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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT of 1934 for the quarterly period ended 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 _________
Registration Number 333-53553
TIME WARNER TELECOM LLC
(Exact name of registrant as specified in its charter)
Delaware 84-1465464
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)
5700 S. Quebec Street
Greenwood Village, CO 80111
(303) 566-1000
(Address, including zip code, and telephone number, including
area code, of each registrant's principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ ] No [X]
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INDEX TO FORM 10-Q
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PART I. FINANCIAL INFORMATION
Management's Discussion and Analysis of Financial Condition and Results
of Operations 1
Combined Balance Sheets at June 30, 1998 and December 31, 1997 12
Combined Statements of Operations for the Three Months and Six Months
Ended June 30, 1998 and 1997 13
Combined Statements of Cash Flows for the Six Months Ended
June 30, 1998 and 1997 14
Combined Statements of Changes in Members' Equity 15
Notes to combined financial statements 16
PART II. OTHER INFORMATION 20
Item 2. Change in Securities and Uses of Proceeds
Item 6. Exhibits and Reports on Form 8-K
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TIME WARNER TELECOM LLC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Time Warner Telecom LLC is a leading facilities-based competitive local
exchange carrier ("CLEC") in selected metropolitan markets across the United
States, offering a wide range of business telephony services, primarily to
medium- and large-sized business customers.
The term "Company" refers to Time Warner Telecom LLC, its consolidated
and unconsolidated subsidiaries, including Time Warner Telecom Inc. ("TWT") and
all operations of the Company that were historically conducted by the Members
(as defined herein). The term "Members" refers to Time Warner Inc. and certain
of its subsidiaries (collectively, "TW"), MediaOne Group, Inc. and certain of
its subsidiaries (collectively, "MediaOne"), and Advance/Newhouse Partnership
("Newhouse"). TW and MediaOne, through certain subsidiaries, are partners in
Time Warner Entertainment Company, L.P. ("TWE"). TWE and Newhouse are partners
in Time Warner Entertainment-Advance/Newhouse Partnership ("TWEAN"). The term
"TW Cable" refers collectively to the cable systems owned by subsidiaries and
divisions of TWE, TWEAN and TW.
The business of the Company was commenced in 1993 by TW Cable and
reflects the combined commercial telecommunication operations under the
ownership or management control of TW Cable. These operations consist of the
commercial telecommunication operations of TW and TWEAN that were each acquired
or formed in 1995, as well as the pre-existing commercial telecommunication
operations of TWE. All intercompany accounts and transactions between the
combined entities have been eliminated.
The Company was recently formed in connection with a reorganization (the
"Reorganization") of the assets and liabilities of its business, which were
previously owned by subsidiaries and divisions of TWE, TWEAN and TW (together,
the "Parent Companies"). The Reorganization was consummated on July 14, 1998. In
connection with the Reorganization, the assets and liabilities of the Company's
business were contributed to the Company by the Parent Companies and in
connection therewith, TW, MediaOne and Newhouse received 61.95%, 18.88% and
19.17%, respectively, of the limited liability company interests in the Company
(all in the form of Class B limited liability company interests). The Company
accounted for the Reorganization at each of the Members' historical cost basis
of accounting and accordingly, the Reorganization had no effect on the Company's
total members' equity which has been presented on a consistent basis.
In connection with the Reorganization, the Company's Management
Committee approved an option plan that provides for the granting of options to
purchase Class A limited liability company interests in the Company representing
approximately 10% of the equity in the Company, in the aggregate on a fully
diluted basis. Generally, options issued under such an option plan will become
exercisable over a four-year vesting period and will expire ten years from the
date of the grant. In addition, the purchase price of the Class A limited
liability company interests in the Company covered by each option will not be
less than the fair market value of such interests on the date of grant.
The majority of the Company's revenues have been derived from the
provision of "private line" and "direct access" telecommunications services.
Because the Company has deployed switches in 16 of its 19 service areas as of
June 30, 1998, management expects that a growing portion of its revenues will be
derived from providing switched services. The Company's customers are
principally telecommunications-intensive business end-users, long distance
carriers ("IXCs"), internet service providers ("ISPs"), wireless communications
companies and governmental entities. Such customers are offered a wide range of
integrated telecommunications products and services, including dedicated
transmission, local switched, data
1
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TIME WARNER TELECOM LLC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)
and video transmission services and Internet services. In addition, the Company
benefits from its strategic relationship with TW Cable both through network
facilities access and cost-sharing. As a result, the Company's networks have
been constructed primarily through the use of fiber capacity licensed from TW
Cable. As of June 30, 1998, the Company operated networks in 19 metropolitan
service areas that spanned 6,309 route miles, contained 248,574 fiber glass
miles and offered service to 2,908 buildings. The Company's 19 service areas
include 18 networks that are wholly owned and one that is owned through a 50%
joint venture and is not consolidated with the Company's financial results. The
Company's consolidated revenues were $55.4 million for the year ended December
31, 1997 and $49.1 million for the six months ended June 30, 1998. As of June
30, 1998, the Parent Companies had invested $555.8 million in the Company.
The Company's revenues have been derived primarily from end-user to
end-user private line connections and from a variety of services including: (i)
access between IXCs, (ii) access between end-users and IXCs, (iii) collocated
special access, (iv) collocated points of presence ("POP") to local exchange
carriers ("LECs") switched access transport and (v) local switched services.
Since its inception in 1993, the Company has experienced significant growth in
revenues and in the geographic scope of its operations. Management believes an
increasing portion of the Company's future growth will come from the provision
of local switched services as a result of the 16 switches deployed as of June
30, 1998. The Company believes that switched services provide the opportunity
for higher profit margins and better utilization of capital investment than
those expected from transport services. The shift of the revenue growth to
switched services may cause the Company's revenues to become less predictable
since a portion of such services are billed to customers on a usage basis.
Dedicated transport customers are typically billed a flat monthly rate which
produces a less variable stream of revenues for the Company. Furthermore, it is
expected that the growth in the switched service offerings will expand the
Company's customer base by making more services available to customers that are
generally smaller than those who purchase dedicated transport services. These
smaller customers are also expected to be the principal users of the Company's
long distance service, which is in the process of being launched. The Company
expects to experience a higher churn rate for these customers than it has
traditionally experienced with transport services. The Company intends to
minimize this churn for long distance services to smaller customers by offering
such service under minimum one-year contracts.
The Company plans to expand its revenue base by fully exploiting
available network capacity in its existing markets and by continuing to develop
and selectively tailor new services in competitively-priced packages to meet the
needs of its medium- and large-sized business customers. The Company plans on
selectively entering new markets and intends to have networks under construction
or operational in several additional cities by the end of 1999.
Operating expenses consist of costs directly related to the operation
and maintenance of the networks and the provision of the Company's services.
This includes the salaries and related expenses of operations and engineering
personnel as well as costs from the incumbent local exchange carrier ("ILECs")
and other competitors for facility leases and interconnection. These costs have
increased over time as the Company has increased its operations and revenues. It
is expected that these costs will continue to increase, but at a slower rate
than revenue growth.
Selling, general and administrative expenses consist of salaries and
related costs for employees other than those involved in operations and
engineering. Such expenses also include costs related to non-technical facility,
sales and marketing, regulatory and legal costs. These costs have increased over
time as the Company has increased its operations and revenues. The Company
expects these costs to continue to increase as the Company's revenue growth
continues, but at a slower rate than revenue growth.
2
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TIME WARNER TELECOM LLC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)
In the normal course of conducting its businesses, the Company has
various transactions with the Parent Companies, generally on terms resulting
from negotiation between the affected units that, in management's view, result
in reasonable allocations. In connection with the Reorganization, the Company
entered into several contracts with the Parent Companies in respect of certain
of these transactions. The Company's selling, general and administrative
expenses include charges allocated from the Parent Companies for certain general
and administrative expenses, primarily including office rent and overhead
charges for various administrative functions performed by TW Cable. These
charges were required to reflect all costs of doing business and have been based
on various methods, which management believes results in reasonable allocations
of such costs that were necessary to present the Company's operations as if they
had been operated on a stand alone basis. In addition, the Company licenses the
right to use the majority of its fiber optic cable capacity from TW Cable and
reimburses it for facility maintenance and pole rental costs. These costs are
included in the Company's operating expense. Finally, effective July 1, 1997
through July 1998, all of the Company's financing requirements were funded with
loans from the Parent Companies. These loans are subordinated in right of
payment to the Notes described below and bear interest (payable in kind) at an
annual rate equal to The Chase Manhattan Bank's prime lending rate as in effect
from time-to-time, which was 8.5% throughout the period from July 1, 1997
through July 1998 and mature on August 15, 2008. The Company believes that this
rate is comparable to rates which could have been obtained from unrelated third
parties. The Parent Companies do not have any obligation to make additional
equity investments in or loans to the Company. In July 1998, the Company
obtained external financing (see "Financing" Section) which, together with
internally generated funds, is expected to provide sufficient funds for the
Company to expand its business as currently planned, pay interest on the Notes
described below and fund its currently expected losses through the end of 1999.
Thereafter, the Company expects to require additional financing.
The Company has not historically, and does not currently, generate
positive operating cash flow. However, for the six months ended June 30, 1998,
14 of the Company's 19 service areas generated positive operating cash flow and
the Company, as a whole, expects to begin generating positive operating cash
flow within the next 12 months. The following comparative discussion of the
results of financial condition and results of operations of the Company includes
an analysis of changes in revenues and operating income (loss) before
depreciation and amortization ("EBITDA"). Industry analysts generally consider
EBITDA to be an important measure of comparative operating performance for the
telecommunications industry, and when used in comparison to debt levels or the
coverage of interest expense, as a measure of liquidity. However, EBITDA should
be considered in addition to, not as a substitute for, operating income, net
income, cash flow and other measures of financial performance and liquidity
reported in accordance with generally accepted accounting principles. EBITDA as
defined herein may not be comparable to similarly titled measures reported by
other companies.
The Company has had and will continue to have significant capital
expenditures. These expenditures pertain to the historical construction and
expansion of the networks and to the future expansion of the existing networks
as well as the construction of new networks.
RESULTS OF OPERATIONS
The following table sets forth certain consolidated statement of
operations data of the Company, in thousands of dollars and expressed as a
percentage of net revenues for each of the periods presented. This table should
be read in conjunction with the Company's financial statements, including the
notes thereto, appearing elsewhere in this report.
3
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TIME WARNER TELECOM LLC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)
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THREE MONTHS ENDED JUNE 30
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1997 1998
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Dollars in Thousands
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Statement of Operations Data:
Revenues:
Dedicated transport services $ 9,839 78.5% $ 19,240 71.1%
Switched services 2,692 21.5 7,807 28.9
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Total revenues 12,531 100.0 27,047 100.0
Costs and expenses:
Operating (1) 9,031 72.1 16,207 59.9
Selling, general
and Administrative (1) 12,776 102.0 17,854 66.0
Depreciation & amortization (1) 9,038 72.1 12,393 45.8
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Total costs & expenses 30,845 246.1 46,454 171.8
Operating loss (18,314) (146.1) (19,407) (71.8)
Equity in losses of
Unconsolidated affiliates (761) (6.1) (29) (0.1)
Interest, net (1) -- -- (2,699) (10.0)
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Net loss (2) ($19,075) (152.2%) ($22,135) (81.8%)
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EBITDA ($ 9,276) (74.0%) ($ 7,014) (25.9%)
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SIX MONTHS ENDED JUNE 30
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1997 1998
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Dollars in Thousands
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Statement of Operations Data:
Revenues:
Dedicated transport services $ 18,140 80.0% $ 35,973 73.3%
Switched services 4,544 20.0 13,122 26.7
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Total revenues 22,684 100.0 49,095 100.0
Costs and expenses:
Operating (1) 17,415 76.8 29,726 60.5
Selling, general
and Administrative (1) 24,761 109.2 34,170 69.6
Depreciation & amortization (1) 17,880 78.8 24,325 49.5
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Total costs & expenses 60,056 264.8 88,221 179.7
Operating loss (37,372) (164.8) (39,126) (79.7)
Equity in losses of
Unconsolidated affiliates (1,354) (6.0) (87) (0.2)
Interest, net (1) -- -- (4,710) (9.6)
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Net loss (2) ($38,726) (170.7%) ($43,923) (89.5%)
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EBITDA ($ 19,492) (85.9%) ($14,801) (30.1%)
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(1) Includes expenses resulting from transactions with affiliates of $3.8
million and $6.8 million in the three months ended June 30, 1997 and 1998
respectively, and $7.8 million and $12.9 million in the six months ended June
30, 1997 and 1998 respectively.
(2) The Company is a limited liability company that has operated as a
partnership for tax purposes during the periods presented herein. Accordingly,
the Company is not subject to Federal and state income taxation.
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
Revenues. Revenue increased $14.5 million, or 115.8%, to $27.0 million
for the three months ended June 30, 1998, from $12.5 million for the same period
in 1997. Revenues from the provision of dedicated transport services increased
$9.4 million, or 95.5%, to $19.2 million in 1998, from $9.8 million in 1997.
Revenues from dedicated transport service increased 91.1% in those markets in
which dedicated transport services were offered as of June 30, 1997. Switched
service revenue increased $5.1 million, or 190.0%, to $7.8 million in 1998, from
$2.7 million in 1997. Switched service revenue increased 78.6% in those markets
in which switched services were offered as of June 30, 1997. The increase in
revenues from dedicated transport services primarily reflects growth of services
and new products offered in existing markets. The increase in switched services
resulted from the offering of services in new markets and the growth of services
in existing markets. At June 30, 1998 the Company offered dedicated transport
services in 19 metropolitan areas, 16 of which offered switched services, as
compared to offering dedicated transport services in 15 metropolitan areas, 4 of
which offered switched services at June 30, 1997.
Operating Expenses. Operating expenses increased $7.2 million, or 79.5%,
to $16.2 million for the three months ended June 30, 1998, from $9.0 million for
the same period in 1997. The increase in operating expenses was primarily
attributable to the Company's expansion of its business, principally switched
services, and the ongoing development of existing markets resulting in higher
LEC charges for circuit leases and interconnection, higher technical personnel
4
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TIME WARNER TELECOM LLC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)
costs, and higher data processing costs. As a percentage of revenues, operating
expenses decreased to 59.9% in 1998 from 72.1% for the same period in 1997.
Selling, General and Administrative. Selling, general and administrative
expenses increased $5.1 million, or 39.7%, to $17.9 million for the three months
ended June 30, 1998, from $12.8 million for the same period in 1997. The
increase in selling, general and administrative expenses was primarily
attributable to higher direct sales costs associated with the increase in
revenues, an increase in consulting expenses relating to local regulatory
matters, implementing new billing and system software, higher property taxes,
and moving costs related to consolidating the corporate office into one
building. As a percentage of revenues, selling, general and administrative
expenses decreased to 66.0% in 1998, from 102.0% for the same period in 1997.
Depreciation and Amortization Expense. Depreciation and amortization
expense increased $3.4 million, or 37.1%, to $12.4 million for the three months
ended June 30, 1998, from $9.0 million for the same period in 1997. The increase
in depreciation and amortization expense was primarily attributable to higher
capital expenditures related to the ongoing construction and expansion of the
Company's telecommunication networks in both 1997 and 1998. As a percentage of
revenues, depreciation and amortization expenses decreased to 45.8% in 1998,
from 72.1% for the same period in 1997.
EBITDA. The EBITDA loss for the three months ended June 30, 1998
decreased $2.3 million, or 24.4%, to $7.0 million in 1998, from a loss of $9.3
million for the same period in 1997. This improvement was primarily the result
of increased revenue due to the Company's expansion of local telecommunications
networks in new and existing markets and growth of the Company's customer base,
partially offset by higher operating expenses in support of the larger customer
base, and higher selling, general and administrative expenses required to
support the expansion.
Interest Expense. Effective July 1, 1997 through July 1998, all of the
Company's financing requirements were funded with loans from the Parent
Companies. Interest expense relating to these loans totaled $2.8 million for the
three months ended June 30, 1998. In July 1998, the Company issued $400 million
of 9 3/4% Senior Notes, due July 15, 2008 (see "Financing" Section).
Net Loss. Net loss increased $3.1 million, or 16.0%, to $22.1 million
for the three months ended June 30, 1998, from a net loss of $19.1 million for
the same period in 1997. This increase resulted from higher depreciation and
amortization expenses relating to the Company's expansion of telecommunications
networks in new and existing markets, as well as interest expense on the loans
payable to the Parent Companies.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
Revenues. Revenues increased $26.4 million, or 116.4%, to $49.1 million
for the six months ended June 30, 1998, from $22.7 million for the same period
in 1997. Revenues from the provision of dedicated transport services increased
$17.8 million, or 98.3%, to $36.0 million for the six months ended June 30,
1998, from $18.1 million for the same period in 1997. Revenues from dedicated
transport service increased 94.2% in those markets in which dedicated transport
services were offered as of June 30, 1997. Switched service revenue increased
$8.6 million, or 188.8%, to $13.1 million for the six months ended June 30,
1998, from $4.5 million for the same period in 1997. Switched service revenue
increased 99.2% in those markets in which switched services were offered as of
June 30, 1997. The increase in revenues from dedicated transport services
primarily reflects growth of services and new products offered in existing
markets. The increase in switched services resulted from the offering of
services in new markets and the
5
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TIME WARNER TELECOM LLC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)
growth of services in existing markets. At June 30, 1998 the Company offered
dedicated transport services in 19 metropolitan areas, 16 of which offered
switched services, as compared to offering dedicated transport services in 15
metropolitan areas, 4 of which offered switched services at June 30, 1997.
Operating Expenses. Operating expenses increased $12.3 million, or
70.7%, to $29.7 million for the six months ended June 30, 1998, from $17.4
million for the same period in 1997. The increase in operating expenses was
primarily attributable to the Company's expansion of its business, principally
switched services, and the ongoing development of existing markets resulting in
higher LEC charges for circuit leases and interconnection, higher technical
personnel costs, and higher data processing costs. As a percentage of revenues,
operating expenses decreased to 60.5% in 1998 from 76.8% for the same period in
1997.
Selling, General and Administrative. Selling, general and administrative
expenses increased $9.4 million, or 38.0%, to $34.2 million for the six months
ended June 30, 1998, from $24.8 million for the same period in 1997. The
increase in selling, general and administrative expenses was primarily
attributable to higher direct sales costs associated with the increase in
revenues, an increase in consulting expenses relating to local regulatory
matters, implementing new billing and system software, higher property taxes,
and moving costs related to consolidating the corporate office into one
building. As a percentage of revenues, selling, general and administrative
expenses decreased to 69.6% in 1998, from 109.2% for the same period in 1997.
Depreciation and Amortization Expense. Depreciation and amortization
expense increased $6.4 million, or 36.0%, to $24.3 million for the six months
ended June 30, 1998, from $17.9 million for the same period in 1997. The
increase in depreciation and amortization expense was primarily attributable to
higher capital expenditures related to the ongoing construction and expansion of
the Company's telecommunication networks in both 1997 and 1998. As a percentage
of revenues, depreciation and amortization expenses decreased to 49.5% in 1998,
from 78.8% for the same period in 1997.
EBITDA. The EBITDA loss for the six months ended June 30, 1998 decreased
$4.7 million, or 24.1%, to $14.8 million in 1998, from a loss of $19.5 million
for the same period in 1997. This improvement was primarily the result of
increased revenue due to the Company's expansion of local telecommunications
networks in new and existing markets and growth of the Company's customer base,
partially offset by higher operating expenses in support of the larger customer
base, and higher selling, general and administrative expenses required to
support the expansion.
Interest Expense. Effective July 1, 1997 through July 1998 all of the
Company's financing requirements were funded with loans from the Parent
Companies. Interest expense relating to these loans totaled $4.8 million for the
six months ended June 30, 1998. In July 1998, the Company issued $400 million of
9 3/4 Senior Notes, due July 15, 2008, (see "Financing" Section).
Net Loss. Net loss increased $5.2 million, or 13.4%, to $43.9 million
for the six months ended June 30, 1998, from a net loss of $38.7 million for the
same period in 1997. This increase resulted from higher depreciation and
amortization expenses relating to the Company's expansion of telecommunications
networks in new and existing markets, as well as interest expense on the loans
payable to the Parent Companies.
6
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TIME WARNER TELECOM LLC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows. For the first six months of 1998, the Company's cash used in
operations decreased to $18.9 million from $36.1 million for the first six
months of 1997. This decrease in cash used in operations of $17.2 million
principally resulted from lower EBITDA losses and working capital requirements
in the first six months of 1998. The Company expects to continue to have
operating cash flow deficiencies for the near future as it develops and expands
its business.
Cash used in investing activities increased $11.8 million to $53.4
million for the first six months of 1998, as compared to $41.6 million for the
first six months of 1997, as a result of higher capital expenditures.
For the first six months of 1998, net cash provided by financing
activities reflects the receipt of interest bearing loans from the Parent
Companies amounting to $72.3 million. Prior to July 1, 1997, the Company's cash
flow deficiencies were entirely funded by non-interest bearing capital
contributions from the Parent Companies. For the first six months of 1997, net
capital contributions amounted to $77.7 million. This decrease of $5.3 million
was primarily due to lower cash funding requirements principally due to
operating cash flow associated with the Company's expansion of its customer base
and services in new and existing markets and lower working capital requirements,
partially offset by higher capital expenditure requirements for the first six
months of 1998.
Net cash provided by financing activities reflects the receipt of
non-interest-bearing capital contributions from the Parent Companies to fund the
Company's cash flow deficiencies through June 30, 1997. Effective July 1, 1997
through July 1998, all of the Company's financing requirements were funded with
interest-bearing loans from the Parent Companies. This indebtedness is
subordinated in right of payment to the Notes, and bears interest (payable in
kind) at an annual rate equal to The Chase Manhattan Bank's prime lending rate
as in effect from time-to-time, which was 8.5% throughout the period July 1,
1997 through July 1998, and matures on August 15, 2008, one month after the
maturity of the Notes.
FINANCING
Historically, the Company has not maintained cash balances since all the
Company's cash receipts and funding requirements were provided to or from the
Parent Companies. The proceeds from the issuance of senior notes ("Debt
Offering"), cash flow from operations and future financings are expected to fund
the Company's future cash requirements through the end of 1999. The Parent
Companies and the Members are not under any obligation to make any additional
equity investments in or loans to the Company. At a future date, the Company may
negotiate a bank credit facility to provide it with working capital and enhance
its financial flexibility. There can be no assurance that such financing will be
available on terms acceptable to the Company or at all.
The development of the Company's business and the installation and
expansion of the Company's communications networks, combined with the
development and operation of the Company's network operations center ("NOC"),
have resulted in substantial capital expenditures. These capital expenditures,
as well as the Company's historical operating losses, have resulted in
substantial negative cash flow for the Company since inception in 1993. Funding
of this historical cash flow deficiency has been primarily accomplished through
the receipt of capital contributions from the Parent Companies through June 30,
1997. From July 1, 1997 through July 1998, the deficiency has been funded
through interest bearing loans from the Parent Companies. Thereafter, the
Company expects cash flow deficiencies to be funded with the proceeds from the
Debt Offering and future financing as described above. This indebtedness to the
Parent
7
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TIME WARNER TELECOM LLC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)
Companies is subordinated in right of payment to the Notes and bears interest
(payable in kind) at an annual rate equal to The Chase Manhattan Bank's prime
lending rate as in effect from time-to-time, which was 8.5% throughout the
period from July 1, 1997 through July 1998 and matures on August 15, 2008, one
month after the maturity of the Notes. The net balance of amounts due to the
Parent Companies, including interest accrued thereon, under this funding
arrangement was $152.6 million and $75.5 million as of June 30, 1998 and
December 31, 1997, respectively. The average net capital contributions from the
Parent Companies were $517.8 million for the six months ended June 30, 1997.
Additional paid-in capital balances, which include all capital contributions
from the Parent Companies have remained at $555.8 million since June 30, 1997.
On July 21, 1998, the Company issued $400 million of 9 3/4% Senior Notes
("Notes") due July 15, 2008. The Notes are unsecured, unsubordinated obligations
of the Company and TWT, who are jointly and severally liable, fully and
unconditionally, with respect to the Notes. Interest on the Notes is payable
semiannually on January 15 and July 15, beginning on January 15, 1999. The net
proceeds of approximately $387.5 million are expected to be used to expand and
develop existing and new networks and for general corporate and working capital
purposes through the end of 1999. The proceeds of the Debt Offering were
immediately invested in short-term investments While the primary use of such
proceeds will be to fund ongoing business operations of the Company's
subsidiaries which own and operate its networks, the Company intends to continue
to evaluate potential acquisitions and joint ventures. The Company has no
definitive agreement with respect to any acquisition or joint venture, although
from time to time it may discuss and assess opportunities with other companies,
including affiliates of the Members, on an ongoing basis.
The Company expects that its future cash requirements principally will
be for working capital, capital expenditures and to fund its operating losses.
The Company expects that the net proceeds of the Debt Offering, together with
internally generated funds, will provide sufficient funds for the Company to
meet the Company's expected capital and liquidity needs to expand its business
as currently planned, pay interest on the Notes and fund its currently expected
losses through the end of 1999. Thereafter, the Company expects to require
additional financing. However, in the event that the Company's plans or
assumptions change or prove to be inaccurate, or the foregoing sources of funds
prove to be insufficient to fund the Company's growth and operations, or if the
Company consummates acquisitions or joint ventures, the Company may be required
to seek additional capital sooner than currently anticipated. The Company's
revenues and costs are dependent upon factors that are not within the Company's
control, such as regulatory changes, changes in technology and increased
competition. Due to the uncertainty of these and other factors, actual revenues
and costs may vary from expected amounts, possibly to a material degree, and
such variations are likely to affect the level of the Company's future capital
expenditures and expansion plans. Sources of financing may include public or
private debt or equity financing by the Company or its subsidiaries or other
financing arrangements.
CAPITAL EXPENDITURES
The facilities-based telecommunications service business is a capital
intensive business. The Company's operations have required and will continue to
require substantial capital investment for: (i) the purchase and installation of
switches, electronics, fiber and other technologies in existing networks and in
additional networks to be constructed in new service areas; and (ii) the
acquisition and expansion of networks currently owned and operated by other
companies. The Company's expected capital expenditures for general corporate and
working capital purposes include (i) expenditures with respect to the Company's
management information system and corporate service support infrastructure and
(ii) operating and administrative expenses with respect to new networks and debt
service. The Company plans to make
8
<PAGE>
<PAGE>
TIME WARNER TELECOM LLC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)
substantial capital investments in connection with the deployment of switches in
all of its existing networks, and plans to construct and develop new networks.
Expansion of the Company's networks will include the geographic expansion of the
Company's existing operations and will consider the development of new markets.
In addition, the Company may acquire existing networks in the future.
During the first six months of 1998, capital expenditures were $53.4
million, an increase of $11.8 million from the first six months in 1997. This
increase resulted from unusually low capital expenditures for the first six
months of 1997, principally due to the Company's new management team put into
place in January 1997, which required time to formulate the Company's current
business strategy focusing exclusively on business customers. The largest
commitment of capital was related to the installation of transport and switch
related electronics to support the increase in sales activity. Based on
expansion plans comparable to the historical expansion of the Company and the
continuation of the Company's relationship with TW Cable with respect to
additional fiber capacity, the Company estimates it will require approximately
$150 million in each of 1998 and 1999 to fund its capital expenditures.
YEAR 2000
The Company is currently working to resolve the potential impact of the
Year 2000 on the processing of time-sensitive information by its computerized
information systems. Year 2000 issues may arise if computer programs have been
written using two digits (rather than four) to define the applicable year. In
such case, programs that have time-sensitive logic may recognize a date using
"00" as the year 1900 rather than the year 2000, which could result in
miscalculations or system failures. The Company utilizes a number of computer
programs across its entire operation. Year 2000 issues could impact the
Company's information systems as well as computer hardware and equipment that is
part of its telephony network such as switches, termination devices and SONET
rings that contain embedded software or "firmware."
The Company's exposure to potential Year 2000 problems exists in two
general areas: technological operations in the sole control of the Company, and
technological operations dependent in some way on one or more third parties. The
majority of the Company's exposure to potential Year 2000 problems is in the
latter area where the situation is much less within the Company's ability to
predict or control. The Company's business is heavily dependent on third
parties, many of whom are themselves heavily dependent on technology. For
example, like all other telecommunications providers, the Company must
interconnect its networks with other carriers and service providers in order to
provide end-to-end service to customers. The Company cannot control the Year
2000 readiness of those parties but does plan to test its interfaces with them
and to work with these parties to resolve any difficulties. In some cases, the
Company's third party dependence is on vendors of technology who are themselves
working towards solutions to Year 2000 problems, such as suppliers of software
systems for billing, ordering and other key business operations.
9
<PAGE>
<PAGE>
TIME WARNER TELECOM LLC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)
The Company has developed a Year 2000 action plan to address
identification and assessment of potential Year 2000 issues and remediation.
The Company has completed the first phase of such action plan which involved
making the Company's internal organizations aware of Year 2000 issues and
assigning responsibility internally for the Year 2000 readiness program. The
Company is now in the assessment phase of its plan which involves a review of
significant software and equipment used in the Company's operations and, to the
extent practicable, in the operations of other parties with which it
interconnects its networks, in order to determine if any Year 2000 risks exist
that may be material to the Company as a whole. This process includes an
assessment of Year 2000 risks on an ongoing basis and the identification of
practical remediation measures that could be taken on a timely basis to alter,
validate or replace time-sensitive software and equipment. The Company expects
to complete the assessment phase of its plan by the third quarter of 1998.
Concurrently with the foregoing assessment work, the Company has already
begun implementing certain remedial measures and intends to complete its
remediation efforts prior to any anticipated material impact on its computerized
information systems or on hardware that is part of its telephony network. In the
normal course of business, the Company is in the process of replacing many of
the computer programs used by key business operations and its financial systems.
The new programs are expected to be in place and operational by the end of 1999.
The specifications for these new systems are all Year 2000 compliant As a
contingency plan, in case the new systems are not fully operational when
planned, the Company plans to remediate certain existing systems so that they
will be Year 2000 ready.
Costs of addressing potential Year 2000 problems have not been material
to date and, based on preliminary information gathered to date from the Company,
its customers and vendors, are not currently expected to have a material adverse
impact on the Company's financial position, results of operations or cash flows
in future periods. However, if the Company, its customers or vendors are unable
to resolve such processing issues in a timely manner, it could result in a
material financial risk, including loss of revenue, substantial unanticipated
costs and service interruptions. Accordingly, the Company plans to devote the
resources it concludes are appropriate to resolve all significant Year 2000
issues in a timely manner.
CAUTIONS CONCERNING FORWARD LOOKING STATEMENTS
Certain information included in this report contains forward-looking
statements, including statements regarding the Company's expected financial
position, business and financing plans. These forward-looking statements reflect
the Company's views with respect to future events and financial performance. The
words "believe", "expect", "plans" and "anticipate" and similar expressions
identify forward-looking statements. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, it can
give no assurance that such expectations will prove to have been correct.
Important factors that could cause actual results to differ materially from such
expectations include the Company's limited history of operations, the Company's
negative cash flow and operating losses, the significant capital requirements
required for the development and expansion of the Company's business, the
Company's substantial leverage and insufficiency of its earnings to cover its
fixed charges, the risks associated with the expansion of the Company's business
and the possible inability of the Company to manage its growth, the dependence
of the Company on its relationship and agreements with TW Cable, risks related
to the Company's expansion into the provision of long distance services, the
Company's dependence upon interconnection with and use of ILEC networks, the
competitive nature of the telecommunications business, the Company's dependence
on its information billing systems, risks related to failure of Year 2000
remediations, the Company's dependence on its significant customers, regulatory
developments and the Company's dependence on governmental and other
authorizations. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of their dates.
10
<PAGE>
<PAGE>
TIME WARNER TELECOM LLC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)
The Company undertakes no obligations to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
11
<PAGE>
<PAGE>
TIMES WARNER TELECOM LLC
COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------- ------------
(Unaudited)
(thousands)
<S> <C> <C>
ASSETS
Current assets
Receivables, less allowances of $1,403 and $776 ...................... $ 14,741 $ 8,882
Prepaid expenses ..................................................... 1,051 1,192
--------- ---------
Total current assets ............................................... 15,792 10,074
Investments in unconsolidated affiliates ............................... 4,289 4,376
Property, plant and equipment .......................................... 537,334 484,206
Less: accumulated depreciation ......................................... (92,797) (69,048)
--------- ---------
444,537 415,158
Intangible assets, net ................................................. 8,176 8,469
--------- ---------
Total assets ....................................................... $ 472,794 $ 438,077
========= =========
LIABILITIES AND MEMBERS' EQUITY
Current liabilities
Accounts payable ..................................................... $ 24,919 $ 32,908
Other current liabilities ............................................ 38,824 29,304
--------- ---------
Total current liabilities .......................................... 63,743 62,212
Subordinated loans payable to the Parent Companies
(including $6,315 and $1,544 of accrued interest, respectively)..... 152,584 75,475
Members' equity
Class A interests having an aggregate participation
percentage of 0% ................................................... -- --
Class B interests having an aggregate participation
percentage of 100% ................................................. 555,807 555,807
Accumulated deficit .................................................. (299,340) (255,417)
--------- ---------
Total members' equity .............................................. 256,467 300,390
--------- ---------
Total liabilities and members' equity .............................. $ 472,794 $ 438,077
========= =========
</TABLE>
See accompanying notes.
12
<PAGE>
<PAGE>
TIME WARNER TELECOM LLC
COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
----------------------- ------------------------
1998 1997 1998 1997
-------- -------- -------- --------
(Unaudited)
(thousands)
<S> <C> <C> <C> <C>
Revenues:
Dedicated transport services ................. $ 19,240 $ 9,839 $ 35,973 $ 18,140
Switched services ............................ 7,807 2,692 13,122 4,544
-------- -------- -------- --------
Total revenues ......................... 27,047 12,531 49,095 22,684
-------- -------- -------- --------
Costs and expenses:
Operating (a) ............................... 16,207 9,031 29,726 17,415
Selling, general and administrative (a) ..... 17,854 12,776 34,170 24.761
Depreciation and amortization (a) ........... 12,393 9,038 24,325 17,880
-------- -------- -------- --------
Total costs and expenses ............... 46,454 30,845 88,221 60,056
-------- -------- -------- --------
Operating loss ................................... (19,407) (18,314) (39,126) (37,372)
Equity in losses of unconsolidated affiliates .... (29) (761) (87) (1,354)
Interest expense, net (a) ....................... (2,699) -- (4,710) --
-------- -------- -------- --------
Net loss ......................................... $(22,135) $(19,075) $(43,923) $(38,726)
======== ======== ======== ========
(a) Includes expenses resulting from transactions
with affiliates (Note 4):
Operating expenses .......................... $ 513 $ 433 $ 1,026 $ 866
======== ======== ======== ========
Selling, general and administrative ......... $ 1,225 $ 1,825 $ 2,643 $ 3,772
======== ======== ======== ========
Depreciation and amortization ............... $ 2,260 $ 1,534 $ 4,453 $ 3,159
======== ======== ======== ========
Interest expense, net ....................... $ 2,763 $ - $ 4,771 $ -
======== ======== ======== ========
</TABLE>
See accompanying notes.
13
<PAGE>
<PAGE>
TIME WARNER TELECOM LLC
COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------
1998 1997
--------- ---------
(Unaudited)
(thousands)
<S> <C> <C>
OPERATIONS
Net loss .............................................. $ (43,923) $ (38,726)
Adjustments for noncash and nonoperating items:
Depreciation and amortization ......................... 24,325 17,880
Equity in loss of unconsolidated affiliates ........... 87 1,354
Changes in operating assets and liabilities:
Accounts receivable and other current assets ..... (5,718) (3,301)
Accounts payable and other current liabilities.... 6,302 (13,149)
Other balance sheet changes ...................... 23 (134)
--------- ---------
Cash used in operations ............................... (18,904) (36,076)
--------- ---------
INVESTING ACTIVITIES
Capital expenditures .................................. (53,434) (41,593)
--------- ---------
Cash used in investing activities ..................... (53,434) (41,593)
--------- ---------
FINANCING ACTIVITIES
Proceeds from loans from the Parent Companies ......... 114,751 -
Capital contributions from the Parent Companies ....... - 97,633
Repayment of loans from the Parent Companies .......... (42,413) -
Distributions to the Parent Companies ................. - (19,964)
--------- ---------
Cash provided by financing activities ................. 72,338 77,669
--------- ---------
INCREASE IN CASH AND EQUIVALENTS ...................... - -
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD ........... - -
--------- ---------
CASH AND EQUIVALENTS AT END OF PERIOD ................. $ - $ -
========= =========
</TABLE>
See accompanying notes.
14
<PAGE>
<PAGE>
TIME WARNER TELECOM LLC
COMBINED STATEMENT OF CHANGES IN MEMBERS' EQUITY
<TABLE>
<CAPTION>
Total
Class B Accumulated Members'
Interests Deficit Equity
--------- --------- --------
(Unaudited)
(thousands)
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1997.... 555,807 (255,417) 300,390
Net loss ....................... -- (43,923) (43,923)
-------- --------- --------
BALANCE AT JUNE 30, 1998 ....... $555,807 $(299,340) $256,467
======== ========= ========
</TABLE>
See accompanying notes.
15
<PAGE>
<PAGE>
TIME WARNER TELECOM LLC
NOTES TO COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Time Warner Telecom LLC, a Delaware limited liability company (the
"Company"), is a facilities-based competitive local telecommunications
services provider ("CLEC") in selected metropolitan markets across the
United States, offering a wide range of business telephony services,
primarily to medium- and large-sized business customers. The business of
the Company was commenced in 1993 by Time Warner Cable ("TW Cable"), a
division of Time Warner Entertainment Company, L.P. ("TWE"), and reflects
the combined commercial telecommunication operations under the ownership or
management control of TW Cable. These operations consist of the commercial
telecommunication operations of Time Warner Inc. and certain of its
subsidiaries ("Time Warner") and the Time Warner Entertainment-Advance/
Newhouse Partnership ("TWEAN") that were acquired or formed in 1995, as
well as the pre-existing commercial telecommunication operations of TWE
(collectively, TWE, TWEAN and Time Warner are referred to herein as the
"Parent Companies").
To date, the majority of the Company's revenues have been derived from
the provision of "private line" or "direct access" telecommunications
services. Because the Company has deployed switches in 16 of its 19
markets, management expects that a growing portion of the Company's
revenues will be derived from providing switched services. The Company's
customers are principally telecommunications-intensive business end-users,
long distance carriers ("IXCs"), internet service providers ("ISPs"),
wireless communications companies and governmental entities. Such customers
are offered a wide range of integrated telecommunications products and
services, including dedicated transmission, local switched, data and video
transmission services and Internet services. In addition, the Company
benefits from its strategic relationship with TW Cable both through access
rights and cost-sharing. As a result, the Company's networks have been
constructed primarily through the use of fiber capacity licensed from TW
Cable.
BASIS OF PRESENTATION
The combined financial statements of the Company reflect the "carved
out" historical financial position, results of operations, cash flows and
changes in members' equity of the commercial telecommunication operations
of the Parent Companies as if they had been operating as a separate
company. The combined statement of operations has been adjusted to
retroactively reflect an allocation of certain expenses pursuant to the
final terms of the related agreements, primarily relating to office rent,
overhead charges for various administrative functions performed by TW Cable
and certain facility maintenance and pole rental costs. These allocations
were required to reflect all costs of doing business and have been based on
various methods (Note 4), which management believes result in reasonable
allocation of such costs.
The accompanying financial statements are unaudited but, in the
opinion of management, contain all the adjustments (consisting of those of
a normal recurring nature) considered necessary to present fairly the
financial position and the results of operations and cash flows for the
periods presented in conformity with generally accepted accounting
principles applicable to interim periods. The accompanying financial
statements should be read in conjunction with the audited combined
financial statements of the Company for the year ended December 31, 1997.
16
<PAGE>
<PAGE>
TIME WARNER TELECOM LLC
NOTES TO COMBINED FINANCIAL STATEMENTS - (continued)
(UNAUDITED)
During fiscal 1997, the Financial Accounting Standard Board ("FASB")
issued Statement No. 131, "Disclosures about Segments of an Enterprise and
Related Information" ("FAS 131"). FAS 131 requires disclosure of financial
and descriptive information about an entity's reportable operating segments
under the "management approach" as defined in the statement. The company
will adopt FAS 131 as of December 31, 1998. The impact of adoption of this
standard on the Company's financial statements is not expected to be
material.
In June 1998, the FASB issued Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("FAS 133"), effective for
years beginning after June 15, 1999, with early application encouraged. The
new rules establish standards requiring that all derivative financial
instruments, such as interest rate swap contracts and foreign exchange
contracts, be recognized and measured at fair market value regardless of
the purpose or intent for holding them. The Company does not hold any
derivative financial instruments.
CASH AND EQUIVALENTS
The Company has not historically maintained any cash balance since all
funding of the Company's operating, investing and financing activities were
provided by the Parent Companies or by subordinated loans payable to the
Parent Companies (Note 3). This funding consisted of non-interest-bearing
capital contributions through June 30, 1997 and subordinated loans during
the period from July 1, 1997 through July 1998. The non-interest-bearing
capital contributions have been included in paid-in capital. The average
net capital contributions from the Parent Companies were $517.8 million for
the six months ended June 30, 1997. The subordinated loans, including
accrued interest, have been reflected as a long-term liability in the
accompanying balance sheet.
2. MEMBER'S EQUITY
At June 30, 1998, all the assets and liabilities of the Company were
beneficially owned by Time Warner and MediaOne Group, Inc. ("MediaOne"),
which, through certain subsidiaries, are partners in TWE. The assets and
liabilities of the Company were also beneficially owned by the
Advance/Newhouse Partnership ("A/N") through TWEAN. Time Warner and certain
of its subsidiaries, MediaOne and certain of its subsidiaries and A/N are
collectively referred to herein as the "Members".
In July 1998, the Company completed a reorganization (the
"Reorganization"), under which the Company's capitalization was authorized
to include two classes of interests, Class A Interests and Class B
Interests. In connection with the Reorganization, the Parent Companies
contributed their respective assets and liabilities of the Company's
business to the Company and in connection therewith, Time Warner, MediaOne
and A/N received Class B Interests having an aggregate participation
percentage of 100%. Following the Reorganization, Time Warner, MediaOne
and A/N held Class B interests having participation percentages equaling
61.95%, 18.88% and 19.17%, respectively. Accordingly, the accompanying
combined financial statements have been adjusted to retroactively reflect
the authorization of Class A Interests and the authorization and issuance
of Class B Interests having an aggregate participation percentage of 100%
for all periods.
The Class A Interests and Class B Interests are substantially
identical in all respects, except that the Class A Interests have no voting
rights, provided, however, that the approval of the holders of a majority
(in participation percentage) of the Class A Interests, voting as a
separate class, is required for any amendment to the Company's Limited
Liability Company Agreement that would have an adverse effect on the rights
of the holders of such class. The business and affairs of the Company are
managed by a
17
<PAGE>
<PAGE>
TIME WARNER TELECOM LLC
NOTES TO COMBINED FINANCIAL STATEMENTS - (continued)
(UNAUDITED)
management committee (the "Management Committee"), except for certain
matters which require the unanimous vote of the holders of Class B
Interests. Representatives of the Management Committee are appointed by the
Members.
In connection with the Reorganization, the Management Committee
approved an option plan that provides for the granting of options to
purchase Class A Interests representing approximately 10% of the equity in
the Company, in the aggregate on a fully diluted basis. Generally, options
issued under such option plan will become exercisable over a four-year
vesting period and expire ten years from the date of the grant. In
addition, the purchase price of the Class A Interests covered by each
option will not be less than the fair market value of the Class A Interests
on the date of the grant.
3. SUBORDINATED LOANS PAYABLE TO THE PARENT COMPANIES
Effective July 1, 1997 through July 1998, all of the Company's
financing requirements began to be funded with subordinated loans from the
Parent Companies. These loans bear interest (payable in kind) at The Chase
Manhattan Bank's prime rate which was 8.5% throughout the period from July
1, 1997 through July 1998 and mature on August 15, 2008. The Parent
Companies do not have any obligation to make additional equity investments
in or loans to the Company. Interest expense relating to these loans
totaled approximately $2.8 million and $4.8 million for the three and six
months ended, for the six months ended, June 30, 1998, respectively.
4. RELATED PARTY TRANSACTIONS
In the normal course of conducting its businesses, the Company has
various transactions with the Parent Companies, generally on terms
resulting from negotiation between the affected units that, in management's
view, results in reasonable allocations.
The Company's operations, which in certain cases are co-located with
TW Cable divisions, are allocated a charge for various overhead expenses
for services provided by TW Cable. These allocations are based on direct
labor, total expenses, or headcount relative to each division. The Company
is also allocated rent based on the square footage of space occupied by the
Company at TW Cable facilities. The aggregate of these charges totaled
approximately $547,000 and $1.3 million for the three months ended June 30,
1998 and 1997, respectively, and $1.2 million and $2.5 million for the six
months ended June 30, 1998 and 1997, respectively.
The Company participates in the Time Warner Cable Pension Plan (the
"Pension Plan"), a noncontributory defined benefit pension plan which
covers approximately 90% of all employees. The remaining 10% of employees
are participating in a pension plan under the administration of MediaOne,
their previous employer. The Company also participates in the Time Warner
Cable Employees Savings Plan (the "Savings Plan"), a defined contribution
plan. Both the Pension Plan and Savings Plan are administered by a
committee appointed by the Board of Representatives of TWE and cover
substantially all employees.
Benefits under the Pension Plan are determined based on formulas which
reflect employees' years of service and compensation levels during their
employment period. Total pension costs relating to the Pension Plan were
$273,000 and $252,000 for the three months ended June 30, 1998 and 1997,
respectively, and $644,000 and $578,000 for the six months ended June 30,
1998 and 1997, respectively. Relating to the MediaOne pension plan, pension
costs were approximately $185,000 and $150,000 for the three months ended
June 30, 1998 and 1997, respectively, and $336,000 and $307,000 for the six
months ended June 30, 1998 and 1997, respectively.
18
<PAGE>
<PAGE>
TIME WARNER TELECOM LLC
NOTES TO COMBINED FINANCIAL STATEMENTS - (continued)
(UNAUDITED)
The Company's contributions to the Savings Plan can represent up to
6.67% of the employees' compensation during the plan year. TWE's Board of
Representatives has the right in any year to set the maximum amount of the
Company's annual contribution. Defined contribution plan expense was
$220,000 and $151,000 for the three months ended June 30, 1998 and 1997,
respectively, and $442,000 and $343,000 for the six months ended June 30,
1998 and 1997, respectively.
The Company licenses the right to use the majority of its fiber optic
cable from TW Cable. The Company paid TW Cable approximately $2.0 million
and $4.6 million for the three months ended June 30, 1998 and 1997,
respectively, under this arrangement, and $3.2 million and $10.2 million in
the six months ended June 30, 1998 and 1997, respectively and such costs
have been capitalized by the Company. The amortization of these costs and
fiber previously capitalized in the amount of approximately $2.3 million
and $1.6 million for the three months ended June 30, 1998 and 1997,
respectively, and $4.5 million and $3.2 million for the six months ended
June 30, 1998 and 1997, respectively, has been classified as a component of
depreciation and amortization in the accompanying combined statement of
operations. In addition, under this licensing arrangement, the Company
reimburses TW Cable for facility maintenance and pole rental costs, which
costs amounted to $513,000 and $433,000 for the three months ended June 30,
1998 and 1997, respectively, and $1.0 million and $866,000 for the six
months ended June 30, 1998 and 1997, respectively.
