warrant Agent shall register the
transfer of any Regulation S Temporary Global Warrant (x) if
the proposed transferee is a Non-U.S. Person and the proposed
transferor has delivered to the Warrant Agent a certificate
substantially in the form of Exhibit C hereto or (y) if the
proposed transferee is a QIB and the proposed transferor has
checked the box provided for on the form of Warrant stating,
or has otherwise advised the Company and the Warrant Agent in
writing, that the sale has been made in compliance with the
provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Warrant stating, or
has otherwise advised the Company and the Warrant Agent in
writing, that it is purchasing the Warrant for its own account
or an account with respect to which it exercises sole
investment discretion and that each of it and any such account
is a QIB within the meaning of Rule 144A, and is aware that
the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding
the Company as it has requested pursuant to Rule 144A or has
determined not to request such information and that it is
aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from
registration provided by Rule 144A.
(ii) If the proposed transferee is a Participant,
upon receipt by the Warrant Agent of the documents referred to
in clause (i)(x) above and instructions given in accordance
with the Depositary's and the Warrant Agent's procedures, the
Warrant Agent shall reflect on its books and records the date
and an increase in the number of Warrants subject to the Rule
144A Global Warrant in an amount equal to the number of
Warrants subject to the Regulation S Temporary Global Warrant
to be transferred, and the Warrant Agent shall decrease the
amount of the Regulation S Temporary Global Warrant.
(c) Transfers of Interests in the Regulation S Permanent
Global Warrant or Regulation S Certificated Warrant to U.S. Persons.
The following provisions shall
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<PAGE>
apply with respect to registration of any proposed transfer of
interests in the Regulation S Permanent Global Warrant or Regulation S
Certificated Warrant to U.S. Persons:
(i) The Warrant Agent shall register the
transfer of any such Warrant without requiring any additional
certification, except as otherwise provided herein
(ii) (A) If the proposed transferor is a
Participant holding a beneficial interest in the Regulation S
Permanent Global Warrant upon receipt by the Warrant Agent of
instructions in accordance with the Depositary's and the
Warrant Agent's procedures, the Warrant Agent shall reflect on
its books and records the date and a decrease in the number of
the Regulation S Permanent Global Warrant in an amount equal
to the number of the beneficial interest in which is subject
to the Regulation S Permanent Global Warrant to be
transferred, and (B) if the proposed transferee is a
Participant, upon receipt by the Warrant Agent of instructions
given in accordance with the Depositary's and the Warrant
Agent's procedures, the Warrant Agent shall reflect on its
books and records the date and an increase in the number of
the Rule 144A Global Warrant in an amount equal to the number
of the Regulation S Certificated Warrant or the Regulation S
Permanent Certificated Warrant, as the case may be, to be
transferred, and the Warrant Agent shall cancel the Global
Warrant, if any, so transferred or decrease the amount of the
Regulation S Permanent Global Warrant.
(d) Transfers to Non-U.S. Persons at Any Time. The following
provisions shall apply with respect to any transfer of a Warrant to a
Non-U.S. Person:
(i) Prior to May 21, 1999, the Warrant Agent
shall register any proposed transfer of a Warrant to a
Non-U.S. Person only upon receipt of a certificate
substantially in the form of Exhibit C hereto from the
proposed transferor and the proposed transferee.
(ii) On and after May 21, 1999, the Warrant Agent
shall register any proposed transfer to any Non-U.S. Person if
the Warrant to be transferred is a Rule 144A Certificated
Warrant or an interest in the Rule 144A Global Warrant, upon
receipt of a certificate substantially in the form of Exhibit
C hereto from the proposed transferor.
(iii) (A) If the proposed transferor is a
Participant holding a beneficial interest in the Rule 144A
Global Warrant, upon receipt by the
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Warrant Agent of the documents, if any, required by paragraph
(ii) and instructions in accordance with the Depositary's and
the Warrant Agent's procedures, the Warrant Agent shall
reflect on its books and records the date and a decrease in
the principal amount of the Rule 144A Global Warrant in an
amount equal to the principal amount of the beneficial
interest in the Rule 144A Global Warrant to be transferred,
and (B) if the proposed transferee is a Participant, upon
receipt by the Warrant Agent of instructions given in
accordance with the Depositary's and the Warrant Agent's
procedures, the Warrant Agent shall reflect on its books and
records the date and an increase in the principal amount of
the Regulation S Global Warrant in an amount equal to the
principal amount of the Rule 144A Global Warrant or the Rule
144A Global Warrant, as the case may be, to be transferred,
and the Warrant Agent shall cancel the Global Warrant, if any,
so transferred or decrease the amount of the Rule 144A Global
Warrant.
(e) Private Placement Legend. Upon the transfer, exchange or
replacement of Warrants or Warrant Shares not bearing the Private
Placement Legend, the Warrant Agent shall deliver Warrants or Warrant
Shares, as applicable, that do not bear the Private Placement Legend.
Upon the transfer, exchange or replacement of Warrants or Warrant
Shares bearing the Private Placement Legend, the Warrant Agent shall
deliver only Warrants or Warrant Shares, as applicable, that bear the
Private Placement Legend unless such transfer or exchange (i) is
effected pursuant to an effective registration statement under the
Securities Act, (ii) in the case of Warrant Shares, such Warrant Shares
were acquired pursuant to an effective registration statement under the
Securities Act, (iii) such transfer or exchange is effected pursuant to
Rule 144 under the Securities Act or (iv) there is delivered to the
Warrant Agent an Opinion of Counsel reasonably satisfactory to the
Company and the Warrant Agent to the effect that neither such legend
nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act.
(f) General. By its acceptance of any Warrant or Warrant Share
bearing the Private Placement Legend, each Holder of such a Warrant or
Warrant Share, as applicable, acknowledges the restrictions on transfer
of such Warrant or Warrant Share, as applicable, set forth in this
Warrant Agreement and in the Private Placement Legend and agrees that
it shall transfer such Warrant or Warrant Share, as applicable, only as
provided in this Warrant Agreement. The Warrant Agent shall not
register a transfer of any Warrant or Warrant Share unless such
transfer complies with the restrictions on transfer of such Warrant or
Warrant Share, as applicable, set forth in this Warrant Agreement. In
connection with any transfer of Warrants or Warrant Shares, each Holder
agrees by its acceptance of the Warrants or Warrant Shares, as
15
<PAGE>
applicable, to furnish the Warrant Agent or the Company such
certifications, legal opinions or other information as either of them
may reasonably require to confirm that such transfer is being made
pursuant to an effective registration statement under the Securities
Act, an exemption from, or a transaction not subject to, the
registration requirements of the Securities Act; provided that the
Warrant Agent shall not be required to determine (but may rely on a
determination made by the Company or its counsel with respect to) the
sufficiency of any such certifications, legal opinions or other
information.
The Warrant Agent shall retain copies of all letters, notices
and other written communications received pursuant to this Article. The Company
shall have the right to inspect and make copies of all such letters, notices or
other written communications at any reasonable time upon the giving of
reasonable written notice to the Warrant Agent.
SECTION 2.4. Execution and Countersignature. Two Officers
shall sign the Warrant Certificates for the Company by manual or facsimile
signature. If an Officer whose signature is on a Warrant Certificate no longer
holds that office at the time the Warrant Agent countersigns the Warrant
Certificate, the Warrant Certificate shall nevertheless be valid. A Warrant
Certificate shall not be valid until an authorized signatory of the Warrant
Agent manually countersigns the Warrant Certificate. Such authorized signature
shall be conclusive evidence that the Warrant Certificate has been countersigned
under this Agreement.
The Warrant Agent shall initially countersign and deliver
Warrant Certificates entitling the Holders thereof to purchase in the aggregate
not more than 200,226 Warrant Shares upon a written order of the Company signed
by two Officers or by an Officer and either an Assistant Treasurer or an
Assistant Secretary of the Company.
The Warrant Agent may appoint an agent reasonably acceptable
to the Company to countersign the Warrant Certificates. Unless limited by the
terms of such appointment, such agent may countersign Warrant Certificates
whenever the Warrant Agent may do so. Each reference in this Agreement to
countersignature by the Warrant Agent includes countersignature by such agent.
Such agent will have the same rights as the Warrant Agent for service of notices
and demands.
SECTION 2.5. Certificate Register. The Warrant Agent shall
keep a register ("Certificate Register") of the Warrant Certificates and of
their transfer and exchange. The Certificate Register shall show the names and
addresses of the respective Holders and the date and number of Warrants
represented on the face of each Warrant Certificate. The Company and the Warrant
Agent may deem and treat the Person in whose name a Warrant Certificate is
registered as the absolute owner of such Warrant Certificate for all purposes
whatsoever and neither the Company nor the Warrant Agent shall be affected by
notice to the contrary.
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SECTION 2.6. Separation of Warrants and Notes. (a) Prior to
the Separation Date no Warrant may be sold, assigned or otherwise transferred to
any Person unless, simultaneously with such transfer, the Warrant Agent receives
confirmation from the Trustee for the Notes that the Holder thereof has
requested a transfer of the related Notes to the same transferee.
(b) On or after the Separation Date, the holder of a Warrant
Certificate containing a Separability Legend may surrender such Warrant
Certificate accompanied by a written application to the Warrant Agent, duly
executed by the Holder thereof, for a new Warrant Certificate or certificates
not containing the Separability Legend.
SECTION 2.7. Transfer and Exchange. (a) The Warrant
Certificates shall be issued in registered form only and shall be transferable
only upon the surrender of such Warrant Certificate for registration of
transfer. When a Warrant Certificate is presented to the Warrant Agent with a
request to register a transfer, the Warrant Agent shall register the transfer as
requested if the reasonable requirements of the Warrant Agent and of Section 8-
401(1) of the Uniform Commercial Code as in effect in the State of New York are
met; provided, however, that prior to the Separation Date the Warrant Agent
shall not register a transfer of a Warrant Certificate and such transfer will be
void and of no effect unless the Notes that are a part of the same Unit as the
Warrants represented by the Warrant Certificate to be transferred are
simultaneously transferred to the same transferee. To permit the registration of
transfers and exchanges, the Company shall execute and the Warrant Agent shall
countersign Warrant Certificates at the Warrant Agent's request. All Warrant
Certificates issued upon any registration of transfer or exchange of Warrant
Certificates shall be valid obligations of the Company, entitled to the same
benefits under this Agreement as the Warrant Certificates surrendered upon such
registration of transfer or exchange. No service charge will be made to a Holder
for any registration of transfer or exchange upon surrender of any Warrant
Certificate at the office of the Warrant Agent maintained for that purpose.
However, 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 Warrant Certificates but not for any
exchange or original issuance (not involving a transfer) pursuant to Section
2.9, 3.4 or 3.5.
(b) Notwithstanding any other provisions of this Section 2.7,
unless and until it is exchanged in whole or in part for Warrants in definitive
registered form, the Global Warrant may not be transferred except as a whole by
DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC
or by DTC or any such nominee to a successor depositary or a nominee of such
successor depositary. Interests of beneficial owners in the Global Warrant may
be transferred in accordance with the rules and procedures of DTC. Members of,
or participants in, DTC ("Participants") shall have no rights under this
Agreement with respect to the Global Warrant held on their behalf by DTC or the
Warrant
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Agent as its custodian, and DTC may be treated by the Company, the Warrant Agent
and any agent of the Company or the Warrant Agent as the absolute owner of such
Global Warrant for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Warrant Agent or any agent of the
Company or the Warrant Agent from giving effect to any written certification,
proxy or other authorization furnished by DTC or impair, as between DTC and its
Participants, the operation of customary practices governing the exercise of the
rights of a Holder of any Warrants. The registered holder of the Global Warrant
may grant proxies and otherwise authorize any person, including Participants and
persons that may hold interests through Participants, to take any action which a
Holder is entitled to take under this Agreement or the Warrants.
If DTC notifies the Company that it is unwilling or unable to
continue as depositary for the Global Warrant or Warrants or if at any time DTC
shall no longer be eligible under the next sentence of this paragraph, the
Company shall appoint a successor depositary with respect to the Warrants. Each
depositary appointed pursuant to this Section 2.6 must, at the time of its
appointment and at all times while it serves as depositary, be a clearing agency
registered under the Exchange Act and any other applicable statute or
regulation. The Company will execute, and the Warrant Agent, upon receipt of
written instructions from the Company, will countersign and deliver, Warrants in
definitive registered form in any authorized denominations, in an aggregate
amount equal to the amount of the Global Warrant or Warrants representing such
Warrants in exchange for such Global Warrant or Warrants if DTC notifies the
Company that it is unwilling or unable to continue as depositary for the Global
Warrant or Warrants or if at any time DTC shall no longer be eligible to serve
as depositary and a successor depositary for the Warrants is not appointed by
the Company within 60 days after the Company receives such notice or becomes
aware of such ineligibility.
SECTION 2.8. Replacement Certificates. If a mutilated Warrant
Certificate is surrendered to the Warrant Agent or if the Holder of a Warrant
Certificate claims that the Warrant Certificate has been lost, destroyed or
wrongfully taken, the Company shall issue and the Warrant Agent shall
countersign a replacement Warrant Certificate if the reasonable requirements of
the Warrant Agent and of Section 8-405 of the Uniform Commercial Code as in
effect in the State of New York are met. Such Holder shall furnish an indemnity
bond sufficient in the judgment of the Company and the Warrant Agent to protect
the Company and the Warrant Agent from any loss which either of them may suffer
if a Warrant Certificate is replaced. The Company and the Warrant Agent may
charge the Holder for their expenses in replacing a Warrant Certificate. Every
replacement Warrant Certificate is an additional obligation of the Company.
SECTION 2.9. Temporary Certificates. Until definitive Warrant
Certificates are ready for delivery, the Company may prepare and the Warrant
Agent shall countersign
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temporary Warrant Certificates. Temporary Warrant Certificates shall be
substantially in the form of definitive Warrant Certificates but may have
variations that the Company considers appropriate for temporary Warrant
Certificates. Without unreasonable delay, the Company shall prepare and the
Warrant Agent shall countersign definitive Warrant Certificates and deliver them
in exchange for temporary Warrant Certificates.
SECTION 2.10. Cancellation. (a) In the event the Company shall
purchase or otherwise acquire Warrant Certificates, the same shall thereupon be
delivered to the Warrant Agent for cancellation.
(b) The Warrant Agent and no one else shall cancel and may,
but shall not be required to, destroy all Warrant Certificates surrendered for
transfer, exchange, replacement, exercise or cancellation unless the Company
directs the Warrant Agent to deliver canceled Warrant Certificates to the
Company. The Company may not issue new Warrant Certificates to replace Warrant
Certificates to the extent they represent Warrants which have been exercised or
Warrants which the Company has purchased or otherwise acquired.
ARTICLE 3
Exercise Terms
SECTION 3.1. Exercise Price. Each Warrant shall initially
entitle the Holder thereof, subject to adjustment pursuant to the terms of this
Agreement, to purchase 1.25141 shares of Common Stock for a per share exercise
price (the "Exercise Price") of $24.20.
SECTION 3.2. Exercise Periods; Restrictions on Exercise. (a)
Subject to the terms and conditions set forth herein, the Warrants shall be
exercisable at any time or from time to time after November 15, 1998.
(b) Notwithstanding anything to the contrary in this Agreement
or the Warrants, the Company shall have the right not to allow an exercise of
the Warrants (or any portion thereof) to the extent necessary in order to ensure
compliance with the rules, regulations and policies of the Federal
Communications Commission ("FCC Rules"), and Warrants will not be exercisable by
any Holder if such exercise would cause the Company to be in violation of the
Communications Act of 1934 (the "Communications Act") or FCC Rules. The Company
will have the right prior to the exercise of any Warrant to require the Holder
thereof to furnish the Company with such certificates or other information as it
may reasonably be to confirm that such exercise would not cause the Company to
be in violation of the Communications Act or FCC Rules.
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(c) No Warrant shall be exercisable after May 15, 2008 (the
"Expiration Date").
(d) As a condition to the exercise prior to the end of the
Restricted Period of any Regulation S Global Warrant that bears a Private
Placement Legend, each holder who proposes to exercise such Warrant must deliver
to the Company and the Warrant Agent a written certification satisfactory in
form and substance to the effect set forth in Rule 903(b)(iii)(5)(ii)(A) of
Regulation S or a legal opinion to the effect set forth in subclause (B) of such
Rule 903(b)(iii)(5)(ii). No such exercise shall be valid unless such
certification or opinion shall have been delivered.
SECTION 3.3. Expiration. Each Warrant shall terminate and
become void as of the earlier of (i) the close of business on the Expiration
Date or (ii) the date such Warrant is exercised. The Company shall give notice
not less than 90 and not more than 120 days prior to the Expiration Date to the
Holders of all then outstanding Warrants to the effect that the Warrants will
terminate and become void as of the close of business on the Expiration Date;
provided, however, that if the Company fails to give notice as provided in this
Section 3.3, the Warrants will nevertheless expire and become void on the
Expiration Date.
SECTION 3.4. Manner of Exercise. Warrants may be exercised
upon (i) surrender to the Warrant Agent at the principal corporate trust office
of the Warrant Agent of the related Warrant Certificate, together with the form
of election to purchase Common Stock on the reverse thereof duly filled in and
signed by the Holder thereof, and (ii) payment to the Warrant Agent, for the
account of the Company, of the Exercise Price for each Warrant Share issuable
upon the exercise of such Warrants then exercised. Such payment shall be made
(i) in cash or by certified or official bank check payable to the order of the
Company or by wire transfer of funds to an account designated by the Company for
such purpose or (ii) without the payment of cash, by reducing the number of
shares of Common Stock obtainable upon the exercise of a Warrant so as to yield
a number of shares of Common Stock upon the exercise of such Warrant equal to
the product of (a) the number of shares of Common Stock issuable as of the
Exercise Date upon the exercise of such Warrant (if payment of the Exercise
Price were being made in cash) and (b) the Cashless Exercise Ratio. An exercise
of a Warrant in accordance with the immediately preceding sentence is herein
called a "Cashless Exercise". Upon surrender of a Warrant Certificate
representing more than one Warrant in connection with the holder's option to
elect a Cashless Exercise, the number of shares of Common Stock deliverable upon
a Cashless Exercise shall be equal to the number of shares of Common Stock
issuable upon the exercise of Warrants that the Holder specifies are to be
exercised pursuant to a Cashless Exercise multiplied by the Cashless Exercise
Ratio. All provisions of this Agreement shall be applicable with respect to a
surrender of a Warrant Certificate pursuant to a Cashless Exercise for less than
the full number of Warrants represented thereby. Subject to Section 3.2, the
rights represented by the Warrants shall be exercisable at the election of the
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Holders thereof either in full at any time or from time to time in part and in
the event that a Warrant Certificate is surrendered for exercise of less than
all the Warrants represented by such Warrant Certificate at any time prior to
the Expiration Date, a new Warrant Certificate representing the remaining
Warrants shall be issued. The Warrant Agent shall countersign and deliver the
required new Warrant Certificates, and the Company, at the Warrant Agent's
request, shall supply the Warrant Agent with Warrant Certificates duly signed on
behalf of the Company for such purpose.
SECTION 3.5. Issuance of Warrant Shares. Subject to Section
2.7, upon the surrender of Warrant Certificates and payment of the per share
Exercise Price, as set forth in Section 3.4, the Company shall issue and cause
the Warrant Agent or, if appointed, a transfer agent for the Common Stock
("Transfer Agent") to countersign and deliver to or upon the written order of
the Holder and in such name or names as the Holder may designate a certificate
or certificates for the number of full Warrant Shares so purchased upon the
exercise of such Warrants or other securities or property to which it is
entitled, registered or otherwise, to the Person or Persons entitled to receive
the same, together with cash as provided in Section 3.6 in respect of any
fractional Warrant Shares otherwise issuable upon such exercise. Such
certificate or certificates shall be deemed to have been issued and any Person
so designated to be named therein shall be deemed to have become a holder of
record of such Warrant Shares as of the date of the surrender of such Warrant
Certificates and payment of the per share Exercise Price, as aforesaid;
provided, however, that if, at such date, the transfer books for the Warrant
Shares shall be closed, the certificates for the Warrant Shares in respect of
which such Warrants are then exercised shall be issuable as of the date on which
such books shall next be opened and until such date the Company shall be under
no duty to deliver any certificates for such Warrant Shares; provided further,
however, that such transfer books, unless otherwise required by law, shall not
be closed at any one time for a period longer than 20 calendar days. Each
certificate representing Warrant Shares shall bear the Private Placement Legend
except as otherwise provided in Section 2.3(e).
SECTION 3.6. Fractional Warrant Shares. The Company shall not
be required to issue fractional Warrant Shares on the exercise of Warrants. If
more than one Warrant shall be exercised in full at the same time by the same
Holder, the number of full Warrant Shares which shall be issuable upon such
exercise shall be computed on the basis of the aggregate number of Warrant
Shares purchasable pursuant thereto. If any fraction of a Warrant Share would,
except for the provisions of this Section 3.6, be issuable on the exercise of
any Warrant (or specified portion thereof), the Company shall pay at the time of
exercise an amount in cash equal to the Current Market Value per Warrant Share,
as determined on the day immediately preceding the date the Warrant is
exercised, multiplied by such fraction, computed to the nearest whole cent.
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SECTION 3.7. Reservation of Warrant Shares. The Company shall
at all times keep reserved out of its authorized shares of Common Stock a number
of shares of Common Stock sufficient to provide for the exercise of all
outstanding Warrants. The registrar for the Common Stock (the "Warrant Agent")
shall at all times until the Expiration Date reserve such number of authorized
shares as shall be required for such purpose. The Company will keep a copy of
this Agreement on file with the Transfer Agent. All Warrant Shares which may be
issued upon exercise of Warrants shall, upon issue, be fully paid,
nonassessable, free of preemptive rights and free from all taxes, liens, charges
and security interests with respect to the issue thereof. The Company will
supply such Transfer Agent with duly executed stock certificates for such
purpose and will itself provide or otherwise make available any cash which may
be payable as provided in Section 3.6. The Company will furnish to such Transfer
Agent a copy of all notices of adjustments (and certificates related thereto)
transmitted to each Holder.
Before taking any action which would cause an adjustment
pursuant to Article 4 to reduce the Exercise Price below the then par value (if
any) of the Common Stock, the Company shall take any and all corporate action
which may, in the opinion of its counsel, be necessary in order that the Company
may validly and legally issue fully paid and nonassessable shares of Common
Stock at the Exercise Price as so adjusted.
The Company covenants that all shares of Common Stock which
may be issued upon exercise of Warrants will, upon issue, be fully paid,
nonassessable, free of preemptive rights, free from all taxes and free from all
liens, charges and security interests, created by or through the Company, with
respect to the issue thereof.
SECTION 3.8. Compliance with Law. Notwithstanding anything in
this Agreement to the contrary, in no event shall a Holder be entitled to
exercise a Warrant unless (i) a registration statement filed under the
Securities Act in respect of the issuance of the Warrant Shares is then
effective or (ii) in the opinion of counsel to the Company addressed to the
Warrant Agent the exercise of such Warrants is exempt from the registration
requirements of the Securities Act and such securities are qualified for sale or
exempt from qualification under the applicable securities laws of the States or
other jurisdictions in which such holders reside.
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ARTICLE 4
Antidilution Provisions
SECTION 4.1. Changes in Common Stock. In the event that at any
time or from time to time the Company shall (i) pay a dividend or make a
distribution on its Common Stock payable in shares of its Common Stock or other
equity interests of the Company, (ii) subdivide its outstanding shares of Common
Stock into a larger number of shares of Common Stock, (iii) combine its
outstanding shares of Common Stock into a smaller number of shares of Common
Stock or (iv) increase or decrease the number of shares of Common Stock
outstanding by reclassification of its Common Stock, then the number of shares
of Common Stock issuable upon exercise of each Warrant immediately after the
happening of such event shall be adjusted to a number determined by multiplying
the number of shares of Common Stock that such holder would have owned or have
been entitled to receive upon exercise had such Warrants been exercised
immediately prior to the happening of the events described above (or, in the
case of a dividend or distribution of Common Stock or other shares of capital
stock, immediately prior to the record date therefor) by a fraction, the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately after the happening of the events described above and
the denominator of which shall be the total number of shares of Common Stock
outstanding immediately prior to the happening of the events described above;
and subject to Section 4.8, the Exercise Price for each Warrant shall be
adjusted to a number determined by dividing the Exercise Price immediately prior
to such event by the aforementioned fraction. An adjustment made pursuant to
this Section 4.1 shall become effective immediately after the effective date of
such event, retroactive to the record date therefor in the case of a dividend or
distribution in shares of Common Stock or other shares of the Company's capital
stock.
SECTION 4.2. Cash Dividends and Other Distributions. In the
event that at any time or from time to time the Company shall distribute to all
holders of Common Stock (i) any dividend or other distribution of cash,
evidences of its indebtedness, shares of its capital stock or any other assets,
properties or debt securities or (ii) any options, warrants or other rights to
subscribe for or purchase any of the foregoing (other than, in each case, (w)
the issuance of any rights under a shareholder rights plan, (x) any dividend or
distribution described in Section 4.1, (y) any rights, options, warrants or
securities described in Section 4.3 and (z) any cash dividends or other cash
distributions from current or retained earnings), then the number of shares of
Common Stock issuable upon the exercise of each Warrant shall be increased to a
number determined by multiplying the number of shares of Common Stock issuable
upon the exercise of such Warrant immediately prior to the record date for any
such dividend or distribution by a fraction, the numerator of which shall be the
Current Market Value per share of Common Stock on the record date for such
dividend or distribution and the denominator of which shall be such Current
Market Value per share of Common Stock on the
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record date for such dividend or distribution less the sum of (x) the amount of
cash, if any, distributed per share of Common Stock and (y) the fair value (as
determined in good faith by the Board, whose determination shall be evidenced by
a board resolution filed with the Warrant Agent, a copy of which will be sent to
Holders upon request) of the portion, if any, of the distribution applicable to
one share of Common Stock consisting of evidences of indebtedness, shares of
stock, securities, other assets or property, warrants, options or subscription
or purchase rights; and, subject to Section 4.8, the Exercise Price shall be
adjusted to a number determined by dividing the Exercise Price immediately prior
to such record date by the aforementioned fraction. Such adjustments shall be
made whenever any distribution is made and shall become effective as of the date
of distribution, retroactive to the record date for any such distribution;
provided, however, that the Company is not required to make an adjustment
pursuant to this Section 4.2 if at the time of such distribution the Company
makes the same distribution to Holders of Warrants as it makes to holders of
Common Stock pro rata based on the number of shares of Common Stock for which
such Warrants are exercisable (whether or not currently exercisable). No
adjustment shall be made pursuant to this Section 4.2 which shall have the
effect of decreasing the number of shares of Common Stock issuable upon exercise
of each Warrant or increasing the Exercise Price.
SECTION 4.3. Rights Issue to All Holders of Common Stock. In
the event that at any time or from time to time the Company shall issue to all
holders of Common Stock without any charge, rights, options or warrants
entitling the holders thereof to subscribe for shares of Common Stock, or
securities convertible into or exchangeable or exercisable for Common Stock,
entitling such holders to subscribe for or purchase shares of Common Stock at a
price per share that is lower at the record date for such issuance than the then
Current Market Value per share of Common Stock other than in connection with the
adoption of a shareholder rights plan by the Company, then the number of shares
of Common Stock issuable upon the exercise of each Warrant shall be increased to
a number determined by multiplying the number of shares of Common Stock
theretofore issuable upon exercise of each Warrant by a fraction, the numerator
of which shall be the number of shares of Common Stock outstanding on the date
of issuance of such rights, options, warrants or securities plus the number of
additional shares of Common Stock offered for subscription or purchase or into
or for which such securities that are issued are convertible, exchangeable or
exercisable, and the denominator of which shall be the number of shares of
Common Stock outstanding on the date of issuance of such rights, options,
warrants or securities plus the total number of shares of Common Stock which the
aggregate consideration expected to be received by the Company (assuming the
exercise or conversion of all such rights, options, warrants or securities)
would purchase at the then Current Market Value per share of Common Stock.
Subject to Section 4.8, in the event of any such adjustment, the Exercise Price
shall be adjusted to a number determined by dividing the Exercise Price
immediately prior to such date of issuance by the aforementioned fraction. Such
adjustment shall be made immediately after such rights, options or warrants are
issued and shall become effective, retroactive to the record date for the
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determination of stockholders entitled to receive such rights, options, warrants
or securities. Notwithstanding anything to the contrary in this Article IV, no
adjustment to the number of Warrant Shares issuable upon exercise of the
Warrants or to the Exercise Price shall be made as a result of the offering by
the Company to all holders of its Common Stock of rights, options or warrants
entitling the holders thereof to subscribe for Common Stock or securities
convertible into or exchangeable or exercisable for shares of Common Stock,
resulting from the operation of any anti-dilution provision in any warrant or
other security of the Company convertible into, exercisable or exchangeable for
Common Stock of the Company, which such warrant or security is outstanding on
the date of this Agreement. No adjustment shall be made pursuant to this Section
4.3 which shall have the effect of decreasing the number of shares of Common
Stock purchasable upon exercise of each Warrant or of increasing the Exercise
Price.
SECTION 4.4. Other Issuances of Common Stock or Rights. In the
event that at any time or from time to time the Company shall issue (i) shares
of Common Stock (subject to the provisions below), (ii) rights, options or
warrants entitling the holder thereof to subscribe for shares of Common Stock
(provided, however, that no adjustment shall be made upon the exercise of such
rights, options or warrants), or (iii) securities convertible into or
exchangeable or exercisable for Common Stock (provided, however, that no
adjustment shall be made upon the conversion, exchange or exercise of such
securities (other than issuances specified in (i), (ii) or (iii) which are made
as the result of anti- dilution adjustments in such securities)), at a price per
share at the record date of such issuance that is less than the then Current
Market Value per share of Common Stock, then the number of shares of Common
Stock issuable upon the exercise of each Warrant shall be increased to a number
determined by multiplying the number of shares of Common Stock theretofore
issuable upon exercise of each Warrant by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding immediately after such
sale or issuance plus the number of additional shares of Common Stock offered
for subscription or purchase or into or for which such securities that are
issued are convertible, exchangeable or exercisable, and the denominator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such sale or issuance plus the total number of shares of Common Stock
which the aggregate consideration expected to be received by the Company
(assuming the exercise or conversion of all such rights, options, warrants or
securities, if any) would purchase at the then Current Market Value per share of
Common Stock, and subject to Section 4.8 the Exercise Price shall be adjusted to
a number determined by dividing the Exercise Price immediately prior to such
date of issuance by the aforementioned fraction; provided, however, that no
adjustment to the number of Warrant Shares issuable upon the exercise of the
Warrants or to the Exercise Price shall be made as a result of (i) the issuance
of shares of Common Stock under any warrants, options or other rights existing
on the date hereof, (ii) the issuance of shares of Common Stock in bona fide
public or private offerings that are underwritten or in which a placement agent
is retained by the Company or (iii) the issuance of options, rights or shares of
Common Stock pursuant to any option, under any employee benefit plans approved
by the Board of Directors. Such
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adjustments shall be made whenever such rights, options or warrants or
convertible securities are issued. No adjustment shall be made pursuant to this
Section 4.4 which shall have the effect of decreasing the number of shares of
Common Stock issuable upon exercise of each warrant or of increasing the
Exercise Price. For purposes of Section 4.4 only, any issuance of Common Stock,
or rights, options or warrants to subscribe for, or other securities convertible
into or exercisable or exchangeable for, Common Stock, which issuance (or
agreement to issue) (A) is in exchange for or otherwise in connection with the
bona fide acquisition of property (excluding any such exchange exclusively for
cash) of any Person and (B) is at a price per share determined by the Board of
Directors to be equal to the fair market value thereof at the time an agreement
in principle is reached or at the time a definitive agreement is entered into,
shall be deemed to have been made at a price per share equal to the Current
Market Value per share at the record date with respect to such issuance (the
time of closing or consummation of such exchange or acquisition) if such
definitive agreement is entered into within 90 days of the date of such
agreement in principle.
SECTION 4.5. Combination; Liquidation. (a) Except as provided
in Section 4.5(b), in the event of a Combination, each Holder shall have the
right to receive upon exercise of the Warrants the kind and amount of shares of
capital stock or other securities or property which such Holder would have been
entitled to receive upon or as a result of such Combination had such Warrant
been exercised immediately prior to such event. Unless paragraph (b) is
applicable to a Combination, the Company shall provide that the surviving or
acquiring Person (the "Successor Company") in such Combination will enter into
an agreement with the Warrant Agent confirming the Holders' rights pursuant to
this Section 4.5(a) and providing for adjustments, which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Article
4. The provisions of this Section 4.5(a) shall similarly apply to successive
Combinations involving any Successor Company.
(b) In the event of (i) a Combination where consideration to
the holders of Common Stock in exchange for their shares is payable solely in
cash or (ii) the dissolution, liquidation or winding-up of the Company, the
holders of the Warrants shall be entitled to receive, upon surrender of their
Warrant Certificates, distributions on an equal basis with the holders of Common
Stock or other securities, issuable upon exercise of the Warrants, as if the
Warrants had been exercised immediately prior to such event, less the Exercise
Price.
In case of any Combination described in this Section 4.5(b),
the surviving or acquiring Person and, in the event of any dissolution,
liquidation or winding-up of the Company, the Company shall deposit promptly
with the Warrant Agent the funds, if any, necessary to pay to the holders of the
Warrants the amounts to which they are entitled as described above. After such
funds and the surrendered Warrant Certificates are received, the Warrant Agent
is required to deliver a check in such amount as is appropriate (or, in the case
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of consideration other than cash, such other consideration as is appropriate) to
such Person or Persons as it may be directed in writing by the Holders
surrendering such Warrants.
SECTION 4.6. Other Events. If any event occurs as to which the
foregoing provisions of this Article 4 are not strictly applicable or, if
strictly applicable, would not, in the good faith judgment of the Board, fairly
and adequately protect the purchase rights of the Warrants in accordance with
the essential intent and principles of such provisions, then such Board shall
make such adjustments in the application of such provisions, in accordance with
such essential intent and principles, as shall be reasonably necessary, in the
good faith opinion of such Board, to protect such purchase rights as aforesaid,
but in no event shall any such adjustment have the effect of increasing the
Exercise Price or decreasing the number of shares of Common Stock issuable upon
exercise of any Warrant.
SECTION 4.7. Superseding Adjustment. Upon the expiration of
any rights, options, warrants or conversion or exchange privileges which
resulted in adjustments pursuant to this Article 4, if any thereof shall not
have been exercised, the number of Warrant Shares issuable upon the exercise of
each Warrant shall be readjusted pursuant to the applicable section of Article 4
as if (A) the only shares of Common Stock issuable upon exercise of such rights,
options, warrants, conversion or exchange privileges were the shares of Common
Stock, if any, actually issued upon the exercise of such rights, options,
warrants or conversion or exchange privileges and (B) shares of Common Stock
actually issued, if any, were issuable for the consideration actually received
by the Company upon such exercise plus the aggregate consideration, if any,
actually received by the Company for the issuance, sale or grant of all such
rights, options, warrants or conversion or exchange privileges whether or not
exercised and the Exercise Price shall be readjusted inversely; provided,
however, that no such readjustment shall (except by reason of an intervening
adjustment under Section 4.1) have the effect of decreasing the number of
Warrant Shares purchasable upon the exercise of each Warrant or increase the
Exercise Price by an amount in excess of the amount of the adjustment initially
made in respect of the issuance, sale or grant of such rights, options, warrants
or conversion or exchange privileges.
SECTION 4.8. Minimum Adjustment. The adjustments required by
the preceding Sections of this Article 4 shall be made whenever and as often as
any specified event requiring an adjustment shall occur, except that no
adjustment of the Exercise Price or the number of shares of Common Stock
issuable upon exercise of Warrants that would otherwise be required shall be
made unless and until such adjustment either by itself or with other adjustments
not previously made increases or decreases by at least 1% the Exercise Price or
the number of shares of Common Stock issuable upon exercise of Warrants
immediately prior to the making of such adjustment. Any adjustment representing
a change of less than such minimum amount shall be carried forward and made as
soon as such adjustment, together with other adjustments required by this
Article 4 and not previously made, would result in a
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minimum adjustment. For the purpose of any adjustment, any specified event shall
be deemed to have occurred at the close of business on the date of its
occurrence. In computing adjustments under this Article 4, fractional interests
in Common Stock shall be taken into account to the nearest one-hundredth of a
share.
SECTION 4.9. Notice of Adjustment. Whenever the Exercise Price
or the number of shares of Common Stock and other property, if any, issuable
upon exercise of the Warrants is adjusted, as herein provided, the Company shall
deliver to the Warrant Agent a certificate of a firm of independent accountants
selected by the Board (who may be the regular accountants employed by the
Company) setting forth, in reasonable detail, the event requiring the adjustment
and the method by which such adjustment was calculated (including a description
of the basis on which (i) the Board determined the fair value of any evidences
of indebtedness, other securities or property or warrants, options or other
subscription or purchase rights and (ii) the Current Market Value of the Common
Stock was determined, if either of such determinations were required), and
specifying the Exercise Price and the number of shares of Common Stock issuable
upon exercise of Warrants after giving effect to such adjustment. The Company
shall promptly cause the Warrant Agent to mail a copy of such certificate to
each Holder in accordance with Section 7.6. The Warrant Agent shall be entitled
to rely on such certificate and shall be under no duty or responsibility with
respect to any such certificate, except to exhibit the same from time to time,
to any Holder desiring an inspection thereof during reasonable business hours.
The Warrant Agent shall not at any time be under any duty or responsibility to
any Holder to determine whether any facts exist which may require any adjustment
of the Exercise Price or the number of shares of Common Stock or other stock or
property issuable on exercise of the Warrants, or with respect to the nature or
extent of any such adjustment when made, or with respect to the method employed
in making such adjustment or the validity or value of any shares of Common
Stock, evidences of indebtedness, warrants, options, or other securities or
property.
SECTION 4.10. Notice of Certain Transactions. In the event
that the Company shall propose to (a) pay any dividend payable in securities of
any class to the holders of its Common Stock or to make any other non-cash
dividend or distribution to the holders of its Common Stock, (b) offer the
holders of its Common Stock rights to subscribe for or to purchase any
securities convertible into shares of Common Stock or shares of stock of any
class or any other securities, rights or options, (c) issue any (i) shares of
Common Stock, (ii) rights, options or warrants entitling the holders thereof to
subscribe for shares of Common Stock, or (iii) securities convertible into or
exchangeable or exercisable for Common Stock (in the case of (i), (ii) and
(iii), if such issuance or adjustment would result in an adjustment hereunder),
(d) effect any capital reorganization, reclassification, consolidation or
merger, (e) effect the voluntary or involuntary dissolution, liquidation or
winding-up of the Company or (f) make a tender offer or exchange offer with
respect to the Common Stock, the Company shall within 5 days send to the Warrant
Agent and the Warrant Agent shall within 5 days send
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the Holder a notice (in such form as shall be furnished to the Warrant Agent by
the Company) of such proposed action or offer. Such notice shall be mailed by
the Warrant Agent to the Holders at their addresses as they appear in the
Certificate Register, which shall specify the record date for the purposes of
such dividend, distribution or rights, or the date such issuance or event is to
take place and the date of participation therein by the holders of Common Stock,
if any such date is to be fixed, and shall briefly indicate the effect of such
action on the Common Stock and on the number and kind of any other shares of
stock and on other property, if any, and the number of shares of Common Stock
and other property, if any, issuable upon exercise of each Warrant and the
Exercise Price after giving effect to any adjustment pursuant to Article 4 which
will be required as a result of such action. Such notice shall be given as
promptly as possible and (x) in the case of any action covered by clause (a) or
(b) above, at least 10 days prior to the record date for determining holders of
the Common Stock for purposes of such action or (y) in the case of any other
such action, at least 20 days prior to the date of the taking of such proposed
action or the date of participation therein by the holders of Common Stock,
whichever shall be the earlier.
SECTION 4.11. Adjustment to Warrant Certificate. The form of
Warrant Certificate need not be changed because of any adjustment made pursuant
to this Article 4, and Warrant Certificates issued after such adjustment may
state the same Exercise Price and the same number of shares of Common Stock
issuable upon exercise of the Warrants as are stated in the Warrant Certificates
initially issued pursuant to this Agreement. The Company, however, may at any
time in its sole discretion make any change in the form of Warrant Certificate
that it may deem appropriate to give effect to such adjustments and that does
not affect the substance of the Warrant Certificate, and any Warrant Certificate
thereafter issued or countersigned, whether in exchange or substitution for an
outstanding Warrant Certificate or otherwise, may be in the form as so changed.
SECTION 4.12. Exceptions to Antidilution Provisions. Without
limiting any other exception contained in this Article 4, and in addition
thereto, no adjustment need be made for:
(i) grants or exercises of rights granted to employees,
directors or consultants of the Company or any of its subsidiaries or
shares of Common Stock issued or granted to such persons under
equity-based incentive or corporation plans or otherwise, whether or
not upon the exercise, exchange or conversion of any such rights;
(ii) options, warrants or other agreements or rights to
purchase capital stock of the Company entered into prior to the date of
the issuance of the Warrants and any issuance of shares of Common Stock
in connection therewith;
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(iii) rights to purchase shares of Common Stock pursuant to
a Company plan for reinvestment of dividends or interest;
(iv) a change in the par value of shares of Common Stock
(including a change from par value to no par value or vice versa);
(v) the consummation of the Reorganization; and
(vi) bona fide public offerings or private placements
pursuant to Section 4(2) of the Securities Act, Regulation D thereunder
or Regulation S of any security trading on any national securities
exchange, the Nasdaq system or in the over the counter market, or of a
security directly or indirectly convertible or exchangeable for any
such security (the latter security being a "Reference Security"),
involving at least one investment bank of national reputation, if such
security is sold to investors at a price equal to the closing sale, bid
or ask price (whichever is customary)(less such discount, if any, as
such investment bank shall reasonably determine is necessary to permit
the consummation of such public offering or private placement) of such
security or the Reference Security on the date of the public offering
or private placement.
ARTICLE 5
Registration Rights
SECTION 5.1. Effectiveness of Registration Statement. Subject
to Section 5.2, the Company shall cause to be filed pursuant to Rule 415 (or any
successor provision) of the Securities Act a shelf registration statement
covering the issuance by the Company of Warrant Shares to the Holders upon
exercise of the Warrants by the Holders thereof and resales of Warrants and
Warrant Shares by the holders thereof (the "Warrant Registration Statement") and
shall use its reasonable best efforts to cause the Warrant Registration
Statement to be declared effective on or before 180 days after the Issue Date.
Subject to Section 5.2, the Company shall cause the Warrant Registration
Statement to remain effective until the earlier of (i) the second anniversary of
the date on which the last Warrant has been exercised at a time when the Warrant
Registration Statement was not effective or when the use of the prospectus
contained therein was suspended and (ii) the date when all the Warrants and/or
Warrant Shares have been sold pursuant to the Warrant Registration Statement. In
connection the Warrant Registration Statement, (i) the Company shall furnish to
the Warrant Agent, prior to the filing with the Commission, a copy of the
Warrant Registration Statement, and each amendment thereof and each amendment or
supplement, if any, to the prospectus included therein and shall use its
reasonable best efforts to reflect in each such document,
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when filed with the Commission, such comments as the Warrant Agent may
reasonably propose, (ii) the Company shall furnish to each Holder, without
charge, at least one copy of the Warrant Registration Statement and any
post-effective amendment thereto, including financial statements and schedules,
and, if the Holder so requests in writing, all exhibits thereto (including those
incorporated by reference), (iii) the Company shall, for so long as the Warrant
Registration Statement is effective, deliver to each Holder, without charge, as
many copies of the prospectus (including each preliminary prospectus) included
in the Warrant Registration Statement and any amendment or supplement thereto as
such Holder may reasonably request, and the Company consents to the proper use
of the prospectus therein and any amendment or supplement thereto by each of the
selling Holders in connection with the offering and sale of the Warrants and/or
Warrant Shares covered by such prospectus and any amendment or supplement
thereto, (iv) the Company may require each Holder of Warrants to be exercised in
connection with the Warrant Registration Statement to furnish to the Company
such information regarding the Holder and the distribution of such Warrants or
Warrant Shares as the Company may from time to time reasonably request for
inclusion in the Warrant Registration Statement, (v) the Company shall, if
requested, promptly incorporate in a prospectus supplement or post-effective
amendment to the Warrant Registration Statement such information as a majority
in interest of the Holders reasonably agree should be included therein and shall
make all required filings of such prospectus supplement or post-effective
amendment as soon as notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment, and (vi) the Company shall
enter into such agreements (including underwriting agreements) as are
appropriate, customary and reasonably necessary in connection with the Warrant
Registration Statement. The Company will furnish the Warrant Agent with current
prospectuses meeting the requirements of the Securities Act in sufficient
quantity to permit the Warrant Agent to deliver, at the Company's expense, a
prospectus to each holder of a Warrant upon the exercise thereof. The Company
shall promptly inform the Warrant Agent of any change in the status of the
effectiveness or availability of the Warrant Registration Statement.
SECTION 5.2. Suspension. During any consecutive 365-day
period, the Company shall be entitled to suspend the availability of the Warrant
Registration Statement for up to two 45 consecutive-day periods (except during
the 45 consecutive-day period immediately prior to the Expiration Date) if the
Company's Board determines in the exercise of its reasonable judgment that there
is a valid business purpose for such suspension and provides notice that such
determination was made by the Company's Board to the holders of the Warrants;
provided, however, that in no event shall the Company be required to disclose
the business purpose for such suspension if the Company determines in good faith
that such business purpose must remain confidential.
SECTION 5.3. Demand Registration; Repurchase of Warrants. (a)
In connection with an Exercise Event, the Company will give notice thereof to
all Holders as
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soon as practicable but in no event later than five Business Days following such
Exercise Event. Upon request from Holders of at least 25% of Warrants
outstanding, the Company shall be required to use its reasonable best efforts to
effect one registration under the Securities Act in respect of an underwritten
sale of Warrant Shares (a "Demand Registration"), subject to certain
limitations, unless an exemption from the registration requirements of the
Securities Act is then available for the sale of such Warrant Shares. Upon a
demand, the Company will prepare, file and use its reasonable best efforts to
cause to be effective within 120 days of such demand a registration statement in
respect of all Warrant Shares that request to be included in such registration
statement (a "Demand Registration Statement").
(b) The right of any Holder to include its Warrant Shares in
the Demand Registration Statement shall be conditioned upon such Holder's
participation and inclusion of such Holder's Warrant Shares in the underwritten
offering. All Holders proposing to distribute Warrant Shares through such
underwritten offering shall enter into an underwriting agreement in customary
form with the underwriter or underwriters which shall be selected by a majority
in interest of the Holders and shall be approved by the Company, which approval
shall not be unreasonably withheld; provided, (i) that all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of the underwriters shall also be made to and for
the benefit of such Holders, (ii) that any or all of the conditions precedent to
the obligations of the underwriters shall be conditions precedent to the
obligations of such Holders, and (iii) that no Holder shall be required to make
any representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
Holder or the Warrant Shares of such Holder and such Holder's intended method of
distribution and any other representations required by law or reasonably
required by the underwriter. If any such Holder disapproves of the terms of the
underwriting, such Holder may elect to withdraw all its Warrant Shares by
written notice to the Company and the managing underwriter. The Warrant Shares
so withdrawn shall also be withdrawn from registration.
(c) In connection with the Demand Registration Statement, (i)
the Company shall furnish to the Holders distributing Warrant Shares pursuant to
the Demand Registration Statement, prior to the filing with the Commission, a
copy of the Demand Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, and all exhibits thereto
(including those incorporated by reference), and each amendment or supplement,
if any, to the prospectus included therein and shall use its reasonable best
efforts to reflect in each such document, when filed with the Commission, such
comments as such Holders may reasonably propose, (ii) the Company shall, for so
long as the Demand Registration Statement is effective, deliver to such Holders,
without charge, as many copies of the prospectus (including each preliminary
prospectus) included in the Demand Registration Statement and any amendment or
supplement thereto as such Holders may reasonably request, and the Company
consents to the proper use of the prospectus therein and
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any amendment or supplement thereto by the underwriter in connection with the
offering and sale of the Warrant Shares covered by such prospectus and any
amendment or supplement thereto, (iii) the Company may require, as a condition
to the participation of such Holder in the Demand Registration Statement, that
such Holder to furnish to the Company such information regarding such Holder and
the distribution of such Warrants or Warrant Shares as the Company may from time
to time reasonably request for inclusion in the Demand Registration Statement,
(iv) the Company shall, if requested, promptly incorporate in a prospectus
supplement or post-effective amendment to the Demand Registration Statement such
information as a majority in interest of such Holders reasonably agree should be
included therein and shall make all required filings of such prospectus
supplement or post-effective amendment as soon as notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment, (v) the
Company shall enter into such agreements (including underwriting agreements) as
are appropriate, customary and reasonably necessary in connection with the
Demand Registration Statement and (vi) the Company shall (A) make available all
material customary for reasonable due diligence examinations in connection with
such Demand Registration Statement, (B) make such representations and warranties
to such Holders as are customary and reasonable in connection with the Demand
Registration Statement, (C) obtain such opinions of counsel to the Company
addressed to and reasonably satisfactory to such Holders and the underwriters as
are customary and reasonable in connection with the Demand Registration
Statement and (D) obtain such "comfort" letters and updates thereof from the
independent certified public accountants of the Company addressed to such
Holders and the underwriters as are customary and reasonable in connection with
the Demand Registration Statement. The Company shall promptly inform such
Holders of any change in the status of the effectiveness or availability of the
Demand Registration Statement.
(d) Notwithstanding the foregoing, in lieu of completing the
obligation to file the Demand Registration Statement as set forth in subsection
(a) above, the Company may offer to repurchase for cash all Warrants, at the
Current Market Value per Warrant, of Holders requesting the Demand Registration
Statement.
(e) If the Company elects to repurchase Warrant Shares
pursuant to subsection (d) above, the Company shall give notice of such
repurchase offer to all Holders and to the Warrant Agent. The repurchase offer
shall commence on the date on which the Company gives such notice (the "Notice
Date"), and such repurchase offer shall expire at 5:00 p.m., New York City time,
on a date determined by the Company (the "expiration date") that is at least 30
but not more than 60 calendar days after the Notice Date. The Company shall
offer to repurchase for cash at Current Market Value the Warrant Shares or
Warrants pursuant to subsection (d) above, provided that proper tender must be
made to the Warrant Agent by the Holders prior to the expiration date for such
repurchase offer.
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(f) Each Holder may, but shall not be obligated to, accept the
Company's offer to repurchase pursuant to Section 5.3(d), by tendering to the
Warrant Agent, on or prior to the expiration date for such repurchase offer, the
Warrant Shares or Warrants such Holder desires to have repurchased in such
offer, and in the case of Warrants tendered, together with a completed
Certificate for Surrender in substantially the form attached to the Warrant
Certificate. A Holder may withdraw all or a portion of the Warrant Shares or
Warrants tendered to the Warrant Agent at any time prior to the expiration date
for such repurchase offer. If less than all the Warrants represented by a
Warrant Certificate shall be tendered, such Warrant Certificate shall be
surrendered and a new Warrant Certificate of the same tenor and for the number
of Warrants which were not tendered shall be executed by the Company and
delivered to the Warrant Agent and the Warrant Agent shall countersign the new
Warrant Certificate to the Person or Persons entitled to receive the same;
provided that the Holder of such Warrants shall be responsible for the payment
of any transfer taxes required as a result of any change in ownership of such
Warrants. Holders not tendering their Warrants pursuant to Section 5.3(e) shall
have no further rights to require the Company to effect a Demand Registration
Statement with respect to the Exercise Event as to which the offer to purchase
has been made.
SECTION 5.4. Liquidated Damages. (a) If the Warrant
Registration Statement (i) is not declared effective by the Commission on or
prior to the date specified for such effectiveness in this Agreement (the
"Effectiveness Target Date"), or (ii) such Registration Statement is filed and
declared effective on or prior to the Effectiveness Target Date but shall
thereafter cease to be effective or the prospectus as contained therein fails to
be usable for its intended purpose without being succeeded within five business
days by a post-effective amendment to the Warrant Registration Statement or an
amendment or supplement to such prospectus that cures such failure and that, is
the case of a post-effective amendment, is itself immediately declared effective
(each such event referred to in clauses (i) through (ii) above, a "Registration
Default"), the Company shall pay to the holders of Warrants and/or Warrant
Shares that in either case are Transfer Restricted Securities an amount in cash
of $1.00 per Warrant or Warrant Share ("Liquidated Damages") for the first
90-day period (or portion thereof) following such Warrant Registration Default.
The amount of Liquidated Damages will increase by an additional $.50 per Warrant
or Warrant Share with respect to each subsequent 90-day period (or portion
thereof) until all Registration Defaults have been cured, up to a maximum rate
of Liquidated Damages of $2.50 per Warrant or Warrant Share. All accrued
Liquidated Damages will be paid to Holders by the Company on the last day of
each calendar quarter during any such payment shall have become due ("Liquidated
Damages Payment Date"). Following the cure of all Registration Defaults relating
to any particular Transfer Restricted Securities, the accrual of Liquidated
Damages with respect to such Transfer Restricted Securities will cease.
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All obligations of the Company set forth in the preceding
paragraph that have accrued and are outstanding with respect to any Transfer
Restricted Security at the time such security ceases to be a Transfer Restricted
Security shall survive until such time as all such obligations with respect to
such Transfer Restricted Security shall have been satisfied in full.
Warrants and/or Warrant Shares shall be defined as "Transfer
Restricted Securities," until the earlier to occur of (i) the date on which such
Warrants and/or Warrant Shares have been registered under the Securities Act and
disposed of in accordance with the Warrant Registration Statement (ii) the date
on which such Warrants and/or Warrant Shares are eligible for distribution to
the public pursuant to Rule 144 under the Securities Act.
(b) The Company shall notify the Warrant Agent within one
business day after each and every date on which an event occurs in respect of
which Liquidated Damages are required to be paid (an "Event Date"). Liquidated
Damages shall be paid by depositing Liquidated Damages with the Warrant Agent,
in trust, for the benefit of the Holders of the Warrants and/or Warrant Shares,
on or before the applicable Liquidated Damages Payment Date (whether or not any
payment other than Liquidated Damages is payable to such Holders),in immediately
available funds in sums sufficient to pay the Liquidated Damages then due to
such Holders. Each obligation to pay Liquidated Damages shall be deemed to
accrue from the applicable date of the occurrence of the Registration Default.
SECTION 5.5. Blue Sky. The Company shall use its reasonable
best efforts to register or qualify the Warrant and Warrant Shares under all
applicable securities laws, blue sky laws or similar laws of all jurisdictions
in the United States and Canada in which any Holder may or may be deemed to
purchase Warrants and Warrant Shares and shall use its reasonable efforts to
maintain such registration or qualification through the earlier of (i) such time
as all Warrants have been exercised and (ii) the Expiration Date; provided,
however, that the Company shall not be required to qualify generally to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 5.5 or to take any action which would subject it to general
service of process or to taxation in any such jurisdiction where it is not then
so subject.
SECTION 5.6. Accuracy of Disclosure. The Company represents
and warrants to each Holder and agrees for the benefit of each Holder that (i)
the Warrant Registration Statement or the Demand Registration Statement and any
amendment thereto will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements contained therein not misleading; and (ii) each of the prospectus
furnished to such Holder for delivery in connection with the exercise of
Warrants or in connection with the sale of Warrant Shares, as the case may be,
and the documents incorporated by reference therein will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make
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the statements contained therein, in light of the circumstances under which they
were made, not misleading; provided, however, that the Company shall have no
liability under clause (i) or (ii) of this Section 5.5 with respect to any such
untrue statement or omission made in the Warrant Registration Statement or the
Demand Registration Statement in reliance upon and in conformity with
information furnished to the Company by or on behalf of the Holders specifically
for inclusion therein.
SECTION 5.7. Indemnification. (a) In connection with either
the Warrant Registration Statement or the Demand Registration Statement, the
Company agrees to indemnify and hold harmless each Holder of the Warrants and/or
Warrant Shares and each person, if any, who controls such Holder within the
meaning of the Securities Act or the Exchange Act (each Holder and such
controlling persons being referred to collectively as the "Indemnified Parties")
from and against any losses, damages or liabilities, joint or several, or any
actions in respect thereof (including but not limited to any losses, claims,
damages, liabilities or actions relating to purchases and sales of the Warrants
and/or Warrant Shares) to which each Indemnified Party may become subject under
the Securities Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages, liabilities or actions arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Warrant Registration Statement or Demand Registration Statement or their related
prospectuses or in any amendment or supplement thereto, or arise out of, or are
based upon, the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, and shall
reimburse, as incurred, the Indemnified Parties for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action in respect thereof; provided,
however, that (i) the Company shall not be liable in any such case to the extent
that such loss, claim, damage or liability arises out of or is based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in the Warrant Registration Statement or the Demand Registration Statement
or any preliminary or final prospectus or in any amendment or supplement thereto
in reliance upon and in conformity with written information pertaining to such
Holder and furnished to the Company by or on behalf of such Holder specifically
for inclusion therein, (ii) with respect to any untrue statement or omission or
alleged untrue statement or omission made in any prospectus relating to the
Warrant Registration Statement or the Demand Registration Statement, the
indemnity agreement contained in this subsection (a) shall not inure to the
benefit of any person as to which there is a prospectus delivery requirement (a
"Delivering Seller") that sold the Warrants or the Warrant Shares, as the case
may be, to the person asserting any such losses, claims, damages or liabilities
to the extent that any such loss, claim, damage or liability of such Delivering
Seller results from the fact that there was not sent or given to such person, on
or prior to the written confirmation of such sale, a copy of the relevant
prospectus, as amended and supplemented, provided that (I) the Company shall
have previously furnished copies thereof to such Delivering Seller in
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accordance with this Agreement and (II) such furnished prospectus, as amended
and supplemented, would have corrected any such untrue statement or omission or
alleged untrue statement or omission, and (iii) this indemnity agreement will be
in addition to any liability which the Company may otherwise have to such
Indemnified Party.
(b) In connection with either the Warrant Registration
Statement or the Demand Registration Statement, the Holders of the Warrants
agree to indemnify and hold harmless Company and each person, if any, who
controls the Company within the meaning of the Securities Act or the Exchange
Act (the Company and such controlling persons being referred to collectively as
the "Holder Indemnified Parties") from and against any losses, damages or
liabilities, joint or several, or any actions in respect thereof (including but
not limited to any losses, claims, damages, liabilities or actions relating to
purchases and sales of the Warrant Shares) to which each Holder Indemnified
Party may become subject under the Securities Act, the Exchange Act or
otherwise, insofar as such losses, claims, damages, liabilities or actions arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Warrant Registration Statement or Demand
Registration Statement or their related prospectuses or in any amendment or
supplement thereto, or arise out of, or are based upon, the omission or alleged
omission to therein a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, and shall reimburse, as incurred, the Holder
Indemnified Parties for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action in respect thereof; provided, however, that (i) such Holder
shall not be liable in any such case to the extent that such loss, claim, damage
or liability arises out of or is based upon any untrue statement or alleged
untrue statement or omission or alleged omission made in the Warrant
Registration Statement or the Demand Registration Statement or any preliminary
or final prospectus or in any amendment or supplement thereto in reliance upon
and in conformity with written information pertaining to such Holder and
furnished to such Holder by or on behalf of the Company specifically for
inclusion therein.
(c) Promptly after receipt by an indemnified party under this
Section 5 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 5, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 5 except to the extent it has
been materially prejudiced by such failure and, provided further, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under Section 5(a) or
5(b) hereof. If any such claim or action shall be brought against an indemnified
party, and it shall have notified the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it wishes, jointly with any
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other similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 5 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
the indemnified party shall have the right to employ counsel to represent
jointly the indemnified party and those other Holders and their respective
officers, employees and controlling persons who may be subject to liability
arising out of any claim in respect of which indemnity may be sought Holders by
an indemnified party against the indemnifying party under this Section 5 if, in
the reasonable judgment of the indemnified party it is advisable for the
indemnified party and those Holders, officers, employees and controlling persons
to be jointly represented by separate counsel, and in that event the fees and
expenses of such separate counsel shall be paid by the indemnifying party. In no
event shall the indemnifying parties be liable for the fees and expenses of more
than one counsel (in addition to local counsel) for all indemnified parties in
connection with any proceeding or related proceedings. Each indemnified party,
as a condition of the indemnity agreements contained in Section 5(a) and 5(b)
hereof, shall use its best efforts to cooperate with the indemnifying party in
the defense of any such action or claim. No indemnifying party shall (i) without
the prior written consent of the indemnified parties (which consent shall not be
unreasonably withheld), settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding, or (ii) be liable for any
settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with its written
consent or if there is a final judgment for the plaintiff in any such action,
the indemnifying party agrees to indemnify and hold harmless any indemnified
party from and against any loss or liability by reason of such settlement or
judgment in accordance with this Section 5.
(d) If the indemnification provided for in this Section 5
shall for any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 5(a) or 5(b) in respect of any loss, claim,
damage or liability, or any action in respect thereof, referred to therein, then
each indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, in such
proportion as shall be appropriate to reflect the relative fault of the Company
on the one hand and the Holders on the other with respect to the statements or
omissions which resulted in such loss, claim, damage or liability, or action in
respect thereof, as well as any other relevant equitable considerations. The
relative fault shall be determined by reference to, among other things,
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<PAGE>
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by the
Company or the Holders, the intent of the parties and their relative knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company and the Holders agree that it would not be just and
equitable if contributions pursuant to this Section 5(d) were to be determined
by pro rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this Section 5(d) shall be
deemed to include, subject to limitations set forth above, for purposes of this
Section 5(d), 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 5(d), no Holder shall
be required to indemnify or contribute any amount in excess of the amount by
which proceeds received by such Holder from an offering of the Notes exceeds the
amount of any damages which such Holder has otherwise paid or become liable to
pay by reason of any untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation. The Holders'
obligations to contribute as provided in this Section 5(d) are several and not
joint. The remedies provided for in this Section 5 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.
(e) The agreements contained in this section shall survive the
exercise of the Warrants pursuant to the Warrant Registration Statement and the
sale of the Warrant Shares pursuant to the Demand Registration Statement, and
shall remain in full force and effect, regardless of any termination or
cancellation of this Agreement or any investigation made by or on behalf of any
indemnified party.
SECTION 5.8. Additional Acts. If the issuance or sale of any
Common Stock or other securities issuable upon the exercise of the Warrants
requires registration or approval of any governmental authority (other than the
registration requirements under the Securities Act), or the taking of any other
action under the laws of the United States of America or any political
subdivision thereof before such securities may be validly offered or sold in
compliance with such laws, then the Company covenants that it will, in good
faith and as expeditiously as reasonably possible, use all reasonable efforts to
secure and maintain such registration or approval or to take such other action,
as the case may be.
SECTION 5.9. Expenses. All expenses incident to the Company's
performance of or compliance with its obligations under this Article 5 will be
borne by the Company, including, without limitation: (i) all Commission, stock
exchange or National
39
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Association of Securities Dealers, Inc. registration and filing fees, (ii) all
fees and expenses incurred in connection with compliance with state securities
or blue sky laws, (iii) all expenses of any Persons incurred by or on behalf of
the Company in preparing or assisting in preparing, printing and distributing
the Common Shelf Registration Statement, the Demand Registration Statement or
any other registration statement, prospectus, any amendments or supplements
thereto and other documents relating to the performance of and compliance with
this Article 5, (iv) the fees and disbursements of the Warrant Agent, (v) the
fees and disbursements of counsel for the Company and the Warrant Agent and, in
the case of a Demand Registration Statement, of counsel for the underwriters
(vi) the fees and disbursements of the independent public accountants of the
Company, including the expenses of any special audits or comfort letters
required by or incident to such performance and compliance. The Holders selling
Warrant Shares pursuant to the Demand Registration Statement shall be
responsible for any expenses customarily borne by selling securityholders,
including underwriting discounts and commissions and fees and expenses of
counsel to the selling securityholders.
SECTION 5.10. Listing of Warrant Shares. The Company shall use
its reasonable best efforts to the Warrant Shares to be approved for listing in
the Nasdaq Stock Market by November 21, 1998.
ARTICLE 6
Warrant Agent
SECTION 6.1. Appointment of Warrant Agent. The Company hereby
appoints the Warrant Agent to act as agent for the Company in accordance with
the express provisions of this Agreement and the Warrant Agent hereby accepts
such appointment.
SECTION 6.2. Right and Duties of Warrant Agent. (a) Agent for
the Company. In acting under this Warrant Agreement and in connection with the
Warrant Certificates, the Warrant Agent is acting solely as agent for the
Company and does not assume any obligation or relationship or agency or trust
for or with any of the holders of Warrant Certificates or beneficial owners of
Warrants.
(b) The Warrant Agent may consult with counsel satisfactory to
it (who may be counsel to the Company), and the advice of such counsel shall be
full and complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in accordance with the
advice of such counsel.
(c) The Warrant Agent shall be protected and shall incur no
liability for or in respect of any action taken or thing suffered by it in
reliance upon any Warrant Certificate,
40
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notice, direction, consent, certificate, affidavit, statement, opinion or other
paper or document reasonably believed by it to be genuine and to have been
presented or signed by the proper parties.
(d) The Warrant Agent shall be obligated to perform only such
duties as are specifically set forth herein and in the Warrant Certificates, and
no implied duties or obligations of the Warrant Agent shall be read into this
Agreement or the Warrant Certificates. The Warrant Agent shall not be under any
obligation to take any action hereunder which may tend to involve it in any
expense or liability for which it does not receive indemnity if such indemnity
is reasonably requested. The Warrant Agent shall not be accountable or under any
duty or responsibility for the use by the Company of any of the Warrant
Certificates countersigned by the Warrant Agent and delivered by it to the
Holders or on behalf of the Holders pursuant to this Agreement or for the
application by the Company of the proceeds of the Warrants. The Warrant Agent
shall have no duty or responsibility in case of any default by the Company in
the performance of its covenants or agreements contained herein or in the
Warrant Certificates or in the case of the receipt of any written demand from a
Holder with respect to such default, including any duty or responsibility to
initiate or attempt to initiate any proceedings at law or otherwise.
(e) The Warrant Agent shall not at any time be under any duty
or responsibility to any Holder to determine whether any facts exist that may
require an adjustment of the number of shares of Common Stock issuable upon
exercise of each Warrant or the Exercise Price, or with respect to the nature or
extent of any adjustment when made or with respect to the method employed or
provided to be employed herein or in any supplemental agreement in making the
same. The Warrant Agent shall not be accountable with respect to the validity or
value of any shares of Common Stock or of any securities or property which may
at any time be issued or delivered upon the exercise of any Warrant or upon any
adjustment pursuant to Article 4, and it makes no representation with respect
thereto. The Warrant Agent shall not be responsible for any failure of the
Company to make any cash payment or to issue, transfer or deliver any shares of
Common Stock or stock certificates upon the surrender of any Warrant Certificate
for the purpose of exercise or upon any adjustment pursuant to Article 4, or to
comply with any of the covenants of the Company contained in Article 4.
SECTION 6.3. Individual Rights of Warrant Agent. The Warrant
Agent and any stockholder, director, officer or employee of the Warrant Agent
may buy, sell or deal in any of the Warrants or other securities of the Company
or its affiliates or become pecuniarily interested in transactions in which the
Company or its affiliates may be interested, or contract with or lend money to
the Company or its affiliates or otherwise act as fully and freely as though it
were not the Warrant Agent under this Agreement. Nothing herein shall preclude
41
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the Warrant Agent from acting in any other capacity for the Company or for any
other legal entity.
SECTION 6.4. Warrant Agent's Disclaimer. The Warrant Agent
shall not be responsible for and makes no representation as to the validity or
adequacy of this Agreement or the Warrant Certificates and it shall not be
responsible for any statement in this Agreement or the Warrant Certificates
other than its countersignature thereon.
SECTION 6.5. Compensation and Indemnity. The Company and the
Warrant Agent have entered into an agreement pursuant to which the Company
agrees to pay the Warrant Agent from time to time compensation for its services
and to reimburse the Warrant Agent upon request for all reasonable out-of-pocket
expenses incurred by it, including the reasonable compensation and expenses of
the Warrant Agent and its directors, officers, agents and counsel. The Company
shall indemnify the Warrant Agent and its directors, officers, agents and
counsel against any and all loss, liability, damage, claim or expense (including
agents' and attorneys' fees and expenses) incurred by the Warrant Agent without
negligence, bad faith or willful misconduct on its part arising out of or in
connection with the acceptance or performance of its duties under this
Agreement. The Warrant Agent shall notify the Company promptly of any claim for
which it may seek indemnity. The Company need not reimburse any expense or
indemnify against any loss or liability incurred by the Warrant Agent through
wilful misconduct, negligence or bad faith. The Company's payment obligations
pursuant to this Section 6.5 shall survive the termination of this Agreement.
To secure the Company's payment obligations under this
Agreement, the Warrant Agent shall have a lien prior to the Holders on all money
or property held or collected by the Warrant Agent.
SECTION 6.6. Successor Warrant Agent. The Company agrees for
the benefit of the Holders that there shall at all times be a Warrant Agent
hereunder until all the Warrants have been exercised or are no longer
exercisable.
(a) The Warrant Agent may at any time resign by giving written
notice to the Company of such intention on its part, specifying the date on
which its desired resignation shall become effective; provided, however, that
such date shall not be less than 60 days after the date on which such notice is
given unless the Company otherwise agrees. The Warrant Agent hereunder may be
removed at any time by the filing with it of an instrument in writing signed by
or on behalf of the Company and specifying such removal and the date when it
shall become effective, which date shall not be less than 60 days after such
notice is given unless the Warrant Agent otherwise agrees. Any removal under
this Section 6.6 shall take effect upon the appointment by the Company as
hereinafter provided of a successor Warrant Agent (which shall be a bank or
trust company authorized under the laws of the jurisdiction of its
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organization to exercise corporate trust powers) and the acceptance of such
appointment by such successor Warrant Agent. If a successor Warrant Agent does
not take office within 60 days after the retiring Warrant Agent resigns or is
removed, the retiring Warrant Agent or the Holders of 10% of the Warrants may
petition, at the expense of the Company, any court of competent jurisdiction for
the appointment of a successor.
(b) In the event that at any time the Warrant Agent shall
resign, or shall be removed, or shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or shall commence a voluntary case under
Federal bankruptcy laws, as now or hereafter constituted, or under any other
applicable Federal or state bankruptcy, insolvency or similar law, or shall
consent to the appointment of or taking possession by a receiver, custodian,
liquidator, assignee, trustee, sequestrator (or other similar official) of the
Warrant Agent or its property or affairs, or shall make an assignment for the
benefit of creditors, or shall admit in writing its inability to pay its debts
generally as they become due, or shall take corporate action in furtherance of
any such action, or a decree or order for relief by a court having jurisdiction
in the premises shall have been entered in respect of the Warrant Agent in an
involuntary case under the Federal bankruptcy laws, as now or hereafter
constituted, or any other applicable Federal or State bankruptcy, insolvency or
similar law, or a decree or order by a court having jurisdiction in the premises
shall have been entered for the appointment of a receiver, custodian,
liquidator, assignee, trustee, sequestrator (or similar official) of the Warrant
Agent or of its property or affairs, or any public officer shall take charge or
control of the Warrant Agent or of its property or affairs for the purpose of
rehabilitation, conservation, winding up or liquidation, a successor Warrant
Agent, qualified as aforesaid, shall be appointed by the Company by an
instrument in writing filed with the successor Warrant Agent. Upon the
appointment as aforesaid of a successor Warrant Agent and acceptance by the
successor Warrant Agent of such appointment, the Warrant Agent shall cease to be
the Warrant Agent hereunder; provided, however, that in the event of the
resignation of the Warrant Agent hereunder, such resignation shall be effective
on the earlier of (i) the date specified in the Warrant Agent's notice of
resignation and (ii) the appointment and acceptance of a successor Warrant Agent
hereunder.
(c) Any successor Warrant Agent appointed hereunder shall
execute, acknowledge and deliver to its predecessor and to the Company an
instrument accepting such appointment hereunder, and thereupon such successor
Warrant Agent, without any further act, deed or conveyance, shall become vested
with all the rights and obligations of such predecessor with like effect as if
originally named as Warrant Agent hereunder, and such predecessor, upon payment
of its charges and disbursements then unpaid, shall thereupon become obligated
to transfer, deliver and pay over, and such successor Warrant Agent shall be
entitled to receive, all monies, securities and other property on deposit with
or held by such predecessor, as Warrant Agent hereunder.
43
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(d) Any corporation into which the Warrant Agent hereunder may
be merged or consolidated, or any corporation resulting from any merger or
consolidation to which the Warrant Agent shall be a party, or any corporation to
which the Warrant Agent shall sell or otherwise transfer all or substantially
all the corporate trust or stock transfer assets and business of the Warrant
Agent, provided that it shall be qualified as aforesaid, shall be the successor
Warrant Agent under this Agreement without the execution or filing of any paper
or any further act on the part of any of the parties hereto.
ARTICLE 7
Remedies
SECTION 7.1. Defaults. It shall be deemed a "Default" with
respect to the Company's (or its successor's) obligations under this Agreement
if an Exercise Event occurs and, (i) following the request of at least 25% of
Holders of Warrants outstanding, the Company fails to use its reasonable best
efforts to have declared effective and kept effective a Demand Registration
Statement as set forth in Section 5.3(a), or (ii) the Company fails to
repurchase the Warrants tendered pursuant to an offer to purchase Section 5.3(e)
in lieu of having a Demand Registration Statement declared effective, as set
forth in Section 5.3(a).
SECTION 7.2. Payment Obligations. In the event of a Default
under this Agreement, the Company shall be obligated to increase the amounts
payable under Section 5.3(b) in respect of which such Default relates by an
amount equal to interest thereon at a rate per annum equal to 10% from the date
of the Default to the date of payment, which interest shall compound quarterly
(all such payment obligations in respect of amounts payable under Section 5.3,
together with all such increased amounts, being the "Repurchase Obligations").
SECTION 7.3. Remedies. Notwithstanding any other provision of
this Agreement, if a Default occurs and is continuing, the Holders may pursue
any available remedy to collect the Repurchase Obligations or to enforce the
performance of any provision of this Agreement. A delay or omission by any
Holder of a Warrant in exercising, or a failure to exercise, any right or remedy
arising out of a Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Default. All remedies are cumulative to the
extent permitted by law.
44
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ARTICLE 8
Miscellaneous
SECTION 8.1. Financial Statements and Reports of the Company.
The Company agrees (a) to provide to each Holder, without cost to such Holder,
copies of the annual and quarterly reports and documents that the Company files
with the Commission (to the extent such filings are accepted by the Commission
and whether or not the Company has a class of securities registered under the
Securities Exchange Act of 1934 (the "Exchange Act")) or that the Company would
be required to file were it subject to Section 13 or 15 of the Exchange Act,
within 15 days after the date of such filing or the date on which the Company
would be required to file such reports or documents, and all such annual or
quarterly reports shall include the geographic segment financial information as
has heretofore been disclosed by the Company in its public filings with the
Commission, and (b) if filing such reports and documents is not accepted by the
Commission or is prohibited under the Exchange Act, to supply at the Company's
expense copies of such reports and documents to any prospective Holder promptly
upon request.
SECTION 8.2. Third Party Beneficiaries. The Holders shall be
third party beneficiaries to the agreements made hereunder between the Company,
on the one hand, and the Warrant Agent, on the other hand, and each Holder shall
have the right to enforce such agreements directly to the extent it deems such
enforcement necessary or advisable to protect its rights or the rights of
Holders hereunder.
SECTION 8.3. Rights of Holders. Holders of unexercised
Warrants are not entitled to (i) receive dividends or other distributions, (ii)
receive notice of or vote at any meeting of the stockholders, (iii) consent to
any action of the stockholders, (iv) receive notice as stockholders of any other
proceedings of the Company, (v) exercise any preemptive rights or (vi) exercise
any other rights whatsoever as stockholders of the Company.
SECTION 8.4. Amendment. This Agreement may be amended by the
parties hereto without the consent of any Holder for the purpose of curing any
ambiguity, or of curing, correcting or supplementing any defective provision
contained herein or adding or changing any other provisions with respect to
matters or questions arising under this Agreement as the Company and the Warrant
Agent may deem necessary or desirable (including without limitation any addition
or modification to provide for compliance with the transfer restrictions set
forth herein); provided, however, that such action shall not adversely affect
the rights of any of the Holders. Any amendment or supplement to this Agreement
that has an adverse effect on the interests of the Holders shall require the
written consent of the Holders of a majority of the then outstanding Warrants.
The consent of each Holder affected shall be required for any amendment pursuant
to which the Exercise Price would be increased
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or the number of Warrant Shares issuable upon exercise of Warrants would be
decreased (other than pursuant to adjustments provided herein) or the exercise
period with respect to the Warrants would be shortened. In determining whether
the Holders of the required number of Warrants have concurred in any direction,
waiver or consent, Warrants owned by the Company or by any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company shall be disregarded and deemed not to be outstanding,
except that, for the purpose of determining whether the Warrant Agent shall be
protected in relying on any such direction, waiver or consent, only Warrants
which the Warrant Agent actually knows are so owned shall be so disregarded.
Also, subject to the foregoing, only Warrants outstanding at the time shall be
considered in any such determination.