Effective July 1, 1997 through July 1998, all of the Company's
financing requirements began to be funded with loans from the Parent
Companies. Interest expense relating to these loans totaled approximately
$2.8 million and $4.8 million for the three and six months ended June 30,
1998, respectively.
5. COMMITMENTS AND CONTINGENCIES
Pending legal proceedings are substantially limited to litigation
incidental to the business of the Company. In the opinion of management,
the ultimate resolution of these matters will not have a material effect on
the Company's financial statements.
6. SUBSEQUENT EVENTS
On July 21, 1998, the Company issued $400 million of 9 3/4% Senior
Notes ("Notes") due July 15, 2008. The Notes are unsecured, unsubordinated
obligations of the Company and Time Warner Telecom Inc., a wholly owned
subsidiary of the Company, who are jointly and severally liable, fully and
unconditionally, with respect to the Notes. Interest on the Notes is
payable semiannually on January 15 and July 15, beginning January 15, 1999.
The net proceeds of approximately $387.5 million are expected to be used to
expand and develop existing and new networks and for general corporate and
working capital purposes over the next two years. The proceeds were
immediately invested in short-term investments.
19
<PAGE>
<PAGE>
TIME WARNER TELECOM LLC
OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.
On July 14, 1998, pursuant to the Reorganization, the Company issued
Class B limited liability company interests, having an aggregate participation
percentage of 100%, to the Members, in a private placement under Section 4(2) of
the Securities Act of 1933.
On July 16, 1998, the Company's Registration Statement on Form S-1,
Registration No. 333-53553, pursuant to which $400 million of the Company's
9 3/4% Senior Notes due 2008 were registered under the Securities Act of 1933,
was declared effective. The offering commenced on July 16, 1998, and terminated
on July 21, 1998, with the sale of all of the registered securities for an
aggregate offering price of $400 million. The managing underwriters of the
offering were Morgan Stanley Dean Witter and Lehman Brothers. The net proceeds
to the Company from the offering, after deduction of expenses, was approximately
$387.5 million. The aggregate amount of underwriting discounts and commissions
was $11,000,000, and the amount of other expenses incurred in respect of the
offering was approximately $1.5 million.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
The exhibits listed on the accompanying Exhibit Index are filed or
incorporated by reference as a part of this report and such Exhibit Index is
incorporated herein by reference.
(b) Reports on Form 8-K.
No Current Report on Form 8-K was filed by the Company during the
quarter ended June 30, 1998.
20
<PAGE>
<PAGE>
TIME WARNER TELECOM LCC
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TIME WARNER TELECOM LLC
(Registrant)
By: /s/ David J. Rayner
-------------------------------
Name: David J. Rayner
Title: Senior Vice President - Chief Financial Officer
Dated: August 20, 1998
<PAGE>
<PAGE>
TIME WARNER TELECOM LLC
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
<S> <C>
2.1 Reorganization Agreement, dated as of July 14, 1998 among Time
Warner Companies, Inc., MediaOne Group, Inc., Advance/Newhouse Partnership,
Time Warner Entertainment Company, L.P., and Time Warner
Entertainment-Advance/Newhouse Partnership
4.1 Indenture, dated as of July 21, 1998 among the Company, Time Warner
Telecom, Inc. and The Chase Manhattan Bank, as Trustee
10.1 Underwriting Agreement, dated as of July 14, 1998 among the Company, Time
Warner Telecom Inc. and Morgan Stanley & Co. Incorporated and Lehman
Brothers Inc.
10.2 Time Warner Telecom LLC 1998 Option Plan as amended as of August 5, 1998
10.3 Capacity License Agreement, dated as of July 1, 1998
10.4 Trade Name License, dated as of July 1, 1998 between the Company, TWT and
Time Warner Inc.
27 Financial Data Schedule
</TABLE>
STATEMENT OF DIFFERENCES
------------------------
The section symbol shall be expressed as ............................. 'SS'
<PAGE>
<PAGE>
REORGANIZATION AGREEMENT
AGREEMENT, dated as of July 14, 1998, among TIME WARNER COMPANIES, INC., a
Delaware corporation ("TWX"), MEDIAONE GROUP, INC. (formerly U S WEST, INC.), a
Delaware corporation ("MediaOne"), ADVANCE/NEWHOUSE PARTNERSHIP, a New York
general partnership ("A/N"), TIME WARNER ENTERTAINMENT COMPANY, L.P., a Delaware
limited partnership ("TWE"), and TIME WARNER ENTERTAINMENT-ADVANCE/NEWHOUSE
PARTNERSHIP, a New York general partnership ("TWE-A/N").
W I T N E S S E T H:
WHEREAS, TWX, MediaOne and certain of their respective subsidiaries are
parties to the Agreement of Limited Partnership of TWE, dated as of October 29,
1991, as amended (the "TWE Partnership Agreement"), pursuant to which the
parties thereto formed TWE;
WHEREAS, TWE, A/N and PARAGON COMMUNICATIONS, a New York general
partnership all the interests of which are owned by subsidiaries of TWX and by
TWE ("Paragon"), are parties to the Partnership Agreement of TWE-A/N, dated as
of September 9, 1994, as amended (the "TWE-A/N Partnership Agreement"), pursuant
to which the parties thereto formed TWE-A/N;
WHEREAS, TWE and TWE-A/N and TWX, through the Local Operating Entities (as
defined herein), are jointly engaged in a business which provides telephony
services to business customers in markets in which the cable television systems
of TWE, TWE-A/N and TWX are located (the "Time Warner Telecom Business");
WHEREAS, the parties hereto desire to contribute the Time Warner Telecom
Business to a newly formed entity, distribute the equity of such entity to TWX,
MediaOne and A/N and effect a public debt offering of such entity;
WHEREAS, TWE and MediaOne are parties to the Option Agreement, dated as of
September 15, 1993 (the "Option Agreement"), pursuant to which TWE has granted
to MediaOne an option to increase its partnership interest in TWE in certain
circumstances (the "Option");
WHEREAS, in connection with the transactions contemplated hereby, TWE and
MediaOne desire to provide for certain adjustments to the terms of the Option;
and
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WHEREAS, the parties hereto are entering into this Agreement to effect the
foregoing transactions and certain other related transactions described herein
and to make certain representations and warranties and enter into certain
covenants and agreements in connection therewith.
NOW, THEREFORE, in reliance upon the representations and warranties made
herein and in consideration of the mutual agreements herein contained, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. For purposes of this Agreement, the following terms shall
have the meanings set forth below:
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such other Person.
"Agreement" shall mean this Reorganization Agreement, as it may be amended,
restated, modified or supplemented from time to time in accordance with its
terms.
"Annualization Factor" means (a) with respect to any Threshold Telecom
Disposition occurring prior to the beginning of the two-year period referred to
in Section 3.1(a)(i), eight and (b) with respect to any Threshold Telecom
Disposition occurring during the two-year period referred to in Section
3.1(a)(i), the product of eight and a fraction the numerator of which is the
number of days from the date of such Threshold Telecom Disposition to the end of
such two-year period and the denominator of which is 730.
"A Sub-Account" shall have the meaning ascribed to such term in the TWE
Partnership Agreement.
"A Threshold" shall have the meaning ascribed to such term in the TWE
Partnership Agreement.
"B Threshold" shall have the meaning ascribed to such term in the TWE
Partnership Agreement.
"Cable EBITDA" shall have the meaning ascribed to such term in the Option
Agreement.
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"Class A Partner" shall have the meaning ascribed to such term in the TWE
Partnership Agreement.
"Common Partnership Units" shall have the meaning ascribed to such term in
the TWE-A/N Partnership Agreement.
"Common Sub-Account" shall have the meaning ascribed to such term in the
TWE Partnership Agreement.
"Company EBITDA" shall mean, for any period, the net income of the Company
or any successor of the Company, plus the sum of interest expense, income tax
expenses, depreciation and amortization (in each case, to the extent deducted in
determining such net income), determined in a manner consistent with the
calculation of Cable EBITDA. In determining Company EBITDA, the proportional
method of consolidation shall be used for all joint ventures and other interests
held by the Company or such successor.
"Control Termination Date" shall mean the earlier of (i) the date on which
the TW Partners and the MediaOne Partner cease to collectively hold the right
pursuant to the LLC Agreement, Stockholders' Agreement or any successor
agreements to designate a majority of the Members' Committee or Board of
Directors of the Company or any successor of the Company or (ii) the date upon
which a sale of all or substantially all of the assets of the Company or any
successor of the Company is consummated.
"Executive Committee" shall have the meaning ascribed to such term in the
TWE-A/N Partnership Agreement.
"Gross Option Amount" shall have the meaning ascribed to such term in the
Option Agreement.
"Governmental Authority" shall mean any foreign, Federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Local Operating Entities" shall mean the partnerships and corporations,
all of the interests of which are directly or indirectly owned by TWE, TWE-A/N
and TWX, through which the Time Warner Telecom Business is currently operated,
other than those specified on Schedule I hereto.
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"Long Range Plan" shall mean the long range plan of the Time Warner Telecom
Business attached as Exhibit A hereto.
"Management Committee" shall have the meaning ascribed to such term in the
TWE Partnership Agreement.
"MediaOne Partner" shall mean MediaOne Group, Inc. (formerly U S WEST
Multimedia Communications, Inc.), a Colorado corporation.
"Option Closing" shall have the meaning ascribed to such term in the Option
Agreement.
"Option Entitlement" shall have the meaning ascribed to such term in the
Option Agreement.
"Participating Percentage Share" shall have the meaning ascribed to such
term in the TWE Partnership Agreement.
"Person" shall mean an individual, corporation, partnership, trust or
unincorporated organization or a government or any agency or political
subdivision thereof.
"SAR Amount" shall have the meaning ascribed thereto in the Option
Agreement.
"SAR Election" shall have the meaning ascribed thereto in the Option
Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Third Party" shall mean a party or parties un-Affiliated with any of the
parties hereto.
"TWE-A/N Share" shall mean 57.5%.
"TWE Initial Equity" shall mean (a) the Interests issued to TWE pursuant to
Section 2.1(c)(i) and 2.2(a)(i), (b) the shares of Class B Common Stock issued
in the Reconstitution in respect of the Interests issued to TWE pursuant to
Section 2.1(c)(i) and 2.2(a)(i), or (c) any equity securities of the Company or
any successor of the Company issued in respect of such Interests or shares of
Class B Common Stock (or Class A Common Stock received upon conversion thereof)
in connection with a merger, reorganization or other corporate transaction
involving the Company.
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"TWE Option Share" shall mean, as of any date, the percentage which the TWE
Initial Equity represents of the issued and outstanding common equity of the
Company or any successor to the Company; provided, however, that the TWE Option
Share shall equal 74.02% as of any date from and after the Control Termination
Date. In calculating the "TWE Option Share" for all purposes of this Agreement
(other than for purposes of Sections 3.2 and 3.3(a) prior to the Control
Termination Date), there shall be excluded from the issued and outstanding
common equity of the Company the shares of Class A Common Stock issued by the
Company in the IPO Transaction.
"TWE Share" shall mean 36.5%.
"TW Partners" shall mean TWX, American Television and Communications
Corporation, a Delaware corporation, Warner Communications Inc., a Delaware
corporation, and TW/TAE Inc., a Delaware corporation.
"TW/KBLCOM" shall mean FibrCOM Holdings L.P., a Delaware limited
partnership that is owned by TW/KBLCOM Inc., a Delaware corporation.
"TWX Company Share" shall mean 6.0%.
1.2 Terms Defined Elsewhere in the Agreement. For purposes of this
Agreement, the following terms shall have the meanings set forth in the sections
indicated:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Company.....................................................................2.1(a)
Company Indebtedness........................................................2.1(b)
Contribution................................................................2.1(a)
Debt Percentage.............................................................3.1(b)
Debt Registration Statement.................................................2.1
Debt Transaction............................................................2.3
Distribution................................................................2.2(a)
Interests...................................................................2.1(c)
IPO Transaction.............................................................2.4(a)
Mandatory Prepayment........................................................3.1(c)
MediaOne..................................................................recitals
Option....................................................................recitals
Option Agreement..........................................................recitals
Paragon...................................................................recitals
Successor Securities........................................................3.3(a)
Time Warner Telecom Business..............................................recitals
Time Warner Telecom Value...................................................3.4
Threshold Telecom Acquisition...............................................3.1(b)
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Threshold Telecom Disposition...............................................3.1(c)
TWE.......................................................................recitals
TWE Partnership Agreement.................................................recitals
TWE-A/N...................................................................recitals
TWE-A/N Partnership Agreement.............................................recitals
TWX.......................................................................recitals
Value Adjustment............................................................3.3(a)
</TABLE>
1.3 Other Definitional Provisions. (a) The words "hereof", "herein", and
"hereunder" and words of similar import, when used in this Agreement, shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement.
(b) The terms defined in the singular shall have a comparable meaning when
used in the plural, and vice versa.
(c) The terms "dollars" and "$" shall mean United States dollars.
ARTICLE II
THE CONTRIBUTION; THE DISTRIBUTION;
THE DEBT TRANSACTION; THE IPO TRANSACTION
2.1. The Contribution. (a) Immediately prior to the effectiveness of the
Registration Statement on Form S-1 with respect to the Debt Transaction (the
"Debt Registration Statement"), but subject to the conditions specified herein,
TWE, TWE-A/N and TWX shall contribute (the "Contribution") all of the assets and
liabilities of the Time Warner Telecom Business to TIME WARNER TELECOM LLC, a
newly formed Delaware limited liability company (the "Company"). The
Contribution shall be effected substantially in accordance with the transaction
steps specified in Exhibit B hereto.
(b) It is agreed that all contributions or advances made by TWE, TWE-A/N
and TWX to the Local Operating Entities prior to July 1, 1997 were made in the
form of equity contributions and that all contributions and advances made (or
being made) by TWE, TWE-A/N and TWX to the Local Operating Entities from and
after July 1, 1997 were made (or are being made) in the form of loans. In
connection with the Contribution, existing indebtedness owed by the Local
Operating Entities to TWE, TWE-A/N and TWX not exceeding the applicable amount
set forth below (pro-rated on a monthly basis during a quarter) shall remain
outstanding (the "Company Indebtedness"):
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<PAGE>
<TABLE>
<CAPTION>
End of Fiscal Quarter in Amount of Company
which Contribution Occurs Indebtedness
--------------------------- -------------------
<S> <C>
First Quarter 1998 $150 million
Second Quarter 1998 $180 million
Third Quarter 1998 $215 million
Fourth Quarter 1998 $260 million
</TABLE>
If the actual amount of indebtedness owed by the Local Operating Entities to
TWE, TWE-A/N and TWX as of the date of the Contribution exceeds the applicable
cap set forth above, then such excess indebtedness shall be funded by TWE,
TWE-A/N and TWX on a pro rata basis based upon the relative participation
percentages of their respective Interests.
(c) In connection with the Contribution, the Company shall issue all of the
limited liability interests of the Company (each, an "Interest" and collectively
the "Interests") as follows:
(i) TWE shall be issued an Interest having a participation percentage
equal to the TWE Share.
(ii) TWE-A/N shall be issued an Interest having a participation
percentage equal to the TWE-A/N Share.
(iii) TW/KBLCOM shall be issued an Interest having a participation
percentage equal to the TWX Company Share.
2.2. The Distribution. (a) Immediately following consummation of the
Contribution, the parties hereto shall cause the following transactions to occur
in the order set forth below (collectively, the "Distribution"):
(i) TWE-A/N shall distribute 33.33% of the Interest which TWE-A/N receives
in connection with the Contribution to A/N, 65.26% of the Interest which TWE-A/N
receives in connection with the Contribution to TWE and 1.41% of the Interest
which TWE-A/N receives in connection with the Contribution to Paragon. Such
distributions shall be deemed to have been made in respect of the Common
Partnership Units of TWE, A/N and Paragon.
(ii) TWE shall distribute all of the Interests which TWE receives in
connection with the Contribution and pursuant to the distribution contemplated
by Section 2.2(a)(i) to the MediaOne Partner and the TW Partners in accordance
with their respective Participating Percentage Shares. Such distributions shall
be deemed to have been made in respect of the Common Sub-Accounts of the
MediaOne Partner and the TW Partners. TWX, on behalf of itself and the TW
Partners, and MediaOne, on
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behalf of itself and the MediaOne Partner, acknowledge and agree that the
distributions contemplated by this Section 2.2(a)(ii) shall not be taken into
account in determining whether distributions to a Class A Partner and its
Affiliates equal or exceed the A Threshold or the B Threshold of such Class A
Partner for purposes of Article VIII of the TWE Partnership Agreement.
(b) In connection with the Distribution the TW Partners, the MediaOne
Partner, A/N, Paragon and TWI/KBLCOM shall execute the LLC Agreement of the
Company, in the form attached as Exhibit C hereto (the "LLC Agreement").
(c) The parties agree that the rights of TWE, TWE-A/N and TWX in respect of
the Company Indebtedness shall not be distributed by TWE-A/N or TWE to TWX,
MediaOne or A/N in connection with the Distribution.
2.3. The Debt Transaction. Following the Distribution, the parties shall
cause the Company to effect an offering of debt securities of the Company (the
"Debt Transaction"). The execution of this Agreement shall be deemed to be an
agreement of the parties to effect the Debt Transaction. The terms of the Debt
Transaction, including, without limitation, the terms of the underwriting
arrangements and the pricing of any securities offered, shall be subject to the
approval of the Management Committee and the Executive Committee, and any such
approval shall bind the TW Partners, the MediaOne Partner, A/N, Paragon and
TW/KBLCOM. In connection with the Debt Transaction, the Company Indebtedness
shall remain outstanding and shall be evidenced by a promissory note of the
Company in the form of Exhibit D hereto, which shall be duly executed and
delivered by the Company concurrently with the Contribution.
2.4. The IPO Transaction. (a) Following consummation of the Debt
Transaction, at such time as is determined in the manner required by the LLC
Agreement, the parties shall cause the Company to effect an initial public
offering of primary equity of the Company (the "IPO Transaction"). The terms of
the IPO Transaction, including, without limitation, the terms of the
underwriting arrangements and the pricing of any securities offered, shall be
determined as set forth in the LLC Agreement.
(b) All or a portion of the proceeds received by the Company pursuant to
the IPO Transaction shall be used to repay the Company Indebtedness as set forth
in the promissory note evidencing such Company Indebtedness.
8
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ARTICLE III
ADJUSTMENTS TO OPTION
3.1. Cable EBITDA Adjustment. (a) From and after the consummation of the
Distribution, Cable EBITDA, for the two calendar years ending immediately prior
to the date of any exercise of the Option, shall be increased by an amount equal
to the sum of:
(i) for the portion of such two year period, if any, commencing on the
date the Distribution is effected, and ending prior to the Control
Termination Date, the product of (x) the TWE Option Share multiplied by (y)
the Company EBITDA for such period; plus
(ii) for the portion of such two year period, if any, beginning on the
Control Termination Date, the product of (x) the TWE Option Share
multiplied by (y) the EBITDA of the Company set forth in the Long Range
Plan for such period; provided, however, that if such period includes a
portion of a calendar year, the EBITDA of the Company set forth in the Long
Range Plan for such calendar year shall be appropriately prorated.
(b) In the event that the Company makes an acquisition that would be
treated as a "Threshold Cable Acquisition" under the Option Agreement if it were
made by the Cable Division of TWE (a "Threshold Telecom Acquisition"), then, for
purposes of Section 3.1(a)(i), Company EBITDA shall be decreased by the
Adjustment Percentage (as defined in the Option Agreement) of any amounts
borrowed or deemed borrowed by the Company prior to or during the two year
period referred to in Section 3.1(a)(i) in order to make such Threshold Telecom
Acquisition (with the amount deemed borrowed being the net increase (up to the
purchase price of such Threshold Telecom Acquisition), within a 135-day period
prior to or subsequent to such Threshold Telecom Acquisition, in the amount of
any indebtedness of the Company); provided, however, that the amount by which
Company EBITDA shall be decreased in accordance with this sentence shall in no
event exceed the Debt Percentage of the Company EBITDA generated by the assets
or businesses that are the subject of such Threshold Telecom Acquisition during
such two year period. For purposes of the foregoing, (1) "Debt Percentage" shall
mean a fraction, the numerator of which is the amount borrowed or deemed
borrowed by the Company in order to make the Threshold Telecom Acquisition and
the denominator of which is the total value of the consideration paid in
connection with the Threshold Telecom Acquisition, (2) the total value of the
consideration paid in connection with a Threshold Telecom Acquisition shall mean
the sum of (A) the market value on the date of consummation of such Threshold
Telecom Acquisition of any securities or assets issued or transferred by the
Company in connection with such Threshold Telecom Acquisition, (B) the aggregate
amount of any cash paid by the Company in connection with such Threshold Telecom
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Acquisition and (C) the aggregate principal amount of any indebtedness assumed
by the Company in connection with such Threshold Telecom Acquisition and (3) in
determining the amount of Company EBITDA generated by the assets or businesses
that are the subject of such Threshold Telecom Acquisition, incremental
corporate overhead of the Company resulting from such Threshold Telecom
Acquisition shall be allocated to such assets or businesses and, to the extent
assets are co-mingled or shared, TWX and MediaOne shall negotiate in good faith
to agree on a methodology to determine the actual Company EBITDA generated by
such assets or businesses. It is acknowledged and agreed that the provisions of
this Section 3.1(b) shall only apply to the determination of Company EBITDA
pursuant to Section 3.1(a)(i) prior to the Control Termination Date and shall
not apply to the adjustments to Cable EBITDA contemplated by Section 3.1(a)(ii)
beginning on the Control Termination Date.
(c) In the event that the Company makes a disposition (including a
distribution of the stock of a Subsidiary to its stockholders, but excluding a
disposition of all or substantially all of the assets of the Company or a
liquidating distribution), that would be treated as a "Threshold Cable
Disposition" under the Option Agreement if it were made by the Cable Division of
TWE (a "Threshold Telecom Disposition"), then, for purposes of Section
3.1(a)(i), Company EBITDA shall be increased by (x) the Adjustment Percentage of
any proceeds of such Threshold Telecom Disposition occurring prior to or during
the two-year period referenced in Section 3.1(a)(i) to the extent such proceeds
are used to make a Mandatory Prepayment (as defined below) or are distributed to
the Company's stockholders as a dividend or used to repurchase or redeem shares
of the Company's capital stock or (y) the Adjustment Percentage of the value of
the Subsidiary distributed to the Company's stockholders; provided, however,
that the amount by which Company EBITDA shall be increased in accordance with
this sentence shall in no event exceed the Annualization Factor times the actual
amount of Company EBITDA generated by the assets or businesses that are the
subject of such Threshold Telecom Disposition during the last full fiscal
quarter completed prior to the consummation of such Threshold Telecom
Disposition (accreted at a rate equal to the growth rate of the remaining
Company EBITDA during the relevant period), reduced by the amount of incremental
corporate overhead of the Company attributable to such assets or businesses. For
purposes of the foregoing, (1) a "Mandatory Prepayment" shall mean amounts used
to prepay outstanding indebtedness of the Company or any of its Subsidiaries
required to be prepaid under the terms of any indenture or loan agreement to
which the Company or any of its Subsidiaries is a party, to the extent so
applied within 180 days following consummation of such Threshold Telecom
Disposition and (2) the proceeds of a Threshold Telecom Disposition shall be
deemed to have been distributed to the Company's stockholders as a dividend or
used to repurchase or redeem shares of the Company's capital stock to the extent
the Company pays a dividend on its capital stock (other than regular cash
dividends in amounts comparable to amounts paid prior to the time of such
Threshold Telecom Disposition) or repurchases or redeems shares of its capital
stock within 180 days following the consummation of such Threshold Telecom
Disposition. It is acknowledged and agreed
10
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that the provisions of this Section 3.1(c) shall only apply to the determination
of Company EBITDA pursuant to Section 3.1(a)(i) prior to the Control Termination
Date and shall not apply to the adjustments to Cable EBITDA contemplated by
Section 3.1(a)(ii) beginning on the Control Termination Date.
3.2. Determination of Gross Option Amount. From and after the Distribution,
the valuation of TWE as a going concern for purposes of determining the fair
market value of the partnership interest represented by the Gross Option Amount
under Section 2 of the Option Agreement shall be increased by an amount equal to
the product of (x) the TWE Option Share multiplied by (y) the Time Warner
Telecom Value (as defined below) as of the date of such valuation of TWE.
3.3. Additional Value Delivery. (a) From and after the Distribution, the
Option shall be adjusted so that upon each exercise by MediaOne of the Option,
MediaOne shall be entitled to receive at the Option Closing additional value
(the "Value Adjustment") equal to the product of (x) the TWE Option Share
multiplied by (y) the Time Warner Telecom Value as of the last day of the
immediately preceding calendar year multiplied by (z) (A) if a SAR Election is
not made by MediaOne, the Option Entitlement (or if a portion of the Option is
exercised, such portion of the Option Entitlement) and (B) if a SAR Election is
made by MediaOne, the Participating Percentage Share represented by the SAR
Amount as determined pursuant to Section 2(e) of the Option Agreement (without
giving effect to any adjustments pursuant to Section 8 of the Option Agreement).
The Value Adjustment shall be payable by TWE, at the option of TWX, (i) in cash,
(ii) in Interests or shares of Class B Common Stock (or equity securities of a
successor to the Company or a Person which purchases the Company ("Successor
Securities")) owned by TWX or (iii) in additional partnership interests in TWE.
(b) If TWX elects that the Value Adjustment be paid in Interests, shares of
Class B Common Stock or Successor Securities, (A) if shares of Class A Common
Stock or such Successor Securities are publicly traded at such time, such shares
of Class B Common Stock or Successor Securities shall be valued based upon the
average of the closing prices of the Class A Common Stock or such Successor
Securities for the ten trading days immediately prior to the Option Closing and
(B) the Interests and, if shares of Common Stock or such Successor Securities
are not publicly traded at such time, such shares of Class B Common Stock or
such Successor Securities, shall be valued as of the 10th day prior to the
Option Closing by an investment banking firm, which shall be selected by two
other investment banking firms, one selected by TWX and one selected by
MediaOne. Each of TWX and MediaOne shall instruct the investment banking firms
so selected to select the third investment banking firm within 30 days following
an exercise by MediaOne of the Option. The investment banking firm selected in
accordance with the foregoing procedure shall submit a written report setting
forth its determination of such value no
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later than 45 days after the date of its selection. The fees, costs and expenses
of the investment banking firms so selected shall be borne by TWE.
(c) If TWX elects that the Value Adjustment be paid in additional
partnership interests in TWE, the Common Sub-Account and A Sub-Account of the
MediaOne Partner shall be increased by an amount representing a Participating
Percentage Share equal to the quotient of (x) the Value Adjustment divided by
(y) the fair market value of the portion of TWE represented by the aggregate A
Sub-Accounts and Common Sub-Accounts based on a valuation of TWE as a going
concern as determined in accordance with the procedures set forth in Section
2(a) of the Option Agreement, which amount shall be adjusted in a manner
consistent with Section 8 of the Option Agreement to give effect to the
dilution, if any, of the MediaOne Partner's existing Common Sub-Account and A
Sub-Account resulting from such increase (provided that such dilution adjustment
shall be made without giving effect to any additional partnership interests
issued to the MediaOne Partner upon exercise of the Option). Such issuances of
partnership interests in TWE shall be effected in accordance with Sections
7.2(a) and 8.2(c) of the TWE Partnership Agreement.
3.4. Determination of Time Warner Telecom Value. As used in this Agreement,
"Time Warner Telecom Value" shall have the following meaning:
(a) If the date of valuation is prior to the Control Termination Date,
"Time Warner Telecom Value" shall equal the private market value of the Company
or a successor to the Company as a going concern as determined by the investment
banking firm selected to determine the valuation of TWE as a going concern for
purposes of determining the Gross Option Amount under Section 2(a) of the Option
Agreement (which value shall equal the price at which all of the outstanding
equity of the Company or such successor could be sold on the date of such
valuation in a private transaction to an unrelated Third Party on an arms-length
basis, taking into account any control premium for the Company or such successor
as a whole).
(b) If the date of valuation is after the Control Termination Date, "Time
Warner Telecom Value" shall equal the private market value of the Company as a
going concern on the date of the closing of the Distribution (which value shall
equal the price at which all of the outstanding equity of the Company could be
sold on the date of the closing of the Distribution in a private transaction to
an unrelated Third Party on an arms-length basis, taking into account any
control premium for the Company as a whole and prior to any "IPO discount")
accreted on a daily basis at a rate of 15% per annum from the closing of the
Distribution (compounded quarterly). Such value shall be as determined in the
following manner. Each of TWX and MediaOne shall select an investment banking
firm and shall instruct the investment banking firms so selected to select a
third investment banking firm within 30 days following the closing of the
Distribution. The investment banking firm selected in accordance with the
foregoing procedure shall submit a written report setting forth its
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determination of the value of such securities no later than 45 days after the
date of its selection. The fees, costs and expenses of the investment banking
firms so selected shall be borne by TWE.
3.5. Certain Procedures for Option Exercise. In the event any dispute
arises as to any determination or calculation required to be made pursuant to
the Option Agreement or this Article III, TWE and MediaOne shall negotiate in
good faith to resolve such dispute as soon as practicable thereafter. In the
event TWE and MediaOne are unable to resolve any such dispute, such dispute
shall be resolved by a nationally recognized accounting firm selected jointly by
MediaOne and TWE which is not an accounting firm regularly employed by MediaOne
or TWE or their respective Affiliates. Such accounting firm shall inform the
disputing parties of its resolution of such dispute by delivering a written
report to TWE and MediaOne within 30 days after its selection. The decision of
such accounting firm with respect to such dispute shall be final and binding
upon TWE and MediaOne.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Each of the parties hereto hereby represents and warrants to the other
parties hereto as follows:
4.1. Organization. Such party is a corporation or partnership duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization and has all requisite
corporate or partnership power and authority to own and operate and to carry on
its business as currently conducted.
4.2. Authorization. Such party has full corporate or partnership power and
authority to execute and deliver this Agreement, and to perform its obligations
hereunder. The execution, delivery and performance by such party of this
Agreement have been duly and validly authorized and no additional corporate or
partnership authorization or consent is required in connection with the
execution, delivery and performance by such party of this Agreement.
4.3. Consents and Approvals. Except as specifically set forth in Schedule
4.3 or as required by the HSR Act, no consent, approval, waiver or authorization
is required to be obtained by such party from, and no notice or filing is
required to be given by such party to, or made by such party with, any federal,
state, local or other Governmental Authority or other Person in connection with
the execution, delivery and performance by such party of this Agreement.
4.4. Non-Contravention. Except as set forth in Schedule 4.4, the execution,
delivery and performance by such party of this Agreement, and the
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consummation of the transactions contemplated hereby, does not and will not (i)
violate any provision of the charter and bylaws or partnership agreement or
other organizational documents of such party or (ii) assuming compliance with
the matters set forth in Section 4.3, violate or result in a breach of or
constitute a default under any law of any court or Governmental Authority to
which such party is subject.
4.5. Binding Effect. This Agreement constitutes a valid and legally binding
obligation of such party enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
4.6. No Other Representations or Warranties. Except as otherwise
specifically set forth herein, the Company acknowledges and agrees that it has
satisfied itself as to the state and condition of the assets of the Time Warner
Telecom Business. Except as otherwise specifically set forth herein, (i) the
Company accepts the condition of the assets and businesses of the Time Warner
Telecom Business AS IS AND WHERE IS, (ii) none of TWE, TWE-A/N, TWX, MediaOne or
A/N makes any express or implied representations, warranties or guarantees as to
the condition, extent, type or value thereof and (iii) the Company acknowledges
and agrees that TWE, TWE-A/N, TWX, MediaOne and A/N have made no such
representations or warranties. Without limiting the generality of the foregoing
words of exclusion, there are excluded, in particular, representations and
warranties by TWE, TWE-A/N, TWX, MediaOne and A/N as to title, quiet possession,
merchantable quality, fitness for any particular, or any, purpose and as to
description, as regards any asset of the Time Warner Telecom Business or the use
of any such asset by either the Company or any of its Subsidiaries following the
Contribution. The exclusions and limitations of liability in this Section 4.6
shall arise and continue notwithstanding the termination of this Agreement, and
shall operate as waivers by the Company and its Affiliates of any claims in tort
as well as under the law of contract. Such exclusions and limitations shall be
in addition to, not in substitution for, and notwithstanding any, right of
reimbursement or relief otherwise available to TWE, TWE-A/N, TWX, MediaOne or
A/N.
ARTICLE V
CERTAIN COVENANTS AND AGREEMENTS
5.1. Reasonable Best Efforts. (a) Subject to the terms and conditions of
this Agreement, each party shall use all reasonable best efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated hereby,
including (i) the obtaining of all necessary actions or nonactions, waivers,
consents and approvals from Governmental Authorities and the making of all
necessary registrations and filings (including filings
14
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with Governmental Authorities), if any and the taking of all reasonable steps as
may be necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Authorities), (ii) the obtaining of all
necessary consents, approvals or waivers from Third Parties and (iii) the
execution and delivery of any additional instruments necessary to consummate the
transactions contemplated hereby.
(b) Without limiting the foregoing and notwithstanding anything to the
contrary in this Agreement, except as expressly set forth in the LLC Agreement
or the Stockholders' Agreement contemplated thereby, no party to this Agreement
shall be required to agree to any prohibition, limitation or other requirements,
including but not limited to (i) any prohibition or limitation on the ownership
or operation by such party or any of its Subsidiaries or Affiliates of any
portion of the business or assets of such party or any of its Subsidiaries or
Affiliates, or any prohibition or limitation that would compel such party or any
of its Subsidiaries or Affiliates to dispose of or hold separate any portion of
the business or assets of such party or any of its Subsidiaries or Affiliates,
(ii) any prohibition or limitation on the rights of such party to acquire, own
or enter into any businesses or lines of businesses, (iii) any prohibition or
limitation on the ability of such party to acquire or hold, or exercise full
rights of ownership of, any interests in or shares of capital stock of the
Company, including the right to vote the capital stock of the Company acquired
by it on all matters properly presented to the stockholders of the Company, (iv)
any prohibition or limitation on such party or any of its Subsidiaries or
Affiliates from effectively controlling in any material respect the business or
operations of such party or any of its Subsidiaries or Affiliates or (v) any
change in any respect in the governance of the Company from that set forth in
the Certificate of Incorporation, the Company's By-Laws and this Agreement, any
change in such party's rights under the LLC Agreement, Stockholders' Agreement
or this Agreement or any limitations on the ability of such party to exercise
any such rights.
5.2. Employee Options. For purposes of Section 17.7(b) of the TWE
Partnership Agreement and Section 3.1(h)(i)(3) of the TWEAN Partnership
Agreement, officers and employees of the Company and its subsidiaries or any
successor(s) thereto that, prior to the date hereof, have been issued options to
acquire securities of TWX shall, notwithstanding the Distribution, continue to
be Eligible Option Holders (as such term is defined in the TWE Partnership
Agreement) from and after the Distribution.
5.3. Indemnification. The Company hereby agrees to indemnify and hold
harmless TWX, MediaOne, AN, TWE and TWE-A/N and each of their respective
directors, officers, employees and Affiliates from and against any and all
losses, liabilities, obligations, damages, costs and expenses (including
reasonable fees and disbursements of counsel) based upon, attributable to, or
arising out of, the operation of the Time Warner Telecom Business whether
before, on or after the date of the Contribution.
15
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ARTICLE VI
CONDITIONS TO TRANSACTIONS
6.1. Conditions to Transactions. The obligations of TWX, MediaOne, A/N, TWE
and TWE-A/N to consummate the Contribution and the Distribution shall be subject
to the fulfillment of each of the following conditions, any or all of which may
be waived in whole or in part by TWE, MediaOne, A/N, TWE and TWE-A/N:
(a) No Injunction. No statute, rule, regulation, injunction,
restraining order or decree of any nature of any court or Governmental
Authority shall be in effect that restrains, prevents or materially
changes the Contribution or the Distribution.
(b) Consents. All material consents, approvals, licenses,
permits, orders or authorizations of, or registrations, declarations,
notices or filings with, any Governmental Authority which are required
to be obtained or made in connection with the Contribution and the
Distribution shall have been obtained or made.
ARTICLE VII
GENERAL PROVISIONS
7.1. Termination. Notwithstanding anything to the contrary contained in
this Agreement, this Agreement may be terminated at any time (i) prior to
consummation of the Contribution and the Distribution, by the mutual written
consent of TWE and TWE-A/N or (ii) if the Contribution and the Distribution are
not consummated by December 31, 1998.
7.2. Amendments. This Agreement may be amended only by a written instrument
executed by all of the parties hereto or their respective successors or assigns;
provided, however, that Article III may be amended by a written instrument
executed by TWE, TWX and MediaOne.
7.3. Expenses. Except as otherwise provided herein, the Company shall pay
all fees and expenses relating to the Contribution and the Distribution, except
that each of the parties hereto shall pay the fees and expenses of its
respective counsel and shall pay all other expenses incurred by it in connection
with the negotiation, preparation and execution of this Agreement.
7.4. Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the law of the State of New York without reference to
16
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choice of law principles, including all matters of construction, validity and
performance.
7.5. Notices. Notices, requests, permissions, waivers, and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if signed by the respective persons giving them (in the case of any
corporation the signature shall be by an officer thereof) and delivered by hand,
mailed by United States mail (registered, return receipt requested) or reputable
overnight courier service, properly addressed and postage prepaid, or delivered
by telecopy:
If to TWX, TWE or TWE-A/N, to:
TIME WARNER COMPANIES, INC.
75 Rockefeller Plaza
New York, New York 10019
Telephone: (212) 484-7580
Telecopy: (212) 956-7281
Attention: General Counsel
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Telephone: (212) 474-1000
Telecopy: (212) 474-3700
Attention: William P. Rogers, Jr.
If to MediaOne, to:
MEDIAONE GROUP, INC.
188 Inverness Drive West
Englewood, Colorado 80112
Telephone: (303) 858-3562
Telecopy: (303) 858-3487
Attention: Vice President-Law
17
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with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Telephone: (212) 310-8000
Telecopy: (212) 310-8007
Attention: Akiko Mikumo, Esq.
If to A/N, to:
ADVANCE/NEWHOUSE PARTNERSHIP
5015 Campuswood Drive
East Syracuse, New York 13057
Telephone: (315) 463-7675
Telecopy: (315) 463-4127
Attention: Robert J. Miron
with a copy to:
Sabin, Bermant & Gould LLP
350 Madison Avenue
New York, New York 10017
Telephone: (212) 692-4418
Telecopy: (212) 692-4406
Attention: Arthur J. Steinhauer
Such names and addresses may be changed by notice given in accordance with this
Section 7.5.
7.6. Entire Agreement. This Agreement (including the Schedules and Exhibits
attached hereto, all of which are a part hereof) and the LLC Agreement contains
the entire understanding of the parties hereto with respect to the subject
matter contained herein and supersedes and cancels all prior agreements,
negotiations, correspondence, undertakings and communications of the parties,
oral or written, respecting such subject matter.
7.7. Headings; References. The article, section and paragraph headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. All references
herein to "Articles", "Sections," "Schedules" or "Exhibits" shall be deemed to
be references to Articles or Sections hereof or Schedules or Exhibits hereto
unless otherwise indicated.
18
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7.8. Counterparts. This Agreement may be executed in one or more
counterparts and each counterpart shall be deemed to be an original.
7.9. Parties in Interest; Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors or assigns. Nothing in this Agreement, express or implied, is
intended to confer upon any Person not a party to this Agreement any rights or
remedies under or by reason of this Agreement, except that the Company shall be
a third party beneficiary of the representations and warranties set forth in
Article IV. No party to this Agreement may assign or delegate all or any portion
of its rights, obligations or liabilities under this Agreement without the prior
written consent of the other parties to this Agreement.
7.10. Severability; Enforcement. The invalidity of any portion hereof shall
not affect the validity, force or effect of the remaining portions hereof. If it
is ever held that any restriction hereunder is too broad to permit enforcement
of such restriction to its fullest extent, each party agrees that a court of
competent jurisdiction may enforce such restriction to the maximum extent
permitted by law, and each party hereby consents and agrees that such scope may
be judicially modified accordingly in any proceeding brought to enforce such
restriction.
7.11. Arbitration. Any controversy arising under, out of, in connection
with, or relating to, this Agreement, and any amendment hereof, or the breach
hereof or thereof, shall be determined and settled by arbitration in New York,
New York, by a person or persons mutually agreed upon, or in the event of a
disagreement as to the selection of the arbitrator or arbitrators, in accordance
with the rules of the American Arbitration Association. Any award rendered
therein shall specify the findings of fact of the arbitrator or arbitrators and
the reasons of such award, with the reference to and reliance on relevant law.
Any such award shall be final and binding on each and all of the paries thereto
and their personal representatives, and judgment may be entered thereon in any
court having jurisdiction thereof.
19
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
TIME WARNER COMPANIES, INC.
By: /s/ Spencer B. Hays
------------------------------
Name: Spencer B. Hays
Title: Vice President
MEDIAONE GROUP, INC.
(a Delaware corporation)
By: /s/ Pearre A. Williams
------------------------------
Name: Pearre A. Williams
Title: Vice President
ADVANCE/NEWHOUSE PARTNERSHIP
By: ADVANCE COMMUNICATION CORP.,
General Partner
By: /s/ Robert J. Miron
--------------------------
Name: Robert J. Miron
Title: President
TIME WARNER ENTERTAINMENT
COMPANY, L.P.
By: /s/ Spencer B. Hays
------------------------------
Name: Spencer B. Hays
Title: Vice President
TIME WARNER ENTERTAINMENT-
ADVANCE/NEWHOUSE PARTNERSHIP
By: TIME WARNER ENTERTAINMENT
COMPANY, L.P., General Partner
By: /s/ Spencer B. Hays
--------------------------
Name: Spencer B. Hays
Title: Vice President
For the purposes of Sections 4.6 and 5.3:
TIME WARNER TELECOM LLC
By: /s/ Spencer B. Hays
------------------------------
Name: Spencer B. Hays
Title: Vice President
<PAGE>
<PAGE>
TIME WARNER TELECOM LLC
and
TIME WARNER TELECOM INC.,
Obligors,
and
THE CHASE MANHATTAN BANK,
Trustee
---------------
Indenture
Dated as of July 21, 1998
---------------
9 3/4% Senior Notes due 2008
<PAGE>
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Sections Indenture Sections
- ------------ ------------------
<S> <C>
'SS'310(a)(1)....................................................... 7.10
(a)(2)....................................................... 7.10
(b).......................................................... 7.03; 7.08
'SS'311(a).......................................................... 7.03
(b).......................................................... 7.03
'SS'312(a).......................................................... 2.03
(b).......................................................... 10.02
(c).......................................................... 10.02
'SS'313(a).......................................................... 7.06
(b)(2)....................................................... 7.07
(c).......................................................... 7.05; 7.06; 10.02
(d).......................................................... 7.06
'SS'314(a).......................................................... 7.05; 10.02
(a)(4)....................................................... 4.17; 10.02
(c)(1)....................................................... 10.03
(c)(2)....................................................... 10.03
(e).......................................................... 4.17; 10.04
'SS'315(a).......................................................... 7.02
(b).......................................................... 7.05; 10.02
(c).......................................................... 7.02
(d).......................................................... 7.02
(e).......................................................... 6.11
'SS'316(a)(1)(A).................................................... 6.05
(a)(1)(B).................................................... 6.04
(b).......................................................... 6.07
(c).......................................................... 9.03
'SS'317(a)(1)....................................................... 6.08
(a)(2)....................................................... 6.09
(b).......................................................... 2.04
'SS'318(a).......................................................... 10.01
(c).......................................................... 10.01
</TABLE>
Note: The Cross-Reference Table shall not for any purpose be deemed to be a
part of the Indenture.
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions......................................................................1
SECTION 1.02. Incorporation by Reference of Trust Indenture Act...............................20
SECTION 1.03. Rules of Construction...........................................................21
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating.................................................................21
SECTION 2.02. Execution, Authentication and Denominations.....................................22
SECTION 2.03. Registrar and Paying Agent......................................................23
SECTION 2.04. Paying Agent to Hold Money in Trust.............................................24
SECTION 2.05. Transfer and Exchange...........................................................24
SECTION 2.06. Replacement Notes...............................................................26
SECTION 2.07. Outstanding Notes...............................................................26
SECTION 2.08. Temporary Notes.................................................................27
SECTION 2.09. Cancellation....................................................................27
SECTION 2.10. CUSIP Numbers...................................................................28
SECTION 2.11. Defaulted Interest..............................................................28
SECTION 2.12. Issuance of Additional Notes....................................................28
ARTICLE THREE
REDEMPTION
SECTION 3.01. Right of Redemption.............................................................28
SECTION 3.02. Notices to Trustee..............................................................29
SECTION 3.03. Selection of Notes to Be Redeemed...............................................29
SECTION 3.04. Notice of Redemption............................................................30
SECTION 3.05. Effect of Notice of Redemption..................................................31
SECTION 3.06. Deposit of Redemption Price.....................................................31
SECTION 3.07. Payment of Notes Called for Redemption..........................................31
SECTION 3.08. Notes Redeemed in Part..........................................................31
</TABLE>
- --------
Note: The Table of Contents shall not for any purposes be deemed to be a part
of the Indenture.