SECTION 8.5. Notices. Any notice or communication shall be in
writing and delivered in Person or mailed by first-class mail addressed as
follows:
if to the Company:
10411 Motor City Drive, Suite 301
Bethesda, Maryland 20817
Attention: Chief Financial Officer
with a copy to:
Schnader, Harrison, Segal
& Lewis LLP
1225 Eye Street, NW, Suite 600
Washington, DC 20005
Attention: Robert B. Murphy, Esq.
If to the Warrant Agent:
First Union National Bank
800 East Main Street
Lower Mezzanine
Richmond, Virginia 23219
Attention: Corporate Trust Department
The Company or the Warrant Agent by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
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Any notice or communication mailed to a Holder shall be mailed
to the Holder at the Holder's address as it appears on the Certificate Register
and shall be sufficiently given if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders. If
a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
SECTION 8.6. Governing Law. The laws of the State of New York
shall govern this Agreement and the Warrants.
SECTION 8.7. Successors. All agreements of the Company in this
Agreement and the Warrant Certificates shall bind its successors. All agreements
of the Warrant Agent in this Agreement shall bind its successors.
SECTION 8.8. Multiple Originals. The parties may sign any
number of copies of this Agreement. Each signed copy shall be an original, but
all of them together represent the same agreement. One signed copy is enough to
prove this Agreement.
SECTION 8.9. Table of Contents. The table of contents and
headings of the Articles and Sections of this Agreement have been inserted for
convenience of reference only, are not intended to be considered a part hereof
and shall not modify or restrict any of the terms or provisions hereof.
SECTION 8.10. Severability. The provisions of this Agreement
are severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Agreement in any jurisdiction.
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IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the date first written above.
STARTEC GLOBAL COMMUNICATIONS
CORPORATION
by ______________________________
Name:
Title:
FIRST UNION NATIONAL BANK,
as Warrant Agent
by ______________________________
Name:
Title:
48
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EXHIBIT A
FORM OF FACE OF WARRANT CERTIFICATE
[UNTIL THE SEPARATION DATE (AS DEFINED), THIS NOTE HAS BEEN
ISSUED AS, AND MUST BE TRANSFERRED AS, A UNIT TOGETHER WITH THE ASSOCIATED
WARRANTS TO PURCHASE COMMON STOCK OF THE COMPANY. EACH UNIT CONSISTS OF $1,000
PRINCIPAL AMOUNT OF NOTES AND A WARRANT TO PURCHASE 1.25141 SHARES OF COMMON
STOCK OF THE COMPANY, SUBJECT TO ADJUSTMENT UNDER CERTAIN CIRCUMSTANCES. A COPY
OF THE WARRANT AGREEMENT PURSUANT TO WHICH THE WARRANTS HAVE BEEN ISSUED IS
AVAILABLE FROM THE COMPANY UPON REQUEST.]2
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN THE WARRANT AGREEMENT REFERRED TO HEREIN.]3
THE EXERCISE OF THIS WARRANT (AND THE OWNERSHIP OF COMMON
STOCK ISSUABLE UPON THE EXERCISE THEREOF) MAY BE LIMITED
- - --------
2. To be included on Warrants issued before the Separation Date.
3. To be included on Global Warrants.
A-1
<PAGE>
BY STARTEC GLOBAL COMMUNICATIONS CORPORATION IN ORDER TO ENSURE COMPLIANCE WITH
THE RULES, REGULATIONS AND POLICIES OF THE FEDERAL COMMUNICATIONS COMMISSION,
AND THIS WARRANT WILL NOT BE EXERCISABLE BY ANY HOLDER IF SUCH EXERCISE WOULD
CAUSE STARTEC GLOBAL COMMUNICATIONS CORPORATION TO BE IN VIOLATION OF THE
COMMUNICATIONS ACT OF 1934 OR THE RULES, REGULATIONS AND POLICIES OF THE FEDERAL
COMMUNICATIONS COMMISSION.
[THE WARRANTS EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR
OTHER SECURITIES LAWS. NEITHER THIS WARRANT NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING
ITS WARRANT IN AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 904 OF REGULATION S
UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE
WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k)
UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER
OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS WARRANT) OR THE
LAST DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF
THIS WARRANT (OR ANY PREDECESSOR OF THIS WARRANT) AND (Y) SUCH LATER DATE, IF
ANY, AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION
DATE") OFFER, SELL OR OTHERWISE TRANSFER THIS WARRANT EXCEPT (A) TO THE COMPANY,
(B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER
THE SECURITIES ACT, (C) FOR SO LONG AS THE WARRANTS ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING
A-2
<PAGE>
OF REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3)
AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS WARRANT IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY,
THE Warrant Agent AND THE REGISTRAR SHALL HAVE THE RIGHT PRIOR TO ANY SUCH
OFFER, SALE OR TRANSFER, IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A
CERTIFICATION OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS
WARRANT IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE Warrant Agent. IN
CONNECTION WITH ANY TRANSFER OF THIS WARRANT WITHIN THE TIME PERIOD REFERRED TO
ABOVE, 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 THE
Warrant Agent. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER
THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM
BY REGULATION S UNDER THE SECURITIES ACT.]4
[THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON ITS
EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT AND THE WARRANT MY
NOT BE EXERCISED BY OR ON BEHALF OF ANY U.S. PERSON UNLESS REGISTERED UNDER THE
ACT OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. IN ORDER TO EXERCISE
THIS WARRANT, THE HOLDER MUST FURNISH TO THE COMPANY AND THE WARRANT AGENT
EITHER (A) A WRITTEN CERTIFICATION THAT IT IS NOT A U.S. PERSON AND THE WARRANT
IS NOT BEING EXERCISED ON BEHALF OF A U.S. PERSON OR (B) A WRITTEN OPINION OF
COUNSEL TO THE EFFECT THAT THE SECURITIES DELIVERED UPON EXERCISE OF THE WARRANT
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OR THAT THE DELIVERY OF SUCH
SECURITIES IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.]5
- - --------
4. To be included on Warrant Certificates required to bear the Pointer
Placement Legend.
5. To be inserted on Regulation S Global Warrants.
A-3
<PAGE>
No. Certificate for _____ Warrants
WARRANTS TO PURCHASE COMMON STOCK OF
STARTEC GLOBAL COMMUNICATIONS CORPORATION
THIS CERTIFIES THAT __________, or its registered assigns, is
the registered holder of the number of Warrants set forth above (the
"Warrants"). Each Warrant entitles the holder thereof (the "Holder"), at its
option and subject to the provisions contained herein and in the Warrant
Agreement referred to below, to purchase from Startec Global Communications
Corporation, a Maryland corporation ("the Company"), 1.25141 shares of Common
Stock, par value of $0.01 per share, of the Company (the "Common Stock") at the
per share exercise price of $24.20 (the "Exercise Price"), or by Cashless
Exercise referred to below. This Warrant Certificate shall terminate and become
void as of the close of business on November 15, 2008 (the "Expiration Date") or
upon the exercise hereof as to all the shares of Common Stock subject hereto.
The number of shares issuable upon exercise of the Warrants and the Exercise
Price per share shall be subject to adjustment from time to time as set forth in
the Warrant Agreement.
This Warrant Certificate is issued under and in accordance
with a Warrant Agreement dated as of May 21, 1998 (the "Warrant Agreement"),
between the Company and First Union National Bank (the "Warrant Agent", which
term includes any successor Warrant Agent under the Warrant Agreement), and is
subject to the terms and provisions contained in the Warrant Agreement, to all
of which terms and provisions the Holder of this Warrant Certificate consents by
acceptance hereof. The Warrant Agreement is hereby incorporated herein by
reference and made a part hereof. Reference is hereby made to the Warrant
Agreement for a full statement of the respective rights, limitations of rights,
duties and obligations of the Company, the Warrant Agent and the Holders of the
Warrants. Capitalized terms used but not defined herein shall have the meanings
ascribed thereto in the Warrant Agreement. A copy of the Warrant Agreement may
be obtained for inspection by the Holder hereof upon written request to the
Warrant Agent at First Union national Bank, 800 East Main Street, Lower
Mezzanine, Richmond, Virginia 23219, Attention: Corporate Trust Department.
Subject to the terms of the Warrant Agreement, the Warrants
may be exercised in whole or in part (i) by presentation of this Warrant
Certificate with the Election to Purchase attached hereto duly executed and with
the simultaneous payment of the Exercise Price in cash (subject to adjustment)
to the Warrant Agent for the account of the Company at the office of the Warrant
Agent or (ii) by Cashless Exercise. Payment of the Exercise Price in cash shall
be made by certified or official bank check payable to the order of the Company
or by wire transfer of funds to an account designated by the Company for such
purpose. Payment by Cashless Exercise shall be made without the payment of cash
by reducing the amount of
A-4
<PAGE>
Common Stock that would be obtainable upon the exercise of a Warrant and payment
of the Exercise Price in cash so as to yield a number of shares of Common Stock
upon the exercise of such Warrant equal to the product of (1) the number of
shares of Common Stock for which such Warrant is exercisable as of the Exercise
Date (if the Exercise Price were being paid in cash) and (2) a fraction, the
numerator of which is the excess of the Current Market Value per share of Common
Stock on the Exercise Date over the Exercise Price per share as of the Exercise
Date and the denominator of which is the Current Market Value per share of the
Common Stock on the Exercise Date.
This Warrant requires the Holder to comply with certain certification
and opinion delivery requirements under certain circumstances in order to
validly exercise the Warrant.
As provided in the Warrant Agreement and subject to the terms
and conditions therein set forth, the Warrants shall be exercisable at any time
on or after November 15, 1998; provided, however, that no Warrant shall be
exercisable after May 15, 2008. This Warrant is entitled to the benefit of
certain registration rights contained in the Warrant Agreement.
In the event the Company enters into a Combination, the Holder
hereof will be entitled to receive upon exercise of the Warrants the kind and
amount of shares of capital stock or other securities or other property of such
surviving entity as the Holder would have been entitled to receive upon or as a
result of the combination had the Holder exercised its Warrants immediately
prior to such Combination; provided, however, that in the event that, in
connection with such Combination, consideration to holders of Common Stock in
exchange for their shares is payable solely in cash or in the event of the
dissolution, liquidation or winding-up of the Company, the Holder hereof will be
entitled to receive such cash distributions as the Holder would have received
had the Holder exercised its Warrants immediately prior to such Combination,
less the Exercise Price.
As provided in the Warrant Agreement, the number of shares of
Common Stock issuable upon the exercise of the Warrants and the Exercise Price
are subject to adjustment upon the happening of certain events.
The Company may require payment of a sum sufficient to pay all
taxes, assessments or other governmental charges in connection with the transfer
or exchange of the Warrant Certificates pursuant to Section 2.6 of the Warrant
Agreement, but not for any exchange or original issuance (not involving a
transfer) with respect to temporary Warrant Certificates, the exercise of the
Warrants or the issuance of the Warrant Shares.
Upon any partial exercise of the Warrants, there shall be
countersigned and issued to the Holder hereof a new Warrant Certificate
representing those Warrants which were not exercised. This Warrant Certificate
may be exchanged at the office of the Warrant Agent
A-5
<PAGE>
by presenting this Warrant Certificate properly endorsed with a request to
exchange this Warrant Certificate for other Warrant Certificates evidencing an
equal number of Warrants. No fractional Warrant Shares will be issued upon the
exercise of the Warrants, but the Company shall pay an amount in cash equal to
the Current Market Value per Warrant Share on the day immediately preceding the
date the Warrant is exercised, multiplied by the fraction of a Warrant Share
that would be issuable on the exercise of any Warrant.
All shares of Common Stock issuable by the Company upon the
exercise of the Warrants shall, upon such issue, be duly and validly issued and
fully paid and non-assessable.
The holder in whose name the Warrant Certificate is registered
may be deemed and treated by the Company and the Warrant Agent as the absolute
owner of the Warrant Certificate for all purposes whatsoever and neither the
Company nor the Warrant Agent shall be affected by notice to the contrary.
The Warrants do not entitle any holder hereof to any of the
rights of a shareholder of the Company.
This Warrant shall be governed by the laws of the State of New
York.
This Warrant Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Warrant Agent.
STARTEC GLOBAL COMMUNICATIONS
CORPORATION
By _____________________________
By _____________________________
DATED:
Countersigned:
FIRST UNION NATIONAL BANK
as Warrant Agent,
- - ---------------------------
By: Authorized Signatory
A-6
<PAGE>
A-7
<PAGE>
FORM OF ELECTION TO PURCHASE WARRANT SHARES
(to be executed only upon exercise of Warrants)
STARTEC GLOBAL COMMUNICATIONS CORPORATION
The undersigned hereby irrevocably elects to exercise Warrants
at an exercise price per Warrant (subject to adjustment) of $24.20 to acquire
_____ shares of Common Stock, par value $0.01 per share, of Startec Global
Communications Corporation on the terms and conditions specified within the
Warrant Certificate and the Warrant Agreement therein referred to, surrenders
this Warrant Certificate and all right, title and interest therein to Startec
Global Communications Corporation and directs that the shares of Common Stock
deliverable upon the exercise of such Warrants be registered or placed in the
name and at the address specified below and delivered thereto.
Date:____________, 19__
-----------------------------------
(Signature of Owner)
-----------------------------------
(Street Address)
-----------------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
-----------------------------------
Signature must be guaranteed
by an eligible Guarantor
Institution (banks, stock
brokers, savings and loan
associations and credit
unions) with membership in an
approved guarantee medallion
program pursuant to Securities
and Exchange Commission Rule
17Ad-5
- - ----------
A-8
<PAGE>
The signature must correspond with the name as written upon
the face of the within Warrant Certificate in every
particular, without alteration or enlargement or any change
whatsoever, and must be guaranteed.
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:____________________________________________
Street Address:__________________________________
City, State and Zip Code:________________________
Any unexercised Warrants represented by the Warrant Certificate to be issued to:
Please insert social security or identifying number:
Name:____________________________________________
Street Address:__________________________________
City, State and Zip Code:________________________
A-9
<PAGE>
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby
sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- - ----------------------------------
- - --------------------------------------------------------------------------------
(Please print or typewrite name and address including zip code of assignee)
- - --------------------------------------------------------------------------------
the within Warrant and all rights thereunder, hereby irrevocably constituting
and appointing
attorney to transfer such Warrant on the books of the Company with full power of
substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL WARRANTS OTHER THAN WARRANTS,
REGULATION S PERMANENT GLOBAL WARRANTS AND
REGULATION S PERMANENT CERTIFICATED WARRANTS]
In connection with any transfer of this Warrant occurring
prior to the date which is the earlier of the date of an effective Registration
Statement or the end of the period referred to in Rule 144(k) under the
Securities Act, the undersigned confirms that without utilizing any general
solicitation or general advertising that:
[Check One]
|_| (a) this Warrant is being transferred in compliance with the exemption
from registration under the Securities Act of 1933, as amended, provided
by Rule 144A thereunder.
or
|_| (b) this Warrant is being transferred other than in accordance with (a)
above and documents are being furnished which comply with the conditions
of transfer set forth in this Warrant and the Warrant Agreement.
A-10
<PAGE>
If neither of the foregoing boxes is checked, the Warrant Agreement shall not be
obligated to register this Warrant in the name of any Person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 3.2 of the Warrant Agreement shall
have been satisfied.
Date:__________________________ ____________________________________
NOTICE: The signature to this
assignment must correspond with the
name as written upon the face of the
within-mentioned instrument in every
particular, without alteration or
any change whatsoever.
Signature Guarantee 1___________________
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Warrant for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, as amended, and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the undersigned has requested pursuant to
Rule 144A or has determined not to request such information and that it is aware
that the transferor is relying upon the undersigned's foregoing representations
in order to claim the exemption from registration provided by Rule 144A.
Date:__________________________ ____________________________________
NOTICE: To be executed by an
executive officer
- - --------
1 The Holder's signature must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the 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 Registrar in addition to
or in substitution for STAMP, all in accordance with the Securities
Exchange Act of 1934, as amended.
A-11
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Warrant purchased by the Company
pursuant to Section 1010 or Section 1017 of the Indenture, check the Box: [ ]
If you wish to have a portion of this Warrant purchased by the
Company pursuant to Section 1010 or Section 1017 of the Indenture, state the
amount (in original principal amount) below:
$_________________________.
Date:____________________
Your Signature: ________________
(Sign exactly as your name appears on the other side of this Warrant)
Signature Guarantee 1_____________
- - --------
1 The Holder's signature must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the 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 Registrar in addition to
or in substitution for STAMP, all in accordance with the Securities
Exchange Act of 1934, as amended.
A-12
<PAGE>
Exhibit B
Form of Certificate
to Be Delivered upon
Termination of Restricted Period
[DATE]
First Union National Bank
800 East Main St., Lower Mezzanine
Richmond, Virginia 23219
Attention: Corporate Trust Department
Re: Startec Global Communications Corporation (the "Company")
Warrants to Purchase Common Stock (the "Warrants")
----------------------------------------------------------
Ladies and Gentlemen:
This letter relates to Warrants represented by the offshore
global Warrant certificate (the "Regulation S Global Warrant"). Pursuant to
Section 2.1 of the Warrant Agreement dated as of May 21, 1998 relating to the
Warrants (the "Warrants" we hereby certify that (1) we are the beneficial owner
of such of Warrants represented by the Regulation S Global Warrant and (2) we
are a Non-U.S. Person to whom the Warrants could be transferred in accordance
with Rule 904 of Regulation S promulgated under the Securities Act of 1933, as
amended ("Regulation S"). Accordingly, you are hereby requested to issue a
Regulation S Permanent Global Warrant representing the undersigned's interest in
the number of Warrants represented by the Global Warrant, all in the manner
provided by the Indenture.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By:________________________
Authorized Signature
B-1
<PAGE>
Exhibit C
Form of Regulation S Certificate
[DATE]
First Union National Bank
800 East Main St., Lower Mezzanine
Richmond, Virginia 23219
Attention: Corporate Trust Department
Re: Startec Global Communications Corporation (the "Company")
Warrants to Purchase Common Stock (the "Warrants")
----------------------------------------------------------
Ladies and Gentlemen:
This Certificate relates to our proposed transfer of Warrants
issued under the Warrant Agreement dated as of May 21, 1998 relating to the
Warrants. Terms are used in this Certificate as defined in Regulation S under
the Securities Act of 1933, as amended (the "Securities Act"). We hereby certify
as follows:
1. The offer of the Warrants was not made to a person in the
United States (unless such person or the account held by it for which
it is acting is excluded from the definition of "U.S. person" pursuant
to Rule 902(o) of Regulation S under the circumstances described in
Rule 902(i)(3) of Regulation S) or specifically targeted at an
identifiable group of U.S. citizens abroad.
2. Either (a) at the time the buy order was originated, the
buyer was outside the United States or we and any person acting on our
behalf reasonably believed that the buyer was outside the United States
or (b) the transaction was executed in, on or through the facilities of
a designated offshore securities market, and neither we nor any person
acting on our behalf knows that the transaction was prearranged with a
buyer in the United States.
3. Neither we, any of our affiliates, nor any person acting on
our or their behalf, has made any directed selling efforts in the
United States.
C-1
<PAGE>
C-2
4. The proposed transfer of Warrants is not part of a plan or
scheme to evade the registration requirements of the Securities Act.
5. If we are a dealer or a person receiving a selling
concession or other fee or remuneration in respect of the Warrants, and
we are an officer or director of the Company or a distributor, we
certify that the proposed transfer is being made in accordance with the
provisions of Rule 904(c) of Regulation S.
You and the Company are entitled to rely upon this Certificate
and are irrevocably authorized to produce this Certificate or a copy hereof to
any interested party in any administrative or legal proceeding or official
inquiry with respect to the matters covered hereby.
Very truly yours,
[NAME OF SELLER]
By:________________________
Authorized Signature
[Insert Name of Transferee]
By:_____________________
C-2
<PAGE>
APPENDIX A
LIST OF FINANCIAL EXPERTS
----------------
BT Alex. Brown
Bear, Stearns & Co., Inc.
Credit Suisse First Boston Corporation
Donaldson, Lufkin & Jenrette Securities Corporation
ING Baring (U.S.) Securities Corporation
Goldman, Sachs & Co.
Lazard Freres & Co.
Lehman Brothers Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Morgan Stanley, Dean Witter & Co. Incorporated
Oppenheimer & Co., Inc.
Prudential Securities Inc.
SBC Warburg Dillon Read Inc.
Smith Barney Salomon Inc.
C-3
================================================================================
COLLATERAL PLEDGE AND
SECURITY AGREEMENT
Dated as of May 21, 1998
from
STARTEC GLOBAL COMMUNICATIONS CORPORATION,
Pledgor
to
FIRST UNION NATIONAL BANK,
Trustee
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- - ------- ----
<S> <C> <C>
SECTION 1. Definitions; Appointment; Deposit and Investment................... 2
1.1 Definitions........................................................ 2
1.2 Appointment of the Trustee......................................... 6
1.3 Pledge and Grant of Security Interest.............................. 6
SECTION 2. Delivery of Collateral; Establishment of Collateral Accounts....... 7
SECTION 3. Delivery of the Pledged Securities................................. 8
SECTION 4. Delivery of Collateral Other than U.S. Government Obligations...... 9
SECTION 5. Investing of Amounts in the Collateral Accounts.................... 10
SECTION 6. Disbursements...................................................... 10
SECTION 7. Representations and Warranties..................................... 13
SECTION 8. Further Assurances................................................. 14
SECTION 9. Covenants.......................................................... 15
SECTION 10. Power of Attorney.................................................. 15
SECTION 11. No Assumption of Duties; Reasonable Care........................... 16
SECTION 12. Indemnity.......................................................... 16
SECTION 13. Remedies upon Event of Default..................................... 17
SECTION 14. Expenses........................................................... 17
SECTION 15. Security Interest Absolute......................................... 18
SECTION 16. Startec Securities Intermediary's Representations,
Warranties and Covenants........................................... 18
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Section Page
- - ------- ----
<S> <C> <C>
SECTION 17. Miscellaneous Provisions........................................... 19
17.1 Notices............................................................ 20
17.2 Severability....................................................... 20
17.3 Headings........................................................... 20
17.4 Counterpart Originals.............................................. 21
17.5 Benefits of Pledge Agreement....................................... 21
17.6 Amendments, Waivers and Consents................................... 21
17.7 Interpretation of Agreement........................................ 21
17.8 Continuing Security Interest; Termination.......................... 21
17.9 Survival Provisions................................................ 22
17.10 Waivers............................................................ 22
17.11 Authority of the Trustee........................................... 22
17.12 Final Expression................................................... 23
17.13 Rights of Holders of the Notes..................................... 23
17.14 GOVERNING LAW; SUBMISSION TO JURISDICTION;
WAIVER OF DAMAGES.................................................. 23
17.15 Effectiveness...................................................... 25
SCHEDULE I PLEDGED SECURITIES................................................. 1
EXHIBIT A FIRST UNION NATIONAL BANK OFFICER'S CERTIFICATE.................... 1
EXHIBIT B [Attach Report from Arthur Andersen LLP]........................... 1
</TABLE>
ii
<PAGE>
This Collateral Pledge and Security Agreement (this "Pledge
Agreement") is made and entered into as of May 21, 1998 by Startec Global
Communications Corporation, a Maryland corporation (the "Pledgor"), having its
principal offices at 10411 Motor City Drive, Bethesda, Maryland 20817, in favor
of First Union National Bank (the "Trustee") having its principal corporate
trust office at 800 East Main St., Lower Mezzanine, Richmond, Virginia 23219,
Attention: Corporate Trust Department, as trustee for the holders (the
"Holders") of the Notes (as defined herein) issued by the Pledgor under the
Indenture referred to below.
W I T N E S S E T H:
WHEREAS, the Pledgor and the Initial Purchasers (as defined in
the Purchase Agreement) are parties to a Purchase Agreement, dated as of May 21,
1998 (the "Purchase Agreement"), pursuant to which the Pledgor will issue and
sell to the Initial Purchasers 160,000 units (the "Units") consisting of
$160,000,000 in aggregate principal amount of the Pledgor's 12% Senior Notes due
2008 (the "Notes") and warrants (the "Warrants") to purchase shares of the
Company's common stock (the "Common Stock");
WHEREAS, the Pledgor and the Trustee have entered into that
certain indenture, dated as of the date hereof (as amended, restated,
supplemented or otherwise modified from time to time, the "Indenture"), pursuant
to which the Pledgor is issuing and selling the Notes to the Initial Purchaser
on the date hereof;
WHEREAS, pursuant to the Indenture, the Pledgor is required,
on the Closing Date (as defined in the Purchase Agreement), to purchase, or
cause the purchase of, and pledge to the Trustee for the benefit of the Holders
of the Notes U.S. Government Obligations (as defined in the Indenture) in an
amount that will be sufficient upon receipt of scheduled interest and principal
payments of such securities, in the opinion of a nationally-recognized firm of
independent public accountants selected by the Pledgor (the "Accounting Firm")
to provide for payment in full of the first six scheduled interest payments due
on the Notes to secure the Pledgor's obligation to provide for payment in full
of the first six scheduled interest payments due on the Notes (such obligation,
together with the obligation to repay the principal, premium, Liquidated Damages
(as defined in the Registration Rights Agreement), if any, and interest on the
Notes in the event that the Notes become due and payable prior to such time as
the first six scheduled interest payments thereon shall have been paid in full,
being collectively referred to herein as (the "Obligations");
WHEREAS, the Pledgor has opened a securities account (the
"Pledge Account") with First Union National Bank, as Securities Intermediary
(the "Startec Securities Intermediary"), at its office at 40 Broad Street, New
York, New York
<PAGE>
10004, Account No. 8076000146 (designated "Pledge Account pledged by Startec
Global Communications Corporation to First Union National Bank as Trustee and
Sole Entitlement Holder"), in the name of the Pledgor but under the sole
dominion and control of the Trustee and subject to the terms of this Pledge
Agreement;
WHEREAS, the Pledgor has opened a non-interest bearing cash
collateral account (the "Cash Collateral Account") with the Startec Securities
Intermediary, at its office at 40 Broad Street, New York, New York, Account No.
8076000137 (designated "Cash Collateral Account pledged by Startec Global
Communications Corporation to First Union National Bank, as Trustee"), in the
name of the Pledgor but under the sole dominion and control of the Trustee and
subject to the terms of this Pledge Agreement;
WHEREAS, pursuant to the Purchase Agreement it is a condition
precedent to the purchase of the Units by the Initial Purchasers that the
Pledgor apply certain of the proceeds of the offering of the Units to purchase
the Pledged Securities (as defined below) and to deposit such Pledged Securities
into the Pledge Account to be held therein under the sole dominion and control
of the Trustee and subject to the terms of this Pledge Agreement;
WHEREAS, to secure the Obligations of the Pledgor, the Pledgor
has agreed to execute and deliver this Pledge Agreement and pledge to the
Trustee, for its benefit and the ratable benefit of the Holders of the Notes,
the Pledged Securities and the related Collateral in order to secure the payment
by the Pledgor of all the Obligations.
All capitalized terms used herein but not defined herein shall
have the meanings assigned to such terms in the Indenture.
NOW, THEREFORE, in consideration of the premises herein
contained, and in order to induce the Holders of the Notes to purchase the Notes
(as a part of the purchase of the Units), the Pledgor and the Trustee hereby
agree, for the benefit of the Trustee and for the ratable benefit of the Holders
of the Notes, as follows:
SECTION 1. Definitions; Appointment; Deposit and Investment.
1.1 Definitions.
(a) Unless otherwise defined in this Pledge Agreement, terms
defined or referenced in the Indenture are used in this Pledge Agreement as such
terms are defined or referenced therein.
2
<PAGE>
(b) Unless otherwise defined in the Indenture or in this
Pledge Agreement, terms defined in Article 8 or 9 of the Uniform Commercial Code
in effect in the State of New York from time to time and/or in Section 357.2 of
the Treasury Regulations (as defined in Section 1.1(c)) are used in this Pledge
Agreement as such terms are defined in such Article 8 or 9 and/or such Section
357.2. Such terms shall include, but not be limited to, "book-entry security,"
"certificated security", "entitlement holder", "CUBES", "entitlement order",
"financial asset", "instrument", "participant's securities account", "proceeds",
"securities account" "securities intermediary", "security", "security
entitlement" and "STRIPS".
(c) In this Pledge Agreement the following terms have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
"Adverse Claim" has the meaning specified in UCC ss.
8-102(a)(1).
"Cash Collateral Account" has the meaning specified in the
recitals hereto:
"Cash Equivalents" means any of the following, to the extent
owned by the Pledgor free and clear of all liens other than liens created
hereunder: (a) U.S. Government Obligations, (b) insured certificates of deposit
of, or time deposits with, any commercial bank that (i) is a member of the
Federal Reserve System, (ii) issues (or the parent of which issues) commercial
paper rated as described in clause (c), (iii) is organized under the laws of the
United States of America or any state thereof and (iv) has combined capital and
surplus of at least $500 million, (c) commercial paper in an aggregate amount of
no more than $5 million per issuer outstanding at any time, issued by any
corporation organized under the laws of any state of the United States of
America and rated at least "Prime-1"(or the then equivalent grade) by Moody's
Investors Service, Inc. or "A-1" (or the then equivalent grade) by Standard &
Poor's Ratings Group, a division of The McGraw-Hill Companies, Inc. or (d)
overnight repurchase agreements (including overnight repurchase agreements
between the Trustee and the Startec Securities Intermediary) secured by U.S.
Government Obligations.
"Certificated Security" has the meaning specified in Section
8-103(a)(4) of the UCC.
"CFR" means U.S. Code of Federal Regulations.
"Collateral" has the meaning specified in Section 1.3.
3
<PAGE>
"Collateral Accounts" means the Pledge Account and the Cash
Collateral Account.
"Deposit Account" has the meaning specified in Section
9-105(e) of the UCC.
"Entitlement Holder" has the meaning specified in UCC ss.
8-102(a)(7).
"Entitlement Order" has the meaning specified in UCC ss.
8-102(a)(8).
"Startec Securities Intermediary" has the meaning specified in
the recitals hereto.
"Financial Asset" has the meaning specified in UCC ss.
8-102(a)(9).
"FRBR" means Federal Reserve Bank of Richmond.
"FRBR Account" means the participant's securities account
maintained in the name of the Startec Securities Intermediary by the FRB.
"FRBR Member": any Person that is eligible to maintain (and
that maintains) with the FRBR one or more FRBR Member Securities Accounts in
such Person's name.
"FRBR Member Securities Account": in respect of any Person, an
account in the name of such Person at the FRBR, to which account U.S. Government
Obligations held for such Person are or may be credited.
"General Intangibles" has the meaning specified in Section
9-106 of the UCC.
"Instruments" has the meaning specified in Section 9-105 of
the UCC.
"Investment Property" has the meaning specified in UCC ss.
9-115(1)(f).
"Lien" any lien, mortgage, security interest, charge, Adverse
Claim or encumbrance of any kind, including the rights of a vendor, lessor, or
similar party under any conditional sale agreement or other title retention
agreement or lease substantially equivalent thereto.
"Money" has the meaning specified in Section 1-201(24) of the
UCC.
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"Pledgor" has the meaning specified has the meaning specified
in the recital of the parties hereto.
"Proceeds": all "proceeds" as such term is defined in Section
9-306(l) of the UCC and, in any event, shall include without limitation, all
interest, dividends or other earnings, income or distributions from or in
respect of, or from or in respect of investments or reinvestments of, the cash
and Cash Equivalents and Investment Property from time to time on deposit in the
Collateral Accounts, all collections and distributions with respect to the U.S.
Government Obligations and all other proceeds of Collateral.
"Securities Account" has the meaning specified in UCC ss.
8-501(a).
"Securities Control" shall mean "control" as defined in UCC
ss. 9-115(1)(e).
"Securities Intermediary": a Person that is a "securities
intermediary" (as defined in UCC ss. 8-102(a)(14)) and, in respect of any
book-entry security, a "securities intermediary" (as defined in 31 C.F.R. ss.
357.2 or, as applicable to such book-entry security, the corresponding Federal
book-entry regulations).
"Security" has the meaning specified in Section 8-102(a)(15)
of the UCC.
"Security Certificate" has the meaning specified in Section
8-102(a)(16) of the UCC.
"Security Entitlement" as defined in UCC ss. 8-102(a)(17) or,
in respect of any book-entry security, as defined in 31 C.F.R. ss. 357.2 (or, as
applicable to such book-entry security, the corresponding Federal book-entry
regulations).
"Settlement Date" means, as to any U.S. Government
Obligations, the date on which the purchase of such U.S. Government Obligations
shall have been settled.
"Termination Date" means the earlier of (a) the date of the
payment in full in cash of each of the first six scheduled interest payments due
on the Notes under the terms of the Indenture and (b) the date of the payment in
full of all obligations due and owing under this Pledge Agreement, the Indenture
and the Notes, in the event such obligations become due and payable prior to the
payment of the first six scheduled interest payments on the Notes.
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"Treasury Regulations" means (a) the regulations contained in
31 CFR Part 357 (including, without limitation, Section 357.2, Section 357.10
through Section 357.14 and Section 357.41 through Section 357.44 of 31 CFR) and
(b) to the extent substantially identical to the regulations referred to in
clause (a) above (as in effect from time to time) the regulations governing
other U.S. Government Obligations.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Pledge Agreement or any successor thereto appointed in
accordance with the provisions of the TIA.
"UCC" means, unless otherwise specified herein, the Uniform
Commercial Code as in effect in New York State.
"Uncertificated Security" has the meaning specified in Section
8-102(a)(18) of the UCC.
"U.S. Government Obligations" means Securities (including,
without limitation, United States Treasury Securities, including Treasury bills,
Treasury notes, Treasury bonds, STRIPS and CUBES) and the Security Entitlements
in, and Financial Assets based on, such Securities maintained in the form of
entries in the commercial book-entry system of the FRBR and held for the related
Entitlement Holder by a FRBR Member pursuant to the Treasury Regulations.
1.2 Appointment of the Trustee. The Pledgor hereby appoints
the Trustee as Trustee in accordance with the terms and conditions set forth
herein and the Trustee hereby accepts such appointment.
1.3 Pledge and Grant of Security Interest. As security for the
prompt and complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations, the Pledgor hereby
grants to the Trustee for its benefit and for the ratable benefit of the Holders
of the Notes, a lien on and security interest in all of the Pledgor's right,
title and interest in, to and under the following property (whether
characterized as Certificated Securities or Uncertificated Securities, Financial
Assets, Security Entitlements, Deposit Accounts, banks accounts, Securities
Accounts, Money, Proceeds, Investment Property, General Intangibles or
otherwise): (a) the U.S. Government Obligations identified by CUSIP No. in
Schedule I to this Pledge Agreement (the "Pledged Securities"), the scheduled
payments of principal and interest of which will be sufficient to provide for
payment in full of the first six scheduled interest payments due on the Notes,
(b) any and all applicable Security Entitlements to the Pledged Securities, (c)
the Pledge Account, all funds held therein and all certificates and instruments,
if any, from time to time representing or
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evidencing the Pledge Account, (d) all Collateral Investments (as hereinafter
defined) and all certificates and instruments, if any, representing or
evidencing the Collateral Investments, and any and all Security Entitlements to
the Collateral Investments, and any and all related Securities Accounts in which
any Security Entitlements to the Collateral Investments is carried, (e) the Cash
Collateral Account, (f) all notes, certificates of deposit, Deposit Accounts,
checks and other instruments, if any, from time to time hereafter delivered to
or otherwise possessed by the Trustee for or on behalf of the Pledgor in
substitution for or in addition to any or all of the then existing Collateral,
(g) all interest, dividends, cash, instruments and other property, if any, from
time to time received by the Trustee, receivable or otherwise distributed in
respect of or in exchange for any or all of the then existing Collateral and (h)
except as otherwise provided herein, all proceeds of any and all of the
foregoing Collateral (including, without limitation, proceeds that constitute
property of the types described in clauses (a) - (g) of this Section 1.3) (such
property being collectively referred to herein as the "Collateral").
SECTION 2. Delivery of Collateral; Establishment of Collateral
Accounts. (a) The Trustee has established with the Startec Securities
Intermediary, and at all times until the Termination Date, the Pledgor shall
maintain with the Startec Securities Intermediary, each of the Cash Collateral
Account and the Pledge Account. The following provisions shall apply to the
establishment and maintenance of each such Collateral Account:
(i) The Trustee shall cause each Collateral Account to be, and
each Collateral Account shall be, separate from all other accounts
maintained by the Trustee.
(ii) The Trustee shall, in accordance with all applicable
laws, have sole dominion and control (including, without limitation,
Securities Control) over each Collateral Account, and it shall be a
term and condition of each Collateral Account and the Pledgor
irrevocably instructs the Trustee, notwithstanding any other term or
condition to the contrary in any other agreement, that no Collateral
shall be released to or for the account of, or withdrawn by or for the
account of, the Pledgor or any other Person except as expressly
provided in this Pledge Agreement.
(iii) The Trustee shall, in accordance with and subject to all
applicable laws, be the sole Entitlement Holder of, and have the power
to originate Entitlement Orders with respect to, the Pledge Account and
all U.S. Government Obligations, Securities, Security Entitlements and
other Financial Assets held therein, and it shall be a term and
condition of the Pledge Account
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that the Trustee shall have the right to issue such Entitlement Orders
with respect to the Pledge Account and such Securities, Security
Entitlements and other Financial Assets without further consent of the
Pledgor, and that no Collateral shall be released to or for the account
of, or withdrawn by or for the account of, the Pledgor or any other
Person except as expressly provided in this Pledge Agreement.
(b) On the Closing Date, the Pledgor shall transfer, or cause
to be transferred, to the Trustee an amount equal to $52,900,000 by depositing
all such proceeds into the Cash Collateral Account.
(c) As soon as possible after receipt of the amount referred
to in Section 2(b), (i) the Trustee shall apply such amount to purchase the U.S.
Government Obligations (in the name of the Trustee) listed on Schedule I hereto,
and cause the Startec Securities Intermediary to credit such U.S. Government
Obligations to the Pledge Account as Collateral hereunder; and (ii) the Trustee
shall ensure that, on the Settlement Date, the FRBR credits in the FRBR Account
those U.S. Government Obligations being settled on such date.
(d) The Trustee will, from time to time, reinvest the proceeds
of Collateral that may mature or be sold in such Collateral Investments (in the
name of the Trustee) as it may be directed in writing by the Pledgor, and cause
such Collateral Investments to be credited to the Pledge Account as Collateral
hereunder. Such proceeds that are not so reinvested in Collateral Investments
shall be deposited and held in the Cash Collateral Account.
SECTION 3. Delivery of the Pledged Securities. (a) The Pledged
Securities shall be pledged and delivered to the Pledge Account and the Trustee
and the Trustee shall become the Entitlement Holder of a Security Entitlement to
the Pledged Securities through action by the Startec Securities Intermediary, as
confirmed (in writing or electronically or otherwise in accordance with standard
industry practice) to the Trustee by the Startec Securities Intermediary (i)
indicating by book-entry that the Pledged Securities and all Security
Entitlements thereto have been credited to the Pledge Account, or (ii) acquiring
the Pledged Securities and all Security Entitlements thereto for the Trustee and
accepting the same for credit to the Pledge Account.