<PAGE>
<PAGE>
ii
ARTICLE FOUR
COVENANTS
<TABLE>
<S> <C> <C>
SECTION 4.01. Payment of Notes................................................................32
SECTION 4.02. Maintenance of Office or Agency.................................................32
SECTION 4.03. Limitation on Indebtedness......................................................32
SECTION 4.04. Limitation on Restricted Payments...............................................35
SECTION 4.05. Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries.......................................................38
SECTION 4.06. Limitation on the Issuance and Sale of Capital Stock of Restricted
Subsidiaries..................................................................39
SECTION 4.07. Limitation on Issuances of Guarantees by Restricted Subsidiaries................40
SECTION 4.08. Limitation on Transactions with Stockholders and Affiliates.....................40
SECTION 4.09. Limitation on Liens.............................................................41
SECTION 4.10. Limitation on Sale-Leaseback Transactions.......................................42
SECTION 4.11. Limitation on Asset Sales.......................................................42
SECTION 4.12. Repurchase of Notes upon a Change of Control....................................43
SECTION 4.13. Existence.......................................................................43
SECTION 4.14. Payment of Taxes and Other Claims...............................................44
SECTION 4.15. Maintenance of Properties and Insurance.........................................44
SECTION 4.16. Notice of Defaults..............................................................44
SECTION 4.17. Compliance Certificates.........................................................44
SECTION 4.18. Commission Reports and Reports to Holders.......................................45
SECTION 4.19. Waiver of Stay, Extension or Usury Laws.........................................45
SECTION 4.20. Amendments to Parent Company Debt...............................................45
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, Etc.....................................................46
SECTION 5.02. Successor Substituted...........................................................47
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default...............................................................47
SECTION 6.02. Acceleration....................................................................48
SECTION 6.03. Other Remedies..................................................................49
SECTION 6.04. Waiver of Past Defaults.........................................................50
SECTION 6.05. Control by Majority.............................................................50
SECTION 6.06. Limitation on Suits.............................................................50
</TABLE>
<PAGE>
<PAGE>
iii
<TABLE>
<S> <C> <C>
SECTION 6.07. Rights of Holders to Receive Payment............................................51
SECTION 6.08. Collection Suit by Trustee......................................................51
SECTION 6.09. Trustee May File Proofs of Claim................................................51
SECTION 6.10. Priorities......................................................................52
SECTION 6.11. Undertaking for Costs...........................................................52
SECTION 6.12. Restoration of Rights and Remedies..............................................52
SECTION 6.13. Rights and Remedies Cumulative..................................................52
SECTION 6.14. Delay or Omission Not Waiver....................................................53
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. General ........................................................................53
SECTION 7.02. Certain Rights of Trustee.......................................................53
SECTION 7.03. Individual Rights of Trustee....................................................55
SECTION 7.04. Trustee's Disclaimer............................................................55
SECTION 7.05. Notice of Default...............................................................55
SECTION 7.06. Reports by Trustee to Holders...................................................55
SECTION 7.07. Compensation and Indemnity......................................................55
SECTION 7.08. Replacement of Trustee..........................................................56
SECTION 7.09. Successor Trustee by Merger, Etc................................................57
SECTION 7.10. Eligibility.....................................................................58
SECTION 7.11. Money Held in Trust.............................................................58
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Obligors' Obligations............................................58
SECTION 8.02. Defeasance and Discharge of Indenture...........................................59
SECTION 8.03. Defeasance of Certain Obligations...............................................61
SECTION 8.04. Application of Trust Money......................................................62
SECTION 8.05. Repayment to Obligors...........................................................62
SECTION 8.06. Reinstatement...................................................................63
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders......................................................63
SECTION 9.02. With Consent of Holders.........................................................64
SECTION 9.03. Revocation and Effect of Consent................................................65
SECTION 9.04. Notation on or Exchange of Notes................................................66
</TABLE>
<PAGE>
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iv
<TABLE>
<S> <C> <C>
SECTION 9.05. Trustee to Sign Amendments, Etc.................................................66
SECTION 9.06. Conformity with Trust Indenture Act.............................................66
ARTICLE TEN
MISCELLANEOUS
SECTION 10.01. Trust Indenture Act of 1939....................................................66
SECTION 10.02. Notices........................................................................66
SECTION 10.03. Certificate and Opinion as to Conditions Precedent.............................68
SECTION 10.04. Statements Required in Certificate or Opinion..................................68
SECTION 10.05. Acts of Holders................................................................68
SECTION 10.06. Rules by Trustee, Paying Agent or Registrar....................................70
SECTION 10.07. Payment Date Other Than a Business Day.........................................70
SECTION 10.08. Governing Law..................................................................70
SECTION 10.09. No Adverse Interpretation of Other Agreements..................................70
SECTION 10.10. No Recourse Against Others.....................................................70
SECTION 10.11. Successors.....................................................................71
SECTION 10.12. Duplicate Originals............................................................71
SECTION 10.13. Separability...................................................................71
SECTION 10.14. Table of Contents, Headings, Etc...............................................71
EXHIBIT A Form of Note............................................................................A-1
</TABLE>
<PAGE>
<PAGE>
INDENTURE, dated as of July 21, 1998, among TIME WARNER TELECOM LLC, a
Delaware limited liability corporation (the "Company"), TIME WARNER TELECOM
INC., a Delaware corporation ("TWT," and together with the Company, the
"Obligors") and THE CHASE MANHATTAN BANK, a New York banking corporation,
trustee (the "Trustee").
RECITALS
The Obligors have duly authorized the execution and delivery of this
Indenture to provide for the issuance initially of up to $400 million aggregate
principal amount of their 9 3/4% Senior Notes due 2008 (the "Notes") issuable as
provided in this Indenture. All things necessary to make this Indenture a valid
agreement of the Obligors, in accordance with its terms, have been done, and the
Obligors have done all things necessary to make the Notes, when executed by the
Obligors and authenticated and delivered by the Trustee hereunder and duly
issued by the Obligors, valid obligations of the Obligors as hereinafter
provided.
This Indenture is subject to, and shall be governed by, the provisions
of the Trust Indenture Act of 1939, as amended, that are required to be a part
of and to govern indentures qualified under the Trust Indenture Act of 1939, as
amended.
AND THIS INDENTURE FURTHER 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, as follows.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Acquired Indebtedness" means Indebtedness of a Person existing at the
time such Person becomes a Restricted Subsidiary or assumed in connection with
an Asset Acquisition by 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 of such Person which is
redeemed, defeased, retired or otherwise repaid at the time of or immediately
upon consummation of the transactions by which such Person becomes a Restricted
Subsidiary or such Asset Acquisition shall not be Acquired Indebtedness.
"Adjusted Consolidated Net Income" means, for any period, the aggregate
net income (or loss) of the Company and its Restricted Subsidiaries for such
period determined in conformity with GAAP; provided that the following items
shall be excluded in computing Adjusted Consolidated
<PAGE>
<PAGE>
2
Net Income (without duplication): (i) the net income (or loss) of any Person
that is not a Restricted Subsidiary, except (x) with respect to net income, to
the extent of the amount of dividends or other distributions actually paid to
the Company or any of its Restricted Subsidiaries by such Person during such
period and (y) with respect to net losses, to the extent of the amount of
Investments made by the Company or any Restricted Subsidiary in such Person
during such period; (ii) solely for the purposes of calculating the amount of
Restricted Payments that may be made pursuant to clause (C) of the first
paragraph of Section 4.04 (and in such case, except to the extent includable
pursuant to clause (i) above), the net income (or loss) of any Person accrued
prior to the date it becomes a Restricted Subsidiary or is merged into or
consolidated with the Company or any of its Restricted Subsidiaries or all or
substantially all of the property and assets of such Person are acquired by the
Company or any of its Restricted Subsidiaries; (iii) the net income of any
Restricted Subsidiary to the extent that the declaration or payment of dividends
or similar distributions by such Restricted Subsidiary of such net income is not
at the time permitted by the operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to such Restricted Subsidiary; (iv) any gains or losses
(on an after-tax basis) attributable to Asset Sales; (v) except for purposes of
calculating the amount of Restricted Payments that may be made pursuant to
clause (C) of the first paragraph of Section 4.04, any amount paid or accrued as
dividends (other than dividends to the extent paid or payable in shares of
Capital Stock (other than Disqualified Stock) of the Company) on Preferred Stock
of the Company or any Restricted Subsidiary owned by Persons other than the
Company and any of its Restricted Subsidiaries; (vi) all extraordinary gains and
extraordinary losses; and (vii) any compensation expense paid or payable solely
with Capital Stock (other than Disqualified Stock) of the Company or any
options, warrants or other rights to acquire Capital Stock (other than
Disqualified Stock).
"Adjusted Consolidated Net Tangible Assets" means the total amount of
assets of the Company and its Restricted Subsidiaries (less applicable
depreciation, amortization and other valuation reserves), except to the extent
resulting from write-ups of capital assets (excluding write-ups in connection
with accounting for acquisitions in conformity with GAAP), after deducting
therefrom (i) all current liabilities of the Company and its Restricted
Subsidiaries (excluding intercompany items) and (ii) all goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other like
intangibles, all as set forth on the most recent quarterly or annual
consolidated balance sheet of the Company and its Restricted Subsidiaries,
prepared in conformity with GAAP and filed with the Commission or provided to
the Trustee pursuant to Section 4.18.
"Adjusted Net Cash Proceeds" has the meaning provided in Section 4.11.
"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
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3
"controlling," "controlled by" and "under common control with"), as applied to
any Person, means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
"Agent" means any Registrar, Co-Registrar, Paying Agent or
authenticating agent.
"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 or shall be merged into or consolidated
with the Company or any of its Restricted Subsidiaries; provided that such
Person's primary business is related, ancillary or complementary to the
businesses of the Company and its Restricted Subsidiaries on the date of such
investment 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; provided that the property and
assets acquired are related, ancillary or complementary to the businesses of the
Company and its Restricted Subsidiaries on the date of such acquisition.
"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 (i) all or substantially all of the Capital Stock of
any Restricted Subsidiary 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 transaction) 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, (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 (other than the Capital Stock or other
Investment in an Unrestricted Subsidiary) 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 the
provisions of this Indenture applicable to mergers, consolidations and sales of
all or substantially all of the assets of the Company; provided that "Asset
Sale" shall not include (a) sales or other dispositions of inventory,
receivables and other current assets, (b) sales, transfers or other dispositions
of assets constituting a Restricted Payment permitted to be made under Section
4.04, (c) sales, transfers or other dispositions of assets with a fair market
value (as certified in an Officers' Certificate) not in excess of $5 million in
any transaction or series of related transactions, or (d) sales or other
dispositions of assets for consideration at least equal to the fair market value
of the assets sold or disposed of, to the extent
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4
that the consideration received would constitute property, assets or securities
of the kind described in clause (B) of Section 4.11.
"Average Life" means, at any date of determination with respect to any
debt security, the quotient obtained by dividing (i) the sum of the products of
(a) the number of years from such date of determination to the dates of each
successive scheduled principal payment of such debt security and (b) the amount
of such principal payment by (ii) the sum of all such principal payments.
"Board of Directors" means, prior to the Reconstitution, the Management
Committee of the Company, and following the Reconstitution, the Board of
Directors of the Company.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in The City of New York, or in the city of the Corporate
Trust Office of the Trustee, are authorized by law to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) in equity of such Person, whether outstanding on the
Closing Date or issued thereafter, including, without limitation, all Common
Stock and Preferred Stock.
"Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present value
of the rental obligations of such Person as lessee, in conformity with GAAP, is
required to be capitalized on the balance sheet of such Person.
"Capitalized Lease Obligations" means the discounted present value of
the rental obligations under a Capitalized Lease.
"Change of Control" means such time as (i) the Existing Stockholders as
a group cease to have the ability to elect a majority of the members of the
Board of Directors (other than the chief executive officer of the Company and
independent directors; provided that independent directors shall be included in
calculating whether the foregoing majority requirement is satisfied if the
Directors nominated by the Existing Stockholders do not constitute a majority of
the committee that selects the Board of Directors' nominees for independent
directors) and a "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act) (other than the Existing Stockholders) has become
the ultimate "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act) of more than 35% of the total voting power of the Voting Stock of the
Company
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5
on a fully diluted basis and such ownership represents a greater percentage of
the total voting power of the Voting Stock of the Company, on a fully diluted
basis, than is held by the Existing Stockholders as a group on such date; or
(ii) individuals who on the Closing Date constitute the Board of Directors
(together with any new Directors whose election by the Board of Directors or
whose nomination by the Board of Directors for election by the Company's
stockholders or members, as the case may be, was approved by a vote of at least
two-thirds of the members of the Board of Directors then in office who either
were members of the Board of Directors on the Closing Date or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the members of the Board of Directors then in office.
"Change of Control Period" means, with respect to a Change of Control,
the period of 60 days commencing on the date of the earlier to occur of (a)
public notice of the occurrence of a Change of Control or of the intention of
the Company to effect a Change of Control and (b) the Change of Control.
"Closing Date" means the date on which the Notes are originally issued
under this Indenture.
"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 instrument such Commission is not existing and performing the
duties now assigned to it under the TIA, then the body performing such duties at
such time.
"Common Stock" means, with respect to any Person, such Person's equity
other than Preferred Stock of such Person, whether outstanding on the Closing
Date or issued thereafter, including, without limitation, all series and classes
of such common stock, including any and all shares, interests, participations or
other equivalents (however designated, whether voting or non-voting) thereof.
"Company" means Time Warner Telecom LLC and, following the
Reconstitution, any corporate successor to Time Warner Telecom LLC.
"Company Order" means a written request or order signed in the name of
each of the respective Obligors (i) by its Chairman, a Vice Chairman, its
President or a Vice President and (ii) by its Treasurer, an Assistant Treasurer,
its Secretary or an Assistant Secretary and delivered to the Trustee; provided,
however, that such written request or order may be signed by any two of the
officers or directors listed in clause (i) above in lieu of being signed by one
of such officers or directors listed in such clause (i) and one of the officers
listed in clause (ii) above.
"Consolidated EBITDA" means, for any period, Adjusted Consolidated Net
Income for such period (x) plus, to the extent such amount was deducted in
calculating such Adjusted
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6
Consolidated Net Income, (i) Consolidated Interest Expense, (ii) income taxes
(other than income taxes (either positive or negative) attributable to
extraordinary and non-recurring gains or losses or sales of assets), (iii)
depreciation expense, (iv) amortization expense and (v) all other non-cash items
reducing Adjusted Consolidated Net Income (other than items that will require
cash payments and for which an accrual or reserve is, or is required by GAAP to
be, made), less all non-cash items increasing Adjusted Consolidated Net Income,
all as determined on a consolidated basis for the Company and its Restricted
Subsidiaries in conformity with GAAP, and (y) solely for purposes of calculating
the amount of Restricted Payments that may be made pursuant to clause (C) of the
first paragraph of Section 4.04, less (to the extent not otherwise reduced in
accordance with GAAP) the aggregate amount of deposits made by the Company and
its Restricted Subsidiaries after the Closing Date in connection with proposed
Asset Acquisitions that are forfeited by the Company or any of its Restricted
Subsidiaries; provided that, if any Restricted Subsidiary is not a Wholly Owned
Restricted Subsidiary, Consolidated EBITDA shall be reduced (to the extent not
otherwise reduced in accordance with GAAP) by an amount equal to (A) the amount
of the Adjusted Consolidated Net Income attributable to such Restricted
Subsidiary multiplied by (B) the percentage ownership interest in the income of
such Restricted Subsidiary not owned on the last day of such period by the
Company or any of its Restricted Subsidiaries.
"Consolidated Interest Expense" means, for any period, the aggregate
amount of interest in respect of Indebtedness (including, without limitation,
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, in each case that is paid, accrued or
scheduled to be paid or to be accrued by the Company and its Restricted
Subsidiaries during such period; excluding, however, (i) in calculating
Consolidated EBITDA, any amount of such interest of any Restricted Subsidiary if
the net income of such Restricted Subsidiary is excluded in the calculation of
Adjusted Consolidated Net Income pursuant to clause (iii) of the definition
thereof (but only in the same proportion as the net income of such Restricted
Subsidiary is excluded from the calculation of Adjusted Consolidated Net Income
pursuant to clause (iii) of the definition thereof) and (ii) any premiums, fees
and expenses (and any amortization thereof) payable in connection with the
offering of the Notes, all as determined on a consolidated basis (without taking
into account Unrestricted Subsidiaries) in conformity with GAAP.
"Consolidated Leverage Ratio" means, on any Transaction Date, the ratio
of (i) the aggregate amount of Indebtedness of the Company and its Restricted
Subsidiaries on a consolidated basis outstanding on such Transaction Date to
(ii) the aggregate amount of Consolidated EBITDA for the then most recent four
fiscal quarters for which financial statements of the Company have been filed
with the Commission or provided to the Trustee pursuant to
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7
Section 4.18 (such four fiscal quarter period being the "Four Quarter Period");
provided that, in making the foregoing calculation, (A) pro forma effect shall
be given to any Indebtedness to be Incurred or repaid on the Transaction Date;
(B) pro forma effect shall be given to Asset Dispositions and Asset Acquisitions
(including giving pro forma effect to the application of proceeds of any Asset
Disposition) that occur from the beginning of the Four Quarter Period through
the Transaction Date (the "Reference Period"), as if they had occurred and such
proceeds had been applied on the first day of such Reference Period; and (C) pro
forma effect shall be given to asset dispositions and asset acquisitions
(including giving pro forma effect to the application of proceeds of any asset
disposition) that have been made by any Person that has become a Restricted
Subsidiary or has been merged with or into the Company or any Restricted
Subsidiary during such Reference Period and that would have constituted Asset
Dispositions or Asset Acquisitions had such transactions occurred when such
Person was a Restricted Subsidiary as if such asset dispositions or asset
acquisitions were Asset Dispositions or Asset Acquisitions that occurred on the
first day of such Reference Period; provided that to the extent that clause (B)
or (C) of this sentence requires that pro forma effect be given to an Asset
Acquisition or Asset Disposition, such pro forma calculation shall be based upon
the four full fiscal quarters immediately preceding the Transaction Date of the
Person, or division or line of business of the Person, that is acquired or
disposed of for which financial information is available.
"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 Restricted Subsidiaries
(which shall be as of a date not more than 90 days prior to the date of such
computation, and which shall not take into account Unrestricted Subsidiaries),
less any amounts attributable to Disqualified 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 Restricted 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 office of the Trustee at which the
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date of this Indenture,
located at The Chase Manhattan Bank, 450 West 33rd Street, New York, New York
10001.
"Credit Agreement" means credit agreements, vendor financings or
similar facilities or arrangements made available from time to time to the
Company and its Restricted Subsidiaries from banks, other financial institutions
and/or equipment manufacturers for the Incurrence of Indebtedness, including
letters of credit and any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, as the same may be
amended, supplemented, modified or restated from time to time.
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8
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement.
"Default" means any event that is, or after notice or passage of time
or both would be, an Event of Default.
"Depositary" means The Depository Trust Company, its nominees, and
their respective successors.
"Director" means, prior to the Reconstitution, a Representative on the
Management Committee of the Company, and following the Reconstitution, a
Director on the Board of Directors of the Company.
"Disqualified Stock" means any class or series of Capital Stock of any
Person that by its terms or otherwise is (i) required to be redeemed prior to
the Stated Maturity of the Notes, (ii) redeemable at the option of the holder of
such class or series of Capital Stock at any time prior to 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 prior to the Stated Maturity of the Notes; provided that any Capital
Stock that would not constitute Disqualified 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 prior to the Stated Maturity of the Notes shall not constitute
Disqualified 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 Section 4.11 and Section 4.12 and
such Capital Stock, or the agreements or instruments governing the redemption
rights thereof, specifically provides that such Person will not repurchase or
redeem any such stock pursuant to such provision prior to the Company's
repurchase of such Notes as are required to be repurchased pursuant to Section
4.11 and Section 4.12.
"Equity Offering" means an offering of Common Stock of the Company for
cash pursuant to an effective registration statement under the Securities Act or
an exemption from the registration requirements contained therein.
"Excess Proceeds" has the meaning provided in Section 4.11.
"Exchange Act" means the Securities Exchange Act of 1934.
"Existing Stockholders" means Time Warner, Inc., MediaOne Group, Inc.,
Advance/Newhouse Partnership and the Affiliates of each of the foregoing.
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9
"fair market value" means the price that would be paid 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,
as determined in good faith by the Board of Directors, whose determination shall
be conclusive if evidenced by a Board Resolution; provided that for purposes of
clause (viii) of the second paragraph of Section 4.03, (x) the fair market value
of any security registered under the Exchange Act shall be the average of the
closing prices, regular way, of such security for the 20 consecutive trading
days immediately preceding the sale of Capital Stock and (y) in the event the
aggregate fair market value of any other property (other than cash or cash
equivalents) received by the Company exceeds $15 million, the fair market value
of such property shall be determined by a nationally recognized investment
banking firm and set forth in their written opinion which shall be delivered to
the Trustee.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Closing Date, 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. All ratios and computations contained or referred
to in this Indenture shall be computed in conformity with GAAP applied on a
consistent basis, except that calculations made for purposes of determining
compliance with the terms of the covenants and with other provisions of this
Indenture shall be made without giving effect to (i) the amortization of any
expenses incurred in connection with the offering of the Notes and (ii) except
as otherwise provided, the amortization of any amounts required or permitted by
Accounting Principles Board Opinion Nos. 16 and 17.
"Global Notes" has the meaning provided in Section 2.01.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness 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 of
such other Person (whether arising by virtue of partnership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities or services
(unless such purchase arrangements are on arm's-length terms and are entered
into in the ordinary course of business), 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 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" or "Noteholder" means the registered holder of any Note.
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"Incur" 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 Acquired Indebtedness; provided that
neither the accrual of interest nor the accretion of original issue discount
shall be considered an Incurrence of Indebtedness.
"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, but excluding obligations with
respect to letters of credit (including trade letters of credit) securing
obligations (other than obligations described in (i) or (ii) above or (v), (vi)
or (vii) below) entered into in the ordinary course of business of such Person
to the extent such letters of credit are not drawn upon or, if drawn upon, to
the extent such drawing is reimbursed no later than the third Business Day
following receipt by such Person of a demand for reimbursement), (iv) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services, which purchase price is due more than six months after the
date of placing such property in service or taking delivery and title thereto or
the completion of such services, except Trade Payables, (v) all Capitalized
Lease Obligations 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 and (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 and (viii) 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 (A)
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 the
time of its issuance as determined in conformity with GAAP, (B) that money
borrowed and set aside at the time of the Incurrence of any Indebtedness in
order to prefund the payment of the interest on such Indebtedness shall not be
deemed to be "Indebtedness" so long as such money is held to secure the payment
of such interest and (C) that Indebtedness shall not include any liability for
federal, state, local or other taxes.
"Indenture" means this Indenture as originally executed or as it may be
amended or supplemented from time to time by one or more indentures supplemental
to this Indenture entered into pursuant to the applicable provisions of this
Indenture.
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"Interest Payment Date" means each semiannual interest payment date on
January 15 and July 15 of each year, commencing January 15, 1999.
"Interest Rate Agreement" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement, option or future contract or other similar
agreement or arrangement.
"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 and shall include
(i) the designation of a Restricted Subsidiary as an Unrestricted Subsidiary and
(ii) the fair market value of the Capital Stock (or any other Investment), held
by the Company or any of its Restricted Subsidiaries, of (or in) any Person that
has ceased to be a Restricted Subsidiary, including without limitation, by
reason of any transaction permitted by clause (iii) of Section 4.06; provided
that the fair market value of the Investment remaining in any Person that has
ceased to be a Restricted Subsidiary shall not exceed the aggregate amount of
Investments previously made in such Person valued at the time such Investments
were made less the net reduction of such Investments. For purposes of the
definition of "Unrestricted Subsidiary" and Section 4.04, (i) "Investment" shall
include the fair market value of the assets (net of liabilities (other than
liabilities to the Company or any of its Restricted Subsidiaries)) of any
Restricted Subsidiary at the time that such Restricted Subsidiary is designated
an Unrestricted Subsidiary, (ii) the fair market value of the assets (net of
liabilities (other than liabilities to the Company or any of its Restricted
Subsidiaries)) of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary shall be considered a reduction
in outstanding Investments and (iii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the time of
such transfer.
"Investment Grade" means a rating of the Notes by both S&P and Moody's,
each such rating being in one of such agency's four highest generic rating
categories that signifies investment grade (i.e., BBB- (or the equivalent) or
higher by S&P and Baa3 (or the equivalent) or higher by Moody's); provided, in
each case, such ratings are publicly available; provided further, that in the
event Moody's or S&P is no longer in existence, for purposes of determining
whether the Notes are rated "Investment Grade," such organization may be
replaced by a nationally recognized statistical rating organization (as defined
in Rule 436 under the Securities Act) designated by the Obligors, notice of
which designation shall be given to the Trustee.
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"Lien" means any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind (including, without limitation, any conditional sale or
other title retention agreement or lease in the nature thereof or any agreement
to give any security interest).
"Moody's" means Moody's Investors Service, Inc. and its successors.
"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) and proceeds
from the conversion of other property received when converted to cash or cash
equivalents, net of (i) brokerage commissions and other fees and expenses
(including fees and expenses of counsel and investment bankers) related to such
Asset Sale, (ii) provisions for all taxes (whether or not such taxes will
actually be paid or are 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, (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 as a reserve against any 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) and proceeds from the
conversion of other property received when converted to cash or cash
equivalents, net of attorney's 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 securities, as defined in the first paragraph
of the recitals hereof, that are authenticated and delivered under this
Indenture. For all purposes of this Indenture, the term "Notes" shall include
the Notes initially issued on the Closing Date and any other Notes issued after
the Closing Date under this Indenture. For purposes of this Indenture, all Notes
shall vote together as one series of Notes under this Indenture.
"Offer to Purchase" means an offer to purchase Notes by the Obligors
from the Holders commenced by mailing a notice to the Trustee and each Holder
stating: (i) the covenant pursuant
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13
to which the offer is being made 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 "Payment Date"); (iii)
that any Note not tendered will continue to accrue interest pursuant to its
terms; (iv) that, unless the Obligors default in the payment of the purchase
price, any Note accepted for payment pursuant to the Offer to Purchase shall
cease to accrue interest on and after the Payment Date; (v) that Holders
electing to have a Note purchased pursuant to the Offer to Purchase will be
required to surrender the Note, together with the form entitled "Option of the
Holder to Elect 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 Payment Date; (vi) that
Holders will 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 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
an integral multiple thereof. On the Payment Date, the Obligors shall (i) accept
for payment on a pro rata basis Notes or portions thereof tendered pursuant to
an Offer to Purchase; (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 Officers' Certificate specifying the Notes or
portions thereof accepted for payment by the Obligors. 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 an integral multiple thereof. The
Obligors will publicly announce the results of an Offer to Purchase as soon as
practicable after the Payment Date. The Trustee shall act as the Paying Agent
for an Offer to Purchase. The Company will comply with Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable, in the event that the Obligors
are required to repurchase Notes pursuant to an Offer to Purchase.
"Officer" means, with respect to the Obligors, (i) the Chairman of the
Board, the Chief Executive Officer, the President, any Vice President or the
Chief Financial Officer, and (ii) the Treasurer or any Assistant Treasurer, or
the Secretary or any Assistant Secretary.
"Officers' Certificate" means a certificate signed by one Officer
listed in clause (i) of the definition thereof and one Officer listed in clause
(ii) of the definition thereof or two Officers listed in clause (i) of the
definition thereof. Each Officers' Certificate (other than certificates
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14
provided pursuant to TIA Section 314(a)(4)) shall include the statements
provided for in Section 10.04.
"Opinion of Counsel" means a written opinion signed by legal counsel,
who may be an employee of or counsel to the Company, that meets the requirements
of Section 10.04 hereof.
"Parent Company Debt" means Indebtedness of the Company to any Existing
Stockholder that is subordinated in right of payment to the Notes, as evidenced
by a promissory note dated the date of the Reorganization, and any additional
notes issued pursuant to the terms of such note.
"Paying Agent" has the meaning provided in Section 2.03, except that,
for the purposes of Article Eight, the Paying Agent shall not be the Company or
a Subsidiary of the Company or an Affiliate of any of them. The term "Paying
Agent" includes any additional Paying Agent.
"Payment Date" has the meaning provided in the definition of Offer to
Purchase.
"Permitted Investment" means (i) an Investment in the Company or 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; provided that such Person's primary business is
related, ancillary or complementary to the businesses of the Company and its
Restricted Subsidiaries on the date of such Investment; (ii) Temporary Cash
Investments; (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) stock, obligations or securities received in
settlement of Indebtedness Incurred in the ordinary course of business, upon
foreclosure of a Lien created in the ordinary course of business or in
satisfaction of judgments, including in connection with a bankruptcy proceeding;
(v) Investments in prepaid expenses, negotiable instruments held for collection
and lease, utility and worker's compensation, performance and other similar
deposits; (vi) Interest Rate Agreements and Currency Agreements designed solely
to protect the Company or its Restricted Subsidiaries against fluctuations in
interest rates or foreign currency exchange rates; (vii) loans or advances to
officers or employees of the Company or any Restricted Subsidiary that do not in
the aggregate exceed $2 million at any time outstanding; and (viii) Investments
in any Person that is engaged in the telecommunications business and that is not
an Affiliate or a Related Person of the Company.
"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 and common law 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
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15
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
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
acquired after the Closing Date; provided that (a) such Lien is created solely
for the purpose of securing Indebtedness Incurred, in accordance with Section
4.03, to finance the cost (including the cost of design, development,
acquisition, construction, installation, improvement, transportation or
integration and all transaction costs related to the foregoing) 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, (b) the
principal amount of the Indebtedness secured by such Lien does not exceed 100%
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 property subject to any
Capitalized Lease or operating lease; (x) Liens arising from filing Uniform
Commercial Code financing statements regarding leases; (xi) Liens on property
of, or on shares of Capital Stock or Indebtedness of, any Person existing at the
time such Person 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;
(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 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 within the
general parameters customary in the industry and incurred in the ordinary course
of business, in each case, securing Indebtedness under Interest Rate Agreements
and Currency Agreements and forward contracts, options, future contracts,
futures options or similar agreements or arrangements designed solely
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16
to protect the Company or any of its Restricted Subsidiaries from fluctuations
in interest rates, currencies or the price of commodities; (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 on or sales of receivables; and (xix) Liens that secure
Indebtedness with an aggregate principal amount not in excess of $5 million at
any time outstanding.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"principal" of a debt security, including the Notes, means the
principal amount due on the Stated Maturity as shown on such debt security.
"Reconstitution" means the reconstitution of the Company from a limited
liability company to a corporation, whether by merger, exchange or otherwise.
"Redemption Date" means, when used with respect to any Note to be
redeemed, the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price" means, when used with respect to any Note to be
redeemed, the price at which such Note is to be redeemed pursuant to this
Indenture.
"Registrar" has the meaning provided in Section 2.03.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the January 1 or July 1 (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date.
"Related Person" means, as applied to any Person, any other Person
directly or indirectly owning (a) 10% or more of the outstanding Common Stock of
such Person (or, in the case of a Person that is not a corporation, 10% or more
of the outstanding equity interest in such Person) or (b) 10% or more of the
combined outstanding voting power of the Voting Stock of such Person, and all
Affiliates of any such other Person.
"Responsible Officer", when used with respect to the Trustee, means any
officer of the Trustee with direct responsibility for the administration of this
Indenture and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his or her
knowledge of and familiarity with the particular subject.
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17
"Restricted Payments" has the meaning provided in Section 4.04.
"Restricted Subsidiary" means any Subsidiary of the Company other than
an Unrestricted Subsidiary.
"Securities Act" means the Securities Act of 1933.
"Security Register" has the meaning provided in Section 2.03.
"Significant Subsidiary" means, at any date of determination, TWT and
any Restricted Subsidiary that, together with its Subsidiaries, (i) for the most
recent fiscal year of the Company, accounted for more than 10% of the
consolidated revenues of the Company and its Restricted Subsidiaries or (ii) as
of the end of such fiscal year, was the owner of more than 10% of the
consolidated assets of the Company and its Restricted Subsidiaries, all as set
forth on the most recently available consolidated financial statements of the
Company for such fiscal year.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, and its successors.
"Specified Date" means any Redemption Date, any Payment Date for an
Offer to Purchase or any date on which the Notes first become due and payable
after an Event of Default.
"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.
"Strategic Subordinated Indebtedness" means Indebtedness of the Company
Incurred to finance the acquisition of a Person engaged in a business that is
related, ancillary or complementary to the business conducted by the Company or
any of its Restricted Subsidiaries, which Indebtedness by its terms, or by the
terms of any agreement or instrument pursuant to which such Indebtedness is
Incurred, (i) is expressly made subordinate in right of payment to the Notes and
(ii) provides that no payment of principal, premium or interest on, or any other
payment with respect to, such Indebtedness may be made prior to the payment in
full of all of the Company's obligations under the Notes; provided that such
Indebtedness may provide for and be repaid at any time from the proceeds of the
sale of Capital Stock of the Company (other than Disqualified Stock) or other
Indebtedness of the Company which by its terms, or by the terms of any agreement
or instrument pursuant to which such other Indebtedness is Incurred, meets
clauses (i) and (ii) above after the Incurrence of such Indebtedness.
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"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the voting power
of the outstanding Voting Stock is owned, directly or indirectly, by such Person
and one or more other Subsidiaries of such Person.
"Tax Amount" means, with respect to any period, without duplication,
the increase in the cumulative United States Federal, state and local tax
liability of holders of equity interests in the Company (or if such holder is a
pass-through entity for United States income tax purposes, holders of its equity
interests) in respect of their interests in the Company for such period plus any
additional amounts payable to such holders to cover taxes arising from the
ownership of such equity interests, but excluding any increase in tax liability
or additional amounts payable in respect of a gain realized by a holder of an
equity interest in the Company upon the sale or disposition by such holder of an
equity interest, including without limitation, any redemption thereof by the
Company, in the Company.
"Temporary Cash Investment" means any of the following: (i) direct
obligations of the United States of America or any agency thereof or obligations
fully and unconditionally guaranteed by the United States of America or any
agency thereof, (ii) time deposit accounts, certificates of deposit and money
market deposits maturing within one year of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States of America, and which bank or trust company has capital,
surplus and undivided profits aggregating in excess of $500 million (or the
foreign currency equivalent thereof) 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) or any money-market fund sponsored by a registered broker dealer
or mutual fund distributor, (iii) repurchase obligations with a term of not more
than 30 days for underlying securities of the types described in clause (i)
above entered into with a bank meeting the qualifications described in clause
(ii) above, (iv) commercial paper, maturing not more than one year after the
date of acquisition, issued by a corporation (other than an Affiliate of the
Company) organized and in existence under the laws of the United States of
America, any state thereof or any foreign country recognized by the United
States of America with a rating at the time as of which any Investment therein
is made of "P-1" (or higher) according to Moody's or "A-1" (or higher) according
to S&P, (v) securities with maturities of six months or less from the date of
acquisition issued or fully and unconditionally guaranteed by any state,
commonwealth or territory of the United States of America, or by any political
subdivision or taxing authority thereof, and rated at least "A" by S&P or
Moody's, (vi) corporate debt securities with maturities of eighteen months or
less from the date of acquisition and with a rating at the time as of which any
Investment therein is made of "A3" (or higher) according to Moody's or "A-" (or
higher) according to S&P and (vii) money market funds at least 95% of the assets
of which are invested in the foregoing.
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19
"TIA" or "Trust Indenture Act" means the Trust Indenture Act of 1939
(15 U.S. Code 'SS' 'SS'77aaa-77bbbb), as in effect on the date this Indenture
was executed, except as provided in Section 9.06 provided, however, that, in the
event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" or "TIA" means, to the extent required by any such amendment, the
Trust Indenture Act of 1939 as so amended.
"Trade Payables" means, with respect to any Person, any accounts
payable or any other indebtedness or monetary obligation to trade creditors
created, assumed or Guaranteed by such Person or any of its Subsidiaries arising
in the ordinary course of business in connection with the acquisition of goods
or 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.
"Trustee" means the party named as such in the first paragraph of this
Indenture until a successor replaces it in accordance with the provisions of
Article Seven of this Indenture and thereafter means such successor.
"United States Bankruptcy Code" means the Bankruptcy Reform Act of
1978, as amended and as codified in Title 11 of the United States Code, as
amended from time to time hereafter, or any successor federal bankruptcy law.
"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 (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) any Guarantee by the Company or any
Restricted Subsidiary of any Indebtedness of the Subsidiary being so designated
shall be deemed an "Incurrence" of such Indebtedness and an "Investment" by the
Company or such Restricted Subsidiary (or both, if applicable) at the time of
such designation; (B) either (I) the Subsidiary to be so designated has total
assets of $1,000 or less or (II) if such Subsidiary has assets greater than
$1,000, such designation would be permitted under Section 4.04 and (C) if
applicable, the Incurrence of Indebtedness and the Investment referred to in
clause (A) of this proviso would be permitted under Section 4.03 and Section
4.04. The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided that (i) no Default or Event of Default shall
have occurred and be continuing at the time of or after giving effect to such
designation and (ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately after such designation would, if Incurred at such time,
have been permitted to be Incurred (and shall be deemed to have
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20
been Incurred) for all purposes of this Indenture. 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.
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof at any time prior
to the Stated Maturity of the Notes, and shall also include a depository receipt
issued by a bank or trust company as custodian with respect to any such U.S.
Government Obligation or a specific payment of interest on or principal of any
such U.S. Government Obligation held by such custodian for the account of the
holder of a 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 interest on
or principal of the U.S. Government Obligation evidenced by such depository
receipt.
"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.
"Wholly Owned" means, with respect to any Subsidiary of any Person, the
ownership of all of the outstanding Capital Stock of such Subsidiary (other than
any director's qualifying shares or Investments by foreign nationals mandated by
applicable law) by such Person or one or more Wholly Owned Subsidiaries of such
Person.
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder or a Noteholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
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21
"obligor" on the indenture securities means the Obligors or
any other obligor on the Notes.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by a rule of the
Commission and not otherwise defined herein have the meanings assigned to them
therein.
SECTION 1.03. Rules of Construction. Unless the context otherwise
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(iii) "or" is not exclusive;
(iv) words in the singular include the plural, and words in
the plural include the singular;
(v) provisions apply to successive events and transactions;
(vi) "herein," "hereof" and other words of similar import
refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision;
(vii) all ratios and computations based on GAAP contained in
this Indenture shall be computed in accordance with the definition of
GAAP set forth in Section 1.01; and
(viii) all references to Sections or Articles and other
subdivisions refer to Sections or Articles and other subdivisions of
this Indenture unless otherwise indicated.
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating. 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 notations,
legends or endorsements required by law, stock exchange agreements to which the
Obligors are subject or usage. The Obligors 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.
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22
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 Obligors and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
The Notes shall be issued initially in the form of one or more global
Notes in registered form, substantially in the form set forth in Exhibit A (the
"Global Notes"), deposited with, or on behalf of, the Depositary, duly executed
by the Obligors and authenticated by the Trustee as hereinafter provided. Each
Global Note shall bear such legend as may be required or reasonably requested by
the Depositary.
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 2.02. Execution, Authentication and Denominations. Subject to
Article Four and applicable law, the aggregate principal amount of Notes which
may be authenticated and delivered under this Indenture is unlimited. The Notes
shall be executed by an Officer of the Company and an Officer of TWT. The
signature of these Officers on the Notes may be by facsimile or manual signature
in the name and on behalf of the Obligors.
If an Officer whose signature is on a Note no longer holds that office
at the time the Trustee or authenticating agent authenticates the Note, the Note
shall be valid nevertheless.
A Note shall not be valid until the Trustee or authenticating agent
manually signs the certificate of authentication on the Note. The signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture.
At any time and from time to time after the execution of this
Indenture, the Trustee or an authenticating agent shall upon receipt of a
Company Order authenticate for original issue Global Notes in the aggregate
principal amount specified in such Company Order; provided that the Trustee
shall be entitled to receive an Officers' Certificate and an Opinion of Counsel
of the Company in connection with such authentication of Notes. Such Company
Order shall specify the amount of Global Notes to be authenticated and the date
on which the original issue of Notes is to be authenticated and, in case of an
issuance of Notes pursuant to Section 2.12, shall certify that such issuance is
in compliance with Article Four.
The Trustee may appoint an authenticating agent to authenticate Notes.
An authenticating agent may authenticate Notes whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such authenticating agent. An
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23
authenticating agent has the same rights as an Agent to deal with the Obligors
or an Affiliate of the Obligors.
The Notes shall be issuable only in registered form without coupons and
only in denominations of $1,000 in principal amount and any integral multiple
thereof.
SECTION 2.03. Registrar and Paying Agent. The Obligors shall maintain
an office or agency where Notes may be presented for registration of transfer or
for exchange (the "Registrar"), an office or agency where Notes may be presented
for payment (the "Paying Agent") and an office or agency where notices and
demands to or upon the Obligors in respect of the Notes and this Indenture may
be served, which shall be in the Borough of Manhattan, The City of New York. The
Obligors shall cause the Registrar to keep a register of the Notes and of their
transfer and exchange (the "Security Register"). The Security Register shall be
in written form or any other form capable of being converted into written form
within a reasonable time. The Obligors may have one or more co-Registrars and
one or more additional Paying Agents.
The Obligors shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Obligors shall give
prompt written notice to the Trustee of the name and address of any such Agent
and any change in the address of such Agent. If the Obligors fail to maintain a
Registrar, Paying Agent and/or agent for service of notices and demands, the
Trustee shall act as such Registrar, Paying Agent and/or agent for service of
notices and demands. The Obligors may remove any Agent upon written notice to
such Agent and the Trustee; provided that no such removal shall become effective
until (i) the acceptance of an appointment by a successor Agent to such Agent as
evidenced by an appropriate agency agreement entered into by the Obligors and
such successor Agent and delivered to the Trustee or (ii) notification to the
Trustee that the Trustee shall serve as such Agent until the appointment of a
successor Agent in accordance with clause (i) of this proviso. The Company, TWT,
any Subsidiary of the Company, or any Affiliate of any of them may act as Paying
Agent, Registrar or co-Registrar, and/or agent for service of notice and
demands.
The Obligors initially appoint the Trustee as Registrar, Paying Agent,
and agent for service of notice and demands. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Holders and shall otherwise comply with TIA'SS'
312(a). If the Trustee is not the Registrar, the Obligors shall furnish to the
Trustee as of each Regular Record Date and at such other times as the Trustee
may reasonably request the names and addresses of Holders as they appear in the
Security Register, including the aggregate principal amount of Notes held by
each Holder. At the option of the Company, payment of principal and interest may
be made by check mailed to the address of the Holders as such address appears in
the Security Register.
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SECTION 2.04. Paying Agent to Hold Money in Trust. Not later than 11:00
a.m. (New York City time) on each due date of the principal, premium, if any,
and interest on any Notes, the Obligors shall deposit with the Paying Agent
money in immediately available funds sufficient to pay such principal, premium,
if any, and interest so becoming due. The Obligors shall require each Paying
Agent other than the Trustee to agree in writing that such Paying Agent shall
hold in trust for the benefit of the Holders or the Trustee all money held by
the Paying Agent for the payment of principal of, premium, if any, and interest
on the Notes (whether such money has been paid to it by the Obligors or any
other obligor on the Notes), and such Paying Agent shall promptly notify the
Trustee of any default by the Obligors (or any other obligor on the Notes) in
making any such payment. The Obligors at any time may require a Paying Agent to
pay all money held by it to the Trustee and account for any funds disbursed, and
the Trustee may at any time during the continuance of any payment default, upon
written request to a Paying Agent, require such Paying Agent to pay all money
held by it to the Trustee and to account for any funds disbursed. Upon doing so,
the Paying Agent shall have no further liability for the money so paid over to
the Trustee. If the Company, TWT or any Subsidiary of the Company or any
Affiliate of any of them acts as Paying Agent, it will, on or before each due
date of any principal of, premium, if any, or interest on the Notes, segregate
and hold in a separate trust fund for the benefit of the Holders a sum of money
sufficient to pay such principal, premium, if any, or interest so becoming due
until such sum of money shall be paid to such Holders or otherwise disposed of
as provided in this Indenture, and will promptly notify the Trustee of its
action or failure to act.
SECTION 2.05. Transfer and Exchange. When Notes are presented to the
Registrar or a co-Registrar with a request to register the transfer or to
exchange them for an equal principal amount of Notes of other authorized
denominations, the Registrar shall register the transfer or make the exchange as
requested if its requirements for such transactions are met (including that such
Notes are duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Trustee and Registrar duly executed by the Holder
thereof or by an attorney who is authorized in writing to act on behalf of the
Holder). To permit registrations of transfers and exchanges, the Obligors shall
execute and the Trustee shall authenticate Notes at the Registrar's request. No
service charge shall be made for any registration of transfer or exchange or
redemption of the Notes, but the Obligors may require payment of a sum
sufficient to cover any transfer tax or similar governmental charge payable in
connection therewith (other than any such transfer taxes or other similar
governmental charge payable upon exchanges pursuant to Section 2.08, 3.08 or
9.04).
The Registrar 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 day of the mailing of a notice of redemption of Notes selected
for redemption under Section 3.03 and ending at the close of business on the day
of such mailing, or (ii) to register the transfer of or exchange any
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25
Note so selected for redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part.
Notwithstanding any other provisions of this Section 2.05, unless and
until it is exchanged in whole or in part for Notes in definitive registered
form, the Global Notes representing all or a portion of the Notes may not be
transferred except as a whole by the Depositary to a nominee of such Depositary
or by a nominee of such Depositary to such Depositary or another nominee of such
Depositary or by such Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary.
Members of, or participants in, the Depositary (the "Agent Members")
shall have no rights under this Indenture with respect to any Global Note held
on their behalf by the Depositary, or the Trustee as its custodian, or under
such Global Note, and the Depositary may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the absolute owner of such Global
Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent that Company, the Trustee or any agent of the Company or the
Trustee, from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the Depositary
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Note.
If the Depositary notifies the Obligors that it is unwilling or unable
to continue as Depositary for the Global Notes or if at any time the Depositary
shall no longer be eligible under the next sentence of this paragraph, the
Obligors shall appoint a successor Depositary with respect to the Notes. Each
Depositary appointed pursuant to this Section 2.05 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 Obligors will execute, and the Trustee, upon receipt of an
authentication order, will authenticate and deliver, Notes in definitive
registered form in any authorized denominations, in an aggregate principal
amount equal to the principal amount of the Global Note or Notes representing
such Notes in exchange for such Global Note or Notes if (i) the Depositary
notifies the Obligors that it is unwilling or unable to continue as Depositary
for the Global Notes or if at any time the Depositary shall no longer be
eligible to serve as Depositary and a successor Depositary for the Notes is not
appointed by the Obligors within 60 days after the Obligors receive such notice
or becomes aware of such ineligibility or (ii) an Event of Default has occurred
and is continuing.
The Obligors may at any time and in their sole discretion determine
that the Notes shall no longer be represented by a Global Note or Notes. In such
event the Obligors will execute, and the Trustee will, upon receipt of an
authentication order, authenticate and deliver, Notes in definitive registered
form in any authorized denominations, in an aggregate principal amount equal to
the principal amount of the Global Note or Notes representing such Notes in
exchange for such Global Note or Notes.
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26
Upon the exchange of a Global Note for Notes in definitive registered
form, without coupons, in authorized denominations, such Global Note shall be
cancelled by the Trustee. Notes in definitive registered form issued in exchange
for a Global Note pursuant to this Section 2.05 shall be registered in such
names and in such authorized denominations as the Depositary for such Global
Note, pursuant to instructions from its direct or indirect participants or
otherwise, shall instruct the Trustee. The Trustee shall deliver such Notes to
or as directed by the Persons in whose names such Notes are so registered.
All Notes issued upon any registration of transfer or exchange of Notes
shall be valid obligations of the Obligors, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
SECTION 2.06. Replacement Notes. If a mutilated Note is surrendered to
the Trustee or if the Holder claims that the Note has been lost, destroyed or
wrongfully taken, then, in the absence of notice to the Obligors or the Trustee
that such Note has been acquired by a bona fide purchaser, the Obligors shall
issue and the Trustee shall authenticate a replacement Note of like tenor and
principal amount and bearing a number not contemporaneously outstanding;
provided that the requirements of this Section 2.06 are met. If required by the
Trustee or the Obligors, an indemnity bond must be furnished that is sufficient
in the judgment of both the Trustee and the Obligors to protect the Obligors,
the Trustee or any Agent from any loss that any of them may suffer if a Note is
replaced. The Obligors may charge such Holder for its expenses and the expenses
of the Trustee in replacing a Note. In case any such mutilated, lost, destroyed
or wrongfully taken Note has become or is about to become due and payable, the
Obligors in their discretion may pay such Note instead of issuing a new Note in
replacement thereof.
Every replacement Note is an additional obligation of the Obligors and
shall be entitled to the benefits of this Indenture.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies against the Obligors and the
Trustee with respect to the replacement or payment of mutilated, destroyed, lost
or wrongfully taken Notes.
SECTION 2.07. Outstanding Notes. Notes outstanding at any time are all
Notes that have been authenticated by the Trustee except for those cancelled by
it, those delivered to it for cancellation and those described in this Section
2.07 as not outstanding.
If a Note is replaced pursuant to Section 2.06, it ceases to be
outstanding unless and until the Trustee and the Obligors receive proof
satisfactory to them that the replaced Note is held by a bona fide purchaser.
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27
If the Paying Agent (other than the Company, TWT or an Affiliate of the
Company) holds on a maturity date or Redemption Date money sufficient to pay
Notes payable on that date, then on and after that date such Notes cease to be
outstanding and interest on them shall cease to accrue.
A Note does not cease to be outstanding because an Obligor or one of
its Affiliates holds such Note, provided, however, that in determining whether
the Holders of the requisite principal amount of the outstanding Notes have
given any request, demand, authorization, direction, notice, consent or waiver
hereunder, Notes owned by an Obligor or any other obligor upon the Notes or any
Affiliate of an Obligor or of such other obligor shall be disregarded and deemed
not to be outstanding, except that, in determining whether the Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Notes which the Trustee has actual knowledge to
be so owned shall be so disregarded. Notes so owned which have been pledged in
good faith may be regarded as 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 an Obligor or any other obligor upon the Notes
or any Affiliate of an Obligor or of such other obligor.
SECTION 2.08. Temporary Notes. Until definitive Notes are ready for
delivery, the Obligors may prepare and execute and the Trustee shall
authenticate temporary Notes. Temporary Notes shall be substantially in the form
of definitive Notes but may have insertions, substitutions, omissions and other
variations determined to be appropriate by the Officers executing the temporary
Notes, as evidenced by their execution of such temporary Notes. If temporary
Notes are issued, the Obligors will 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 Obligors designated for such
purpose pursuant to Section 4.02, without charge to the Holder. Upon surrender
for cancellation of any one or more temporary Notes the Obligors shall execute
and 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 be entitled to the same benefits under this
Indenture as definitive Notes.
SECTION 2.09. Cancellation. The Obligors at any time may deliver to the
Trustee for cancellation any Notes previously authenticated and delivered
hereunder which the Obligors may have acquired in any manner whatsoever, and may
deliver to the Trustee for cancellation any Notes previously authenticated
hereunder which the Obligors have not issued and sold. The Registrar and the
Paying Agent shall forward to the Trustee any Notes surrendered to them for
registration of transfer, exchange or payment. The Trustee (and no one else)
shall cancel all Notes surrendered for registration of transfer, exchange,
payment, replacement or cancellation and shall dispose of them in accordance
with its normal procedure.
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28
SECTION 2.10. CUSIP Numbers. The Obligors in issuing the Notes may use
a "CUSIP" number (if then generally in use), and the Obligors and the Trustee
shall use such "CUSIP" number in notices of redemption or exchange as a
convenience to Holders; provided that any such notice shall state that no
representation is made as to the correctness of such CUSIP number either as
printed on the Notes or as contained in any notice of redemption or exchange and
that reliance may be placed only on the other identification numbers printed on
the Notes; and provided further that failure to use CUSIP numbers in any notice
of redemption or exchange shall not affect the validity or sufficiency of such
notice. The Obligors shall promptly notify the Trustee of any change in "CUSIP"
number for the Notes.
SECTION 2.11. Defaulted Interest. If the Obligors default in a payment
of interest on the Notes, they shall pay, or shall deposit with the Paying Agent
money in immediately available funds sufficient to pay, the defaulted interest,
plus (to the extent lawful) any interest payable on the defaulted interest, to
the Persons who are Holders on a subsequent special record date. A special
record date, as used in this Section 2.11 with respect to the payment of any
defaulted interest, shall mean the 15th day next preceding the date fixed by the
Obligors for the payment of defaulted interest, whether or not such day is a
Business Day. At least 15 days before the subsequent special record date, the
Obligors shall mail to each Holder and to the Trustee a notice that states the
subsequent special record date, the payment date and the amount of defaulted
interest to be paid.
SECTION 2.12. Issuance of Additional Notes. The Obligors may, subject
to Article Four of this Indenture and applicable law, issue additional Notes
under this Indenture. The Notes issued on the Closing Date and any additional
Notes subsequently issued shall be treated as a single class for all purposes
under this Indenture.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Right of Redemption. (a) The Notes are redeemable, at the
Obligors' option, in whole or in part, at any time or from time to time, on or
after July 15, 2003 and prior to maturity, upon not less than 30 nor more than
60 days' prior notice mailed by first-class mail to each Holder's last address,
as it appears in the Security Register, at the following Redemption Prices
(expressed in percentages of principal amount), plus accrued and unpaid
interest, if any, to the Redemption Date (subject to the right of Holders of
record on the relevant Regular Record Date that is on or prior to the Redemption
Date to receive interest due on an Interest Payment Date), if redeemed during
the 12-month period commencing July 15 of the years set forth below:
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29
<TABLE>
<CAPTION>
Redemption
Year Price
---- -----
<S> <C>
2003............................... 104.875%
2004............................... 103.250%
2005............................... 101.625%
2006 and thereafter................ 100.000%
</TABLE>
(b) In addition, at any time prior to July 15, 2001, the Obligors may
redeem up to 35% of the aggregate principal amount of the Notes with the net
proceeds of one or more Equity Offerings, at any time or from time to time, at a
Redemption Price (expressed as a percentage of principal amount) of 109.750%,
plus accrued and unpaid interest to the Redemption Date (subject to the rights
of Holders of record on the relevant Regular Record Date that is on or prior to
the Redemption Date to receive interest due on an Interest Payment Date);
provided that (i) at least 65% of the aggregate principal amount of Notes
originally issued on the Closing Date remains outstanding after each such
redemption and (ii) notice of such redemption is mailed within 90 days of the
related Equity Offering.
SECTION 3.02. Notices to Trustee. If the Obligors elect to redeem Notes
pursuant to Section 3.01(a) or (b), they shall notify the Trustee in writing of
the Redemption Date and the principal amount of Notes to be redeemed and the
clause of this Indenture pursuant to which redemption shall occur.
The Obligors shall give each notice provided for in this Section 3.02
in an Officers' Certificate at least 45 days before the Redemption Date (unless
a shorter period shall be satisfactory to the Trustee).
SECTION 3.03. Selection of Notes to Be Redeemed. If less than all of
the Notes are to be redeemed at any time, the Trustee shall select the Notes to
be redeemed in compliance with the requirements, as certified to it by the
Obligors, 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 or automated quotation system, by lot or by such other method as the
Trustee in its sole discretion shall deem fair and appropriate; provided that no
Note of $1,000 in principal amount or less shall be redeemed in part.
The Trustee shall make the selection from the Notes outstanding and not
previously called for redemption. Notes in denominations of $1,000 in principal
amount may only be redeemed in whole. The Trustee may select for redemption
portions (equal to $1,000 in principal amount or any integral multiple thereof)
of Notes that have denominations larger than $1,000 in principal amount.
Provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption. The Trustee shall notify the
Obligors and the Registrar promptly in writing of the Notes or portions of Notes
to be called for redemption.
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30
SECTION 3.04. Notice of Redemption. With respect to any redemption of
Notes pursuant to Section 3.01, at least 30 days but not more than 60 days
before a Redemption Date, the Obligors shall mail a notice of redemption by
first-class mail to each Holder whose Notes are to be redeemed.
The notice shall identify the Notes to be redeemed and shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the name and address of the Paying Agent;
(iv) that Notes called for redemption must be surrendered to
the Paying Agent in order to collect the Redemption Price;
(v) that, unless the Obligors default in making the redemption
payment, interest on Notes called for redemption ceases to accrue on
and after the Redemption Date and the only remaining right of the
Holders is to receive payment of the Redemption Price plus accrued and
unpaid interest to the Redemption Date upon surrender of the Notes to
the Paying Agent;
(vi) that, if any Note is being redeemed in part, the portion
of the principal amount (equal to $1,000 in principal amount or any
integral multiple thereof) of such Note to be redeemed and that, on and
after the Redemption Date, upon surrender of such Note, a new Note or
Notes in principal amount equal to the unredeemed portion thereof will
be issued upon cancellation of the original Note; and
(vii) that, if any Note contains a CUSIP number as provided in
Section 2.10, no representation is being made as to the correctness of
the CUSIP number either as printed on the Notes or as contained in the
notice of redemption and that reliance may be placed only on the other
identification numbers printed on the Notes.
At the Obligors' request (which request may be revoked by the Obligors
at any time prior to the time at which the Trustee shall have given such notice
to the Holders), made in writing to the Trustee at least 45 days (or such
shorter period as shall be satisfactory to the Trustee) before a Redemption
Date, the Trustee shall give the notice of redemption in the name and at the
expense of the Obligors. If, however, the Obligors give such notice to the
Holders, each Obligor shall concurrently deliver to the Trustee an Officers'
Certificate stating that such notice has been given.
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31
SECTION 3.05. Effect of Notice of Redemption. Once notice of redemption
is mailed, Notes called for redemption become due and payable on the Redemption
Date and at the Redemption Price. Upon surrender of any Notes to the Paying
Agent, such Notes shall be paid at the Redemption Price, plus accrued and unpaid
interest, if any, to the Redemption Date.
Notice of redemption shall be deemed to be given when mailed, whether
or not the Holder receives the notice. In any event, failure to give such
notice, or any defect therein, shall not affect the validity of the proceedings
for the redemption of Notes held by Holders to whom such notice was properly
given.
SECTION 3.06. Deposit of Redemption Price. On or prior to any
Redemption Date, the Obligors shall deposit with the Paying Agent (or, if one of
the Obligors is acting as the Paying Agent, shall segregate and hold in trust as
provided in Section 2.04) money sufficient to pay the Redemption Price of and
accrued and unpaid interest on all Notes to be redeemed on that date other than
Notes or portions thereof called for redemption on that date that have been
delivered by the Obligors to the Trustee for cancellation.
SECTION 3.07. Payment of Notes Called for Redemption. If notice of
redemption has been given in the manner provided above, the Notes or portion of
Notes specified in such notice to be redeemed shall become due and payable on
the Redemption Date at the Redemption Price stated therein, together with
accrued and unpaid interest to such Redemption Date, and on and after such date
(unless the Obligors shall default in the payment of such Notes at the
Redemption Price and accrued and unpaid interest to the Redemption Date, in
which case the principal, until paid, shall bear interest from the Redemption
Date at the rate prescribed in the Notes), such Notes shall cease to accrue
interest. Upon surrender of any Note for redemption in accordance with a notice
of redemption, such Note shall be paid and redeemed by the Obligors at the
Redemption Price, together with accrued and unpaid interest, if any, to the
Redemption Date; provided that installments of interest whose Stated Maturity is
on or prior to the Redemption Date shall be payable to the Holders registered as
such at the close of business on the relevant Regular Record Date.
SECTION 3.08. Notes Redeemed in Part. Upon surrender of any Note that
is redeemed in part, the Obligors shall execute and the Trustee shall
authenticate and deliver to the Holder without service charge, a new Note equal
in principal amount to the unredeemed portion of such surrendered Note.
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32
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes. The Obligors shall pay the principal
of, premium, if any, and interest on the Notes on the dates and in the manner
provided in the Notes and this Indenture. An installment of principal, premium,
if any, or interest shall be considered paid on the date due if the Trustee or
Paying Agent (other than the Company, a Subsidiary of the Company, or any
Affiliate of any of them) holds on that date money designated for and sufficient
to pay the installment. If the Company, TWT, or any Subsidiary of the Company or
any Affiliate of any of them acts as Paying Agent, an installment of principal,
premium, if any, or interest shall be considered paid on the due date if the
entity acting as Paying Agent complies with the last sentence of Section 2.04.
As provided in Section 6.09, upon any bankruptcy or reorganization procedure
relative to the Obligors, the Trustee shall serve as the Paying Agent, if any,
for the Notes.
The Obligors shall pay interest on overdue principal and premium, if
any, and interest on overdue installments of interest, to the extent lawful, at
the rate per annum specified in the Notes.
SECTION 4.02. Maintenance of Office or Agency. The Obligors will
maintain in the Borough of Manhattan, The City of New York, an office or agency
where Notes may be surrendered for registration of transfer or exchange or for
presentation for payment and where notices and demands to or upon the Obligors
in respect of the Notes and this Indenture may be served. The Obligors will give
prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Obligors shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the address of the Trustee set forth in Section 10.02.
The Obligors may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided
that no such designation or rescission shall in any manner relieve the Obligors
of their obligation to maintain an office or agency in the Borough of Manhattan,
The City of New York, for such purposes. The Obligors shall give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
The Obligors hereby initially designate the Corporate Trust Office of
the Trustee as such office of the Obligors in accordance with Section 2.03.
SECTION 4.03. Limitation on Indebtedness. (a) The Company will not, and
will not permit any of its Restricted Subsidiaries to, Incur any Indebtedness
(other than the Notes and
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33
Indebtedness existing on the Closing Date); provided that the Company may Incur
Indebtedness if, after giving effect to the Incurrence of such Indebtedness and
the receipt and application of the proceeds therefrom, the Consolidated Leverage
Ratio would be greater than zero and less than 6.0:1.
Notwithstanding the foregoing, the Company and any Restricted
Subsidiary (except as specified below) may Incur each and all of the following:
(i) Indebtedness outstanding at any time in an aggregate principal amount not to
exceed $300 million, less any amount of such Indebtedness permanently repaid as
provided under Section 4.11; (ii) Indebtedness owed (A) to the Company evidenced
by a promissory note or (B) to any Restricted Subsidiary; provided that any
event which results in any such Restricted Subsidiary ceasing to be a Restricted
Subsidiary or any subsequent transfer of such Indebtedness (other than to the
Company or another Restricted Subsidiary) shall be deemed, in each case, to
constitute an Incurrence of such Indebtedness not permitted by this clause (ii);
(iii) Indebtedness issued in exchange for, or the net proceeds of which are used
to refinance or refund, then outstanding Indebtedness (other than Indebtedness
Incurred under clause (i), (ii), (iv), (vi), (viii) or (ix) of this paragraph)
and any refinancings thereof in an amount not to exceed the amount so refinanced
or refunded (plus premiums, accrued interest, fees and expenses); provided that
Indebtedness the proceeds of which are used to refinance or refund the Notes or
Indebtedness that is pari passu with, or subordinated in right of payment to,
the Notes shall only be permitted under this clause (iii) 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 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 (iii); (iv) Indebtedness (A)
in respect of performance, surety or appeal bonds provided in the ordinary
course of business, (B) under Currency Agreements and Interest Rate Agreements;
provided that such agreements (a) are designed solely to protect the Company or
its Restricted Subsidiaries against fluctuations in foreign currency exchange
rates or interest rates and (b) 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
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34
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 (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; (v) Indebtedness of
the Company, to the extent the net proceeds thereof are promptly (A) used to
purchase Notes tendered in an Offer to Purchase made as a result of a Change of
Control or (B) deposited to defease the Notes pursuant to Article Eight; (vi)
Guarantees of the Notes and Guarantees of Indebtedness of the Company by any
Restricted Subsidiary provided the Guarantee of such Indebtedness is permitted
by and made in accordance with Section 4.07; (vii) Indebtedness Incurred to
finance the cost (including the cost of design, development, acquisition,
construction, installation, improvement, transportation or integration and all
transaction costs related to the foregoing) to acquire equipment, inventory or
network assets (including acquisitions by way of Capitalized Lease and
acquisitions of the Capital Stock of a Person that becomes a Restricted
Subsidiary to the extent of the fair market value of the equipment, inventory or
network assets so acquired plus goodwill associated therewith) by the Company or
a Restricted Subsidiary after the Closing Date; (viii) Indebtedness of the
Company not to exceed, at any one time outstanding, two times (A) the Net Cash
Proceeds received by the Company after the Closing Date from the issuance and
sale of its Capital Stock (other than Disqualified Stock) to a Person that is
not a Subsidiary of the Company, to the extent (I) such Net Cash Proceeds have
not been used pursuant to clause (C)(2) of the first paragraph or clause (iii),
(iv), (vi) or (vii) of the second paragraph of Section 4.04 to make a Restricted
Payment and (II) if such Net Cash Proceeds are used to consummate a transaction
pursuant to which the Company Incurs Acquired Indebtedness, the amount of such
Net Cash Proceeds exceeds one-half of the amount of Acquired Indebtedness so
Incurred and (B) 80% of the fair market value of property (other than cash and
cash equivalents) received by the Company after the Closing Date from the sale
of its Capital Stock (other than Disqualified Stock) to a Person that is not a
Subsidiary of the Company, to the extent (I) such sale of Capital Stock has not
been used pursuant to clause (iii), (iv), (vi) or (vii) of the second paragraph
of Section 4.04 to make a Restricted Payment and (II) if such Capital Stock is
used to consummate a transaction pursuant to which the Company Incurs Acquired
Indebtedness, 80% of the fair market value of the property received exceeds
one-half of the amount of Acquired Indebtedness so Incurred; provided that such
Indebtedness does not mature prior to the Stated Maturity of the Notes and has
an Average Life longer than the Notes; (ix) Acquired Indebtedness; (x) Strategic
Subordinated Indebtedness; and (xi) subordinated Indebtedness of the Company (in
addition to Indebtedness permitted under clauses (i) through (x) above) in an
aggregate principal amount outstanding at any time not to exceed $200 million,
less any amount of such Indebtedness permanently repaid as provided under
Section 4.11.
(b) Notwithstanding any other provision of this Section 4.03, the
maximum amount of Indebtedness that the Company or a Restricted Subsidiary may
Incur pursuant to this Section
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35
4.03 shall not be deemed to be exceeded, with respect to any outstanding
Indebtedness due solely to the result of fluctuations in the exchange rates of
currencies.
(c) For purposes of determining any particular amount of Indebtedness
under this Section 4.03, (1) Guarantees, Liens or obligations with respect to
letters of credit supporting Indebtedness otherwise included in the
determination of such particular amount shall not be included and (2) any Liens
granted pursuant to the equal and ratable provisions referred to in Section 4.09
shall not be treated as Indebtedness. For purposes of determining compliance
with this Section 4.03, 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 Obligors, in their sole discretion, shall classify, and from time
to time may reclassify, such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of such clauses.
(d) For purposes of determining compliance with any Dollar-denominated
restriction on the Incurrence of Indebtedness denominated in a foreign currency,
the Dollar-equivalent principal amount of such Indebtedness Incurred pursuant
thereto shall be calculated based on the relevant currency exchange rate in
effect on the date that such Indebtedness was Incurred, provided that (x) the
Dollar-equivalent principal amount of any such Indebtedness outstanding on the
Closing Date shall be calculated based on the relevant currency exchange rate in
effect on the Closing Date and (y) if such Indebtedness is Incurred to refinance
other Indebtedness denominated in a foreign currency, and such refinancing would
cause the applicable Dollar-denominated restriction to be exceeded if calculated
at the relevant currency exchange rate in effect on the date of such
refinancing, such Dollar-denominated restriction shall be deemed not to have
been exceeded so long as the principal amount of such refinancing Indebtedness,
converted into the currency in which the Indebtedness being refinanced is
denominated at the currency exchange rate in effect on the date of such
refinancing, does not exceed the principal amount of such Indebtedness being
refinanced (plus premiums, accrued interest, fees and expenses). The principal
amount of any Indebtedness Incurred to refinance other Indebtedness, if Incurred
in a different currency from the Indebtedness being refinanced, shall be
calculated based on the foreign currency exchange rate applicable to the
currencies in which such respective Indebtedness is denominated that is in
effect on the date of such refinancing.
SECTION 4.04. Limitation on Restricted Payments. The Company will not,
and will not permit any Restricted Subsidiary to, directly or indirectly, (i)
declare or pay any dividend or make any distribution on or with respect to its
Capital Stock (other than (x) dividends or distributions payable solely in
shares of its Capital Stock (other than Disqualified Stock) or in options,
warrants or other rights to acquire shares of such Capital Stock and (y) pro
rata dividends or distributions on Common Stock of Restricted Subsidiaries held
by minority stockholders) held by Persons other than the Company or any of its
Restricted Subsidiaries, (ii) purchase, redeem, retire or otherwise acquire for
value any shares of Capital Stock of (A) the Company or an Unrestricted
Subsidiary (including options, warrants or other rights to acquire such shares
of Capital Stock) held by any
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Person or (B) a Restricted Subsidiary (including options, warrants or 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 of such holder) of 5% or more of the Capital Stock of the Company,
(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) above 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 the first paragraph of Section 4.03
or (C) the aggregate amount of all Restricted Payments (the amount, if other
than in cash, to be determined in good faith by the Board of Directors, whose
determination shall be conclusive and evidenced by a Board Resolution) made
after the Closing Date shall exceed the sum of (1) the amount by which
Consolidated EBITDA exceeds 150% of Consolidated Interest Expense, in each case,
determined on a cumulative basis during the period (taken as one accounting
period) beginning on the first day of the fiscal quarter immediately following
the Closing Date and ending on the last day of the last fiscal quarter preceding
the Transaction Date for which reports have been filed with the Commission or
provided to the Trustee pursuant to Section 4.18, plus (2) the aggregate Net
Cash Proceeds received by the Company after the Closing Date from the issuance
and sale permitted by this Indenture of its Capital Stock (other than
Disqualified Stock) to a Person who is not a Subsidiary of the Company,
including an issuance or sale permitted by this Indenture of Indebtedness of the
Company for cash subsequent to the Closing Date upon the conversion of such
Indebtedness into Capital Stock (other than Disqualified Stock) of the Company,
or from the issuance to a Person who is not a Subsidiary of the Company of any
options, warrants or other rights to acquire Capital Stock of the Company (in
each case, exclusive of any Disqualified Stock or any options, warrants or other
rights that are redeemable at the option of the holder, or are required to be
redeemed, prior to the Stated Maturity of the Notes), in each case except to the
extent such Net Cash Proceeds are used to Incur Indebtedness pursuant to clause
(viii) or (ix) of the second paragraph under Section 4.03, plus (3) an amount
equal to the net reduction in Investments (other than reductions in Permitted
Investments) in any Person resulting from payments of interest on Indebtedness,
dividends, repayments of loans or advances, or other transfers of assets, in
each case to the Company or any Restricted Subsidiary or from the Net Cash
Proceeds from the sale of any such Investment (except, in each case, to the
extent any such payment or proceeds are included in the calculation of Adjusted
Consolidated Net Income), or from redesignations of Unrestricted Subsidiaries as
Restricted Subsidiaries (valued in each case as provided in the definition of
"Investments"), not to exceed, in each case, the amount of Investments
previously made by the Company or any Restricted Subsidiary in such Person or
Unrestricted Subsidiary.
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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 premium, if any, and accrued and unpaid interest, with the
proceeds of, or in exchange for, Indebtedness Incurred under clause (iii) of the
second paragraph of part (a) of Section 4.03; (iii) the repurchase, redemption
or other acquisition of Capital Stock of the Company or an Unrestricted
Subsidiary (or options, warrants or other rights to acquire such Capital Stock)
in exchange for, or out of the proceeds of a substantially concurrent offering
of, shares of Capital Stock (other than Disqualified Stock) of the Company (or
options, warrants or other rights to acquire such Capital Stock); (iv) the
making of any principal payment or the repurchase, redemption, retirement,
defeasance or other acquisition for value of Indebtedness of the Company which
is subordinated in right of payment to the Notes (including, without limitation,
Parent Company Debt) in exchange for, or out of the proceeds of a substantially
concurrent sale of, shares of the Capital Stock (other than Disqualified Stock)
of the Company (or options, warrants or other rights to acquire such Capital
Stock); (v) payments or distributions to dissenting stockholders pursuant to
applicable law, pursuant to or in connection with a consolidation, merger or
transfer of assets that complies with the provisions of this Indenture
applicable to mergers, consolidations and transfers of all or substantially all
of the property and assets of the Company; (vi) Investments in any Person the
primary business of which is related, ancillary or complementary to the business
of the Company and its Restricted Subsidiaries on the date of such Investments;
provided that the aggregate amount of Investments made pursuant to this clause
(vi) does not exceed the sum of (a) $10 million and (b) the amount of Net Cash
Proceeds received by the Company after the Closing Date from the sale of its
Capital Stock (other than Disqualified Stock) to a Person who is not a
Subsidiary of the Company, except to the extent such Net Cash Proceeds are used
to Incur Indebtedness pursuant to clause (viii) or (ix) under Section 4.03 or to
make Restricted Payments pursuant to clause (C)(2) of the first paragraph, or
clauses (iii) or (iv) of this paragraph, of this Section 4.04, plus (z) the net
reduction in Investments made pursuant to this clause (vi) resulting from
distributions on or repayments of such Investments or from the Net Cash Proceeds
from the sale of any such Investment (except in each case to the extent any such
payment or proceeds is included in the calculation of Adjusted Consolidated Net
Income) or from such Person becoming a Restricted Subsidiary (valued in each
case as provided in the definition of "Investments"), provided that the net
reduction in any Investment shall not exceed the amount of such Investment;
(vii) Investments acquired in exchange for Capital Stock (other than
Disqualified Stock) of the Company; (viii) other Restricted Payments in an
aggregate amount not to exceed $10 million; (ix) for so long as the Company is
treated as a pass-through entity for United States Federal income tax purposes,
distributions to equity holders of the Company in an amount not to exceed the
Tax Amount for such period; and (x) the repurchase, redemption or other
acquisition of Capital Stock of the Company (or options, warrants or other
rights to acquire such Capital Stock) from Persons who are or were formerly
directors, officers or employees of the Company or any Restricted Subsidiary,
provided that the aggregate amount
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of all such repurchases made in any calendar year pursuant to this clause (x)
shall not exceed $2.0 million; provided that, except in the case of clauses (i)
and (iii), 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 preceding paragraph
(other than the Restricted Payment referred to in clause (ii) thereof, an
exchange of Capital Stock for Capital Stock or Indebtedness referred to in
clause (iii) or (iv) thereof and an Investment referred to in clause (vi)
thereof), and the Net Cash Proceeds from any issuance of Capital Stock referred
to in clauses (iii), (iv) and (vi), shall be included in calculating whether the
conditions of clause (C) of the first paragraph of this Section 4.04 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, or Indebtedness that
is pari passu with the Notes, then the Net Cash Proceeds of such issuance shall
be included in clause (C) of the first paragraph of this Section 4.04 only to
the extent such proceeds are not used for such redemption, repurchase or other
acquisition of Indebtedness.
SECTION 4.05. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries. The Company will not, and will 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 (i) pay dividends or make any other
distributions permitted by applicable law 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 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) existing under or by reason of applicable law or
required by any regulatory authority having jurisdiction over the Company or any
Restricted Subsidiary; (iii) 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, and any extensions, renewals or replacements
of such encumbrances or restrictions; provided that the encumbrances and
restrictions in any such extensions, renewals or replacements are no less
favorable in any material
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respect to the Holders than those encumbrances or restrictions that are then in
effect and that are being extended, renewed or replaced; (iv) in the case of
clause (iv) of the first paragraph of this Section 4.05, (A) that restrict in a
customary manner the subletting, assignment or transfer of any property or asset
that is a lease, 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; (v) 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; or (vi)
contained in the terms of any Indebtedness or any agreement pursuant to which
such Indebtedness was issued if (A) the encumbrance or restriction either (1)
applies only in the event of a payment default or non-compliance with respect to
a financial covenant contained in such Indebtedness or agreement or (2) is
contained in a Credit Agreement, (B) the encumbrance or restriction is not
materially more disadvantageous to the Holders of the Notes than is customary in
comparable financings (as determined by the Company) and (C) the Company
determines on the date of the Incurrence of such Indebtedness that any such
encumbrance or restriction would not be expected to materially impair either
Obligors' ability to make principal or interest payments on the Notes. Nothing
contained in this Section 4.05 shall prevent the Company or any Restricted
Subsidiary from (1) creating, incurring, assuming or suffering to exist any
Liens otherwise permitted in Section 4.09 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 4.06. Limitation on the Issuance and Sale of Capital Stock of
Restricted Subsidiaries. The Company will not sell, and will not permit any
Restricted Subsidiary, directly or indirectly, to issue or sell, any shares of
Capital Stock of a Restricted Subsidiary (including options, warrants or other
rights to purchase shares of such Capital Stock) except (i) to the Company or a
Wholly Owned Restricted Subsidiary; (ii) issuances of director's qualifying
shares or sales to foreign nationals of shares of Capital Stock of foreign
Restricted Subsidiaries, to the extent required by applicable law; (iii) if,
immediately after giving effect to such issuance or sale, such Restricted
Subsidiary would no longer constitute a Restricted Subsidiary and any Investment
in such Person remaining after giving effect to such issuance or sale would have
been permitted to be made under Section 4.04 if made on the date of such
issuance or sale; or (iv) issuances or sales of Common Stock of a Restricted
Subsidiary, provided that the Company or such Restricted Subsidiary applies the
Net Cash Proceeds, if any, of any such sale in compliance with Section 4.11.
Notwithstanding the foregoing, the Company will ensure that TWT remains a wholly
owned Subsidiary of the Company; provided that the foregoing shall not prevent a
merger of TWT into the Company.
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SECTION 4.07. Limitation on Issuances of Guarantees by Restricted
Subsidiaries. The Company will not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee any Indebtedness of the Company which is pari passu
with or subordinate in right of payment to the Notes ("Guaranteed
Indebtedness"), unless (i) such Restricted Subsidiary simultaneously executes
and delivers a supplemental indenture to this Indenture providing for a
Guarantee (a "Subsidiary Guarantee") of payment of the Notes by such Restricted
Subsidiary and (ii) such Restricted Subsidiary waives and will not in any manner
whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the Company
or any other Restricted Subsidiary as a result of any payment by such Restricted
Subsidiary under its Subsidiary Guarantee; provided that this paragraph shall
not be applicable to any Guarantee of any Restricted Subsidiary that existed at
the time such Person became a Restricted Subsidiary and was not Incurred in
connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary. If the Guaranteed Indebtedness is (A) pari passu with the Notes,
then the Guarantee of such Guaranteed Indebtedness shall be pari passu with, or
subordinated to, the Subsidiary Guarantee or (B) subordinated to the Notes, then
the Guarantee of such Guaranteed Indebtedness shall be subordinated to the
Subsidiary Guarantee at least to the extent that the Guaranteed Indebtedness is
subordinated to the Notes.
Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted
Subsidiary may provide by its terms that it shall 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 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 Subsidiary Guarantee, except a discharge
or release by or as a result of payment under such Guarantee.
SECTION 4.08. Limitation on Transactions with Stockholders and
Affiliates. The Company will not, and will 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 a Related Person or
with any Affiliate of the Company or any Restricted Subsidiary, except upon fair
and reasonable terms no less favorable to the Company or such Restricted
Subsidiary than could be obtained, at the time of such transaction or, if such
transaction is pursuant to a written agreement, at the time of the execution of
the agreement providing therefor, in a comparable arm's-length transaction with
a Person that is not such a Related Person or an Affiliate.
The foregoing limitation does not limit, and shall not apply to (i)
transactions (A) approved by a majority of the disinterested members of the
Board of Directors or (B) for which the Company or a Restricted Subsidiary
delivers to the Trustee a written opinion of a nationally recognized investment
banking firm stating that the transaction is fair to the Company or such
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Restricted Subsidiary from a financial point of view; (ii) any transaction
solely between the Company and any of its Wholly Owned Restricted Subsidiaries
or solely between Wholly Owned Restricted Subsidiaries; (iii) the payment of
reasonable and customary regular fees to directors of the Company who are not
employees of the Company; (iv) any payments or other transactions pursuant to
any tax-sharing agreement between the Company and any other Person with which
the Company files a consolidated tax return or with which the Company is part of
a consolidated group for tax purposes; (v) any transaction with respect to the
lease or sharing or other use of cable or fiber lines, equipment, transmission
capacity, right-of-way or other access rights, between the Company or any
Restricted Subsidiary and any other Person; provided that such transaction is on
terms that (A) are consistent with past practice of the Company and its
Restricted Subsidiaries and (B) are no less favorable, taken as a whole, to the
Company or the relevant Restricted Subsidiary than those that could have been
obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person (or, in the event that there are no
comparable transactions involving unrelated Persons to apply for comparative
purposes, is otherwise on terms that, taken as a whole, the Company has
determined to be fair to the Company or the relevant Restricted Subsidiary) or
(vi) any Restricted Payments not prohibited by Section 4.04. Notwithstanding the
foregoing, any transaction or series of related transactions covered by the
first paragraph of this Section 4.08 and not covered by clauses (ii) through
(vi) of this paragraph, the aggregate amount of which exceeds $10 million in
value, must be determined to be fair in the manner provided for in clause (i)(A)
or (B) above.
SECTION 4.09. Limitation on Liens. The Company will not, and will not
permit any Restricted Subsidiary to, create, incur, assume or suffer to exist
any Lien on any of its assets or properties of any character (including, without
limitation, licenses), or any shares of Capital Stock or Indebtedness of any
Restricted Subsidiary, without making effective provision for all of the Notes
and all other amounts due under this Indenture to be directly secured equally
and ratably with (or, if the obligation or liability to be secured by such Lien
is subordinated in right of payment to the Notes, prior to) the obligation or
liability secured by such Lien.
The foregoing limitation does not apply to (i) Liens existing on the
Closing Date; (ii) 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; (iii) Liens with respect to the assets of a Restricted Subsidiary
granted by such Restricted Subsidiary to the Company or a Wholly Owned
Restricted Subsidiary to secure Indebtedness owing to the Company or such other
Restricted Subsidiary; (iv) Liens securing Indebtedness which is Incurred to
refinance secured Indebtedness which is permitted to be Incurred under clause
(iii) of the second paragraph of Section 4.03; 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; (v) Liens on the Capital Stock of, or any property or assets of, a
Restricted Subsidiary securing Indebtedness of such Restricted Subsidiary
permitted under Section 4.03; or (vi) Permitted Liens.
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SECTION 4.10. Limitation on Sale-Leaseback Transactions. The Company
will not, and will not permit any Restricted Subsidiary to, enter into any
sale-leaseback transaction involving any of its assets or properties whether now
owned or hereafter acquired, whereby the Company or a Restricted Subsidiary
sells or transfers such assets or properties and then or thereafter leases such
assets or properties or any part thereof or any other assets or properties which
the Company or such Restricted Subsidiary, as the case may be, intends to use
for substantially the same purpose or purposes as the assets or properties sold
or transferred.
The foregoing restriction does not apply to any sale-leaseback
transaction if (i) the lease is for a period, including renewal rights, of not
in excess of three years; (ii) the lease secures or relates to industrial
revenue or pollution control bonds; (iii) the transaction is solely between the
Company and any Wholly Owned Restricted Subsidiary or solely between Wholly
Owned Restricted Subsidiaries; or (iv) the Company or such Restricted Subsidiary
applies an amount not less than the net proceeds received from such sale in
compliance with Section 4.11.
SECTION 4.11. Limitation on Asset Sales. The Company will not, and will
not permit any Restricted Subsidiary to, consummate any Asset Sale, unless (i)
the consideration received by the Company or such Restricted Subsidiary is at
least equal to the fair market value of the assets sold or disposed of and (ii)
at least 75% of the consideration received consists of cash, Temporary Cash
Investments or the assumption of Indebtedness of the Company (other than
Indebtedness that is subordinated to the Notes) or of a Restricted Subsidiary
and unconditional release of the Company and its Restricted Subsidiaries from
all liability on the Indebtedness assumed; provided, however, that this clause
(ii) shall not apply to long-term assignments of capacity in a
telecommunications network. In the event and to the extent that the Net Cash
Proceeds received by the Company or any of its Restricted Subsidiaries from one
or more Asset Sales occurring on or after the Closing Date in any period of 12
consecutive months exceed 10% of Adjusted Consolidated Net Tangible Assets
(determined as of the date closest to the commencement of such 12-month period
for which a consolidated balance sheet of the Company and its Subsidiaries has
been filed with the Commission pursuant to Section 4.18), then the Company shall
or shall cause the relevant Restricted Subsidiary to (i) within 12 months after
the date Net Cash Proceeds so received exceed 10% of Adjusted Consolidated Net
Tangible Assets (A) apply an amount equal to such excess Net Cash Proceeds less
any amounts invested within 6 months prior to such Asset Sale in property or
assets of a nature or type or that are used in a business (or in a company
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 on the date of such
Asset Sale (the "Adjusted Net Cash Proceeds") to permanently repay
unsubordinated Indebtedness of the Company, or any Restricted Subsidiary
providing a Subsidiary Guarantee pursuant to Section 4.07 or Indebtedness of any
other 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 of Adjusted Net Cash Proceeds not so applied pursuant to clause (A)
(or enter into a definitive agreement committing to so invest within 12 months
after the
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date of such agreement), in property or assets (other than current assets) of a
nature or type or that are used in a business (or in a company 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 12-month period referred to in clause (i)) such excess
Adjusted Net Cash Proceeds (to the extent not applied pursuant to clause (i)) as
provided in the following paragraph of this Section 4.11. The amount of such
excess Adjusted Net Cash Proceeds required to be applied (or to be committed to
be applied) during such 12-month period as set forth in clause (i) of 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 Offer to Purchase pursuant to this
Section 4.11 totals at least $10 million, the Obligors must commence, not later
than the fifteenth Business Day of such month, and consummate an Offer to
Purchase from the Holders on a pro rata basis an aggregate principal amount of
Notes and to the extent permitted or required by the terms thereof, any other
Indebtedness of the Company that is pari passu with the Notes, equal to the
Excess Proceeds on such date, at a purchase price equal to 100% of the principal
amount of the Notes and such other Indebtedness, if applicable, on the relevant
Payment Date, plus, in each case, accrued interest (if any) to the Payment Date.
SECTION 4.12. Repurchase of Notes upon a Change of Control. The
Obligors shall commence within 30 days of the later of (a) the occurrence of a
Change of Control and (b) the end of the Change of Control Period with respect
to a Change of Control, and consummate an Offer to Purchase for all Notes then
outstanding, at a purchase price equal to 101% of the principal amount thereof
on the relevant Payment Date, plus accrued interest (if any) to the Payment
Date; provided that, the Obligors shall not be required to commence and
consummate an Offer to Purchase if, at the time specified above for the
commencement of an Offer to Purchase, the Notes shall be rated Investment Grade.
SECTION 4.13. Existence. Subject to Articles Four and Five of this
Indenture, the Obligors will do or cause to be done all things necessary to
preserve and keep in full force and effect their respective existences and the
existence of each of the Restricted Subsidiaries in accordance with the
respective organizational documents of the Obligors and each Restricted
Subsidiary and the rights (whether pursuant to charter, partnership certificate,
agreement, statute or otherwise), licenses and franchises of the Obligors and
each Restricted Subsidiary; provided that the Obligors shall not be required to
preserve any such right, license or franchise, or the existence of any
Restricted Subsidiary, if the maintenance or preservation thereof is no longer
desirable in the conduct of the business of the Obligors and the Restricted
Subsidiaries taken as a whole.
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SECTION 4.14. Payment of Taxes and Other Claims. Each Obligor will pay
or discharge and shall cause each of the Restricted Subsidiaries to pay or
discharge, or cause to be paid or discharged, before the same shall become
delinquent (i) all material taxes, assessments and governmental charges levied
or imposed upon (a) either Obligor or any such Restricted Subsidiary, (b) the
income or profits of any such Restricted Subsidiary which is a corporation or
(c) the property of either Obligor or any such Restricted Subsidiary and (ii)
all material lawful claims for labor, materials and supplies that, if unpaid,
might by law become a lien upon the property of the Company or any such
Restricted Subsidiary; provided that the Obligors shall not be required to pay
or discharge, or cause to be paid or discharged, any such tax, assessment,
charge or claim the amount, applicability or validity of which is being
contested in good faith by appropriate proceedings and for which adequate
reserves have been established.
SECTION 4.15. Maintenance of Properties and Insurance. Each Obligor
will cause all properties used or useful in the conduct of its business or the
business of any of the Restricted Subsidiaries to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of each Obligor may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided that nothing in
this Section 4.15 shall prevent an Obligor or any Restricted Subsidiary from
discontinuing the use, operation or maintenance of any of such properties or
disposing of any of them, if such discontinuance or disposal is, in the judgment
of the appropriate Obligor or of such Restricted Subsidiary having managerial
responsibility for any such property, desirable in the conduct of the business
of such Obligor or such Restricted Subsidiary.
The Obligors will provide or cause to be provided, for themselves and
the Restricted Subsidiaries, insurance (including appropriate self-insurance)
against loss or damage of the kinds customarily insured against by corporations
similarly situated and owning like properties with reputable insurers or with
the government of the United States of America, or an agency or instrumentality
thereof, in such amounts, with such deductibles and by such methods as the
Obligors in good faith shall determine to be reasonable and appropriate in the
circumstances.
SECTION 4.16. Notice of Defaults. In the event that any Officer of an
Obligor becomes aware of any Default or Event of Default, the Obligors shall
promptly deliver to the Trustee an Officers' Certificate specifying such Default
or Event of Default.
SECTION 4.17. Compliance Certificates. The Obligors shall deliver to
the Trustee, within 90 days after the end of each fiscal year, an Officers'
Certificate stating whether or not the signers know of any Default or Event of
Default that occurred during such fiscal year and, that a review has been
conducted of the activities of the Obligors and the Restricted Subsidiaries and
the Obligors' and the Restricted Subsidiaries' performance under this Indenture
and that the
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Company, as applicable, has complied with all conditions and covenants under
this Indenture. If any of the Officers of the Obligors signing such certificate
has knowledge of such a Default or Event of Default, the certificate shall
describe any such Default or Event of Default and its status.
SECTION 4.18. Commission Reports and Reports to Holders. The Obligors
shall file with the Commission all such reports and other information required
by Section 13(a) or 15(d) under the Exchange Act, regardless of whether such
Sections of the Exchange Act are applicable to the Company. The Obligors shall
supply the Trustee and each Holder or shall supply to the Trustee for forwarding
to each such Holder, without cost to such Holder, copies of such reports and
other information within 15 days after the date it would have been required to
file such reports or other information with the Commission had it been subject
to such Sections; provided, however, that the copies of such reports mailed to
Holders may omit exhibits which the Obligors will supply to any Holder at such
Holder's request. The Obligors also shall comply with the other provisions of
TIA Section 314(a).
SECTION 4.19. Waiver of Stay, Extension or Usury Laws. The Obligors
covenant (to the extent that they may lawfully do so) that they will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury law or other law
that would prohibit or forgive the Obligors from paying all or any portion of
the principal of, premium, if any, or interest on the Notes as contemplated
herein, wherever enacted, now or at any time hereafter in force, or that may
affect the covenants or the performance of this Indenture; and (to the extent
that they may lawfully do so) the Obligors hereby expressly waive all benefit or
advantage of any such law and covenant that they will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law had been
enacted.
SECTION 4.20. Amendments to Parent Company Debt. The Company will not
amend or modify the terms of the Parent Company Debt from those in effect on the
Closing Date, in any way that is materially adverse to the Holders of the Notes,
provided, however, that no amendment or modification may, without the consent of
each Holder of the Notes, (i) shorten the maturity of the Parent Company Debt,
(ii) change the subordination provisions thereof in a manner that is adverse to
the rights of the Holders in any material respect or (iii) change the provisions
that require payment of interest in kind to require payment in cash or cash
equivalents. Upon any amendment or modification to the terms of the Parent
Company Debt, the Company shall deliver to the Trustee an Officers' Certificate
as to the compliance of such amendment or modification with the terms of this
covenant.
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ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, Etc. The Company will not
consolidate with, 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 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 unless: (i) the Company shall be the continuing Person, or 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 shall be a corporation organized and validly existing under the laws of
the United States of America or any jurisdiction thereof and shall expressly
assume, by a supplemental indenture, executed and delivered to the Trustee, all
of the obligations of the Company on all of the Notes and under this Indenture;
(ii) immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing; (iii) 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; provided that this clause (iii) shall only apply to a
sale of substantially all, but less than all, of the assets of the Company; (iv)
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 the first paragraph of
Section 4.03; provided that this clause (iv) shall not apply to (x) a
consolidation, merger or sale of all (but not less than all) of the assets of
the Company if all Liens and Indebtedness of the Company or any Person becoming
the successor obligor on the Notes, as the case may be, and its Restricted
Subsidiaries outstanding immediately after such transaction would, if Incurred
at such time, have been permitted to be Incurred (and all such Liens and
Indebtedness, other than Liens and Indebtedness of the Company and its
Restricted Subsidiaries outstanding immediately prior to the transaction, shall
be deemed to have been Incurred) for all purposes of this Indenture or (y) a
consolidation, merger or sale of all or substantially all of the assets of the
Company if 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 Leverage Ratio equal to or less than the Consolidated
Leverage Ratio of the Company immediately prior to such transaction; and (v) the
Company delivers to the Trustee an Officers' Certificate (attaching the
arithmetic computations to demonstrate compliance with clauses (iii) and (iv)
above) and an Opinion of Counsel, in each case stating that such consolidation,
merger or transfer and such supplemental indenture complies with this provision
and that all conditions precedent provided for herein relating to such
transaction have been complied with; provided, however, that clauses (iii) and
(iv) above do 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; and provided further
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that any such transaction shall not have as one of its purposes the evasion of
the foregoing limitations.
SECTION 5.02. Successor Substituted. Upon any consolidation or merger,
or any sale, conveyance, transfer, lease or other disposition of all or
substantially all of the property and assets of the Company in accordance with
Section 5.01 of this Indenture, the successor Person formed by such
consolidation or into which the Company is merged or to which such sale,
conveyance, transfer, lease or other disposition is made shall succeed to, and
be substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor Person had been named
as the Company herein; provided that the Company shall not be released from its
obligation to pay the principal of, premium, if any, or interest on the Notes in
the case of a lease of all or substantially all of its property and assets.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default. Any of the following events shall
constitute an "Event of Default" hereunder:
(a) default in the payment of principal of (or premium, if
any, on) any Note when the same becomes due and payable at maturity,
upon acceleration, redemption or otherwise;
(b) default in the payment of interest on any Note when the
same becomes due and payable, and such default continues for a period
of 30 days;
(c) default in the performance or breach of the provisions of
this Indenture applicable to mergers, consolidations and transfers of
all or substantially all of the assets of the Company or the failure to
make or consummate an Offer to Purchase in accordance with Section 4.11
or Section 4.12;
(d) the Company or TWT defaults in the performance of or
breaches any other covenant or agreement of the Company or TWT in this
Indenture or under the Notes (other than a default specified in clause
(a), (b) or (c) above), and such default or breach continues for a
period of 30 consecutive days after written notice by the Trustee to
the Company or by the Holders of 25% or more in aggregate principal
amount of the Notes to the Company and the Trustee;
(e) there occurs with respect to any issue or issues of
Indebtedness of the Company or any Significant Subsidiary having an
outstanding principal amount of $12
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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 within 30 days of such
acceleration and/or (II) the failure to make a principal payment at the
final (but not any interim) fixed maturity and such defaulted payment
shall not have been made, waived or extended within 30 days of such
payment default;
(f) any final judgment or order (not covered by insurance) for
the payment of money in excess of $12 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 Significant 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 $12 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;
(g) a court having jurisdiction in the premises enters a
decree or order for (A) relief in respect of the Company or any
Significant Subsidiary 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
Significant Subsidiary or for all or substantially all of the property
and assets of the Company or any Significant Subsidiary or (C) the
winding up or liquidation of the affairs of the Company or any
Significant Subsidiary and, in each case, such decree or order shall
remain unstayed and in effect for a period of 30 consecutive days; or
(h) the Company or any Significant Subsidiary (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 Significant Subsidiary or for all or
substantially all of the property and assets of the Company or any
Significant Subsidiary or (C) effects any general assignment for the
benefit of creditors.