(b) Prior to or concurrently with the execution and delivery
hereof and prior to the transfer to the Trustee of the Pledged Securities (or
acquisition by the Trustee of any Security Entitlement thereto), as provided in
subsection (a) of this Section 3, the Trustee and the Startec Securities
Intermediary shall establish the Pledge Account on the books of the Startec
Securities Intermediary as a Securities Account
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segregated from all other custodial or collateral accounts such account to be
maintained either (i) directly at its offices located at 40 Broad Street, New
York, New York 10004 or (ii) through a "Securities Account" maintained by the
Startec Securities Intermediary at the FRBR, as Securities Intermediary. Upon
transfer of the Pledged Securities to the Trustee (or the Trustee's acquisition
of a Security Entitlements thereto), as confirmed to the Startec Securities
Intermediary by FRBR or another Securities Intermediary, the Startec Securities
Intermediary shall make appropriate book entries indicating that the Pledged
Securities and/or such Security Entitlement have been credited to and are held
in the Pledge Account. Subject to the other terms and conditions of this Pledge
Agreement, all funds or other property held by the Trustee pursuant to this
Pledge Agreement shall be held in the Pledge Account or the Cash Collateral
Account subject (except as expressly provided in Section 6 hereof) to the
exclusive dominion and control (including, without limitation, Securities
Control) of the Trustee and exclusively for the benefit of the Trustee and for
the ratable benefit of the Holders of the Notes and segregated from all other
funds or other property otherwise held by the Trustee.
(c) All Collateral shall be retained in the Pledge Account or
the Cash Collateral Account pending disbursement pursuant to the terms hereof.
(d) Concurrently with the execution and delivery of this
Pledge Agreement, the Trustee is delivering to the Pledgor and the Initial
Purchasers a duly executed certificate, in the form of Exhibit A hereto, of an
officer of the Trustee, confirming the Trustee's establishment and maintenance
of the Pledge Account with the Startec Securities Intermediary and its receipt
and holding of the Pledge Securities or a Security Entitlement thereto and the
crediting of the Pledged Securities or such Security Entitlement to the Pledge
Account, all in accordance with this Pledge Agreement.
(e) Concurrently with the execution and delivery of this
Pledge Agreement, the Pledgor is delivering to the Trustee an opinion of the
Accounting Firm substantially in the form of Exhibit B hereto.
(f) Concurrently with the execution and delivery of this
Pledge Agreement, the Pledgor is delivering to the Trustee financing statements
in form acceptable for filing under the UCC of the State of New York, the State
of Maryland, and the Commonwealth of Virginia, covering the Collateral described
in this Pledge Agreement.
SECTION 4. Delivery of Collateral Other than U.S. Government
Obligations. (a) Collateral consisting of cash will be deemed to be delivered to
the Trustee (such that the Trustee will have an enforceable lien and security
interest
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thereon and therein), when it has been (and for so long as it shall remain)
deposited in or credited to the Cash Collateral Account.
(b) Collateral consisting of Cash Equivalents (other than U.S.
Government Obligations) will be deemed to be delivered to the Trustee (such that
the Trustee will have an enforceable lien and security interest thereon and
therein), when they have been (and for so long as they shall remain) deposited
in or credited to either Collateral Account.
(c) Collateral consisting of Securities (other than U.S.
Government Obligations) will be deemed delivered to the Trustee when the Startec
Securities Intermediary (A) shall indicate by book entry that such Securities
have been credited to the Pledge Account or (B) shall receive such Security (or
a Financial Asset based on such Security) for the Trustee, from or at the
direction of the Pledgor, and shall accept such Security (or such Financial
Asset) for credit to such Collateral Account;
(d) Collateral consisting of Securities and represented or
evidenced by certificates or instruments will be deemed delivered to the Trustee
when all such certificates or instruments representing or evidencing the
Collateral, including, without limitation, amounts invested as provided in
Section 5, shall be delivered to the Startec Securities Intermediary and held by
or on behalf of the Trustee pursuant hereto and shall be in registered form and
specially indorsed to the Trustee by an effective indorsement, all in form and
substance sufficient to convey a valid security interest in such Collateral to
the Trustee or shall be credited to the Pledge Account.
SECTION 5. Investing of Amounts in the Collateral Accounts. If
at any time, any amounts shall exist in the Collateral Accounts uninvested, and
if directed in writing by the Pledgor, the Trustee will, subject to the
provisions of Section 6 and Section 13, (a) invest such amounts on deposit in
the Collateral Accounts in such Cash Equivalents in the name of the Trustee as
the Pledgor may select and (b) invest interest paid on the Cash Equivalents
referred to in clause (a) above, and reinvest other proceeds of any such Cash
Equivalents that may mature or be sold, in each case in such Cash Equivalents in
the name of the Trustee, as the Pledgor may select and the Trustee may approve
(the Cash Equivalents referred to in clauses (a) and (b) above, together with
the Pledged Securities, being collectively referred to herein as Collateral
Investments"); provided, however, that the amount in cash and Pledged Securities
on deposit in the Collateral Accounts, collectively, at any time during the term
of this Pledge Agreement, must be sufficient to provide for the payment in full
of the remaining interest payments at such time on the Notes up to and including
the sixth scheduled interest payment. Except as otherwise provided in Sections
11 and 12, the
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Trustee shall not be liable for any loss in the investment or reinvestment of
amounts held in the Collateral Accounts.
SECTION 6. Disbursements. The Trustee shall hold the
Collateral in the Collateral Accounts and release the same, or a portion
thereof, only as follows:
(a) At least one Business Day prior to the due date of any of
the first six scheduled interest payments on the Notes, the Pledgor may,
pursuant to written instructions executed by the Pledgor (an "Issuer Order"),
direct the Trustee to release from the Collateral Accounts and pay to the
Holders of the Notes proceeds sufficient to provide for payment in full of such
interest then due on the Notes; provided, however, that in the event Collateral
is required to be liquidated, the Pledgor will give the Trustee at least three
Business Days' notice. Upon receipt of an Issuer Order, the Trustee will take
any action necessary to provide for the payment of the interest on the Notes to
the Holders of the Notes in accordance with the payment provisions of the
Indenture from (and to the extent of) proceeds of the Collateral in the
Collateral Accounts. Nothing in this Section 6 shall affect the Trustee's rights
to apply the Collateral to the payments of amounts due on the Notes upon
acceleration thereof.
(b) If the Pledgor makes any interest payment or portion of an
interest payment for which the Collateral is security from a source of funds
other than the Collateral Accounts ("Pledgor Funds"), the Pledgor may, after
payment in full of such interest payment, direct the Trustee by Issuer Order to
release to the Pledgor or to another party at the direction of the Pledgor (the
"Pledgor's Designee") proceeds from the Collateral Accounts in an amount less
than or equal to the amount of Pledgor Funds applied to such interest payment.
Upon receipt of such Issuer Order by the Trustee, the Trustee shall pay over to
the Pledgor or the Pledgor's Designee, as the case may be, the requested amount
from proceeds in the Collateral Accounts. Concurrently with any release of funds
to the Pledgor pursuant to this Section 6(b), the Pledgor shall deliver to the
Trustee a certificate signed by an officer of the Pledgor stating that the
Pledgor has made the interest payment from a source of funds other than the
Pledge Account, and that such release has been duly authorized by the Pledgor
and will not violate any provision of applicable law or Certificate of
Incorporation or the By-laws of the Pledgor or any material agreement or
instrument binding upon the Pledgor or any of its subsidiaries or any judgment,
order or decree of any governmental body, agency or court having jurisdiction
over the Pledgor or any of its subsidiaries or result in the creation or
imposition of any Lien on any assets of the Pledgor, except for the security
interest granted under the Pledge Agreement.
(c) At least one Business Day prior to the due date of any of
the first six scheduled interest payments on the Notes, the Pledgor covenants to
give the Trustee
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(by Issuer Order) notice as to whether payment of interest will be made pursuant
to Section 6(a) or 6(b) and as to the respective amounts of interest that will
be paid pursuant to Section 6(a) or 6(b); provided, however, that, in the event
Collateral is required to be liquidated, the Pledgor will give the Trustee at
least three Business Days' notice. If no such notice is given, the Trustee will,
subject to Section 6(d), act pursuant to Section 6(a) as if it had received an
Issuer Order pursuant thereto for the payment in full of the interest then due.
(d) The Trustee shall not be required to liquidate any
Collateral Investments in order to make any scheduled payment of interest or any
release hereunder unless instructed to do so by Issuer Order or pursuant to
Section 13 hereof.
(e) Upon the Termination Date, the security interest in the
Collateral evidenced by this Pledge Agreement will automatically terminate and
be of no further force and effect, and the Collateral, upon receipt by the
Trustee of an Issuer Order, shall promptly be paid over and transferred to the
Pledgor.
(f) In the event that the Collateral held in the Pledge
Account exceeds 100% of the amount sufficient, in the written opinion of the
Accounting Firm, to provide for payment in full of the first six scheduled
interest payments due on the Notes (or, in the event an interest payment or
payments have been made, an amount sufficient to provide for payment in full of
all interest payments remaining, up to and including the sixth scheduled
interest payment), the Trustee shall release to the Pledgor, at the Pledgor's
written request, accompanied by a written opinion of the Accounting Firm, any
such excess Collateral.
(g) Upon the release of any Collateral from the Pledge
Account, in accordance with the terms of this Pledge Agreement, the security
interest evidenced by this Pledge Agreement in such released Collateral will
automatically terminate and be of no further force and effect.
(h) Nothing contained in Section 1, this Section 6, Section
13, or any other provision of this Pledge Agreement shall (i) afford the Pledgor
any right to issue Entitlement Orders with respect to any Security Entitlement
to the Pledge Securities or Collateral Investments or any Securities Account in
which any such Security Entitlement may be carried, or otherwise afford the
Pledgor control of any such Security Entitlement or (ii) otherwise give rise to
any rights of the Pledgor with respect to the Collateral Investments, any
Security Entitlement thereto or any Securities Account in which any such
Security Entitlement may be carried, other than the Pledgor's rights under this
Pledge Agreement as the beneficial owner of Collateral pledged to and subject to
the exclusive dominion and control (including, without
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limitation, Securities Control) (except as expressly provided in this Section 6)
of the Trustee in its capacity as such (and not as a Securities Intermediary).
The Pledgor acknowledges, confirms and agrees that the Trustee holds a Security
Entitlement to the Collateral Investments solely as trustee for the Holders of
the Notes and not as a Securities Intermediary for the Pledgor.
SECTION 7. Representations and Warranties. The Pledgor hereby
represents and warrants, as of the date hereof, that:
(a) The execution and delivery by the Pledgor of, and the
performance by the Pledgor of its obligations under, this Pledge
Agreement will not violate any provision of applicable law or the
Articles of Incorporation or By-laws of the Pledgor or any material
agreement or instrument binding upon the Pledgor or any of its
subsidiaries or any judgment, order or decree of any governmental body,
agency or court having jurisdiction over the Pledgor or any of its
subsidiaries, or result in the creation or imposition of any Lien on
any assets of the Pledgor, except for the security interests granted
under this Pledge Agreement. No consent, approval, authorization or
order of, or qualification with, any governmental body or agency is
required (i) for the performance by the Pledgor of its obligations
under this Pledge Agreement, (ii) for the pledge by the Pledgor of the
Collateral pursuant to this Pledge Agreement or (iii) except for any
such consents, approvals, authorizations or orders required to be
obtained by the Trustee (or the Holders) for reasons other than the
consummation of this transaction, for the exercise by the Trustee of
the rights provided for in this Pledge Agreement or the remedies in
respect of the Collateral pursuant to this Pledge Agreement.
(b) The Pledgor is the beneficial owner of the Collateral,
free and clear of any Lien or claims of any person or entity (except
for the security interests granted under this Pledge Agreement). No
financing statement covering the Pledgor's interest in the Collateral
is on file in any public office other than the financing statements, if
any, filed pursuant to this Pledge Agreement.
(c) This Pledge Agreement has been duly authorized, validly
executed and delivered by the Pledgor and (assuming the due
authorization and valid execution and delivery of this Pledge Agreement
by the Trustee and enforceability of the Pledge Agreement against the
Trustee in accordance with its terms and the provisions of the TIA,)
constitutes a valid and binding agreement of the Pledgor, enforceable
against the Pledgor in accordance with its terms, except as (i) may be
limited by bankruptcy, insolvency, fraudulent
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conveyance, preference, reorganization, moratorium or similar laws now
or hereafter in effect relating to or affecting the rights or remedies
of creditors generally, (ii) the availability of equitable remedies may
be limited by equitable principles of general applicability and the
discretion of the court before which any proceeding therefor may be
brought, (iii) the exculpation provisions and rights to indemnification
hereunder may be limited by U.S. federal and state securities laws and
public policy considerations and (iv) the waiver of rights and defenses
contained in Section 13(b), Section 17.11 and Section 17.15 hereof may
be limited by applicable law.
(d) Upon the delivery to the Trustee of the Collateral in
accordance with the procedures described in Section 3 and Section 4
hereof, the pledge of and grant of a security interest in the
Collateral securing the payment of the Obligations for the benefit of
the Trustee and the Holders of the Notes will constitute a valid, first
priority, perfected security interest in such Collateral (except, with
respect to Proceeds, only to the extent permitted by Section 9-306 of
the UCC), enforceable as such against all creditors of the Pledgor and
any persons purporting to purchase any of the Collateral from the
Pledgor, except in each case as enforcement may be affected by general
equitable principles (whether considered in a proceeding in equity or
at law) and other than as permitted by the Indenture.
(e) There are no legal or governmental proceedings pending or,
to the best of the Pledgor's knowledge, threatened, to which the
Pledgor or any of its subsidiaries is a party or to which any of the
properties of the Pledgor or any of its subsidiaries is subject that
would materially adversely affect the power or ability of the Pledgor
to perform its obligations under this Pledge Agreement or to consummate
the transactions contemplated hereby.
(f) The pledge of the Collateral pursuant to this Pledge
Agreement is not prohibited by law or governmental regulation
(including, without limitation, Regulations G, T, U and X of the Board
of Governors of the Federal Reserve System) applicable to the Pledgor.
(g) No Event of Default (as defined herein) exists.
SECTION 8. Further Assurances. The Pledgor will, promptly upon
the request by the Trustee (which request the Trustee may submit at the
direction of the Holders of a majority in aggregate principal amount of the
Notes then outstanding), execute and deliver or cause to be executed and
delivered, or use its reasonable best efforts to procure, all assignments,
instruments and other documents, all in form and
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substance reasonably satisfactory to the Trustee, deliver any instruments to the
Trustee and take any other actions that are necessary or desirable to perfect,
continue the perfection of, or protect the first priority of the Trustee's
security interest in and to the Collateral, to protect the Collateral against
the rights, claims or interests of third persons (other than any such rights,
claims or interests created by or arising through the Trustee) or to effect the
purposes of this Pledge Agreement. The Pledgor also hereby authorizes the
Trustee to file any financing or continuation statements in the United States
with respect to the Collateral without the signature of the Pledgor (to the
extent permitted by applicable law). The Pledgor will promptly pay all
reasonable costs incurred in connection with any of the foregoing within 60 days
of receipt of an invoice therefor. The Pledgor also agrees, whether or not
requested by the Trustee, to use its reasonable best efforts to perfect or
continue the perfection of, or to protect the first priority of, the Trustee's
security interest in and to the Collateral, and to protect the Collateral
against the rights, claims or interests of third persons (other than any such
rights, claims or interests created by or arising through the Trustee).
SECTION 9. Covenants. The Pledgor covenants and agrees with
the Trustee and the Holders of the Notes that from and after the date of this
Pledge Agreement until the Termination Date:
(a) that it will not (i) (and will not purport to) sell or
otherwise dispose of, or grant any option or warrant with respect to,
any of the Collateral nor (ii) create or permit to exist any Lien upon
or with respect to any of the Collateral (except for the security
interests granted under this Pledge Agreement and any Lien created by
or arising through the Trustee) and at all times will be the sole
beneficial owner of the Collateral; and
(b) that it will not (i) enter into any agreement or
understanding that restricts or inhibits or purports to restrict or
inhibit the Trustee's rights or remedies hereunder, including, without
limitation, the Trustee's right to sell or otherwise dispose of the
Collateral or (ii) fail to pay or discharge any tax, assessment or levy
of any nature with respect to the Collateral not later than five
Business Days prior to the date of any proposed sale under any
judgment, writ or warrant of attachment with respect to the Collateral.
SECTION 10. Power of Attorney. In addition to all of the
powers granted to the Trustee pursuant to the Indenture, subject to the terms of
this Pledge Agreement, the Pledgor hereby appoints and constitutes the Trustee
as the Pledgor's attorney-in-fact (with full power of substitution) to exercise
to the fullest extent permitted by law all of the following powers upon and at
any time after the occurrence and during the continuance of an Event of Default:
(a) collection of proceeds of any
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Collateral; (b) conveyance of any item of Collateral to any purchaser thereof;
(c) giving of any notices or recording of any Liens under Section 3 hereof; and
(d) paying or discharging taxes or Liens levied or placed upon the Collateral,
the legality or validity thereof and the amounts necessary to discharge the same
to be determined by the Trustee in its reasonable discretion, and such payments
made by the Trustee to become part of the Obligations of the Pledgor to the
Trustee, due and payable immediately upon demand. The Trustee's authority under
this Section 10 shall include, without limitation, the authority to endorse and
negotiate any checks or instruments representing proceeds of Collateral in the
name of the Pledgor, execute and give receipt for any certificate of ownership
or any document constituting Collateral, transfer title to any item of
Collateral, sign the Pledgor's name on all financing statements (to the extent
permitted by applicable law) or any other documents deemed necessary or
appropriate by the Trustee in its reasonable discretion to preserve, protect or
perfect the security interest in the Collateral and to file the same, prepare,
file and sign the Pledgor's name on any notice of Lien, and to take any other
actions arising from or incident to the powers granted to the Trustee in this
Pledge Agreement. This power of attorney is coupled with an interest and is
irrevocable by the Pledgor but shall remain in effect only during the
continuance of an Event of Default.
SECTION 11. No Assumption of Duties; Reasonable Care. The
rights and powers granted to the Trustee hereunder are being granted in order to
preserve and protect the security interest of the Trustee and the Holders of the
Notes in and to the Collateral granted hereby and shall not be interpreted to,
and shall not impose any duties on, the Trustee in connection therewith other
than those expressly provided herein or imposed under applicable law. Except as
provided by applicable law or by the Indenture, the Trustee shall be deemed to
have exercised reasonable care in the custody and preservation of the Collateral
in its possession if the Collateral is accorded treatment substantially equal to
that which the Trustee accords similar property held by the Trustee for similar
accounts, it being understood that the Trustee in its capacity as such shall not
have any responsibility for (a) ascertaining or taking action with respect to
calls, conversions, exchanges, maturities or other matters relative to any
Collateral, whether or not the Trustee has or is deemed to have knowledge of
such matters, (b) taking any necessary steps to preserve rights against any
parties with respect to any Collateral or (c) investing or reinvesting any of
the Collateral, provided, however, that nothing contained in this Pledge
Agreement shall relieve the Trustee of any responsibilities as a Securities
Intermediary under applicable law.
SECTION 12. Indemnity. The Pledgor shall indemnify, hold
harmless and defend the Trustee and its directors, officers, attorneys-in-fact
and agents from and against any and all claims, actions, obligations,
liabilities and expenses, including reasonable legal fees, arising from the
Trustee's performance as Trustee under this
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<PAGE>
Pledge Agreement, except to the extent that such claim, action, obligation,
liability or expense arises from the bad faith, gross negligence or willful
misconduct of such indemnified person. The provisions of this Section 12 shall
survive termination of this Pledge Agreement and the resignation and removal of
the Trustee for a period of three (3) years after the Termination Date.
SECTION 13. Remedies upon Event of Default. If any Event of
Default under the Indenture or breach of the terms hereof (any such Event of
Default or breach being referred to in this Pledge Agreement as an "Event of
Default") shall have occurred and be continuing:
(a) The Trustee and the Holders of the Notes shall have, in
addition to all other rights given by law or by this Pledge Agreement
or the Indenture, all of the rights and remedies with respect to the
Collateral of a secured party under the UCC then in effect in the State
of New York and the State of Maryland. Any sale of the Collateral
conducted in conformity with reasonable commercial practices of banks,
insurance companies, commercial finance companies, or other financial
institutions disposing of property similar to the Collateral shall be
deemed to be commercially reasonable. Any requirements of reasonable
notice shall be met if such notice is mailed to the Pledgor as provided
in Section 17.1 hereof at least ten (10) days before the time of the
sale or disposition. The Trustee or any Holder of Notes may, in its own
name or in the name of a designee or nominee, buy any of the Collateral
at any public sale and, if permitted by applicable law, at any private
sale. All expenses (including court costs and reasonable attorneys'
fees, expenses and disbursements) of, or incident to, the enforcement
of any of the provisions hereof shall be recoverable from the proceeds
of the sale or other disposition of the Collateral.
(b) The Pledgor further agrees to use its reasonable best
efforts to do or cause to be done all such other acts as may be
necessary to make such sale or sales of all or any portion of the
Collateral pursuant to this Section 13 valid and binding and in
compliance with any and all other applicable requirements of law. The
Pledgor further agrees that a breach of any of the covenants contained
in this Section 13 will cause irreparable injury to the Trustee and the
Holders of the Notes, that the Trustee and the Holders of the Notes
have no adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this Section 13
shall be specifically enforceable against the Pledgor, and the Pledgor
hereby waives and agrees not to assert any defenses against an action
for specific performance of such covenants except for a defense that no
Event of Default has occurred.
17
<PAGE>
SECTION 14. Expenses. The Pledgor will, upon demand, pay to
the Trustee the amount of any and all reasonable expenses, including, without
limitation, the reasonable fees, expenses and disbursements of its counsel,
experts and agents retained by the Trustee, that the Trustee may incur in
connection with (a) the review, negotiation and administration of this Pledge
Agreement, (b) the custody or preservation of, or the sale of, collection from,
or other realization upon, any of the Collateral, (c) the exercise or
enforcement of any of the rights of the Trustee and the Holders of the Notes
hereunder or (d) the failure by the Pledgor to perform or observe any of the
provisions hereof.
SECTION 15. Security Interest Absolute. All rights of the
Trustee and the Holders of the Notes and security interests hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Indenture or
any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to any departure from the
Indenture;
(c) any exchange, surrender, release or non-perfection of any
Liens on any other collateral for all or any of the Obligations; or
(d) to the extent permitted by applicable law, any other
circumstance which might otherwise constitute a defense available to,
or a discharge of, the Pledgor in respect of the Obligations or of this
Pledge Agreement.
SECTION 16. Startec Securities Intermediary's Representations,
Warranties and Covenants. For the purposes of this Section 16 only, the Startec
Securities Intermediary represents and warrants that it is as of the date
hereof, and it agrees that for so long as it maintains the Collateral Accounts
and acts as the Securities Intermediary pursuant to this Pledge Agreement it
shall be a Securities Intermediary and a FRBR Member. In furtherance of the
foregoing the Startec Securities Intermediary hereby:
(a) represents and warrants that it is a corporation that in
the ordinary course of its business maintains securities accounts for
others and is acting in that capacity hereunder and with respect to the
Pledge Account;
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<PAGE>
(b) represents and warrants that it maintains a FRBR Member
Securities Account with the FRBR;
(c) agrees that the Pledge Account shall be an account to
which Financial Assets may be credited, and the Startec Securities
Intermediary undertakes to treat the Trustee as entitled to exercise
rights that comprise (and entitled to the benefits of) such Financial
Assets, and entitled to exercise the rights of an Entitlement Holder in
the manner contemplated by the UCC;
(d) hereby represents that it has not granted, and covenants
that so long as it acts as a Securities Intermediary hereunder it shall
not grant, control (including without limitation, Securities Control)
over or with respect to any Collateral credited to any Collateral
Account from time to time to any other Person other than the Trustee.
(e) covenants that in its capacity as Startec Securities
Intermediary hereunder and with respect to the Collateral Accounts, it
shall not take any action inconsistent with, and represents and
covenants that it is not and so long as this Pledge Agreement remains
in effect will not become party to any agreement the terms of which are
inconsistent with the provisions of this Pledge Agreement;
(f) agrees that any item of property credited to the Pledge
Account shall be treated as a Financial Asset;
(g) agrees that any item of Collateral credited to any
Collateral Account shall not be subject to any security interest, Lien
or right of setoff in favor of the Startec Securities Intermediary,
except as may be expressly permitted under the Indenture (and the
Startec Securities Intermediary shall take such actions as shall be
necessary and appropriate to cause such Collateral to remain free of
any Lien or security interest of any underlying Securities Intermediary
through which the Startec Securities Intermediary holds such Collateral
or any Security Entitlement thereto);
(h) agrees, so long as it serves as Startec Securities
Intermediary pursuant to this Pledge Agreement, to maintain the
Collateral Accounts and maintain appropriate books and records in
respect thereof in accordance with its usual procedures and subject to
the terms of this Pledge Agreement; and
(i) agrees, with the other parties to this Pledge Agreement,
that the Startec Securities Intermediary's jurisdiction, for purposes
of Section 8-110(e)
19
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of the UCC as it pertains to this Pledge Agreement, the Collateral
Accounts and the Security Entitlements relating thereto, shall be the
State of New York.
SECTION 17. Miscellaneous Provisions.
17.1 Notices. Any notice, approval, consent or other
communication shall be sufficiently given if in writing and delivered in person
or mailed by first class mail, commercial courier service or telecopier
communication, addressed as follows:
if to the Pledgor:
Startec Global Communications Corporation
10411 Motor City Drive
Bethesda, Maryland 20817
Attention: President
Telecopier No.: (301) 365-1744
with a copy to:
Schnader Harrison Segal & Lewis LLP
1225 Eye Street, NW
Suite 600
Washington, D.C. 20005
Attention: Robert B. Murphy, Esq.
Telecopier No.: (202) 775-8741
if to the Trustee:
First Union National Bank
800 East Main Street, Lower Mezzanine
Richmond, VA 23210
Attention: Corporate Trust Department
Telecopier No.: (804) 343-6699
17.2 Severability. The provisions of this Pledge Agreement are
severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Pledge Agreement in any jurisdiction.
20
<PAGE>
17.3 Headings. The headings in this Pledge Agreement 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.
17.4 Counterpart Originals. This Pledge Agreement may be
signed in two or more counterparts, each of which shall be deemed an original,
but all of which shall together constitute one and the same agreement.
17.5 Benefits of Pledge Agreement. Nothing in this Pledge
Agreement, express or implied, shall give to any person, other than the parties
hereto and their successors hereunder, and the Holders of the Notes, any benefit
or any legal or equitable right, remedy or claim under this Pledge Agreement.
17.6 Amendments, Waivers and Consents. Any amendment or waiver
of any provision of this Pledge Agreement and any consent to any departure by
the Pledgor from any provision of this Pledge Agreement shall be effective only
if made or duly given in compliance with all of the terms and provisions of the
Indenture, and neither the Trustee nor any Holder of Notes shall be deemed, by
any act, delay, indulgence, omission or otherwise, to have waived any right or
remedy hereunder or to have acquiesced in any Default or Event of Default or in
any breach of any of the terms and conditions hereof. Failure of the Trustee or
any Holder of Notes to exercise, or delay in exercising, any right, power or
privilege hereunder shall not preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. A waiver by the Trustee or
any Holder of Notes of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy that the Trustee or such Holder
of Notes would otherwise have on any future occasion. The rights and remedies
herein provided are cumulative, may be exercised singly or concurrently and are
not exclusive of any rights or remedies provided by law.
17.7 Interpretation of Agreement. All terms not defined herein
or in the Indenture shall have the meaning set forth in the UCC, except where
the context otherwise requires. To the extent a term or provision of this Pledge
Agreement conflicts with the Indenture, the Indenture shall control with respect
to the subject matter of such term or provision. Acceptance of or acquiescence
in a course of performance rendered under this Pledge Agreement shall not be
relevant to determine the meaning of this Pledge Agreement even though the
accepting or acquiescing party had knowledge of the nature of the performance
and opportunity for objection.
17.8 Continuing Security Interest; Termination. (a) This
Pledge Agreement shall create a continuing security interest in and to the
Collateral and shall, unless otherwise provided in the Indenture or in this
Pledge Agreement, remain in full
21
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force and effect until the payment in full in cash of the Obligations. This
Pledge Agreement shall be binding upon the Pledgor, its transferees, successors
and assigns, and shall inure, together with the rights and remedies of the
Trustee hereunder, to the benefit of the Trustee, the Holders of the Notes and
their respective successors, transferees and assigns.
(b) In addition to the provisions of Section 6(e) hereof and
subject to the provisions of Section 17.10 hereof, this Pledge Agreement shall
terminate upon the payment in full in cash of the Obligations. At such time, and
subject to Section 12, the Trustee shall, pursuant to an Issuer Order, reassign
and redeliver to the Pledgor all of the Collateral hereunder that has not been
sold, disposed of, retained or applied by the Trustee in accordance with the
terms of this Pledge Agreement and the Indenture. Such reassignment and
redelivery shall be without warranty by or recourse to the Trustee in its
capacity as such, except as to the absence of any Liens on the Collateral
created by or arising through the Trustee, and shall be at the reasonable
expense of the Pledgor.
17.9 Survival Provisions. All representations, warranties and
covenants of the Pledgor contained herein shall survive the execution and
delivery of this Pledge Agreement, and shall terminate only upon the termination
of this Pledge Agreement. The obligations of the Pledgor under Sections 14
hereof shall survive the termination of this Pledge Agreement.
17.10 Waivers. The Pledgor waives presentment and demand for
payment of any of the Obligations, protest and notice of dishonor or default
with respect to any of the Obligations, and all other notices to which the
Pledgor might otherwise be entitled, except as otherwise expressly provided
herein or in the Indenture.
17.11 Authority of the Trustee. (a) The Trustee shall have and
be entitled to exercise all powers hereunder that are specifically granted to
the Trustee by the terms hereof, together with such powers as are reasonably
incident thereto. The Trustee may perform any of its duties hereunder or in
connection with the Collateral by or through agents or employees and shall be
entitled to retain counsel and to act in reliance upon the advice of counsel
concerning all such matters. Except as otherwise expressly provided in this
Pledge Agreement or the Indenture, neither the Trustee nor any director,
officer, employee, attorney or agent of the Trustee shall be liable to the
Pledgor for any action taken or omitted to be taken by the Trustee, in its
capacity as Trustee, hereunder, except for its own bad faith, gross negligence
or willful misconduct, and the Trustee shall not be responsible for the
validity, effectiveness or sufficiency hereof or of any document or security
furnished pursuant hereto. The
22
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Trustee and its directors, officers, employees, attorneys and agents shall be
entitled to rely on any communication, instrument or document reasonably
believed by it or them to be genuine and correct and to have been signed or sent
by the proper person or persons. The Trustee shall have no duty to cause any
financing statement or continuation statement to be filed in respect of the
Collateral.
(b) The Pledgor acknowledges that the rights and
responsibilities of the Trustee under this Pledge Agreement with respect to any
action taken by the Trustee or the exercise or non-exercise by the Trustee of
any option, right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Pledge Agreement shall, as between
the Trustee and the Holders of the Notes, be governed by the Indenture and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Trustee and the Pledgor, the Trustee shall be
conclusively presumed to be acting as agent for the Holders of the Notes with
full and valid authority so to act or refrain from acting, and the Pledgor shall
not be obligated or entitled to make any inquiry respecting such authority.
17.12 Final Expression. This Pledge Agreement, together with
the Indenture and any other agreement executed in connection herewith, is
intended by the parties as a final expression of this Pledge Agreement and is
intended as a complete and exclusive statement of the terms and conditions
thereof.
17.13 Rights of Holders of the Notes. No Holder of Notes shall
have any independent rights hereunder other than those rights granted to
individual Holders of the Notes pursuant to Section 607 of the Indenture;
provided that nothing in this subsection shall limit any rights granted to the
Trustee under the Notes or the Indenture.
17.14 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF
DAMAGES. (a) BOTH THIS PLEDGE AGREEMENT AND THE PLEDGE ACCOUNT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND ANY
DISPUTE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THE PLEDGOR, THE TRUSTEE AND THE HOLDERS OF THE
NOTES IN CONNECTION WITH THIS PLEDGE AGREEMENT, AND WHETHER ARISING IN CONTRACT,
TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK. NOTWITHSTANDING THE FOREGOING, THE MATTERS IDENTIFIED IN 31
C.F.R. ss.ss. 357.10 AND 357.11 (AS IN EFFECT ON THE DATE OF THIS PLEDGE
AGREEMENT) SHALL BE GOVERNED SOLELY BY THE LAWS SPECIFIED
23
<PAGE>
THEREIN. REGARDLESS OF ANY PROVISION IN ANY OTHER AGREEMENT, FOR PURPOSES OF THE
UCC, NEW YORK SHALL BE DEEMED TO BE THE SECURITIES INTERMEDIARY'S JURISDICTION
AS DEFINED IN SECTIONS 9- 103(6)(d) AND 8-110(e) OF THE UCC AND THE PLEDGE
ACCOUNT (AS WELL AS ANY SECURITIES ENTITLEMENTS RELATED THERETO) SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
(b) THE PLEDGOR HEREBY APPOINTS SCHNADER HARRISON SEGAL &
LEWIS LLP, 330 MADISON AVENUE, NEW YORK, NEW YORK 10017 AS ITS AGENT FOR SERVICE
OF PROCESS IN ANY SUIT, ACTION OR PROCEEDING WITH RESPECT TO THIS PLEDGE
AGREEMENT AND FOR ACTIONS BROUGHT UNDER THE U.S. FEDERAL OR STATE SECURITIES
LAWS BROUGHT IN ANY FEDERAL OR STATE COURT LOCATED IN THE CITY OF NEW YORK (EACH
A "NEW YORK COURT"). EACH OF THE PARTIES HERETO SUBMITS TO THE JURISDICTION OF
ANY NEW YORK COURT AND TO THE COURTS OF ITS CORPORATE DOMICILE WITH RESPECT TO
ANY ACTIONS BROUGHT AGAINST IT AS DEFENDANT IN ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED BETWEEN THE PLEDGOR, THE TRUSTEE AND THE HOLDERS OF THE NOTES IN
CONNECTION WITH THIS PLEDGE AGREEMENT, AND EACH OF THE PARTIES HERETO WAIVES ANY
OBJECTION THAT IT MAY HAVE TO THE LAYING OF VENUE, INCLUDING ANY PLEADING OF
FORUM NON CONVENIENS, WITH RESPECT TO ANY SUCH ACTION AND WAIVES ANY RIGHT TO
WHICH IT MAY BE ENTITLED ON ACCOUNT OF PLACE OF RESIDENCE OR DOMICILE.
(c) THE PLEDGOR AGREES THAT THE TRUSTEE SHALL, IN ITS CAPACITY
AS TRUSTEE OR IN THE NAME AND ON BEHALF OF ANY HOLDER OF NOTES, HAVE THE RIGHT,
TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE PLEDGOR OR THE
COLLATERAL IN A COURT IN ANY LOCATION REASONABLY SELECTED IN GOOD FAITH (AND
HAVING PERSONAL OR IN REM JURISDICTION OVER THE PLEDGOR OR THE COLLATERAL, AS
THE CASE MAY BE) TO ENABLE THE TRUSTEE TO REALIZE ON SUCH COLLATERAL, OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE TRUSTEE. THE
PLEDGOR AGREES THAT IT WILL NOT ASSERT ANY COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS
IN ANY PROCEEDING BROUGHT BY THE TRUSTEE TO REALIZE ON SUCH PROPERTY OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE TRUSTEE, EXCEPT FOR SUCH
COUNTERCLAIMS, SETOFFS OR
24
<PAGE>
CROSSCLAIMS WHICH, IF NOT ASSERTED IN ANY SUCH PROCEEDING, COULD NOT OTHERWISE
BE BROUGHT OR ASSERTED.
(d) THE PLEDGOR AGREES THAT NEITHER ANY HOLDER OF NOTES NOR
(EXCEPT AS OTHERWISE PROVIDED IN THIS PLEDGE AGREEMENT OR THE INDENTURE) THE
TRUSTEE IN ITS CAPACITY AS TRUSTEE SHALL HAVE ANY LIABILITY TO THE PLEDGOR
(WHETHER ARISING IN TORT, CONTRACT OR OTHERWISE) FOR LOSSES SUFFERED BY THE
PLEDGOR IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO, THE
TRANSACTIONS CONTEMPLATED AND THE RELATIONSHIP ESTABLISHED BY THIS PLEDGE
AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH,
UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OF A COURT THAT IS
BINDING ON THE TRUSTEE OR SUCH HOLDER OF NOTES, AS THE CASE MAY BE, THAT SUCH
LOSSES WERE THE RESULT OF ACTS OR OMISSIONS ON THE PART OF THE TRUSTEE OR SUCH
HOLDERS OF NOTES, AS THE CASE MAY BE, CONSTITUTING BAD FAITH, GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT.
(e) TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PLEDGOR
WAIVES THE POSTING OF ANY BOND OTHERWISE REQUIRED OF THE TRUSTEE OR ANY HOLDER
OF NOTES IN CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO ENFORCE ANY
JUDGMENT OR OTHER COURT ORDER PERTAINING TO THIS PLEDGE AGREEMENT OR ANY RELATED
AGREEMENT OR DOCUMENT ENTERED IN FAVOR OF THE TRUSTEE OR ANY HOLDER OF NOTES, OR
TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER OR PRELIMINARY
OR PERMANENT INJUNCTION, THIS PLEDGE AGREEMENT OR ANY RELATED AGREEMENT OR
DOCUMENT BETWEEN THE PLEDGOR, ON THE ONE HAND, AND THE TRUSTEE AND/OR THE
HOLDERS OF THE NOTES, ON THE OTHER HAND.
17.15 Effectiveness. This Pledge Agreement shall become
effective upon the effectiveness of the Indenture.
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IN WITNESS WHEREOF, the Pledgor and the Trustee have each
caused this Pledge Agreement to be duly executed and delivered as of the date
first above written.