SECTION 6.02. Acceleration. If an Event of Default (other than an Event
of Default specified in clause (g) or (h) of Section 6.01 that occurs with
respect to an Obligor) occurs and is continuing under this Indenture, the
Trustee or the Holders of at least 25% in aggregate
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principal amount of the Notes then outstanding, by written notice to the
Obligors (and to the Trustee if such notice is given by the Holders), may, and
the Trustee at the request of such Holders shall, declare the principal of,
premium, if any, and accrued interest on the Notes to be immediately due and
payable. Upon a declaration of acceleration, such principal, premium, if any,
and accrued interest shall be immediately due and payable. In the event of a
declaration of acceleration because an Event of Default set forth in clause (e)
of Section 6.01 has occurred and is continuing, such declaration of acceleration
shall be automatically rescinded and annulled if the event of default triggering
such Event of Default pursuant to clause (e) shall be remedied or cured by the
Company or the relevant Significant Subsidiary or waived by the holders of the
relevant Indebtedness within 60 days after the declaration of acceleration with
respect thereto and the Company has paid to the Trustee all amounts due pursuant
to Section 7.07. If an Event of Default specified in clause (g) or (h) of
Section 6.01 occurs with respect to an Obligor, the principal of, premium, if
any, and accrued interest on the Notes then outstanding 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 such declaration of acceleration, but before a
judgment or decree for the payment of the money due has been obtained by the
Trustee, the Holders of at least a majority in principal amount of the
outstanding Notes by written notice to the Company and to the Trustee, may waive
all past Events of Defaults and rescind and annul a declaration of acceleration
and its consequences if (a) the Company has paid or deposited with the Trustee a
sum sufficient to pay (i) all sums paid or advanced by the Trustee hereunder and
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and all other amounts due to the Trustee under
Section 7.07 (ii) all overdue interest on all Notes, (iii) the principal of and
premium, if any, on any Notes that have become due otherwise than by such
declaration or occurrence of acceleration and interest thereon at the rate
prescribed therefor by such Notes, and (iv) to the extent that payment of such
interest is lawful, interest upon overdue interest, if any, at the rate
prescribed therefor by such Notes, (b) all existing Events of Default, other
than the non-payment of the principal of, premium, if any, and accrued interest
on the Notes that have become due solely by such declaration of acceleration,
have been cured or waived and (c) the rescission would not conflict with any
judgment or decree of a court of competent jurisdiction.
SECTION 6.03. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may, and at the direction of the Holders of at least a
majority in aggregate principal amount of the outstanding Notes shall, pursue
any available remedy by proceeding at law or in equity to collect the payment of
principal of, premium, if any, or interest on the Notes or to enforce the
performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding.
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SECTION 6.04. Waiver of Past Defaults. Subject to Sections 6.02, 6.07
and 9.02, the Holders of at least a majority in aggregate principal amount of
the outstanding Notes, by notice to the Trustee, may waive an existing Default
or Event of Default and its consequences, except a Default in the payment of
principal of, premium, if any, or interest on any Note as specified in clause
(a) or (b) of Section 6.01 or in respect of a covenant or provision of this
Indenture which 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 thereto.
SECTION 6.05. Control by Majority. The Holders of at least a majority
in aggregate principal amount of the outstanding Notes may direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on the Trustee; provided that
the Trustee may refuse to follow any direction that conflicts with law or this
Indenture, that may involve the Trustee in personal liability, or that the
Trustee determines in good faith may be unduly prejudicial to the rights of
Holders of Notes not joining in the giving of such direction; and provided
further that the Trustee may take any other action it deems proper that is not
inconsistent with any such direction received from Holders of Notes.
SECTION 6.06. Limitation on Suits. A Holder may not institute any
proceeding, judicial or otherwise, with respect to this Indenture or the Notes,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless:
(i) the Holder has previously given the Trustee written notice
of a continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount
of outstanding Notes shall have made a written request to the Trustee
to pursue such remedy;
(iii) such Holder or Holders offer the Trustee indemnity
reasonably satisfactory to the Trustee against any costs, liability or
expense;
(iv) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of indemnity; and
(v) during such 60-day period, the Holders of a majority in
aggregate principal amount of the outstanding Notes do not give the
Trustee a direction that is inconsistent with the request.
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51
For purposes of Section 6.05 of this Indenture and this Section 6.06,
the Trustee shall comply with TIA Section 316(a) in making any determination of
whether the Holders of the required aggregate principal amount of outstanding
Notes have concurred in any request or direction of the Trustee to pursue any
remedy available to the Trustee or the Holders with respect to this Indenture or
the Notes or otherwise under the law.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holder.
SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding any
other provision of this Indenture, the right of any Holder of a Note to receive
payment of the principal of, premium, if any, or interest on, such Note or to
bring suit for the enforcement of any such payment, on or after the due date
expressed in the Notes, shall not be impaired or affected without the consent of
such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of Default in
payment of principal, premium or interest specified in clause (a), (b) or (c) of
Section 6.01 occurs and is continuing, the Trustee may recover judgment in its
own name and as trustee of an express trust against the Company or any other
obligor of the Notes for the whole amount of principal, premium, if any, and
accrued interest remaining unpaid, together with interest on overdue principal,
premium, if any, and, to the extent that payment of such interest is lawful,
interest on overdue installments of interest, in each case at the rate specified
in the Notes, and such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any
amounts due to the Trustee under Section 7.07.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07) and the Holders allowed in any judicial proceedings relative to
the Obligors (or any other obligor of the Notes), their creditors or their
property and shall be entitled and empowered to collect and receive any monies,
securities or other property payable or deliverable upon conversion or exchange
of the Notes or upon any such claims and to distribute the same, and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
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 to
the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07. Nothing herein contained shall be
deemed
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52
to empower the Trustee to authorize or consent to, or accept or adopt on behalf
of any Holder, any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.10. Priorities. If the Trustee collects any money pursuant to
this Article Six, it shall pay out the money in the following order:
First: to the Trustee for all amounts due under Section 7.07;
Second: to Holders for amounts then due and unpaid for
principal of, premium, if any, and interest 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, premium, if any,
and interest, respectively; and
Third: to the Company or any other obligors of the Notes, as
their interests may appear, or as a court of competent jurisdiction may
direct.
The Trustee, upon prior written notice to the Company, may fix a record
date and payment date for any payment to Holders pursuant to this Section 6.10.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of
any right or remedy under this Indenture or in any suit against the Trustee for
any action taken or omitted by it as Trustee, a court in its discretion may
require any party litigant in such suit to file an undertaking to pay the costs
of the suit, and the court in its discretion may assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in the suit
having due regard to the merits and good faith of the claims or defenses made by
the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a
suit by a Holder pursuant to Section 6.07, or a suit by Holders of more than 10%
in principal amount of the outstanding Notes.
SECTION 6.12. Restoration of Rights and Remedies. If the Trustee or any
Holder has instituted any proceeding to enforce any right or remedy under this
Indenture 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 Obligors,
the Trustee and the Holders shall be restored severally and respectively to
their former positions hereunder and thereafter all rights and remedies of the
Obligors, Trustee and the Holders shall continue as though no such proceeding
had been instituted.
SECTION 6.13. Rights and Remedies Cumulative. Except as otherwise
provided with respect to the replacement or payment of mutilated, destroyed,
lost or wrongfully taken Notes in
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Section 2.06, 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 6.14. Delay or Omission Not Waiver. No delay or omission of the
Trustee or of any Holder 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 Six 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.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. General. The duties and responsibilities of the Trustee
shall be as provided by the TIA and as set forth herein. Notwithstanding the
foregoing, no provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it. Whether or not herein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Article Seven.
SECTION 7.02. Certain Rights of Trustee. Subject to TIA
Sections 315(a) through (d):
(i) the Trustee may rely, and shall be protected in acting or
refraining from acting, upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed
or presented by the proper person;
(ii) before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel, which shall
conform to Section 10.04. The Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on such
certificate or opinion;
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(iii) the Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any
attorney or agent appointed with due care by it hereunder;
(iv) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders, unless such Holders shall have
offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities that might be incurred by it in
compliance with such request or direction;
(v) the Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within
its rights or powers, provided that the Trustee's conduct does not
constitute negligence or bad faith;
(vi) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an Officers'
Certificate;
(vii) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company personally or by agent or
attorney;
(viii) 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;
(ix) 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;
(x) the Trustee shall not be charged with knowledge of any
Default or Event of Default with respect to the Notes unless either (1)
a Responsible Officer of the Trustee assigned to the Corporate Trust
Department of the Trustee (or any successor division or department of
the Trustee) shall have actual knowledge of such Default or Event of
Default or (2) written notice of such Default or Event of Default shall
have been given to the
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Trustee by the Company or any other obligor on the Notes or by any
Holder of the Notes; and
(xi) 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.
SECTION 7.03. Individual Rights of Trustee. The Trustee, in its
individual or any other capacity, may become the owner or pledgee of Notes and
may otherwise deal with each Obligor or their respective Affiliates with the
same rights it would have if it were not the Trustee. Any Agent may do the same
with like rights. However, the Trustee is subject to TIA Sections 310(b) and
311.
SECTION 7.04. Trustee's Disclaimer. The Trustee (i) makes no
representation as to the validity or adequacy of this Indenture or the Notes,
(ii) shall not be accountable for the Obligors' use or application of the
proceeds from the Notes and (iii) shall not be responsible for any statement in
the Notes other than its certificate of authentication.
SECTION 7.05. Notice of Default. If any Default or any Event of Default
occurs and is continuing and if such Default or Event of Default is known to the
Trustee, the Trustee shall mail to each Holder in the manner and to the extent
provided in TIA Section 313(c) notice of the Default or Event of Default within
45 days after it occurs, unless such Default or Event of Default has been cured
or waived; provided, however, that, except in the case of a default in the
payment of the principal of, premium, if any, or interest on any Note, the
Trustee shall be protected in withholding such notice if and so long as the
board of directors, the executive committee or a trust committee of directors
and/or Responsible Officers of the Trustee in good faith determine that the
withholding of such notice is in the interest of the Holders.
SECTION 7.06. Reports by Trustee to Holders. Within 60 days after each
May 15, beginning with May 15, 1999, the Trustee shall mail to each Holder as
provided in TIA Section 313(c) a brief report dated as of such May 15, if
required by TIA Section 313(a).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to each Obligor and filed with the Commission and each
stock exchange on which the Notes are listed in accordance with TIA Section
313(d). The Company shall promptly notify the Trustee when the Notes are listed
on any stock exchange or of any delisting thereof.
SECTION 7.07. Compensation and Indemnity. The Obligors shall pay to the
Trustee such compensation as shall be agreed upon in writing for its services
hereunder. The compensation of the Trustee shall not be limited by any law on
compensation of a trustee of an express trust. The Obligors shall reimburse the
Trustee upon request for all reasonable
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disbursements, expenses and advances incurred or made by the Trustee without
negligence or bad faith on its part. Such expenses shall include the reasonable
compensation and expenses of the Trustee's agents and counsel.
The Obligors shall, jointly and severally, indemnify the Trustee for,
and hold it harmless against, any loss or liability or expense incurred by it
without negligence or bad faith on its part in connection with the acceptance or
administration of this Indenture and its duties under this Indenture and the
Notes, including the costs and expenses of defending itself against any claim or
liability and of complying with any process served upon it or any of its
officers in connection with the exercise or performance of any of its powers or
duties under this Indenture and the Notes. The Trustee shall notify the Obligors
promptly of any claim for which it may seek indemnity. Failure by the Trustee to
so notify the Obligors shall not relieve the Obligors of their obligations
hereunder, unless the Obligors are materially prejudiced thereby. The Obligors
shall defend the claim and the Trustee shall cooperate in the defense. Unless
otherwise set forth herein, the Trustee may have separate counsel and the
Obligors shall pay the reasonable fees and expenses of such counsel. The
Obligors need not pay for any settlement made without their consent, which
consent shall not be unreasonably withheld. The Company need not reimburse any
expense or indemnity against loss or liability incurred by the Trustee through
negligence or bad faith.
To secure the Obligors' payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Notes on all money or property held or
collected by the Trustee, in its capacity as Trustee, except money or property
held in trust to pay principal of, premium, if any, and interest on particular
Notes.
If the Trustee incurs expenses or renders services after the occurrence
of an Event of Default specified in clause (g) or (h) of Section 6.01, the
expenses and the compensation for the services will be intended to constitute
expenses of administration under Title 11 of the United States Bankruptcy Code
or any applicable federal or state law for the relief of debtors.
The provisions of this Section 7.07 shall survive the resignation or
removal of the Trustee and the termination of this Indenture.
The Trustee shall comply with the provisions of TIA Section 313(b)(2)
to the extent applicable.
SECTION 7.08. Replacement of Trustee. A resignation or removal of the
Trustee and appointment of a successor Trustee shall become effective only upon
the successor Trustee's acceptance of appointment as provided in this Section
7.08.
The Trustee may resign at any time by so notifying the Company in
writing at least 30 days prior to the date of the proposed resignation. The
Holders of a majority in principal amount
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of the outstanding Notes may remove the Trustee by so notifying the Trustee in
writing and may appoint a successor Trustee with the consent of the Obligors.
Either Obligor may remove the Trustee if: (i) the Trustee is no longer eligible
under Section 7.10; (ii) the Trustee is adjudged a bankrupt or an insolvent;
(iii) a receiver or other public officer takes charge of the Trustee or its
property; or (iv) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed, or if a vacancy exists in the
office of Trustee for any reason, either Obligor shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in principal amount of the outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company. If
the successor Trustee does not deliver its written acceptance required by the
next succeeding paragraph of this Section 7.08 within 30 days after the retiring
Trustee resigns or is removed, the retiring Trustee, the Obligors or the Holders
of a majority in principal amount of the outstanding Notes may, at the expense
of the Company, petition any court of competent jurisdiction for the appointment
of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Obligors. Immediately after the
delivery of such written acceptance, subject to the lien provided in Section
7.07, (i) the retiring Trustee shall transfer all property held by it as Trustee
to the successor Trustee, (ii) the resignation or removal of the retiring
Trustee shall become effective and (iii) the successor Trustee shall have all
the rights, powers and duties of the Trustee under this Indenture. A successor
Trustee shall mail notice of its succession to each Holder. 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.
If the Trustee is no longer eligible under Section 7.10 or shall fail
to comply with TIA Section 310(b), any Holder who satisfies the requirements of
TIA Section 310(b) may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee. If at any
time the Trustee shall cease to be eligible in accordance with the provisions of
this Section 7.08, the Trustee shall resign immediately in the manner and with
the effect provided in this Section.
The Obligors shall give notice of any resignation and any removal of
the Trustee and each appointment of a successor Trustee to all Holders. Each
notice shall include the name of the successor Trustee and the address of its
Corporate Trust Office.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligation under Section 7.07 shall continue for the benefit
of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, Etc. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business to,
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another corporation or national banking association, the resulting, surviving or
transferee corporation or national banking association without any further act
shall be the successor Trustee with the same effect as if the successor Trustee
had been named as the Trustee herein, provided such corporation shall be
otherwise qualified and eligible under this Article.
SECTION 7.10. Eligibility. This Indenture shall always have a Trustee
who satisfies the requirements of TIA Section 310(a)(1). The Trustee shall have
a combined capital and surplus of at least $50 million as set forth in its most
recent published annual report of condition that is subject to the requirements
of applicable federal or state supervising or examining authority. If at any
time the Trustee shall cease to be eligible in accordance with the provisions of
this Section, the Trustee shall resign immediately in the manner and with the
effect specified in this Article.
SECTION 7.11. Money Held in Trust. The Trustee shall not be liable for
interest on any money received by it except as the Trustee may agree in writing
with the Company. Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law and except for money held in
trust under Article Eight of this Indenture.
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Obligors' Obligations. Except as otherwise
provided in this Section 8.01, the Obligors may terminate their obligations
under the Notes and this Indenture if:
(i) all Notes previously authenticated and delivered (other
than destroyed, lost or stolen Notes that have been replaced or Notes
that are paid pursuant to Section 4.01 or Notes for whose payment money
or securities have theretofore been held in trust and thereafter repaid
to the Obligors, as provided in Section 8.05) have been delivered to
the Trustee for cancellation and the Obligors have paid all sums
payable by them hereunder; or
(ii) (A) the Notes mature within one year or all of them are
to be called for redemption within one year under arrangements
satisfactory to the Trustee for giving the notice of redemption, (B)
the Obligors irrevocably deposit in trust with the Trustee during such
one-year period, under the terms of an irrevocable trust agreement in
form and substance satisfactory to the Trustee, as trust funds solely
for the benefit of the Holders for that purpose, money or U.S.
Government Obligations sufficient (in the opinion of a nationally
recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee), without
consideration of any reinvestment of any interest thereon, to pay
principal, premium, if, any, and interest on the Notes to
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maturity or redemption, as the case may be, and to pay all other sums
payable by it hereunder, (C) no Default or Event of Default with
respect to the Notes shall have occurred and be continuing on the date
of such deposit, (D) such deposit will not result in a breach or
violation of, or constitute a default under, this Indenture or any
other agreement or instrument to which the Obligors are a party or by
which they are bound and (E) the Obligors have each delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, in each
case stating that all conditions precedent provided for herein relating
to the satisfaction and discharge of this Indenture have been complied
with.
With respect to the foregoing clause (i), the Obligors' obligations
under Section 7.07 shall survive. With respect to the foregoing clause (ii), the
Obligors' obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.11, 4.01,
4.02, 7.07, 7.08, 8.04, 8.05 and 8.06 shall survive until the Notes are no
longer outstanding. Thereafter, only the Obligors' obligations in Sections 7.07,
8.04, 8.05 and 8.06 shall survive. After any such irrevocable deposit, the
Trustee upon request shall acknowledge in writing the discharge of the Obligors'
obligations under the Notes and this Indenture except for those surviving
obligations specified above.
SECTION 8.02. Defeasance and Discharge of Indenture. The Obligors will
be deemed to have paid and will be discharged from any and all obligations in
respect of the Notes on the 123rd day after the date of the deposit referred to
in clause (A) of this Section 8.02, and the provisions of this Indenture will no
longer be in effect with respect to the Notes, and the Trustee, at the expense
of the Obligors, shall execute proper instruments acknowledging the same if:
(A) with reference to this Section 8.02, the Obligors have
irrevocably deposited or caused to be irrevocably deposited with the
Trustee (or another trustee satisfying the requirements of Section
7.10) and conveyed all right, title and interest to the Trustee for the
benefit of the Holders, under the terms of an irrevocable trust
agreement in form and substance satisfactory to the Trustee as trust
funds in trust, specifically pledged to the Trustee for the benefit of
the Holders as security for payment of the principal of, premium, if
any, and interest, if any, on the Notes, and dedicated solely to, the
benefit of the Holders, in and to (1) money in an amount, (2) U.S.
Government Obligations that, through the payment of interest, premium,
if any, and principal in respect thereof in accordance with their
terms, will provide, not later than one day before the due date of any
payment referred to in this clause (A), money in an amount or (3) a
combination thereof in an amount 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, without consideration of the reinvestment of such interest
and after payment of all federal, state and local taxes or other
charges and assessments in respect thereof payable by the Trustee, the
principal of, premium, if any, and interest on the outstanding Notes on
the Stated Maturity of such principal or interest; provided that the
Trustee shall have been irrevocably instructed to apply such money or
the proceeds of such
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U.S. Government Obligations to the payment of such principal, premium,
if any, and interest with respect to the Notes;
(B) the Obligors have delivered to the Trustee (1) either (x)
an Opinion of Counsel to the effect that Holders will not recognize
income, gain or loss for federal income tax purposes as a result of the
Obligors' exercise of their option under this Section 8.02 and will be
subject to federal income tax on the same amount and in the same manner
and at the same times as would have been the case if such option had
not been exercised, which Opinion of Counsel shall be based upon (and
accompanied by a copy of) a ruling of the Internal Revenue Service to
the same effect unless there has been a change in applicable federal
income tax law after the Closing Date such that a ruling is no longer
required or (y) a ruling directed to the Trustee received from the
Internal Revenue Service to the same effect as the aforementioned
Opinion of Counsel and (2) an Opinion of Counsel to the effect that the
creation of the defeasance trust does not violate the Investment
Company Act of 1940 and that after the passage of 123 days following
the deposit (except, with respect to any trust funds for the account of
any Holder who may be deemed to be an "insider" for purposes of the
United States Bankruptcy Code, after one year following the deposit),
the trust funds will not be subject to the effect of Section 547 of the
United States Bankruptcy Code or Section 15 of the New York Debtor and
Creditor Law;
(C) immediately after giving effect to such deposit, on a pro
forma basis, no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or during the period ending on
the 123rd day after such date of such deposit, and such deposit shall
not result in a breach or violation of, or constitute a default under,
this Indenture or any other agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries is bound;
(D) if the Notes are then listed on a national securities
exchange, the Obligors have delivered to the Trustee an Opinion of
Counsel to the effect that the Notes will not be delisted as a result
of such deposit, defeasance and discharge; and
(E) the Obligors have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.02 have been complied with.
Notwithstanding the foregoing, prior to the end of the 123-day (or one
year) period referred to in clause (B)(2) of this Section 8.02, none of the
Obligors' obligations under this Indenture shall be discharged. Subsequent to
the end of such 123-day (or one year) period with respect to this Section 8.02,
the Obligors' obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.11, 4.01,
4.02, 7.07, 8.04, 8.05, 8.06 and the rights, powers, trusts, duties and
immunities of
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the Trustee hereunder shall survive until the Notes are no longer outstanding.
Thereafter, only the Obligors' obligations in Sections 7.07, 8.04, 8.05 and 8.06
shall survive. If and when a ruling from the Internal Revenue Service or an
Opinion of Counsel referred to in clause (B)(1) of this Section 8.02 is able to
be provided specifically without regard to, and not in reliance upon, the
continuance of the Obligors' obligations under Section 4.01, then the Obligors'
obligations under such Section 4.01 shall cease upon delivery to the Trustee of
such ruling or Opinion of Counsel and compliance with the other conditions
precedent provided for herein relating to the defeasance contemplated by this
Section 8.02.
After any such irrevocable deposit, the Trustee upon request shall
acknowledge in writing the discharge of the Obligors' obligations under the
Notes and this Indenture except for those surviving obligations in the
immediately preceding paragraph.
SECTION 8.03. Defeasance of Certain Obligations. The Obligors may omit
to comply with any term, provision or condition set forth in clauses (iii) and
(iv) of Section 5.01 and Sections 4.03 through 4.11 and Section 4.20 and clause
(c) of Section 6.01 with respect to clauses (iii) and (iv) of Section 5.01,
clause (d) of Section 6.01 with respect to Sections 4.01, 4.02 and 4.12 through
4.19 and clauses (e) and (f) of Section 6.01 shall be deemed not to be Events of
Default, in each case with respect to the outstanding Notes if:
(i) with reference to this Section 8.03, the Obligors have
irrevocably deposited or caused to be irrevocably deposited with the
Trustee (or another trustee satisfying the requirements of Section
7.10) and conveyed all right, title and interest to the Trustee for the
benefit of the Holders, under the terms of an irrevocable trust
agreement in form and substance satisfactory to the Trustee as trust
funds in trust, specifically pledged to the Trustee for the benefit of
the Holders as security for payment of the principal of, premium, if
any, and interest, if any, on the Notes, and dedicated solely to, the
benefit of the Holders, in and to (A) money in an amount, (B) U.S.
Government Obligations that, through the payment of interest, premium,
if any, and principal in respect thereof in accordance with their
terms, will provide, not later than one day before the due date of any
payment referred to in this clause (i), money in an amount or (C) a
combination thereof in an amount 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, without consideration of the reinvestment of such interest
and after payment of all federal, state and local taxes or other
charges and assessments in respect thereof payable by the Trustee, the
principal of, premium, if any, and interest on the outstanding Notes on
the Stated Maturity of such principal or interest; provided that the
Trustee shall have been irrevocably instructed to apply such money or
the proceeds of such U.S. Government Obligations to the payment of such
principal, premium, if any, and interest with respect to the Notes;
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(ii) the Obligors have delivered to the Trustee an Opinion of
Counsel to the effect that (A) the creation of the defeasance trust
does not violate the Investment Company Act of 1940, (B) after the
passage of 123 days following the deposit (except, with respect to any
trust funds for the account of any Holder who may be deemed to be an
"insider" for purposes of the United States Bankruptcy Code, after one
year following the deposit), the trust funds will not be subject to the
effect of Section 547 of the United States Bankruptcy Code or Section
15 of the New York Debtor and Creditor Law (C) the Holders will not
recognize income, gain or loss for federal income tax purposes as a
result of such deposit and defeasance of certain covenants and Events
of Default and will be subject to federal income tax on the same amount
and in the same manner and at the same times as would have been the
case if such deposit and defeasance had not occurred and (D) the
Trustee, for the benefit of the Holders, has a valid first-priority
security interest in the trust funds;
(iii) immediately after giving effect to such deposit on a pro
forma basis, no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or during the period ending on
the 123rd day after such date of such deposit, and such deposit shall
not result in a breach or violation of, or constitute a default under,
this Indenture or any other agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries is bound;
(iv) if the Notes are then listed on a national securities
exchange, the Obligors have delivered to the Trustee an Opinion of
Counsel to the effect that the Notes will not be delisted as a result
of such deposit, defeasance and discharge; and
(v) the Obligors have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.03 have been complied with.
SECTION 8.04. Application of Trust Money. Subject to Sections 8.05 and
8.06, the Trustee or Paying Agent shall hold in trust money or U.S. Government
Obligations deposited with it pursuant to Section 8.01, 8.02 or 8.03, as the
case may be, and shall apply the deposited money and the money from U.S.
Government Obligations in accordance with the Notes and this Indenture to the
payment of principal of, premium, if any, and interest on the Notes; but such
money need not be segregated from other funds except to the extent required by
law.
SECTION 8.05. Repayment to Obligors. Subject to Sections 7.07, 8.01,
8.02 and 8.03, the Trustee and the Paying Agent shall promptly pay to the
Obligors upon request set forth in an Officers' Certificate any excess money
held by them at any time and thereupon shall be relieved from all liability with
respect to such money. The Trustee and the Paying Agent shall pay to the
Obligors upon request any money held by them for the payment of principal,
premium, if any,
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or interest that remains unclaimed for two years; provided that the Trustee or
Paying Agent before being required to make any payment may cause to be published
at the expense of the Obligors once in a newspaper of general circulation in The
City of New York or mail to each Holder entitled to such money at such Holder's
address (as set forth in the Security Register) notice that such money remains
unclaimed and that after a date specified therein (which shall be at least 30
days from the date of such publication or mailing) any unclaimed balance of such
money then remaining will be repaid to the Obligors. After payment to the
Obligors, Holders entitled to such money must look to the Obligors for payment
as general creditors unless an applicable law designates another Person, and all
liability of the Trustee and such Paying Agent with respect to such money shall
cease.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is unable
to apply any money or U.S. Government Obligations in accordance with Section
8.01, 8.02 or 8.03, as the case may be, by reason of any legal proceeding or by
reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, the Obligors'
obligations under this Indenture and the Notes shall be revived and reinstated
as though no deposit had occurred pursuant to Section 8.01, 8.02 or 8.03, as the
case may be, until such time as the Trustee or Paying Agent is permitted to
apply all such money or U.S. Government Obligations in accordance with Section
8.01, 8.02 or 8.03, as the case may be; provided that, if the Obligors have made
any payment of principal of, premium, if any, or interest on any Notes because
of the reinstatement of its obligations, the Obligors shall be subrogated to the
rights of the Holders of such Notes to receive such payment from the money or
U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders. The Obligors, when authorized
by a resolution of their respective Boards of Directors (as evidenced by Board
Resolutions), and the Trustee may amend or supplement this Indenture or the
Notes without notice to or the consent of any Holder:
(1) to cure any ambiguity, defect or inconsistency in this
Indenture; provided that such amendments or supplements shall not, in
the good faith opinion of the Board of Directors as evidenced by a
Board Resolution, adversely affect the interests of the Holders in any
material respect;
(2) to comply with Article Five;
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(3) to comply with any requirements of the Commission in
connection with the qualification of this Indenture under the TIA;
(4) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee;
(5) to provide for uncertificated Notes in addition to or in
place of certificated Notes;
(6) to add one or more subsidiary guarantees on the terms
required by this Indenture; or
(7) to make any change that, in the good faith opinion of the
Board of Directors as evidenced by a Board Resolution, does not
materially and adversely affect the rights of any Holder.
SECTION 9.02. With Consent of Holders. Subject to Sections 6.04 and
6.07 and without prior notice to the Holders, the Obligors, when authorized by
their respective Boards of Directors (as evidenced by Board Resolutions), and
the Trustee may amend this Indenture and the Notes with the written consent of
the Holders of a majority in aggregate principal amount of the Notes then
outstanding, and the Holders of a majority in aggregate principal amount of the
Notes then outstanding by written notice to the Trustee may waive future
compliance by the Obligors with any provision of this Indenture or the Notes.
Notwithstanding the provisions of this Section 9.02, without the
consent of each Holder affected, an amendment or waiver, including a waiver
pursuant to Section 6.04, may not:
(i) change the Stated Maturity of the principal of, or any
installment of interest on, any Note;
(ii) reduce the principal amount of, premium, if any, or
interest on any Note;
(iii) change the place or currency of payment of principal
of, premium, if any, or interest on, any Note;
(iv) impair the right to institute suit for the enforcement
of any payment on or after the Stated Maturity (or, in the case of
redemption, on or after the Redemption Date) on any Note;
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(v) reduce the percentage or principal amount of outstanding
Notes the consent of whose Holders is necessary to modify or amend this
Indenture or to waive compliance with certain provisions of or certain
Defaults under this Indenture;
(vi) waive a default in the payment of principal of, premium,
if any, or interest on, any Note; or
(vii) modify any of the provisions of this Section 9.02,
except to increase any such percentage 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 the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Obligors shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. The Obligors will
mail supplemental indentures to Holders upon request. Any failure of the
Obligors to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture or waiver.
SECTION 9.03. Revocation and Effect of Consent. Until an amendment or
waiver becomes effective, a consent to it by a Holder is a continuing consent by
the Holder and every subsequent Holder of a Note or portion of a Note that
evidences the same debt as the Note of the consenting Holder, even if notation
of the consent is not made on any Note. However, any such Holder or subsequent
Holder may revoke the consent as to its Note or portion of its Note. Such
revocation shall be effective only if the Trustee receives the notice of
revocation before the date the amendment, supplement or waiver becomes
effective. An amendment, supplement or waiver shall become effective on receipt
by the Trustee of written consents from the Holders of the requisite percentage
in principal amount of the outstanding Notes.
The Obligors may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then, notwithstanding the last
two sentences of the immediately preceding paragraph, those Persons who were
Holders at such record date (or their duly designated proxies) and only those
Persons shall be entitled to consent to such amendment, supplement or waiver or
to revoke any consent previously given, whether or not such persons continue to
be Holders after such record date. No such consent shall be valid or effective
for more than 90 days after such record date.
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After an amendment, supplement or waiver becomes effective, it shall
bind every Holder unless it is of the type described in the second paragraph of
Section 9.02. In case of an amendment or waiver of the type described in the
second paragraph of Section 9.02, the amendment or waiver shall bind each Holder
who has consented to it and every subsequent Holder of a Note that evidences the
same indebtedness as the Note of the consenting Holder.
SECTION 9.04. Notation on or Exchange of Notes. If an amendment,
supplement or waiver changes the terms of a Note, the Trustee may require the
Holder to deliver such Note to the Trustee. At the Obligors' expense, the
Trustee may place an appropriate notation on the Note about the changed terms
and return it to the Holder and the Trustee may place an appropriate notation on
any Note thereafter authenticated. Alternatively, if the Obligors or the Trustee
so determines, the Obligors in exchange for the Note shall issue and the Trustee
shall authenticate a new Note that reflects the changed terms. Failure to make
the appropriate notation, or issue a new Note, shall not affect the validity and
effect of such amendment, supplement or waiver.
SECTION 9.05. Trustee to Sign Amendments, Etc. The Trustee shall be
entitled to receive, and shall be fully protected in relying upon, an Opinion of
Counsel that complying with Section 10.03 and stating that the execution of any
amendment, supplement or waiver authorized pursuant to this Article Nine is
authorized or permitted by this Indenture and that it will be valid and binding
upon the Obligors. Subject to the preceding sentence, the Trustee shall sign
such amendment, supplement or waiver if the same does not adversely affect the
rights, duties, liabilities or immunities of the Trustee. The Trustee may, but
shall not be obligated to, execute any such amendment, supplement or waiver that
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise.
SECTION 9.06. Conformity with Trust Indenture Act. Every supplemental
indenture executed pursuant to this Article Nine shall conform to the
requirements of the TIA as then in effect.
ARTICLE TEN
MISCELLANEOUS
SECTION 10.01. Trust Indenture Act of 1939. This Indenture shall be
subject to the provisions of the TIA that are required to be a part of this
Indenture and shall, to the extent applicable, be governed by such provisions.
SECTION 10.02. Notices. Any notice or communication shall be
sufficiently given if in writing and delivered in person, mailed by first-class
mail or sent by telecopier transmission addressed as follows:
<PAGE>
<PAGE>
67
if to the Obligors:
Time Warner Telecom LLC
Time Warner Telecom Inc.
5700 S. Quebec Street
Greenwood Village, CO 80111
Telecopier No.: (303) 566-3349
Attention: David J. Rayner
if to the Trustee:
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Telecopier No.: (212) 946-8158
Attention: Global Trust Services
The Obligors or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Holder shall be mailed to it at
its address as it appears on the Security Register by first-class mail and shall
be sufficiently given to him if so mailed within the time prescribed. Any notice
or communication shall also be so mailed to any Person described in TIA Section
313(c), to the extent required by the TIA. Copies of any such communication or
notice to a Holder shall also be mailed to the Trustee and each Agent at the
same time.
Failure to mail notice or communication to a Holder as provided herein
or any defect in any such notice or communication shall not affect its
sufficiency with respect to other Holders. Except for a notice to the Trustee,
which is deemed given only when received, and except as otherwise provided in
this Indenture, if a notice or communication is mailed in the manner provided in
this Section 10.02, it is duly given, whether or not the addressee receives it.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by 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.
<PAGE>
<PAGE>
68
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Obligors, the Trustee, the Registrar and anyone else shall have the protection
of TIA Section 312(c).
SECTION 10.03. Certificate and Opinion as to Conditions Precedent. Upon
any request or application by the Obligors to the Trustee to take any action
under this Indenture, the Obligors shall furnish to the Trustee:
(i) an Officers' Certificate stating that, in the opinion of
the signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(ii) an Opinion of Counsel stating that, in the opinion of
such Counsel, all such conditions precedent have been complied with.
SECTION 10.04. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture shall include:
(i) a statement that each person signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statement or opinion
contained in such certificate or opinion is based;
(iii) a statement that, in the opinion of each such person, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(iv) a statement as to whether or not, in the opinion of each
such person, such condition or covenant has been complied with;
provided, however, that, with respect to matters of fact, an Opinion of
Counsel may rely on an Officers' Certificate or certificates of public
officials.
SECTION 10.05. 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
<PAGE>
<PAGE>
69
may be embodied in and evidenced by one or more instruments of substantially
similar tenor signed by such Holders in person or by an agent duly appointed in
writing or may be embodied in or evidenced by an electronic transmission which
identifies the documents containing the proposal on which such consent is
requested and certifies such Holders' consent thereto and agreement to be bound
thereby; 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 either Obligor. 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 (subject to Section 7.01)
conclusive in favor of the Trustee and the Obligors, 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 to such
execution or by the certificate of any 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 an officer of a corporation or a member of a partnership, on
behalf of such corporation or partnership, such certificate or affidavit shall
also constitute sufficient proof of his 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 which the Trustee
deems sufficient.
(c) The ownership of Notes shall be proved by the Security
Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Note shall bind every
future Holder of the same Note or the Holder of every Note issued upon the
transfer thereof or in exchange therefor or in lieu thereof, in respect of
anything done, suffered or omitted to be done by the Trustee, any Paying Agent
or the Obligors in reliance thereon, whether or not notation of such action is
made upon such Note.
(e) If the Obligors shall solicit from the Holders any
request, demand, authorization, direction, notice, consent, waiver or other
action, the Obligors may, at their option, by 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 action, but
the Obligors shall have no obligation to do so. Notwithstanding Trust Indenture
Act Section 316(c), any such record date shall be the record date specified in
or pursuant to such Board Resolution, which shall be a date not more than 30
days prior to the first solicitation of Holders generally in connection
therewith and no 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 action may be given
before or after the record date, but only the Holders of record at the close of
business on the record date shall be deemed to be Holders for the purposes of
determining whether Holders of the requisite proportion of Notes outstanding
have authorized or agreed or consented to such request, demand, authorization,
direction, notice, consent, waiver or
<PAGE>
<PAGE>
70
other action, and for that purpose the Notes outstanding shall be computed as of
the record date; provided that no such authorization, agreement or consent by
the Holders on the record date shall be deemed effective unless it shall become
effective pursuant to the provisions of this Indenture not later than six months
after the record date, and that no such authorization, agreement or consent may
be amended, withdrawn or revoked once given by a Holder, unless the Obligors
shall provide for such amendment, withdrawal or revocation in conjunction with
such solicitation of authorizations, agreements or consents or unless and to the
extent required by applicable law.
(f) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Note shall bind 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 or suffered to be done
by the Trustee or the Obligors in reliance thereon whether or not notation of
such action is made upon such Note.
SECTION 10.06. Rules by Trustee, Paying Agent or Registrar. The Trustee
may make reasonable rules for action by or at a meeting of Holders. The Paying
Agent or Registrar may make reasonable rules for its functions.
SECTION 10.07. Payment Date Other Than a Business Day. If an Interest
Payment Date, Redemption Date, Payment Date, Stated Maturity or date of maturity
of any Note shall not be a Business Day, then payment of principal of, premium,
if any, or interest on such Note, as the case may be, need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the Interest Payment Date, Payment Date or Redemption
Date, or at the Stated Maturity or date of maturity of such Note; provided that
no interest shall accrue with respect to such payment for the period from and
after such Interest Payment Date, Payment Date, Redemption Date, Stated Maturity
or date of maturity, as the case may be.
SECTION 10.08. Governing Law. This Indenture and the Notes shall be
governed by the laws of the State of New York. The Trustee, the Obligors and the
Holders agree to submit to the jurisdiction of the courts of the State of New
York in any action or proceeding arising out of or relating to this Indenture or
the Notes.
SECTION 10.09. No Adverse Interpretation of Other Agreements. This
Indenture may not be used to interpret another indenture, loan or debt agreement
of the Company, TWT or any Subsidiary of the Company. Any such indenture, loan
or debt agreement may not be used to interpret this Indenture.
SECTION 10.10. No Recourse Against Others. No recourse for the payment
of the principal of, premium, if any, or interest on any of the Notes, or for
any claim based thereon or otherwise in respect thereof, and no recourse under
or upon any obligation, covenant or agreement
<PAGE>
<PAGE>
71
of the Obligors contained in this Indenture or in any of the Notes, or because
of the creation of any Indebtedness represented thereby, shall be had against
any incorporator or against any past, present or future partner, stockholder,
other equityholder, officer, director, employee or controlling person, as such,
of the Obligors or of any successor Person, either directly or through the
Obligors or any successor Person, whether by virtue of any constitution, statute
or rule of law, or by the enforcement of any assessment or penalty or otherwise;
it being expressly understood that all such liability is hereby expressly waived
and released as a condition of, and as a consideration for, the execution of
this Indenture and the issue of the Notes.
SECTION 10.11. Successors. All agreements of the Obligors in this
Indenture and the Notes shall bind their respective successors. All agreements
of the Trustee in this Indenture shall bind its successor.
SECTION 10.12. Duplicate Originals. The parties may sign any number of
copies of this Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
SECTION 10.13. Separability. 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.
SECTION 10.14. Table of Contents, Headings, Etc. The Table of Contents,
Cross- Reference Table and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not to be
considered a part hereof and shall in no way modify or restrict any of the terms
and provisions hereof.
<PAGE>
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.
TIME WARNER TELECOM LLC
By: David Rayner
--------------------------------
Name:
Title:
TIME WARNER TELECOM INC.
By: David Rayner
---------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK
By:
---------------------------------
Name:
Title:
<PAGE>
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.
TIME WARNER TELECOM LLC
By:
--------------------------------
Name:
Title:
TIME WARNER TELECOM INC.
By:
---------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK
By: R. Lorenzen
---------------------------------
Name: R. Lorenzen
Title: Senior Trust Officer
<PAGE>
<PAGE>
Exhibit A
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, TO THE OBLIGORS OR THEIR AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER ENTITY 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.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR
SECURITIES IN DEFINITIVE REGISTERED FORM, THIS CERTIFICATE 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.
TIME WARNER TELECOM LLC
TIME WARNER TELECOM INC.
9 3/4% Senior Note due 2008
CUSIP 887321AA5
No.___ $___________
TIME WARNER TELECOM LLC, a Delaware limited liability company (the
"Company"), and TIME WARNER TELECOM INC., a Delaware corporation ("TWT" and,
together with the Company, the "Obligors"), which term includes any successor
under the Indenture hereinafter referred to), for value received, promises to
pay to __________, or its registered assigns, the principal sum of
____________________ ($__________) on July 15, 2008.
Interest Payment Dates: January 15 and July 15, commencing January 15,
1999
Regular Record Dates: January 1 and July 1
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.
<PAGE>
<PAGE>
A-2
IN WITNESS WHEREOF, the Obligors have caused this Note to be signed
manually or by facsimile by its duly authorized officers.
Date: __________ TIME WARNER TELECOM LLC
By: __________________________________
Name:
Title:
TIME WARNER TELECOM INC.
By: __________________________________
Name:
Title:
(Trustee's Certificate of Authentication)
This is one of the 9 3/4% Senior Notes due 2008 described in the within-
mentioned Indenture.
THE CHASE MANHATTAN BANK,
as Trustee
By:__________________________________
Authorized Officer
<PAGE>
<PAGE>
A-3
TIME WARNER TELECOM LLC
TIME WARNER TELECOM INC.
9 3/4% Senior Note due 2008
1. Principal and Interest.
The Obligors will pay the principal of this Note on July 15, 2008.
The Obligors promise to pay interest on the principal amount of this
Note on each Interest Payment Date, as set forth below, at the rate per annum
shown above.
Interest will be payable semiannually (to the holders of record of the
Notes at the close of business on the January 1 or July 1 immediately preceding
the Interest Payment Date) on each Interest Payment Date, commencing January 15,
1999.
Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from July 21, 1998;
provided that, if there is no existing default in the payment of interest and
this Note is authenticated between a Regular Record Date referred to on the face
hereof and the next succeeding Interest Payment Date, interest shall accrue from
such Interest Payment Date. Interest will be computed on the basis of a 360-day
year of twelve 30-day months.
The Obligors shall pay interest on overdue principal and premium, if
any, and interest on overdue installments of interest, to the extent lawful, at
a rate per annum that is 2% in excess of the rate otherwise payable.
2. Method of Payment.
The Obligors will pay interest (except defaulted interest) on the
principal amount of the Notes as provided above on each January 15 and July 15,
commencing January 15, 1999 to the Persons who are Holders (as reflected in the
Security Register at the close of business on the January 1 or July 1
immediately preceding the Interest Payment Date), in each case, even if the Note
is cancelled on registration of transfer or registration of exchange after such
record date; provided that, with respect to the payment of principal, the
Obligors will make payment to the Holder that surrenders this Note to a Paying
Agent on or after July 15, 2008.
<PAGE>
<PAGE>
A-4
The Obligors will pay principal, premium, if any, and as provided
above, interest in money of the United States that at the time of payment is
legal tender for payment of public and private debts. However, the Obligors, at
their option, may pay principal, premium, if any, and interest by check payable
in such money. It may mail an interest check to a Holder's registered address
(as reflected in the Security Register). If a payment date is a date other than
a Business Day at a place of payment, payment may be made at that place on the
next succeeding day that is a Business Day and no interest shall accrue with
respect to such payment for the intervening period.
3. Paying Agent and Registrar.
Initially, the Trustee will act as Paying Agent and Registrar. The
Obligors may change any Paying Agent or Registrar without notice. The Obligors,
any Subsidiary or any Affiliate of any of them may act as Paying Agent,
Registrar or co-Registrar.
4. Indenture; Limitations.
The Obligors issued the Notes under an Indenture dated as of July 21,
1998 (the "Indenture"), among the Company, TWT and The Chase Manhattan Bank,
trustee (the "Trustee"). Capitalized terms herein are used as defined in the
Indenture unless otherwise indicated. The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act. The Notes are subject to all such terms, and Holders are
referred to the Indenture and the Trust Indenture Act for a statement of all
such terms. To the extent permitted by applicable law, in the event of any
inconsistency between the terms of this Note and the terms of the Indenture, the
terms of the Indenture shall control.
The Notes are general unsecured obligations of the Obligors.
The Obligors may, subject to Article Four of the Indenture and
applicable law, issue additional Notes under the Indenture.
5. Optional Redemption.
The Notes are redeemable, at the Obligors' option, in whole or in part,
at any time or from time to time, on or after July 15, 2003 and prior to
maturity, upon not less than 30 nor more than 60 days' prior notice mailed by
first class mail to each Holder's last address, as it appears in the Security
Register, at the following Redemption Prices (expressed in percentages of
principal amount), plus accrued and unpaid interest, if any, to the Redemption
Date (subject to the right of Holders of record on the relevant Regular Record
Date that is on or prior to the Redemption Date to receive interest due on an
Interest Payment Date), if redeemed during the 12-month period commencing July
15 of the years set forth below:
<PAGE>
<PAGE>
A-5
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2003............................... 104.875%
2004............................... 103.250%
2005............................... 101.625%
2006 and thereafter................ 100.000%
</TABLE>
At any time prior to July 15, 2001, the Obligors may redeem up to 35%
of the aggregate principal amount of the Notes with the net proceeds of one or
more Equity Offerings, at any time or from time to time, at a Redemption Price
(expressed as a percentage of principal amount) of 109.750%, plus accrued and
unpaid interest to the Redemption Date (subject to the rights of Holders of
record on the relevant Regular Record Date that is on or prior to the Redemption
Date to receive interest due on an Interest Payment Date); provided that (i) at
least 65% of the aggregate principal amount of Notes originally issued on the
Closing Date remains outstanding after each such redemption and (ii) notice of
such redemption shall be mailed within 90 days of the related Equity Offering.
Notes in original denominations larger than $1,000 may be redeemed in
part. On and after the Redemption Date, interest ceases to accrue on Notes or
portions of Notes called for redemption, unless the Obligors default in the
payment of the Redemption Price.
6. Repurchase upon Change of Control.
The Obligors shall commence within 30 days of the later of (a) the
occurrence of a Change of Control and (b) the end of the Change of Control
Period with respect to a Change of Control, and consummate an Offer to Purchase
for all Notes then outstanding, at a purchase price equal to 101% of the
principal amount thereof on the relevant Payment Date, plus accrued interest (if
any) to the Payment Date; provided that, the Obligors shall not be required to
commence and consummate an Offer to Purchase if, at the time specified above for
the commencement of an Offer to Purchase, the Notes shall be rated Investment
Grade.