Pledgor:
STARTEC GLOBAL COMMUNICATIONS
CORPORATION
By:
------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK,
as Trustee
By:
------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK,
as Securities Intermediary, for
purposes of Section 16 only
By:
------------------------------
Name:
Title:
26
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SCHEDULE I
PLEDGED SECURITIES
Original
Description CUSIP Final Principal Cost at
of Security No(s). Maturity Amount Closing Date
----------- ------ -------- ------ ------------
U.S. Treasury 912827V74 11/15/98 $8,524,000 $8,531,586
Note
U.S. Treasury 912827X72 05/15/99 $8,759,000 $8,835,314
Note
U.S. Treasury 912827Z96 11/15/99 $9,038,000 $9,084,817
Note
U.S. Treasury 9128272T8 05/15/00 $9,304,000 $9,451,208
Note
U.S. Treasury 912820AY3 11/15/00 $9,600,000 $8,374,752
Strip
U.S. Treasury 912820BA4 05/15/01 $9,599,000 $8,139,472
Strip
I-1
<PAGE>
EXHIBIT A
FIRST UNION NATIONAL BANK
OFFICER'S CERTIFICATE
Pursuant to Section 3(d) of the Collateral Pledge and Security
Agreement (the "Pledge Agreement") dated as of May 21, 1998 between Startec
Global Communications Corporation, a Maryland corporation (the "Pledgor") and
First Union National Bank, trustee (the "Trustee") for the holders of the
Pledgor's 12% Senior Notes due 2008, the undersigned officer of the Trustee, on
behalf of the Trustee, makes the following certifications to the Pledgor and the
Initial Purchasers. Capitalized terms used and not defined in this Officer's
Certificate have the meanings set forth or referred to in the Pledge Agreement.
1. Substantially contemporaneously with the execution and
delivery of this Officer's Certificate, the Trustee has established the Cash
Collateral Account and the Pledge Account with the Startec Securities
Intermediary. The Trustee is the entitlement holder with respect to the
financial assets on deposit in the Cash Collateral Account and has acquired a
security entitlement with respect to such financial assets. The Trustee will be
the entitlement holder with respect to the Pledged Securities and will acquire a
security entitlement with respect to the Pledged Securities when the Startec
Securities Intermediary indicates by book entry that the Pledged Securities have
been credited to the Pledge Account. Without limiting the generality of the
foregoing, the Pledge Account, the Cash Collateral Account, the Pledged
Securities and the other Collateral are not, and the Trustee's security
entitlement with respect to the financial assets on deposit in the Cash
Collateral Account is not, to the actual knowledge of the corporate trust
officer having responsibility for the administration of this Indenture on behalf
of the Trustee, subject to any Lien granted by or to or arising through or in
favor of any Securities Intermediary (including, without limitation, the Startec
Securities Intermediary, or the Federal Reserve Bank of Richmond).
2. The Trustee has not caused or permitted the Cash Collateral
Account or its Security Entitlement with respect to the financial assets on
deposit in the Cash Collateral Account to become subject to any Lien created by
or arising through the Trustee.
B-1
<PAGE>
IN WITNESS WHEREOF, the undersigned officer has executed this
Officer's Certificate on behalf of First Union National Bank, Trustee this 21st
day of May, 1998.
FIRST UNION NATIONAL BANK,
Trustee
By:__________________________________
Name:
Title:
B-2
<PAGE>
EXHIBIT B
[Attach Report from Arthur Andersen LLP]
C-1
NETWORK PRODUCTS PURCHASE AGREEMENT
Northern Telecom Inc., a Delaware corporation having offices at 2350 Lakeside
Blvd., Richardson, Texas 75082-4399 ("Nortel") and Startec Global Communications
Corporation, a Maryland corporation, having its principal offices and place of
business at 10411 Motor City Drive Suite 301, Bethesda, MD 20817 ("Buyer") agree
as follows:
1. SCOPE
1.1 Certain terms used in this Agreement shall be defined as set
forth in Exhibit A.
1.2 The terms and conditions of this Agreement shall apply to the
purchase by Buyer and the sale by Nortel of Equipment and
Services and the licensing of Software furnished in
connection with such Equipment. The terms and conditions
contained in a Product Attachment shall modify and/or
supplement the other terms and conditions of this Agreement,
only with respect to the Product Line and Services described
in the Product Attachment.
1.3 All Products. and Services obtained by Buyer pursuant to this
Agreement shall be obtained by Buyer solely for initial use
by Buyer in its internal business to provide services
available through its networks, and not as stock in trade or
inventory which is intended for resale by Buyer to any third
party as new and unused material. All such Products shall be
installed in the United States.
2. TERM
2.1 This Agreement shall be in effect during the period that any
Product Attachment is in effect. Each Product Attachment
shall be in effect during its Product Attachment Term. This
Agreement or any part thereof may be terminated in accordance
with the express provisions of this Agreement concerning
termination or by written agreement of the parties.
2.2 The termination of this Agreement or any part thereof shall
not affect the obligations of either party thereunder which
have not been fully performed with respect to any accepted
Order, unless such Order is expressly terminated in
accordance with this Agreement or by written agreement of the
parties.
3. ORDERING
All purchases pursuant to this Agreement shall be made by means of
Orders issued from time to time by Buyer and accepted by Nortel in
writing within fifteen (15) days. Otherwise, any such Order shall be
deemed to be void. All
<PAGE>
Page 2
Orders shall reference this Agreement and the applicable Product
Attachment and shall be governed solely by the terms and conditions
set forth herein as modified and/or supplemented pursuant to Section
1.2 by the terms and conditions of any applicable Product Attachments.
4. PRICES
4.1 The prices, charges, and fees applicable to Orders shall be
set forth in the appropriate Product Attachments and may be
revised in accordance with the provisions stated therein.
Buyer shall pay transportation charges, including insurance,
in accordance with the applicable Product Attachment.
4.2 Until the total of all prices, charges and fees for Products
and related Services furnished hereunder shall have been paid
to Nortel, Buyer shall cooperate with Nortel in perfecting
Nortel's purchase money security interest in such Products
and Buyer shall promptly execute all documents and take all
actions required by Nortel in connection therewith. Buyer
shall not sell, lease or otherwise transfer such Products or
any portion thereof or allow any liens or encumbrances to
attach to such Products or any portion thereof prior to
payment in full to Nortel of the total of all such prices,
charges, and fees.
5. TERMS OF PAYMENT
5.1 The amounts payable for Products and/or Services may be
invoiced by Nortel to Buyer in accordance with the applicable
Product Attachments. All amounts payable and properly
invoiced pursuant to this Agreement shall be paid by Buyer to
Nortel within thirty (30) days from the date of Nortel's
invoice in accordance with the payment instructions contained
in such invoice.
5.2 Overdue payments, excluding those which are the subject of a
good faith dispute, shall be subject to interest charges,
calculated daily commencing on the 31st day after the date of
the invoice, at one and one half percent (1- 1/2%) per month
or such lesser rate as may be the maximum permissible rate
under applicable law.
6. TAXES
Buyer shall at Nortel's direction promptly pay to Nortel or pay
directly to the applicable government or taxing authority, if
requested by Nortel, all taxes and charges, including, without
limitation, penalties and interest, which may be imposed by any
federal, state, or local governmental or taxing authority arising
hereunder, such as, but not limited to all such taxes and charges
relating to the (degree) purchase, license, ownership, possession,
use, operation and/or relocation of any
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Equipment, Software, or Services furnished by Seller pursuant to this
Agreement, excluding, however, all taxes computed upon the net income
of Nortel. Buyer's obligations pursuant to this Section 6 shall
survive any termination of this Agreement.
7. RISK OF LOSS, TITLE
7.1 Risk of loss or dam. age to Products shall pass to Buyer upon
delivery to the loading dock at the installation site or
other delivery location specified by Buyer in its Order, and
Buyer shall keep such Products fully insured for the total
amount then due Nortel for such Products.
7.2 Good title to Equipment furnished hereunder which shall be
free and clear of all liens and encumbrances shall vest in
Buyer upon full payment by Buyer of the total prices, charges
and fees payable by Buyer for such Equipment and any related
Software or Services furnished by Nortel in connection with
such Equipment.
7.3 Buyer shall receive a license to use Software subject to the
terms set forth in Exhibit B.
8. TESTING, TURNOVER AND ACCEPTANCE
8.1 If Nortel installs any Products furnished hereunder, the
rights and obligations of the parties with respect to
testing, turnover and acceptance of such Products shall be as
set forth in the applicable Product Attachment.
8.2 If Nortel does not install Products furnished hereunder,
Nortel shall prior to delivery of the Products perform such
factory tests as Nortel determines to be appropriate in order
to confirm that such Products shall be in accordance with the
applicable Specifications. Buyer shall be deemed to have
accepted the Products upon completion of such tests.
8.3 In the event that Buyer places Products into
revenue-generating service, such Products shall be deemed to
have been accepted by Buyer without limitation or
restriction.
9. DISCLAIMERS OF WARRANTIES AND REMEDIES
THE WARRANTIES AND REMEDIES SET FORTH IN EXHIBIT D AND IN ANY PRODUCT
ATTACHMENT CONSTITUTE THE ONLY WARRANTIES OF NORTEL WITH RESPECT TO
THE PRODUCTS AND SERVICES AND BUYER'S EXCLUSIVE REMEDIES IN THE EVENT
SUCH WARRANTIES ARE BREACHED. THEY ARE IN LIEU OF ALL OTHER
WARRANTIES, WRITTEN OR ORAL, STATUTORY, EXPRESS OR IMPLIED, INCLUDING,
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WITHOUT LIMITATION ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE. NORTEL SHALL NOT BE LIABLE FOR ANY INCIDENTAL OR
CONSEQUENTIAL DAMAGES OF ANY NATURE WHATSOEVER, BEFORE OR AFTER THE
PLACING OF ANY PRODUCT INTO SERVICE.
10. LIABILITY FOR BODILY INJURY, PROPERTY DAMAGE AND PATENT
INFRINGEMENT
10.1 A party hereto shall defend the other party against any suit,
claim, or proceeding brought against the other party for
direct damages due to bodily injuries (including death) or
damage to tangible property which allegedly result from the
negligence or willful misconduct of the defending party in
the performance of this Agreement. The defending party shall
pay all litigation costs, reasonable attorney's fees,
settlement payments and such direct damages awarded or
resulting from any such suit, claim or proceeding.
10.2 Nortel shall defend Buyer against any suit, claim or
proceeding brought against Buyer alleging that any Products,
excluding Vendor Items, furnished hereunder infringe any
United States patent. Nortel shall pay all litigation costs,
reasonable attorney's fees, settlement payments and any
damages awarded or resulting from any such suit, claim or
proceeding. With respect to Vendor Items, Nortel shall assign
any rights with respect to infringement of US patents granted
to Nortel by the supplier of such Vendor Items to the extent
of Nortel's right to do so.
10.3 The party entitled to defense pursuant to Section 10.1 or
10.2 shall promptly advise the party required to provide such
defense of the applicable suit, claim, or proceeding and
shall cooperate with such party in the defense or settlement
thereof. The party required to provide such defense shall
have sole control of the defense of the applicable suit,
claim, or proceeding and of all negotiations for its
settlement or compromise.
10.4 If an injunction is obtained against Buyer's use of any
Products as a result of any suit, claim, or proceeding
described in Section 10.2, Nortel shall at Nortel's option
use its reasonable efforts to either:
10.4.1 procure for Buyer the right to continue using the
portions of the Products enjoined from use; or
10.4.2 replace or modify the same with equivalent or better
Products so that Buyer's use is not subject to any
such injunction.
10.5 If Nortel cannot perform under Section 10.4.1 or 10.4.2,
Buyer shall have the right to return the infringing Products
to Nortel upon written notice to
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Nortel, and in the event of such return, neither party shall
have any further liabilities or obligations under this
Agreement on account of such infringement or return, except
Nortel shall refund the depreciated value of such Products
carried on Buyer's books at the time of such return, less any
outstanding monies due Nortel hereunder.
10.6 The obligations of Nortel hereunder with respect to any suit,
claim, or proceeding described in Section 10.2 shall not
apply with respect to Products which are (a) manufactured or
supplied by Nortel in accordance with any design or any
special instruction furnished by Buyer, (b) used by Buyer in
a manner or for a purpose not contemplated by this Agreement,
(c) located by Buyer outside the United States, or (d)used by
Buyer in combination with other products not provided by
Nortel, including, without limitation, any software developed
solely by Buyer through the permitted use of Products
furnished hereunder, provided the infringement arises from
such combination or the use thereof. Buyer shall indemnify
and hold Nortel harmless against any loss, cost, expense,
damage, settlement or other liability, including, but not
limited to, attorneys' fees, which may be incurred by Nortel
with respect to any suit, claim, or proceeding described in
this Section 10.6.
10.7 Notwithstanding the above, Nortel shall have no obligation or
liability with regard to any patent infringement suit, claim,
or proceeding that may be made or brought against Buyer (i)
alleging that method of use claims in such patent are
infringed by any service offering and/or by any use by Buyer
of Products furnished hereunder to make such service offering
available or (ii) resulting in a settlement payment, or award
of damages, or accounting of profits, where such settlement,
award, or accounting is based on the revenues or profits
earned or other value obtained by Buyer from its use of such
Products and/or is based on the lost revenues or profits of
third parties arising from Buyer's use of such Products.
10.8 If Nortel determines that any Products are or may become the
subject of a suit, claim, or proceeding as described in
Section 10.7, Nortel may provide Buyer with notice to that
effect. Nortel shall have no liability to Buyer pursuant to
Section 10.2, 10.4, or 10.5 with respect to Buyer's use of
such Products which occurs subsequent to such notice. In
addition to its obligations pursuant to Section 10.3, if
Buyer becomes aware that any Products may become the subject
of any such suit, claim, or proceeding before receiving any
such notice from Nortel, Buyer shall provide Nortel with
notice to that effect.
10.9 After receipt of notice from Nortel pursuant to Section 10.8,
Buyer shall have the option to return to Nortel the
applicable Products identified in such notice and Nortel
shall refund the depreciated value (as carried on the books
of Buyer) of the returned Products to Buyer as more fully set
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forth in Section 10.5.
10.10 The provisions of Sections 10.2 through 10.9 state the entire
liability of Nortel and its suppliers and the exclusive
remedy of Buyer with respect to any suits, claims, or
proceedings of the nature described in Section 10.2.
10.11 Each party's respective obligations pursuant to this Section
shall survive any termination of this Agreement.
11. REMEDIES AND LIMITATION OF LIABILITY
11.1 Nortel shall have the right to suspend its performance by
written notice to Buyer and forthwith remove and take
possession of all Products that shall have been delivered to
Buyer, if, prior to payment to Nortel of any amounts due
pursuant to this Agreement with respect to such Products,
Buyer shall (a) become insolvent or bankrupt or cease, be
unable, or admit in writing its inability, to pay all debts
as they mature, or make a general assignment for the benefit
of, or enter into any arrangement with, creditors, (b)
authorize, apply for, or consent to the appointment of, a
receiver, trustee, or liquidator of all or a substantial part
of its assets or have proceedings seeking such appointment
commenced against it which are not terminated within ninety
(90) days of such commencement, or (c) file a voluntary
petition under any bankruptcy or insolvency law or under the
reorganization or arrangement provisions of the United States
Bankruptcy Code or any similar law of any jurisdiction or
have proceedings under any such law instituted against it
which are not terminated within ninety (90) days of such
commencement.
11.2 In the event of any material breach of this Agreement which
shall continue for thirty (30) or more days after written
notice of such breach (including a reasonably detailed
statement of the nature of such breach) shall have been given
to the breaching party by the aggrieved party, the aggrieved
party shall be entitled at its option to avail itself of any
and all remedies available at law or equity, except as
otherwise provided in this Agreement.
11.3 Nothing contained in Section 11.2 or elsewhere in this
Agreement shall make Nortel liable for any incidental,
indirect, consequential or special damages of any nature
whatsoever for any breach of this Agreement whether the
claims for such damages arise in tort, contract, or
otherwise, or shall increase the liability of Nortel under
Section 9 or 10 or Exhibit D beyond that prescribed therein.
11.4 Nortel shall not be liable for any additional costs,
expenses, losses or damages resulting from errors, acts or
omissions of Buyer, including, but not limited to,
inaccuracy, incompleteness or untimeliness in the provision
<PAGE>
Page 7
of information by Buyer to Nortel or fulfillment by Buyer of
any of its obligations under this Agreement. Buyer shall pay
Nortel the amount of any such costs, expenses, losses or
damage incurred by Nortel.
11.5 Any action for breach of this Agreement or to enforce any
right hereunder shall be commenced within two (2) years after
the cause of action accrues or it shall be deemed waived and
barred, except any action for nonpayment by Buyer of any
prices, charges, or fees payable here. under may be brought
by Nortel at any time permitted by applicable law.
11.6 The limitations on Nortel's liability and other obligations
set forth in Sections 9, 10, and 11 shall survive any
termination of this Agreement.
12. FORCE MAJEURE
If the performance by a party of any of its obligations under this
Agreement shall be interfered with by reason of any circumstances
beyond the reasonable control of that party, including without
limitation, unavailability of supplies or sources of energy, power
failure, breakdown of machinery, or labor difficulties, including
without limitation, strikes, slowdowns, picketing or boycotts, then
that party shall be excused from such performance for a period equal
to the delay resulting from the applicable circumstances and such
additional period as may be reasonably necessary to allow that party
to resume its performance. With respect to labor difficulties as
described above, a party shall not be obligated to accede to any
demands being made by employees or other personnel.
13. CONFIDENTIAL INFORMATION
13.1 Each party which receives the other party's Confidential
Information shall use reasonable care to hold such
Confidential Information in confidence and not disclose such
Confidential Information to anyone other than to its
employees and employees of its affiliates with a need to
know. A party that receives the other party's Confidential
Information shall not reproduce .such Confidential
Information, except to the extent reasonably required for the
performance of its obligations pursuant to this Agreement and
in connection with any permitted use of such Confidential
Information.
13.2 Buyer shall take reasonable care to use Nortel's Confidential
Information only for study, operating, or maintenance
purposes in connection with Buyer's use of Products furnished
by Nortel pursuant to this Agreement.
13.3 Nortel shall take reasonable care to use Buyer's Confidential
Information only to perform Nortel's obligations to provide
Products and/or Services to Buyer, provided Nortel may use
any of Buyer's Confidential Information for the development,
manufacture, marketing and
<PAGE>
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maintenance of new products and/or services and/or changes
or modifications to the existing Products and/or Services,
which Nortel may, in either case, provide to third parties
without restriction.
13.4 The obligations of either party pursuant to this Section 13
shall not extend to any Confidential Information which
recipient can demonstrate through written documentation was
already known to the recipient prior to its disclosure to the
recipient, was known or generally available to the public at
the time of disclosure' to the recipient, becomes known or
generally available to the public (other than by act of the
recipient) subsequent to its disclosure to the recipient, is
disclosed or made available in writing to the recipient by a
third party having a bona fide right to do so, or is required
to be disclosed by process of law, provided that the
recipient shall notify the disclosing party promptly upon any
request or demand for such disclosure.
13.5 The parties' obligations pursuant to this Section 13 shall
survive any termination of this Agreement.
14. BUYER'S RESPONSIBILITIES
14.1 All sites at which the Products shall be delivered or
installed shall be prepared by Buyer in accordance with
Nortel's standards, including, without limitation,
environmental requirements.
14.2 Buyer shall provide Nortel-designated personnel access to the
Products during the times deemed necessary by Nortel to
install, maintain and service the Products in accordance with
Nortel's obligations. Nortel personnel shall comply with
Buyer's reasonable site and security regulations, provided
Nortel receives written notice of any such regulations
reasonably in advance of the arrival of Nortel's personnel at
the site.
14.3 Buyer shall provide reasonable working space and facilities,
including heat, light, ventilation, telephones, electrical
current, trash removal and other necessary utilities for use
by Nortel-designated maintenance personnel, and adequate
secure storage space, if required by Nortel, for Products and
materials. Buyer shall also provide adequate security for the
Products while on Buyer's site.
14.4 Buyer shall obtain all necessary governmental permits
applicable to Buyer in connection with the installation,
operation, and maintenance of Products furnished hereunder,
excluding any applicable permits required in the normal
course of Nortel's doing business.
14.5 Any information which Nortel reasonably requests from Buyer
and which
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is necessary for Nortel to properly install or maintain the
Products shall be provided by Buyer to Nortel in a timely
fashion and in a form reasonably specified by Nortel.
15. HAZARDOUS MATERIALS
15.1 Prior to issuing any Order for Services to be performed at
Buyer's facilities, Buyer shall identify and notify Nortel in
writing of the existence of all Hazardous Materials which
Nortel may encounter during the performance of such Services,
including, without limitation, any Hazardous Materials
contained within any equipment to be removed by Nortel.
15.2 If Buyer breaches its obligations pursuant to Section 15.1,
(a) Nortel may discontinue the performance of the appropriate
Services until all the applicable Hazardous Materials have
been removed or abated to Nortel's satisfaction by Buyer at
Buyer's sole expense, and (b) Buyer shall defend, indemnify
and hold Nortel harmless from any and all damages, claims,
losses, liabilities and expenses, including, without
limitation, attorneys' fees, which arise out of Buyer's
breach of such obligations. Buyer's obligations pursuant to
this Section 15.2 shall survive any termination of this
Agreement.
16. SUBCONTRACTING
Nortel may subcontract any of its obligations under this Agreement, but
no such subcontract shall relieve Nortel of primary responsibility for
performance of its obligations.
17. REGULATORY COMPLIANCE
In the event of any change in the Specifications or Nortel's
manufacturing or delivery processes for any Products as a result of the
imposition of requirements by any government, Nortel may upon notice to
Buyer, increase its prices, charges and fees to cover the added costs
and expenses directly and indirectly incurred by Nortel as a result of
such change.
18. GENERAL
18.1 If any of the provisions of this Agreement shall be invalid
or unenforceable under applicable law and a party deems such
provisions to be material, that party may terminate this
Agreement upon notice to the other .party. Otherwise, such
invalidity or unenforceability shall not invalidate or render
this Agreement unenforceable, but this Agreement shall be
construed as if not containing the particular invalid or
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unenforceable provision and the rights and obligations of
the parties shall be construed and enforced accordingly.
18.2 A party shall not release without the prior written approval
of the other party any advertising or other publicity
relating to this Agreement wherein such other party may
reasonably be identified. In addition each party shall take
reasonable precautions to keep the existence and the contents
of this Agreement confidential so long as this Agreement
remains in effect and for a period of three (3) years
thereafter, except as may be reasonably required to enforce
this Agreement or by law.
18.3 The construction, interpretation and performance of this
Agreement shall be governed by the laws of the State of North
Carolina, except for its rules with respect to the conflict
of laws.
18.4 Neither party may assign or transfer this Agreement or any of
its rights hereunder without the prior written consent of the
other party, such consent not to be unreasonably withheld,
except Buyer's consent shall not be required for any
assignment or transfer by Nortel (a) to any Affiliate of all
or any part of this Agreement or of Nortel's rights
hereunder, or (b) to any third party of Nortel's right to
receive any monies which may become due to Nortel pursuant to
this Agreement.
18.5 Notices and other communications.
18.5.1 Notices and other communications shall be transmitted
in writing by certified United States Mail, postage prepaid,
return receipt requested, by guaranteed overnight delivery,
or by facsimile addressed to the parties as follows:
To Buyer: Startec
Global Communications Corp.
10411 Motor City Drive,
Suite 301
Bethesda, MD 20817
Attention: Mr. Gustavo Pereira
Facsimile: (301) 365-8939
To Nortel: Northern Telecom Inc.
2350 Lakeside Blvd.
Richardson, Texas 75082-4399
Attention: Vice President Carrier Networks
Facsimile: (972) 685-8845
In addition, notices submitted by Buyer to Nortel specific to any
Product Attachment shall be delivered to the address stated in the
applicable Product Attachment along with a copy submitted to Nortel at
the address stated above.
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Any notice or communication sent under this Agreement shall
be deemed given upon receipt, as evidenced by the United
States Postal Service return receipt Mail if given by
certified United States Mail, on the following business day
if sent by guaranteed overnight delivery, or on the
transmission date if given by facsimile during the receiving
party's normal business hours.
The address information listed for a party in this Section or
any Product Attachment may be changed from time to time by
that party by giving notice to the other as provided above.
18.6 In the event of a conflict between the provisions of this
Agreement which are not contained in a Product Attachment and
the provisions of a Product Attachment, the provisions of the
Product Attachment shall prevail with respect to the Product
Line and Services described in that Product Attachment.
18.7 All headings used herein are for index and reference purposes
only, and shall not be given any substantive effect. This
Agreement .has been created jointly by the parties, and no
rule of construction requiring interpretation against the
drafter of this Agreement shall apply in its interpretation.
18.8 Buyer shall not export any technical data received from
Nortel pursuant to this Agreement, or release any such
technical data with the knowledge or intent that such
technical data will be exported or transmitted to any country
or to foreign nationals of any country, except in accordance
with applicable US law concerning the exporting of such
technical data. Buyer shall obtain all authorizations from
the US government in accordance with applicable law prior to
exporting or transmitting any such technical data as
described above.
18.9 Any changes to this Agreement may only be effected if agreed
upon in writing by duly authorized representatives of the
parties hereto. No agency, partnership, joint venture, or
other similar business relationship shall be or is created by
this Agreement.
18.10 This Agreement, including all Product Attachments and
Exhibits constitutes the entire agreement of the parties with
respect to the subject matter hereof.
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NORTHERN TELECOM INC. STARTEC GLOBAL
COMMUNICATIONS CORP.
(Signature)
<PAGE>
Page 12
NORTHERN TELECOM INC. STARTEC GLOBAL
COMMUNICATIONS CORP.
Name: Name:
(Print) (Print)
Title: Title:
Date: Date:
<PAGE>
EXHIBIT A
DEFINITIONS
As used in the Agreement (as defined below), the following initially capitalized
terms shall have the following meanings:
"Affiliate" shall mean Nortel's parent corporation, Northern Telecom Limited and
any corporation controlled directly or indirectly by Northern Telecom Limited
through the ownership or control of shares or other securities in such
corporation.
"Agreement" shall mean the Agreement to which this Exhibit is attached, and all
Exhibits and Product Attachments.
"Confidential Information" shall mean all information, including, without
limitation, specifications, drawings, documentation, know-how and pricing
information, of every kind or description which may be disclosed by either party
or an Affiliate to the other party in connection with this Agreement, provided
the disclosing party shall clearly mark any such information which is disclosed
in writing as the confidential property of the disclosing party and the
disclosing party shall identify the confidential nature of any such information
which it orally discloses at the time of such disclosure and shall provide a
written summary of the orally disclosed information to the recipient within
fifteen (15) days of such disclosure.
"Equipment" shall mean the hardware listed or otherwise identified in, or
pursuant to, any Product Attachment.
"Exhibits" shall mean Exhibits A, B, C, and D attached hereto, and any
additional Exhibits which Nortel and Buyer subsequently agree in writing shall
be incorporated into, and made a part of the Agreement by reference.
"Hazardous Materials" shall mean any pollutants or dangerous, toxic or hazardous
substances (including, without limitation, asbestos) as defined in, or pursuant
to, the OSHA Hazard Communication Standard (29 CFR Part 1910, Subpart Z), the
Resource Conservation and Recovery Act of 1976 (42 USC Section 6901, et seq.),
the Toxic Substances Control Act (15 USC Section 2601, et seq.), the
Comprehensive Environmental Response Compensation and Liability Act (42 USC
Section 9601, et seq.), and any other federal, state or local environmental law,
ordinance, rule or regulation.
"Order" shall mean a written purchase order issued by Buyer to Nortel. Each
Order shall specify on the face of the Order the types and quantities of
Products and/or Services to be furnished by Nortel pursuant to the Order, the
applicable prices, charges and/or fees with respect to such Products and/or
Services,
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Page 2
Buyer's facility to which the Products are to be delivered, the delivery and/or
completion schedule, and any other information which may be required to be
included in an Order in accordance with the provisions of this Agreement.
"Product Attachments" shall mean any Product Attachments which the parties'
agree in writing shall be incorporated into, and made a part of, this Agreement.
"Product Attachment Term" shall mean the period specified in a Product
Attachment during which that Product Attachment shall be in effect.
"Product Line" shall mean the Products described in and which may be furnished
pursuant to a specific Product Attachment.
"Products" shall mean any Equipment and/or Software which may be provided under
this Agreement.
"Services" shall mean all services listed or otherwise identified in, or
pursuant to, any Product Attachment which may be purchased from or provided by
Nortel and which are associated with the Product Line described in that Product
Attachment.
"Software" shall mean (a) programs in machine-readable code or firmware which
(i) are owned by, or licensed to, Nortel or any of its Affiliates, (ii) reside
in Equipment memories, tapes, disks or other media, and (iii) provide basic
logic operating instructions and user-related application instructions, and (b)
documentation associated with any such programs which may be furnished by Nortel
to Buyer from time to time.
"Specifications" shall mean, with respect to any Product Line, the
specifications identified in the applicable Product Attachment, provided Nortel
shall have the right at its sole discretion to modify, change or amend such
specifications at any time.
"Third Party Software Vendor" shall mean any supplier of programs contained in
the Software which is not an Affiliate.
"Vendor Items" shall mean, with respect to a Product Line, those portions of the
Product which are identified in the applicable Product Attachment as Vendor
Items.
"Warranty Period" shall mean, with respect to a Product Line, the Warranty
Period specified in the applicable Product Attachment.
<PAGE>
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EXHIBIT B
SOFTWARE LICENSE
1. Buyer acknowledges that the Software may contain programs which have
been supplied by, and are proprietary to, Third Party Software
Vendors. In addition to the terms and conditions herein, Buyer shall
abide by any additional terms and conditions provided by Nortel to
Buyer with respect to any Software provided' by any Third Party
Software Vendor.
2. Upon Buyer's payment to Nortel of the applicable fees with respect to
any Software furnished to Buyer pursuant to this Agreement, Buyer
shall be granted a personal, non-exclusive, paid-up license to use the
version of the Software furnished to Buyer only in conjunction with
Buyer's use of the Equipment with respect to which such Software was
furnished for the life of that Equipment as it may be repaired or
modified. Buyer shall be granted no title or ownership rights to the
Software, which rights shall remain in Nortel or its suppliers.
3. As a condition precedent to this license and to the supply of Software
by Nortel pursuant to the Agreement, Nortel requires Buyer to give
proper assurances to Nortel for the protection of the Software.
Accordingly, all Software supplied by Nortel under or in
implementation of the Agreement shall be treated by Buyer as the
exclusive property, and as proprietary and a TRADE SECRET, of Nortel
and/or its suppliers, as appropriate, and Buyer shall: a) hold the
Software, including, without limitation, any methods or concepts
utilized therein in confidence for the benefit of Nortel and/or its
suppliers, as appropriate; b) not provide or make the Software
available to any person except to its employees on a 'need to know'
basis; c)not reproduce, copy, or modify the Software in whole or in
part except as authorized by Nortel; d)not attempt to decompile,
reverse engineer, disassemble, reverse translate, or in any other
manner decode the Software; e) issue adequate instructions to all
persons, and take all actions reasonably necessary to satisfy Buyer's
obligations under this license; and f) forthwith return to Nortel, or
with Nortel's consent destroy, any magnetic tape, disc, semiconductor
device or other memory device or system and/or documentation or other
material, including, but not limited to all printed material furnished
by Nortel to Buyer which shall be replaced, modified or updated.
4. The obligations of Buyer hereunder shall not extend to any information
or data relating to the Software which is now available to the general
public or becomes available by reason of acts or failures to act not
attributable to Buyer.
5. Buyer shall not assign this license or sublicense any rights herein
granted '
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to any other party without Nortel's prior written consent.
6. Buyer shall indemnify and hold Nortel and its suppliers, as
appropriate, harmless from any loss or damage resulting from a breach
of this Exhibit B. The obligations of Buyer under this Exhibit B shall
survive the termination of the Agreement and shall continue if the
Software is removed from service.
<PAGE>
EXHIBIT C
STORAGE
If Buyer notifies Nortel prior to the scheduled shipment date of Products that
Buyer does not wish to receive such Products on the date agreed by the parties,
or the installation site or other delivery location is not prepared in
sufficient time for Nortel to make delivery in accordance with such date, or
Buyer fails to take delivery of any portion of such Products, Nortel may place
the applicable Products in storage, such storage facilities to be mutually
agreed to by the parties. In that event Buyer shall be liable for all additional
costs thereby incurred by Nortel. Delivery by Nortel of any Products to a
storage location as provided above shall be deemed to constitute delivery of the
Products to Buyer for purposes of this Agreement, including, Without limitation,
provisions for the commencement of the payment, invoicing and Warranty Periods
and the passage of risk of loss, pursuant to Nortel's standard shipment,
turnover and acceptance intervals beginning with the date of delivery originally
agreed upon by the parties as a starting point.
<PAGE>
EXHIBIT D
LIMITED WARRANTIES AND REMEDIES
1. Nortel warrants that the Equipment supplied hereunder will under
normal use and service be free from defective material and faulty
workmanship and will conform to the applicable Specifications for the
Warranty Period specified in the Product Attachment with respect to
such Equipment. The foregoing warranty shall not apply to items
normally consumed in operation, such as, but not limited to, lamps and
fuses or to Vendor Items. Any installation Services performed by
Nortel with respect to such Equipment shall be free from defects in
workmanship for the Warranty Period set forth in the applicable
Product Attachment.
2. Nortel's sole obligation and Buyer's exclusive remedy under the
warranty set forth in Section 1 above shall be limited to the
replacement or repair, at Nortel's option and expense, of the
defective Equipment, or correction of the defective installation
Services. Replacement Equipment may be new or reconditioned at
Nortel's option.
3. Nortel warrants that any Software licensed by Nortel to Buyer under
this Agreement shall function during the Warranty Period of the
Equipment with respect to which such Software is furnished without any
material, service affecting nonconformance to the applicable
Specifications, provided that Buyer shall have paid all Software
support fees specified in the applicable Product Attachment. If the
Software fails to so function, Buyer's sole remedy and Nortel's sole
obligation under this warranty is for Nortel to correct such failure
through, at Nortel's option, the replacement or modification of the
Software or such other actions as Nortel reasonably determines to be
appropriate.
4. Unless otherwise stated in a Product Attachment, (a) Nortel's
warranties in Section 3 above shall only apply to the portion of the
Software actually developed by Nortel or its Affiliates, (b) all other
Software shall be provided by Nortel "AS IS", (c) Nortel shall assign
to Buyer on a nonexclusive basis any warranty on such other Software
provided to Nortel by the developer of such other Software to the
extent of Nortel's legal right to do so.
5. The obligations and remedies set forth in Sections 1, 2, and 3 above
shall be conditional upon: the Equipment not having been altered or
repaired, the Software not having been modified, and the Products not
having been installed outside the United States; any defect or
nonconformance not being the result of mishandling, abuse, misuse,
improper storage, improper performance of installation, other
services, maintenance or operation by other than Nortel (including use
in conjunction with any product which is incompatible with the
applicable Equipment or Software or of inferior performance), and/or
any error, act, or omission of Buyer described in Section 11.4; the
Product not having been
<PAGE>
Page 2
damaged by fire, explosion, power failure, power surge, or other power
irregularity, lightning, failure to comply with all applicable
environmental requirements for the Products specified by Nortel or any
other applicable supplier, such as but not limited to temperature or
humidity ranges, or any act of God, nature or public enemy; and
written notice of the defect having been given to Nortel within the
applicable Warranty Period.
6. The performance by Nortel of any of its obligations described in
Section 2 or 3 of this Exhibit D shall not extend the applicable
Warranty Period except to the extent specified in the applicable
Product Attachment.
7. Upon expiration of the applicable Warranty Period for Equipment
furnished hereunder, repair and replacement Service for such Equipment
shall be available to Buyer from Nortel in accordance with Nortel's
then-current terms, conditions and prices. Such repair and replacement
Service and notice of any discontinuance of such repair and
replacement Service shall be available for a minimum period set forth
in the Product Attachment applicable to such Equipment. This provision
shall survive the expiration of this Agreement.
8. Unless Nortel elects to repair or replace defective Equipment at
Buyer's facility, all Equipment to be repaired or replaced, whether in
or out of warranty, shall be packed by Buyer in accordance with
Nortel's instructions stated in the applicable Product Attachment and
shipped at Buyer's expense and risk of loss to a location designated
by Nortel. Replacement Equipment shall be returned to Buyer at
Nortel's expense and risk of loss. Buyer shall ship the defective
Equipment to Nortel within thirty (30) days of receipt of the
replacement Equipment. In the event Nortel fails to receive such
defective Equipment within such thirty (30) day period, Nortel shall
invoice Buyer for the replacement Equipment at the then current price
in effect therefor.
9. With respect to any Vendor Item furnished by Nortel to Buyer pursuant
to this Agreement, Nortel shall assign to Buyer on a nonexclusive
basis any warranty granted by the party that supplied such Vendor Item
to Nortel to the extent of Nortel's right to do so.
10. Neither Nortel nor Nortel's suppliers, as appropriate, shall have any
responsibility for warranties offered by Buyer to any of its
customers. Buyer shall indemnify Nortel and Nortel's suppliers, as
appropriate, with respect thereto.
<PAGE>
PRODUCT ATTACHMENT
CARRIER NETWORKS PRODUCTS
Northern Telecom Inc. ("Nortel") and Startec Global Communications
Corp. ("Buyer") agree as follows:
1. INCORPORATION BY REFERENCE
This Product Attachment shall be incorporated into and made a
part of Network Products Purchase Agreement No.
NPA199712-STI-CN-BB between Nortel and Buyer.
2. DEFINITIONS
For purposes of this Product Attachment:
"Acceptance Criteria" shall mean, with respect to any Products
installed by Nortel hereunder, the standards and
specifications contained in the Nortel Installation Manuals
which are applicable to such Products.
"Equipment" shall mean the equipment listed in Schedule A.
"Extension" shall mean Equipment and/or Software which Nortel
engineers and installs and which is added to an Initial System
after the Turnover Date of the Initial System.
"Initial System" shall mean the Equipment and Software which
is included in any configuration identified in Schedule A as
an "Initial System."
"Installation Site" shall mean Buyer's facility identified in
an Order to which the applicable Products identified in such
Order shall be delivered or at which the applicable Services,
if any, are to be performed, respectively.
"Merchandise" shall mean any Equipment which is not part of a
System and with respect to which no engineering or
installation Services shall be provided by Nortel.
"Product Attachment Term" shall mean the period which shall
commence on the date this Product Attachment is executed by
the latter of the parties and shall expire twelve (12) months
thereafter.
"Services" shall mean the services described in Schedule B.
"Software" shall mean the software listed in Schedule A.
<PAGE>
Page 2
"Specifications" shall mean with respect to any Products
furnished hereunder, the specifications published by Nortel
which Nortel identifies as its standard performance
specifications for such Products as of the date of Buyer's
Order for such Products.
"System" shall mean any Initial System or Extension.
"Turnover Date" shall mean, with respect to any Products
installed by Nortel hereunder, the date on which Nortel
provides the Turnover Notice to Buyer pursuant to Section 8.a
of this Product Attachment.
"Warranty Period" shall mean, with respect to:
(a) Any System, the period which shall commence upon the
Acceptance Date with respect to such System and shall expire
twelve (12) months thereafter,
(b) Merchandise, the period which shall commence upon the date of
shipment with respect to such Merchandise by Nortel to Buyer
and shall expire ninety (90) days thereafter,
(c) Installation Services involving any System, the period which
shall commence upon the Turnover Date with respect to such
System and shall expire twelve (12) months thereafter,
(d) Equipment which is repaired or replaced pursuant to Nortel's
obligations under Exhibit D to the Agreement, the period
commencing five (5) days after (i) shipment of the replacement
Equipment to Buyer or (ii) completion of the repair at the
Installation Site of the applicable Equipment and which shall
expire on the later of thirty (30) days thereafter or the last
day of the original Warranty Period with respect to the
Equipment which was repaired or replaced, and
(e) Software which was corrected pursuant to Nortel's obligations
under Exhibit D to the Agreement, the period commencing upon
delivery of the corrected Software by Nortel to Buyer and
expiring on the later of thirty (30) days thereafter or the
last day of the original Warranty Period with respect to such
Software.
<PAGE>
Page 3
3. SCOPE
a. Nortel agrees to sell to Buyer, subject to Buyer first purchasing
Nortel's DMS 300/250 Certification as set forth and as priced in
Schedule A, Exhibit 1 (2.0) as follows:
DMS 300/250 Certification with GCAR0002 software upgrade, and
Buyer agrees to purchase and/or license, as applicable, and take
delivery of one set of the Products as described in Schedule A,
Exhibit 2 as follows:
DMS 300/250 Standard and Optional Software
at the prices set forth in Schedule A, Exhibit 1 (2.4). Buyer
acknowledges that the prices set forth in Schedule A, Exhibit 1
(2.4) are discounted prices based upon Buyer's commitment to
purchase Products as set forth in Section 3.c., and that Buyer's
failure to meet the commitment therein will require Buyer to pay
the additional amount set forth in Section 3.d. in refund of the
discount.
b. Nortel shall not have any responsibilities or obligations with
regard to the Buyer's existing DMS-300/250 (currently at 111
Eighth Avenue, New York, New York), and the Warranty provisions
set forth herein in this Agreement and in the Network Product
Purchase Agreement shall not commence, until such time when the
Buyer's existing DMS-300/250 has successfully completed the
Certification process described in the attached Schedule A,
Exhibit 1 (2.1). Buyer shall pay the prices, fees and charges set
forth in the attached Schedule A, Exhibit 1 (2.4), for the
Certification in accordance with Section 7 of this Product
Attachment. Upon the successful completion of the Certification,
Nortel shall certify that the Buyer's existing DMS-300/250 system
is eligible for support by Nortel, consisting of either the
services offered by Nortel under its Extended Service Plan or
preventative or remedial maintenance on a time and material
basis.
c. During the Product Attachment Term, Buyer commits to purchase
and/or license, as applicable, and take delivery of the Products
as described in Schedule A, Exhibit 1 (1.0) as follows:
DMS 300/250 Initial System and Power for the DMS 300/250 Initial
System at the prices set forth in Schedule A, Exhibit 1 (1.0).
d. In the event that Buyer does not satisfy the commitment under
Section 3.c. of this Product Attachment, Nortel shall invoice
Buyer and Buyer agrees to pay the amount of One Hundred Eighty
Three Thousand One Hundred Eight
<PAGE>
Page 4
Dollars ($183,108) for the discounted portion of the Software
purchased pursuant to this Product Attachment and described in
Schedule A, Exhibit 2 of this Product Attachment.
e. Buyer agrees to provide to Nortel, at Buyer's own expense and
during the term of this Product Attachment, the Central Control
Complex (Core) of Buyer's DMS NT-40 System. ,Upon receipt by
Nortel at a site designated by Nortel of the Central Control
Complex (Core) of Buyer's DMS NT-40 System Nortel agrees to
provide Buyer with credit of One Hundred Twenty Thousand Dollars
($120,000) that may only be used towards the purchase of the
Products set forth in Section 3.c. above.
4. SCHEDULES
The following Schedules which are attached hereto are an integral part
of the Product Attachment and are incorporated herein by reference:
Schedule A Products, Prices, and Fees
Schedule B Services and Charges
Schedule C Delivery
Schedule D - Documentation
5. ORDERING
With respect to Section 3, ORDERING of the Agreement the following
additional terms shall apply:
a. Buyer shall identify in each Order for Products whether the
Products constitute an Initial System, Extension, or Merchandise.
All Orders for Extensions, Merchandise, or any Services other
than engineering and installation Services provided by Nortel in
connection with an Order for an Initial System shall be subject
to written agreement of Buyer and Nortel on the applicable
prices, charges and fees with respect thereto as required
pursuant to Section 6, PRICING, of this Product Attachment.
b. Notwithstanding Exhibit C to the Agreement, Buyer may by written
notice to Nortel cancel without charge any Order for Products
and/or Services prior to the delivery date of the applicable
Products set forth in such Order or the agreed date for the
commencement by Nortel of the applicable Services ("Service
Commencement Date"), except that if Buyer cancels such Order
within six (6) weeks or less of any such date, a cancellation fee
of fifteen percent (15%) of the aggregate price of all Products
and/or Services included in such cancelled Order shall be payable
by Buyer. Nortel may invoice such amount upon receipt of Buyer's
notice of cancellation of the Order.
<PAGE>
Page 5
c. Notwithstanding Exhibit C to the Agreement, Buyer may by written
notice to Nortel not less than six (6) weeks prior to the
delivery date of any Products set forth in an Order and/or the
Service Commencement Date of the applicable Services, delay the
delivery date of such Products and/or the Service Commencement
Date of such Services for a period which shall not exceed ninety
(90) days from the date such Products were originally scheduled
to be delivered or ninety (90) days from the Service Commencement
Date, subject to the availability from Nortel of the applicable
Products and/or Services after such period of delay.
d. Except as set forth in Sections 5.b. and 5.c. of this Product
Attachment, any change to an Order after Nortel's acceptance of
such Order shall require written agreement of Nortel and Buyer
upon a written change to the Order ("Change Order") which shall
reference the original Order and be executed by the parties. No
such changes shall be implemented until the applicable Change
Order has been executed by the parties.
e. With respect to each Order for Products which is accepted by
Nortel, Buyer may make a written request at least ninety (90)
days prior to the scheduled shipment date of such Products for a
change ("Change") consisting of certain addition(s) or
deletion(s) to such Products. After receipt of such request,
Nortel shall submit a Job Change Order ("JCO") to Buyer for
Buyer's approval with respect to the requested Change, except
that Nortel shall be under no obligation to submit such JCO to
Buyer if Nortel determines that the Price applicable to such
Order would be reduced by more than ten percent (10%) as a result
of the implementation of the Change. Each JCO shall state whether
the requested Change shall increase or decrease the Price and/or
time required by Nortel for any aspect of its performance under
the Agreement with respect to such Order. Buyer shall accept or
reject the JCO in writing within ten (10) days of receipt
thereof. Failure of the Buyer to accept or reject the JCO in
writing as described above shall be deemed a rejection of the JCO
by Buyer. In the event an accepted JCO involves the return to
Nortel of any Equipment which shall have been previously
delivered to Buyer, Nortel may invoice and Buyer shall pay the
transportation costs and Nortel's then- current restocking charge
for the returned Equipment.
f. Any increase or decrease in the Price with respect to an Order
hereunder which is occasioned by an accepted JCO shall be added
to or subtracted from, as applicable, the amount of the last
payment due pursuant to Section 6 with respect to such Order.
g. If Buyer rejects a proposed JCO, then the rights and obligations
of the parties with respect to the applicable Order shall not be
subject to Buyer's requested Changes, provided that Buyer shall
promptly pay to Nortel all of Nortel's additional costs and
expenses incurred hereunder in accordance with Buyer's
<PAGE>
Page 6
requested Changes and Nortel's additional costs and expenses
subsequently incurred in order that Nortel may be able to perform
Nortel's obligations without modification by the requested
Changes, and Nortel shall be entitled to an extension of the
dates for performance of its obligations with respect to the
applicable Order as a result of any delays in such performance
which result from the foregoing.
6. PRICING
With respect to Section 4, PRICES of the Agreement, the following
additional terms shall apply:
a. The prices set forth in Schedule A with respect to any Initial
System shall be in effect for a period which shall commence upon
the effective date of this Product Attachment and shall expire
after six (6) months. Nortel may in its sole discretion,
thereafter, increase any prices set forth in Schedule A upon
sixty (60) days prior written notice to Buyer. The prices listed
in Schedule A shall apply to any Order for an Initial System
listed in Schedule A which shall be received by Nortel prior to
the effective date of any change in such prices as permitted by
this Section, provided that delivery date for such Initial System
as set forth in the applicable Order shall be not more than
one-hundred twenty (120) days after Nortel's acceptance of such
Orders.
b. The prices for Equipment and the fees for the right to use the
Software included in any Extension, prices for any Merchandise,
and charges for any Services, other than engineering and
installation Services provided with any Initial System shall be
as subsequently agreed in writing by Nortel and Buyer.
c. All transportation charges associated with the shipment of the
Products to Buyer for delivery are included in the prices, fees
and charges set-forth in the attached Schedule A.
7. TERMS OF PAYMENT
With respect to Section 5, TERMS OF PAYMENT, the following additional
terms shall apply:
a. With respect to each Initial System furnished hereunder by Nortel
to Buyer the price listed in Schedule A shall be invoiced by
Nortel in accordance with the following schedule:
(i) Twenty percent (20%) of such price may be invoiced upon
Nortel's acceptance of the Order for such Initial System,
<PAGE>
Page 7
(ii) Fifty percent (50%) of such price may be invoiced on the
date of shipment by Nortel to Buyer of the switch
component of such Initial System,
(iii) Twenty percent (20%) of such price may be invoiced on the
Turnover Date of such Initial System, and
(iv) Ten percent (10%) of such price may be invoiced on the
date of Acceptance of such Initial System.
b. With respect to each Extension furnished hereunder by Nortel to
Buyer, the applicable price determined in accordance with Section
6.b. of this Product Attachment shall be invoiced by Nortel in
accordance with the following schedule:
(i) Twenty percent (20%) of such price may be invoiced upon
Nortel's acceptance of the Order for such Extension,
(ii) Fifty percent (50%) of such price may be invoiced on the
date of shipment by Nortel to Buyer of the Equipment
included in such Extension,
(iii) Twenty percent (20%) of such price may be invoiced on the
Turnover Date with respect to such Extension, and
(iv) Ten percent (10%) of such price may be invoiced on the
date of Acceptance of such Extension.
c. With respect to each DMS 300/250 Certification furnished
hereunder by Nortel to Buyer, the price listed in Schedule A
shall be invoiced by Nortel in accordance with the following
schedule:
(i) One hundred percent (100%) of such price may be invoiced
upon Nortel's acceptance of the Order for such
Certification.
d. Notwithstanding Section 7.b., with respect to each GCAR0002
Software Upgrade furnished hereunder in conjunction with
DMS-300/250 Certification by Nortel to Buyer, the price listed in
Schedule A shall be invoiced by Nortel in accordance with the
following schedule:
(i) One hundred percent (100%) of such price may be invoiced
upon Nortel's delivery of such Software to Buyer.
e. Except as may be otherwise agreed in. writing by the parties
Nortel's prices for Merchandise and charges for any Services
determined in accordance with
<PAGE>
Page 8
Section 6.b. above may be respectively invoiced upon delivery of
such Merchandise and upon performance of such Services by Nortel.
8. TESTING, TURNOVER, AND ACCEPTANCE
Pursuant to Section 8.1 of the Agreement, the rights and obligations of
the parties with respect to testing, turnover and acceptance of any
Products o furnished hereunder and installed by Nortel shall be as
follows:
a. Nortel shall provide Buyer with five (5) days written notice
prior to commencing final commissioning and testing of any
Products installed by Nortel. Buyer shall cause an authorized
representative of Buyer to be present at the applicable
Installation Site to witness such final commissioning and
testing, provided that in the event such representative fails to
be present for any reason, Nortel shall not be required to delay
performance of such final commissioning and testing. In
connection with the final commissioning and testing of such
Products, Nortel shall test the Products for conformity with the
applicable Acceptance Criteria. When such tests have been
successfully completed, Nortel shall provide Buyer with written
notice ("Turnover Notice") that the applicable Products meet such
Acceptance Criteria and are ready for Buyer's testing for
compliance with such Acceptance Criteria. Buyer shall promptly
complete and return to Nortel Buyer's acknowledgment of receipt
of such Turnover Notice.
b. Following the Turnover Date, Buyer may test the applicable
Products for compliance with the Acceptance Criteria using the
tests and test procedures contained in Nortel's Installation
Manuals with respect to such Products. Within thirty (30) days
following the Turnover Date of the applicable Products, Buyer
shall notify Nortel either that Buyer has accepted such Products
in writing using Nortel's standard Acceptance Notice form or that
Buyer has not accepted such Products in which case Buyer shall
also provide Nortel with a written notice ("Notice of
Deficiency") which shall provide in reasonable detail the manner
in which Buyer asserts that the Products failed to meet the
Acceptance Criteria. With respect to any such details with which
Nortel agrees, Nortel shall promptly proceed to take appropriate
corrective action and following correction, Buyer may retest the
Products in accordance with this Section. Buyer shall accept the
Products in writing without delay when the tests pursuant to this
Section indicate that the Products comply with the Acceptance
Criteria.
c. With respect to any points of disagreement between Nortel and
Buyer concerning any Notice of Deficiency which are not resolved
by Nortel and Buyer within ten (10) days after the effective date
of the Notice of Deficiency, Buyer, at its option, may waive any
rights it may have on account of any such
<PAGE>
Page 9
points of disagreement, or require that the disputed points be
resolved by arbitration.
d. Buyer shall notify Nortel in writing of its election pursuant to
Section 8.c. not later than ten (10) days after the effective
date of the Notice of Deficiency, if any, given to Nortel by
Buyer. Upon expiration of such ten (10) day period unless Buyer
has notified Nortel to the contrary, Buyer shall be deemed to
have elected to waive its right with respect to any points of
disagreement then existing between it and Nortel with respect to
such Notice of Deficiency.
e. If Buyer makes timely election to require arbitration of such
disputed points, the arbitrator shall be chosen by mutual
agreement. If the parties cannot agree upon an arbitrator within
three (3) days of Buyer's election to arbitrate, each party shall
within three (3) days thereafter select an independent and an
unaffiliated person to be an arbitrator. These two (2) persons
selected shall select a third person, independent and
unaffiliated with either party, as a third arbitrator. The
arbitration shall be conducted in accordance with the Rules of
the American Arbitration Association, provided, however that the
Arbitrator(s) shall be empowered to reduce the Prices of Products
only to the extent that the Arbitrator(s) find that the benefit
of Buyer's bargain has been reduced. The Arbitrator(s) shall not
have any authority to grant partial or total rescission unless
the Arbitrator(s) determine that (i) Buyer has not substantially
received the benefit of its bargain; and (ii) money damages will
not provide an adequate remedy. Judgment upon the award rendered
by the Arbitrator(s) may be entered in any Court of competent
jurisdiction.
f. For purposes of this Product Attachment, "Acceptance" of the
applicable Products shall occur upon the earliest of the
following and Buyer shall upon request sign Nortel's Acceptance
Notice confirming such Acceptance without any conditions,
restrictions, or limitations of any nature whatsoever:
(i) The date on which Buyer accepts such Products pursuant to
Section 8.b. of this Product Attachment;
(ii) The failure of Buyer to provide Nortel with any notice
required by Section 8.b. of this Product Attachment, with
respect to such Products;
(iii) Use by Buyer of such Products or any portion thereof in
revenue-producing service at any time; or
(iv) Waiver by Buyer of its rights pursuant to Section 8.c. or
8.d.
g. Acceptance by Buyer of such Products pursuant to Section 8.f. of
this Product Attachment above shall not be withheld or postponed
due to.:
<PAGE>
Page 10
(i) Deficiencies of such Products resulting from causes not
attributable to Nortel, such as, but not limited to (A)
inaccuracy of information provided by Buyer, (B)
inadequacy or deficiencies of any materials, facilities or
services provided directly or indirectly by Buyer and
tested in conjunction with the applicable Products,
(C)other conditions external to the Products which are
beyond the limits specified by Nortel in the
Specifications for the Products and which are used by
Nortel in performance calculations with respect to the
Acceptance Criteria, or (D) spurious outputs from adjacent
material; or
(ii) Minor deficiencies or shortages with respect to such
Products which are attributable to Nortel, but of a nature
that do not prevent full and efficient operation of the
Products.
h. With respect to any deficiencies of the type described in Section
8.g.(i), Nortel shall at Buyer's request and expense assist Buyer
in the elimination or minimization of any such deficiencies. With
respect to any deficiencies or shortages as described in the
Section 8.g.(ii), Nortel shall, at Nortel's expense, take prompt
and effective action to correct any such deficiencies or
shortages.
i. In the event Buyer's Acceptance of any Products is withheld or
postponed due to any deficiencies of the type described in
Section 8.g.(i), Nortel shall invoice and Buyer shall pay
Nortel's charges and reasonable expenses incurred by Nortel
associated with Nortel's investigation of the reasons for Buyer's
withholding or postponement of such Acceptance.
9. WARRANTIES AND REMEDIES
With respect to Exhibit D, LIMITED WARRANTIES AND REMEDIES, the following
additional terms shall apply:
a. Except as set forth in Section 9.b. below, Nortel shall in
performance of its obligations under Section 2 of Exhibit D to
the Agreement, (i) ship replacement Equipment or complete the
repair within thirty (30) days of Nortel's receipt of the
Equipment to be replaced or repaired, and (ii) commence the
correction of the applicable installation Services within thirty
(30) days of receipt of notice from Buyer pursuant to Section 5
of Exhibit D to the Agreement. o -
b. For emergency warranty service situations involving the
Equipment, Nortel shall during the applicable Warranty Period use
all reasonable efforts to ship replacement Equipment within
twenty-four (24) hours of notification of the applicable warranty
defect by Buyer pursuant to Section 5 of Exhibit D to the
Agreement, provided that Buyer shall have requested such
emergency service. Nortel may invoice Buyer and Buyer shall pay
Nortel's surcharge for
<PAGE>
Page 11
emergency warranty services. If Nortel determines that due to the
particular circumstances, onsite technical assistance is
necessary, Nortel shall use all reasonable efforts to dispatch
emergency service personnel to the applicable Installation Site
within twenty-four (24) hours of receipt of notice from Buyer as
described above.
c. All Products to be repaired or replaced, both within and outside
of the applicable Warranty Period, shall be packed by Buyer in
accordance with Nortel's then-current instructions.
d. No later than ninety (90) days prior to the expiration of the
Warranty Period with respect to any Initial System, Nortel shall
offer to Buyer post-warranty support by means of an extended
service plan or other terms, provided that neither party shall
have any obligation with respect thereto except as may be agreed
upon in writing by the parties.
10. NOTICES
Pursuant to Section 18.5 of the Agreement, any notices by Buyer to Nortel
which are specific to this Product Attachment shall be delivered to the
following address:
Northern Telecom Inc.
2350 Lakeside Blvd.
Richardson, Texas 75082-4399
Attn: Senior Manager, Contracts Management & Negotiations
11. ADDITIONAL TERMS
The following additional terms shall apply to the Agreement:
(a) With respect to Section 14, BUYER'S RESPONSIBILITIES, the
following additional terms shall apply:
(i) Buyer shall be responsible for ordering and coordinating
with each applicable local telephone company the
installation of all central office trunks and test trunks
and Buyer shall be responsible for all utility charges
associated with the installation, testing, operation and
maintenance of Products furnished hereunder, including,
but not limited to, all applicable charges for such
central office trunks, test trunks and any tie lines.
(b) Nortel shall provide documentation with respect to the Products
in accordance with Schedule D to this Product Attachment. . .
<PAGE>
PAGE 12
STARTEC GLOBAL COMMUNICATION INC.
NORTHERN TELECOM
(Signature) (Signature)
<PAGE>
NORTHERN TELECOM INC. STARTEC GLOBAL
COMMUNICATIONS CORP.
By:. By:
(Signature) (Signature)
Name:. Name:
(Print) (Print)
Title: Title:
Date: Date:
<PAGE>
SCHEDULE A
PRODUCTS, PRICES AND FEES
EXHIBIT 1
NORTEL SHALL ENGINEER THE DMS-300/250 INITIAL SYSTEM PROVIDED
HEREUNDER IN ACCORDANCE WITH NORTEL'S STANDARD ENGINEERING
PRACTICES AND PROCEDURES. AFTER NORTEL HAS ENGINEERED EACH
DMS-300/250 INITIAL SYSTEM ORDERED BY BUYER HEREUNDER, NORTEL
SHALL PROVIDE BUYER WITH A DETAILED LIST OF THE COMPONENTS OF
SUCH DMS-300/250 INITIAL SYSTEM.
1.0 DMS-300/250 INITIAL SYSTEM (4800 PORT MODEL)
1.1 DMS-300/250 INITIAL SYSTEM INCLUDES:
A DMS-300/250 Initial System (4800 Port Model) shall
consists of the following configuration of major
Equipment and Software:
a ) SNSE front end, 16K Enhanced Network and other
common Equipment as follows:
o One (1) SuperNode-SE equipped with
BRISC60 processor, Message Switch, and
SLM III.
o One (1) 16K Enhanced Network to support
an Initial System wired for 4800 ports
and equipped with 4800 ports.
o One (1) LIS shelf wired for twelve (12)
LIU7's, equipped with twelve (12) LIU7
links.
o Two (2) ISME frames equipped with
service and test circuits as well as
four (4) Enhanced Digital Recorded
Announcement Machine circuit packs each
providing a maximum of four minutes of
recordable announcement time.
o Two (2) Input Output Equipment (IOE)
frames equipped with:
- > One (1) Mag Tape Device
- > Four (4) SCSI Disk Drive Units
- > Three(3) IOC Shelves -
- > Four (4) I/O Controllers -
- > Four (4) X.25 Automatic File
Transfer circuit packs
o Two (2) MIS frames equipped with
required inverts and terminal block
assemblies.
o One (1) Meridian Cabinet Spare Storage
(MCSS) cabinet to house switch spares.
o One (1) Power Distribution Center (PDC)
frames equipped with "A" and "B" feed
fuse panels & fuses as required.
<PAGE>
Page 2
o Miscellaneous Switch Room Equipment as follows:
- > One (1) Maintenance Administration Positions & MAP Furniture
- > Two (2) UDS 2440 Modems
- > Two (2) RTIF Terminals
- > One (1) MAP Printers
- > One (1) Helmsman Workstation and CD-ROM documentation disk
b) SuperNode Line and Trunk configurable equipment as follows:
o Five (5) DTEI frames wired for 4800 DS-0 ports equipped with
the following: - > Thirty Eight Hundred (3840) DS-0 SS7 ports
-> Nine Hundred and Sixty (960) DS-0 interworking ports.
o Note: Four thousand eight hundred (4800) DS-0 ports are wired
with Continuity Tone Detectors for SS7 and STRs for
reorigination.
o One (1) PDTE frame wired for 960 DS-0 ports equipped with the
following: -> Nine Hundred Sixty (960) DS-0 E1 ports
c) DMS-300/250 Standard Software Features as set forth in Exhibit 2
Section 2 of' Schedule A.
d) Nortel's standard complement of switch spares.
1.2 DMS-300/250 INITIAL SYSTEM (4800 PORT MODEL) Pricing
The firm price for the DMS-300/250 (4800 DS-0 Port Model) is One
Million Six Hundred Twelve Thousand Seven Hundred Forty Four Dollars
($1,612,744).
1.3 Power for the Initial System (4800 Port Model)
The price for the power plant with four(4) hour battery backup to
support the DMS~ 300/250 (4800 DS-0 Port Model) is Seventy Three
Thousand Five Hundred Eighty Six
Dollars ($73,586)..
1.4 Training for the Initial System (4800 Port MODEL)
One Hundred (100) days of training will be included for no additional
charge with the purchase of the DMS-300/250 (4800 DS-0 Port Model).
1.5 Post Cut-Over Support for the Initial System (4800 Port Model).
With the purchase of the Initial DMS-300/250 4800 Port Module Switch
System, Nortel will make available to the buyer Post Cut-Over Support
of six (6) weeks or 240 Manned Hours. This Service includes "Switch
Grooming" and "Feature and Call Through Testing" support. Nortel will
assign one (1) resource per Initial switch site, that will be available
during normal business hours (08:00AM-05:00PM, local time, Monday
through Friday, with one hour for lunch, except Nortel holiday). Post
Cut-over Support typically commence one (1) week prior to K Date and
consists of a six week effort.
<PAGE>
Page 3
2.0 DMS-300/250 Certification with GCAR0002 software upgrade.
With respect to the DMS-300/250 System equipment which Buyer obtained
from a source other than Nortel, Nortel shall not assume any support
obligations with respect thereto until such time as said DMS-300/250
System (currently at 111 Eighth Avenue, New York, New York),
successfully passes Nortel's certification process ("Certification").
2.1 DMS-300/250 Certification
The Certification includes Nortel's performance of a certification
audit of the referenced DMS-300/250 System equipment. Buyer is
responsible for the purchase of additional Equipment and /or licensing
of additional Software as may be required in order to meet the
Certification requirements.
The Certification will include, but not be limited to, the following:
a. Visual Inspection:
o Proper grounding
o Proper installation
b. Verification of Equipment and Software to determine if:
o Customer furnished equipment is in a fully
supportable configuration .........
o Circuit packs are at the current baseline
o Software is either within two (2) releases
of Nortel's current release on a SuperNode
or at BCS35 on a NT40
c. Testing, per Nortel's standards, only on a system not
in service:
o Peripheral Module (PM) diagnostics
o Power verification tests
o Traffic Simulation test (ICTS or ESIT)
d. Quality control Process Inspection Procedure and
e. Completion of Nortel's Switch Configuration
Control/Extended Product Inventory Control
Worksheets.
Upon successful completion of the Certification, Nortel shall certify that the
DMS-300/250 system is eligible for support by Nortel consisting of either the
services offered by Nortel under its Extended Service Plan, or preventive or
remedial maintenance on a time and material basis.
2.2 GCAR0002 Software Upgrade
GCAR0002 Standard Software Features as set forth in Exhibit 2
Section 3 of Schedule A.
2.3 Training
Fifty (50) days of training will be included with the purchase of
the certification and GCAR0002 software.
2.4 Certification with GCAR0002 Software Package Pricing
<PAGE>
Page 4
The firm price for the Certification with GCAR0002 software is
Nine Hundred Thirty One Thousand Seven Hundred Seventy Seven
Dollars ($931,777). This price includes a One Hundred and Twenty
Thousand Dollar ($120,000) buy back credit for NT-40 equipment,
and is contingent upon the purchase of the DMS-300/250 (4800 Port
Model).
GCAR0002 Software $896,777
DMS 300/250 Certification $35,000
3.0 Fully Wired and Fully Equipped DTEI Port Extension
3.1 DTEI Port Extension Fully Wired and Fully Equipped
All prices for DTEI Port Extensions include the following and are
sold in minimum increments of nine hundred sixty (960) DS-0
ports, configured for SS7/PTS or ISDN signaling at Buyer's
request:
a) DTEI hardware and XPM+;
b) Either UTR, STR, CTD for OTCs configured for SS7 or
PTS capability, or UTR and ISDN pre-processor
circuit packs configured for ISDN PRI capability;
c) Any required 16K ENET expansion or MS expansions,
d) Any required Service/Test Circuits;
e) Any required Power Distribution Center (PDC)
Equipment;
f) Optional DTEI Equipment as outlined in 1.2 below at
defined pricing levels; and
g) Spare circuit packs, if required, based on Nortel's
standard engineering sparing guidelines.
3.2 DTEI Port Extension Prices
Trunk Type Extension Price
PRI Long Distance Trunking Port $268/DS-0 port
SS7 Trunking Port $194/DS-0 port
a) Pricing for DTEI Port Extensions excludes software
license fees.
3.3 DTEI Optional Equipment
3.3.1 Dialable Wideband
Nortel shall provide two (2) NTAX78AA circuit packs per DTC
instead of the standard timeswitch circuit packs on new DTEI Port
Extensions for an incremental price of Five Thousand Dollars
($5,000.00) per DTC or Ten Thousand Dollars ($10,000.00) per DTEI
<PAGE>
START HERE
Page 5
frame. Additional spare, if required, is Two Thousand Five
Hundred Dollars ($2,500) per circuit pack.
3.3.2 Echo Cancellation
The incremental price to upgrade to the NT6X50EC circuit
pack-from the standard NT6X50AB circuit pack, prior to delivery,
shall be Seventy Dollars ($70.00) per port sold in 48 port
increments for Three Thousand Three Hundred Sixty Dollars
($3,360.00) each.
4.0 Fully Wired and Fully Equipped PDTC Port Extension
4.1 PDTC Port Extension Fully Wired and Fully Equipped
All prices for PDTC Port Extensions include the following and are
sold in minimum increments of nine hundred sixty (960) E1 ports:
a) PDTC hardware and XPM+;
b) Any required 16K ENET or MS
expansions,
c) Any required Service/Test Circuits;
d) Any required Power Distribution Center (PDC) Equipment;
e) Spare circuit packs, if required, based on Nortel's standard
engineering sparing guidelines.
4.2 PDTC Port Extension Prices
Trunk Type Extension Price
E1Trunking Port $228/port
a) Pricing for PDTC Port Extensions excludes software license
fees.
5.0 Add-On Port Pricing
5.1 Add-On SS7 & PRI Ports for Initial Systems Purchased under this
Agreement
In the event Buyer includes an Order for additional ports
("Add-On Ports") with Buyer's Order for the DMS-300/250 Initial
System described in Part I, Section 1.0, Buyer shall purchase
such Add-On Ports in minimum increments of nine hundred sixty
(960) Add-On Ports per DMS-300/250 Initial System. The below
listed Add-On Port price includes engineering, installation and
Equipment. In the event Buyer purchases Add-On Parts in
increments of less than nine hundred sixty (960) Add-On Ports per
DMS-300/250 Initial System, the prices for such Add-On Ports
shall be at Nortel's then current prices:
Trunk Type "Add-On" Price
SS7 Trunking Por S128/port '
<PAGE>
Page 6
PRI Long Distance Trunking Port $179/port
5.2 Add-On E-1 Ports for Initial Systems Purchased under this
Agreement
In the event Buyer includes an Order for E-1 ports Add-On Ports
("E-1 Ports") to be installed in an DMS-300/250 Initial System
purchased under this Agreement prior to Turnover date or includes
such an order with its Order for any Initial System described in
this Agreement, Buyer shall purchase such E-1 Ports in minimum
increments of nine hundred sixty (960) E-1 Ports per Initial
System and pay the purchase price set forth below. The price
includes engineering, installation and/ or testing associated
with E-1 Ports. In the event Buyer purchases E-1 Ports In
increments of less than nine hundred sixty (960) per Initial
System, the prices for such Add-On Ports shall be at Nortel's
then current prices.
Trunk Type "Add-On" Price
Add-On E-1 Ports $151/port
6.0 DMS-300/250 SYSTEM UPGRADE PRICING
6.1 DMS-300/250 SNSE System Upgrade to DMS-300/250 SN
In the event Buyer wishes to upgrade from a DMS-300/250 SuperNode
SE to a DMS-300/250 SuperNode, the price is Five Hundred Seventy
Five Thousand Dollars ($575,000.00)
<PAGE>
Page 7
SCHEDULE A
PRODUCTS, PRICES AND FEES
EXHIBIT 2
1.0 DMS-300/250 STANDARD SOFTWARE FEATURES
1.1 Nortel may deliver Software ordered hereunder in a single
Software load which may include Software which Buyer has not
yet licensed ("Non-Licensed Software"). Except as set forth in
Section 1.2 below, Buyer shall not be entitled to use such
Non-licensed Software, until such time as the applicable right
to use fees are paid by Buyer pursuant to Section 1.5.
1.2 For the purpose of gathering market trial information and
prior to payment of any applicable right-to-use fees, certain
Non-licensed Software may be placed in service by Buyer on a
limited, non-revenue-generating, trial basis only ("Feature
Trial"). Buyer may request the right to evaluate such
Non-licensed Software for a maximum period of six (6) months
commencing as of the date of Nortel's written consent to such'
Feature Trial. Nortel shall respond to Buyer's request as
described above in writing. ' ........ Within ten (10)
business days following expiration of the agreed to Feature
Trial period, Buyer shall notify Nortel in writing of its
plans for activation or deactivation of such Non-licensed
Software, and the corresponding number of units activated, i f
applicable.
1.3 Upon Buyer's placement of any Non-licensed Software
in-service, Buyer shall pay the applicable right-to-use fees
for such Non-licensed Software pursuant to this Agreement,
except as described in Section 1.2. Buyer shall also have the
option to pay the applicable right-to-use fees for any
Non-licensed Software upon installation of a Software load
containing such Non-licensed Software. For any Non-licensed
Software that is installed and added pursuant to a product
computing module load ("PCL") and or non-computing module load
("NCL"), if any, the right-to-use fees shall be the list price
for such feature in effect as of the date of activation.
1.4 To ensure Buyer's proper activation and/or usage of the
appropriate Software, Buyer shall properly notify Nortel at
the address specified in Section 9 of this Product Attachment
to the attention of Director, Sales Engineering, prior to the
activation and/or usage by Buyer of any Software. Buyer shall
identify all Software being activated and/or used (including
the number of units activated, if applicable) in each Initial
System.
1.5 Nortel shall promptly review notification from Buyer provided
pursuant to Section 1.4 above and identify any applicable
prerequisite Equipment or Software required by Buyer prior to
activation and/or usage of the applicable Software. Nortel
shall respond to Buyer's written notice by means of a price
quotation. Such price quotation shall include Nortel's consent
to activate and/or use such Software or notification that such
Software requires engineering to determine whether the current
switch configuration will require additional Equipment prior
to activation and/or usage.. Upon Buyer's written acceptance
of Nortel's price quotation, Nortel shall grant its consent to
<PAGE>
Page 8
Buyer to activate and/or use such Software prior to payment of
the applicable right-to-use fees. However, under no
circumstances shall such Software be activated and/or used by
Buyer prior to Buyer's acceptance of Nortel's price quotation.
Nortel shall invoice Buyer for all applicable right to use
fees and associated feature 'activation engineering charges.
One hundred percent (100%) of such invoiced right to use fees
and engineering charges shall be due and payable within thirty
(30) days of the date of Nortel's invoice therefor.
1.6 Notwithstanding the foregoing, Buyer shall not be required to
pay additional right to use fees associated with the Software
licensed prior to the initial date of this Product Attachment.
1.7 Nortel reserves the right, every six (6) months to submit a
written report for each site containing a Software load. The
written report shall identify all Software activated and/or
used (including the number of incremental units activated, if
applicable) by Buyer during the applicable reporting period.
Buyer shall audit the report against Purchase Order(s) which
have been submitted by Buyer and accepted by Nortel during the
applicable period to determine the existence of any
discrepancies. Buyer shall submit such audited written report
to Nortel at the address specified in Section 9 of this
Product Attachment to the attention of Director, Sales
Engineering, within thirty (30) days from receipt of such
request.
1.8 Nortel also reserves the right to access by remote polling or
to .conduct an on-site inspection of any site in which a
Software load is installed and/or to perform an on-site review
of Buyer's books and records related to such site to verify
activation and/or usage of Software.
1.9 Nortel shall issue invoices, for any applicable prices,
charges or fees, in addition to those amounts previously
invoiced, as a result of Buyer's activation and/or usage of
any Software that does not appear on Nortel's written report
or that appear as a result of Nortel's remote polling of an
Initial Systems.
1.10 Upon payment of the applicable fight to use fees for Software
activated and/or used by Buyer, Buyer shall receive a
non-exclusive paid-up license to use such Software in
accordance with the provisions of this Agreement. Nortel may
immediately terminate the applicable license granted hereunder
for Buyer's failure to pay the applicable fight to use fees
for such Software which has been activated and/or used.
1.11 The obligations of Buyer under this Section ! shall without
limitation survive the termination of this Agreement and shall
continue if the Software is removed from service. Buyer agrees
to indemnify Nortel or Third Party Software Vendors as
appropriate for any loss or damage resulting from a breach of
this Section 1.
<PAGE>
Page 9
2.0 GCAR0002 Software included in the DMS-300/250 Initial System
The following represents the GCAR0002 Software packages that
are included in the price of the DMS-250/300 Initial System
(4800 Port Model) The following is a list of Software only and
does not include any/all required Equipment to provide feature
functionality
2.1 CARRIER BASE S/W
<TABLE>
<CAPTION>
FEATURE/PACKAGE DESCRIPTION
--------------- -----------
<S> <C>
BASE0001 Base
BASE0008 Base SNSE Series 60 Processor
GWYB0001 GWYB GWY Base
TEL00001 TEL Telecom Layer
TEL00008 TEL CCS7 Base
TEL00003 TEL Gateway Screening
UCSB0001 UCSB UCS Base
ISDN0001 ISDN Platform Supt DMS250
N00R0001 In-switch N00/NXX Service
N00R0002 N00R N00/NXX TCAP Service
NSER0001 NSER Network Services
NSER0002 NSER TCAP Auth & Acct Validation
UTRS0001 UTRS UCS Trans & Routing
GATE0016 DCME Control
GATE0017 GATE0 GWECHO
GATE0018 N5 Digital
GATE0041 TS 16 Control of Echo Cancellers
GATE0042 GATE0 ISUP92
GATE0048 GATE0 EARLYACM
</TABLE>
<PAGE>
Page 10
3.0 GCAR0002 Software included in the Software Upgrade
The following represents the GCAR0002 Software packages that
are included in the price of the Certification with GCAR0002
software upgrade. The following is a list of Software only and
does not include any/all required Equipment to provide feature
functionality..
3.1 CARRIER BASE S/W
<TABLE>
<CAPTION>
Feature/Package Description
--------------- -----------
<S> <C>
BASE0001 Base
BASE0006 Base SN Series 60 Processor
GWYB0001 GWYB GWY Base
TEL00001 TEL Telecom Layer
TEL00008 TEL CCS7 Base
TEL00003 TEL Gateway Screening
UCSB0001 UCSB UCS Base
ISDN0001 ISDN Platform Supt DMS250
N00R0001 In-switch N00/NXX Service
N00R0002 N00R N00/NXX TCAP Service
NSER0001 NSER Network Services
NSER0002 NSER TCAP Auth & Acct Validation
UTRS0001 UTRS UCS Trans & Routing
GATE0016 DCME Control
GATE0017 GATE0 GWECHO
GATE0018 N5 Digital
GATE0041 TS 16 Control of Echo Cancellers
GATE0042 GATE0 ISUP92
GATE0048 GATE0 EARLYACM
</TABLE>
<PAGE>
Page 1
4.0 DMS-300/250 Optional Software
4.1 GCAR0002 Optional Software to the DMS-300/250 System
The following represents the GCAR0002 Optional Software packages that
are not included in the price of the DMS-300/250 Initial System (4800
Port Model) or the GCAR0002 software upgrade, as defined in Schedule A,
Part I, of this Product Attachment. The following Software represents
those feature packages that may be ordered by Buyer at an additional
price for a DMS-300/250 Initial System and does not include any and/or
all required Equipment to provide feature functionality.