A notice of Change of Control will be mailed within 30 days after any
Change of Control occurs to each Holder at its last address as it appears in the
Security Register. Notes in original denominations larger than $1,000 may be
sold to the Company in part. On and after the Payment Date, interest ceases to
accrue on Notes or portions of Notes surrendered for purchase by the Obligors,
unless the Obligors default in the payment of the purchase price.
<PAGE>
<PAGE>
A-6
7. Denominations; Transfer; Exchange.
The Notes are in registered form without coupons in denominations of
$1,000 of principal amount and multiples of $1,000 in excess thereof. A Holder
may register the transfer or exchange of Notes in accordance with the Indenture.
The Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not register the transfer
or exchange of any Notes selected for redemption. Also, it need not register the
transfer or exchange of any Notes for a period of 15 days before the day of
mailing of a notice of redemption of Notes selected for redemption.
8. Persons Deemed Owners.
A Holder shall be treated as the owner of a Note for all purposes.
9. Unclaimed Money.
If money for the payment of principal, premium, if any, or interest
remains unclaimed for two years, the Trustee and the Paying Agent will pay the
money back to the Obligors at their request. After that, Holders entitled to the
money must look to the Obligors for payment, unless an abandoned property law
designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
10. Discharge Prior to Redemption or Maturity.
If the Obligors deposit with the Trustee money or U.S. Government
Obligations sufficient to pay the then outstanding principal of, premium, if
any, and interest on the Notes (a) to redemption or maturity, the Obligors will
be discharged from the Indenture and the Notes, except in certain circumstances
for certain provisions thereof, and (b) to the Stated Maturity, the Obligors
will be discharged from certain covenants set forth in the Indenture.
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Notes may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount of the Notes then outstanding, and any existing default or
compliance with any provision may be waived with the consent of the Holders of
at least a majority in aggregate principal amount of the Notes then outstanding.
Without notice to or the consent of any Holder, the parties thereto may amend or
supplement the Indenture or the Notes to, among other things, cure any
ambiguity, defect or inconsistency and make any change that does not materially
and adversely affect the rights of any Holder.
<PAGE>
<PAGE>
A-7
12. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of the
Company, TWT and the Company's Restricted Subsidiaries, among other things, to
Incur additional Indebtedness, make Restricted Payments, suffer to exist
restrictions on the ability of Restricted Subsidiaries to make certain payments
to the Company, issue Capital Stock of Restricted Subsidiaries, Guarantee
Indebtedness of the Company, engage in transactions with Affiliates, suffer to
exist or incur Liens, enter into sale-leaseback transactions, use the proceeds
from Asset Sales, or merge, consolidate or transfer substantially all of its
assets. Within 90 days after the end of each fiscal year, the Obligors shall
deliver to the Trustee an Officers' Certificate stating whether or not the
signers thereof know of any Default or Event of Default under such restrictive
covenants.
13. Successor Persons.
When a successor Person or other entity assumes all the obligations of
its predecessor under the Notes and the Indenture, the predecessor Person will
be released from those obligations.
14. Defaults and Remedies.
Any of the following events constitutes an "Event of Default" under the
Indenture:
(a) default in the payment of principal of (or premium, if
any, on) any Note when the same becomes due and payable at maturity,
upon acceleration, redemption or otherwise;
(b) default in the payment of interest on any Note when the
same becomes due and payable, and such default continues for a period
of 30 days;
(c) default in the performance or breach of the provisions of
the Indenture applicable to mergers, consolidations and transfers of
all or substantially all of the assets of the Company or the failure to
make or consummate an Offer to Purchase in accordance with Section 4.11
or Section 4.12 of the Indenture;
(d) the Company or TWT defaults in the performance of or
breaches any other covenant or agreement of the Company or TWT in the
Indenture or under the Notes (other than a default specified in clause
(a), (b) or (c) above), and such default or breach continues for a
period of 30 consecutive days after written notice by the Trustee to
the Company or by the Holders of 25% or more in aggregate principal
amount of the Notes to the Company and the Trustee;
<PAGE>
<PAGE>
A-8
(e) there occurs with respect to any issue or issues of
Indebtedness of the Company or any Significant Subsidiary having an
outstanding principal amount of $12 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 within 30 days of such acceleration and/or (II) the failure to
make a principal payment at the final (but not any interim) fixed
maturity and such defaulted payment shall not have been made, waived or
extended within 30 days of such payment default;
(f) any final judgment or order (not covered by insurance) for
the payment of money in excess of $12 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 Significant 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 $12 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;
(g) a court having jurisdiction in the premises enters a
decree or order for (A) relief in respect of the Company or any
Significant Subsidiary 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
Significant Subsidiary or for all or substantially all of the property
and assets of the Company or any Significant Subsidiary or (C) the
winding up or liquidation of the affairs of the Company or any
Significant Subsidiary and, in each case, such decree or order shall
remain unstayed and in effect for a period of 30 consecutive days; or
(h) the Company or any Significant Subsidiary (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 Significant Subsidiary or for all or
substantially all of the property and assets of the Company or any
Significant Subsidiary or (C) effects any general assignment for the
benefit of creditors.
<PAGE>
<PAGE>
A-9
If an Event of Default, as defined in the Indenture, occurs and is
continuing, the Trustee may, and at the direction of the Holders of at least 25%
in aggregate principal amount of the Notes then outstanding shall, declare all
the Notes to be due and payable. If a bankruptcy or insolvency default with
respect to the Obligors occurs and is continuing, the Notes automatically become
due and payable. Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee may require indemnity satisfactory to it
before it enforces the Indenture or the Notes. Subject to certain limitations,
Holders of at least a majority in principal amount of the Notes then outstanding
may direct the Trustee in its exercise of any trust or power.
15. Trustee Dealings with the Company.
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from and perform services for the
Obligors or their Affiliates and may otherwise deal with the Obligors and their
Affiliates as if it were not the Trustee.
16. No Recourse Against Others.
No incorporator or any past, present or future partner, stockholder,
other equityholder, officer, director, employee or controlling person, as such,
of the Obligors or of any successor Person shall have any liability for any
obligations of the Obligors under the Notes or the Indenture or for any claim
based on, in respect of or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the Notes.
17. Authentication.
This Note shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on the other side of this Note.
18. Abbreviations.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
19. Governing Law.
This Note shall be governed by the laws of the State of New York.
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A-10
The Obligors will furnish a copy of the Indenture to any Holder upon
written request and without charge. Requests may be made to Time Warner Telecom
LLC, Time Warner Telecom Inc., 5700 S. Quebec Street, Greenwood Village, CO
80111; Attention: David J. Rayner.
<PAGE>
<PAGE>
Execution Copy
$400,000,000 9 3/4% SENIOR NOTES DUE 2008
TIME WARNER TELECOM LLC
AND
TIME WARNER TELECOM INC.
UNDERWRITING AGREEMENT
July 16, 1998
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<PAGE>
July 16, 1998
Morgan Stanley & Co. Incorporated
Lehman Brothers Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
Time Warner Telecom LLC, a Delaware limited liability company
("TIME WARNER"), and Time Warner Telecom Inc., a Delaware corporation and wholly
owned subsidiary of Time Warner (the "COMPANY" and, together with Time Warner,
the "OBLIGORS"), propose to issue and sell to the several Underwriters named in
Schedule I hereto (the "UNDERWRITERS") $400,000,000 aggregate principal amount
of their 9 3/4% Senior Notes due 2008 (the "NOTES") to be issued pursuant to the
provisions of an Indenture to be dated as of the Closing Date (as defined below)
(the "INDENTURE") between the Obligors and The Chase Manhattan Bank (the
"TRUSTEE").
Time Warner and the Company were recently formed in connection
with a reorganization (the "REORGANIZATION") of certain assets and liabilities
previously owned by subsidiaries and divisions of Time Warner Entertainment
Company, L.P. ("TWE"), Time Warner Entertainment-Advance/Newhouse Partnership
("TWE-A/N") and Time Warner Inc. ("TW") pursuant to a Reorganization Agreement
dated as of July 14, 1998 (the "REORGANIZATION AGREEMENT"), among Time Warner
Companies, Inc. ("TWC"), MediaOne Group, Inc. ("MEDIAONE"), Advance/Newhouse
Partnership ("NEWHOUSE"), TWE and TWE- A/N. The Reorganization was consummated
on July 14, 1998.
The Obligors have filed with the Securities and Exchange
Commission (the "COMMISSION") a registration statement, including a prospectus,
relating to the Notes. The registration statement as amended at the time it
becomes effective, including the information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Securities Act of 1933, as amended (the "SECURITIES ACT"), is hereinafter
referred to as the "REGISTRATION STATEMENT"; the prospectus in the form first
used to confirm sales of Notes is hereinafter referred to as the "PROSPECTUS."
If the Company has filed an abbreviated registration statement to register
additional Notes pursuant to Rule 462(b) under the Securities Act (the "RULE 462
REGISTRATION STATEMENT"), then any reference herein to the term "Registration
Statement" shall be deemed to include such Rule 462 Registration Statement.
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2
1. Representations and Warranties. (A) The Obligors represent
and warrant to and agree with each of the Underwriters that:
(a) The Registration Statement has become effective; no stop
order suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for such purpose are pending before or, to
the knowledge of Time Warner or the Company, threatened by the
Commission.
(b) (i) The Registration Statement, when it became effective,
did not contain and, as amended or supplemented, if applicable, 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 therein not misleading, (ii) the Registration Statement and
the Prospectus comply and, as amended or supplemented, if applicable,
will comply in all material respects with the Securities Act and the
applicable rules and regulations of the Commission thereunder and (iii)
the Prospectus does not contain and, as amended or supplemented, if
applicable, will not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading, except that the representations and warranties set forth in
this paragraph do not apply (A) to statements or omissions in the
Registration Statement or the Prospectus, or any amendment or
supplement thereto, based upon information relating to any Underwriter
furnished to the Obligors in writing by such Underwriter through you
expressly for use therein or (B) to that part of the Registration
Statement that constitutes the Statement of Eligibility and
Qualification (Form T-1) under the Trust Indenture Act of 1939, as
amended (the "TRUST INDENTURE ACT"), of the Trustee.
(c) Time Warner has been duly formed and is validly existing
as a limited liability company in good standing under the laws of
Delaware, has the requisite limited liability company power and
authority to own its property and to conduct its business as described
in the Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its business
or its ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on Time Warner and
its subsidiaries, taken as a whole.
(d) The Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described
in the Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its business
or its ownership or leasing of property requires such qualification,
except to the extent that the failure to be
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3
so qualified or be in good standing would not have a material adverse
effect on Time Warner and its subsidiaries, taken as a whole.
(e) Each subsidiary of Time Warner has been duly incorporated
or, in the case of partnerships or limited liability companies, duly
organized, is validly existing as a corporation, a partnership or a
limited liability company, as the case may be, in good standing under
the laws of the jurisdiction of its incorporation or organization, has
the power and authority to own its property and to conduct its business
as described in the Prospectus and is duly qualified to transact
business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to
be so qualified or be in good standing would not have a material
adverse effect on Time Warner and its subsidiaries, taken as a whole;
all of the issued shares of capital stock of each subsidiary of Time
Warner that is a corporation have been duly and validly authorized and
issued, are fully paid and non-assessable and are owned directly or
indirectly by Time Warner, free and clear of all liens, encumbrances,
equities or claims; and all of the partnership interests and membership
interests in each subsidiary of Time Warner that is a partnership or a
limited liability company, as the case may be, are owned directly or
indirectly by Time Warner, free and clear of all liens, encumbrances,
equities or claims.
(f) This Agreement has been duly authorized, executed and
delivered by Time Warner and the Company.
(g) The Indenture has been duly qualified under the Trust
Indenture Act and has been duly authorized by each of the Obligors and,
when duly executed and delivered by the Obligors on the Closing Date,
assuming due authorization, execution and delivery by the Trustee, will
constitute a valid and binding agreement of each of the Obligors,
enforceable in accordance with its terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited
by equitable principles of general applicability.
(h) The Notes have been duly authorized and, when executed and
authenticated in accordance with the provisions of the Indenture, and
delivered to and paid for by the Underwriters in accordance with the
terms of this Agreement, will be entitled to the benefits of the
Indenture, and will be valid and binding obligations of each of the
Obligors, enforceable in accordance with their terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited
by equitable principles of general applicability.
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4
(i) The Reorganization Agreement has been duly authorized,
executed and delivered by each of the parties thereto and is a valid
and binding agreement of each of the parties thereto, enforceable in
accordance with its terms except as (i) the enforceability thereof may
be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable
principles of general applicability.
(j) No consent, approval, waiver or authorization that is
material to Time Warner and its subsidiaries taken as a whole is
required to be obtained by any of the parties to the Reorganization
Agreement, and no notice or filing that is material to Time Warner and
its subsidiaries taken as a whole is required to be given by such
parties to, or made by such parties to, or made by such parties with,
any federal, state, local or other governmental authority or any other
person in connection with the execution, delivery and performance by
such parties of the Reorganization Agreement.
(k) The execution, delivery and performance of the
Reorganization Agreement by the parties thereto, and the consummation
of the transactions contemplated thereby, does not and will not (i)
violate any provision of the charter or bylaws or partnership agreement
or other organizational documents of such parties or (ii) violate or
result in a breach of or constitute a default under any law of any
country or governmental authority to which such party is subject.
(l) The execution and delivery by each of the Obligors of, and
the performance by the Obligors of their respective obligations under,
this Agreement, the Indenture and the Notes will not contravene any
provision of applicable law or the certificate of incorporation or the
certificate of formation, as applicable, or by-laws or limited
liability company agreement, as applicable, of the Obligors or any
agreement or other instrument binding upon either of the Obligors or
any of their subsidiaries that is material to Time Warner and its
subsidiaries, taken as a whole, or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over Time Warner
or any of its subsidiaries, and no consent, approval, authorization or
order of, or qualification with, any governmental body or agency is
required for the performance by the Obligors of their respective
obligations under this Agreement, except (1) such as may have been
obtained and (2) such as may be required by the securities or Blue Sky
laws of the various states and other jurisdictions in connection with
the offer and sale of the Notes.
(m) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of Time Warner and its
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5
subsidiaries, taken as a whole, from that set forth in the Prospectus
(exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement).
(n) There are no legal or governmental proceedings pending or,
to the knowledge of the Obligors, threatened to which either of the
Obligors or any of their subsidiaries is a party or to which any of the
properties of either of the Obligors or any of their subsidiaries is
subject that are required to be described in the Registration Statement
or the Prospectus and are not so described or any statutes,
regulations, contracts or other documents that are required to be
described in the Registration Statement or the Prospectus or to be
filed as exhibits to the Registration Statement that are not described
or filed as required.
(o) Each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Securities Act,
complied when so filed in all material respects with the Securities Act
and the applicable rules and regulations of the Commission thereunder.
(p) Neither of the Obligors is, and after giving effect to the
offering and sale of the Notes and the application of the proceeds
thereof as described in the Prospectus, neither will be, an "investment
company" as such term is defined in the Investment Company Act of 1940,
as amended.
(q) The Obligors and their subsidiaries (i) are in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits,
licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are
in compliance with all terms and conditions of any such permit, license
or approval, except where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, have a
material adverse effect on Time Warner and its subsidiaries, taken as a
whole.
(r) There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or
operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any permit, license or approval,
any related constraints on operating activities and any potential
liabilities to third parties) which would, singly or in the aggregate,
have a material adverse effect on Time Warner and its subsidiaries,
taken as a whole.
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6
(s) Except as set forth in the Prospectus, there are no
contracts, agreements or understandings between Time Warner or the
Company and any person granting such person the right to require Time
Warner or the Company to file a registration statement under the
Securities Act with respect to any securities of Time Warner or the
Company or to require Time Warner or the Company to include such
securities with the Notes registered pursuant to the Registration
Statement.
(t) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, (1) neither
Time Warner, nor any of its subsidiaries has incurred any material
liability or obligation, direct or contingent, nor entered into any
material transaction not in the ordinary course of business; (2)
neither Time Warner, nor any of its subsidiaries has purchased any of
Time Warner's outstanding Interests (as defined in the Prospectus), nor
has Time Warner declared, paid or otherwise made any distribution of
any kind on its Interests other than ordinary and customary
distributions; and (3) there has not been any material change in the
Interests, short-term debt or long-term debt of Time Warner and its
subsidiaries, taken as a whole, except in each case as set forth or
described in the Prospectus.
(u) The Obligors and their subsidiaries have good and
marketable title in fee simple to all real property and good marketable
title to all personal property owned by them, in each case free and
clear of all liens, encumbrances and defects except such as are
described in the Prospectus or such as do not materially affect the
value of such property and do not interfere with the use made and
proposed to be made of such property by the Obligors and their
subsidiaries or such as do not, singly or in the aggregate, have or
could not result in a material adverse effect on Time Warner and its
subsidiaries, taken as a whole; and any real property and buildings
held under lease by the Obligors and their subsidiaries are held by
them under valid, subsisting and enforceable leases with such
exceptions as do not interfere with the use made and proposed to be
made of such property and buildings by the Obligors and their
subsidiaries or such as do not, singly or in the aggregate, have or
could not result in a material adverse effect on Time Warner and its
subsidiaries, taken as a whole, in each case except as described in the
Prospectus.
(v) Except as set forth in the Prospectus, the Obligors and
their subsidiaries own or possess, or can acquire on reasonable terms,
all patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names, currently employed by them
in connection with the business now operated by them, except where the
failure to own or possess or to have the right to acquire any of the
foregoing, singly or in the aggregate, does not have a material adverse
effect on Time Warner and its subsidiaries, taken as a whole,
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7
and neither the Obligors nor any of their subsidiaries has received any
notice of infringement of or conflict with asserted rights of others
with respect to any of the foregoing which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would
have a material adverse effect on Time Warner and its subsidiaries,
taken as a whole.
(w) No labor dispute with the employees of the Obligors or any
of their subsidiaries exists, except as described in the Prospectus,
or, to the knowledge of the Obligors, is imminent, except for disputes
that do not or would not have a material adverse effect on Time Warner
and its subsidiaries taken as a whole; and the Obligors are not aware
of any existing, threatened or imminent labor disturbance by the
employees of any of their principal suppliers or contractors that could
have a material adverse effect on Time Warner and its subsidiaries,
taken as a whole.
(x) The Obligors and their subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the
businesses in which they are engaged; and neither of the Obligors nor
any of their respective subsidiaries has any reason to believe that it
will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that
would not have a material adverse effect on Time Warner and its
subsidiaries, taken as a whole, except as described in the Prospectus.
(y) The Obligors and their subsidiaries possess all permits,
licenses, rights of way, approvals, consents and other authorizations
issued by the appropriate federal, state, local or foreign regulatory
agencies or bodies (including the Federal Communications Commission
(the "FCC"), the public utilities commission, or any equivalent body,
of each state in which the Obligors do business and any other relevant
State or local governmental department, commission, board, bureau,
agency, court or other authority thereof (the "LOCAL AUTHORITIES")
required for the conduct of the telecommunications business now
operated by them (collectively, the "GOVERNMENTAL LICENSES"), except
where the failure to possess any such Governmental Licenses would not,
singly or in the aggregate, have a material adverse effect on Time
Warner and its subsidiaries, taken as a whole; the Obligors and their
subsidiaries are in compliance with the terms and conditions of all
such Licenses, except where the failure so to comply would not, singly
or in the aggregate, have a material adverse effect on Time Warner and
its subsidiaries, taken as a whole; all of the Governmental Licenses
are valid and in full force and effect, except where the invalidity of
such Governmental Licenses or the failure of such Governmental Licenses
to be in full force and effect would not, singly or in the aggregate,
have a material adverse effect on Time Warner and its subsidiaries,
taken as a whole; there is no outstanding adverse judgment, decree
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8
or order that has been issued by the FCC or any of the Local
Authorities against the Obligors or any of their subsidiaries and
which, singly or in the aggregate, would have a material adverse effect
on Time Warner and its subsidiaries, taken as a whole; and neither the
Obligors nor any of their subsidiaries has received any notice of or is
aware of proceedings relating to the revocation or modification of any
such Governmental Licenses or, except as set forth in the Prospectus,
that would otherwise affect the operations of the Obligors or their
subsidiaries and which, singly or in the aggregate, would have a
material adverse effect on Time Warner and its subsidiaries, taken as a
whole.
(z) The Obligors and each of their subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (1) transactions are executed in accordance with
management's general or specific authorizations; (2) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain asset accountability; (3) access to assets is permitted only
in accordance with management's general or specific authorization; and
(4) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
2. Agreements to Sell and Purchase. The Obligors hereby agree
to sell to the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from the
Obligors the respective principal amounts of Notes set forth in Schedule I
hereto opposite its name at 97.25% of their principal amount with respect to the
Notes (the "PURCHASE PRICE") plus accrued interest, if any, from July 21, 1998
to the date of payment and delivery.
3. Terms of Public Offering. The Company is advised by you
that the Underwriters propose to make a public offering of their respective
portions of the Notes as soon after the Registration Statement and this
Agreement have become effective as in your judgment is advisable. The Company is
further advised by you that (a) the Notes are to be offered to the public
initially at 100% of the principal amount (the "PUBLIC OFFERING PRICE") plus
accrued interest, if any, and to certain dealers selected by you at a price that
represents a concession not in excess of .25% of their principal amount under
the Public Offering Price, and that any Underwriter may allow, and such dealers
may reallow, a concession, not in excess of .125% of their principal amount, to
any Underwriter or to certain other dealers.
4. Payment and Delivery. Payment for the Notes shall be made
to the Company in Federal or other funds immediately available in New York City
against delivery of such Notes for the respective accounts of the several
Underwriters at the offices of
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9
Shearman & Sterling, 599 Lexington Avenue, New York, New York, at 10:00 a.m.,
New York City time, on July 21, 1998, or at such other time on the same or such
other date, not later than July 28, 1998, as shall be designated in writing by
you. The time and date of such payment are hereinafter referred to as the
"CLOSING DATE."
Certificates for the Notes shall be in definitive form and
registered in such names and in such denominations as you shall request in
writing not later than one full business day prior to the Closing Date. The
certificates evidencing the Notes shall be delivered to you on the Closing Date
for the respective accounts of the several Underwriters, with any transfer taxes
payable in connection with the transfer of the Notes to the Underwriters duly
paid, against payment of the Purchase Price therefor.
5. Conditions to the Underwriters' Obligations. The
obligations of the Company to sell the Notes to the Underwriters and the several
obligations of the Underwriters to purchase and pay for the Notes on the Closing
Date are subject to the condition that the Registration Statement shall have
become effective not later than 5:30 p.m. (New York City time) on the date
hereof.
The several obligations of the Underwriters are subject to the
following further conditions:
(a) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date:
(i) there shall not have occurred any downgrading,
nor shall any notice have been given of any intended or
potential downgrading or of any review for a possible change
that does not indicate the direction of the possible change,
in the rating accorded any of Time Warner's or the Company's
securities by any "nationally recognized statistical rating
organization," as such term is defined for purposes of Rule
436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or
operations of Time Warner and its subsidiaries, taken as a
whole, from that set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of
this Agreement) that, in your judgment, is material and
adverse and that makes it, in your judgment, impracticable to
market the Notes on the terms and in the manner contemplated
in the Prospectus.
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10
(b) The Underwriters shall have received on the Closing Date a
certificate from each of Time Warner and the Company, dated the Closing
Date and signed by an executive officer of Time Warner and the Company,
respectively, to the effect set forth in Section 5(a)(i) above and to
the effect that the representations and warranties of the Obligors
contained in this Agreement are true and correct as of the Closing Date
and that the Obligors have complied with all of the agreements and
satisfied all of the conditions on their part to be performed or
satisfied hereunder on or before the Closing Date.
The officer signing and delivering each such certificate may
rely upon the best of his or her knowledge as to proceedings
threatened.
(c) The Underwriters shall have received on the Closing Date
an opinion of Cravath, Swaine & Moore, outside counsel for the
Obligors, dated the Closing Date, to the effect that:
(i) based solely on a certificate of good standing
from the Secretary of State of the State of Delaware, Time
Warner has been duly formed, and is validly existing as a
limited liability company in good standing under the laws of
Delaware, with full limited liability company power and
authority to own its property and to conduct its business as
described in the Prospectus;
(ii) based solely on a certificate of good standing
from the Secretary of State of the State of Delaware, the
Company has been duly incorporated, and is validly existing
and in good standing under the laws of the State of Delaware,
with full corporate power and authority to own its property
and to conduct its business as described in the Prospectus;
(iii) the Notes have been duly authorized by each of
the Obligors, and, when executed and authenticated in
accordance with the provisions of the Indenture, and delivered
to and paid for by the Underwriters pursuant to the
Underwriting Agreement, will constitute legal, valid and
binding obligations of each of the Obligors, entitled to the
benefits of the Indenture and enforceable against each of them
in accordance with their terms (subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and other similar laws affecting creditors' rights
generally and general principles of equity, including, without
limitation, concepts of materiality, reasonableness, good
faith and fair dealing, regardless of whether in a proceeding
in equity or at law);
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11
(iv) the Indenture has been duly authorized, executed
and delivered by each of the Obligors, has been duly qualified
under the Trust Indenture Act of 1939 and constitutes a legal,
valid and binding obligation of each of the Obligors
enforceable against each of them in accordance with its terms
(subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other similar laws
affecting creditors' rights generally and general principles
of equity including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing,
regardless of whether in a proceeding in equity or at law);
(v) this Agreement has been duly authorized, executed
and delivered by each of Time Warner and the Company;
(vi) the Reorganization Agreement has been duly
authorized, executed and delivered by TWC, TWE-A/N and TWE,
and constitutes a valid and binding agreement of each of TWC,
TWE-A/N and TWE, enforceable against each of them in
accordance with its terms (subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance
and other similar laws affecting creditors' rights generally
and general principles of equity including, without
limitation, concepts of materiality, reasonableness, good
faith and fair dealing, regardless of whether in a proceeding
in equity or at law);
(vii) the execution and delivery by the Obligors of,
and the performance by the Obligors of their respective
obligations under, this Agreement, the Indenture or the Notes
will not contravene any provision of applicable law or the
certificate of incorporation or the certificate of formation,
as applicable, or by-laws or limited liability company
agreement, as applicable, of the Obligors or, to such
counsel's knowledge, any agreement or other instrument binding
upon either of the Obligors or any of their subsidiaries that
is material to Time Warner and its subsidiaries, taken as a
whole, or, to the best of such counsel's knowledge, any
judgment, order or decree of any governmental body, agency or
court having jurisdiction over the Obligors or any of their
subsidiaries, and no consent, approval, authorization or order
of, or qualification with, any governmental body or agency is
required for the performance by the Obligors of their
obligations under this Agreement, except such as has been
obtained under the Securities Act and such as may be required
by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Notes by the
Underwriters;
(viii) the statements (A) in the Prospectus under the
captions "Certain Relationships and Related Transactions,"
"Description of Interests," "Certain
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12
United States Federal Tax Consequences to Holders of Notes,"
"Description of Capital Stock" and "Description of the Notes"
and (B) in the Registration Statement in Items 14 and 15, in
each case insofar as such statements constitute summaries of
the legal matters, documents or proceedings referred to
therein, fairly present the information required to be
described with respect to such legal matters, documents and
proceedings and summarize in all material respects the matters
referred to therein;
(ix) to such counsel's knowledge, there are no (i)
legal or governmental proceedings pending or threatened to
which the Obligors or any of their subsidiaries is a party or
to which any of the properties of the Obligors or any of their
subsidiaries is subject that are required to be described in
the Registration Statement or the Prospectus and are not so
described or (ii) contracts, indentures, mortgages, loan
agreements, notes, leases or other documents that are required
to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration
Statement that are not described or filed as required;
(x) to such counsel's knowledge, there are no
statutes or regulations (other than federal, state or local
telecommunications statutes or regulations as to which such
counsel need express no opinion) that are required to be
described in the Registration Statement or the Prospectus that
are not described as required; and
(xi) neither of the Obligors is and, after giving
effect to the offering and sale of the Notes and the
application of the proceeds thereof as described in the
Prospectus, neither will be an "investment company" as such
term is defined in the Investment Company Act of 1940, as
amended.
(d) The Underwriters shall have received on the Closing Date a
statement of Cravath, Swaine & Moore, outside counsel for the Obligors,
dated the Closing Date, to the effect that:
Although such counsel has made certain inquiries and
investigations in connection with the preparation of the
Registration Statement and the Prospectus, the limitations
inherent in the role of outside counsel are such that such
counsel cannot and does not assume responsibility for the
accuracy or completeness of the statements made in the
Registration Statement and Prospectus, except in so far as
such statements relate to such counsel and except to the
extent set forth in paragraph (viii) of such counsel's opinion
to you dated the Closing Date. Subject to the foregoing, such
counsel hereby advises you
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13
that such counsel's work in connection with this matter did
not disclose any information that gave such counsel reason to
believe that: (i) the Registration Statement at the time the
Registration Statement became effective, or the Prospectus as
of the date hereof (in each case except for the financial
statements and other information of a statistical, accounting
or financial nature included therein, and the Statement of
Eligibility (Form T-1) included as an exhibit to the
Registration Statement, as to which such counsel does not
express any view) was not appropriately responsive in all
material respects to the requirements of the Securities Act
and the Trust Indenture Act of 1939 and the applicable rules
and regulations of the Commission thereunder, or (ii) the
Registration Statement at the time the Registration Statement
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, as of its date and as of
the date hereof, included or includes an untrue statement of a
material fact or omits to state a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading (in
each case except for the financial statements and other
information of a statistical, accounting or financial nature
included therein, and the Statement of Eligibility (Form T-1)
included as an exhibit to the Registration Statement, as to
which such counsel does not express any view).
(e) The Underwriters shall have received on the Closing Date
an opinion of Paul B. Jones, Esq., General Counsel to Time Warner and
to the Company, dated the Closing Date, to the effect that:
(i) Time Warner has been duly formed and is validly
existing as a limited liability company in good standing under
the laws of Delaware, with full limited liability company
power and authority to own its property and to conduct it
business as described in the Prospectus;
(ii) the Company has been duly incorporated and is
validly existing and in good standing under the laws of the
State of Delaware, with full corporate power and authority to
own its property and to conduct its business as described in
the Prospectus;
(iii) each of Time Warner and the Company is duly
qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be
in good
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14
standing would not have a material adverse effect on Time
Warner and its subsidiaries, taken as a whole;
(iv) each subsidiary of Time Warner has been duly
incorporated or, in the case of partnerships or limited
liability companies, duly organized, is validly existing as a
corporation, a partnership or a limited liability company, as
the case may be, in good standing under the laws of the
jurisdiction of its incorporation or organization, as the case
may be, has the power and authority to own its property and to
conduct its business as described in the Prospectus and is
duly qualified to transact business and is in good standing in
each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be
in good standing would not have a material adverse effect on
Time Warner and its subsidiaries, taken as a whole;
(v) all of the issued shares of capital stock of each
subsidiary of Time Warner that is a corporation have been duly
and validly authorized and issued, are fully paid and
non-assessable and are owned directly by Time Warner free and
clear of all liens, encumbrances, equities or claims; and all
of the partnership interests and membership interests in each
subsidiary of Time Warner that is a partnership or limited
liability company, as the case may be, are owned directly by
Time Warner free and clear of all liens, encumbrances,
equities or claims;
(vi) The statements contained in the Registration
Statement under the captions "Risk Factors -- Risks Relating
to Long Distance," "Risk Factors -- Dependence Upon
Interconnection with ILECs; Competition," "Risk Factors --
Federal and State Regulation," "Risk Factors -- Relationship
with TW Cable," "Certain Relationships and Related
Transactions -- Certain Operating Agreements," "Business --
Competition," "Business -- State Regulation" and "Business --
Local Government Authorizations," insofar as such statements
constitute a summary of the legal or regulatory matters or
legal or regulatory proceedings referred to therein, are
correct in all material respects and do not omit a material
fact necessary to make the statements contained therein not
misleading;
(vii) to such counsel's knowledge, the Obligors
possess the Governmental Licenses and the Obligors are in
compliance with the terms and conditions of all such
Governmental Licenses, except where the failure to so comply
would not, singly or in the aggregate, have a material adverse
effect on Time Warner and its subsidiaries, taken as a whole,
and all of the Governmental
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15
Licenses are valid and in full force and effect, except when
the invalidity of such Governmental Licenses or the failure of
such Governmental Licenses to be in full force and effect
would not have a material adverse effect on Time Warner and
its subsidiaries, taken as a whole;
(viii) there is no outstanding adverse judgment,
decree or order that has been issued by the FCC or any of the
Local Authorities against the Obligors and their subsidiaries
which, singly or in the aggregate, would have a material
adverse effect on Time Warner and its subsidiaries, taken as a
whole, and, to the best of such counsel's knowledge, neither
the Obligors nor any of their subsidiaries is the object of,
or threatened by, any proceedings relating to the revocation
or modification of any such Governmental Licenses or, except
as set forth in the Prospectus, that would otherwise affect
the operation of the Obligors, which, singly or in the
aggregate, would have a material adverse effect on Time Warner
and its subsidiaries, taken as a whole;
(ix) the Obligors have obtained all
telecommunications, regulatory or public utility
authorizations and consents from New York, Tennessee, North
Carolina and Hawaii required for the issuance of the Notes,
and no further filings with, authorizations, approval,
consent, license, order, registrations, qualification or
decree is necessary or required from any other Local
Authorities having jurisdiction over telecommunications
matters for the Company in connection with the due
authorization, execution and delivery of this Agreement or for
the offering, issuance, sale or delivery of the Notes, except
for notice filings where the failure to make such filings
would not materially adversely affect the performance by the
Obligors of their obligations under this Agreement;
(x) the execution, delivery and performance of this
Agreement and the consummation of the transactions
contemplated in this Agreement, the issuance and sale of the
Notes, and the use of the proceeds from the sale of the Notes
to the extent expressly described in the Prospectus under the
caption "Use of Proceeds" and compliance by the Obligors with
their respective obligations under this Agreement do not and
will not, whether with or without the giving of notice or
lapse of time or both, result in any violation of any
applicable law, statute, rule, regulation, judgment, order,
writ or decree, known to such counsel of any Local Authority
having jurisdiction over Time Warner or any of its
subsidiaries or any of their respective assets or operations
with respect to the provision of telecommunications services
except for such violations that would not have a material
adverse effect on Time Warner and its subsidiaries, taken as a
whole; and
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16
(xi) to such counsel's knowledge, there are no
telecommunications statutes or regulations that are required
to be described in the Registration Statement or the
Prospectus that are not described as required.
In rendering opinion (vii) above, the General Counsel may
rely, as to matters involving the application of the laws of
California, Florida, Hawaii, Indiana, New York, North Carolina, Texas
and Wisconsin, upon the opinions of special counsel to the Obligors
(which opinions shall be dated and furnished to the Underwriters on the
Closing Date and shall be satisfactory in form and substance to counsel
for the Underwriters, provided that the General Counsel shall state in
his opinion that he believes that he is justified in relying upon such
opinions).
(f) The Underwriters shall have received on the Closing Date
an opinion of Fleischman and Walsh, regulatory counsel for the Company,
dated the Closing Date, to the effect that:
(i) The statements contained in the Registration
Statement under the captions "Risk Factors -- Governmental and
Other Authorizations," "Business -- Government Regulation" and
"Business -- Federal Regulation," insofar as such statements
constitute a summary of the legal or regulatory matters or
legal or regulatory proceedings referred to therein, are
correct in all material respects and do not omit a material
fact necessary to make the statements contained therein not
misleading; and
(ii) The execution and delivery of the Amended and
Restated Limited Liability Company Agreement dated as of July
14, 1998 (the "LLC Agreement"), by and among TWE, TWE-A/N,
TWC, MediaOne, Newhouse, American Television and
Communications Corporation, Warner Communications, Inc.,
TW/TAE Inc., FibrCOM Holdings L.P. and Paragon Communications,
and compliance by Time Warner with the terms of the LLC
Agreement does not and will not violate the Federal
Communications Act of 1934, as amended, or the rules and
regulations of the FCC.
(g) The Underwriters shall have received on the Closing Date
an opinion of Sabin, Bermont & Gould LLP, outside counsel for
Advance/Newhouse Partnership, dated as of the Closing Date, to the
effect that the Reorganization Agreement has been duly authorized,
executed and delivered by, and is a valid and binding agreement of,
Advance/Newhouse Partnership, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally and general principles of equity.
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17
(h) The Underwriters shall have received on the Closing Date
an opinion of Weil, Gotshal & Manges LLP, outside counsel for MediaOne,
dated as of the Closing Date, to the effect that the Reorganization
Agreement has been duly authorized, executed and delivered by, and is a
valid and binding agreement of, MediaOne Group, Inc., enforceable
against it in accordance with its terms, subject to applicable
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and general principles of equity.
(i) The Underwriters shall have received on the Closing Date
an opinion of Shearman & Sterling, counsel for the Underwriters, dated
the Closing Date, covering the matters referred to in Sections 5(c)(v),
5(c)(vii), 5(c)(viii) (but only as to the statements in the Prospectus
under "Description of the Notes" and "Underwriters") and 5(d) above.
With respect to Section 5(d) above, Cravath, Swaine & Moore
and Shearman & Sterling may provide their statements in separate
letters and may state that their opinion and belief are based upon
their participation in the preparation of the Registration Statement
and Prospectus and any amendments or supplements thereto and review and
discussion of the contents thereof, but are without independent check
or verification, except as specified.
The opinion of Cravath, Swaine & Moore described in Section
5(c) above shall be rendered to the Underwriters at the request of the
Obligors and shall so state therein.
(j) The Underwriters shall have received, on each of the date
hereof and the Closing Date, a letter dated the date hereof or the
Closing Date, as the case may be, in form and substance satisfactory to
the Underwriters, from Ernst & Young, LLP, independent public
accountants, containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters
with respect to the financial statements and certain financial
information contained in the Registration Statement and the Prospectus;
provided that the letter delivered on the Closing Date shall use a
"cut-off date" not earlier than the date hereof.
(k) The Reorganization (as defined in the Prospectus) shall
have been consummated.
6. Covenants of the Obligors. In further consideration of the
agreements of the Underwriters herein contained, the Obligors covenant with each
Underwriter as follows:
(a) To furnish to you, without charge, five signed copies of
the Registration Statement (including exhibits thereto) and for
delivery to each other Underwriter a
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18
conformed copy of the Registration Statement (without exhibits thereto)
and to furnish to you in New York City, without charge, prior to 10:00
a.m. New York City time on the business day next succeeding the date of
this Agreement and during the period mentioned in Section 6(c) below,
as many copies of the Prospectus and any supplements and amendments
thereto or to the Registration Statement as you may reasonably request.
(b) Before amending or supplementing the Registration
Statement or the Prospectus, to furnish to you a copy of each such
proposed amendment or supplement and not to file any such proposed
amendment or supplement to which you reasonably object, and to file
with the Commission within the applicable period specified in Rule
424(b) under the Securities Act any prospectus required to be filed
pursuant to such Rule.
(c) If, during such period after the first date of the public
offering of the Notes as in the opinion of counsel for the Underwriters
the Prospectus is required by law to be delivered in connection with
sales by an Underwriter or dealer, any event shall occur or condition
exist as a result of which it is necessary to amend or supplement the
Prospectus in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not
misleading, or if it is necessary to amend or supplement the Prospectus
to comply with applicable law, forthwith to prepare, file with the
Commission and furnish, at its own expense, to the Underwriters and to
the dealers (whose names and addresses you will furnish to the
Obligors) to which Notes may have been sold by you on behalf of the
Underwriters and to any other dealers upon request, either amendments
or supplements to the Prospectus so that the statements in the
Prospectus as so amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser, be
misleading or so that the Prospectus, as amended or supplemented, will
comply with law.
(d) To endeavor to qualify the Notes for offer and sale under
the securities or Blue Sky laws of such jurisdictions as you shall
reasonably request; provided that, in connection therewith, neither
Obligor shall be required to qualify as a foreign corporation or
foreign limited liability company, as the case may be, or to file a
general consent to service of process in any jurisdiction.
(e) To make generally available to Time Warner's security
holders and to the Company's security holders and to you as soon as
practicable an earning statement covering the twelve-month period
ending September 30, 1999 that satisfies the provisions of Section
11(a) of the Securities Act and the rules and regulations of the
Commission thereunder.
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19
(f) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or
cause to be paid all expenses incident to the performance of its
obligations under this Agreement, including: (i) the fees,
disbursements and expenses of the Obligors' counsel and the Obligors'
accountants in connection with the registration and delivery of the
Notes under the Securities Act and all other fees or expenses in
connection with the preparation and filing of the Registration
Statement, any preliminary prospectus, the Prospectus and amendments
and supplements to any of the foregoing, including all printing costs
associated therewith, and the mailing and delivering of copies thereof
to the Underwriters and dealers, in the quantities hereinabove
specified, (ii) all costs and expenses related to the transfer and
delivery of the Notes to the Underwriters, including any transfer or
other taxes payable thereon, (iii) the cost of printing or producing
any Blue Sky or Legal Investment memorandum in connection with the
offer and sale of the Notes under state securities laws and all
expenses in connection with the qualification of the Notes for offer
and sale under state securities laws as provided in Section 6(d)
hereof, including filing fees and the reasonable fees and disbursements
of counsel for the Underwriters in connection with such qualification
and in connection with the Blue Sky or Legal Investment memorandum,
(iv) all filing fees and the reasonable fees and disbursements of
counsel to the Underwriters incurred in connection with the review and
qualification of the offering of the Notes by the National Association
of Securities Dealers, Inc., (v) the cost of preparation, issuance and
delivery of the Notes, (vi) the costs and charges of the Trustee, (vii)
the costs and expenses of the Company relating to investor
presentations on any "road show" undertaken in connection with the
marketing of the offering of the Notes, including, without limitation,
expenses associated with the production of road show slides and
graphics, fees and expenses of any consultants engaged in connection
with the road show presentations with the prior approval of the
Obligors, travel and lodging expenses of the representatives and
officers of the Obligors and any such consultants, and the cost of any
aircraft chartered in connection with the road show; provided, that the
Underwriters will reimburse the Obligors for the Underwriters' pro rata
share of the cost of such chartered aircraft, (viii) all expenses in
connection with any offer and sale of the Notes outside of the United
States, including all filing fees and the reasonable fees and
disbursements of counsel for the Underwriters in connection with offers
and sales outside of the United States and (ix) all other costs and
expenses incident to the performance of the obligations of the Company
hereunder for which provision is not otherwise made in this Section. It
is understood, however, that except as provided in this Section,
Section 7 entitled "Indemnity and Contribution," and the last paragraph
of Section 9 below, the Underwriters will pay all of their costs and
expenses, including fees and disbursements of their counsel, transfer
taxes payable on resale of any of the Notes by them and any advertising
expenses connected with any offers they may make.
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20
7. Indemnity and Contribution. (a) Time Warner and the
Company, jointly and severally, agree to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of either Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), from and
against any and all losses, claims, damages and liabilities (including, without
limitation, any legal or other expenses reasonably incurred in connection with
defending or investigating any such action or claim) caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or any amendment thereof, any preliminary prospectus or
the Prospectus (as amended or supplemented if the Obligors shall have furnished
any amendments or supplements thereto), or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any such untrue statement
or omission or alleged untrue statement or omission based upon information
relating to any Underwriter furnished to the Obligors in writing by such
Underwriter through you expressly for use therein.
(b) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless each of Time Warner, the Company, their directors
and officers who sign the Registration Statement and each person, if any, who
controls Time Warner or the Company within the meaning of either Section 15 of
the Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from Time Warner and the Company to such Underwriter, but
only with reference to information relating to such Underwriter furnished to the
Obligors in writing by such Underwriter through you expressly for use in the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendments or supplements thereto.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to Section 7(a) or 7(b), such person (the
"INDEMNIFIED PARTY") shall promptly notify the person against whom such
indemnity may be sought (the "INDEMNIFYING PARTY") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
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21
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all such indemnified parties and that all such fees
and expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by Morgan Stanley & Co. Incorporated, in the case of
parties indemnified pursuant to Section 7(a), and by the Obligors, in the case
of parties indemnified pursuant to Section 7(b). The indemnifying party shall
not be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
(d) To the extent the indemnification provided for in Section
7(a) or 7(b) is unavailable to an indemnified party or insufficient in respect
of any losses, claims, damages or liabilities referred to therein, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Obligors on the one hand and the Underwriters on the
other hand from the offering of the Notes or (ii) if the allocation provided by
clause 7(d)(i) above is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
7(d)(i) above but also the relative fault of the Obligors on the one hand and of
the Underwriters on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative benefits received
by the Obligors on the one hand and the Underwriters on the other hand in
connection with the offering of the Notes shall be deemed to be in the same
respective proportions as the net proceeds from the offering of the Notes
(before deducting expenses) received by the Obligors and the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover of the Prospectus, bear to the Public Offering
Price of the Notes. The relative fault of the Obligors on the one hand and the
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22
Underwriters on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Obligors or by the Underwriters and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Underwriters' respective obligations to
contribute pursuant to this Section 7 are several in proportion to the
respective principal amounts of Notes they have purchased hereunder, and not
joint.
(e) The Obligors and the Underwriters agree that it would not
be just or equitable if contribution pursuant to this Section 7 were determined
by pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in Section 7(d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Notes
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 7 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
(f) The indemnity and contribution provisions contained in
this Section 7 and the representations, warranties and other statements of the
Obligors contained in this Agreement shall remain operative and in full force
and effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter or by or on behalf of the Obligors, its respective officers or
directors or any person controlling the Obligors and (iii) acceptance of and
payment for any of the Notes.
8. Termination. This Agreement shall be subject to termination
by notice given by you to each of the Obligors, if (a) after the execution and
delivery of this Agreement and prior to the Closing Date (i) trading generally
shall have been suspended or materially limited on or by, as the case may be,
any of the New York Stock Exchange, the American Stock Exchange, the National
Association of Securities Dealers, Inc., the Chicago Board of Options Exchange,
the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii)
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23
trading of any securities of the Obligors shall have been suspended on any
exchange or in any over-the-counter market, (iii) a general moratorium on
commercial banking activities in New York shall have been declared by either
Federal or New York State authorities or (iv) there shall have occurred any
outbreak or escalation of hostilities or any change in financial markets or any
calamity or crisis that, in your judgment, is material and adverse and (b) in
the case of any of the events specified in clauses 8(a)(i) through 8(a)(iv),
such event, singly or together with any other such event, makes it, in your
judgment, impracticable to market the Notes on the terms and in the manner
contemplated in the Prospectus.
9. Effectiveness; Defaulting Underwriters. This Agreement
shall become effective upon the execution and delivery hereof by the parties
hereto.