<TABLE>
<CAPTION>
Order Code Description List Price
---------- ----------- ----------
<S> <C> <C> <C> <C>
GATE0001 GATE0 ANSI7PLUS $485,000
GATE0010 GATE0 AUTOSERV See Note The fee is $90,000
for U.S. applications.
The fee is $145,000
for U.K. applications
GATE0038 GATE0 DSTOMPEG $75,000
GATE0013 GATE0 GWY800 $265,000
GATE0020 GATE0 GWYR2 $125,000 No cost if BAB
patches were
licensed
GATE0027 GATE0 ISDNRTE $120,000
GATE0044 GATE0 RCVDCL I $65,000
GATE0024 GATE0 SERVSCRN $220,000
GATE0039 GATE0 TCPIP $110,000
CAIN0001 CAIN Base No Charge
CAIN0500 CAIN CUSTDP Trigger $100,000
CAIN0200 CAIN Extension Parms $ 50,000
CAIN0100 CAIN Messages No Charge
CAIN0300 CAIN SCP Simulator $30,000
CAIN0501 CAIN SPECDIG Trigger $100,000
CAIN0400 CAIN Test Query Tool $30,000
CRDS0001 CRDS Card Services $120,000
CRDS0003 CRDS MVP Card $50,000
Services
CRDS0002 CRDS TCAP Card $25,000
Services
N00R0100 N00 Routing Base No Charge
NPRI0001 NPRI PRI Netwk $25,000
Interface
NSER0100 Network Services Base No Charge
NSER0003 NSER Inter/Intra IMT $50,000
PRLT0001 PRLT ISDN PRI RLT $175,000
UDWS0001 UDWS UCS Dialable $175,000
Widebnd
</TABLE>
<PAGE>
Page 2
SCHEDULE B
SERVICES AND CHARGES
ENGINEERING
1. Nortel shall engineer each System furnished hereunder in accordance
with Nortel's engineering practices applicable to such Initial System
at the time such engineering is performed.
2. Nortel's charges for engineering each Initial System are included in
the prices and fees for the Initial System set forth in Schedule A.
3. The provision of any other engineering by Nortel and the charges
associated therewith shall be as subsequently agreed in writing by
Nortel and Buyer.
INSTALLATION
1. Nortel shall install each Initial System furnished hereunder at the
applicable Installation Site in accordance with Nortel's installation
practices applicable to such Initial System at the time such
installation is performed.
2. Nortel's charges for performance of such installation are included in
the prices and fees for the Initial System set forth in Schedule A.
3. The provision of any other installation by Nortel and the charges
associated therewith shall be as subsequently agreed in writing by
Nortel and Buyer.
4. The parties agree to mutually coordinate the installation and testing
of the Products in a timely fashion to minimize any disruptions to the
Buyer's business activities and intereference with other contractors.
TRAINING
1. With each Initial DMS 300/250 System furnished hereunder, Nortel shall
provide to Buyer at no additional charge One Hundred (100) days of
training at a Nortel Training Center. Such training shall be in any of
the courses scheduled to be provided at that Training Center as set
forth in NTI's applicable Technical Training Course catalog with
respect to the Products described in Schedule A to this Product
Attachment.
2. Buyer shall be responsible for the payment of all travel and living
expenses of its employees whom Buyer sends to receive such training.
<PAGE>
Page 2
3. Additional Training in such courses shall be provided by Nortel to
Buyer subject to availability and scheduling of such courses. NTI may
change the schedule of such courses at any time. Such additional
training shall be provided at NTI's then-current charges.
4. All training provided by NTI shall consist of such materials and cover
such subject as NTI in its sole discretion determines to be
appropriate. Nortel makes no representation concerning the ability of
anyone to satisfactorily complete any training.
5. Nortel may add to, or delete from, the subject matter and or medium of
any of the training courses which NTI provides. In addition, NTI may
reschedule such courses as NTI determines to be appropriate.
6. The availability of any training to Buyer as set forth above shall be
subject to any prerequisites identified by NTI in its training catalog
or other documentation with respect to such training.
ADDITIONAL SERVICES
1. All other services to be furnished hereunder shall be subject to
written agreement of the parties which shall set forth the terms and
conditions applicable to the provision of such services and a
description of such services and the charges for such services.
<PAGE>
SCHEDULE C
DELIVERY
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
SCHEDULE D
DOCUMENTATION
Certain documentation with respect to the Products shall be made available to
Buyer on CD-ROM pursuant to the terms and conditions set forth below.
In addition, Nortel may furnish to Buyer such other documentation with respect
to the Products as Nortel deems appropriate.
HELMSMAN TERMS AND CONDITIONS
1. DEFINITIONS
"CD-ROM" shall mean a compact disk with read-only memory.
"CD-ROM Software" shall mean the computer programs which provide basic logic,
operating instructions or user-related application instructions with respect to
the retrieval of CD-ROM Documentation, along with the documentation used' to
describe, maintain and use such computer programs.
"CD-ROM Documentation" shall mean the documentation that Nortel makes available
to its customers on CD-ROM with respect to DMS-250, DMS-300, DMS-300/250 and/or
DMS-STP Systems.
2. SCOPE
With the delivery of each Initial System ordered by Buyer, Nortel shall deliver
a CD-ROM on which the appropriate CD-ROM Documentation is contained and a user
manual which shall set forth the procedures by which Buyer may use the CD-ROM
Software to access to the CD-ROM Documentation.
Buyer shall be solely responsible for obtaining, at its cost and expense, any
computer or other equipment and software required to use the CD-ROM, CD-ROM
Software and/or CD-ROM Documentation.
Buyer may order additional CD-ROMs from Nortel at Nortel's then current fees
therefor, and any such additional CD-ROMs shall be subject to these terms and
conditions.
3. LICENSE
Upon delivery of the CD-ROM, Nortel shall grant to Buyer a non-exclusive,
non-transferable and non-assignable license, subject to these terms and
conditions:
<PAGE>
Page 2
(a) to use CD-ROM Software solely to access to the CD-ROM Documentation; and
(b) to use the CD-ROM Documentation solely to operate and maintain the Initial
System with which it was delivered.
Buyer acknowledges that, as between Nortel and Buyer, Nortel retains title to
and all other rights and interest in the CD-ROM Software and CD-ROM
Documentation. Buyer shall not modify, translate or copy the CD-ROM Software or
CD-ROM Documentation without Nortel's prior written consent. Buyer shall hold
secret and not disclose to any person, except Buyer's employees with a need to
know, any of the CD-ROM Software or CD-ROM Documentation.
Buyer shall not sell, license, reproduce or otherwise convey or directly or
indirectly allow access to the CD-ROM Software or CD- ROM Documentation to any
other person, firm, corporation or other entity.
Except to the extent expressly set forth in this Schedule D, Nortel shall have
no obligations of any nature whatsoever with respect to the CD-ROM Software or
the CD-ROM Documentation.
4. DISCLAIMER OF WARRANTY AND LIABILITY
NORTEL MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY NATURE WHATSOEVER WITH
RESPECT TO THE CD-ROM, CD-ROM SOFTWARE, CD-ROM DOCUMENTATION OR ANY INFORMATION
CONTAINED ON ANY OF THE FOREGOING OR ANY RESULTS OR CONCLUSIONS REACHED BY BUYER
AS A RESULT OF ACCESS TO OR USE THEREOF, OR WITH RESPECT TO ANY OTHER MATTER OR
SERVICE PROVIDED BY NORTEL, WHETHER STATUTORY, EXPRESS OR IMPLIED, INCLUDING,
BUT NOT LIMITED TO, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR AGAINST INFRINGEMENT. NORTEL SHALL NOT BE LIABLE FOR ANY DIRECT,
SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES OF ANY NATURE WHATSOEVER
INCLUDING ANY SUCH DAMAGES WHICH MAY ARISE OUT OF THE USE OF OR INABILITY TO USE
OR ACCESS THE CD-ROM, THE CD-ROM SOFTWARE, THE CD-ROM DOCUMENTATION, AND FURTHER
INCLUDING LOSS OF USE, REVENUE, PROFITS OR ANTICIPATED SAVINGS REGARDLESS OF HOW
SUCH DAMAGES MAY HAVE BEEN CAUSED.
5. GENERAL
Nothing contained in this Schedule D shall limit, in any manner, Nortel's right
to change the CD-ROM Software or CD-ROM Documentation or the design or
characteristics of Nortel's Products at any time without notice and without
liability.
ALL INFORMATION FURNISHED REGARDING PROPERTY FOR SALE. RENTAL OR FINANCING IS
FROM SOURCES DEEMED RELIABLE. BUT NO WARRANTY OR REPRESENTATION IS MADE AS TO
THE ACCURACY THEREOF AND ,SAME IS SUBJECT TO ERRORS. OMISSIONS. CHANGE OF PRICE.
RENTAL OR OTHER CONDITIONS. PRIOR SALE LEASE OR FINANCING OR WITHDRAWAL WITHOUT
NOTICE
CANUS 1 CABLE SYSTEM
INDEFEASIBLE RIGHT OF USE AGREEMENT
BETWEEN
TELEGLOBE CANTAT-3 INC.
AND
STARTEC INC.
TELEGLOBE REGISTRY NO.: TC3-229
<PAGE>
THIS AGREEMENT, made and entered into as of September 15th, 1997 (the
"Effective Date").
BY AND BETWEEN:
TELEGLOBE CANTAT-3 INC., a corporation incorporated under the laws of
Barbados, having its principal office at 1st Floor, Building 2, Chelston Park,
(P.O. Box 1210, Bridgetown), Collymore Rock, St. Michael, BARBADOS, hereinafter
referred to as "TC-3";
AND:
STARTEC INC., a corporation incorporated under the laws of Maryland, having
its principal office at 10411 Motor City Dr., Bethesda, Maryland 20817, U.S.A.,
hereinafter referred to as the "Grantee".
WHEREAS TC-3 owns capacity on the CANUS I cable system (the "CANUS 1
System");
WHEREAS TC-3 is entitled to transfer capacity on the CANUS 1 System on an
indefeasible right of use ("IRU") basis;
WHEREAS the Grantee desires to acquire from TC-3, on an IRU basis, capacity
on the CANUS 1 System;
NOW, THEREFORE, the Parties agree as follows:
ARTICLE 1 INTERPRETATION
1.1 Definitions. This Section 1.1 lists all defined terms used in this
Agreement. Capitalized terms used in any provision of this Agreement and not
otherwise defined therein shall have the following meanings, respectively,
unless the context otherwise requires.
(A) "Agreement" shall mean this Agreement and the schedule attached
hereto, as amended from time to time;
(B) "Assignable Capacity" shall mean the capacity for sale, assignment
or disposition on the CANUS I System as determined from time to
time. The "Initial Assignable Capacity" of the CANUS I System is
equal to 1,260 half-MIUs;
<PAGE>
-2-
(C) "Branching Unit" shall mean a junction point for the CANUS I
System, and includes a housing and any associated plant and
equipment (including any spare plant and equipment);
(D) "Business Day" shall mean any day (except a Saturday, Sunday or
other day on which commercial banks in the United States are
authorized by law to close);
(E) "Dollar" and "dollars" and the symbol "$" shall mean lawful money
of the United States of America;
--
(F) "Effective Date" shall mean October, 15th 1997. This Agreement
shall be deemed to have taken effect as of the Effective Date,
notwithstanding the formal date of its execution by the Parties;
(G) "Libor" shall mean the London Inter-Bank Offered Rates;
(H) "MIU" shall mean a unit designated as the minimum unit of
investment between System Interfaces of the CANUS I System and
shall consist of a Virtual Container 12 (VC-12), allowing the use
of 2,048,000 bits per second (nominal 2 Mbit/s) digital stream.
MIU may be expressed in terms of whole or half-MIUs.
(I) "Parties" shall mean all of the parties hereto collectively; and
"Party" shall mean any one of them;
(J) "Person" shall mean an individual, corporation, company,
cooperative, partnership, trust or unincorporated association and
pronouns have a similarly extended meaning;
(K) "System Interface" shall be the input/output ports on a
distribution frame (excluding the distribution frame itself) which
shall terminate either electrical or optical connections from the
CANUS I System. These terminations shall be in accordance with
ITU-T recommendations G.703, G.708, G.709 and G.957 and shall be
of STM-1 and or 139,264,000 bit/s capacity. The distribution frame
shall be regarded as a system interface location where the CANUS 1
System connects with other transmission facilities or equipment.
The following terms are defined in the Sections indicated below.
<TABLE>
<CAPTION>
TERM SECTION
<S> <C>
"CANUS 1 System" Preamble
"Capacity" 2.1
"DISPUTE" 15.1
"Grantee" Preamble
"Granting Price"
</TABLE>
<PAGE>
3.1
<TABLE>
<S> <C>
"IRU" Preamble
"Losses" 14.1
"Proprietary Information" 16.5
"Representatives" 16.5
"Segment A" Schedule A
"SEGMENT A PRICE" 3.2
"Segment D" Schedule A
"TC-" Preamble
</TABLE>
1.2 Gender. Any reference in this Agreement to any gender shall include all
genders and words used herein importing the singular number only shall include
the plural and vice versa.
1.3 Headings. The division of this Agreement into Articles, Sections,
Subsections and other Subdivisions and the insertion of headings are for
convenience of reference only and shall not affect or be utilized in the
construction or interpretation hereof.
1.4 Severability. Any Article, Section, Subsection or other Subdivision of this
Agreement or any other provision of this Agreement which is proven to be
illegal, invalid or unenforceable shall be severed herefrom and shall be
ineffective to the extent of such illegality, invalidity or unenforceability and
shall not affect or impair the remaining provisions hereof, which provisions
shall be severed from any illegal, invalid or unenforceable Article, Section,
Subsection or other subdivision of this Agreement or any other provision of this
Agreement and shall otherwise remain in full force and effect.
1.5 Entire Agreement. This Agreement constitutes the entire agreement by and
between the Parties pertaining to the subject matter hereof and supersedes all
prior agreements, understandings, negotiations and discussions, whether oral or
written, of the Parties. Except as provided for herein, this Agreement may be
amended only by an instrument in writing signed by both Parties.
1.6 Governing Law. This Agreement shall be interpreted and construed in
accordance with the laws of Barbados, without giving effect to the laws of such
state governing conflicts of laws.
1.7 Ownership. Nothing in this Agreement shall vary rights of ownership in those
segments of the CANUS I System in which IRUs have been granted to the Grantee.
Ownership of all segments of the CANUS 1 System shall remain with TC-3 and the
other owners of the CANUS I System.
<PAGE>
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ARTICLE 2 GRANTING OF IRU
2. l Granting. As and from the Effective Date, TC-3 grants to the Grantee, on an
IRU basis, an interest in one (1) half-MIU in Segment D of the CANUS 1 System as
well as an IRU in Segment A of the CANUS 1 System (all such segments hereinafter
defined as the "Capacity") to the extent required for the use of its capacity in
the CANUS I System (exclusive of any interconnection between cable systems,
leases, Droits-de-Passage or other rearward facilities arrangement for which the
Grantee shall be solely responsible), for providing telecommunications services
between points in or reached via the United States of America on the one hand,
and points reached via Canada on the other hand.
The IRU granted herein does not include the right to use the Capacity for
traffic terminating in Canada, unless otherwise permitted by applicable law.
ARTICLE 3
GRANTING PRICE AND PRICE FOR SEGMENT A
3.1 Granting Price for the Capacity. The aggregate granting price for the
Capacity, exclusive of the right granted in Segment A shall be $28, 100 (the
"Granting Price").
3.2 Price for Segment A. For the right to use that portion of Segment A of the
CANUS 1 System granted to the Grantee, the Grantee shall pay a lump sum of
$3,900 (the "Segment A Price"), namely $3,900 per MIU.
3.3 Payment of the Granting and Segment A Prices. The Grantee hereby agrees and
covenants to pay the Granting Price and the Segment A Price by wire transfer,
certified cheque or
LUMP SUM
bank draft m the aggregate amount of $32,000. The Granting and Segment A Prices
shall be payable by the Grantee no later than (i) the thirtieth (30th) day
following receipt by the Grantee of an invoice to that effect, or (ii) the
Effective Date, whichever comes last.
ARTICLE 4
PAYMENT OF CHARGES AND EXPENSES
4.1 O&M Charges. The Grantee shall pay a charge for the operating and
maintenance of Segment A and Segment D. For Segment D, the operating and
maintenance charges shall consist of the standby charges and the running
charges:
(A) the standby charges for Segment D (including but not limited
to the cost of attendance, testing, adjustments, storage of
plant and equipment, the maintenance of
<PAGE>
the procurement of cable ship services covering, inter alia,
depreciation, ship retrofit, crew, insurance (other than
at-sea insurance), in-port expenses, the storage of
submersible plant, remotely operated vehicles and other
devices, custom duties and other taxes relating thereto) shall
be recovered through an annual fixed charge of $2,680 per
half-MIU payable quarterly in advance by the Grantee, which
amount shall also include the operating and maintenance costs
of Segment A. Such annual fixed charge shall be adjusted as of
January 1st of each year using the consumer 'price index in
the United States as published by the United States Department
of Labour for the immediately preceding calendar year.
(B) The running charges, which shall be limited to the recovery of
the direct cost incurred in connection with a repair involving
Segment D (including, but not limited to, the cost of repair
(including repair at sea), of fuel, at-sea insurance, costs of
cable working exercises, cable-handling costs, additional crew
at-sea, crew overtime, victualling, telecommunications,
mobilization and demobilization expenses, consumables,
replenished equipment, custom duties and other taxes relating
thereto) shall be apportioned among the grantees of IRUs on
Segment D in accordance with the following formula:
A = B X D
---
C
where:
A = portion of the running charges to be borne by the
Grantee
B = the Capacity (expressed in terms of half- MIUs)
acquired pursuant to this Agreement
C = total Assignable Capacity of the CANUS I System
on the date of the invoice (expressed in terms of
half-MIUs)
D = total running charges incurred
4.2 Restoration Costs. The Granting Price includes the costs of restoration for
the first thirty (30) days of outage on the CANUS-I System per calendar year
(regardless of the Effective Date of this Agreement) for the first ten (10)
years of the term of this Agreement. The Grantee shall pay its proportionate
share (as calculated by TC-3) of the cost of any additional restoration required
beyond the first thirty (30) days per year and shall also pay its proportional
share of any and all restoration required after year ten (10) of the term of
this Agreement.
<PAGE>
-6-
4.2 Invoicing and Payments. From and after the Effective Date, TC-3 shall
submit, or cause to be submitted, to the Grantee an invoice for costs provided
for hereinabove. Invoices for costs referred to in Section 4. l shall be
submitted on a quarterly basis in advance. All payments shall be made no later
than the last day of the month immediately following the month the invoice was
submitted in order that the funds are available for use by TC-3 by the end of
said month. Invoices rendered shall contain details to support the amounts
contained therein and shall identify charges and costs related to Segment A and
Segment D, all operating and maintenance and restoration charges and costs
allocatable to the Capacity and payable by the Grantee. Invoices shall be paid
in the currency in which the invoice is rendered.
All payments made by the Grantee under this Agreement shall be made by wire
transfer, certified cheque or bank draft and be free and clear of all bank
charges, commissions or other charges.
In the event of non-payment of any sum under this Agreement by the due date, an
interest charge shall be paid on overdue amounts calculated on the day-to-day
balance from such date, but excluding the actual payment date thereof. The
annual rate of interest shall be the higher of (i) sixteen percent (16%) or (ii)
eight (8) percentage points above the ninety (90)-day Libor rate of interest as
published by the Wall Street Journal on the date the bill is due to be paid or,
if such is not a Business Day, the next Business Day.
TC-3 may designate, at its sole discretion, any Person for the purpose of
invoicing or receiving payment of all costs charged to the Grantee hereunder
(including the Granting Price and the Segment A Price). TC-3 shall notify in
writing the Grantee of the identity of such Person. Notwithstanding such
designation, TC-3 only shall be liable towards the Grantee for any and all
obligations of TC-3 as provided hereunder.
4.3 Disputes. Should any bill or part thereof be under dispute as to its
correctness, then interest shall not accrue on the amount of such bill provided
always that:
(A) before the payment date, TC-3 (or its designee, as the case
may be) is advised by letter or fax by the Grantee of the
amount in dispute and the nature of that dispute; and
(B) TC-3 (or its designee, as the case may be) shall, if requested
by the Grantee within thirty (30) days of receipt of the bill
in dispute, submit a replacement bill omitting the amount in
dispute, and such replacement bill shall become due for
payment on the date the disputed bill was due. The amount in
dispute shall be investigated by the Parties in good faith
within a thirty (30)-day period and if the amount in dispute
or part of it is found to be correct, any necessary bill with
respect to such amount or part of it shall be raised and paid.
Notwithstanding the foregoing, if on investigation of the
amount in dispute or part thereof such amount is found to be
correct, then the Grantee shall pay interest at the rate
determined hereabove on the unpaid amount or part of it which
is found to be correct from the day after the due
<PAGE>
-7-
date for payment of the original bill in dispute up to and
including the date the outstanding payment is received by TC-3
(or its designee, as the case may be).
4.4 Adjustments. In the case of invoices containing any costs billed on
preliminary billing basis, appropriate adjustments will be made in subsequent
invoices promptly after actual costs involved are determined to insure that the
Grantee bears a proper share of the costs as provided under this Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE GRANTEE
5.1 Representations and Warranties. The Grantee represents and warrants to TC-3
that the Grantee has obtained all relevant telecommunications licenses necessary
for the acquisition of the Capacity, the execution and delivery of and the
performance of its obligations under this Agreement and shall use all reasonable
efforts to have continued in effect such exemptions, 'approvals, consents,
authorizations, licenses and permits as long as it shall have obligations under
this Agreement.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF TC-3
6.1 Representations and Warranties. TC-3 represents and warrants to the Grantee
that it is authorized under the CANUS 1 C&MA to assign interests in the capacity
as contemplated hereunder.
6.2 No representation on the Capacity. Except as expressly set forth in this
Agreement, TC-3 has not made or shall not be deemed to have made any
representations or warranties whatsoever with respect to the Capacity. TC~3
expressly disclaims with respect to the Grantee and the Grantee hereby expressly
waives, releases and renounces, all warranties, obligations and liabilities of
TC-3 and all rights, claims and remedies against TC-3, express or implied,
arising by law or otherwise, with respect to any failure, delay in installation,
cancellation of, non- conformance, temporary or permanent failure of or defect
in the CANUS 1 System or the Capacity, as the case may be, whatsoever shall have
been the cause and however long it shall have lasted (whether or not TC-3 has
been advised of the possibility of such loss or damage arising). Without
limiting the generality of the foregoing, the Grantee acknowledges and agrees
that the Capacity is being assigned on an "as is, where is" basis.
<PAGE>
-8-
ARTICLE 7
COVENANTS OF THE GRANTEE
7.1 Covenants of the Grantee. During the term of this Agreement, the Grantee
shall:
(A) pay to TC-3 (or its designee, as may be notified in writing to
the Grantee, as the case may be) when they become due all
amounts payable under this Agreement and otherwise comply with
all other provisions of this Agreement;
(B) maintain, at its own expense, all appropriate insurance policy
against all risks associated with the Capacity as reasonably
deemed necessary by the Grantee;
(C) undertake to keep the Capacity free of liens, charges and
other encumbrances (including any inchoate liens or floating
charges) and shall reimburse TC-3 (or its designee, as the
case may be), and in the event of accidental breach, to take
all steps required to discharge such liens, charges and other
encumbrances;
(D) not use the Capacity for any illegal, unlawful, fraudulent or
unauthorized purposes and, without limiting the generality of
the foregoing, use the Capacity, at all time, in a manner
consistent with the applicable authorization, licences and
permits for the landing, construction and operation of the
CANUS 1 System;
(E) use the Capacity in such a way as to avoid degrading the
overall performance of the CANUS I System or causing
interruptions of, or interference with, impairment or
degradation of the use of any other capacity in the CANUS 1
System. If, after notification by TC-3, the Grantee does not
take immediate and effective action to comply with its
obligations, TC-3 may take reasonable action required to
protect the other capacity in the CANUS I System up to and
including the interruption of the Capacity responsible for the
interruption, interference, impairment or degradation. The
Grantee shall bear the total cost of any protective measures
reasonably required by TC~3 to be installed on the CANUS I
System resulting from the use of the CANUS 1 System by the
Grantee or any subgrantee, lessee or assignee of the Grantee
or any customer of either the Grantee or any subgrantee,
lessee or assignee of the Grantee.
(F) upon at least a 24-hour prior notice or, at any time, if the
situation or circumstance so justify, make available to TC-3
the Capacity for such test and adjustment as may be necessary
for the Capacity to be maintained in efficient working order.
<PAGE>
-9-
ARTICLE 8
COVENANTS OF TC-3
8.1 Books and Records. TC~3 shall keep and maintain such books, records,
vouchers and accounts of all costs that it receives from the Maintenance
Authority with respect to the repair and restoration of the CANUS 1 System as
may be appropriate to support the billing of any running charges or restoration
costs by TC-3 and such books that relates to the running charges and restoration
costs shall at all reasonable times be made available for inspection by the
Grantee for a period of three (3) years from the date of billing. At Grantee's
request and at Grantee's sole cost and expense, TC-3 will request an audit under
the CANUS 1 C&MA to the extent that it has the right to do so.
8.2 Sharing of Liquidation Proceeds and Costs. In the event of liquidation of
Segment A or any part thereof and/or Segment D or any part thereof by sale or
other disposition, TC-3 shall share with the Grantee any proceeds or costs of
such liquidation, sale or disposition received or incurred by TC-3, including,
without limitation, any costs related to the removal of such Segment A and/or
Segment D. The Grantee's share of such proceeds or costs shall be determined in
accordance with the following formula:
A = B X D
---
C
where:
A = portion of the net proceeds or costs to be paid to, or
payable by, the Grantee
B = the Capacity (expressed in terms of half-MIUs)
C = total Assignable Capacity of the CANUS 1 System on the
date of disposition or liquidation (expressed in terms
of half-MIUs)
D = total net proceeds or costs of disposition or
liquidation
8.3 Maintenance of the Capacity. TC-3 agrees to act reasonably in the
performance of its obligations as a party to the CANUS I C&MA.
<PAGE>
-10-
8.4 Provision of TRANSIT FACILITIES. TC-3 shall use all reasonable efforts to
provide suitable digital transit facilities as and when required for use in
connection with circuits in the CANUS 1 System so as to provide through circuits
between points reached via Segment A.
ARTICLE 9
INTELLECTUAL PROPERTY RIGHTS
9.1 No License. No license under patents is granted by TC-3 or shall be implied
or arise by estoppel in favour of the Grantee with respect to any apparatus,
system or method used by the Grantee in connection with the use of the MIUs
granted to the Grantee under this Agreement.
9.2 SPECIFIC INDEMNIFICATION. With respect to claims of patent infringement made
by third Persons, the Grantee will save TC-3 and the other owners of the CANUS 1
System harmless against claims arising out of or based on the use by the
Grantee, in combination or in connection with the Capacity, any apparatus,
system or method provided by the Grantee, any subgrantee or lessee of the
Grantee or any customer of the Grantee, of such subgrantee or of such lessee.
ARTICLE 10
RECONFIGURATION OF CAPACITY
10.1 REDUCTION IN THE CAPACITY. In the event that the total number of MIUs on
Segment D is reduced below the Initial Assignable Capacity, as a result of
physical deterioration, or for any other reason, during the term of this
Agreement, TC-3 shall give the Grantee written notice of said decrease and the
MIUs in which the Grantee has been granted an IRU hereunder shall be reduced in
the same proportion as the total number of MIUs assigned to TC-3 in Segment D is
reduced, except that such reductions shall not extend to fractions of half-MIUs.
10.2 Adjustment in O&M and Other Charges. If the number of MIUs on Segment D is
decreased as provided in Section 10.1 and that operating and maintenance charges
related thereto are reduced proportionally, the Grantee's payments with respect
to operating and maintenance charges for the IRU granted under this Agreement
shall be adjusted proportionally to such reduction.
10.3 INCREASE IN COMMUNICATION CAPABILITY.
(A) The communication capability of the Capacity used by the
Grantee on Segment D may be increased, subject to prior notice
to TC-3, by the use of equipment which will make more
efficient use of such MIUs, provided that such use of the
Capacity does not cause an interruption of or interference in
the CANUS 1 System or other systems interconnecting with the
CANUS I System.
<PAGE>
-11-
(B) The Grantee shall not be entitled to share in any increase in
capacity or be entitled to credits or reduction in the sums
paid for the Capacity in the event that the Initial Assignable
Capacity is increased beyond 1,260 half-MIUs.
ARTICLE 11
TERM
11.1 Term. This Agreement shall continue in effect for the initial term up to
the end of the expected useful life of the CANUS 1 System at 23:59 Universal
Time Coordinated, on September 15, 2020, unless the CANUS 1 System is taken out
of service earlier, in which case this Agreement will terminate on the same date
as that of the CANUS I System. TC-3 shall give the Grantee prompt notice of the
taking out of service of the CANUS 1 System. In the event that the CANUS 1
System is extended tacitly beyond its initial term as stated above, this
Agreement will continue in effect tacitly during such extension under the same
terms and conditions.
Notwithstanding the termination of this Agreement, all payment obligations of
the Grantee for amounts still due or payable under this Agreement for the period
ending at the date of termination shall survive until full payment and the
Grantee shall be liable for any costs and shall benefit from any proceeds under
Section 8.2 hereof incurred or received, as the case may be, in the case of
liquidation, sale or disposition occurring within two (2) years after the
termination date.
ARTICLE 12
EVENT OF DEFAULT
12.1 Event of Default. The occurrence of any one or more of the following events
shall constitute an Event of Default under this Agreement:
(A) If the Grantee fails to make the payment of any amount due to
TC-3 (or its designee, as the case may be) under the provisions
of this Agreement, when the same becomes due and payable as
herein provided and such default has not been cured within ten
(10) days after receipt by the Grantee of a notice to that
effect;
(B) If the Grantee fails to duly observe, perform and discharge the
covenants, conditions and obligations on its part to be
observed, performed or discharged hereunder. (other than the
default of payment of amounts under any provisions of this
Agreement which is subject to Subsection 12.1(a)) and such
default has not been cured within twenty (20) days after receipt
by the Grantee of a notice from TC-3;
(C) If any representation or warranty made herein shall prove at any
time to be materially incorrect;
<PAGE>
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(D) If the Grantee has defaulted on its payment obligations to TC-3
or any of its affiliates under any telecommunications service
agreements including or incorporating the provision of CANUS 1
capacity, or if the Grantee becomes insolvent or bankrupt or
ceases paying its debts generally as they mature or has a
receiver, administrative receiver or manager appointed over the
whole or any part of its assets or goes into liquidation
(whether compulsorily or voluntarily), otherwise than' for the
purpose of an amalgamation or reconstruction, or makes any
arrangements with its creditors or has any form of execution or
distress levied upon its assets or ceases to carry on its
business.
ARTICLE 13
TERMINATION
13.1 Termination Upon Default. Upon the occurrence of an Event of Default, TC-3
shall have the right to terminate this Agreement immediately, and, in addition
to any other remedies available hereunder, at law or in equity, shall be
entitled to repossess the Capacity without any other notice or action, with or
without legal process. In addition, upon occurrence of an Event of Default, TC-3
may temporarily discontinue use of the Capacity without incurring any liability
to the Grantee, its subgrantees, its lessees or its customers, until the default
is duly cured by the Grantee to the complete satisfaction of TC-3.
13.2 Termination After Initial Term. In the event that this Agreement is
continued beyond the expected useful life of the CANUS 1 System in conformity
with Section 11.1, any Party may thereafter terminate this Agreement by giving
the other Party a notice of not less than one (1) year.
13.3 Other Remedies. Termination of this Agreement by the Party not in default
in accordance with the terms hereof shall be without prejudice to any other
rights or remedies such Party shall have hereunder, at law or in equity.
ARTICLE 14
GENERAL INDEMNIFICATION
14.1 General Indemnification. The Grantee shall indemnify and save TC-3
harmless, from and against any direct or consequential claims, demands, actions,
causes of action, damages, losses (which shall include any reduction in value),
liabilities, costs or expenses (including, without limitation, interest,
penalties and reasonable attorneys' fees and disbursements) (collectively, the
"Losses") which may be made against TC-3 or which TC-3 may suffer or incur as a
result of, arising out of or relating to:
<PAGE>
-13-
(A) any non-performance of or non-compliance with any covenant,
agreement or obligation of the Grantee under or pursuant to
this Agreement;
(B) any incorrectness in, or breach of, any representation or
warranty made by the Grantee; and
(C) any action, suit, claim, trial, demand, investigation,
arbitration or other proceeding by any Person containing
allegations which, if true, would constitute an event
described in Subsection 14.1(a) or 14. l(b).
ARTICLE 15
DISPUTE RESOLUTION
15.1 Arbitration. Any difference, controversy or claim arising out of or
relating to this Agreement, its interpretation or performance, shall be
considered a "Dispute". Any Dispute shall be subject to binding arbitration as
provided hereafter.
(A) The aggrieved Party shall diligently notify the other Party of
the occurrence of a Dispute. The notification shall be deemed
diligently made if communicated to the other Party within five
(5) Business Days of the knowledge of the occurrence of the
Dispute.
(B) Within ten (10) Business Days following such notification,
each Party shall prepare and disclose to the other Party a
brief on its position and within fifteen (15) days thereafter
the parties shall prepare a common brief which shall contain
all points of Agreement and all points of disagreement in
relation to the Dispute.
(C) Notwithstanding Subsection 15.1(b) above, if no resolution of
the Dispute has occurred thirty (30) days after the date on
which a Party has submitted the Dispute to its Chief Executive
Officer or a Person appointed by him, then the Dispute shall
be submitted for resolution by binding arbitration under the
Rules of Conciliation and Arbitration of the International
Chamber of Commerce in effect on the date the arbitration is
submitted to the tribunal of arbitration. In such event:
(I) a sole arbitrator shall be appointed, unless the parties
agree in a particular case within thirty (30) days of the
submission of the Dispute to arbitration that the
tribunal should consist of more than one arbitrator. Such
arbitrator(s) shall be knowledgeable in the field of law
involved;
(II) the place of arbitration shall be Washington, D.C. and
the arbitration shall be conducted in English;
<PAGE>
-14-
(III) responsibility for paying the costs of the arbitration,
including the costs incurred by the parties themselves in
preparing and presenting their cases, shall be
apportioned by the tribunal of arbitration;
(IV) the award shall be rendered in the English language and
shall state the reasons upon which it is based;
(V) the award of the tribunal of arbitration may be entered
and enforced as a judgment against a Party in any court
of competent jurisdiction or application may be made to
such court for a judicial acceptance of the award and an
order of enforcement, as the case may be.
(D) Nothing in the foregoing shall prevent a Party from initiating
such protective measure proceedings as are necessary to
protect any arm's length third-party rights.
(E) The fact that a dispute is brought to arbitration does not
relieve either Party from its obligation to fulfill its other
covenants or agreements as provided by this Agreement which
are not affected by the Dispute.
ARTICLE 16
MISCELLANEOUS
16.1 Assignment. Neither this Agreement nor any rights, remedies, liabilities or
obligations arising under it or by reason of it shall be assignable by the
Grantee without the prior written consent of TC-3, which consent shall not be
unreasonably withheld. Subject thereto, this Agreement shall inure to the
benefit of and be binding on the Parties and their respective successors and
permitted assigns.
16.2 Further Assurances. The Parties shall, with reasonable diligence, do all
things and provide all reasonable assurances as may be required to consummate
the transactions contemplated by this Agreement, and each Party shall provide
further documents or instruments required by the other Party as may be
reasonably necessary or desirable to effect the purpose of this Agreement.
16.3 Notices. Any notice, consent, request, authorization, permission, direction
or other communication required or permitted to be given hereunder shall be in
writing and shall be delivered either by personal delivery or by telex,
telecopier or similar telecommunications device, return receipt requested, and
addressed as follows:
<PAGE>
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(A) in the case of TC-3:
TELEGLOBE CANTAT-3 INC.
1st Floor, Building 2, Chelston Park
Collymore Rock, St. Michael, BARBADOS
Attention: Mr. V. Owen Springer, Vice President and
General Manager
Telephone: 246 437 8736
Telecopier: 246 435 3107
(B) in the case of the Grantee:
STARTEC INC.
10411 Motor City Dr.
Bethesda, Maryland 20817, U.S.A.,
Attention: Mr. Ram Mukunda, President
Telephone: 301 365 8959
Telecopier: 301 365 8969
Any notice, consent, request, authorization, permission, direction or other
communication delivered as aforesaid shall be deemed to have been effectively
received, if sent by telex, telecopier or similar telecommunication device, on
the Business Day next following transmission thereof, or, if personally
delivered, on the date of such delivery, provided, however, that if such date is
not a Business Day then it shall be deemed to have been received on the Business
Day next following such delivery. An address may be modified by written notice
delivered as aforesaid.
16.4 No Partnership. The relationship between TC-3 and the Grantee under this
Agreement shall not be that of partners or joint venturers and nothing herein
contained shall be deemed to constitute a partnership or joint venture between
them and the rights and obligations of the Parties shall be limited to the
express provisions of this Agreement.
16.5 Confidentiality and Public Announcement. It is expected that the Parties
may disclose to each other proprietary or confidential technical, financial and
business information ("Proprietary Information"). Except as necessary to perform
its obligations under this Agreement, the receiving Party shall not make any use
of Proprietary Information for its own benefit or for the benefit of any other
Person, and, except with the prior written consent of the disclosing Party or as
otherwise specifically provided herein, the receiving Party will not, during and
for a period of three (3) years after the termination of this Agreement,
duplicate, use or disclose any Proprietary Information to any Person.
<PAGE>
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The receiving Party shall not disclose all or any part of the disclosing Party's
Proprietary Information to any affiliates, agents, officers, directors,
employees or representatives (collectively, "Representatives") of the receiving
Party, except on a need to know basis. Such Representatives shall be informed of
the confidential and proprietary nature of the Proprietary Information. Each
Party shall maintain the other Party's Proprietary Information with at least the
same degree of care each Party uses to maintain its own proprietary information.
The receiving Party shall immediately advise the disclosing Party in writing of
any misappropriation or misuse by any Person of the disclosing Party's
Proprietary Information of which the receiving Party is aware.
All Proprietary Information in whatever form shall be promptly returned by the
receiving Party to the disclosing Party upon written request by the disclosing
Party for any reason or upon termination of this Agreement.
Each receiving Party acknowledges that the Proprietary Information of the
disclosing Party is central to the disclosing Party's business and was developed
by or for the disclosing Party at a significant cost. Each receiving Party
further acknowledges that damages would not be an adequate remedy for any breach
of this Agreement by the receiving Party or its Representatives and that the
disclosing Party may obtain injunctive or other equitable relief to remedy or
prevent any breach or threatened breach of this Agreement by the receiving Party
or any of its Representatives. Such remedy shall not be deemed to be the
exclusive remedy for any such breach of this Section 16.5, but shall be in
addition to all other remedies available at law or in equity to the disclosing
Party.