If, on the Closing Date, any one or more of the Underwriters
shall fail or refuse to purchase Notes that it has or they have agreed to
purchase hereunder on such date, and the aggregate principal amount of Notes
which such defaulting Underwriter or Underwriters agreed but failed or refused
to purchase is not more than one-tenth of the aggregate principal amount of
Notes to be purchased on such date, the other Underwriters shall be obligated
severally in the proportions that the principal amount of Notes set forth
opposite their respective names in Schedule I bears to the aggregate principal
amount of Notes set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as you may specify, to purchase the
Notes which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase on such date; provided that in no event shall the principal
amount of Notes that any Underwriter has agreed to purchase pursuant to this
Agreement be increased pursuant to this Section 9 by an amount in excess of
one-ninth of such principal amount of Notes without the written consent of such
Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall fail
or refuse to purchase Notes and the aggregate principal amount of Notes with
respect to which such default occurs is more than one-tenth of the aggregate
principal amount of Notes to be purchased, and arrangements satisfactory to you
and the Company for the purchase of such Notes are not made within 36 hours
after such default, this Agreement shall terminate without liability on the part
of any non-defaulting Underwriter or the Company. In any such case either you or
the Company shall have the right to postpone the Closing Date, but in no event
for longer than seven days, in order that the required changes, if any, in the
Registration Statement and in the Prospectus or in any other documents or
arrangements may be effected. Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability in respect of any default of
such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or
any of them, because of any failure or refusal on the part of the Company to
comply with the terms or to fulfill any of the conditions of this Agreement, or
if for any reason the Company shall be unable to perform its obligations under
this Agreement, the Company will reimburse the
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24
Underwriters or such Underwriters as have so terminated this Agreement with
respect to themselves, severally, for all out-of-pocket expenses (including the
fees and disbursements of their counsel) reasonably incurred by such
Underwriters in connection with this Agreement or the offering contemplated
hereunder.
10. Counterparts. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
11. Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.
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<PAGE>
12. Headings. The headings of the sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed a
part of this Agreement.
Very truly yours,
TIME WARNER TELECOM LLC
By: /s/ David J. Rayner
-----------------------
Name: David J. Rayner
Title: Senior Vice President and
Chief Financial Officer
TIME WARNER TELECOM INC.
By: /s/ David J. Rayner
-----------------------
Name: David J. Rayner
Title: Senior Vice President and
Chief Financial Officer
Accepted as of the date hereof
MORGAN STANLEY & CO. INCORPORATED
LEHMAN BROTHERS INC.
Acting severally on behalf of themselves
and the several Underwriters
named in Schedule I hereto.
By: Morgan Stanley & Co. Incorporated
By: ___________________________
Name:
Title:
<PAGE>
<PAGE>
12. Headings. The headings of the sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed a
part of this Agreement.
Very truly yours,
TIME WARNER TELECOM LLC
By:
-----------------------
Name:
Title:
TIME WARNER TELECOM INC.
By:
-----------------------
Name:
Title:
Accepted as of the date hereof
MORGAN STANLEY & CO. INCORPORATED
LEHMAN BROTHERS INC.
Acting severally on behalf of themselves
and the several Underwriters
named in Schedule I hereto.
By: Morgan Stanley & Co. Incorporated
By: /s/ Daniel H. Klausner
---------------------------
Name: Daniel H. Klausner
Title: Vice President
<PAGE>
<PAGE>
SCHEDULE 1
UNDERWRITERS
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL AMOUNT
OF NOTES
UNDERWRITER TO BE PURCHASED
----------- ---------------
<S> <C>
Morgan Stanley & Co. Incorporated................ $200,000,000
Lehman Brothers Inc.............................. $200,000,000
------------
Total Notes............................. $400,000,000
============
</TABLE>
<PAGE>
<PAGE>
As amended as of
August 5, 1998
TIME WARNER TELECOM LLC
1998 OPTION PLAN
ARTICLE I
Purpose of the Plan
The purpose of the Time Warner Telecom LLC (the "Company") 1998
Option Plan (hereinafter the "Plan") is to provide for the granting of options
to representatives and employees of the Company and its Subsidiaries in
recognition of the valuable services provided, and contemplated to be provided,
by such representatives and employees. The general purpose of the Plan is to
promote the interests of the Company and its members and to reward dedicated
representatives and employees of the Company and its Subsidiaries by providing
them additional incentives to continue and increase their efforts with respect
to, and to remain in the employ of, the Company or its Subsidiaries.
ARTICLE II
Certain Definitions
The following terms (whether used in the singular or plural) have
the meanings indicated when used in the Plan:
(a) "Agreement" means the option agreement specified in Article
XI.
(b) "Approved Transaction" means any transaction in which the
Board (or, if approval of the Board is not required as a matter of law, the
members of the Company) shall approve (i) any consolidation or merger of the
Company in which the Company is not the continuing or surviving company or
pursuant to which Interests would be converted into cash, securities or other
property, other than a merger of the Company in which the equityholders of the
Company immediately prior to the merger have the same proportionate ownership of
the equity value of the surviving company immediately after the merger or (ii)
any sale, lease, exchange, or other transfer (in one transaction or a series of
related transactions) of all, or substantially all, of the assets of the
Company, or (iii) the adoption of any plan or proposal for the liquidation or
dissolution of the Company; provided that the reconstitution of the Company as a
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corporation or other entity or a public offering of the equity of the Company
(or its successor) shall not constitute an Approved Transaction.
(c) "Award" means grants of Options under this Plan.
(d) "Board" means the Management Committee of the Company.
(e) "Board Change" means such time as the Initial Members and
their respective affiliates as a group cease to have the ability to elect a
majority of the members of the Board (other than the chief executive officer of
the Company and independent representatives; provided that independent
representatives shall be included in calculating whether the foregoing majority
requirement is satisfied if the representatives nominated by the Initial Members
and their respective affiliates do not constitute a majority of the committee
that selects the Board's nominees for independent representatives) and a
"person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Exchange Act) (other than the Initial Members and their respective affiliates)
has become the ultimate "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of more than 35% of the total voting power of the voting interests
of the Company on a fully diluted basis and such ownership represents a greater
percentage of the total voting power of the voting interests of the Company, on
a fully diluted basis, than is held by the Initial Members and their respective
affiliates as a group on such date.
(f) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor statute or statutes thereto. Reference to
any specific Code section shall include any successor section.
(g) "Committee" means the Committee comprised of members of the
Board appointed pursuant to Article IV.
(h) "Company" means Time Warner Telecom LLC, a limited liability
company, and any successor thereto.
(i) "Effective Date" means the date the Plan becomes effective
pursuant to Article XV.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor statute or statutes thereto.
Reference to any specific Exchange Act section shall include any successor
section.
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(k) "Fair Market Value" of Units shall mean the fair market value
of such Units as determined in good faith by the Board after consultation with
an independent appraiser or other third party deemed appropriate by the Board.
In the event of an Approved Transaction involving the sale of Interests of the
Company, the Fair Market Value of a Unit shall be based upon the price per Unit
paid by the acquiror in connection with such Approved Transaction, subject to
appropriate adjustment to reflect relative differences among the Units as
determined in good faith by the Board.
(l) "Holder" means a representative or an employee of the Company
or any of its Subsidiaries who has received an Award under this Plan. An
individual shall continue to be considered a Holder for purposes of this Plan
during the period such individual holds Units acquired pursuant to an exercise
of an Option.
(m) "Initial Members" means Time Warner Inc., MediaOne Group,
Inc., Advance/Newhouse Partnership and the affiliates of each of the foregoing.
(n) "Interest" shall mean a Class A Interest in the Company as
defined in the Operating Agreement.
(o) "Operating Agreement" shall mean the Amended and Restated
Limited Liability Company Agreement of Time Warner Telecom LLC dated July 14,
1998, as in effect from time to time.
(p) "Option" means any option granted pursuant to this Plan.
(q) "Plan" has the meaning ascribed thereto in Article I.
(r) "Subsidiary" of a person means any present or future
subsidiary of such person as such term is defined in section 425 of the Code and
any present or future trade or business, whether or not incorporated, controlled
by or under common control with such person. An entity shall be deemed a
Subsidiary of a person only for such periods as the requisite ownership or
control relationship is maintained.
(s) "Total Disability" means a permanent and total disability as
defined in section 22(e)(3) of the Code.
(t) "Unit" shall mean an Interest in the Company expressed as a
unit. As of the date of the initial grant of Options under the Plan, the Board
shall determine the notional amount of Units considered to be outstanding and
the
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percentage interest of the equity value of the Company represented by each Unit,
which amounts shall be subject to adjustment as provided in Section 3.02 and
Section 6.06. Any references herein to Units include any securities exchanged in
the conversion of Units.
ARTICLE III
Units Subject to the Plan
SECTION 3.01. Number of Units. Subject to the provisions of
Section 3.02 and Section 6.06, the maximum number of Units in respect of which
Awards may be granted under the Plan shall be determined by the Board as of the
date of the initial grant of Awards under the Plan, but shall in no event
represent more than 10% of the equity value of the Company as of that date. The
maximum number of Units in respect of which Awards may be granted during any
calendar year to any one individual under the Plan shall not exceed one-half the
number of Units that may be subject to Awards granted under the Plan under the
preceding sentence. If and to the extent that an Option shall expire, terminate
or be canceled for any reason without having been exercised, the Units subject
to such expired, terminated or canceled portion of the Option shall again become
available for purposes of the Plan.
SECTION 3.02. Adjustments. In addition to the adjustment in the
Interests as described in Section 6.06, in the event that the Board determines
that any dividend or other distribution (whether in the form of cash, Interests,
securities or other property), recapitalization, reorganization, merger,
consolidation, issuance or exchange of Interests, other ownership interests or
other securities of the Company, issuance of warrants or other rights to
purchase Interests, other ownership interests or other securities of the Company
or other similar corporate transaction or event affects the Interests such that
an adjustment is determined by the Board in its discretion to be appropriate in
order to prevent inappropriate dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the Board
may, in such manner as it may deem equitable, adjust any or all of (a) the
number of Units, other ownership interests or other securities of the Company
(or number and kind of other securities or property) with respect to which
Awards may be granted, (b) the number of Units, other ownership interests or
other securities of the Company (or number and kind of other securities or
property) subject to outstanding Awards or the percentage of Interests, other
ownership interests or
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other securities of the Company subject to Units and (c) the exercise price with
respect to any Option or, if deemed appropriate, make provision for a cash
payment to the Holder of an outstanding Option in consideration for the
cancelation of such Option. No adjustment shall be made on account of the
issuance of Interests with respect to Options.
ARTICLE IV
Administration
SECTION 4.01. Powers. The Plan shall be administered by the
Board. Subject to the express provisions of the Plan, the Board shall have
plenary authority, in its discretion, to grant Awards under the Plan and to
determine the terms and conditions (which need not be identical) of all Awards
so granted, including without limitation, (a) the individuals to whom, and the
time or times at which, Awards shall be granted or awarded, (b) the number of
Units to be subject to each Award, (c) when an Option can be exercised and
whether in whole or in installments, and (d) the form, terms and provisions of
any Agreement (which terms may be amended, subject to Article XIV).
SECTION 4.02. Factors to Consider. In making determinations
hereunder, the Board may take into account the nature of the services rendered
by the respective representatives and employees, their dedication and past
contributions to the Company and its Subsidiaries, their present and potential
contributions to the success of the Company and its Subsidiaries and such other
factors as the Board in its discretion shall deem relevant.
SECTION 4.03. Interpretation. Subject to the express provisions
of the Plan, the Board shall have plenary authority to interpret the Plan, to
prescribe, amend and rescind the rules and regulations relating to it and to
make all other determinations deemed necessary or advisable for the
administration of the Plan. The determinations of the Board on the matters
referred to in this Article IV shall be conclusive.
SECTION 4.04. Delegation to Committee. Notwithstanding anything
to the contrary contained herein, the Board may at any time, or from time to
time, appoint a Committee and delegate to such Committee the authority of the
Board to administer the Plan, including to the extent provided by the Board, the
power to further delegate such authority. Upon such appointment and delegation,
any such Committee shall have all the powers, privileges and duties of
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the Board in the administration of the Plan to the extent provided in such
delegation, except for the power to appoint members of the Committee and to
terminate, modify or amend the Plan. The Board may from time to time appoint
members of any such Committee in substitution for or in addition to members
previously appointed, may fill vacancies in such Committee and may discharge
such Committee.
Any such Committee shall hold its meetings at such times and
places as it shall deem advisable. A majority of members shall constitute a
quorum and all determinations shall be made by a majority of such quorum. Any
determination reduced to writing and signed by all of the members shall be fully
as effective as if it had been made by a majority vote at a meeting duly called
and held.
ARTICLE V
Eligibility
Awards may be made only to (a) representatives, employees,
including officers and representatives who are also employees, of, and
consultants to, the Company or any of its Subsidiaries, (b) prospective
employees of the Company or any of its Subsidiaries and (c) any other
individuals providing services to the Company or any of its Subsidiaries. The
exercise of Options granted to a prospective employee shall be conditioned upon
such person becoming an employee of the Company or any of its Subsidiaries. For
purposes of the Plan, the term "prospective employee" shall mean any person who
holds an outstanding offer of employment on specific terms from the Company or
any of its Subsidiaries. Awards may be made to employees who hold or have held
Awards under this Plan or any similar or other awards under any other plan of
the Company or its Subsidiaries.
ARTICLE VI
Options
SECTION 6.01. Option Price. The purchase price of the Units under
each Option shall be determined by the Board and set forth in the applicable
Agreement, but shall not be less than 100% of the Fair Market Value of the Unit
on the date of grant.
SECTION 6.02. Term of Options. The term of each Option shall be
for such period as the Board shall determine, as set forth in the applicable
Agreement, but not more than
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10 years from the date of grant (except as provided in Section 6.08(b)).
SECTION 6.03. Exercise of Options. An Option granted under the
Plan shall become (and remain) exercisable during the term of the Option to the
extent provided in the applicable Agreement and this Plan and, unless the
Agreement otherwise provides, may be exercised to the extent exercisable, in
whole or in part, at any time and from time to time during such term; provided,
however, that subsequent to the grant of an Option, the Board, at any time
before complete termination of such Option, may accelerate the time or times at
which such Option may be exercised in whole or in part (without reducing the
term of such Option). The Agreement may contain conditions precedent to the
exercisability of Options, including without limitation, the achievement of
minimum performance criteria.
SECTION 6.04. Manner of Exercise. Payment of the Option purchase
price shall be made in cash or in whole Units already owned by the person
exercising an Option or, partly in cash and partly in such Units; provided,
however, that such payment may be made in whole or in part in Units held for six
months and only if and to the extent permitted by the applicable Agreement. In
addition, before the occurrence of an IPO (as defined below), the Company may,
in its sole discretion, lend, on a full recourse basis, funds sufficient to pay
any applicable exercise price; provided that any such loan shall (i) be made
only in the event of the Holder's death or the Holder's termination of
employment by the Company without cause (as determined by the Board), (ii) be
made at commercial rates and (iii) be payable in full by the borrower on the
earliest to occur of (a) the six month anniversary of the date of exercise, (b)
30 days after an IPO or (c) the sale of the Unit(s) acquired upon exercise of
the Option. Such an Option shall be exercised by written notice to the Company
upon such terms and conditions as provided in the Agreement. The Company shall
effect the transfer of the Units purchased under the Option as soon as
practicable. No Holder or other person exercising an Option shall have any of
the rights of a Unitholder of the Company with respect to Units subject to an
Option granted under the Plan until due exercise and full payment has been made.
SECTION 6.05. Limited Transferability of Options. Except as set
forth in this Section 6.05 and Article XXI, Options shall not be transferable
other than by will or the laws of descent and distribution, and Options may be
exercised during the lifetime of the Holder thereof only by such Holder (or his
or her court appointed legal
7
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representative). The Agreement may provide that Options are transferable by gift
to such persons or entities and upon such terms and conditions specified in the
Agreement.
SECTION 6.06. Adjustment of Percentage of Interests Subject to
Units. Upon the issuance or redemption of Interests in the Company, the number
of Units available under the Plan and the number of Units subject to outstanding
Options shall be equitably adjusted as determined by the Board in its sole
discretion to prevent inappropriate dilution or enlargement of the economic
interest represented by such Units.
SECTION 6.07. Restrictions. As a condition to the exercise of an
Option, the Holder will be required to become a party to the Operating Agreement
and the Stockholders Agreement (as defined in the Operating Agreement) and the
Interests acquired upon exercise of the Option will be held subject in all
respects to the terms and conditions of the Operating Agreement and Stockholders
Agreement. In addition, certificates representing Interests issued upon exercise
of Options shall bear a restrictive legend to the effect that transferability of
such Interests is subject to the restrictions contained in the Plan and the
applicable Agreement.
SECTION 6.08. Special Exercise Delay/Extension of Options. The
provisions of this Section 6.08 shall apply to an Option unless the applicable
Option Agreement otherwise provides.
(a) An otherwise vested Option shall not be exercisable until the
"Liquidity Date" which shall be the earlier of (i) an initial public
offering of equity securities (an "IPO") of the Company or a successor
thereto and (ii) the first anniversary of the initial grant of Options
under the Plan; provided that the Liquidity Date may be postponed at the
discretion of the Board, to comply with applicable securities laws or,
prior to an IPO, to avoid the need for the Company to register the
Interests under the securities laws.
(b) If the vested portion of an Option would expire when the
Liquidity Date has not yet occurred, the expiration date of such vested
portion shall be extended until the later of (i) 30 days after the
Liquidity Date or (ii) the regularly scheduled expiration date.
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(c) Prior to an IPO, vested Options may be exercised only during
the 30-day period starting on each Communication Date.
SECTION 6.09. Section 83(b) election. Unless the Board determines
otherwise, an individual exercising an Option will be required to make a timely,
valid election under section 83(b) of the Code.
SECTION 6.10. Tax Treatment of Exercise. Solely for purposes of
determining the appropriate tax treatment of the Members and the Holder, upon
exercise of an Option, a Holder will be treated as if the Company paid him or
her an amount equal to the aggregate difference between the exercise price and
the Fair Market Value of the Units subject to the Option and the Holder then
purchased from the Company for cash the applicable number of Units at the
then-current Fair Market Value of such Units.
SECTION 6.11 Value Determinations. The Company shall determine
the Fair Market Value of the Units as of December 31 and June 30 of each year
(each, a "Valuation Date"). Such Fair Market Value shall be communicated to
Holders as soon as practicable following each Valuation Date (each such date, a
"Communication Date").
ARTICLE VII
Acceleration of Options
Notwithstanding any contrary waiting period or installment period
in any Agreement or in the Plan, or unless the applicable Agreement provides
otherwise, if a Holder's employment shall terminate by reason of death or Total
Disability, or in the event of any Approved Transaction or Board Change each
outstanding Option granted under the Plan shall immediately become exercisable
in full in respect of the aggregate number of Units covered thereby.
ARTICLE VIII
Termination of Employment
SECTION 8.01. General. If a Holder's employment shall terminate
prior to the complete exercise of an Option, then such Option shall thereafter
be exercisable in accordance with the provisions of the applicable Agreement
(including the provisions of any other agreement referred to in the Agreement);
provided, however, that (a) no Option may be exercised after the scheduled
expiration date of such Option; (b) if the Holder's employment terminates by
reason
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of death or Total Disability, Options shall remain exercisable for a period of
at least one year following such termination (but not later than the scheduled
expiration of such Option); and (c) any termination by the employing company for
cause will be treated in accordance with the provisions of Section 8.02.
SECTION 8.02. Termination for Cause. If a Holder's employment
with the Company or any of its Subsidiaries shall be terminated for cause, by
the Company or such Subsidiary prior to the exercise of any Option, then all
Options held by such Holder and any permitted transferee pursuant to Section
6.05 shall immediately terminate. For the purposes of this Section 8.02, cause
shall have the meaning ascribed thereto in any employment agreement to which
such Holder is a party. In the absence of an employment agreement, cause shall
include but not be limited to, insubordination, dishonesty, incompetence, moral
turpitude, other misconduct of any kind and the refusal to perform his duties
and responsibilities for any reason other than illness or incapacity; provided,
however, that if such termination occurs within 12 months after an Approved
Transaction or Board Change, termination for cause in the absence of an
employment agreement shall mean only a felony conviction for fraud,
misappropriation or embezzlement.
SECTION 8.03. Miscellaneous. The Board may determine whether any
given leave of absence constitutes a termination of employment. Awards made
under the Plan shall not be affected by any change of employment so long as the
Holder continues to be an employee of the Company or one of its Subsidiaries.
ARTICLE IX
Right of Company to Terminate Employment
Nothing contained in the Plan or in any Award shall confer on any
Holder any right to continue in the employ of the Company or any of its
Subsidiaries or interfere in any way with the right of the Company or a
Subsidiary to terminate the employment of the Holder at any time, with or
without cause; subject, however, to the provisions of any employment agreement
between the Holder and the Company or any of its Subsidiaries.
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ARTICLE X
Nonalienation of Benefits
Except as specifically provided in Section 6.05 and Article XXI,
no right or benefit under the Plan shall be subject to anticipation, alienation,
sale, assignment, hypothecation, pledge, exchange, transfer, encumbrance or
charge, and any attempt to anticipate, alienate, sell, assign, hypothecate,
pledge, exchange, transfer, encumber or charge the same shall be void. No right
or benefit hereunder shall in any manner be liable for or subject to the debts,
contracts, liabilities or torts of the person entitled to such benefits.
ARTICLE XI
Written Agreement
Each grant of an Option shall be evidenced by an Option Agreement
in such form and containing such terms and provisions not inconsistent with the
provisions of the Plan as the Board from time to time shall approve; provided,
however, that such Awards shall be evidenced by a single agreement. The
effective date of the granting of an Award shall be the date on which the Board
approves such grant. Each grantee of an Option shall be notified promptly of
such grant and a written Agreement shall be promptly executed and delivered by
the Company and the grantee; provided that such grant of Options shall terminate
if such written Agreement is not signed by such grantee (or his attorney) and
delivered to the Company within 90 days after the date the Agreement is sent to
such grantee for signature. Any such written Agreement may contain (but shall
not be required to contain) such provisions as the Board deems appropriate to
ensure that the penalty provisions of section 4999 of the Code will not apply to
any stock or cash received from the Company or any of its Subsidiaries by the
Holder or a transferee of such Holder if the Award, or any part thereof, has
been transferred pursuant to Section 6.05 or Article XXI.
ARTICLE XII
Right of First Refusal
The Agreement may contain such provisions as the Board shall
determine to the effect that if a Holder, or such other person exercising an
Option, elects to sell all or any Units that such Holder or other person
acquired upon the exercise of an Option awarded under the Plan, then such Holder
or other person shall not sell such Units unless such
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Holder or other person shall have first offered in writing to sell such Units to
the Company at Fair Market Value on a date specified in such offer (which date
shall be at least three business days and not more than 10 business days
following the date of such offer). If the Company does not accept such offer
within 10 days, the Units may be sold on terms no more favorable than those
offered to the Company. If the Units (i) are not sold within 10 days of the date
the Company declined to purchase the Units or (ii) would be sold on terms more
favorable than those offered to the Company, the holder of the Units must again
offer the Units for sale to the Company in accordance with this Article XII
before any subsequent sale of such Units. Any transfer of Units that occurs
after any violation of this Article XII shall be null and void.
ARTICLE XIII
Put Rights and Call Rights
SECTION 13.01. Recurring Put Rights. (a) Prior to any IPO, if a
Holder has exercised an Option and held the Units acquired upon exercise for a
period of more than six months, such Holder shall have the right to sell to the
Company all or any portion of such Units.
(b) The put right may be exercised only during the 30-day period
starting on each Communication Date, at fair market value determined as of the
preceding Valuation Date; provided that, unless otherwise determined by the
Board, with respect to any calendar year the Company shall not be required to
purchase Units issued pursuant to the Plan with an aggregate value in excess of
$20,000,000 (the "Put Limit"). To the extent Units with a value in excess of the
Put Limit have been put to the Company, the Company shall purchase a pro rata
share of the Units put to the Company by each individual.
(c) The put right will not be available to any Holder who is
terminated for cause.
(d) Prompt payment in respect of the put right will be due,
without interest.
(e) The determination of fair market value shall be made by the
Board in good faith. Such determination shall be made on a going concern basis
and a minority interest discount shall not be applied in assigning a value to
the Units that are being put back to the Company.
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(f) Notwithstanding the foregoing, the Company shall not be
obligated to take any action or make any payment in satisfaction of a Holder's
exercise of a put right (the Company being hereinafter referred to as the "Put
Obligor") (i) if an event of default should then exist and be continuing under
the terms of any agreement for indebtedness for borrowed money to which the Put
Obligor or any of its subsidiaries is a party at such time or (ii) if such
action or payment would constitute a default or an event of default or result in
a mandatory prepayment requirement under the terms of any agreement for
indebtedness for borrowed money to which the Put Obligor or any of its
subsidiaries is a party at such time (each a "Financing Limitation")
(g) If the Put Obligor is unable to make payments in respect of
the exercise of a put right due to a Financing Limitation, the Put Obligor will
make payment of the Put Date Value at the earliest practicable date following
the date when such payment would no longer contravene a Financing Limitation,
together with interest at the prime rate from the Scheduled Payment Date to the
date of payment by the Put Obligor.
SECTION 13.02. Recurring Call Rights.
(a) Prior to an IPO, if a Holder whose employment has terminated
for any reason holds Units of the Company acquired upon the exercise of an
Option, the Company may, in its discretion, purchase all or any number of such
Units that have been held by the Holder for a period of more than six months.
(b) The call right may be exercised only during the 30-day period
starting on each Communication Date.
(c) The purchase price for called Units shall be the fair market
value as determined by the Board as of the preceding Valuation Date, as
applicable, and shall be determined under the principles governing the
determination of fair market value for purposes of the put right in Section
13.01 of this Plan.
ARTICLE XIV
Termination And Amendment
SECTION 14.01. General. Unless the Plan shall theretofore have
been terminated as hereinafter provided, no Awards may be made under the Plan on
or after the tenth anniversary of the Effective Date. The Board may at any time
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prior to the tenth anniversary of the Effective Date terminate the Plan, and the
Board may at any time modify or amend the Plan in such respects as it shall deem
advisable.
SECTION 14.02. Modification. No termination, modification or
amendment of the Plan may, without the consent of the person to whom any Award
shall theretofore have been granted (or a transferee of such person if the
Award, or any part thereof, has been transferred pursuant to Section 6.05 or
Article XXI), adversely affect the rights of such person with respect to such
Award. No modification, extension, renewal or other change in any Award granted
under the Plan shall be made after the grant of such Award, unless the same is
consistent with the provisions of the Plan. With the consent of the Holder (or a
transferee of such Holder if the Award, or any part thereof, has been
transferred pursuant to Section 6.05 or Article XXI) and subject to the terms
and conditions of the Plan (including Section 14.01), the Board may amend
outstanding Agreements with any Holder (or any such transferee), including,
without limitation, any amendment which would (a) accelerate the time or times
at which the Award may be exercised and/or (b) extend the scheduled expiration
date of the Award. Without limiting the generality of the foregoing, the Board
may but solely with the Holder's consent, agree to cancel any Award under the
Plan held by such Holder and issue a new Award in substitution therefor;
provided that the Award so substituted shall satisfy all of the requirements of
the Plan as of the date such new Award is made.
SECTION 14.03. Initial Public Offering. (a) Upon the occurrence
of an Initial Public Offering ("IPO") of stock by the Company or a successor,
the public corporation shall assume this Plan and any outstanding Options in
such manner as the Board shall determine to be equitable and consistent with the
purposes of the Plan. The Board shall, in its discretion, determine the period
during which the fair market value of the equity interests subject to the
Options are determined for purposes of this Section 14.03.
(b) The Board shall have the right to require all Holders to
participate in a sale or merger transaction and to sell their Units to a third
party purchaser in connection with such sale or merger. Such right shall be
exercisable by written notice (the "Buyout Notice") given to each Holder which
shall state (i) that there has been a proposal to effect the sale of the
Interests of every Member of the Company to such third party purchaser, (ii) the
proposed purchase price per Unit to be paid by the third party purchaser for the
Interests of all of the Members, and
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(iii) the name of the third party purchaser, and to which shall be attached a
copy of all writings between such selling Member and the other parties to such
transaction necessary to establish the terms of such transaction. Each such
Holder agrees that, upon receipt of a Buyout Notice, each such Holder shall be
obligated to sell his Option Interests upon the terms and conditions of such
transaction (and otherwise take all reasonably necessary action to cause
consummation of the proposed transaction, including voting any such Option
Interest in favor of such transaction). The third party purchaser shall furnish
evidence reasonably satisfactory to the Board to the effect that it has the
financial ability to consummate the proposed purchase of the Interests of all of
the Members. For purposes of this paragraph, "Holder" means a person who holds
an unexercised Option or who holds an Interest acquired upon exercise of an
Option. The term "Option Interest" means either an Option or an Interest
acquired pursuant to exercise of an Option.
SECTION 14.04. Corporate Reconstitution. If the Company's
business is reconstituted in corporate form, outstanding Options shall be
assumed by the successor corporation in accordance with the principles set forth
in Section 14.03.
ARTICLE XV
Effectiveness of the Plan
The Plan shall become effective upon approval by the affirmative
vote of a majority of the Members of the Company entitled to vote thereon.
ARTICLE XVI
Government and Other Regulations
The obligation of the Company with respect to Awards shall be
subject to all applicable laws, rules and regulations and such approvals by any
governmental agencies as may be required, including, without limitation, the
effectiveness of any registration statement required under the Securities Act of
1933, and the rules and regulations of any applicable securities exchange.
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ARTICLE XVII
Withholding
The Company's obligation to deliver Units in respect of any Award
under the Plan shall be subject to applicable federal, state and local tax
withholding requirements. Federal, state and local withholding taxes paid upon
the exercise of any Option may be paid in Units upon such terms and conditions
as the Board shall determine; provided, however, that the Board in its sole
discretion may disapprove such payment and require that such taxes be paid in
cash.
ARTICLE XVIII
Separability
If any of the terms or provisions of this Plan conflict with the
requirements of applicable law or applicable rules and regulations thereunder,
including the applicable requirements, if any, of section 162(m) of the Code or
Rule 16b-3 under the Exchange Act, then such terms or provisions shall be deemed
inoperative to the extent necessary to avoid the conflict with applicable law,
or applicable rules and regulations, without invalidating the remaining
provisions hereof.
ARTICLE XIX
Non-Exclusivity of the Plan
Neither the adoption of the Plan by the Board nor the submission
of the Plan to the Members of the Company for approval shall be construed as
creating any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and the awarding of stock and cash otherwise than
under the Plan, and such arrangements may be either generally applicable or
applicable only in specific cases.
ARTICLE XX
Exclusion from Pension and Profit-Sharing Computation.
By acceptance of an Award, each Holder shall be deemed to have
agreed that such Award is special incentive compensation that will not be taken
into account, in any manner, as salary, compensation or bonus in determining the
amount of any payment under any pension, retirement or other
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employee benefit plan of the Company or any of its Subsidiaries. In addition,
each beneficiary of a deceased Holder shall be deemed to have agreed that such
Award will not affect the amount of any life insurance coverage, if any,
provided by the Company or any of its Subsidiaries on the life of the Holder
which is payable to such beneficiary under any life insurance plan covering
employees of the Company or any of its Subsidiaries.
ARTICLE XXI
Beneficiaries
Each Holder may designate any person(s) or legal entity(ies),
including his or her estate, as his or her beneficiary under the Plan. Such
designation shall be made in writing on a form filed with the Secretary of the
Company or his or her designee and may be revoked or changed by such Holder at
any time by filing written notice of such revocation or change with the
Secretary of the Company or his or her designee. If no person shall be
designated by a Holder as his or her beneficiary or if no person designated as a
beneficiary survives such Holder, the Holder's beneficiary shall be his or her
estate.
ARTICLE XXII
Governing Law
The Plan shall be governed by, and construed in accordance with,
the laws of the State of New York.
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MASTER TERMS AND CONDITIONS
CAPACITY LICENSE AGREEMENT
DATED AS OF JULY 1, 1998
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These MASTER TERMS AND CONDITIONS (the "Terms") dated as of July
1 1998 shall govern each CAPACITY LICENSE AGREEMENT (each, an "Agreement")
entered into between an affiliated local cable system operator of Time Warner
Cable, a division of Time Warner Entertainment Company, L.P., which affiliate is
acting as licensor of fiberoptic cable capacity ("Licensor"), and an affiliate
of Time Warner Telecom LLC, which affiliate is acting as Licensee of fiberoptic
cable capacity ("Licensee"); each of which such Agreements shall expressly
incorporate the terms and conditions hereof by reference.
RECITALS
WHEREAS, Licensor owns fiberoptic facilities (the "System")
within the geographic area described in the Agreement (the "Service Area"); and
WHEREAS, Licensee desires to provide certain telecommunications
services as specified herein (the "Telecommunications Services") within the
Service Area; and
WHEREAS, subject to the terms and conditions set forth below,
Licensor desires to license the use of certain fiber capacity over the System to
Licensee, and Licensee desires to license the use of such capacity, to enable it
to provide such Telecommunications Services in the Service Area;
NOW THEREFORE, in consideration of the foregoing, and of the
promises and covenants contained in this Agreement, the parties agree as
follows:
1. License of Initial Capacity.
(a) Subject to the terms and conditions of the Agreement,
Licensor hereby licenses to Licensee the exclusive use of all capacity (the
"Initial Capacity") of the fiberoptic facilities described on Schedule 1
attached to the Agreement (the "Initial Facilities"). Licensee acknowledges that
it has accepted all the Initial Capacity as meeting the Acceptance Criteria set
forth herein.
(b) The description of the Initial Facilities set forth on
Schedule 1 defines fiber counts and either fiber segment routes or "logical
rings". Licensor agrees to deliver copies to Licensee of specific network
information regarding the Initial Facilities from its own maps or schematic
documentation files upon Licensee's request.
2. Licenses of Additional Capacity.
(a) Requests.
(i) At any time during the term of this Agreement,
Licensee may request Licensor to construct fiber optic facilities and/or license
to Licensee the capacity ("Additional Capacity"and together with the Initial
Capacity, the "Capacity") of any of Licensor's fiber optic facilities
("Additional Facilities" and together with the Initial Facilities,
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the "Facilities"), whether then existing or to be constructed. Licensor will
not, however, be obligated to fulfill any such request.
(b) Request Submission. Each Request shall contain such
information, such as the routes, the location of splice points, network
architecture and diversity requirements, and the proposed commencement date, as
Licensor may reasonably request to assist it in determining whether it will
construct and/or license the capacity of Additional Facilities. If Licensor
agrees to fulfill any Request, it shall deliver to Licensee a Cost Estimate
Schedule, in the form of Exhibit A, setting forth its good faith estimate of the
Allocated Cost (as defined on Annex A) of constructing such Additional
Facilities.
(c) Request Procedures. Upon Licensor's agreement to license
to Licensee Additional Capacity and Licensee's acceptance of Licensor's estimate
of the Allocated Cost thereof (which acceptance shall be evidenced by Licensee's
execution of the Cost Estimate Schedule and its return of same to such Licensor,
not later than twenty-one (21) days after the date specified on such Cost
Estimate Schedule; Licensee's failure to timely return any such Cost Estimate
Schedule shall render its Request null and void), Licensor shall seek to obtain
any required permits or similar authorizations and thereupon commence
construction of such Facilities for Licensee. Upon agreement by Licensor and
Licensee as to the license of Additional Capacity, and Licensee's acceptance of
Additional Capacity pursuant to Section 2(d) below, the parties shall execute a
Final Cost Schedule setting forth the final information regarding such
Additional Capacity as is required by the form of Exhibit B. On the effective
date or dates set forth in such Final Cost Schedule (or if not specified
therein, the date on which the Additional Capacity is accepted by Licensee in
accordance with Section 2(d) below or, if earlier, the date Licensee commences
use of such Additional Capacity), such facilities shall be deemed to be
Additional Facilities and the capacity thereof Additional Capacity, for purposes
of this Agreement. Licensee's payments for any Additional Capacity shall be
calculated as set forth in Annex A attached hereto, and the amount of such
payments shall be set forth on the Final Cost Schedule relating thereto.
(d) Acceptance Criteria. Upon its determination that any
Additional Capacity is ready for acceptance by Licensee, Licensor shall notify
Licensee (not less than two business days in advance of the proposed test) that
it will conduct a test (the "Acceptance Test") of the Additional Capacity, which
Acceptance Test will be conducted in accordance with the procedures set forth on
Annex B hereto. Annex B may be amended from time to time by mutual agreement of
the parties, provided that any amendments therein shall apply only to Additional
Capacity that is agreed to be licensed after implementation of such amendments.
The parties acknowledge that the test provided on Annex B is based on current
fiber optic telecommunications industry standards for technical and performance
specifications, and that any amendments thereto will be designed to reflect
changes in such standards from time to time (the "Specifications"). Licensee
shall have the right to be present during, and to participate in, the Acceptance
Test. Upon completion of the Acceptance Test, Licensor shall provide Licensee
with a test completion certificate in the form of Annex C appropriately
completed. Licensee shall then have ten days to reject the Additional Capacity
but only if test results do not meet Specifications. If Licensee fails to notify
Licensor of its rejection of the Additional Capacity within such period,
Licensee shall be deemed to have accepted the Additional Capacity as of
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the last day of such ten day period. Licensee shall have the right, by giving
written notice to Licensor within such ten day period, to conduct its own test
of the Additional Capacity within such period, and Licensor and Licensee shall
cooperate with each other to conduct such tests in a manner that does not
unreasonably interfere with Licensor's operations. Such tests shall be conducted
at a time that is mutually convenient to Licensor and Licensee, and Licensor
shall have the right to be present during and to participate in such test.
Licensee shall have five days after completion of the re-test to reject the
Additional Capacity, but only if test results do not meet the Specifications. If
Licensee accepts the Additional Capacity or is deemed to have accepted the
Additional Capacity, Licensor and Licensee shall execute and deliver a Final
Cost Schedule with respect to such Additional Capacity. If Licensee rejects the
Additional Capacity, it shall immediately itemize its reasons for the rejection
in writing, and Licensor and Licensee shall make commercially reasonable efforts
to make the Additional Capacity acceptable (including, if reasonable, partial
acceptance). Following any such cure by Licensor to Licensee's reasonable
satisfaction, Licensee shall promptly accept such Additional Capacity.
3. License Subject to Authorizations. Notwithstanding anything herein
to the contrary, all rights granted to Licensee and obligations of Licensor
hereunder are expressly subject to each of Licensor's authorizations to operate
the System, including without limitation governmental or municipal approval,
franchise or authorization, and to each right-of-way agreement, pole attachment
agreement, conduit agreement, lease, license, consent or other agreement
relating to the Capacity.
4. Term. This Agreement shall commence on the date hereof and shall
terminate, with respect to any Capacity, on the earliest of (a) the date that
the legal ability of the Licensor (or its successor or assign) to operate the
Facilities on which such Capacity is provided in the Service Area either
terminates or is materially impaired, (b) the date this Agreement terminates
with respect to such Capacity pursuant to Sections 18, 19, 25 or 26 hereof or
(c) the thirtieth anniversary of the effective date of this Agreement.
5. Payments.
(a) Calculation and Timing of Payments.
(i) Initial Capacity. Notwithstanding anything in this
Agreement to the contrary, the parties acknowledge and agree that Licensor (or
its parent entity) has made a capital contribution to Licensee in the amount
attributable to the payments which would have been due from Licensee pursuant to
this Agreement for the construction costs of the Initial Capacity. Accordingly,
Licensee shall not be obligated to make any payments to Licensor in respect of
the Initial Capacity pursuant to this Section 5(a)(i) or otherwise for the costs
of construction of the Initial Capacity. All other payments provided for in this
Agreement with respect to the Initial Capacity continue to be due and payable as
provided for herein.
(ii) Additional Capacity. For any Additional Capacity,
Licensee shall pay Licensor two payments. The first payment with respect to any
such Additional Capacity shall be equal to one-half of the Cost Estimate and
shall be paid upon Licensor's and Licensee's execution of the Cost Estimate
Schedule pursuant to Section 2(c) with respect to such Additional Capacity. The
second payment equal to the remaining balance shall be made within forty-five
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(45) days after Licensor and Licensee have executed a Final Cost Schedule in
respect of such Additional Capacity pursuant to Section 2(c). After the second
payment has been made in respect of any such Additional Capacity, Licensee shall
not be obligated to make any additional payments to Licensor, except as may be
otherwise specified in Annex D or elsewhere in this Agreement, in respect of
such Additional Capacity, notwithstanding that this Agreement may continue in
full force and effect thereafter.
(iii) Calculation of Payments. The Parties agree that all
payments set forth on any Cost Estimate Schedule or Final Cost Schedule shall be
calculated in accordance with the procedures set forth in Annex A attached
hereto.
(b) Inspection of Records. The amount of the payments set
forth on the Final Cost Schedule relating to any Additional Capacity shall be
based on the good faith calculations of the Licensor of the actual costs of
constructing such Additional Capacity. Licensor agrees that it will, for a
period of one year after the acceptance by Licensee of any Additional Capacity,
maintain reasonably comprehensive records relating to such costs. Licensor will
permit Licensee at any time during such period upon reasonable written notice
and during normal business hours to examine all of such records, to make copies
and extracts therefrom and to discuss such records and other matters relating to
such Additional Capacity with the respective officers, employees and independent
public accountants and other agents of such Licensor. If any discrepancy is
found in such records which leads Licensee to believe in good faith that the
actual cost of constructing the Additional Capacity was less than Licensor's
calculation of such cost as reflected on any Final Cost Schedule, Licensor and
Licensee shall negotiate in good faith to determine whether an overpayment has
been made by Licensee, and if so, then Licensor shall promptly pay to Licensee
an amount equal to the entire amount of such overpayment. Any records of such
Licensor audited by Licensee shall constitute proprietary information under
Section 20 of this Agreement, irrespective of the lack of restrictive notices or
other express communications to the effect that the information in such records
is proprietary.
6. Taxes and Expenses. Licensee shall pay (a) any sales tax, property
tax, transfer tax, use tax, gross receipts tax, excise tax, business and
occupation tax, or other similar Federal, state and local taxes or charges
(excluding taxes imposed on Licensor's net income) imposed by any governmental
authority upon Licensor or its facilities or Licensee in connection with any
payments due from Licensee to Licensor hereunder, or as a result of Licensee's
activities under this Agreement, or imposed upon or with respect to the Capacity
or the Facilities, (b) any additional franchise fees imposed upon or collected
from Licensor or Licensee by any franchising authority as a result of Licensee's
activities under this Agreement (which payment shall be grossed up to make
Licensor whole for any additional such fees owed with respect to Licensee's
payment), and (c) without duplication of the payments required pursuant to
Section 12 and Annex D attached hereto, for its share on an allocated basis of
pole attachment fees, conduit fees and other out-of-pocket rights-of-way
expenses incurred by Licensor in connection with the Facilities, as follows.
Where Facilities are the only facilities utilizing pole attachment rights,
conduit rights or other rights-of-way, Licensee shall bear all the fees relating
thereto. Where there are no Facilities included in Licensor's facilities
utilizing pole attachments rights, conduit rights or other rights-of-way,
Licensor shall bear all the fees relating thereto. Where Facilities and other
facilities of Licensor utilize pole attachment rights, conduits or other rights
of way, Licensor and Licensee shall each bear 50% of the out-of-pocket fees
relating thereto. Further, if and to the
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extent that Licensor is required to pay incremental pole, conduit or other
right-of-way out-of-pocket fees solely due to the nature of Licensee's use of
the Capacity or Facilities, Licensee shall reimburse Licensor for all such
incremental fees. (If at any time Licensor is required to pay such incremental
fees due to a use of the Facilities or other facilities that is made by both
Licensor and Licensee or any third party exercising rights grants by or through
Licensor, the incremental fees shall be allocated to Licensee according to the
relative proportion of the number of fibers subject to such use). Licensee shall
also pay, or reimburse Licensor for, all fines, penalties, late fees or similar
payments or interest charged on late payments to the extent incurred due to
Licensee's failure to pay amounts owed by it hereunder promptly.
7. Use of Capacity. (a) Licensee shall not use the Capacity in
violation of this Agreement, any law, rule, regulation or order of any
governmental authority having jurisdiction, or any franchise, license, agreement
or certificate relating to the System or Licensor's franchises, unless the
validity thereof is being contested in good faith and by appropriate proceedings
(but only so long as such proceedings and Licensee's use of the Capacity do not,
in Licensor's reasonable opinion, involve any risk of the sale, forfeiture, or
loss of the System, any Authorizations (as defined in Section 16(a)(i)), or any
part thereof or any interest therein). Licensee shall not do or permit anything
to be done with respect to the Capacity that would invalidate or conflict with
any insurance policies maintained by Licensor or Licensee covering the Capacity
or the Facilities.
(b) Licensee shall have exclusive control over the
Telecommunications Services it provides over the Capacity, including, without
limitation, customer premise and nodal electronics, sales and marketing,
electronics maintenance and monitoring, and billing and collection.
(c) Licensee shall not use the Capacity, directly or
indirectly (through a subsidiary or affiliate of Licensee), to engage in the
business of providing, offering, packaging, marketing, promoting, or branding
(alone or jointly with or as an agent for other parties) any Residential
Services or to engage in the business of producing, packaging, distributing,
marketing, hosting or otherwise providing, offering, promoting or branding
Content Services.
(d) (i) "Residential Services" shall mean wireline
telecommunications services or other services (including, without limitation,
data services) of any nature provided directly or indirectly to third party
end-users at address locations other than business locations. "Business
locations" shall mean (A) address locations that are used solely for business
purposes, including, without limitation, public spaces within business locations
and governmental offices; and (B) hotels, hospitals, jails and the business
offices of residential facilities within educational institutions and within
nursing and assisted living complexes.
(ii) "Content Services" means entertainment, information
or other content services, whether fixed or interactive, or any services
incidental thereto; provided, however, that Content Services shall not include
acting solely as a carrier of video, audio or data of unaffiliated third parties
by providing transport services, so long as Licensee has no other direct or
indirect pecuniary interest in the transmitted information or content.
8. Non-Exclusivity. Nothing in this Agreement shall be construed
to require
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Licensor to be Licensee's exclusive provider of, or contractor with respect to,
fiberoptic facilities or equipment in the Service Area or to limit in any way
Licensee's right in its own name to apply for and obtain municipal franchises,
authorizations and permits, to construct, maintain and own fiberoptic
facilities, and to apply for and obtain pole attachment agreements, conduit
licenses or other rights-of-way agreements from other rights-of-way providers.
Further, nothing in this Agreement shall imply or require that Licensee be
Licensor's exclusive licensee or lessee of network facilities or capacity.
9. Use of Licensee Capacity by Licensor. (a) If Licensee obtains
operating authority, rights-of-way, building entrance facilities, pole
attachment agreements or conduit rights in the Service Area, constructs and owns
fiber optic facilities in the Service Area and determines, in its sole
discretion, that it has capacity in such facilities, it will, upon request of
Licensor, negotiate in good faith with Licensor for (i) the license of capacity
to Licensor for the provision of cable television and any other services, such
license to the extent possible to include all the applicable terms and
provisions (including, without limitation, Annexes A and D) of this Agreement as
if Licensee were Licensor and Licensor were Licensee hereunder or (ii) the
provision to Licensor of the kinds of additional facilities services specified
in Section 10 hereof.
(b) In furtherance and not in limitation of the foregoing, with regard
to building entrance or riser facilities constructed by Licensee after the date
hereof (but prior to the fifth anniversary of the date of this Agreement),
Licensee shall:
(i) Notify Licensor of buildings in which it obtains rights of
entry or access;
(ii) Use reasonable efforts to assist Licensor in obtaining
similar rights of entry or access; and
(iii) Upon Licensor's request, construct (with the "Allocated
Cost" of such construction, as defined in Annex A, to be paid by Licensor) and
install up to a one-half inch diameter of coaxial cable or fiber cable bundle
for Licensor's ownership (or, if Licensor cannot obtain the necessary rights of
entry or access, Licensee shall license to Licensor the capacity of such fibers,
as described above in Section 9(a)(i)).