None of the Parties shall disclose or make any public announcement of the
existence of this Agreement, the transaction contemplated hereby or the contents
hereof without in each case the prior written consent of the other, unless such
disclosure is required by law and then only after prior notice to the other
Party.
16.6 Waiver. No waiver of any right under this Agreement shall be deemed
effective unless contained in writing signed by the Party charged with such
waiver, and no waiver of any right arising from any breach or failure to perform
shall be deemed to be a waiver of any future such right or any other right
arising under this Agreement.
16.7 Force Majeure. Neither Party shall be responsible for failures to perform
or delays in performing its obligations due to causes beyond its reasonable
control and without its fault or negligence.
<PAGE>
SCHEDULE A
DESCRIPTION OF THE CANUS 1 SYSTEM
Segment D: shall mean the whole of the submarine cable provided between,
among and including the System Interfaces at the following
cable stations:
Segment A: The cable station at Pennant Point, Nova Scotia, Canada;
Segment B: The cable station at Manasquan, New Jersey, United States of
America;
Segment A and B shall each consist of an appropriate share of
land, civil work, equipment and buildings at the specified
locations for the cable landing and for the cable rights-of-
ways and ducts including manholes, between a cable station and
its respective cable landing point, and an appropriate share
of common service and equipment other than services and
equipment associated solely with the CANUS 1 System, at each
of those locations together with equipment in each of those
cable stations solely associated with the CANUS 1 System, but
which is not a part of Segment D, consisting of Subsegments D1
and D2.
Subsegment D1: That part of Segment D between and including the System
Interface at the cable station in Canada and the Branching
Unit known as Subsegment D3A;
Subsegment D2: That part of Segment D between and including the System
Interface at the cable station in the United States of America
and the Branching Unit known as Subsegment D3A;
Segment D shall also include:
all transmission equipment, power feeding equipment, system
monitoring and control equipment and special test equipment
directly associated with the submersible plant;
the transmission cable equipped with appropriate repeaters and
joint housings between the cable stations and the Branching
Unit known as Subsegment D3A;
- the sea earth cable and electrode system and/or
the land earth system, or an appropriate share
thereof, associated with the CANUS 1 System
power feeding equipment; and
all associated spare parts and components.
<PAGE>
-17-
IN WITNESS WHEREOF the Parties have signed this Agreement as of the date first
above written.
TELEGLOBE CANTAT-3 INC. STARTEC INC.
Per: Per:
------------------------------------ -------------------------
Name: V. Owen Springer Name: PRABHAV MANIYAR
------------------------------------ ------------------------
Title: Vice President and General Manager Title:CHIEF FINANCIAL OFFICER
----------------------------------- -----------------------
Place: St. Michael, Barbados Place: BETHESDA, MD USA
----------------------------------- -----------------------
DATE: DATE: Sept/22/97
------------------------------------ --------------
CANTAT-3 CABLE SYSTEM
INDEFEASIBLE RIGHT OF USE AGREEMENT BETWEEN
TELEGLOBE CANTAT-3 INC.
AND
STARTEC INC.
<PAGE>
THIS AGREEMENT, made and entered into as of September 15th, 1997 (the
"Effective Date").
BY AND BETWEEN:
TELEGLOBE CANTAT-3 INC., a corporation incorporated under the laws of
Barbados, having its principal office at 1st Floor, Building 2, Chelston Park,
(P.O. Box 1210, Bridgetown), Collymore Rock, St. Michael, BARBADOS, hereinafter
referred to as "TC-3";
AND:
STARTEC INC., a corporation incorporated under the laws of Maryland, having
its principal office at 10411 Motor City Dr., Bethesda, Maryland 20817, U.S.A.,
hereinafter referred to as the "Grantee".
WHEREAS TC-3 owns capacity on the CANTAT-3 cable system (the "CANTAT-3
System");
WHEREAS TC-3 is entitled to transfer capacity on the CANTAT-3 System on an
indefeasible right of use ("IRU") basis;
WHEREAS the Grantee desires to acquire from TC-3, on an IRU basis, capacity
on the CANTAT-3 System;
NOW, THEREFORE, the Parties agree as follows:
ARTICLE 1
INTERPRETATION
1.1 Definitions. This Section 1.1 lists all defined terms used in this
Agreement. Capitalized terms used in any provision of this Agreement and not
otherwise defined therein shall have the following meanings, respectively,
unless the context otherwise requires.
(A) "Agreement" shall mean this Agreement and the schedule attached hereto,
as amended from time to time;
(B) "Branching Unit" shall mean a junction and switching point for the
CANTAT-3 System, and includes a housing and any associated plant and
equipment (including any spare plant and equipment);
(C) "Business Day" shall mean any day (except a Saturday, Sunday or other
day on which commercial banks in the United States are authorized by
law to close);
<PAGE>
-2-
(D) "CANTAT-3 C&MA" shall mean that certain construction and maintenance
agreement dated October 8, 1992, the purpose of which was to define the
terms and conditions upon which the CANTAT-3 System will be provided,
constructed, and thereafter maintained and operated, as the same may be
amended from time to time; TC-3 shall at any time submit to the
Grantee, upon request, an updated list of all parties to the CANTAT-3
C&MA;
(E) "Dollar" and "dollars" and the symbol "$" shall mean lawful money of
the United States of America;
(F) "Effective Date" shall mean October 1st, 1997. This Agreement shall be
deemed to have taken effect as of the Effective Date, notwithstanding
the formal date of its execution by the Parties;
(G) "Grantee's Share" shall mean the ratio of the Grantee's Capacity to
TC-3's capacity used in the calculation of TC-3's obligations with
respect to the CANTAT-3 System under the CANTAT-3 C&MA;
(H) "Libor" shall mean the London Inter-Bank Offered Rates;
(I) "Maintenance Authority" shall mean the terminal parties who are
responsible for the operation and maintenance of Segment F of the
CANTAT-3 System;
(J) "MIU" shall mean a unit designated as the minimum unit of investment
between System Interfaces of the CANTAT-3 System and shall consist of a
Virtual Container 12 (VC-12), allowing the use of 2,048,000 bits per
second (nominal 2 Mbit/s) digital stream. MIU may be expressed in terms
of whole or half-MIUs.
(K) "Notional Capacity" shall mean the total assigned Capacity in the
CANTAT-3 System which is equivalent to 2,016 half-MIUs;
(L) "Operating and Maintenance Charges" or "O&M Charges" shall mean all
capital costs and expenses reasonably incurred in operating and
maintaining Segment F, including, but not limited to, the cost of
attendance, testing, adjustments, storage of plant and equipment,
repairs (including repairs at sea), cable ships, maintenance and repair
devices that are or may hereafter become available, including standby
costs, reburial and the replacement of plant, tools and test equipment,
customs duties, taxes (except income tax imposed upon the net income)
paid in respect of such facilities, appropriate financial charges
attributable to other parties' share of costs incurred by the
Maintenance Authority at the rate at which the appropriate Maintenance
Authority generally incurred such financial charges, supervision,
overheads as well as costs and expenses reasonably incurred on account
of claims made by or against other persons in respect of such
facilities or any part thereof and damages or compensation payable by
the parties to the
<PAGE>
CANTAT-3 C&MA on account of such claims shall be shared by them in the
same proportions as they share the costs of operating and maintaining
Segment F, and including but not limited to the costs, or an
appropriate share thereof, for the purchase, storage and maintenance of
special tools and test equipment for use on board cable ships and which
are required for maintenance and repair of the CANTAT-3 System;
(M) "Parties" shall mean all of the parties hereto collectively; and
"Party" shall mean any one of them;
(N) "Person" shall mean an individual, corporation, company, cooperative,
partnership, trust or unincorporated association and pronouns have a
similarly extended meaning;
(O) "Station Costs" shall mean the costs charged by the terminal parties
for the construction, provision, operation and maintenance of Segments
A and C and paid by TC-3;
(P) "System Interface" shall be the input/output ports on a distribution
frame (excluding the distribution frame itself) which shall terminate
either electrical or optical connections from the CANTAT-3 System.
These terminations shall be in accordance with ITU-T recommendations
G.703, G.708, G.709 and G.957 and shall be of STM-I and or 139,264,000
bit/s capacity. The distribution frame shall be regarded as a system
interface location where the CANTAT-3 System connects with other
transmission facilities or equipment.
The following terms are defined in the Sections indicated below:
<TABLE>
<CAPTION>
TERM SECTION
<S> <C>
"CANTAT-3 System" Preamble
"Capacity" 2. !
"Dispute" 15.1
"Grantee" Preamble
"Granting Price" 3.1
"IRU" Preamble
"Losses" 14.1
"Proprietary Information" 16.5
"Representatives" 16.5
"Segments A and C" Schedule A
"Segments A and C Price" 3.2
"Segment F" Schedule A
"TC-3" Preamble
</TABLE>
<PAGE>
1.2 Gender. Any reference in this Agreement to any gender shall include all
genders and words used herein importing the singular number only shall include
the plural and vice versa.
1.3 Headings. The division of this Agreement into Articles, Sections,
Subsections and other Subdivisions and the insertion of headings are for
convenience of reference only and shall not affect or be utilized in the
construction or interpretation hereof.
1.4 Severability. Any Article, Section, Subsection or other Subdivision of this
Agreement or any other provision of this Agreement which is proven to be
illegal, invalid or unenforceable shall be severed herefrom and shall be
ineffective to the extent of such illegality, invalidity or unenforceability and
shall not affect or impair the remaining provisions hereof, which provisions
shall be severed from any illegal, invalid or unenforceable Article, Section,
Subsection or other subdivision of this Agreement or any other provision of this
Agreement and shall otherwise remain in full force and effect.
1.5 Entire Agreement. This Agreement constitutes the entire agreement by and
between the Parties pertaining to the subject matter hereof and supersedes all
prior agreements, understandings, negotiations and discussions, whether oral or
written, of the Parties. Except as provided for herein, this Agreement may be
amended only by an instrument in writing signed by both Parties.
1.6 Governing Law. This Agreement shall be interpreted and construed in
accordance with the laws of Barbados, without giving effect to the laws of such
state governing conflicts of laws.
1.7 Ownership. Nothing in this Agreement shall vary rights of ownership in those
segments of the CANTAT-3 System in which IRUs have been granted to the Grantee.
Ownership of all segments of the CANTAT-3 System shall remain with TC-3 and the
other signatories to the CANTAT-3 C&MA.
ARTICLE 2
GRANTING OF IRU
2.1 Granting. As and from the Effective Date, TC-3 grants to the Grantee, on an
IRU basis, an interest in one (1) whole-MIU in Segment F of the CANTAT-3 System
between Segment A and Segment C as well as an IRU in Segments A and C of the
CANTAT-3 System (all such segments hereinafter defined as the "Capacity") to the
extent required for the use of its capacity in the CANTAT-3 System (exclusive of
any interconnection between cable systems, leases, Droits-de-Passage or other
rearward facilities arrangement for which the Grantee shall be solely
responsible), for providing telecommunications services between points reached
via the United Kingdom on the one hand, and points reached via Canada on the
other hand.
<PAGE>
The IRU granted herein does not include the right to use the Capacity for
traffic terminating in Canada, unless otherwise permitted by applicable law.
ARTICLE 3
GRANTING PRICE AND PRICE FOR SEGMENTS A AND C
3.1 Granting Price for the Capacity. The aggregate granting price for the
Capacity, exclusive of the right granted in Segments A and C shall be $252,300
(the "Granting Price"), namely $126,150 per half-MIU.
3.2 Price for Segments A and C. For the right to use that portion of Segments A
and C of the CANTAT-3 System granted to the Grantee, the Grantee shall pay a
lump sum of $3,700 (the "Segments A and C Price").
3.3 Payment of the Granting and Segments A and C Prices. The Grantee hereby
agrees and covenants to pay the Granting Price and the Segments A and C Price by
wire transfer, certified cheque or bank draft in the aggregate lump sum of
$256,000. The Granting and Segments A and C Prices shall be payable by the
Grantee no later than (i) the thirtieth (30th) day following receipt by the
Grantee of an invoice to that effect, or (ii) the Effective Date, whichever
comes last.
ARTICLE 4
PAYMENT OF CHARGES AND EXPENSES
4.1 O&M Charges. The Grantee shall pay the Grantee's Share of O&M Charges,
Station Costs and restoration costs in the manner provided hereafter.
4.2 Restoration Costs. The Granting Price includes the costs of restoration for
the first thirty (30) days of outage on the CANTAT-3 System per calendar year
(regardless of the Effective Date of this Agreement) for the first ten (10)
years of the term of this Agreement. The Grantee shall pay its proportionate
share (as calculated by TC-3) of the cost of any additional restoration required
beyond the first thirty (30) days per year and shall also pay its proportional
share of any and all restoration required after year ten (10) of the term of
this Agreement.
4.3 Invoicing and Payments. From and after the Effective Date, TC-3 shall
submit, or cause to be submitted, to the Grantee, an invoice for costs provided
for hereinabove. Invoices for costs referred to in Section 4.1 shall be
submitted on a quarterly basis in advance. All payments shall be made no later
than the last day of the month immediately following the month the invoice was
submitted in order that the funds are available for use by TC-3 by the end of
said month. Invoices rendered shall contain details to support the amounts
contained therein and shall identify
<PAGE>
-6-
O&M Charges, Station Costs as well as restoration costs allocatable to the
Capacity and payable by the Grantee. Invoices shall be paid in the currency in
which the invoice is rendered.
All payments made by the Grantee under this Agreement shall be made by wire
transfer, certified cheque or bank draft and be free and clear of all bank
charges, commissions or other charges.
In the event of non-payment of any sum under this Agreement by the due date, an
interest charge shall be paid on overdue amounts calculated on the day-to-day
balance from such date, but excluding the actual payment date thereof. The
annual rate of interest shall be the higher of (i) sixteen percent (16%) or (ii)
eight (8) percentage points above the ninety (90)-day Libor rate of interest as
published by the Wall Street Journal on the date the bill is due to be paid or,
if such is not a Business Day, the next Business Day.
TC-3 may designate, at its sole discretion, any Person for the purpose of
invoicing or receiving payment of all costs charged to the Grantee hereunder
(including the Granting Price and the Segments A and C Price). TC-3 shall notify
in writing the Grantee of the identity of such Person. Notwithstanding such
designation, TC-3 only shall be liable towards the Grantee for any and all
obligations of TC-3 as provided hereunder.
4.4 Disputes. Should any bill or part thereof be under dispute as to its
correctness, then interest shall not accrue on the amount of such bill provided
always that:
(A) before the payment date, TC-3 (or its designee, as the case
may be) is advised by letter or fax by the Grantee of the
amount in dispute and the nature of that dispute; and
(B) TC-3 (or its designee, as the case may be) shall, if requested
by the Grantee within thirty (30) days of receipt of the bill
in dispute, submit a replacement bill omitting the amount in
dispute, and such replacement bill shall become due for
payment on the date the disputed bill was due. The amount in
dispute shall be investigated by the Parties in good faith
within a thirty (30)-day period and if the amount in dispute
or part of it is found to be correct, any necessary bill with
respect to such amount or part of it shall be raised and paid.
Notwithstanding the foregoing, if on investigation of the
amount in dispute or part thereof such amount is found to be
correct, then the Grantee shall pay interest at the rate
determined hereabove on the unpaid amount or part of it which
is found to be correct from the day after the due date for
payment of the original bill in dispute up to and including
the date the outstanding payment is received by TC-3 (or its
designee, as the case maybe).
4.5 Adjustments. In the case of invoices containing any costs billed on
preliminary billing basis, appropriate adjustments will be made in subsequent
invoices promptly after actual costs involved are determined to insure that the
Grantee bears a proper share of the costs as provided under this Agreement.
<PAGE>
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE GRANTEE
5.1 Representations and Warranties. The Grantee represents and warrants to TC-3
that the Grantee has obtained all relevant telecommunications licenses necessary
for the acquisition of the Capacity, the execution and delivery of and the
performance of its obligations under this Agreement and shall use all reasonable
efforts to have continued in effect such exemptions, approvals, consents,
authorizations, licenses and permits as long as it shall have obligations under
this Agreement.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF TC-3
6. I Representations and Warranties. TC-3 represents and warrants to the Grantee
that it is authorized under the CANTAT-3 C&MA to assign interests in the
capacity as contemplated hereunder.
6.2 No representation on the Capacity. Except as expressly set forth in this
Agreement, TC-3 has not made or shall not be deemed to have made any
representations or warranties whatsoever with respect to the Capacity. TC-3
expressly disclaims with respect to the Grantee and the Grantee hereby expressly
waives, releases and renounces, all warranties, obligations and liabilities of
TC-3 and all rights, claims and remedies against TC-3, express or implied,
arising by law or otherwise, with respect to any failure, delay in installation,
cancellation of, non-conformance, temporary or permanent failure of or defect in
the CANTAT-3 System or the Capacity, as the case may be, whatsoever shall have
been the cause and however long it shall have lasted (whether or not TC-3 has
been advised of the possibility of such loss or damage arising). Without
limiting the generality of the foregoing, the Grantee acknowledges and agrees
that the Capacity is being assigned on an "as is, where is" basis.
ARTICLE 7
COVENANTS OF THE GRANTEE
7.1 Covenants of the Grantee. During the term of this Agreement, the Grantee
shall:
(A) pay to TC-3 (or its designee, as may be notified in writing to
the Grantee, as the case may be) when they become due all
amounts payable under this Agreement and otherwise comply with
all other provisions of this Agreement;
(B) maintain, at its own expense, all appropriate insurance policy
against all risks associated with the Capacity as reasonably
deemed necessary by the Grantee;
<PAGE>
-8-
(C) undertake to keep the Capacity free of liens, charges and
other encumbrances (including any inchoate liens or floating
charges) and shall reimburse TC-3 (or its designee, as the
case may be), and in the event of accidental breach, to take
all steps required to discharge such liens, charges and other
encumbrances;
(D) not use the Capacity for any illegal, unlawful, fraudulent or
unauthorized purposes and, without limiting the generality of
the foregoing, use the Capacity, at all time, in a manner
consistent with the applicable authorization, licenses and
permits for the landing, construction and operation of the
CANTAT-3 System;
(E) use the Capacity in such a way as to avoid degrading the
overall performance of the CANTAT-3 System or causing
interruptions of, or interference with, impairment or
degradation of the use of any other capacity in the CANTAT-3
System. If, after notification by TC-3, the Grantee does not
take immediate and effective action to comply with its
obligations, TC-3 may take reasonable action required to
protect the other capacity in the CANTAT-3 System up to and
including the interruption of the Capacity responsible for the
interruption, interference, impairment or degradation. The
Grantee shall bear the total cost of any protective measures
reasonably required by TC-3 to be installed on the CANTAT-3
System resulting from the use of the CANTAT-3 System by the
Grantee or any subgrantee, lessee or assignee of the Grantee
or any customer of either the Grantee or any subgrantee,
lessee or assignee of the Grantee;
(F) upon at least a 24-hour prior notice or, at any time, if the
situation or circumstance so justify, make available to TC-3
the Capacity for such test and adjustment as may be necessary
for the Capacity to be maintained in efficient working order.
ARTICLE 8
COVENANTS OF TC-3
8.1 Books and Records. TC-3 shall keep and maintain such books, records,
vouchers and accounts of all costs that it receives from the Maintenance
Authority with respect to the maintenance, operation and restoration of the
CANTAT-3 System as may be appropriate to support the billing of any O&M Charges,
Station Costs or restoration costs by TC-3 and such books that relates to the
running charges and restoration costs shall at all reasonable times be made
available for inspection by the Grantee for a period of two (2) years from the
date of billing. At Grantee's request and at Grantee's sole cost and expense,
TC-3 will request an audit under the CANTAT-3 C&MA to the extent that it has the
right to do so.
8.2 Sharing of Liquidation Proceeds and Costs. In the event of liquidation of
Segments A and C or any part thereof and/or Segment F or any part thereof by
sale or other disposition, TC-3 shall share with the Grantee any proceeds or
costs of such liquidation, sale or disposition received or incurred by TC-3
including, without limitation, any costs related to the removal of
<PAGE>
-9-
such Segments A and C and/or Segment F. Such proceeds or costs shall benefit or
be incurred by the Grantee in accordance with the Grantee's Share of such
proceeds or costs.
8.3 Maintenance of the Capacity. TC-3 agrees to act reasonably in the
performance of its obligations as a party to the CANTAT-3 C&MA.
8.4 Provision of Transit Facilities. TC-3 shall use all reasonable efforts to
provide suitable digital transit facilities as and when required for use in
connection with circuits in the CANTAT-3 System so as to provide through
circuits between points reached via Segments A and C.
ARTICLE 9
INTELLECTUAL PROPERTY RIGHTS
9.1 No License. No license under patents is granted by TC-3 or shall be implied
or arise by estoppel in favour of the Grantee with respect to any apparatus,
system or method used by the Grantee in connection with the use of the MIUs
granted to the Grantee under this Agreement.
9.2 Specific Indemnification. With respect to claims of patent infringement made
by third Persons, the Grantee will save TC-3 and the other signatories to the
CANTAT-3 C&MA harmless against claims arising out of or based on the use by the
Grantee, in combination or in connection with the Capacity, any apparatus,
system or method provided by the Grantee, any subgrantee or lessee of the
Grantee or any customer of the Grantee, of such subgrantee or of such lessee.
ARTICLE 10
RECONFIGURATION OF CAPACITY
10.1 Reduction in the Capacity. In the event that the total number of MIUs on
Segment F is reduced below the Notional Capacity, as a result of physical
deterioration, or for any other reason, during the term of this Agreement, TC-3
shall give the Grantee written notice of said decrease and the MIUs in which the
Grantee has been granted an IRU hereunder shall be reduced in the same
proportion as the total number of MIUs assigned to TC-3 in Segment F is reduced,
except that such reductions shall not extend to fractions of half-MIUs.
10.2 Adjustment in O&M and Other Charges. If the number of MIUs on Segment F is
decreased as provided in Section 10.1 and that operating and maintenance charges
related thereto are reduced proportionally, the Grantee's payments with respect
to operating and maintenance charges for the IRU granted under this Agreement
shall be adjusted proportionally to such reduction.
<PAGE>
- 10-
10.3 Increase in Communication Capability.
(A) The communication capability of the Capacity used by the
Grantee on Segment F may be increased, subject to prior notice
to TC-3, by the use of equipment which will make more
efficient use of such MIUs, provided that such use of the
Capacity does not cause an interruption of or interference in
the CANTAT-3 System or other systems interconnecting with the
CANTAT-3 System.
(B) The Grantee shall not be entitled to share in any increase in
capacity or be entitled to credits or reduction in the sums
paid for the Capacity in the event that the Notional Capacity
is increased beyond 2,016 half-MIUs.
ARTICLE 11
TERM
11.1 Term. This Agreement shall continue in effect for the initial term up to
the end of the expected useful life of the CANTAT-3 System at 23:59 Universal
Time Coordinated, on October 8th, 2019 unless the CANTAT-3 System is taken out
of service earlier, in which case this Agreement will terminate on the same date
as that of the CANTAT-3 System. TC-3 shall give the Grantee prompt notice of the
taking out of service of the CANTAT-3 System. In the event that the CANTAT-3
System is extended tacitly beyond its initial term as stated above, this
Agreement will continue in effect tacitly during such extension under the same
terms and conditions.
Notwithstanding the termination of this Agreement, all payment obligations of
the Grantee for amounts still due or payable under this Agreement for the period
ending at the date of termination shall survive until full payment and the
Grantee shall be liable for any costs and shall benefit from any proceeds under
Section 8.2 hereof incurred or received, as the case may be, in the case of
liquidation, sale or disposition occurring within two (2) years after the
termination date.
ARTICLE 12
EVENT OF DEFAULT
12.1 Event of Default. The occurrence of any one or more of the following events
shall constitute an Event of Default under this Agreement:
(A) If the Grantee fails to make the payment of any amount due to
TC-3 under the provisions of this Agreement, when the same
becomes due and payable as herein provided and such default
has not been cured within ten (10) days after receipt by the
Grantee of a notice to that effect;
<PAGE>
-11-
(B) If the Grantee fails to duly observe, perform and discharge the
covenants, conditions and obligations on its part to be
observed, performed or discharged hereunder (other than the
default of payment of amounts under any provisions of this
Agreement which is subject to Subsection 12.1(a)) and such
default has not been cured within twenty (20) days after receipt
by the Grantee of a notice from TC-3;
(C) If any representation or warranty made herein shall prove at any
time to be materially incorrect;
(D) If the Grantee has defaulted on its payment obligations to TC-3
or any of its affiliates under any telecommunications service
agreements including or incorporating the provision of CANTAT-3
capacity, or if the Grantee becomes insolvent or bankrupt or
ceases paying its debts generally as they mature or has a
receiver, administrative receiver or manager appointed over the
whole or any part of its assets or goes into liquidation
(whether compulsorily or voluntarily), otherwise than for the
purpose of an amalgamation or reconstruction, or makes any
arrangements with its creditors or has any form of execution or
distress levied upon its assets or ceases to carry on its
business.
ARTICLE 13
TERMINATION
13.1 Termination Upon Default. Upon the occurrence of an Event of Default, TC-3
shall have the right to terminate this Agreement immediately, and, in addition
to any other remedies available hereunder, at law or in equity, shall be
entitled to repossess the Capacity without any other notice or action, with or
without legal process. In addition, upon occurrence of an Event of Default, TC-3
may temporarily discontinue use of the Capacity without incurring any liability
to the Grantee, its subgrantees, its lessees or its customers, until the default
is duly cured by the Grantee to the complete satisfaction of TC~3.
13.2 Termination After Initial Term. In the event that this Agreement is
continued beyond the expected useful life of the CANTAT-3 System in conformity
with Section 11.1, any Party may thereafter terminate this Agreement by giving
the other Party a notice of not less than one ( 1 ) year.
13.3 Other Remedies. Termination of this Agreement by the Party not in default
in accordance with the terms hereof shall be without prejudice to any other
rights or remedies such Party shall have hereunder, at law or in equity.
<PAGE>
-12-
ARTICLE 14
GENERAL INDEMNIFICATION
14.1 General Indemnification. The Grantee shall indemnify and save TC-3 harmless
from and against any direct or consequential claims, demands, actions, causes of
action, damages, losses (which shall include any reduction in value),
liabilities, costs or expenses (including, without limitation, interest,
penalties and reasonable attorneys' fees and disbursements) (collectively, the
"Losses") which may be made against TC-3 or which TC-3 may suffer or incur as a
result of, arising out of or relating to:
(A) any non-performance of or non-compliance with any covenant,
agreement or obligation of the Grantee under or pursuant to
this Agreement;
(B) any incorrectness in, or breach of, any representation or
warranty made by the Grantee;
(C) any action, suit, claim, trial, demand, investigation,
arbitration or other proceeding by any Person containing
allegations which, if true, would constitute an event
described in Subsection 14. l(a) or 14.1(b).
ARTICLE 15
DISPUTE RESOLUTION
15.1 Arbitration. Any difference, controversy or claim arising out of or
relating to this Agreement, its interpretation or performance, shall be
considered a "Dispute". Any Dispute shall be subject to binding arbitration as
provided hereafter.
(A) The aggrieved Party shall diligently notify the other Party of
the occurrence of a Dispute. The notification shall be deemed
diligently made if communicated to the other Party within five
(5) Business Days of the knowledge of the occurrence of the
Dispute.
(B) Within ten (10) Business Days following such notification,
each Party shall prepare and disclose to the other Party a
brief on its position and within fifteen (15) days thereafter
the parties shall prepare a common brief which shall contain
all points of Agreement and all points of disagreement in
relation to the Dispute.
(C) Notwithstanding Subsection 15.1(b) above, if no resolution of
the Dispute has occurred thirty (30) days after the date on
which a Party has submitted the Dispute to its Chief Executive
Officer or a Person appointed by him, then the Dispute shall
be submitted for resolution by binding arbitration under the
Rules of Conciliation
<PAGE>
-13-
and Arbitration of the International Chamber of Commerce in
effect on the date the arbitration is submitted to the
tribunal of arbitration. In such event:
(I) a sole arbitrator shall be appointed, unless the parties
agree in a particular case within thirty (30) days of the
submission of the Dispute to arbitration that the tribunal
should consist of more than one arbitrator. Such
arbitrator(s) shall be knowledgeable in the field of law
involved;
(II) the place of arbitration shall be Washington, D.C. and the
arbitration shall be conducted in English;
(III) responsibility for paying the costs of the arbitration,
including the costs incurred by the parties themselves in
preparing and presenting their cases, shall be apportioned
by the tribunal of arbitration;
(IV) the award shall be rendered in the English language and
shall state the reasons upon which it is based;
(V) the award of the tribunal of arbitration may be entered
and enforced as a judgment against a Party in any court of
competent jurisdiction or application may be made to such
court for a judicial acceptance of the award and an order
of enforcement, as the case may be.
(D) Nothing in the foregoing shall prevent a Party from initiating
such protective measure proceedings as are necessary to
protect any arm's length third-party rights.
(E) The fact that a dispute is brought to arbitration does not
relieve either Party from its obligation to fulfill its other
covenants or agreements as provided by this Agreement which
are not affected by the Dispute.
ARTICLE 16
MISCELLANEOUS
16.1 Assignment. Neither this Agreement nor any rights, remedies, liabilities or
obligations arising under it or by reason of it shall be assignable by the
Grantee without the prior written consent of TC-3, which consent shall not be
unreasonably withheld. Subject thereto, this Agreement shall inure to the
benefit of and be binding on the Parties and their respective successors and
permitted assigns.
16.2 Further Assurances. The Parties shall, with reasonable diligence, do all
things and provide all reasonable assurances as may be required to consummate
the transactions contemplated by this Agreement, and each Party shall provide
further documents or instruments
<PAGE>
-14-
required by the other Party as may be reasonably necessary or desirable to
effect the purpose of this Agreement.
16.3 Notices. Any notice, consent, request, authorization, permission, direction
or other communication required or permitted to be given hereunder shall be in
writing and shall be delivered either by personal delivery or by telex,
telecopier or similar telecommunications device, return receipt requested, and
addressed as follows:
(A) in the case of TC-3:
TELEGLOBE CANTAT-3 INC.
1st Floor, Building 2, Chelston Park
Collymore Rock, St. Michael, BARBADOS
Attention: Mr. V. Owen Springer, Vice President
and General Manager
Telephone: 246 437 8736
Telecopier: 246 435 3107
(B) in the case of the Grantee:
STARTEC INC.
10411 Motor City Dr.
Bethesda, Maryland 20817, U.S.A.,
Attention: Mr. Ram Mukunda, President
Telephone: 301 365 8959
Telecopier: 301 365 8969
Any notice, consent, request, authorization, permission, direction or other
communication delivered as aforesaid shall be deemed to have been effectively
received, if sent by telex, telecopier or similar telecommunication device, on
the Business Day next following transmission thereof, or, if personally
delivered, on the date of such delivery, provided, however, that if such date is
not a Business Day then it shall be deemed to have been received on the Business
Day next following such delivery. An address may be modified by written notice
delivered as aforesaid.
16.4 No Partnership. The relationship between TC-3 and the Grantee under this
Agreement shall not be that of partners or joint venturers and nothing herein
contained shall be deemed to constitute a partnership or joint venture between
them and the rights and obligations of the Parties shall be limited to the
express provisions of this Agreement.
16.5 Confidentiality and Public Announcement. It is expected that the Parties
may disclose to each other proprietary or confidential technical, financial and
business information ("Proprietary Information"). Except as necessary to perform
its obligations under this Agreement, the receiving Party shall not make any use
of Proprietary Information for its own benefit or for the benefit of any other
Person, and, except with the prior written consent of the
<PAGE>
-15-
disclosing Party or as otherwise specifically provided herein, the receiving
Party will not, during and for a period of three (3) years after the termination
of this Agreement, duplicate, use or disclose any Proprietary Information to any
Person.
The receiving Party shall not disclose all or any part of the disclosing Party's
Proprietary Information to any affiliates, agents, officers, directors,
employees or representatives (collectively, "Representatives") of the receiving
Party, except on a need to know basis. Such Representatives shall be informed of
the confidential and proprietary nature of the Proprietary Information. Each
Party shall maintain the other Party's Proprietary Information with at least the
same degree of care each Party uses to maintain its own proprietary information.
The receiving Party shall immediately advise the disclosing Party in writing of
any misappropriation or misuse by any Person of the disclosing Party's
Proprietary Information of which the receiving Party is aware.
All Proprietary Information in whatever form shall be promptly returned by the
receiving Party to the disclosing Party upon written request by the disclosing
Party for any reason or upon termination of this Agreement.
Each receiving Party acknowledges that the Proprietary Information of the
disclosing Party is central to the disclosing Party's business and was developed
by or for the disclosing Party at a significant cost. Each receiving Party
further acknowledges that damages would not be an adequate remedy for any breach
of this Agreement by the receiving Party or its Representatives and that the
disclosing Party may obtain injunctive or other equitable relief to remedy or
prevent any breach or threatened breach of this Agreement by the receiving Party
or any of its Representatives. Such remedy shall not be deemed to be the
exclusive remedy for any such breach of this Section 16.5, but shall be in
addition to all other remedies available at law or in equity to the disclosing
Party.
None of the Parties shall disclose or make any public announcement of the
existence of this Agreement, the transaction contemplated hereby or the contents
hereof without in each case the prior written consent of the other, unless such
disclosure is required by law and then only after prior notice to the other
Party.
16.6 Waiver. No waiver of any right under this Agreement shall be deemed
effective unless contained in writing signed by the Party charged with such
waiver, and no waiver of any right arising from any breach or failure to perform
shall be deemed to be a waiver of any future such right or any other right
arising under this Agreement.
16.7 Force Majeure. Neither Party shall be responsible for failures to perform
or delays in performing its obligations due to causes beyond its reasonable
control and without its fault or negligence.
<PAGE>
-16-
IN WITNESS WHEREOF the Parties have signed this Agreement as of the date first
above written.
TELEGLOBE CANTAT-3 INC. STARTEC INC.
Per: Per:
Name: V. Owen Springer Name:
Title: Vice President and General Manager Title:
Place: St. Michael, Barbados Place:
Date: Date: Sept./12/1997
<PAGE>
SCHEDULE A
DESCRIPTION OF THE CANTAT-3 SYSTEM
Segment F: shall mean the whole of the submarine cable provided between and
among, and including the System Interface at the following cable
stations:
Segment A: A cable station at Pennant Point, Nova Scotia, Canada;
Segment B: A cable station at Vestmannaeyjar, Iceland;
Segment B 1: A cable station at Tjornuvik, Faroe Island;
Segment C: A cable station at Redcar, United Kingdom;
Segment D: A cable station at Blaabjerg, Denmark
Segment E: A cable station at Sylt, Germany;
Segments A, B, B 1, C, D and E shall each consist of an
appropriate share of land, civil work, equipment and buildings at
the specified locations for the cable landing and for the cable
right-of-way and ducts between a cable station and its respective
landing point, and an appropriate share of common services and
equipment other than services and equipment associated solely
with the CANTAT-3 System, at each of those locations together
with equipment in each of those cable stations solely associated
with the CANTAT-3 System, but which is not a part of Segment F,
consisting of Subsegments F1, F2, F3A, F3B, F3C, F4, F5, F6 and
F7.
Subsegment F1: That part of Segment F between and including the System Interface
at the cable station in Canada, Segment A, and BU1, including a
three-eight (3/8) portion of BU 1;
Subsegment F2: That part of Segment F between BU 1 and the System Interface at
the cable station in Iceland, Segment B, including a one-quarter
(1/4) portion of BU1;
Subsegment F3A:That part of Segment F between BU1 and BU1A including a
three-eight (3/8) portion of BU 1;
<PAGE>
Subsegment F3B: That part of Segment F between BU1A and System Interface at the
cable station in the Faroe Islands B 1, including the whole of
BU 1A.
Subsegment F3C: That part of Segment F between BU1A and BU2 including a
three-tenths (3/10) portion of BU2.
Subsegment F4: That part of Segment F between BU2 and the System Interface of
the cable station in the United Kingdom, Segment C, including a
three-tenths (3/10) portion of BU2;
Subsegment F5: That partof Segment F between BU2 and BU3 including a two-fifths
(2/5) portion of BU2 and a two-fifths (2/5) portion of BU3;
Subsegment F6: That part of Segment F between BU3 and the System Interface of
the cable station in Denmark, Segment D,including a three-tenths
(3/10) portion of BU3;
Subsegment F7: That part of Segment F between BU3 and the System Interface of
the cable station in Germany, Segment E,including a three-tenths
(3/10) portion of BU3.
Segment F shall also include:
- all transmission equipment, power feeding equipment and special
test equipment directly associated with the submersible plant;
- the transmission cable equipped with appropriate repeaters and
joint housings between the cable stations and the Branching Units
and between the Branching Units themselves; and
- the sea earth cable and electrode system and/or the land earth
system, or an appropriate share thereof, associated with the
CANTAT-3 System power feeding equipment.
<PAGE>
Subsegment F3B: That part of Segment F between BU1A and System Interface at the
cable station in the Faroe Islands B 1, including the whole of
BU1A.
Subsegment F3C: That part of Segment F between BU1A and BU2 including a
three-tenths (3/10) portion of BU2.
Subsegment F4: That part of Segment F between BU2 and the System Interface of
the cable station in the United Kingdom, Segment C, including a
three-tenths (3/10) portion of BU2;
Subsegment F5: That part of Segment F between BU2 and BU3 including a
two-fifths (2/5) portion of BU2 and a two-fifths (2/5) portion
of BU3;
Subsegment F6: That part of Segment F between BU3 and the System Interface of
the cable station in Denmark, Segment D, including a
three-tenths (3/10) portion of BU3;
Subsegment F7: That part of Segment F between BU3 and the System Interface of
the cable station in Germany, Segment E, including a
three-tenths (3/10) portion of BU3.
Segment F shall also include:
- all transmission equipment, power feeding equipment and
special test equipment directly associated with the
submersible plant;
- the transmission cable equipped with appropriate repeaters
and joint housings between the cable stations and the
Branching Units and between the Branching Units themselves;
and
- the sea earth cable and electrode system and/or the land
earth system, or an appropriate share thereof, associated
with the CANTAT-3 System power feeding equipment.
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<FISCAL-YEAR-END> JUN-30-1997 JUN-30-1998
<PERIOD-START> JAN-01-1997 JAN-01-1998
<PERIOD-END> JUN-30-1997 JUN-30-1998
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<CURRENT-ASSETS> 11,928 146,166
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<SALES> 28,836 63,353
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<CGS> 25,250 54,485
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<INTEREST-EXPENSE> 252 2,577
<INCOME-PRETAX> 358 (1,728)
<INCOME-TAX> 7 30
<INCOME-CONTINUING> 351 (1,758)
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