10. Other Services. To the extent Licensor is unable or unwilling to
provide requested Additional Capacity to Licensee pursuant to Section 2 above,
Licensor will, upon request of Licensee, provide Licensee with the following
alternative services, subject to agreement in advance in writing upon
compensation Licensor is to receive with respect thereto, and subject to and in
accordance with any applicable legal, contractual, regulatory or technical
limitations:
(a) permit Licensee (subject to Section 13) to overlash
Licensor owned facilities (which shall become Additional Facilities hereunder)
on poles on which Licensor's facilities are located;
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(b) make available to Licensee any spare capacity, determined
in Licensor's sole discretion, in conduits, ducts, inner ducts, building entry
facilities or building riser facilities owned or leased by such Licensor; and
(c) use reasonable efforts to obtain, in Licensor's name, pole
attachment agreements or conduit licenses and to sublet or assign such
agreements or licenses to Licensee to permit Licensee to construct facilities.
11 Splicing Services. (a) Unless otherwise agreed between the parties
or as provided below, Licensor will perform fiber splicing services on any
Facilities on which Capacity is licensed hereunder. Any splice request shall be
in writing and shall contain information as to the general location of the
desired splice point, number of fibers to be spliced and desired completion
date. Splicing shall occur only at splice points designated or approved in
writing by Licensor.
(b) Where the Facilities to be spliced are in a separate
sheath from any other Licensor fibers ("separate sheath Facilities"), Licensor
shall use commercially reasonable efforts to mark within six months of the date
of this Agreement the separate sheath Facilities' splice containers for ease of
identification. After such marking is completed, Licensee shall have 24- hour,
365 days access to each splice point for separate sheath Facilities for the
purpose of splicing and maintaining splices of such Facilities.
(c) Licensor and Licensee shall agree upon a set of request
and notification procedures, and response times and procedures (to be subject to
revision every two years), for splicing and splice maintenance (including in
emergency circumstances) where the Facilities are in a sheath shared with other
Licensor fibers ("shared sheath Facilities"). Licensee shall request, and
Licensor shall provide, splicing and maintenance services in accordance with
these procedures; provided that if Licensor fails with regard to any specific
project to provide splicing or splice maintenance service in accordance with
such procedures, Licensee shall thereupon be entitled (as its sole remedy, in
addition to Section 23) to 24-hour, 365 day access to the splice points for
shared sheath Facilities for the purpose of splicing and maintaining splices of
such Facilities with regard to such specific project only.
The compensation to Licensor for any splicing work (other than splicing
as part of construction of Additional Facilities hereunder, which shall be as
set forth in Annex A) shall be as set forth in Annex D. All splicing or
maintenance undertaken by Licensee hereunder shall be solely in accordance with
Section 13.
12. Performance and Maintenance. Licensor shall use its commercially
reasonable efforts to maintain the Facilities so that at all times each portion
of such Facilities performs in accordance with the Specifications in effect as
of the date the Capacity of such Facilities was added to this Agreement. In
consideration of the performance of such maintenance, Licensee shall pay
maintenance fees to Licensor in the amounts and at the times set forth in Annex
D. Inspection and maintenance will be provided by the Licensor or its
subcontractors unless prior arrangements have been made between Licensor and
Licensee.
13. Licensee Requirements. Notwithstanding any other provision hereof,
for any project of Licensee agreed to by Licensor that requires access to or
easements over Licensor's
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headends, facilities, network, conduit, hubsites, splice cans or other property,
Licensee shall in each instance comply with all of the following:
(a) Licensee shall only employ and permit access by a
contractor that has been specifically approved in writing by Licensor for work
within the Service Area; provided that Licensor shall not unreasonably withhold
or delay approval of any proposed contractor.
(b) Licensee shall not rearrange any Licensor facilities
(including Facilities) without Licensor's prior written consent.
(c) Licensee shall give Licensor such prior written notice of
its activity as is set forth in the Agreement and Licensor shall be entitled to
be present, at Licensee's expense, and to supervise Licensee and its agents with
respect to its activities regarding the Facilities.
(d) Licensee (or its agents or permittees) shall provide
Licensor with a diagram of the exact configuration of any splice or other work
completed. Licensor shall have no liability of any nature whatsoever hereunder
for maintenance or other work that is improperly performed due to failure of
Licensee to provide Licensor with such diagram and information.
Assuming no Facilities splice point is involved,
Licensee shall not be required to abide by the restrictions of this Section 13
with regard to its actions on customer premises locations.
14. Title. All right, title and interest in the System and the
Facilities provided by Licensor hereunder shall at all times remain exclusively
with Licensor. All right, title and interest in all facilities and associated
equipment provided by Licensee shall at all times remain exclusively with
Licensee. No such Licensee facilities and equipment shall be placed in any
public rights-of-way unless Licensee has obtained an independent right to do so
from the appropriate public authority. Except as expressly provided elsewhere in
this Agreement, Licensor shall retain full operating control and shall continue
to hold and be solely responsible for all operating authority with regard to the
System. Licensee shall hold and be responsible for all operating authority for
its facilities (other than the Facilities or Capacity) and for the provision of
any services by it, including its use of the Capacity.
15. Liens and Encumbrances. Neither party, directly or indirectly,
shall create, impose or suffer to be imposed any lien on (a) any property
interest of the other, (b) the rights or title relating thereto, or any interest
therein, or (c) this Agreement. Each party will promptly, at its own expense,
take such action as may be necessary to duly discharge any such lien.
16. Representations and Warranties.
(a) Licensor hereby represents, warrants and covenants to
Licensee as follows:
(i) Licensor has made available to Licensee true
and correct copies of each governmental or municipal approval, franchise and
authorization, right-of-way agreement, pole attachment agreement, conduit
agreement and lease, license, consent or other agreement
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relating to the Facilities and/or the Capacity thereof (all of which are
hereinafter collectively called the "Authorizations") obtained by it which
relate to Licensor's ability to license the Capacity and perform Licensor's
obligations under this Agreement.
(ii) Licensor is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or
organization, is duly authorized to do business in the jurisdiction in which the
Capacity is made available and has full organizational power and authority to
execute, deliver and perform the terms of this Agreement.
(b) Licensee hereby represents, warrants and covenants to
Licensor as follows:
(i) Licensee has made available to Licensor true and
correct copies of each Authorization obtained by it which relate to Licensee's
ability to use the Capacity and perform Licensee's obligations under this
Agreement.
(ii) Licensee is duly organized and validly existing
under the laws of its jurisdiction of organization, is authorized to do business
in the jurisdiction in which the Capacity is made available and has full
organizational power and authority to execute, deliver and perform the terms of
this Agreement.
17. Compliance with Law. Each party shall perform its respective rights
and obligations hereunder in material compliance with the Authorizations
obtained by it and all applicable laws, rules and regulations imposed by any
governmental authority.
18. Relocation of the Facilities. Licensee recognizes that, from time
to time, Licensor may elect or be required to relocate the Facilities. Where
such relocation is solely for the convenience of Licensor, Licensor shall be
solely responsible for all costs incurred to relocate the Facilities.
(Relocations requested by governmental authorities shall not be deemed for the
convenience of Licensor.) In all other cases (including street widening or
improvement projects), Licensee shall pay (a) 50% of the direct, out-of-pocket
costs of the relocation, if the project involves both Facilities and other
facilities of Licensor, or (b) 100% of the direct, out-of-pocket costs of the
relocation, if the project involves only Facilities; but in either case, only to
the extent such costs cannot be recovered from any third party. Licensee will,
however, have the option of terminating this Agreement with respect to such
Capacity and paying Licensor any as yet unpaid amounts pursuant to Section 5 and
any other amounts which are then due and payable under this Agreement (the
"Payoff Amount"). Licensor will use commercially reasonable efforts to effect
any relocation in a manner that will not cause any material interruption to
Licensee's use of the Capacity. Licensor shall use commercially reasonable
efforts to give Licensee at least six months prior notice of any relocation or
of any governmental proceedings which could reasonably be expected to result in
a relocation, or such lesser amount of notice that Licensor receives from such
governmental authority, and Licensee shall have the right to participate in any
such proceedings.
19. Condemnation and Casualty.
(a) Condemnation. If all or any portion of the Facilities
are taken for any
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<PAGE>
public or quasi-public purpose by any lawful power or authority by the exercise
of the right of condemnation or eminent domain, Licensee shall be entitled to
terminate the license of the Capacity provided hereunder on such Facilities. In
such event, both parties shall be entitled to participate in any condemnation
proceedings to seek to obtain compensation by either joint or separate awards
for the economic value of their respective interests in the Capacity or the
Facilities and will equitably share any awards as their economic interests
appear.
(b) Casualty. If all or any portion of the Facilities are made
inoperable and beyond feasible repair due to a casualty or other force majeure
event (as that term is defined in Section 27 below), Licensee shall be entitled
to terminate this Agreement with regard to the Capacity affected by such
casualty or other event. In such event, both parties shall be entitled to seek
to recover the economic value of their respective interests in the Capacity or
the Facilities (i) under any insurance policy carried by either party or their
affiliates or any third party, or (ii) in either joint or separate actions, from
any third party which may be legally responsible for causing such casualty. The
parties will equitably share any recoveries as their economic interests appear.
20. Proprietary Information. Each party acknowledges that, in the
course of the performance of this Agreement, it may have access to privileged
and proprietary information claimed to be unique, secret and confidential, and
which constitutes the exclusive property or trade secrets of the other, and the
parties acknowledge that they are in a confidential relationship with each
other. This information may be presented in documents marked with a restrictive
notice or during oral discussions, at which time representatives of the
disclosing party will specify that the information is proprietary. Information
that a party receives from the disclosing party that, while not so marked, would
be reasonably understood by the recipient as confidential or proprietary (such
as customer information) shall also be considered proprietary information
hereunder. Such information shall specifically include, but is not limited to,
this Agreement and all exhibits, annexes, attachments, schedules and addenda
hereto.
Each party agrees to maintain the confidentiality of the
proprietary information and to use the same degree of care as it uses with
regard to its own proprietary information to prevent the disclosure, publication
or unauthorized use of the proprietary information. Neither party may duplicate
or copy proprietary information of the other party other than to the extent
necessary for legitimate business uses in connection with this Agreement. A
party shall be excused from these nondisclosure provisions if (a) the
proprietary information has been or is subsequently made public other than
through a breach of this Agreement or (b) the proprietary information is
independently developed by such party or (c) the other party gives its consent
to the disclosure of the proprietary information or (d) the disclosure is
required by law, regulation or governmental or judicial authority (provided that
the compelled party gives prompt notice of such required disclosure to the
original disclosing party to enable it to obtain a protective order or other
relief). Notwithstanding anything to the contrary in this Agreement, this
provision shall survive the termination or expiration of this Agreement.
21. Indemnification.
(a) Indemnification by Licensee Licensee will indemnify and
hold harmless Licensor, its affiliates, and all officers, directors, employees,
stockholders, partners and agents of Licensor and its affiliates from and
against any and all claims, demands, costs, damages, losses,
11
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liabilities, expenses of any nature (including reasonable attorneys',
accountants', and experts' fees and disbursements), judgments, fines,
settlements and other amounts (collectively, "Damages") arising from any and all
claims, demands, actions, suits or proceedings, civil, criminal, administrative
or investigative (collectively "Claims") relating to or arising out of:
(i) the installation, maintenance or operation of
Licensee's connections to the Facilities or the conduct or management of
Licensee's business with regard to the Facilities or the connections thereto or
the Capacity thereof, except to the extent such Damages are caused or
contributed to by Licensor or its agents;
(ii) any breach by Licensee of any material
obligation or covenants under this Agreement;
(iii) any failure of any representation or warranty
made by Licensee herein to be true in any material respect as of the date made
or deemed made;
(iv) any Claim by any customer of Licensee relating
to the provision by Licensee of services to such customer, over the Capacity or
otherwise; and
(v) any Claim of any third party (other than as
described in Section 21 (b)(iv) below) resulting from the gross negligence or
wilful misconduct of Licensee.
The foregoing indemnification obligations
shall not be construed to broaden the representations and warranties of Licensee
regarding Authorizations as set forth in Section 16(b)(i).
(b) Indemnification by Licensor. Licensor will indemnify and
hold harmless Licensee, its affiliates and all officers, directors, employees,
stockholders, partners and agents of Licensee and its affiliates from and
against any and all Damages arising from any and all Claims relating to or
arising out of:
(i) The installation, maintenance or operation by
Licensor of the Facilities or the Capacity thereof or the conduct or management
of Licensor's business, except to the extent such Damages are caused or
contributed to by Licensee or its agents;
(ii) Any breach on the part of Licensor of any
material obligation or covenant under this Agreement;
(iii) Any failure of any representation or warranty
made by Licensor herein to be true in any material respect as of the date made
or deemed made; and
(iv) Any Claim by any customer of Licensor relating
to Licensor's provision of services over any facilities of which the Facilities
are a part; and
(v) Any Claim of any third party (other than as
described in Section 21 (a)(iv) above) resulting from the gross negligence or
wilful misconduct of Licensor.
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The foregoing indemnification obligations
shall not be construed to broaden the representations and warranties of Licensor
regarding Authorizations as set forth in Section 16(a)(i).
(c) Procedure. No claims for indemnification shall be made by
either party against the other unless the aggregate amount of such claim exceeds
the amount of $5,000. A person seeking indemnification hereunder shall promptly
notify the indemnifying party in writing of any Claim for which indemnification
is sought, provided that any failure to so notify the indemnifying party will
not relieve the indemnifying party from any liability or obligation which it may
have to any indemnified person except to the extent of any material prejudice to
the indemnifying party resulting from such failure.
If the facts giving rise to such indemnification
involve any actual or threatened claim or demand by or against a third party,
the indemnifying party shall be entitled to control the defense, prosecution and
settlement of such claim or demand in the name of the indemnified person, if the
indemnifying party notifies the indemnified person in writing of its intention
to do so within twenty (20) days of the receipt of such notice by the
indemnified person.
The indemnified person shall have the right, however,
to participate in such proceeding through counsel of its own choosing, which
participation shall be at its sole expense. Whether or not the indemnifying
party chooses to defend or prosecute such claim, each indemnified person which
is not the indemnifying party, shall, to the extent requested by the
indemnifying party and at the indemnifying party's expense, cooperate in the
prosecution or defense of such claim and shall furnish such records, information
and testimony and attend such conferences, discovery proceedings, hearings,
trials and appeals as may reasonably be requested in connection therewith. The
indemnifying party shall not settle any claim or assertion, unless the
indemnified party consents in writing to such settlement, which consent shall
not be unreasonably withheld and which consent shall not be withheld in
connection with any such settlement for money damages to be paid by the
indemnifying party only, which does not admit the fault of the indemnified party
and which does not impose injunctive or other equitable relief on the
indemnified party.
22. Provision of Insurance Coverage. Each Party shall, at its own
expense, secure and maintain in force, throughout the term of this Agreement,
the following insurance coverage and limits of liability with carriers
authorized to conduct business in all states in which any Facilities are
located, that have an A.M. Best rating of B+ or better:
(a) Comprehensive General Liability.
(i) Coverages to include: Products and Completed Operations
Liability, Hazards of Premises/Operations (including XCU), Blanket Contractual
Liability, Independent Contractors Liability, Fire Legal Liability, Personal
Injury (including death), and Broad Form Property Damage.
(ii) Limits of Liability: $2,000,000 per occurrence, combined
single limit for bodily injury and property damage.
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<PAGE>
(iii) With respect to any Facilities or Capacity, Licensor and
Licensee each will name the other as additional insured.
(b) Comprehensive Auto Liability.
(i) Coverage to include: Owned/Leased vehicles, Non-owned
vehicles, Hired Vehicles.
(ii) Limits of Liability: $2,000,000 per accident, combined
single limit for bodily injury and property damage.
(iii) With respect to any Facilities or Capacity, Licensor and
Licensee will name the other as additional insured.
(c) Workers' Compensation - statutory coverage and limits.
(d) Property Insurance.
(i) Coverage: All Risk to property and includes Business
Interruption. With regard to transmission and distribution lines, this coverage
may be provided through commercial insurance or a self-insured reserve fund.
(ii) Limits to be sufficient to cover full replacement cost of
Leased Facilities.
(iii) With respect to any Facilities or Capacity, Licensor and
Licensee will name the other as Loss Payee.
(e) Certificate of Insurance; Additional Conditions. With respect to
any Facilities or Capacity, Licensor and Licensee each shall provide to the
other a Certificate of Insurance evidencing all coverages outlined in this
Section 22. All such insurance obtained by either Licensor or Licensee, as the
case may be, shall require that the other be notified, in writing, at least
thirty days prior to the cancellation or adverse modification of any such
required insurance policy. Any such notification shall be required to be sent by
registered certified mail or certified courier service. The fulfilment of a
party's obligations regarding insurance coverage shall not relieve such party of
any liability hereunder or in any other way modify such party's obligations
hereunder.
23. Interruption of Service. Notwithstanding any other provision of
this Agreement, in the event of any interruption of use by Licensee of any
portion of the Capacity which causes a customer service outage through no fault
of Licensee, which interruption is the responsibility of Licensor or its agents
and is not a force majeure event, as that term is defined in Section 27,
Licensor's sole obligation shall be to provide a credit to Licensee against
Licensee's obligation to pay maintenance fees pursuant to Section 12, which
credit shall be calculated on a per occurrence basis at the lesser of (a) an
amount equal to the actual damage suffered by Licensee, and (b) the amount set
forth in the following chart:
14
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<PAGE>
<TABLE>
<CAPTION>
Length of Outage: Credit:
- ---------------- -------
<S> <C>
2 hours or less: no credit
over 2 hours to 8 hours: $20,000
over 8 hours: $50,000;
</TABLE>
provided, however, that in no event shall the amount required to be credited by
Licensor under this Section 23 in any calendar year exceed the amount payable by
Licensee to Licensor for maintenance fees pursuant to Section 12 in such year.
The remedy provided in this Section 23 shall be Licensee's sole and exclusive
remedy for outages or interruptions of service, unless such outages or
interruptions of service were caused by Licensor's willful misconduct or gross
negligence and except for the termination provisions in Sections 18, 19 and 25.
24. Events of Default. Each of the following events shall constitute an
event of default (whether any such event shall be voluntary or involuntary or
occur by operation of law or pursuant to any judgment, decree, order, rule or
regulation of any court or administrative or governmental body):
(a) the failure of Licensee to make any license payment
pursuant to Section 5 hereof within fifteen days of the due date thereof; or any
failure of Licensee to make any maintenance payment pursuant to Section 12
hereof or any other payment due hereunder within fifteen days after Licensee's
receipt of notice from Licensor of Licensee's failure to make such payment when
due;
(b) the failure of either party to perform or observe any
material covenant or agreement (including without limitation, any failure of
Licensee to comply with the use restrictions under Section 7) to be performed or
observed by it hereunder, and such failure shall continue unremedied for a
period of thirty days after written notice is given to the defaulting party by
the non-defaulting party; or
(c) a court or governmental authority of competent
jurisdiction shall enter an order appointing, without consent by the party, a
custodian, receiver, trustee, intervener, or other officer with similar powers
with respect to it or with respect to any substantial part of its property, or
constituting an order for relief or approving a petition in bankruptcy or
insolvency law of any jurisdiction, or ordering the dissolution, winding up, or
liquidation of either party, or if any such petition shall be filed against
either party and shall not be dismissed within sixty days thereafter, or an
order shall have been issued granting either party a suspension of payments
under applicable law and any such order is not dismissed within sixty days
thereafter.
25. Remedies. Upon the occurrence and during the continuance of any
event of default, the non-defaulting party may, at its option, declare this
Agreement to be in default and may, in addition to any other remedies provided
herein, terminate this Agreement. Except as expressly provided herein, no remedy
is intended to be exclusive, but each shall be cumulative and in addition to and
may be exercised concurrently with any other remedy available to Licensor or
Licensee at law or in equity. If Licensor terminates this Agreement due to a
Licensee default,
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<PAGE>
Licensee shall pay the Payoff Amount promptly to Licensor. IN NO EVENT SHALL
EITHER PARTY BE LIABLE FOR INDIRECT, SPECIAL, CONSEQUENTIAL, EXEMPLARY OR
PUNITIVE DAMAGES, WHETHER BASED IN CONTRACT, TORT, OR OTHERWISE.
26. Additional Termination Rights.
(a) Licensee. Upon the payment by Licensee of the Payoff
Amount due with respect to such Capacity, and upon one hundred eighty (180) days
written notice to Licensor, Licensee may, without further obligation to
Licensor, terminate its license of any reasonably defined portion of the
Capacity without cause. Licensee shall thereupon remove or cause all of its
plant and facilities connected to the related Facilities to be removed at its
expense or may, if Licensor agrees, abandon such plant and facilities in place.
If Licensee abandons any of such plant and facilities, Licensor may, within
eighteen (18) months of its receipt of such notice, remove the abandoned plant
and facilities and bill Licensee for the costs incurred by it which are
reasonably allocable to the removal of such plant and facilities, which bill
shall be payable within thirty (30) days of receipt.
(b) Licensor. If any governmental agency or third party
institutes proceedings to impose any public utility or common carrier status or
obligations on Licensor or the use of Licensor's capacity or facilities as a
result of its performance of this Agreement, or if any action is brought by any
third party challenging the continued validity or seeking to adversely modify,
suspend or revoke Licensor's operating authority for all or any part of its
services or System as a result of its or Licensee's performance of this
Agreement, or if, as a result of any change in applicable law or regulation (or
in judicial or other official interpretations thereof), Licensor reasonably
deems that such a proceeding is likely and has a significant possibility of
success on the merits, Licensor may, without further liability to Licensee, upon
one hundred eighty (180) days written notice, terminate this Agreement as a
whole without cause; provided, however that Licensor shall not terminate this
Agreement or any Capacity provided by it during the pendency of such proceedings
or actions if Licensee agrees to indemnify and hold harmless Licensor (pursuant
to an indemnification agreement in form and substance reasonably satisfactory to
Licensor) against all liability, claims, fines or damages (including reasonable
attorneys' fees) incurred by Licensor as a result of Licensee's continued
operations and use of the Capacity unless (x) Licensor is required to do so by a
valid and final order of a court of competent jurisdiction, or (y) in Licensor's
opinion, continued performance or activity by Licensee under the terms of this
Agreement would have a present or future material adverse effect on the local
cable or other operations of Licensor, its financial condition or operating
condition or is reasonably likely to result in the imposition of public utility
or common carrier status on Licensor or an adverse modification, suspension or
revocation of such Licensor's operating authority for its services or its System
or the forfeiture of any portion of the System. Licensor shall control the
defense, prosecution and settlement of such claim or demand but shall allow
Licensee the opportunity to participate in such defense through counsel of its
own choosing, which participation will be at the sole expense of Licensee. If
the proceedings or actions would in any event affect only a portion of the
Capacity, Licensor will instead terminate only the license of the Capacity that
is affected thereby. Upon the effective date of such a termination, Licensee
shall terminate its use of the Capacity, remove its plant and equipment (or
abandon the same as provided in Section 26(a) above), and cease operations over
such Capacity.
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27. Force Majeure Events. Neither party shall be liable to the other
for any failure of performance under this Agreement due to causes beyond its
control, including but not limited to: acts of God, fire, flood or other
catastrophes; any law, order, regulation, direction, action or request of the
United States government, or of any other government, including state and local
governments having or claiming jurisdiction over such party, or of any
department, agency, commission, bureau, corporation or other instrumentality of
any one or more of these federal, state or local governments, or of any civil or
military authority; national emergencies; unavailability of materials or
rights-of-way; insurrections; riots; wars; or strikes, lock-outs, or work
stoppages (collectively, "force majeure events"). If a force majeure event
continues for more than 60 days in effect, the party who has not been receiving
performance shall be entitled to terminate any the License of specific Capacity
affected by such force majeure event, upon written notice to the other party.
28. Orderly Termination: Return of Facilities. Upon termination of this
Agreement in whole or with respect to any specific Capacity (other than
expiration of the term thereof under Section 4(c)), Licensor and Licensee agree
to cooperate in good faith to effect an orderly transition of any
Telecommunications Services provided over such Capacity. Without limitation,
Licensor hereby agrees that notwithstanding such termination it will, to the
extent permitted by applicable law and regulation and governmental authority,
(i) continue to make available to Licensee any portions of the Capacity at the
rates specified herein which Licensee reasonably requires to fulfill its
obligations under existing customer agreements for a period up to three months
after such termination in the case of a termination for Licensee's default, or
twelve (12) months after such termination in all other cases, and (ii) upon
termination under Section 4(c), negotiate agreements with Licensee that are
reasonable in the independent judgment of Licensor and Licensee, pursuant to
which such Licensor may provide fiber optic facilities to Licensee in order for
Licensee to provide telecommunications services in the Service Area. Unless any
alternate arrangements are otherwise agreed, upon termination and expiration of
the applicable transition period, Licensee shall at its expense remove or cause
to be removed all of its plant and facilities connected to the Facilities, or
may, if Licensor agrees, abandon such plant and facilities in place in
accordance with Section 26(a).
29. Network Architecture and Diversity. The parties shall consult and
cooperate with each other with regard to all technical matters relating to
network architecture, diversity and related matters. Each party will designate a
technical engineering representative and each agrees to inform the other party
of all its construction plans as in effect from time to time.
30. Additional Obligations of Licensee. In addition to the obligations
of Licensee set forth elsewhere in this Agreement, Licensee shall:
(a) have full and complete control, responsibility and
liability for the signals distributed over the Capacity by Licensee or for its
benefit;
(b) have full and complete control, responsibility and
liability for the purchase, installation, construction and maintenance of the
terminals and peripheral equipment connected to the Capacity utilized by
Licensee, provided that such equipment shall not be located in public rights of
way without Licensee having obtained all necessary rights to utilize such rights
of way;
17
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<PAGE>
(c) employ its own employees, agents and/or independent
contractors in the handling, storage, retrieval, processing, transmitting,
and/or receiving of any electronic signals distributed over the Capacity;
(d) provide all commercial or other power supplies for the
operation of the Capacity (or, if agreed by Licensor and Licensee, Licensee
shall instead bear its Allocated Cost share of Licensor's costs for power
supplies), terminals and peripheral equipment or facilities used with or
connected to any System and located on Licensee's, or its customers', premises;
and
(e) have full and complete control, responsibility and
liability for maintaining any operating authority from any Federal, state or
local governmental body or agency that relates to the activities of Licensee
under this Agreement, including Lessee's utilization of Capacity.
31. Interest. All payments due from either party to the other under the
terms of this Agreement which are not paid when due shall bear interest from the
due date until paid at an interest rate equal to the then-current Time Warner
intercompany rate, if both Licensee and Licensor are then Time Warner
affiliates, or if not, the lesser of 1 1/2% per month or the maximum lawful rate
permitted by law.
32. Assignment. Other than as set forth herein, the rights, privileges
and obligations of either party hereunder may not be subleased, sublicensed,
assigned or delegated or otherwise transferred or extended to another party, in
whole or in any part, and any such attempted sublease, sublicense, assignment,
delegation or transfer or extension shall be null and void. Licensor or Licensee
may, however, assign or transfer this Agreement, in whole or in part, to any
affiliate controlling, controlled by or under common control with their
respective parent companies, without approval of the other, upon 30 days notice,
provided such affiliate continues to be under the common control of Licensor's
or Licensee's parent company (as the case may be). Further, Licensor may assign,
delegate or otherwise transfer its rights and obligations under this Agreement,
or any portion thereof, without Licensee's consent, in connection with a sale,
assignment or other transfer of all or substantially all of the System (or any
individual cable system within the System), and its business, assets or equity
interests in connection therewith; provided that such transferee agrees in
writing to assume all of the obligations of Licensor hereunder with regard to
such System (or portion thereof); and provided further that upon such assumption
Licensor shall be released from any obligation with regard to the subsequent
performance of obligations hereunder regarding Capacity or Facilities included
in the transferred System (or portion thereof).
33. Miscellaneous.
(a) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument; and in pleading or
proving any provision of this Agreement, it shall not be necessary to produce
more than one complete set of such counterparts.
(b) Captions: Gender. Article and section headings contained
in this Agreement are for reference purposes only and shall not in any way
affect the meaning or interpretation of this Agreement. Whenever used herein the
singular number shall include the
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<PAGE>
plural, the plural shall include the singular, and the use of any gender shall
include all genders.
(c) Governing Law and Binding Effect. This Agreement shall be
governed by and construed and enforced in accordance with the law (other than
the law governing conflicts of law questions) and decisions of the State of New
York applicable to contracts made and to be performed entirely therein. This
Agreement shall bind and inure to the benefit of each of the parties and their
successors and permitted assigns.
(d) Waivers and Amendments. This Agreement may not be amended
nor shall any waiver, change, modification, consent or discharge be effected,
except by an instrument in writing adopted, in the case of an amendment, by each
party and, in the case of a waiver, consent or discharge, executed by the party
against whom enforcement of such instrument is sought. Any consent by either
party to, or waiver of, a breach by the other party shall not constitute a
waiver or consent to any subsequent or different breach. If either party shall
fail to enforce a breach of this Agreement by the other party, such failure to
enforce shall not be considered a consent to or a waiver of said breach or any
subsequent breach for any purpose whatsoever.
(e) Relationship Not a Partnership or an Agency. Nothing
contained in this Agreement shall be deemed to constitute a partnership, joint
venture or agency agreement between parties.
(f) DISCLAIMERS. THERE ARE NO AGREEMENTS, WARRANTIES OR
REPRESENTATIONS, EXPRESS OR IMPLIED EITHER IN FACT OR BY OPERATION OF LAW,
STATUTORY OR OTHERWISE, INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR
A PARTICULAR PURPOSE OR USE, EXCEPT THOSE EXPRESSLY SET FORTH HEREIN.
(g) Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule or law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to either party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the greatest
extent possible.
(h) Further Assurances. Each party agrees to execute all such
further instruments and documents and to take all such further actions as the
other party may reasonably request in order to effectuate the terms and purposes
of this Agreement.
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SCHEDULE OF SIGNATORIES
TO
CAPACITY LICENSE AGREEMENT
MASTER TERMS AND CONDITIONS
<TABLE>
<CAPTION>
LANDLORD: TENANT:
--------- -------
<S> <C>
1)Albany Division, Time Warner AXS of Albany, L.P.
Time Warner Entertainment-
Advance/Newhouse
2)Austin Division Time Warner Communications
Time Warner Entertainment- of Austin, L.P.
of Austin, L.P.
3)Binghamton Division, Time Warner AXS of Albany, L.P.
Time Warner Entertainment-
Advance/Newhouse
4)Charlotte Division, Time Warner Communications of
Time Warner Entertainment- North Carolina, L.P.
Advance/Newhouse
5)Cincinnati Division of Time Warner AXS of Greater
Time Warner Cable, Cincinnati, L.P.
Time Warner Entertainment
Company, L.P.
6)Columbus Division Time Warner AXS of Columbus,
of Time Warner Cable, L.P.
Time Warner Entertainment
Company, L.P.
7)Greensboro Division, Time Warner Communications of
Time Warner Entertainment- North Carolina, L.P.
Advance/Newhouse
8)Hawaii Division of Time Warner Communications of
Time Warner Cable, Hawaii, L.P.
Time Warner Entertainment
Company, L.P.
9)Houston Division, Time Warner Communications of
Time Warner Entertainment- Houston, L.P.
Advance/Newhouse
10)Indianapolis Division, Time Warner Communications of
Time Warner Entertainment- Indiana, L.P.
Advance/Newhouse
11)Memphis Division of Time Warner Communications of
of Time Warner Cable, The Mid-South, L.P
Time Warner Entertainment
Company, L.P.
12)Milwaukee Division of Time Time Warner Communications of
Warner Cable, Time Warner Milwaukee, L.P.
Entertainment Company, L.P.
13)New York Division of Time Time Warner AXS of New York
Warner Cable, Time Warner City
Entertainment Company, L.P.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<S> <C>
14)Florida Division, Time Warner AXS of Florida,
Time Warner Entertainment- L.P.
Advance/Newhouse
15)Raleigh/Durham/Chapel Hill Time Warner Communications of
Division, Time Warner Entertainment- North Carolina, L.P.
Advance/Newhouse
16)Rochester Division, Time Warner AXS of Rochester,
Time Warner Entertainment- L.P.
Advance/Newhouse
17)San Antonio Division, Fibrcom, Inc.
KBL Cablesystems of
the Southwest, Inc.
18)San Diego Division, Time Warner AXS of California,
Time Warner Entertainment- L.P.
Advance/Newhouse
19)Tampa Division, Time Warner AXS of Florida,
Time Warner Entertainment- L.P.
Advance/Newhouse
</TABLE>
<PAGE>
<PAGE>
TRADE NAME LICENSE AGREEMENT
AGREEMENT dated as of the 14th day of July, 1998, by and between Time
Warner Inc., a Delaware corporation, located at 75 Rockefeller Plaza, New York,
NY 10019 (hereinafter "Licensor") and Time Warner Telecom LLC, a Delaware
limited liability company, located at 5700 S. Quebec Street, Greenwood Village,
CO 80111 (hereinafter "Licensee").
WHEREAS, Licensor is the owner of the TIME WARNER trademark, service mark
and trade name (hereinafter the "Name");
WHEREAS, Licensee was formed in June, 1998, and wishes to use the Name as
part of its corporate name; and
WHEREAS, Licensor is willing to allow Licensee to use the Name as part of
its corporate name.
NOW, THEREFORE, subject to and upon the terms and conditions set forth
herein, the parties hereto agree as follows:
1. Grant
(a) Licensor hereby grants to Licensee a non-exclusive, royalty-free
license to use the Name in Licensee's trade name TIME WARNER TELECOM and in the
trade names of Licensee's subsidiaries as indicated on Schedule 1 hereto, in
connection with the operation of the business (hereinafter "the Business") as
permitted under the provisions of its Amended and Restated Limited Liability
Company Agreement as in effect on the date hereof (the "LLC Agreement").
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(b) During the term of this Agreement, Licensor shall not use, or license
any third party to use, the Name in combination with the word TELECOM.
(c) Except as specifically provided in Paragraph 1(b) above, this Agreement
shall not in any way limit or restrict Licensor's right, either by itself or
through third parties, to use, promote, license or otherwise exploit the Name.
2. Territory
The license granted herein shall be limited to the United States, its
territories and possessions (hereinafter the "Territory").
3. Term
(a) The term of this Agreement shall commence on the date set forth on page
one hereof and, unless earlier terminated as provided herein, shall continue for
a period of four (4) years (hereinafter the "Initial Term").
(b) Following the Initial Term, this Agreement shall renew automatically
from year to year unless either party shall advise the other of its intention
not to renew at least three (3) months prior to the expiration of the then
current term.
4. Quality Control
(a) Licensee acknowledges and is familiar with the high standards, quality,
style and image of Licensor and Licensee shall at all times conduct all aspects
of the Business in a manner which is consistent therewith.
(b) Licensor shall have the right to periodically review Licensee's use of
the Name in connection with the Business to insure that the operation, quality,
style and image thereof conforms to the standards set forth in Paragraph 4(a)
hereof.
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(c) In the event that the operation, quality, style and image of the
Business falls below the standards set forth in Paragraph 4(a) hereof, Licensor
shall so notify Licensee and Licensee shall restore the quality to said
standards as soon as possible.
(d) Licensee shall use the Name only in such logotype(s) and manner as has
been expressly approved in advance by Licensor.
(e) Licensee shall not use or display the Name in any manner which might be
deceptive or misleading or which might bring Licensor into disrepute.
(f) The proper use and protection of the Name and of the goodwill
associated therewith in accordance with the terms of this Agreement is a
material provision of this Agreement.
5. Rights in the Name
(a) Licensee hereby acknowledges that the Name is a valuable asset
belonging to Licensor and that all rights in and to the Name are and shall
remain the sole and exclusive property of Licensor subject only to the license
granted herein. Nothing in this Agreement shall confer any right of ownership in
the Name in Licensee. Licensee acknowledges, and shall not at any time contest,
the validity or ownership of the Name or the validity of the license granted
herein. Licensee acknowledges that all rights accruing from Licensee's use of
the Name shall inure to the benefit of Licensor.
(b) Licensee shall execute and deliver to Licensor upon Licensor's request,
all documents which are necessary or desirable to secure or preserve Licensor's
rights in the Name.
(c) Licensee agrees to use the Name in a manner which will protect
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Licensor's rights and the goodwill therein.
(d) Licensee agrees that its use of the Name shall at all times be as
Licensee for the account and benefit of Licensor. The use of the Name pursuant
to this Agreement shall not vest in Licensee any right or presumptive right to
continue such use after termination of this Agreement. Nothing contained in this
Agreement shall be construed as an assignment or grant to Licensee of any right,
title or interest in or to the Name, it being understood that all rights
relating thereto are reserved by Licensor, except for the license hereunder to
Licensee of the right to use the Name as specifically and expressly provided
herein. To the extent any rights in and to the Name or in the goodwill
associated therewith are deemed to accrue to Licensee, Licensee agrees to assign
and hereby assigns any and all such rights and goodwill, at such time as they
may be deemed to accrue, to Licensor.
6. Infringement of the Name
(a) Licensee shall promptly give notice to Licensor of any use of the Name,
or of a similar name or mark, by any third party of which it becomes aware.
Licensor shall decide, in its sole discretion, if proceedings shall be commenced
against said third party. In the event that Licensor commences a proceeding or
any other form of action against said third party, Licensee shall cooperate
fully with Licensor to whatever extent Licensor deems necessary or appropriate
to prosecute such action or proceeding, provided that all expenses of such
action or proceeding shall be borne by Licensor and all recoveries (including
settlements) resulting from any such action shall belong solely to Licensor.
(b) Licensee shall not take any action to protect the Name without the
prior express written consent of Licensor's General Counsel, nor shall Licensee
settle any claim for
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infringement of the Name without the prior express written consent of Licensor's
General Counsel.
7. Termination
(a) This Agreement shall automatically and immediately terminate upon the
occurrence of any of the following events:
(i) Licensor or its majority owned and controlled affiliates,
collectively, own less than thirty percent (30%) of the limited
liability company interests (determined by participation
percentage) or, after the Reconstitution referred to in Paragraph
10(a) hereof, the Common Stock, of Licensee;
(ii) Licensor and its majority owned and controlled affiliates,
collectively, no longer have at least three (3) nominees serving
on the Management Committee or, after the Reconstitution, the
Board of Directors, of Licensee;
(iii) Licensee does not comply with the restrictions on the conduct of
its business set forth in the LLC Agreement, or, after the
Reconstitution, its Certificate of Incorporation, or as otherwise
approved by the holders of its limited liability company
interests or, after the Reconstitution, its Class B Common stock;
or
(iv) Any member of Licensee shall have transferred its Class B
Interests (as defined in the LLC Agreement) to a third party
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together with its rights to appoint Representatives to the
Management Committee under the LLC Agreement or, after the
Reconstitution, any holder of the Class B Common Stock of
Licensee shall have transferred its Class B Common Stock together
with its rights to designate nominees to the Board of Directors
of Licensee as contemplated in the Stockholder's Agreement
expected to be entered into among such holders of Class B Common
Stock.
(b) If Licensee defaults in the performance of any of its material
obligations (including, without limitation, Licensee's obligations under
Paragraph 4) under this Agreement, and (i) any such default is not cured by
Licensee within thirty (30) business days of Licensee's receipt of written
notice of such default from Licensor, or (ii) in the case of a default which
cannot reasonably be cured within said thirty (30) business day period, Licensee
has not initiated such action within said period as may be required to cure such
default within a reasonable time thereafter, then Licensor shall have the right
to terminate this Agreement upon written notice to Licensee. Termination shall
become effective immediately upon Licensee's receipt of written notice thereof.
(c) If Licensee commences an action or has an order for relief entered
against it under the federal bankruptcy laws as now or hereafter constituted or
any other federal or state bankruptcy, insolvency or other similar law, or if
within one hundred twenty (120) days after the commencement against Licensee of
such an action, such action shall have
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been consented to or shall not have been dismissed or all orders or
proceedings thereunder affecting the operation of Licensee shall not have been
stayed, or if Licensee shall fail generally to pay its debts as such debts
become due or shall make an assignment for the benefit of its creditors, or if
Licensee discontinues the Business or within one hundred twenty (120) days of
entry of a decree appointing a trustee or a receiver for Licensee or its
business, such appointment shall not have been vacated, this Agreement shall
terminate upon written notice by Licensor to Licensee. Termination shall become
effective immediately upon Licensee's receipt of written notice thereof.
(d) Upon the termination of this Agreement for any reason, Licensee shall
thereafter have a period of three (3) months from the termination date to phase
out all use of the Name. Thereafter, all materials bearing the Name in the
possession, custody or control of Licensee shall be promptly destroyed or
otherwise disposed of to the mutual satisfaction of the parties.
(e) Subject to Paragraph 7(d) above, upon and after the expiration or
termination of this Agreement, all rights in the Name shall revert to Licensor,
and Licensee shall assign any goodwill which may have accrued through its use of
the Name to Licensor. Licensee shall refrain from any further use of the Name or
of any similar mark or name. Licensee shall, at its own expense, execute all
papers and take all actions necessary to prevent further use by Licensee (and
any sub-Licensee permitted hereunder) of the Name, including but not limited to,
the voluntary cancellation of any business name, company name or corporate name
registrations or recordals. Licensee shall return to Licensor or destroy all
material used for the purpose of printing or reproducing the Name.
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8. Representations and Warranties
(a) Licensor represents and warrants as follows:
(i) Licensor owns the Name in the Territory for use in connection
with the Business; and
(ii) Licensor has the right to enter into and fully perform this
Agreement, and to do so will not violate or conflict with any
material term or provision of its charter or by-laws or of any
agreement, instrument, statute, rule, regulation, order or
decree to which it is a party or by which it is bound.
(b) Licensee represents and warrants as follows:
(i) Licensee's conduct of the Business will comply in all respects
with all applicable federal, state and local laws, ordinances
and rules;
(ii) Licensee will not use the Name in any manner which is not
specifically authorized by this Agreement; and
(iii) Licensee has the right to enter into and fully perform this
Agreement, and to do so will not violate or conflict with any
material term or provision of its charter or by-laws or of any
agreement, instrument, statute, rule, regulation, order or
decree to which it is a party or by which it is bound.
9. Indemnification
Licensor and Licensee shall indemnify and hold each other and each other's
directors, officers and employees harmless from and against any and all
liability, loss, damage
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or injury, including reasonable attorney's fees, arising out of a breach, or an
allegation which if true would constitute a breach, of any representation and
warranty set forth herein, provided that the party seeking to enforce such
indemnity shall provide to the indemnifying party prompt notice of any claim
giving rise to such indemnity and the opportunity to defend the same with
counsel of its own choosing.
10. Sub-Licenses and Assignment
(a) Licensee shall have the right to sub-license its subsidiary companies
that are at least 50% owned, directly or indirectly, including without
limitation, Time Warner Telecom Inc., a Delaware corporation, to use the Name
under the same terms and conditions as set forth herein so long as such
sub-licensee remains at least a 50% owned subsidiary of Licensee and, provided
that each such sub-licensee agrees in writing to be bound by the terms of this
Agreement. In the event Licensee is reconstituted (either by merger, exchange,
contribution of assets or otherwise) as a Delaware corporation (the
"Reconstitution"), such corporation shall succeed to the rights and obligations
of Licensee hereunder and all references to Licensee herein shall be deemed
references to such reconstituted corporation.
(b) Except for any sub-license granted pursuant to Paragraph 10(a) above,
neither this Agreement nor any rights hereunder shall be assigned, sub-licensed
or transferred by Licensee, in whole or in part, without the prior express
written consent of Licensor, and any purported assignment or transfer in
violation of this provision shall be void and of no effect.
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11. Notices
(a) All notices to be given under this Agreement shall be in writing and
shall be delivered to the party to whom the notice is given (i) by hand or
courier, (ii) by registered or certified mail, postage prepaid, or (iii) by fax
(with a copy as provided in (i) or (ii) above) at the address or fax number
given below or to such other address or fax number as may be advised by prior
notice in writing to the other party from time to time.
Licensor: Time Warner Inc.
75 Rockefeller Plaza
New York, NY 10019
Attention: General Counsel
Telephone No. (212) 484-7580
Fax. No. (212) 956-7281
Licensee: Time Warner Telecom LLC
5700 S. Quebec Street
Greenwood Village, CO 80111
Attention: Chief Executive Officer
Telephone No. (303) 566-1000
Fax. No. (303) 566-1011
(b) Notice given under this Agreement shall be deemed duly given (i) if
delivered by hand or courier, on the date of such delivery, (ii) if sent by
registered or certified mail, five (5) business days after dispatch, and (iii)
if sent by fax, when the copy is delivered pursuant to Paragraph 11(a) above.
12. Miscellaneous
(a) Nothing contained in this Agreement shall be construed to constitute
Licensor to be a partner or joint venturer with, or an agent for, Licensee and
vice versa. Licensee shall not have any authority to, nor shall Licensee,
obligate or bind the Licensor in any manner whatsoever and vice versa.
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(b) This Agreement shall be governed by and construed and enforced in
accordance with the substantive laws of the State of New York, without reference
to its laws governing conflicts of laws.
(c) This Agreement cannot be canceled, modified, amended or waived, in part
or in full, except by an instrument in writing signed by both parties.
(d) The headings of the paragraphs hereof are for convenience only and
shall not be deemed to limit or in any way affect the scope, meaning or intent
of this Agreement or any provision hereof.
(e) Should any paragraph or provision of this Agreement be held to be void,
invalid or inoperative as a result of any judicial or administrative proceeding
or decree, such decision shall not affect any other paragraph or provision
hereof, and the remainder of this Agreement shall be effective as though such
void, invalid or inoperative paragraph or provision had not been contained
herein.
(f) The failure of any party to enforce at any time any provision of this
Agreement, or to enforce any rights, or to make any elections hereunder, shall
not be deemed a waiver of such provisions, rights or elections. Any waiver of
any breach of this Agreement or of the terms or conditions hereof shall not be
deemed a waiver or any repetition of such breach or in any way affect any other
term or condition hereof.
(g) This Agreement contains the entire understanding between the parties
with respect to the transactions contemplated hereby, and supersedes all prior
writings or agreements, written or oral, with respect to the subject matter
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly
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executed and delivered by their respective officers, each of whom is duly
authorized as of the date set forth on page one hereof.
TIME WARNER INC.
By: /s/ Spencer B. Hays
------------------------
Name: Spencer B. Hays
Title: Vice President
TIME WARNER TELECOM LLC
By: /s/ Larissa L. Herda
------------------------
Name: Larissa L. Herda
Title: President and Chief
Executive Officer
Agreed, pursuant to
Paragraph 10(a) hereof:
TIME WARNER TELECOM INC.
By: /s/ Larissa L. Herda
---------------------------
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 16,144
<ALLOWANCES> 1,403
<INVENTORY> 0
<CURRENT-ASSETS> 15,792
<PP&E> 537,334
<DEPRECIATION> 92,797
<TOTAL-ASSETS> 472,794
<CURRENT-LIABILITIES> 63,743
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 256,467
<TOTAL-LIABILITY-AND-EQUITY> 472,794
<SALES> 49,095
<TOTAL-REVENUES> 49,095
<CGS> 54,051
<TOTAL-COSTS> 54,051
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,710
<INCOME-PRETAX> (43,923)
<INCOME-TAX> 0
<INCOME-CONTINUING> (43,923)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (43,923)
<EPS-PRIMARY> 0
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</TABLE>
